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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  May 1, 2020

 

THE CHEESECAKE FACTORY INCORPORATED

(Exact name of registrant as specified in its charter)

 

 

Delaware   0-20574   51-0340466
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)

 

 

26901 Malibu Hills Road
Calabasas Hills, California
  91301
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (818) 871-3000

 

Not Applicable

(Former name or former address, if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class:   Trading Symbol(s)   Name of each exchange on which registered:
Common Stock, par value $.01 per share   CAKE   Nasdaq Stock Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

  

 

 

 

  

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

 

On May 1, 2020 (the “Effective Date”), The Cheesecake Factory Incorporated (the “Company” or “we,” “us” and “our”) entered into a First Amendment (the “Amendment”) to its existing Third Amended and Restated Loan Agreement, dated July 30, 2019 (as amended by the Amendment, the “Amended Loan Agreement”), with JPMorgan Chase Bank, N.A. (“JPMCB”), as administrative agent, and JPMCB as sole bookrunner and sole lead arranger.

 

The Amended Loan Agreement provides for, among other things, (i) a covenant relief period (the “Covenant Relief Period”) from the Effective Date until the Company demonstrates compliance with its financial covenants as of the quarter ending on or after June 29, 2021, during which the Company is not required to comply with financial covenants requiring maintenance of a maximum ratio of net adjusted debt to EBITDAR (the “Net Adjusted Leverage Ratio”) of 4.75 to 1.00 and a minimum ratio of EBITDAR to interest and rent expense of 1.90 to 1.00 (the “EBITDAR to Interest and Rental Expense Ratio”), (ii) a substitution of the Net Adjusted Leverage Ratio and EBITDAR to Interest and Rental Expense Ratio covenants with a liquidity covenant for the calendar month ending May 31, 2020 and continuing through the calendar month ending February 28, 2021 that requires the liquidity of the Company and its subsidiaries be at least $65,000,000 at the end of each calendar month (with liquidity being the sum of (a) unrestricted cash and cash equivalents and (b) the unused portion of the revolving facility) (and solely for the fiscal quarter ending March 30, 2021, the Company can meet either (x) both the Net Adjusted Leverage Ratio test and the EBITDAR to Interest and Rental Expense Ratio test or (y) meet the minimum liquidity test), with the minimum liquidity covenant to be tested again from the calendar month ending April 30, 2021 until the Company demonstrates compliance with the Net Adjusted Leverage Ratio and EBITDAR to Interest and Rental Expense Ratio for a fiscal quarter ending on or after March 30, 2021, (iii) a lowered amount of permitted increases to revolving loan commitments under the Amended Loan Agreement during the Covenant Relief Period from $200,000,000 to $125,000,000, (iv) a limit on capital expenditures not to exceed $90,000,000 during the Covenant Relief Period, and (v) increased limitations on the Company’s ability to make restricted payments, incur debt, and consummate acquisitions during the Covenant Relief Period.

 

Borrowings under the Amended Loan Agreement during the Covenant Relief Period bear interest, at the Company’s option, at a rate equal to either: (i) the adjusted LIBO Rate (as customarily defined, the “Adjusted LIBO Rate”) plus 2.5%, or (ii) the sum of (a) the highest of (1) the rate of interest last quoted by The Wall Street Journal as the prime rate in effect in the United States, (2) the greater of the rate calculated by the Federal Reserve Bank of New York as the effective federal funds rate or the rate that is published by the Federal Reserve Bank of New York as an overnight bank funding rate, in either case plus 0.5%, and (3) the one-month Adjusted LIBO Rate plus 1.0%, plus (b) 1.50%. The Company will also pay a fee of 0.40% on the daily amount of unused commitments under the Amended Loan Agreement.

 

The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, which is filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.

  

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

The following information under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition” is intended to be furnished. This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this report, regardless of any general incorporation language in the filing.

 

In a press release dated May 5, 2020, a copy of which is furnished as Exhibit 99.1 to this report, the Company provided preliminary first quarter fiscal 2020 financial results.

 

 

 

ITEM 2.03

CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER

AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT

 

The description set forth under Item 1.01 of this Form 8-K is incorporated by reference herein in its entirety.

  

ITEM 8.01 OTHER EVENTS

 

The Company is unable to file its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Quarterly Report”) by the original deadline of May 11, 2020 due to the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic. We have experienced significant disruptions to our business due to suggested and mandated social distancing and shelter-in-place orders resulting in the temporary closure of 32 restaurants across our portfolio, including three The Cheesecake Factory restaurants, with the remaining locations shifted to an off-premise only operating model. Once the reopening of dining rooms is allowed, we will be operating under capacity restrictions for some time as social distancing protocols remain in place.

 

These considerable developments have triggered the need to perform impairment assessments of our long- lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts LLC. This is a substantial undertaking due to the need to develop and analyze several best estimates and assumptions that are more difficult to forecast in these unprecedented times, including future sales and operating results, discount and royalty rates and volatility factors.

 

On March 4, 2020, the Securities and Exchange Commission issued an order (Release No. 34-88318) under Section 36 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) granting exemptions from specified provisions of the Exchange Act and certain rules thereunder, as amended by Release No. 34-88465 issued on March 25, 2020 (collectively, the “Order”). In light of the significant impact of COVID-19, the Company will be unable to complete the analyses described above in time to file its Quarterly Report by the original filing deadline without unreasonable effort or expense. Accordingly, we are relying on the Order to postpone the filing of our Quarterly Report to provide us with additional time to finalize these assessments as well as prepare additional required disclosures related to COVID-19. The Company expects to file its Quarterly Report no later than 45 days after the original deadline of May 11, 2020.

 

In light of the evolving COVID-19 pandemic, the Company is also filing this Current Report on Form 8-K for the purpose of supplementing the risk factors disclosed in Item 1A of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Accordingly, the Company’s risk factor disclosure is hereby updated to add the following:

 

Risks Related to Our Financial Performance

 

The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic have significantly disrupted and will continue to disrupt our business, which has and could continue to materially affect our financial condition and operating results for an extended period of time.

 

The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic, as well as our responses to the outbreak, have significantly disrupted and will continue to disrupt our business. In the United States and other regions, social distancing restrictions have been enacted and in many areas individuals are restricted from non-essential movements outside of their homes. In response to the COVID-19 pandemic and these changing conditions, we have temporarily closed 32 restaurants across our portfolio, including three The Cheesecake Factory restaurants, with the remaining locations shifted to an off-premise only operating model. Once the reopening of dining rooms is allowed, we will be operating under capacity restrictions for some time as social distancing protocols remain in place. Additionally, an outbreak or perceived outbreak of COVID-19 connected to one or more of our restaurants could cause negative publicity directed at any of our brands and cause customers to avoid our restaurants. We cannot predict how long the pandemic will last or whether it will reoccur, what additional restrictions may be enacted, to what extent off-premise dining will continue, or if individuals will be comfortable returning to our dining rooms during or following social distancing protocols. Similarly, we cannot predict the effects the COVID-19 pandemic will have on the restaurant industry as a whole or the share of customer traffic to our restaurants compared to other restaurants or outlets. Any of these changes could materially adversely affect our financial performance.

 

 

 

Our restaurant operations could be further disrupted if any of our restaurant staff members is diagnosed with COVID-19, which has occurred at some of our restaurants, requiring the quarantine of some or all of a restaurant’s staff members and the temporary closure of the restaurant. If a significant percentage of our workforce is unable to work, due to COVID-19 illness, quarantine, limitations on travel or other government restrictions in connection with COVID-19, our operations may be negatively impacted, potentially materially adversely affecting our liquidity, financial condition or results of operations. Our suppliers could be similarly adversely impacted by the COVID-19 outbreak, and we could face shortages of food items or other supplies at our restaurants and our operations and sales could be adversely impacted by such supply interruptions. In addition, we have furloughed approximately 41,000 staff members and may need to implement additional furloughs. Those staff members might seek and find other employment during the furlough, which could materially adversely affect our ability to properly staff and reopen our restaurants with experienced staff members when the business interruptions caused by COVID-19 abate or end.

