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What changed in CHEESECAKE FACTORY INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CHEESECAKE FACTORY INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+132 added−147 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-27)

Top changes in CHEESECAKE FACTORY INC's 2024 10-K

132 paragraphs added · 147 removed · 110 edited across 4 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 14 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for a summary of legal proceedings. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 36 Table of Contents ​ PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 13 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for a summary of legal proceedings. ​ ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 38 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(See Item 1A – Risk Factors – “Our stock price could be adversely affected if we are unable to pay or increase dividends.”) 37 Table of Contents Price Performance Graph The following graph compares the cumulative five-year total return provided to stockholders on the Company’s common stock relative to the S&P 400 Midcap Index, the NASDAQ US Benchmark TR Index and the S&P 600 Restaurants Index.
Biggest change(See Item 1A — Risk Factors — “Our stock price could be adversely affected if we are unable to pay or increase dividends.”) During the fiscal quarter ended January 2, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (in each case, as defined in Item 408 of Regulation S-K). 39 Table of Contents Price Performance Graph The following graph compares the cumulative five-year total return provided to stockholders on the Company’s common stock relative to the S&P 400 Midcap Index, the NASDAQ US Benchmark TR Index and the S&P 600 Restaurants Index.
Our Board declared a quarterly dividend in the second quarter of fiscal 2022 and has declared quarterly dividends since then, following the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement.
Following the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement, our Board declared a quarterly dividend in the second quarter of fiscal 2022 and has declared quarterly dividends since then.
Our share repurchase program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. The timing and number of shares repurchased are subject to legal constraints and financial covenants under our credit facility that limit share repurchases based on a defined ratio.
Our share repurchase program does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. The timing and number of shares repurchased are subject to legal constraints and financial covenants under our Loan Agreement that limit share repurchases based on a defined ratio.
This graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts. 38 Table of Contents ITEM 6. [RESERVED]
This graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates this information by reference and shall not otherwise be deemed filed under such Acts.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Global Select Market under the symbol CAKE. There were approximately 1,450 holders of record of our common stock at February 14, 2023, and we estimate there were approximately 156,700 beneficial stockholders on that date.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on The Nasdaq Global Select Market under the symbol CAKE. There were approximately 1,460 holders of record of our common stock at February 13, 2024, and we estimate there were approximately 134,600 beneficial stockholders on that date.
Under this authorization, we have cumulatively repurchased 55.1 million shares at a total cost of $1,765.6 million through January 3, 2023 with 0.7 million shares repurchased at a cost of $21.6 million during the fourth quarter of fiscal 2022.
Under this authorization, we have cumulatively repurchased 56.5 million shares at a total cost of $1,811.7 million, excluding the excise tax, through January 2, 2024 with 0.3 million shares repurchased at a cost of $9.8 million, excluding the excise tax, during the fourth quarter of fiscal 2023.
Future decisions to pay or to increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of the Loan Agreement and applicable law.
Future decisions to pay or to increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Loan Agreement and applicable law, and such other factors that the Board considers relevant.
The following table presents our purchases of our common stock during the fiscal quarter ended January 3, 2023 (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Total Number of Shares Maximum Number of ​ ​ Number ​ Average ​ Purchased as Part of ​ Shares that May Yet ​ ​ of Shares ​ Price Paid ​ Publicly Announced ​ Be Purchased Under the Period Purchased (1) per Share Plans or Programs Plans or Programs September 28 — November 1, 2022 ​ 255 ​ $ 31.64 253 6,256 November 2 — November 29, 2022 ​ 169 ​ 34.55 156 6,086 November 30 — January 3, 2023 ​ 240 ​ 32.24 240 5,847 Total ​ 664 ​ ​ 649 (1) The total number of shares purchased includes 14,607 shares withheld upon vesting of restricted share awards to satisfy tax withholding obligations.
The following table presents our purchases of our common stock during the fiscal quarter ended January 2, 2024 (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Total Number of Shares Maximum Number of ​ ​ Number ​ Average ​ Purchased as Part of ​ Shares that May Yet ​ ​ of Shares ​ Price Paid ​ Publicly Announced ​ Be Purchased Under the Period Purchased (1) per Share (2) Plans or Programs Plans or Programs October 4 — November 7, 2023 ​ 233 ​ $ 29.72 233 4,539 November 8 — December 5, 2023 ​ 4 ​ 32.89 — 4,534 December 6, 2023 — January 2, 2024 ​ 81 ​ 34.04 69 4,453 Total ​ 318 ​ ​ 302 ​ (1) The total number of shares purchased includes 15,922 shares withheld upon vesting of restricted share awards to satisfy tax withholding obligations.
The historical stock performance presented below is not intended to and may not be indicative of future stock performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 The Cheesecake Factory Incorporated ​ $ 100 ​ $ 93 ​ $ 85 ​ $ 82 ​ $ 87 ​ $ 70 S&P 400 Midcap Index ​ $ 100 ​ $ 88 ​ $ 109 ​ $ 121 ​ $ 150 ​ $ 128 NASDAQ US Benchmark TR Index (1) ​ $ 100 ​ $ 95 ​ $ 124 ​ $ 150 ​ $ 189 ​ $ 152 S&P 600 Restaurants Index (2) ​ $ 100 ​ $ 109 ​ $ 121 ​ $ 153 ​ $ 146 ​ $ 115 (1) Underlying data provided by Nasdaq Global Indexes.
The historical stock performance presented below is not intended to and may not be indicative of future stock performance. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12/31/18 12/31/19 ​ 12/31/20 ​ 12/31/21 ​ 12/31/22 ​ 12/31/23 The Cheesecake Factory Incorporated ​ $ 100 ​ $ 92 ​ $ 89 ​ $ 94 ​ $ 76 ​ $ 84 S&P 400 Midcap Index ​ $ 100 ​ $ 124 ​ $ 139 ​ $ 171 ​ $ 146 ​ $ 167 NASDAQ US Benchmark TR Index (1) ​ $ 100 ​ $ 131 ​ $ 159 ​ $ 200 ​ $ 161 ​ $ 203 S&P 600 Restaurants Index (2) ​ $ 100 ​ $ 111 ​ $ 140 ​ $ 134 ​ $ 106 ​ $ 126 (1) Underlying data provided by Nasdaq Global Indexes.
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(2) The dollar value of shares repurchased excludes excise tax due under the Inflation Reduction Act of 2022.