 

In addition, while we have taken actions to manage our liquidity position in response to COVID-19, we may need to seek additional sources of liquidity. The COVID-19 pandemic is adversely affecting the availability of liquidity generally in the credit markets, and there can be no guarantee that additional liquidity will be available on favorable terms, or at all, especially the longer the COVID-19 pandemic lasts or if it were to reoccur. On May 1, 2020, we entered into an amendment to our revolving credit facility that, among other changes, provides for net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratio covenant relief through the first quarter of fiscal 2021. Following the end of the covenant relief period, a material increase in our level of debt could cause our net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratios to exceed the maximum levels permitted under the covenants in our revolving credit facility.

 

The impact of COVID-19 on our business has resulted in the need to perform impairment assessments of the Company’s long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts LLC, which will delay the filing of our quarterly report on Form 10-Q. Our preliminary financial results for the quarter ended March 31, 2020 do not include these items and the corresponding tax effects, all of which are currently being evaluated. While these items are non-cash in nature, the impact on reported results is expected to be material.

 

Our efforts to address our rent obligations during the COVID-19 pandemic are ongoing and our ability to obtain rent concessions will vary by landlord. While we continue to engage in discussions with our landlords, certain of our landlords have alleged that we are in default of our leases with them. If we are unable to reach an agreement with these landlords, we may face eviction proceedings, which could be expensive to litigate and may jeopardize our ability to continue operations at the impacted restaurant. The COVID-19 pandemic has also adversely affected our ability to open new restaurants, and we have paused nearly all construction of new restaurants and certain remodeling projects at existing restaurants. These changes may materially adversely affect our ability to grow our business, particularly if these construction pauses are in place for a significant amount of time.

 

The impact global and domestic economic conditions have on consumer discretionary spending could materially adversely affect our financial performance.

 

Dining out is a discretionary expenditure that historically has been influenced by domestic and global economic conditions. The outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic have led to a national and global economic downturn. Consumer discretionary spending has weakened and we expect it to continue to weaken. Reduced discretionary spending could influence off-premise dining, customer traffic in our restaurants when it resumes, and average check amount, which in turn could have a material impact on our financial performance.

 

Global and domestic conditions, including as a result of COVID-19, that have an effect on consumer discretionary spending include, but may not be limited to: unemployment, general and industry-specific inflation, consumer confidence, consumer purchasing and saving habits, credit conditions, stock market performance, home values, population growth, household incomes and tax policy. Material changes to governmental policy related to domestic and international fiscal concerns, and/or changes in central bank policies with respect to monetary policy, also could affect consumer discretionary spending. Any of these additional factors affecting consumer discretionary spending may further influence customer traffic in our restaurants and average check amount, thus potentially having a further material impact on our financial performance.

 

 

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

(d) Exhibits  
  10.1 First Amendment, dated as of May 1, 2020, to the Third Amended and Restated Loan Agreement, dated as of July 30, 2019, between The Cheesecake Factory Incorporated, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders from time to time party thereto
  99.1 Press Release dated May 5, 2020, entitled, “The Cheesecake Factory Reports Preliminary Results for the First Quarter of Fiscal 2020”
  104.1 Cover Page Interactive Data File (embedded within the inline XBRL document)

  

Forward Looking Statements

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, without limitation, statements regarding reopening of the Company’s restaurant dining rooms, expected timing of the filing of the Quarterly Report and the Company’s expectations as described in the risk factors included under Item 8.01 above. Such forward-looking statements include all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar expressions. These statements are based on current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These forward-looking statements may be affected by various factors including: the rapidly evolving nature of the COVID-19 outbreak and related containment measures, including the potential for a complete shutdown of the Company’s restaurants, international licensee restaurants and the Company’s bakery operations; economic, public health and political conditions that impact consumer confidence and spending, including the impact of COVID-19 and other health epidemics or pandemics on the global economy; changes in laws impacting the Company’s business, including laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premise dining, and increases in minimum wages and benefit costs; the economic health of the Company’s landlords and other tenants in retail centers in which its restaurants are located, and the Company’s ability to successfully continue its lease arrangements with landlords; unanticipated costs that may arise due to a return to normal course of business, including potential negative impacts from furlough actions; the economic health of suppliers, licensees, vendors and other third parties providing goods or services to the Company; the timing of the resumption of the Company’s new unit development; compliance with debt covenants; strategic capital allocation decisions including share repurchases and dividends; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the Fox Restaurant Concepts restaurants; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; adverse weather conditions in regions in which the Company’s restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the risk, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). Forward- looking statements speak only as of the dates on which they are made and the Company undertakes no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC, which are available at www.sec.gov.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: May 5, 2020 THE CHEESECAKE FACTORY INCORPORATED
   
  By: /s/ Matthew E. Clark
    Matthew E. Clark
    Executive Vice President and Chief Financial Officer

 

 

 

Exhibit 10.1

 

EXECUTION VERSION

 

FIRST AMENDMENT TO
THIRD AMENDED AND RESTATED LOAN AGREEMENT

 

THIS FIRST AMENDMENT TO THIRD AMENDED AND RESTATED LOAN AGREEMENT, dated as of May 1, 2020 (this “Amendment”), is among THE CHEESECAKE FACTORY INCORPORATED, a Delaware corporation (the “Borrower”), the lenders party hereto (the “Lenders”) and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Administrative Agent”).

 

WHEREAS, the Borrower, the Lenders party thereto from time to time, and the Administrative Agent are parties to a Third Amended and Restated Loan Agreement dated as of July 30, 2019 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Existing Loan Agreement”; the Existing Loan Agreement as amended by this Amendment and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Amended Loan Agreement”). Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Amended Loan Agreement, and the rules of interpretation set forth in Section 1.03 (Terms Generally) of the Amended Loan Agreement shall be incorporated herein by reference as if fully set forth herein, mutatis mutandis.

 

WHEREAS, the Borrower has requested that the Administrative Agent and the Required Lenders agree to certain amendments to the Existing Loan Agreement, and each of the Lenders signatory hereto, which Lenders collectively constitute the Required Lenders referred to in the Existing Loan Agreement, have agreed, subject to the terms and conditions set forth herein, to amend the Existing Loan Agreement as herein provided.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

 

1.             Amendments to Existing Loan Agreement. Effective as of the Effective Date (as defined below) and subject to the satisfaction of the conditions precedent in Section 2 of this Amendment, the Existing Loan Agreement is hereby amended as follows:

 

(a)        Section 1.01 of the Existing Loan Agreement is hereby amended to add the following new defined terms in appropriate alphabetical order:

 

Capital Expenditures” means, without duplication, any expenditure or commitment to expend money for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a balance sheet of the Borrower and its Subsidiaries prepared in accordance with GAAP.

 

Covenant Relief Period” means the period beginning on the First Amendment Effective Date and continuing through the first date (which shall be on or after June 29, 2021) on which the Borrower has delivered a compliance certificate to the Administrative Agent pursuant to Section 5.01 evidencing the Borrower’s compliance with the covenants set forth in Section 6.09 as of the last day of a quarter ending on or after June 29, 2021.

 

First Amendment Effective Date” means May 1, 2020.

 

  

 

 

Liquidity” means, at any time, the sum of (a) the aggregate amount of unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries held in the United States and Canada at such time plus (b) the aggregate unused Commitments at such time.

 

(b)        Clause (i) of the definition of “Applicable Rate” in Section 1.01 of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“(i) from the First Amendment Effective Date until the date on which the Administrative Agent receives a certificate pursuant to Section 5.01(c) for a fiscal quarter ending on or after June 29, 2021 so long as the Borrower is in compliance with Section 6.09 as of the last day of such fiscal quarter, 1.50% per annum for any ABR Loan, 2.50% per annum for Eurodollar Revolving Loans and 0.40% for the Unused Fee, and”

 

(c)        The definition of “Net Adjusted Leverage Ratio” in Section 1.01 of the Existing Loan Agreement is hereby amended by adding the following proviso at the end of such definition:

 

“; provided that (x) for purposes of calculating the Net Adjusted Leverage Ratio for the fiscal quarter ending March 30, 2021, such calculation shall be based on Rental Expense and EBITDAR for the period of the two consecutive fiscal quarters ending on such date times two and (y) for purposes of calculating the Net Adjusted Leverage Ratio for the fiscal quarter ending June 29, 2021, such calculation shall be based on Rental Expense and EBITDAR for the period of the three consecutive fiscal quarters ending on such date times 4/3.”

 

(d)        Section 2.20(a) of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“(a) Increase. Provided there exists no Default, the Borrower may from time to time request an increase in the Commitments by an amount (for all such increases) not exceeding (i) during the Covenant Relief Period, $125,000,000 and (ii) thereafter, the result of (x) $200,000,000 minus (y) the amount of any such increases effectuated pursuant to the foregoing clause (i); provided that (A) any such request for an increase shall be in a minimum amount of $10,000,000, (B) the Borrower may make a maximum of three such requests pursuant to this clause (a) and (C) the consent of the Lenders shall not be required for such an increase.”

 

(e)        Section 3.04(a)(i) of the Existing Loan Agreement is hereby amended by replacing the phrase “Pricewaterhouse Coopers LLP” where it appears therein with the phrase “KPMG LLP”.

 

(f)         Section 5.01(a) of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“(a) within 90 days after the end of each fiscal year of the Borrower (provided that, solely with respect to the fiscal year ending December 31, 2020, such deadline shall be not later than the earlier of (x) the date allowed by the Securities and Exchange Commission for the filing of Form 10-K for such fiscal year for the Borrower and (y) 105 days after the end of such fiscal year), its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied.”

 

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(g)        Section 5.01(b) of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (provided that, solely with respect to the fiscal quarters ending March 30, 2020, June 29, 2020 and September 29, 2020, such deadline shall be not later than the earlier of (x) the date allowed by the Securities and Exchange Commission for the filing of Form 10-Q for such fiscal quarter for the Borrower and (y) 85 days after the end of such fiscal quarter), its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes.”

 

(h)        Section 5.01 of the Existing Loan Agreement is hereby further amended by deleting “and” at the end of clause (e) thereof, by replacing the period at the end of clause (f) thereof with “; and” and by adding a new clause (g) thereto as follows:

 

“(g) promptly and in any event within three Business Days after the last day of each calendar month pursuant to which the Borrower is required to comply with a minimum Liquidity test pursuant to Section 6.09 (and including the calendar month ending March 30, 2021 and each calendar month thereafter until the Borrower shall have delivered a certificate pursuant to Section 5.01(c) for a fiscal quarter ending on or after March 30, 2021 demonstrating that the Borrower is in compliance with Sections 6.09(a) and (b) or Section 6.09(d)(i), as applicable, as of the last day of such fiscal quarter), a compliance certificate of a Financial Officer of the Borrower substantially in the form of Exhibit B-1 setting forth reasonably detailed calculations demonstrating compliance with such test.”

 

(i)         The last paragraph of Section 5.02 of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“Each notice delivered under this Section (i) shall be in writing, (ii) shall contain a header or a reference line that reads “Notice under Section 5.02 of the Third Amended and Restated Loan Agreement dated July 30, 2019” and (iii) shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.”

 

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(j)         Section 6.01(l) of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“(l) other unsecured Indebtedness of the Borrower (including, without limitation, unsecured Indebtedness that is convertible into equity) in an aggregate principal amount not to exceed (i) while the Covenant Relief Period in in effect, $75,000,000 at any time outstanding, so long as the Borrower has received the Administrative Agent’s prior written consent to the incurrence of such Indebtedness; and (ii) beginning on the first day following the end of the Covenant Relief Period and continuing thereafter, $300,000,000 at any time outstanding, so long as (in the case of clauses (i) and (ii)) (w) the Borrower is in compliance with Section 6.09 as set forth in the most recent compliance certificate received by the Administrative Agent pursuant to Section 5.01(c) or (g), adjusted to give pro forma effect to the actual amount of Debt outstanding after the incurrence of such Indebtedness, (x) such Indebtedness does not restrict the right of the Borrower or any of its Subsidiaries to grant Liens on their assets to the Credit Parties, (y) other than in the case of Indebtedness incurred pursuant to clause (i) above if such Indebtedness is incurred during a Covenant Relief Period pursuant to the Federal Reserve Board’s Main Street Lending programs or otherwise under the Coronavirus Aid, Relief, and Economic Security Act or any similar legislation in the United States relating to COVID-19, and, in each case, any applicable rules and regulations related thereto (collectively, the “CARES Act-Related Legislation”, and any such Indebtedness arising thereunder, the “CARES Act Indebtedness”), such Indebtedness does not require any repayment of the principal thereof prior to the date that is six months after the Maturity Date and (z) such Indebtedness has covenants, if any, that are no more restrictive than those included in this Agreement as in effect at the time of incurrence thereof (except, with respect to any CARES Act Indebtedness, to the extent any such more-restrictive covenant is required by the applicable CARES Act-Related Legislation).”

 

(k)        Section 6.04 of the Existing Loan Agreement is hereby amended to add the following sentence at the end of such Section to read as follows:

 

“Notwithstanding the foregoing, while the Covenant Relief Period is in effect, the Borrower will not, and will not permit any of its Subsidiaries to, (x) consummate any Acquisitions or other investments pursuant to clauses (e) or (f) above or (y) make any contractual payments arising in connection with the FRC Acquisition unless, in the case of this clause (y), after giving effect to any such contractual payments, the Borrower shall be in compliance with Section 6.09 on a pro forma basis.”

 

(l)         Section 6.06 of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“SECTION 6.06. Restricted Payments.

 

(a)        During the Covenant Relief Period, the Borrower will not, and will not permit any of its Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment, except (i) the Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of the same class of Equity Interests or through adding such dividends to the liquidation preference of such Equity Interests; (ii) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests; and (iii) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and its Subsidiaries, in each case, as in effect on the First Amendment Effective Date.

 

 4 

 

 

(b)        Beginning on the first day following the end of the Covenant Relief Period and continuing thereafter, the Borrower will not, and will not permit any of its Subsidiaries to, declare or make, directly or indirectly, any Restricted Payment, except (i) the Borrower may declare and pay dividends with respect to its Equity Interests payable solely in additional shares of the same class of Equity Interests or through adding such dividends to the liquidation preference of such Equity Interests; (ii) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests; (iii) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and its Subsidiaries; (iv) the Borrower may declare and make additional Restricted Payments in the form of dividends or other distributions (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or in the form of redemptions or repurchases of Equity Interests in the Borrower, so long as at the time of such making or declaration (x) no Default or Event of Default shall be then continuing and (y) after giving pro forma effect thereto, the Net Adjusted Leverage Ratio shall not exceed 4.25 to 1.00; (E) the Borrower may make any other Restricted Payments in an aggregate amount not to exceed $100,000,000 after the Effective Date; and (v) the Borrower may make any Restricted Payment within 60 days after the date of declaration thereof, if at the date of such declaration such Restricted Payment would have complied with the provisions of clause (iv) hereof, provided that the calculation contemplated in clause (iv)(y) hereof shall for such purpose be calculated as of the date of such declaration but giving effect on a pro forma basis to any incurrence of Debt on and after such date and prior to (and after giving pro forma effect to) the making of such Restricted Payment (including any such Debt incurred to finance such Restricted Payment).”