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Shares Authorized for Issuance under Equity Compensation Plans The information required by Item 201(d) of Regulation S-K under Item 5 is incorporated by reference to the section entitled “Equity Compensation Plan Information” in our definitive proxy statement for the annual meeting of stockholders expected to be held on May 30, 2024 (the “Proxy Statement”). 40 Table of Contents ITEM 6. [RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn the future, we may incur expenses or generate income similar to the adjusted items. ​ 44 Table of Contents Following is a reconciliation from net income and diluted net income per common share to the corresponding adjusted measures (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Net income available to common stockholders ​ $ 43,123 ​ $ 49,131 Dividends on Series A preferred stock ​ ​ — ​ ​ 18,661 Net income attributed to Series A preferred stock ​ ​ — ​ ​ 4,581 COVID-19 related costs (1) ​ — ​ 4,917 Impairment of assets and lease termination expenses ​ ​ 31,387 ​ ​ 18,139 Acquisition-related contingent consideration, compensation and amortization expenses ​ ​ 13,368 ​ ​ 19,510 Termination of interest rate swap ​ ​ — ​ ​ 2,354 Uncertain tax positions ​ ​ — ​ ​ 7,139 Tax effect of adjustments (2) ​ (11,637) ​ (11,679) Adjusted net income ​ $ 76,241 ​ $ 112,753 ​ ​ ​ ​ ​ ​ ​ Diluted net income per common share ​ $ 0.86 ​ $ 1.01 Dividends on Series A preferred stock ​ ​ — ​ ​ 0.35 Net income attributable to Series A preferred stock ​ ​ — ​ ​ 0.09 Assumed impact of potential conversion of Series A preferred stock into common stock (3) ​ ​ — ​ ​ (0.08) COVID-19 related costs (1) ​ — ​ 0.09 Impairment of assets and lease termination expenses ​ ​ 0.62 ​ ​ 0.34 Acquisition-related contingent consideration, compensation and amortization expenses ​ ​ 0.27 ​ ​ 0.37 Termination of interest rate swap ​ ​ — ​ ​ 0.04 Uncertain tax positions ​ ​ — ​ ​ 0.13 Tax effect of adjustments (2) ​ (0.23) ​ ​ (0.22) Adjusted net income per share (4) ​ $ 1.51 ​ $ 2.13 (1) Represents incremental costs associated with the COVID-19 pandemic such as additional sanitation, personal protective equipment, sick and vaccination pay, and healthcare benefits.
Biggest changeFollowing is a reconciliation from net income and diluted net income per common share to the corresponding adjusted measures (in thousands, except per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 101,351 ​ $ 43,123 Impairment of assets and lease termination expenses ​ ​ 29,464 ​ ​ 31,387 Acquisition-related contingent consideration, compensation and amortization expenses ​ ​ 11,686 ​ ​ 13,368 Tax effect of adjustments (1) ​ (10,699) ​ (11,637) Adjusted net income ​ $ 131,802 ​ $ 76,241 ​ ​ ​ ​ ​ ​ ​ Diluted net income ​ $ 2.07 ​ $ 0.86 Impairment of assets and lease termination expenses ​ ​ 0.61 ​ ​ 0.62 Acquisition-related contingent consideration, compensation and amortization expenses ​ ​ 0.24 ​ ​ 0.27 Tax effect of adjustments (1) ​ (0.22) ​ ​ (0.23) Adjusted net income per share (2) ​ $ 2.69 ​ $ 1.51 (1) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate.
Other Operating Costs and Expenses Other operating costs and expenses consist of all other restaurant-level operating costs, the major components of which are occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), dining room and to-go supplies, repairs and maintenance, janitorial expenses, credit card processing fees, marketing including delivery commissions, and incentive compensation, as well as bakery production overhead.
Other Operating Costs and Expenses Other operating costs and expenses consist of all other restaurant-level operating costs, the major components of which are occupancy expenses (rent, common area expenses, insurance, licenses, taxes and utilities), dining room and to-go supplies, repairs and maintenance, janitorial expenses, credit card processing fees, marketing including delivery commissions, incentive compensation, and bakery production overhead.
Impairment of Assets and Lease Termination Expenses During fiscal 2022, we recorded impairment of assets and lease terminations expense of $31.4 million primarily related to the impairment of long-lived assets for three The Cheesecake Factory, one Other FRC and three Other restaurants that are primarily located in areas which have not fully recovered from the pandemic.
During fiscal 2022, we recorded impairment of assets and lease terminations expense of $31.4 million primarily related to the impairment of long-lived assets for three The Cheesecake Factory, one Other FRC and three Other restaurants that are primarily located in areas which have not fully recovered from the pandemic.
(See Note 18 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.) Non-GAAP Measures Adjusted net income and adjusted diluted net income per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP.
(See Note 17 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.) Non-GAAP Measures Adjusted net income and adjusted diluted net income per share are supplemental measures of our performance that are not required by or presented in accordance with GAAP.
(See Note 18 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.) (3) Includes obligations for inventory purchases, equipment purchases, information technology and other miscellaneous commitments. Amounts exclude agreements that are cancelable without significant penalty.
(See Note 17 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of income taxes.) (3) Includes obligations for inventory purchases, equipment purchases, information technology and other miscellaneous commitments. Amounts exclude agreements that are cancelable without significant penalty.
(See Note 1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of these impairments.) 50 Table of Contents Long-Lived Assets We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets or asset group may not be recoverable.
(See Note 1 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of these impairments.) Long-Lived Assets We assess the potential impairment of our long-lived assets on an annual basis or whenever events or changes in circumstances indicate that the carrying value of the assets or asset group may not be recoverable.
During fiscal 2023, we currently estimate total inflation across our commodities, total labor (factoring in the latest trends in wage rates and channel mix, as well as in other components such as payroll taxes and benefits) and other operating costs and expenses to be in the mid-single digit range.
During fiscal 2024, we currently estimate total inflation across our commodities, total labor (factoring in the latest trends in wage rates and channel mix, as well as in other components such as payroll taxes and benefits) and other operating costs and expenses to be in the low to mid-single digit range.
Estimates of revenue growth and operating expenses are based on internal projections and consider historical performance and forecasted growth, including assumptions related to the COVID-19 pandemic, the cost environment and macroeconomic and industry conditions. The discount rate is based on the estimated cost of capital that reflects the risk profile of the related business.
Estimates of revenue growth and operating expenses are based on internal projections and consider historical performance and forecasted growth, including assumptions related to the cost environment and macroeconomic and industry conditions. The discount rate is based on the estimated cost of capital that reflects the risk profile of the related business.
This increase is primarily due to the resumption of our share repurchase program in the 48 Table of Contents second quarter of fiscal 2022 after the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement.
This increase is primarily due to the resumption of our share repurchase program in the second quarter of fiscal 2022 after the suspension that began in fiscal 2020 due to the impact of COVID-19 on our business and in conjunction with the terms of our Loan Agreement.
In fiscal 2022, the fair value of the contingent consideration and compensation liability increased by $4.7 million due to a $8.3 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and estimated future revenues utilized in the calculation and amortization, partially offset by a payment of $7.2 million per the FRC acquisition agreement.
In fiscal 2022, the fair value of the contingent consideration and compensation liability increased by $4.7 million due to a $11.9 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and estimated future revenues utilized in the calculation and amortization, partially offset by a payment of $7.2 million per the FRC acquisition agreement.
Therefore, average check is generally higher for off-premise orders as most of these orders are for more than one customer. In turn, the lower mix of sales in the off-premise channel during fiscal 2022 compared to fiscal 2021 comprised approximately 2% of the negative change in mix with a positive correlative impact to traffic.