 

(m)       Section 6.09 of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“SECTION 6.09. Financial Covenants.

 

(a)        Net Adjusted Leverage Ratio. Beginning with the fiscal quarter ending June 29, 2021 and continuing for each fiscal quarter occurring thereafter, the Net Adjusted Leverage Ratio shall not exceed 4.75 to 1.00 as of the last day of such fiscal quarter. For the avoidance of doubt, the Net Adjusted Leverage Ratio shall be calculated on an annualized basis for the fiscal quarter ending June 29, 2021, as set forth in the definition of “Net Adjusted Leverage Ratio”.

 

(b)        EBITDAR to Interest and Rental Expense. Beginning with the fiscal quarter ending June 29, 2021 and continuing for each fiscal quarter occurring thereafter, the ratio of EBITDAR for the four fiscal quarter period ending on the applicable measurement date to the sum of (i) Cash Interest Expense for the four fiscal quarter period ending on such measurement date plus (ii) Rental Expense for the four fiscal quarter period ending on such measurement date (other than non-cash Rental Expense for such period, but including cash payments made during such period in respect of non-cash Rental Expense for a prior period) shall not be less than 1.90 to 1.00 as of the last day of any fiscal quarter; provided that for purposes of calculating compliance with this clause (b) for the period of four fiscal quarters ending June 29, 2021, such calculation shall be based on EBITDAR, Cash Interest Expense and Rental Expense for the period of three fiscal quarters ending on such date times 4/3.

 

(c)        Minimum Liquidity. Beginning with the calendar month ending May 31, 2020 and continuing through the calendar month ending February 28, 2021 (and for the last day of each calendar month from and after April 30, 2021 until the Administrative Agent shall have received a certificate pursuant to Section 5.01(c) for a fiscal quarter ending on or after March 30, 2021 demonstrating that the Borrower is in compliance with Sections 6.09(a)-(b) or Section (d)(i), as applicable, as of the last day of such fiscal quarter), Liquidity shall be at least $65,000,000, calculated as of the last day of each such calendar month.

 

 5 

 

 

(d)        March 30, 2021 Financial Covenants. Solely with respect to the fiscal quarter ending March 30, 2021, either:

 

(i) both:

 

(x) the ratio of EBITDAR for the two fiscal quarter period ending on the applicable measurement date to the sum of (i) Cash Interest Expense for the two fiscal quarter period ending on such measurement date plus (ii) Rental Expense for the two fiscal quarter period ending on such measurement date (other than non-cash Rental Expense for such period, but including cash payments made during such period in respect of non-cash Rental Expense for a prior period) shall not be less than 1.90 to 1.00 as of March 30, 2021; provided that such calculation shall be based on EBITDAR, Cash Interest Expense and Rental Expense for the period of the two consecutive fiscal quarters ending on such date times two; and

 

(y) the Net Adjusted Leverage Ratio shall not exceed 4.75 to 1.00 as of the last day of such fiscal quarter (provided that, for the avoidance of doubt, the Net Adjusted Leverage Ratio shall be calculated on an annualized basis for such fiscal quarter, as set forth in the definition of “Net Adjusted Leverage Ratio”); or

 

(ii) Liquidity shall be at least $65,000,000, calculated as of March 30, 2021.”

 

(n)        Article VI of the Existing Loan Agreement is hereby amended to add a new Section 6.12 thereto in appropriate numerical order to read as follows:

 

“SECTION 6.12. Capital Expenditures. During the Covenant Relief Period, the Borrower shall not, and shall not permit any Subsidiary to, make Capital Expenditures other than Capital Expenditures in an aggregate amount not to exceed $90,000,000.”

 

(o)        The first sentence of Section 8.02(b) of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“The Administrative Agent shall be deemed not to have knowledge of (i) notice of any of the events or circumstances set forth or described in Section 5.02 unless and until written notice thereof stating that it is a “notice under Section 5.02” in respect of this Agreement and identifying the specific clause under said Section is given to the Administrative Agent by the Borrower, or (ii) notice of any Default or Event of Default unless and until written notice thereof (stating that it is a “notice of Default” or a “notice of an Event of Default”) is given to the Administrative Agent by the Borrower, a Lender or an Issuing Bank, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with any Loan Document, (B) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document or the occurrence of any Default or Event of Default, as applicable, (D) the sufficiency, validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items (which on their face purport to be such items) expressly required to be delivered to the Administrative Agent or satisfaction of any condition that expressly refers to the matters described therein being acceptable or satisfactory to the Administrative Agent.”

 

 6 

 

 

(p)        Section 9.06 of the Existing Loan Agreement is hereby amended and restated in its entirety to read as follows:

 

“SECTION 9.06 Counterparts; Integration; Effectiveness; Electronic Execution. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement, any other Loan Document and any agreement, notice or other communication required by this Agreement to be “written” or “in writing”, by telecopy, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement, any other Loan Document and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept electronic signatures in any form or format without its prior written consent. Without limiting the generality of the foregoing, the Borrower hereby (a) agrees that, for all purposes, including without limitation, in connection with any workout, restructuring, enforcement of remedies, bankruptcy proceedings or litigation among the Administrative Agent, the Lenders and the Loan Parties, electronic images of this Agreement or any other Loan Documents (in each case, including with respect to any signature pages thereto) shall have the same legal effect, validity and enforceability as any paper original and (b) waives any argument, defense or right to contest the validity or enforceability of the Loan Documents based solely on the lack of paper original copies of any Loan Documents, including with respect to any signature pages hereto.”

 

(q)        The Exhibits to the Existing Loan Agreement are hereby amended by adding a new Exhibit B-1 in the form of Exhibit B hereto in appropriate alphabetical order and amending Exhibit B in the Existing Loan Agreement to become Exhibit B-2.

 

2.              Conditions Precedent to Effectiveness. This Amendment shall become effective as of the date first above written (the “Effective Date”) upon satisfaction of each of the following conditions:

 

2.1           Amendment. The Administrative Agent shall have received counterparts of this Amendment, duly executed by the parties hereto;

 

2.2           Reaffirmation Agreement. The Administrative Agent shall have received an acknowledgment and reaffirmation agreement substantially in the form of Exhibit A, duly executed by each of the Guarantors and the Administrative Agent.

 

 7 

 

 

2.3          Equity Infusion. The Borrower shall have received gross proceeds of not less than $200,000,000 from an issuance of Equity Interests constituting preferred equity, which preferred equity and related documentation is in form and on terms reasonably acceptable to the Administrative Agent.

 

2.4           Liquidity. Liquidity as calculated on the Effective Date shall be at least $65,000,000, and the Administrative Agent shall have received a certificate to that effect, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower.

 

2.5           Fees; Costs and Expenses. The Administrative Agent shall have received payment of all of its fees and expenses incurred in connection with this Amendment, including the reasonable fees and expenses of its counsel, to the extent invoiced within one Business Day prior to the Effective Date.

 

3.             Representations and Warranties. The Borrower represents and warrants to the Administrative Agent and the Lenders that, on and as of the Effective Date, and after giving effect to this Amendment:

 

3.1           Authorization. The execution and delivery by the Borrower of this Amendment, and its performance hereunder and under the Amended Credit Agreement, have been duly authorized by all necessary corporate action, and this Amendment has been duly executed and delivered by the Borrower.