Therefore, average check is generally higher for off-premise orders as most of these orders are for more than one customer. In turn, the lower mix of sales in the off-premise channel during fiscal 2023 compared to fiscal 2022 comprised approximately 1% of the negative change in mix with a positive correlative impact to traffic.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), which contains forward-looking statements, should be read in conjunction with our audited consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” included in Part I, Item 1A of this report and the cautionary statements included throughout this report.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), which contains forward-looking statements, should be read in conjunction with our audited consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” included in Part I, Item 1A of this report and the cautionary statements included throughout this report.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal year 2022 consisted of 53 weeks, while fiscal year 2021 consisted of 52 weeks. Fiscal year 2023 will consist of 52 weeks. The following MD&A includes a discussion comparing our results in fiscal 2022 to fiscal 2021.
We utilize a 52/53-week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal years 2023 and 2021 each consisted of 52 weeks, while fiscal year 2022 consisted of 53 weeks. Fiscal year 2024 will consist of 52 weeks. The following MD&A includes a discussion comparing our results in fiscal 2023 to fiscal 2022.
As further discussed in Note 15 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report, in February 2023, our Board declared a quarterly dividend to be paid in March 2023.
As further discussed in Note 14 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report, in February 2024, our Board declared a quarterly dividend to be paid in March 2024.
First, we determine if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include, but are not limited to, historical financial performance, assumptions related to the COVID-19 pandemic, wage, product and services inflation, competitive environment, macroeconomic and industry conditions, results of prior impairment tests and share price performance.
First, we determine if, based on qualitative factors, it is more likely than not that an impairment exists. Factors considered include, but are not limited to, historical financial performance, wage, product and services inflation, competitive environment, macroeconomic and industry conditions, results of prior impairment tests and share price performance.
In prior years, we have targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies.
Prior to fiscal 2022, we targeted menu price increases of approximately 2% to 3% annually, utilizing a market-based strategy to help mitigate cost pressure in higher-wage geographies.
We are continuing our efforts on a number of initiatives, including menu innovation, a greater focus on increasing customer throughput in our restaurants, leveraging our gift card program, working with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities, augmenting our marketing programs, enhancing our training programs and leveraging our customer satisfaction measurement platform.
We are continuing our efforts on a number of initiatives, including menu innovation, a greater focus on increasing customer throughput in our restaurants, leveraging our gift card program, working with a third party to provide delivery services for our restaurants, increasing customer awareness of our online ordering capabilities and improving the pick-up experience, augmenting our marketing programs, including our Cheesecake Rewards TM program, enhancing our training programs and leveraging our customer satisfaction measurement platform.
For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional customer experience and (3) continuing to provide our customers with convenient options for off-premise dining, as we believe there is opportunity for a longer-term elevation of our off-premise mix compared to pre-COVID-19 pandemic levels.
Our overall revenue growth is primarily driven by revenues from new restaurant openings and increases in comparable restaurant sales. 41 Table of Contents For The Cheesecake Factory concept, our strategy is to increase comparable restaurant sales by growing average check and maintaining customer traffic through (1) continuing to offer innovative, high quality menu items that offer customers a wide range of options in terms of flavor, price and value, (2) focusing on service and hospitality with the goal of delivering an exceptional customer experience and (3) continuing to provide our customers with convenient options for off-premise dining, as we believe there is opportunity for a longer-term elevation of our off-premise mix compared to pre-COVID-19 pandemic levels.
In fiscal 2021, we recorded $16.3 million of expense primarily related to the impairment of long-lived assets for three The Cheesecake Factory and two Other restaurants.
In fiscal 2022, we recorded $31.4 million of expense primarily related to the impairment of three The Cheesecake Factory, one Other FRC and three Other restaurants. In fiscal 2021, we recorded $16.3 million of expense primarily related to the impairment of long-lived assets for three The Cheesecake Factory and two Other restaurants.
For a discussion comparing our results from fiscal 2021 to fiscal 2020, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 28, 2021, filed with the SEC on February 22, 2022.
For a discussion comparing our results from fiscal 2022 to fiscal 2021, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 3, 2023, filed with the SEC on February 27, 2023.
The liability for this contingent consideration provision was $28.6 million at January 3, 2023. See Note 2 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for discussion of the fair value measurement for this liability.
The liability for this contingent consideration provision was $25.5 million at January 2, 2024. See Note 2 in Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for discussion of the fair value measurement for this liability.
These estimates, as well as the selection of comparable companies and valuation multiples used in the market approaches, are subjective, and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance. These fair value assessments could change materially if different estimates and assumptions were used.
These estimates, as well as the selection of comparable companies and valuation multiples used in the market approaches, are subjective, and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance.
Property and Equipment Capital expenditures for new restaurants, including locations under development as of each fiscal year-end, were $55.1 million and $31.7 million for fiscal 2022 and 2021, respectively.
Property and Equipment Capital expenditures for new restaurants, including locations under development as of each fiscal year-end, were $98.4 million and $55.1 million for fiscal 2023 and 2022, respectively.
Sales through the off-premise channel comprised approximately 25% of our restaurant sales during fiscal 2022 as compared to 32% in fiscal 2021. However, off-premise sales mix remains elevated versus the pre-pandemic level of 16% during fiscal 2019, even as customers continue to return to on-premise dining. We account for each off-premise order as one customer for traffic measurement purposes.
Sales through the off-premise channel comprised approximately 22% of our restaurant sales during fiscal 2023 as compared to 25% in fiscal 2022. However, off-premise sales mix remains elevated versus the pre-pandemic level of 16% during fiscal 2019. We account for each off-premise order as one customer for traffic measurement purposes.
(4) Real estate obligations include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced. Amounts exclude agreements that are cancelable without significant penalty.
(4) Real estate obligations include construction commitments, net of up-front landlord construction contributions, and legally binding minimum lease payments for leases signed but not yet commenced. Amounts exclude agreements that are cancelable without significant penalty. Also includes the commitments associated with the third bakery production facility.
Acquisition-Related Deferred Consideration and Compensation During fiscal 2022 and 2021, we made payments of $11.1 million and $17.0 million, respectively, for deferred consideration related to the FRC acquisition. During fiscal 2022, we also made a payment of $7.2 million for deferred consideration and contingent consideration related to the FRC acquisition.
Acquisition-Related Deferred Consideration and Compensation During fiscal 2023 and 2022, we made payments of $11.3 million and $11.1 million, respectively, for deferred consideration related to the FRC acquisition. During fiscal 2023 and 2022, we also made payments of $13.0 million and $7.2 million, respectively for deferred consideration and contingent consideration related to the FRC acquisition.
In connection with the cash dividend that was declared by our Board on February 16, 2023, on March 21, 2023 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to 47 Table of Contents decrease) of the Notes in accordance with the terms.
In connection with the cash dividend that was declared by our Board on February 15, 2024, on March 5, 2024 we will adjust the conversion rate (which is expected to increase) and the conversion price (which is expected to decrease) of the Notes in accordance with the terms.