 

3.2           Binding Obligation. This Amendment and the Amended Credit Agreement each constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

 

3.3           No Legal Obstacle to Amendment. The execution and delivery by the Borrower of this Amendment, and its performance hereunder and under the Amended Credit Agreement, (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect, (b) will not violate any applicable law or regulation or the charter, by-laws or other organizational documents of the Borrower or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under any material indenture, agreement or other instrument binding upon the Borrower or any of its Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.

 

3.4           Incorporation of Certain Representations. After giving effect to the terms of this Amendment, the representations and warranties set forth in Article III of the Amended Loan Agreement are true and correct in all material respects (without duplication of any materiality qualifiers set forth therein) on and as of the Effective Date as though made on and as of the Effective Date (except to the extent such representations and warranties relate to an earlier date, in which case they were true and correct in all material respects (without duplication of any materiality qualifiers set forth therein) as of such date).

 

3.5            No Default. Immediately prior to and upon the effectiveness of this Amendment, no Default or Event of Default exists and is continuing.

 

 8 

 

 

4.             Miscellaneous.

 

4.1           Incorporation. Upon the effectiveness of this Amendment, each reference in the Existing Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import shall mean and be a reference to the Amended Loan Agreement, and each reference to the Existing Loan Agreement in any other document, instrument or agreement executed or delivered in connection with the Amended Loan Agreement shall mean and be a reference to the Amended Loan Agreement.

 

4.2          Ratification. Except as hereby expressly amended, the Existing Loan Agreement and all other documents, instruments and agreements executed or delivered in connection therewith shall remain unchanged and in full force and effect, and are hereby ratified and confirmed in all respects on and as of the Effective Date.

 

4.3           No Waiver. This Amendment is limited solely to the matters expressly set forth herein and is specific in time and in intent and does not constitute, nor should it be construed as, a waiver or amendment of any other term or condition, right, power, privilege or remedy under the Amended Loan Agreement or under any agreement, contract, indenture, document or instrument mentioned therein. The execution, delivery and effectiveness of this Amendment shall not preclude or prejudice any rights of the Administrative Agent or the Lenders thereunder, or any exercise thereof or the exercise of any other right, power, privilege or remedy, nor shall it require the Required Lenders to agree to an amendment, waiver or consent for a similar transaction or on a future occasion. Nor shall any future waiver of any right, power, privilege or default hereunder, or under any agreement, contract, indenture, document or instrument mentioned in the Amended Loan Agreement, constitute a waiver of any other right, power, privilege or default of the same or of any other term or provision. The Borrower acknowledges and expressly agrees that the Administrative Agent and each Lender reserves the right to, and does in fact, require strict compliance with all terms and provisions of the Amended Loan Agreement and the other Loan Documents.

 

4.4           Entire Agreement. This Amendment and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.

 

4.5           Construction. This parties hereto acknowledge and agree that this Amendment shall not be construed more favorably in favor of any party hereto based upon which party drafted the same, it being acknowledged that all parties hereto contributed substantially to the negotiation of this Amendment.

 

4.6           Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns as provided in the Amended Loan Agreement.

 

4.7          Incorporation of Loan Agreement Provisions. The provisions of Sections 9.06 (Counterparts; Integration; Effectiveness; Electronic Execution), 9.07 (Severability), 9.09 (Governing Law; Jurisdiction; Consent to Service of Process), 9.10 (Waiver of Jury Trial) and 9.11 (Headings) of the Amended Loan Agreement are incorporated herein by reference as if fully set forth herein, mutatis mutandis.

 

4.8           Amendment is a “Loan Document”. This Amendment is a Loan Document and all references to a “Loan Document” in the Amended Loan Agreement and the other Loan Documents (including all such references in the representations and warranties in the Amended Loan Agreement and the other Loan Documents) shall be deemed to include this Amendment.

 

[Signatures Immediately Follow]

 

 9 

 

 

IN WITNESS WHEREOF, the signatories hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

BORROWER: THE CHEESECAKE FACTORY INCORPORATED
   
  By: /s/ Matthew Clark
  Name: Matthew Clark
  Title: CFO EVP

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

ADMINISTRATIVE AGENT: JPMORGAN CHASE BANK, N.A., as Administrative Agent
   
  By: /s/ Marshall Trenckmann
  Name: Marshall Trenckmann
  Title: Executive Director

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

LENDERS: JPMORGAN CHASE BANK, N.A., as a Lender
   
  By: /s/ Marshall Trenckmann
  Name: Marshall Trenckmann
  Title: Executive Director

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

  COÖPERATIEVE RABOBANK U.A., NEW YORK BRANCH, as a Lender
   
  By: /s/ Mark Abrams
  Name: MARK ABRAMS
  Title: Managing Director
     
  By: /s/ Alina Ioani
  Name: ALINA IOANI
  Title: Vice President

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

LENDERS: TD BANK, N.A., as a Lender
   
  By: /s/ Alan Garson
  Name: Alan Garson
  Title: Senior Vice President

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

U.S. BANK NATIONAL ASSOCIATION, as a Lender
   
  By: /s/ Glenn Leyrer
  Name: Glenn Leyrer
  Title: Vice President

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

BANK OF THE WEST, as a Lender
   
  By: /s/ Victor Chien
  Name: Victor Chien
  Title: Vice President

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
   
  By: /s/ Jake Ganajian
  Name: JAKE GANAJIAN
  Title: MARKET EXECUTIVE / SENIOR VICE PRESIDENT

 

Signature Page to First Amendment
to Third Amended and Restated Loan Agreement

 

  

 

 

EXHIBIT A
to First Amendment
to Third Amended and Restated Loan Agreement

 

 

FORM OF ACKNOWLEDGEMENT AND REAFFIRMATION AGREEMENT

 

This Acknowledgement and Reaffirmation Agreement (this “Reaffirmation”) is entered into as of May 1, 2020, among The Cheesecake Factory Restaurants, Inc., The Cheesecake Factory Bakery Incorporated, TCF Co. LLC, Grand Lux Café, LLC, Middle East IP Corporation and TCF California Holding Company (collectively, the “Reaffirming Parties”), and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”).

 

RECITALS

 

A.            Reference is made to (i) that certain Second Amended and Restated Guaranty, dated as of December 22, 2015 (as amended, supplemented or otherwise modified from time to time, the “Guaranty”), executed by the Reaffirming Parties in favor of the Administrative Agent, for the ratable benefit of the holders of the Guarantied Obligations (as defined therein); (ii) that certain Third Amended and Restated Loan Agreement, dated as of July 30, 2019 (as amended, restated, supplemented or otherwise modified prior to the date hereof, the “Existing Loan Agreement”), among The Cheesecake Factory Incorporated, as the borrower (the “Borrower”), the lenders party thereto from time to time (the “Lenders”), and the Administrative Agent; and (iii) that certain First Amendment to Third Amended and Restated Loan Agreement, dated as of the date hereof (the “Amendment”), among the Borrower, the Lenders party thereto, and the Administrative Agent, which, upon the satisfaction of the terms and conditions set forth therein, shall amend the Existing Loan Agreement. The Existing Loan Agreement, as amended by the Amendment and as may be further amended, restated, supplemented or otherwise modified from time to time, is herein referred to as the “Amended Loan Agreement”. Unless otherwise specified herein, capitalized terms used in this Reaffirmation shall have the meanings ascribed to them in the Amendment, and the rules of interpretation set forth in Section 1.03 (Terms Generally) of the Amended Loan Agreement shall be incorporated herein by reference as if fully set forth herein, mutatis mutandis.

 

B.            As a condition precedent to entering into the Amendment, the Administrative Agent and the Lenders have required that the Reaffirming Parties enter into this Reaffirmation.

 

AGREEMENT

 

NOW, THEREFORE, in order to induce the Administrative Agent and the Lenders to enter into the Amendment and for other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, the Reaffirming Parties hereby agree as follows:

 

(a)            Reaffirmation. Each of the Reaffirming Parties:

 

 (i)        (x) confirms to the Administrative Agent and the Lenders that such Reaffirming Party has received a copy of the Amendment, (y) expressly and knowingly ratifies and reaffirms its respective liability under each of the Loan Documents (including the Guaranty) to which it is a party and (z) expressly agrees to be and remain liable under the terms of each such Loan Document to which it is a party, in each case, in accordance with the terms thereof;

 

 Exhibit A-1 

 

 

(ii)       confirms that, as of the date hereof, it has no defense, offset, deduction or counterclaim whatsoever against any Lender or with respect to the obligations of such Reaffirming Party relating to any such Loan Document;

 

(iii)        agrees that, except as expressly contemplated by the Amendment or any other Loan Document executed in connection therewith, each Loan Document (including the Guaranty) to which it is a party shall remain in full force and effect and is hereby ratified and confirmed;

 

(iv)       agrees that the Amendment and all documents executed in connection therewith do not operate to reduce or discharge such Reaffirming Party’s obligations under the Loan Documents (including the Guaranty) to which it is party;

 

(v)       agrees that each reference to the “Loan Agreement” in the Loan Documents (including the Guaranty) to which it is a party shall be deemed to refer to the Amended Loan Agreement as defined herein; and

 

(vi)       agrees that the execution of this Reaffirmation is not required by the terms of the Loan Documents or by applicable law for the continued validity and enforceability of any Loan Document (including the Guaranty) to which it is a party in accordance with its respective terms but that this Reaffirmation is executed to induce the Lenders and the Administrative Agent to approve of and otherwise enter into the Amendment.

 

(b)           Entire Agreement. This Reaffirmation and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.

 

(c)            Successors and Assigns. This Reaffirmation shall be binding upon and inure to the benefit of the parties hereto and to their respective successors and permitted assigns.

 

(d)           Incorporation of Loan Agreement Provisions. The provisions of Sections 9.06 (Counterparts; Integration; Effectiveness; Electronic Execution), Sections 9.07 (Severability), 9.09 (Governing Law; Jurisdiction; Consent to Service of Process), 9.10 (Waiver of Jury Trial) and 9.11 (Headings) of the Amended Loan Agreement are incorporated herein by reference as if fully set forth herein, mutatis mutandis.

 

(e)            Reaffirmation is a Loan Document. This Reaffirmation is a Loan Document and all references to a “Loan Document” in the Amended Loan Agreement and the other Loan Documents (including all such references in the representations and warranties in the Amended Loan Agreement and the other Loan Documents) shall be deemed to include this Reaffirmation.

 

[Signatures Immediately Follow]

 

 Exhibit A-2 

 

 

IN WITNESS WHEREOF, each of the undersigned intending to be legally bound hereby has caused this Reaffirmation to be executed as of the date first above written.

 

  REAFFIRMING PARTIES:
   
  THE CHEESECAKE FACTORY RESTAURANTS, INC.
     
  By:
  Name:                   
Title:  
     
  THE CHEESECAKE FACTORY BAKERY INCORPORATED
     
  By:
  Name:  
Title:  
     
  TCF CO. LLC
     
  By:
  Name:  
Title:  
     
  GRAND LUX CAFÉ, LLC
     
  By:
  Name:  
Title:  
     
  MIDDLE EAST IP CORPORATION
     
  By:
  Name:  
Title:  

 

Signature Page to Acknowledgement and Reaffirmation Agreement

 

  

 

 

  TCF CALIFORNIA HOLDING COMPANY
     
  By:              
  Name:  
Title:  

 

Signature Page to Acknowledgement and Reaffirmation Agreement

 

  

 

 

  ADMINISTRATIVE AGENT:
   
  JPMORGAN CHASE BANK, N.A.
     
  By:                     
  Name:  
Title:

 

Signature Page to Acknowledgement and Reaffirmation Agreement

 

  

 

 

EXHIBIT B
to First Amendment
to Third Amended and Restated Loan Agreement

 

[Attached]

 

B-1

 

 

EXHIBIT B-1

 

FORM OF COMPLIANCE CERTIFICATE (MINIMUM LIQUIDITY – MONTHLY)1

 

For the Calendar Month Ended: ___________, _____

 

To:          JPMorgan Chase Bank, N.A., as Administrative Agent

 

Ladies and Gentlemen:

 

Reference is made to that certain Third Amended and Restated Loan Agreement, dated as of July 30, 2019 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement”, the terms defined therein being used herein as therein defined), among The Cheesecake Factory Incorporated, a Delaware corporation (the “Borrower”), the Lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent.

 

The undersigned Financial Officer hereby certifies as of the date hereof that he/she is the ________________ of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that:

 

1.       The Borrower was required to comply with a minimum monthly Liquidity test, as set forth in Section 6.09[(c)][(d)] of the Agreement, for the most recent calendar month (the “Testing Period”).

 

2.       The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the Testing Period.

 

3.       A review of the activities of the Borrower during such Testing Period has been made under the supervision of the undersigned with a view to determining whether during such Testing Period the Borrower performed and observed all its obligations under the Loan Documents, and

 

[select one:]

 

[to the best knowledge of the undersigned during such Testing Period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it.]

 

 

 

1 To be tested beginning with the calendar month ending May 31, 2020 and continuing through the calendar month ending February 28, 2021, and, subject to Section 6.09(d) of the Agreement, March 30, 2021 (and for each calendar month thereafter until the Administrative Agent shall have received a certificate pursuant to Section 5.01(c) of the Agreement for a fiscal quarter ending on or after March 30, 2021 demonstrating that the Borrower is in compliance with Sections 6.09(a)-(b) of the Agreement or Section (d)(i) of the Agreement, as applicable, as of the last day of such fiscal quarter).

 

B-2

 

 

--or--

 

[the following covenants or conditions have not been performed or observed and the following is a list of each such Default and its nature and status:]

 

4.       The representations and warranties of the Borrower contained in the Agreement are true and correct as of the date of this Certificate, other than the representations and warranties that specifically refer to an earlier date.

 

5.       The covenant analyses and information set forth on Schedule 1 attached hereto are true and accurate on and as of the date of this Certificate.

 

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of _____________.

 

  THE CHEESECAKE FACTORY INCORPORATED
   
  By:  
  Name:                
  Title:  

 

B-3

 

 

For the Last Day of the Calendar Month ended ___________________(“Testing Date”)

 

SCHEDULE 1
to the Compliance Certificate
($ in 000’s)

 

I.         Section 6.09[(c)][(d)] – Minimum Liquidity.

 

A. Aggregate amount of unrestricted cash and Cash Equivalents of the Borrower and its Subsidiaries held in the United States and Canada as of the Testing Date:

$__________

 

     
B. Aggregate unused Commitments as of the Testing Date: $__________
     
C. Total (sum of Line I.A + Line I.B): $__________
     
  Minimum required: $65,000,000  

 

B-4

 

 
Exhibit 99.1
 
 

PRESS RELEASE

 

FOR IMMEDIATE RELEASE Contact: Stacy Feit
  (818) 871-3000
  investorrelations@thecheesecakefactory.com

 

THE CHEESECAKE FACTORY REPORTS PRELIMINARY RESULTS FOR

FIRST QUARTER OF FISCAL 2020

 

CALABASAS HILLS, Calif., – May 5, 2020 – The Cheesecake Factory Incorporated (NASDAQ: CAKE) today reported preliminary financial results for the first quarter of fiscal 2020, which ended on March 31, 2020.

 

Total revenues were $615.1 million in the first quarter of fiscal 2020 compared to $599.5 million in the first quarter of fiscal 2019. Preliminary net loss and diluted net loss per share were $3.9 million and $0.09, respectively, in the first quarter of fiscal 2020 reflecting the impact of COVID-19. The results in this press release include the acquisition of North Italia and the remaining business of Fox Restaurant Concepts LLC (“FRC”) on October 2, 2019.