(See Item 1A — Risk Factors — “Our stock price could be adversely affected if our performance falls short of our financial guidance and/or market expectations.”) Results of Operations The following table presents, for the periods indicated, information from our consolidated statements of income/(loss) expressed as percentages of revenues. ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 2021 Revenues 100.0 % 100.0 % ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ Food and beverage costs ​ 24.6 22.3 Labor expenses ​ 36.7 36.6 Other operating costs and expenses ​ 26.7 27.0 General and administrative expenses ​ 6.2 6.4 Depreciation and amortization expenses ​ 2.8 3.1 Impairment of assets and lease termination expenses ​ 1.0 0.6 Acquisition-related contingent consideration, compensation and amortization expense ​ 0.4 ​ 0.7 ​ Preopening costs ​ 0.4 0.5 Total costs and expenses ​ 98.8 97.2 ​ ​ ​ ​ ​ ​ Income/(loss) from operations ​ 1.2 2.8 Interest and other expense, net ​ (0.2) (0.4) Income/(loss) before income taxes ​ 1.0 2.4 Income tax benefit ​ (0.3) (0.1) Net income/(loss) ​ 1.3 2.5 Dividends on Series A preferred stock ​ — ​ (0.6) ​ Undistributed earnings allocated to Series A preferred stock ​ — ​ (0.2) ​ Net income/(loss) available to common stockholders ​ 1.3 % 1.7 % ​ Fiscal 2022 Compared to Fiscal 2021 Revenues Revenues increased 12.8% to $3,303.2 million for fiscal 2022, including approximately $78.4 million contributed by the 53rd week, compared to $2,927.5 million for fiscal 2021, primarily due to an increase in comparable restaurant sales, reflecting the impact of the COVID-19 pandemic in fiscal 2021, as well as additional revenue related to new restaurant openings.
(See Item 1A — Risk Factors — “Our stock price could be adversely affected if our performance falls short of our financial guidance and/or market expectations.”) 42 Table of Contents Results of Operations The following table presents, for the periods indicated, information from our consolidated statements of income expressed as percentages of revenues. ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Revenues 100.0 % 100.0 % ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ Food and beverage costs ​ 23.4 24.6 Labor expenses ​ 35.7 36.7 Other operating costs and expenses ​ 26.8 26.7 General and administrative expenses ​ 6.3 6.2 Depreciation and amortization expenses ​ 2.7 2.8 Impairment of assets and lease termination expenses ​ 0.9 1.0 Acquisition-related contingent consideration, compensation and amortization expenses ​ 0.3 ​ 0.4 ​ Preopening costs ​ 0.7 0.4 Total costs and expenses ​ 96.8 98.8 ​ ​ ​ ​ ​ ​ Income from operations ​ 3.2 1.2 Interest and other expense, net ​ (0.3) (0.2) Income before income taxes ​ 2.9 1.0 Income tax benefit ​ (0.0) (0.3) Net income ​ 2.9 % 1.3 % ​ Fiscal 2023 Compared to Fiscal 2022 Revenues Revenues increased 4.1% to $3,439.5 million for fiscal 2023, compared to $3,303.2 million for fiscal 2022, which included approximately $78.4 million contributed by the 53rd week, due to an increase in comparable restaurant sales, as well as additional revenue related to new restaurant openings.
Preopening costs can fluctuate significantly from period to period based on the number, mix and timing of restaurant openings and the specific preopening costs incurred for each restaurant. The increase in preopening cost from fiscal 2021 primarily relates to a higher number of managers in reserve for pending openings, partially offset by decreased number of openings.
Preopening costs can fluctuate significantly from period to period based on the number, mix and timing of restaurant openings and the specific preopening costs incurred for each restaurant. The increase in preopening cost from fiscal 2022 primarily relates to a higher number of openings and the mix of new restaurant openings.
(4) Adjusted net income per share may not add due to rounding. 45 Table of Contents Fiscal 2023 Outlook This discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act, and Section 21E of the Exchange Act and should be read in conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” included in Part I, Item 1A of this report and the cautionary statements included throughout this report.
Fiscal 2024 Outlook This discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the Securities Act, and Section 21E of the Exchange Act and should be read in conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” included in Part I, Item 1A of this report and the cautionary statements included throughout this report.
Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and investment in our corporate and information technology infrastructures.
Typically, cash flows generated from operating activities are our principal source of liquidity, which we use to finance our restaurant expansion plans, ongoing maintenance of our restaurants and bakery facilities and investment in our corporate and information technology infrastructures. Similar to many restaurant and retail chain store operations, we utilize operating lease arrangements for all of our restaurant locations.
During fiscal 2022, the fair value of the contingent consideration and compensation liability increased by $4.7 million to $28.6 million due to an $8.3 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2022 revenues and estimated future revenues utilized in the calculation and amortization, partially offset by a payment of $7.2 million per the FRC acquisition agreement.
In fiscal 2023, the fair value of the contingent consideration and compensation liability decreased by $3.1 million due to a payment of $13.0 million per the FRC acquisition agreement, partially offset by $9.9 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2023 revenues and estimated future revenues utilized in the calculation and amortization.
We opened 13 restaurants in fiscal 2022 comprised of three The Cheesecake Factory, four North Italia, three Other FRC and three Other locations compared to 14 restaurants in fiscal 2021 comprised of two The Cheesecake Factory, six North Italia, four Other FRC and two Other locations.
We opened 16 restaurants in fiscal 2023 comprised of six The Cheesecake Factory, three North Italia, six Other FRC, and one Flower Child location compared to 13 restaurants in fiscal 2022 comprised of three The Cheesecake Factory, four North Italia, three Other FRC, and three Flower Child locations.
At January 3, 2023, the conversion rate for the Notes was 13.0675 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately $76.53 per share of common stock.
At January 2, 2024, the conversion rate for the Notes was 13.4936 shares of common stock per $1,000 principal amount of the Notes, which represents a conversion price of approximately $74.11 per share of common stock.
Our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items.
Our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items. In the future, we may incur expenses or generate income similar to the adjusted items.
Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Loan Agreement and applicable law, and other such factors that the Board considers relevant.
Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Loan Agreement and applicable law, and other such factors that the Board considers relevant. 48 Table of Contents Share Repurchases On October 26, 2022, our Board increased the authorization to repurchase our common stock by 5.0 million shares to 61.0 million shares.
We anticipate approximately $165 to $175 million in cash capital expenditures to support this level of unit development, as well as required maintenance on our restaurants. Restaurant opening dates may be impacted by supply chain challenges and permit approval delays. Total revenue for the first quarter of fiscal 2023 are expected to be approximately $850 million to $880 million.
We anticipate approximately $180 to $200 million in cash capital expenditures to support this level of unit development, as well as required maintenance on our restaurants. Restaurant opening dates may be impacted by supply chain challenges and permit approval delays.
We expect to open as many as 20 to 22 new restaurants in fiscal 2023 across our portfolio of concepts. We anticipate approximately $165 to $175 million in capital expenditures to support this level of unit development, as well as required maintenance on our restaurants.
We expect to open as many as 22 new restaurants in fiscal 2024 across our portfolio of concepts, with approximately 75% of the openings occurring in the second half of fiscal 2024. We anticipate approximately $180 to $200 million in capital expenditures to support this level of unit development, as well as required maintenance on our restaurants.
The undiscounted range of outcomes per the Monte Carlo model was $0 to $276.0 million at January 3, 2023 and $0 to $204.0 million at December 28, 2021.
The undiscounted range of outcomes per the Monte Carlo model was $2.6 million to $235.4 million at January 2, 2024 and $0 to $276.0 million at January 3, 2023.
We calculate these non-GAAP measures by eliminating from net income and diluted net income per common share the impact of items we do not consider indicative of our ongoing operations.
We calculate these non-GAAP measures by eliminating from net income and diluted net income per common share the impact of items we do not consider indicative of our ongoing operations. We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.
Preopening Costs Preopening costs were $16.8 million for fiscal 2022 compared to $13.7 million for fiscal 2021.
Preopening Costs Preopening costs were $25.4 million for fiscal 2023 compared to $16.8 million for fiscal 2022.
The increase from fiscal 2021 was primarily driven by increased customer traffic of 11% primarily due to the impact of the COVID-19 pandemic in the prior year, and an increase in average check of 4.0% (based on an increase of 5.5% in menu pricing, partially offset by a 1.5% negative impact from mix).
The increase from fiscal 2022 was primarily driven by an increase in average check of 4.0% (based on an increase of 9.4% in menu pricing, partially offset by a 5.4% negative change from menu mix), partially offset by decreased customer traffic of 1.0%.
On October 6, 2022, we repaid the outstanding balance under the prior credit facility and borrowed the same amount on the Revolver Facility. As of January 3, 2023, we had net availability for borrowings of $238.5 million, based on a $130.0 million outstanding debt balance and $31.5 million in standby letters of credit under the Revolver Facility.
As of January 2, 2024, we had net availability for borrowings of $236.5 million, based on a $130.0 million outstanding debt balance and $33.5 million in standby letters of credit under the Revolver Facility.
(See Note 15 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our repurchase authorization and methods.) Contractual Obligations and Commercial Commitments The following table summarizes our undiscounted contractual obligations and commercial commitments as of January 3, 2023 (amounts in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ Less than ​ ​ ​ ​ More than ​ Total 1 Year 1 ‑ 3 Years 4 ‑ 5 Years 5 Years Contractual obligations ​ ​ ​ ​ ​ Recorded contractual obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating leases liabilities (1) ​ $ 2,021.0 ​ $ 142.8 ​ $ 267.2 ​ $ 271.4 ​ $ 1,339.6 Long-term debt ​ 468.0 ​ — ​ — ​ 468.0 ​ — Acquisition-related deferred consideration ​ ​ 11.3 ​ ​ 11.3 ​ ​ — ​ ​ — ​ ​ — Uncertain tax positions (2) ​ 3.8 ​ — ​ 3.8 ​ — ​ — Unrecorded contractual obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase obligations (3) ​ ​ 129.9 ​ ​ 112.1 ​ ​ 16.4 ​ ​ 1.0 ​ ​ 0.4 Real estate obligations (4) ​ 252.4 ​ 75.9 ​ 28.8 ​ 14.3 ​ 133.4 Total ​ $ 2,886.4 ​ $ 342.1 ​ $ 316.2 ​ $ 754.7 ​ $ 1,473.4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other commercial commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standby letters of credit ​ $ 31.5 ​ $ 31.5 ​ $ — ​ $ — ​ $ — (1) Includes $845.1 million related to options to extend lease terms that are reasonably certain of being exercised.
(See Note 14 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our repurchase authorization and methods.) Contractual Obligations and Commercial Commitments The following table summarizes our undiscounted contractual obligations and commercial commitments as of January 2, 2024 (amounts in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ Less than ​ ​ ​ ​ More than ​ Total 1 Year 1 ‑ 3 Years 4 ‑ 5 Years 5 Years Contractual obligations ​ ​ ​ ​ ​ Recorded contractual obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating leases liabilities (1) ​ $ 2,079.2 ​ $ 138.5 ​ $ 291.3 ​ $ 292.3 ​ $ 1,357.1 Long-term debt ​ 470.0 ​ — ​ ​ 340.0 ​ ​ 130.0 ​ ​ — Uncertain tax positions (2) ​ 3.8 ​ 0.3 ​ 3.5 ​ — ​ — Unrecorded contractual obligations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Purchase obligations (3) ​ ​ 101.4 ​ ​ 78.7 ​ ​ 19.9 ​ ​ 2.3 ​ ​ 0.5 Real estate obligations (4) ​ 414.8 ​ 126.0 ​ 43.3 ​ 23.2 ​ 222.3 Total ​ $ 3,069.2 ​ $ 343.5 ​ $ 698.0 ​ $ 447.8 ​ $ 1,579.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other commercial commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Standby letters of credit ​ $ 33.5 ​ $ 33.5 ​ $ — ​ $ — ​ $ — (1) Includes $710.3 million related to options to extend lease terms that are reasonably certain of being exercised.
Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers. 39 Table of Contents Overview Our strategy is driven by our commitment to customer satisfaction and is focused primarily on menu innovation, service and operational execution to continue to differentiate ourselves from other restaurant concepts, as well as to drive competitively strong performance that is sustainable.
Overview Our strategy is driven by our commitment to customer satisfaction and is focused primarily on menu innovation, service and operational execution to continue to differentiate ourselves from other restaurant concepts, as well as to drive competitively strong performance that is sustainable.
Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 0.8% to 10,841. 41 Table of Contents North Italia comparable sales increased approximately 15% from fiscal 2021 and increased approximately 22% compared to fiscal 2019.
Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 10.1% compared to 1,571 in the prior year. North Italia comparable sales increased approximately 8% from fiscal 2022 and increased approximately 31% compared to fiscal 2019 on an operating week basis.
We currently own and operate 318 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (210 locations), North Italia ® (33 locations), Flower Child ® (30 locations) and a collection of other FRC brands (35 locations). Internationally, 30 The Cheesecake Factory ® restaurants operate under licensing agreements.
We currently own and operate 334 restaurants throughout the United States and Canada under brands including The Cheesecake Factory ® (216 locations), North Italia ® (37 locations), Flower Child ® (32 locations) and additional brands within our FRC portfolio (41 locations). Internationally, 33 The Cheesecake Factory ® restaurants operate under licensing agreements.
The Cheesecake Factory restaurant menus are among the most diversified in the foodservice industry and, accordingly, are not overly dependent on a few select commodities. Changes in costs for one commodity sometimes can be offset by cost changes in other commodity categories. The principal commodity categories for our restaurants include general grocery items, dairy, produce, seafood, poultry, meat and bread.
Changes in costs for one commodity sometimes can be offset by cost changes in other commodity categories. The principal commodity categories for our restaurants include general grocery items, dairy, produce, seafood, poultry, meat and bread.
(See Note 15 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our preferred stock.) Common Stock Dividends Common stock dividends of $42.3 million and $0.3 million were paid in fiscal 2022 and 2021, respectively.
At January 2, 2024, we were in compliance with all covenants in effect at that date. (See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of our long-term debt.) Common Stock Dividends Common stock dividends of $53.2 million and $42.3 million were paid in fiscal 2023 and 2022, respectively.