 

The Company recorded pre-tax COVID-19 related charges of $4.0 million primarily related to healthcare and meal benefits for the Company’s furloughed staff members. Excluding the after-tax impact of this and certain other items, adjusted preliminary net income and adjusted diluted preliminary net income per share for the first quarter of fiscal 2020 were $1.6 million and $0.04, respectively. Please see the Company’s reconciliation of non-GAAP financial measures at the end of this press release.

 

The impact of COVID-19 on the Company’s business has resulted in the need to perform impairment assessments of the Company’s long-lived assets, goodwill and other intangible assets and a revaluation of contingent consideration associated with the acquisition of FRC, which will delay the filing of the Company’s quarterly report on Form 10-Q. These preliminary financial results do not include these items and the corresponding tax effects, all of which are currently being evaluated. While these items are non-cash in nature, the impact on reported results is expected to be material.

 

Comparable restaurant sales at The Cheesecake Factory restaurants decreased 12.9% in the first quarter of fiscal 2020, reflecting the impact of COVID-19. Currently, 32 locations across the Company’s concepts, including three Cheesecake Factory restaurants, are temporarily closed with the remaining locations shifted to an off-premise only operating model.

 

“Our first quarter was off to a solid start with comparable sales growth both ahead of plan and outperforming the broader casual dining industry trend, which drove solid restaurant-level margin results through February,” said David Overton, Chairman and Chief Executive Officer. “That trajectory was impacted by the onset of COVID-19 and the associated social distancing and shelter-in-place orders that required us to close our restaurant dining rooms and shift to an off-premise only operating model in March.”

 

26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100

 

 

Overton continued, “Our restaurant teams have done a tremendous job executing in this environment in the face of significant adversity, and we have seen sales volumes accelerate. At the same time, we have made very difficult, yet necessary decisions to manage costs and preserve cash, while ensuring that we are well-positioned for the eventual reopening of our restaurant dining rooms, although we expect capacity restrictions for some time as social distancing protocols remain in place. With our experienced management teams, long-standing and strong off-premise business and a strengthened liquidity position, we believe we will continue to be able to effectively manage through and ultimately emerge from this crisis even stronger as we have proven in prior cycles.”

 

Overton concluded, “I want to thank our teams for everything they are doing to support our business during this unprecedented time. While the duration of COVID-19 and what the reopening of the economy will look like remains uncertain, we look forward to getting our affected staff members back to work as soon as practicable.”

 

Development

 

The Company opened the following Company-owned restaurants during the first quarter:

 

Concept  Number of Units 
The Cheesecake Factory   - 
North Italia   1 
Fox Restaurant Concepts     
Flower Child   1 

 

The Company has suspended new unit development until more clarity on the restaurant industry operating environment emerges.

 

Balance Sheet

 

As of March 31, 2020, cash and cash equivalents totaled $81.0 million and total debt was $380.0 million.

 

On April 20, 2020, the Company announced that it closed a $200 million convertible preferred investment from affiliates of Roark Capital. As of April 30, 2020, the Company’s cash balance was approximately $260 million.

 

On May 1, 2020, the Company entered into an amendment to its revolving credit facility that, among other changes, provides for net adjusted leverage ratio and EBITDAR to interest and rent expense coverage ratio covenant relief through the first quarter of fiscal 2021.

 

To preserve liquidity and in conjunction with the terms of the credit facility amendment, the Company’s Board of Directors has suspended the quarterly dividend on its common stock, as well as share repurchases.

 

Conference Call and Webcast

 

The Company will hold a conference call to review its results for the first quarter of fiscal 2020 today at 2:00 p.m. Pacific Time. The conference call will be webcast live on the Company’s website at investors.thecheesecakefactory.com and a replay of the webcast will be available through June 4, 2020.

 

26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100

 

 

About The Cheesecake Factory Incorporated

 

The Cheesecake Factory Incorporated is a leader in experiential dining. We are culinary forward and relentlessly focused on hospitality. Delicious, memorable experiences created by passionate people – this defines who we are and where we are going. We currently own and operate 294 restaurants throughout the United States and Canada under brands including The Cheesecake Factory®, North Italia® and a collection within the Fox Restaurant Concepts subsidiary. Internationally, 26 The Cheesecake Factory® restaurants operate under licensing agreements. Our bakery division operates two facilities that produce quality cheesecakes and other baked products for our restaurants, international licensees and third-party bakery customers. In 2020, we were named to the FORTUNE Magazine “100 Best Companies to Work For®” list for the seventh consecutive year. To learn more, visit www.thecheesecakefactory.com, www.northitalia.com and www.foxrc.com.

 

From FORTUNE. ©2020 Fortune Media IP Limited. FORTUNE 100 Best Companies to Work For is a trademark of Fortune Media IP Limited and is used under license. FORTUNE and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Licensee.

 

Safe Harbor Statement

 

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, without limitation, statements regarding sales volumes accelerating, reopening of the Company’s restaurant dining rooms, the Company’s ability to emerge from the COVID-19 crisis and the Company’s strengthened liquidity position. Such forward-looking statements include all other statements that are not historical facts, as well as statements that are preceded by, followed by or that include words or phrases such as “believe,” “plan,” “will likely result,” “expect,” “intend,” “will continue,” “is anticipated,” “estimate,” “project,” “may,” “could,” “would,” “should” and similar expressions. These statements are based on current expectations and involve risks and uncertainties which may cause results to differ materially from those set forth in such statements. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These forward-looking statements may be affected by various factors including: the rapidly evolving nature of the COVID-19 outbreak and related containment measures, including the potential for a complete shutdown of the Company’s restaurants, international licensee restaurants and the Company’s bakery operations; economic, public health and political conditions that impact consumer confidence and spending, including the impact of COVID-19 and other health epidemics or pandemics on the global economy; changes in laws impacting the Company’s business, including laws and regulations related to COVID-19 impacting restaurant operations and customer access to off- and on-premise dining, and increases in minimum wages and benefit costs; the economic health of the Company’s landlords and other tenants in retail centers in which its restaurants are located, and the Company’s ability to successfully continue its lease arrangements with landlords; unanticipated costs that may arise due to a return to normal course of business, including potential negative impacts from furlough actions; the economic health of suppliers, licensees, vendors and other third parties providing goods or services to the Company; the timing of the resumption of the Company’s new unit development; compliance with debt covenants; strategic capital allocation decisions including share repurchases and dividends; acceptance and success of The Cheesecake Factory in international markets; acceptance and success of North Italia and the Fox Restaurant Concepts restaurants; the risks of doing business abroad through Company-owned restaurants and/or licensees; foreign exchange rates, tariffs and cross border taxation; changes in unemployment rates; adverse weather conditions in regions in which the Company’s restaurants are located; factors that are under the control of government agencies, landlords and other third parties; the risk, costs and uncertainties associated with opening new restaurants; and other risks and uncertainties detailed from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”). Forward-looking statements speak only as of the dates on which they are made and the Company undertakes no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by law. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements and the discussion of risk factors contained in the Company’s latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC, which are available at www.sec.gov.

 

26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100

 

 

The Cheesecake Factory Incorporated

Preliminary Condensed Consolidated Financial Statements

(unaudited; in thousands, except per share and statistical data)

 

The following tables present preliminary financial results for the 13 weeks ended March 31, 2020 and do not include impairments of the Company's long-lived assets, goodwill and other intangible assets and the revaluation of contingent consideration associated with the acquisition of Fox Restaurant Concepts LLC ("FRC"), as well as corresponding tax effects, as a result of the impact of COVID-19, all of which are currently being evaluated. While these items are all non-cash, the impact on reported results is expected to be material.