We plan to continue expanding The Cheesecake Factory and North Italia concepts, and in addition, our FRC subsidiary serves as an incubation engine, creating additional concepts for potential future growth.
We plan to continue expanding The Cheesecake Factory and North Italia concepts, and in addition, our FRC subsidiary serves as an incubation engine, innovating new food, dining and hospitality experiences to create fresh, exciting concepts.
Future decisions to pay or to increase or decrease dividends or to repurchase shares are at the discretion of the Board and will be dependent on a number of factors, including limitations pursuant to the terms and conditions of the Loan Agreement and applicable law. 40 Table of Contents Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7%, in aggregate across concepts, and comparable sales growth), combined with margin expansion, planned debt repayments and an anticipated capital return program will support our long-term financial objective of 13% to 14% total return to shareholders, on average.
Longer-term, we believe our domestic revenue growth (comprised of our targeted annual unit growth of 7%, in aggregate across concepts, and comparable sales growth), combined with margin expansion, planned debt repayments and an anticipated capital return program will support our long-term financial objective of 13% to 14% total return to shareholders, on average.
The following table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Cash provided by operating activities ​ $ 161.9 ​ $ 213.0 Additions to property and equipment ​ ​ (112.5) ​ ​ (66.9) Acquisition-related deferred consideration and compensation ​ ​ (18.3) ​ ​ (17.0) Convertible debt issuance, net of issuance cost ​ ​ — ​ ​ 334.9 Common stock issuance, net of issuance cost ​ ​ — ​ ​ 167.1 Borrowings on credit facility ​ ​ 130.0 ​ ​ — Repayments on credit facility ​ ​ (130.0) ​ ​ (150.0) Series A preferred stock cash-settled conversion ​ ​ — ​ ​ (443.8) Series A preferred stock dividends paid ​ ​ — ​ ​ (18.7) Proceeds from exercises of stock options ​ ​ 0.1 ​ ​ 24.8 Common stock dividends paid ​ ​ (42.3) ​ ​ (0.3) Treasury stock purchases ​ ​ (63.1) ​ ​ (5.8) ​ Cash Provided by Operating Activities Cash flows from operations decreased by $51.1 million from fiscal 2021 primarily due to lower net income, the timing of payroll disbursements in relation to the fiscal 2022 versus 2021 year-end dates, higher gift card redemptions and lower accrued incentive compensation.
The following table presents, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fiscal Year ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Cash provided by operating activities ​ $ 218.4 ​ $ 161.9 Additions to property and equipment ​ ​ (151.6) ​ ​ (112.5) Acquisition-related deferred consideration and compensation ​ ​ (24.2) ​ ​ (18.3) Borrowings on credit facility ​ ​ 15.0 ​ ​ 130.0 Repayments on credit facility ​ ​ (15.0) ​ ​ (130.0) Common stock dividends paid ​ ​ (53.2) ​ ​ (42.3) Treasury stock purchases ​ ​ (46.1) ​ ​ (63.1) ​ Cash Provided by Operating Activities Cash flows from operations increased by $56.5 million from fiscal 2022 primarily due to higher net income, a higher payroll accrual due to the timing of payments and higher incentive compensation accrued in fiscal 2023 compared to fiscal 2022 and the collection of our fiscal 2020 net operating loss carryback refund in fiscal 2022.
These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance. In fiscal 2022, we recorded $31.4 million of expense primarily related to the impairment of three The Cheesecake Factory, one Other FRC and three Other restaurants.
These estimates are subjective and our ability to realize future cash flows and asset fair values is affected by factors such as changes in economic conditions and operating performance.
We are not limited to the use of lease arrangements as our only method of opening new restaurants. However, we believe our operating lease arrangements continue to provide appropriate leverage for our capital structure in a financially efficient manner. 46 Table of Contents During fiscal 2022, our cash and cash equivalents decreased by $74.9 million to $114.8 million.
Accordingly, our lease arrangements reduce, to some extent, our capacity to utilize funded indebtedness in our capital structure. We are not limited to the use of lease arrangements as our only method of opening new restaurants. However, we believe our operating lease arrangements continue to provide appropriate leverage for our capital structure in a financially efficient manner.
These favorable factors were partially offset by a higher proportion of non-deductible losses as compared to non-taxable gains in fiscal 2021 on our investments in variable life insurance contracts used to support our non-qualified deferred compensation plan (“Non-Qualified Plans”) in relation to income before income taxes (12.6%), the benefit to our net operating loss carryback recorded in fiscal 2021 of our decision to accelerate payment of certain FICA taxes deferred pursuant to the CARES Act (6.3%), a tax shortfall in fiscal 2022 related to equity compensation (5.5%) and a higher proportion of state taxes expense in relation to income before income taxes (4.7%).
The change was due primarily to a smaller proportion of employment credits in relation to income before income taxes (49.4%), offset by a higher proportion of non-taxable gains as compared to non-deductible losses in fiscal 2022 on our investments in variable life insurance contracts used to support our non-qualified 45 Table of Contents deferred compensation plan (“Non-Qualified Plans”) in relation to income before income taxes (12.1%), a lower tax shortfall in fiscal 2023 related to equity compensation (4.0%) and a lower proportion of state taxes expense in relation to income before income taxes (3.5%).
During fiscal 2021, we recorded impairment of assets and lease terminations expense of $18.1 million primarily related to the impairment of long-lived assets for three The Cheesecake Factory and two Other restaurants. See Notes 1 and 6 of Notes to Consolidated Financial Statements in Part 1V, Item 15 of this report for further discussion of our long-lived and intangible assets.
See Notes 1 and 6 of Notes to Consolidated Financial Statements in Part 1V, Item 15 of this report for further discussion of our long-lived and intangible assets. Acquisition-Related Contingent Consideration, Compensation and Amortization Expense We recorded $11.7 million and $13.4 million of expense during fiscal 2023 and 2022, respectively, of acquisition-related contingent consideration, compensation and amortization.
The Revolver Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit. The Revolver Facility contains a commitment increase feature that, subject to certain conditions precedent, could provide for an additional $200 million in revolving loan commitments.
The Loan Agreement amends and restates in its entirety our prior credit agreement. The Revolver Facility, which terminates on October 6, 2027, provides us with revolving loan commitments that total $400 million, of which $50 million may be used for issuances of letters of credit.
General The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality.
Any of these factors may have an adverse impact on our business and materially adversely affect our financial performance. General The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality.
The increase from fiscal 2021 was primarily driven by increased customer traffic of 6.8% primarily due to the impact of the COVID-19 pandemic in the prior year, and an increase in average check of 0.2% (based on an increase of 5.9% in menu pricing, partially offset by a 5.7% negative change in mix).
The increase from fiscal 2022 was primarily driven by an increase in average check of approximately 5% (based 43 Table of Contents on an increase of 8% in menu pricing, partially offset by a 3% negative impact from mix), as well as increased customer traffic of 3%.
Labor Expenses As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery production labor, including associated fringe benefits, were 36.7% and 36.6% in fiscal 2022 and fiscal 2021, respectively.
Labor Expenses As a percentage of revenues, labor expenses, which include restaurant-level labor costs and bakery production labor, including associated fringe benefits, were 35.7% and 36.7% in fiscal 2023 and fiscal 2022, respectively. This decrease was primarily due to menu price increases in excess of wage rate inflation and improved staffing levels (1.0%).
North Italia average sales per restaurant operating week increased 12.1% to $142,532 in fiscal 2022 from $127,146 in fiscal 2021. Total operating weeks at North Italia increased 18.6% to 1,604 in fiscal 2022 compared to 1,352 in the prior year. Excluding the impact of the 53rd week in fiscal 2022, total operating weeks increased 16.2% to 1,571.
North Italia average sales per restaurant operating week increased 5.0% to $149,727 in fiscal 2023 from $142,532 in fiscal 2022. Total operating weeks at North Italia increased 7.8% to 1,729 in fiscal 2023 compared to 1,604 in the prior year.
Including the 3.5% February 2023 price increase, we will have 10.5% pricing in The Cheesecake Factory menu, and we will evaluate the level of pricing for the summer menu based on inflationary trends.
Based on recent trends and assuming no material operating or consumer disruptions, we anticipate total revenue for fiscal 2024 to be approximately $3.6 billion. Including the 2.5% February 2024 price increase, we will have 4.5% pricing in The Cheesecake Factory menu, and we will evaluate the level of pricing for the summer menu based on inflationary trends.
Cash Flow Outlook We believe that our cash and cash equivalents, combined with expected cash flows provided by operations and available borrowings under the Revolver Facility, will provide us with adequate liquidity for the next 12 months and the foreseeable future. 49 Table of Contents As of January 3, 2023, we had no financing transactions, arrangements or other relationships with any unconsolidated entities or related parties.
We are also required to provide financing to FRC in an amount sufficient to support achievement of these targets during the five years after closing. 49 Table of Contents Cash Flow Outlook We believe that our cash and cash equivalents, combined with expected cash flows provided by operations and available borrowings under the Revolver Facility, will provide us with adequate liquidity for the next 12 months and the foreseeable future.
As a percentage of revenues, food and beverage costs were 24.6% for fiscal 2022 compared to 22.3% for fiscal 2021, primarily due to inflation across most categories in excess of menu price increases (1.9%).
As a percentage of revenues, food and beverage costs were 23.4% for fiscal 2023 compared to 24.6% for fiscal 2022, primarily due to menu price increases in excess of inflation across most categories (1.0%). The Cheesecake Factory restaurant menus are among the most diversified in the foodservice industry and, accordingly, are not overly dependent on a few select commodities.
International licensed locations and restaurants that are no longer in operation, including those which we have relocated, are excluded from comparable sales calculations. Food and Beverage Costs Food and beverage costs consist of raw materials and ingredients used in the food and beverage products sold in our restaurants and to our third-party bakery customers.
Food and Beverage Costs Food and beverage costs consist of raw materials and ingredients used in the food and beverage products sold in our restaurants and to our third-party bakery customers.
While most of our restaurants operated with no restrictions on indoor dining during fiscal years 2021 and 2022, our revenues were negatively impacted during periods of accelerating case counts during which we incurred increased restaurant staff absenteeism and temporary shifts in consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels.
Geopolitical and Other Macroeconomic Impacts to our Operating Environment During fiscal 2021 and 2022, the COVID-19 pandemic continued to affect our business during periods of accelerated case counts in which we experienced increased restaurant staff absenteeism and temporary shifts in consumer behavior, such as changes in customer traffic or the mix between on-premise and off-premise channels.
In fiscal 2020, we recorded $36.2 million of expense primarily related to the impairment of one The Cheesecake Factory, one North Italia, two Other FRC and six Other restaurants, as well as lease termination costs and accelerated depreciation for one The Cheesecake Factory and seven Other restaurants.
In fiscal 2023, we recorded $29.5 million of expense primarily related to the impairment of three The Cheesecake Factory (one previously impaired), one North Italia (previously impaired), one Other FRC and two Other restaurant lease terminations.
Credit Facility On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement” and the revolving credit facility provided thereunder, the “Revolver Facility”). The Loan Agreement amends and restates in its entirety our prior credit agreement.
(See Note 10 of Notes to Consolidated Financial Statements in Part IV, Item 15 of this report for further discussion of the Notes.) Credit Facility On October 6, 2022, we entered into a Fourth Amended and Restated Loan Agreement (the “Loan Agreement” and the revolving credit facility provided thereunder, the “Revolver Facility”).
Additionally, we had no financing arrangements involving synthetic leases or trading activities involving commodity contracts. Critical Accounting Estimates Critical accounting policies are those we believe are most important to portraying our financial condition and results of operations and also require the greatest amount of subjective or complex judgments by management.
Critical Accounting Estimates Critical accounting policies are those we believe are most important to portraying our financial condition and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions.
Total operating weeks at The Cheesecake Factory restaurants increased 2.7% to 11,052 in fiscal 2022 compared to 10,758 in the comparable prior year period.
The Cheesecake Factory average sales per restaurant operating week increased 3.0% to $235,701 in fiscal 2023 from $228,741 in fiscal 2022. Total operating weeks at The Cheesecake Factory restaurants decreased 0.4% to 11,010 in fiscal 2023 compared to 11,052 in the comparable prior year period.
Contingent Consideration and Compensation Liability The Acquisition agreement included a contingent consideration provision, a portion of which was considered part of the acquisition consideration and the remainder of which was considered future compensation expense.
We consider the following policies to be the most critical in understanding the judgment that is involved in preparing our consolidated financial statements. Contingent Consideration and Compensation Liability The FRC acquisition agreement included a contingent consideration provision, a portion of which was considered part of the acquisition consideration and the remainder of which was considered future compensation expense.
The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delay in new restaurant openings.
We also encountered delays in opening new restaurants primarily due to delays in permitting and landlord readiness, as well as supply chain challenges. The ongoing impact of geopolitical and macroeconomic events could lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in the supply chain and delay in new restaurant openings.
We plan to open as many as 20 to 22 new restaurants in fiscal 2023, including five to six The Cheesecake Factory restaurants, five to six North Italia restaurants and 10 restaurants within our FRC business, which includes three to four Flower Child locations.
Based on these factors, we expect fiscal 2024 net income margin of approximately 4.25% at the estimated revenue. 46 Table of Contents We plan to open as many as 22 new restaurants in fiscal 2024, including three The Cheesecake Factory restaurants, six to seven North Italia restaurants, six to seven Flower Child locations and six to seven restaurants within our Other FRC business.
Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative (“G&A”) expenses and preopening expenses.
In addition, on a regular basis, we carefully consider opportunities to adjust our menu offerings or ingredients to help manage product availability and cost. Margins are subject to fluctuations in commodity costs, labor, restaurant-level occupancy expenses, general and administrative (“G&A”) expenses and preopening expenses.
We repurchased 2.0 million shares at a cost of $63.1 million during fiscal 2022 compared to 0.1 million shares at a cost of $5.8 million fiscal 2021.