 

  

13 Weeks Ended

  13 Weeks Ended 

Consolidated Statements of Income

 

March 31, 2020

  April 2, 2019 
   Amount  

Percent of
Revenues

   Amount   Percent of
Revenues
 
                 
Revenues
  $615,106    100.0%  $599,481    100.0%
Costs and expenses:
                    
Cost of sales
   140,905    22.9%   136,187    22.7%
Labor expenses
   237,647    38.7%   217,310    36.2%
Other operating costs and expenses
   167,971    27.3%   153,221    25.6%
General and administrative expenses
   43,960    7.1%   39,123    6.5%
Depreciation and amortization expenses
   23,562    3.8%   21,362    3.6%

Impairment of assets and lease terminations(1)

   324    0.1%   -    0.0%
Acquisition-related costs
   1,236    0.2%   -    0.0%

Acquisition-related contingent consideration, compensation and amortization expenses(2)

   1,948    0.3%   -    0.0%
Preopening costs
   3,119    0.5%   2,130    0.4%
Total costs and expenses
   620,672    100.9%   569,333    95.0%
(Loss)/income from operations
   (5,566)   (0.9)%   30,148    5.0%
Loss on investment in unconsolidated affiliates
   -    0.0%   (1,450)   (0.2)%
Interest and other (expense)/income, net
   (1,518)   (0.3)%   2    0.0%
(Loss)/income before income taxes
   (7,084)   (1.2)%   28,700    4.8%

Income tax (benefit)/provision(3)

 

   (3,151)   (0.6)%   1,716    0.3%
Net (loss)/income
  $(3,933)   (0.6)%  $26,984    4.5%
                     
Basic net (loss)/income per share
  $(0.09)       $0.61     
Basic weighted average shares outstanding
   43,773         44,255     
                    
Diluted net (loss)/income per share
  $(0.09)       $0.60     
Diluted weighted average shares outstanding
   44,137         44,984     

 

(1) Excludes adjustments for impairment of long-lived assets, goodwill and other intangible assets due to COVID-19. The Company's assessment of these assets is in process.
 
(2) Excludes the impact of COVID-19 on the revaluation of contingent consideration associated with the acquisition of FRC. The Company's assessment of this liability is in process.
 
(3) Excludes the income tax impact of impairments of long-lived assets, goodwill and other intangible assets and the revaluation of contingent consideration associated with the acquisition of FRC.

 

26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100

 

 

   13 Weeks
Ended
   13 Weeks
Ended
 
Selected Segment Information  March 31, 2020   April 2, 2019 
Revenues:          
The Cheesecake Factory restaurants  $488,471   $548,633 
North Italia   30,512    - 
Other FRC   35,583    - 
Other   60,540    50,848 
Total  $615,106   $599,481 
           
Preliminary (loss)/income from operations:(1)          
The Cheesecake Factory restaurants  $39,275   $65,939 
North Italia   (562)   - 
Other FRC   2,975    - 
Other   (47,254)   (35,791)
Total  $(5,566)  $30,148 
           
Preopening costs:          
The Cheesecake Factory restaurants  $1,414   $1,481 
North Italia   953    - 
Other FRC   (159)   - 
Other   911    649 
Total  $3,119   $2,130 
           
Depreciation and amortization:          
The Cheesecake Factory restaurants  $17,277   $17,608 
North Italia   965    - 
Other FRC   1,201    - 
Other   4,119    3,754 
Total  $23,562   $21,362 

 

(1) Excludes the impact of COVID-19 as it relates to impairments of the Company's long-lived assets, goodwill and other intangible assets and the revaluation of contingent consideration associated with the acquisition of FRC.

 

The Cheesecake Factory restaurants operating information:        
Comparable restaurant sales   (12.9)%   1.3%
Restaurants opened during period   -    - 
Restaurants open at period-end   206    201 
Restaurant operating weeks   2,674    2,613 
           
North Italia operating information:          
Comparable restaurant sales   (12.0)%   - 
Restaurants opened during period   1    - 
Restaurants open at period-end   23    - 
Restaurant operating weeks   290    - 
           
Fox Restaurant Concepts (FRC) operating information:          
Restaurants opened during period   1    - 
Restaurants open at period-end   50    - 
           
Number of company-owned restaurants:          
The Cheesecake Factory   206      
North Italia   23      
Fox Restaurant Concepts (FRC)   50      
Other   15      
Total   294      
           
Number of international-licensed restaurants:          
The Cheesecake Factory   26      

 

Selected Consolidated Balance Sheet Information  March 31,
2020
   December 31, 2019 
Cash and cash equivalents  $81,023   $58,416 
Long-term debt   380,000    290,000 

 

26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100

 

 

Reconciliation of Non-GAAP Results to Preliminary GAAP Results

 

In addition to the results provided in accordance with accounting principles generally accepted in the United States of America (“GAAP”) in this press release, the Company is providing non-GAAP measurements which present preliminary net (loss)/income and diluted preliminary net (loss)/income per share excluding the impact of certain items. The non-GAAP measurements are intended to supplement the presentation of the Company’s financial results in accordance with GAAP. These non-GAAP measures are calculated by eliminating from net (loss)/income and diluted net (loss)/income per share the impact of items the Company does not consider indicative of its ongoing operations. The Company uses these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons.

 

The Cheesecake Factory Incorporated

Reconciliation of Non-GAAP Financial Measures

(unaudited; in thousands, except per share data)

 

   13 Weeks
Ended
   13 Weeks
Ended
 
   March 31, 2020   April 2, 2019 
Preliminary net (loss)/income (GAAP)(1)  $(3,933)  $26,984 
COVID-19 related costs(2)   3,955    - 
Impairment of assets and lease terminations   324    - 
Loss on investment in unconsolidated affiliates(3)   -    1,450 
Acquisition-related costs(4)   1,236    - 
Acquisition-related contingent consideration, compensation and amortization expenses(5)   1,948    - 
Tax effect of adjustments(6)   (1,939)   (377)
Adjusted preliminary net income (non-GAAP)  $1,591   $28,057 
           
Diluted preliminary net (loss)/income per share (GAAP)  $(0.09)  $0.60 
COVID-19 related costs   0.09    - 
Impairment of assets and lease terminations   0.01    - 
Loss on investment in unconsolidated affiliates   -    0.03 
Acquisition-related costs   0.03    - 
Acquisition-related contingent consideration, compensation and amortization expenses   0.04    - 
Tax effect of adjustments   (0.04)   (0.01)
Adjusted diluted preliminary net income per share (non-GAAP)  $0.04   $0.62 

 

(1) Represents preliminary financial results for the 13 weeks ended March 31, 2020 and does not include the impact of COVID-19 as it relates to impairments of the Company's long-lived assets, goodwill and other intangible assets and the revaluation of contingent consideration associated with the acquisition of FRC, as well as corresponding tax effects, all of which are currently being evaluated.
 
(2) Represents incremental costs associated with COVID-19 primarily related to healthcare and meal benefits for furloughed staff members. These costs were recorded in labor expenses and other operating costs and expenses on the consolidated statements of income.
 
(3) Represents the Company's share of pre-acquisition losses incurred by North Italia and Flower Child.
 
(4) Represents costs incurred to effect and integrate the North and FRC acquisition.
 
(5) Represents changes in the fair value of the deferred consideration and contingent consideration and compensation liabilities related to the North and FRC acquisition, as well as amortization of acquired definite-lived licensing agreements.
 
(6) Based on the federal statutory rate and an estimated blended state tax rate, the tax effect on all adjustments assumes a 26% tax rate for fiscal 2020 and 2019.

 

26901 Malibu Hills Road, Calabasas Hills, CA 91301 · Telephone (818) 871-3000 · Fax (818) 871-3100

 

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