Under this authorization, we have cumulatively repurchased 56.5 million shares at a total cost of $1,811.7 million, excluding excise tax through January 2, 2024. We repurchased 1.4 million shares at a cost of $46.1 million, excluding excise tax during fiscal 2023 compared to 2.0 million shares at a cost of $63.1 million fiscal 2022.
We anticipate commodity inflation of approximately 10% to 12% and expect labor inflation of approximately 6%. Based on these factors, we expect first quarter fiscal 2023 net income margin of approximately 3% to 3.5%.
Based on these factors, we expect first quarter fiscal 2024 net income margin of approximately 3.5% at the mid-point of the estimated revenue range.
We implemented effective menu price increases of approximately 3.25%, 4.25% and 2.8% in the first, third and fourth quarters of fiscal 2022, respectively. The Cheesecake Factory average sales per restaurant operating week increased 7.3% to $228,741 in fiscal 2022 from $213,165 in fiscal 2021.
We implemented effective menu price increases of approximately 4.0% and 3.7% in the second and fourth quarters of fiscal 2023, respectively. Flower Child sales per restaurant operating week increased 6.5% to $79,714 in fiscal 2023 from $74,852 in fiscal 2022. Total operating weeks at Flower Child increased 4.2% to 1,599 in fiscal 2023 compared to 1,534 in the prior year.
However, there remains measurable risk associated with cost fluctuations driven by the current environment. We estimate preopening costs of approximately $24 million. Based on these factors, we expect fiscal 2023 net income margin of approximately 4% at the mid-point of the estimated revenue range.
However, there remains measurable risk associated with cost fluctuations driven by the current environment. We estimate G&A expenses to be consistent with fiscal 2023 as a percent of sales and preopening costs of approximately $28 million.
Due to the inflationary cost pressures we are experiencing, we implemented menu price increases above our historical levels in the first and third quarters of fiscal 2022 and also implemented an incremental price increase in the fourth quarter of fiscal 2022 to support our longer-term restaurant-level margin objectives.
In fiscal years 2022 and 2023, we implemented menu price increases above our historical levels, including an incremental price increase in the fourth quarter of fiscal 2022, to help offset significant inflationary cost pressures. Current and future near-term pricing actions may also be at levels above historical norms to keep pace with any significant cost increases.
We did not record any impairment charges related to indefinite-lived intangible assets in fiscal 2022 or 2021. We recorded impairment charges related to indefinite-lived intangible assets of $180.8 million in fiscal 2020.
These fair value assessments could change materially if different estimates and assumptions were used. 50 Table of Contents We did not record any impairment charges related to indefinite-lived intangible assets in fiscal 2023, 2022 or 2021.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+2 added−0 removed5 unchanged
Biggest changeBased on balances at January 3, 2023 and December 28, 2021, a hypothetical 10% decline in the market value of our deferred compensation asset and related liability would not have impacted income before income taxes. However, under such scenario, net income would have declined by $2.0 million and $2.3 million at January 3, 2023 and December 28, 2021, respectively. ​
Biggest changeBased on balances at January 2, 2024 and January 3, 2023, a hypothetical 10% decline in the market value of our deferred compensation asset and related liability would not have impacted income before income taxes.
During fiscal 2021, we began to experience certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic. These shortages continued in fiscal 2022 and were exacerbated by geopolitical unrest. The aggregate impact of these and other factors contributed to significant cost inflation.
During fiscal 2021, we began to experience certain supply shortages and transportation delays largely attributable to impacts of the COVID-19 pandemic. These shortages continued in fiscal 2022 and were exacerbated by geopolitical unrest and macroeconomic events. The aggregate impact of these and other factors contributed to significant cost inflation.
We continue to evaluate the possibility of entering into similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities. As of the end of fiscal 2022, we had no hedging contracts in place.
We continue to evaluate the possibility of entering into similar arrangements for other commodities and periodically evaluate hedging vehicles, such as direct financial instruments, to assist us in managing risk and variability associated with such commodities. As of the end of fiscal 2023, we had no hedging contracts in place.
The cost of products and services used in our operations is subject to volatility due to the relative availability of labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events such as the COVID-19 pandemic, geopolitical events, economic conditions or other unforeseen circumstances. Climate change may further exacerbate a number of these factors.
The cost of products and services used in our operations is subject to volatility due to the relative availability of labor and distribution, weather, natural disasters, inventory levels and other supply and/or demand impacting events such as geopolitical events, economic conditions or other unforeseen circumstances. Climate change may further exacerbate a number of these factors.
(See Item 1A — 52 Table of Contents Risk Factors — “Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect our financial performance.”) We are exposed to market risk from interest rate changes on our funded debt.
(See Item 1A — Risk Factors — “Our inability to anticipate and react effectively to changes in the costs of key operating resources may increase our cost of doing business, which could materially adversely affect our financial performance.”) We are exposed to market risk from interest rate changes on our funded debt.
While we are in the process of contracting for certain key food and non-food supplies for fiscal 2023, these efforts may not be successful or yield our intended benefits.
While we are in the process of contracting for certain key food and non-food supplies for fiscal 2024, these efforts may not be successful or yield our intended benefits.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following discussion of market risks contains forward-looking statements and should be read in conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” in Part I, Item 1A of this report, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this report and the cautionary statements included throughout this report.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The following discussion of market risks contains forward-looking statements and should be read in conjunction with our consolidated financial statements and related notes in Part IV, Item 15 of this report, the “Risk Factors” in Part I, Item 1A of this report, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”in Part II, Item 7 of this report and the cautionary statements included throughout this report.
This exposure relates to the component of the interest rate on the Loan Agreement that is indexed to market rates. Based on outstanding borrowings at January 3, 2023 and December 28, 2021, a hypothetical 1% rise in interest rates would have increased interest expense by $1.3 million on an annual basis.
This exposure relates to the component of the interest rate on the Loan Agreement that is indexed to market rates. Based on outstanding borrowings at January 2, 2024 and January 3, 2023, a hypothetical 1% rise in interest rates would have increased interest expense by $1.3 million on an annual basis.
We may not have the ability to increase menu prices or vary menu items in response to food commodity price increases. For fiscal 2022 and 2021, a hypothetical increase of 1% in food costs would have negatively impacted food and beverage costs by $8.1 million and $6.5 million, respectively.
We may not have the ability to increase menu prices or vary menu items in response to food commodity price increases. For fiscal 2023 and 2022, a hypothetical increase of 1% in food costs would have negatively impacted food and beverage costs by $8.0 million and $8.1 million, respectively.
We attempt to negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and poultry, depending on market conditions and expected demand.
While we have seen improvements in many of these areas, the absolute level of commodity costs has remained elevated. We attempt to negotiate short-term and long-term agreements for some of our principal commodity, supply and equipment requirements, such as certain dairy products and poultry, depending on market conditions and expected demand.
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However, under such scenario, net income would have declined by $2.4 million and $2.0 million at January 2, 2024 and January 3, 2023, respectively. ​ ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements required to be filed hereunder are set forth in Part IV, Item 15 of this report. ​ ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 52 Table of Contents

Other CAKE 10-K year-over-year comparisons