The Cheesecake Factory(CAKE) - 2026 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and detailed explanatory notes Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Balance Sheets (Unaudited) | ASSETS (in thousands) | July 1, 2025 | December 31, 2024 | | :-------------------- | :----------- | :---------------- | | Cash and cash equivalents | $148,763 | $84,176 | | Total current assets | $379,389 | $333,313 | | Total assets | $3,151,904 | $3,041,760 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | July 1, 2025 | December 31, 2024 | | :-------------------------------- | :----------- | :---------------- | | Total current liabilities | $737,053 | $711,420 | | Long-term debt | $559,623 | $452,062 | | Total liabilities | $2,750,956 | $2,598,305 | | Total stockholders' equity | $400,948 | $443,455 | - Total assets increased by $110.1 million from December 31, 2024, to July 1, 2025, primarily driven by an increase in cash and cash equivalents and property and equipment, net[8] - Total liabilities increased by $152.6 million, largely due to an increase in long-term debt, while total stockholders' equity decreased by $42.5 million[8] Condensed Consolidated Statements of Income (Unaudited) Condensed Consolidated Statements of Income (Unaudited) | Metric (in thousands, except per share data) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | $955,825 | $904,042 | $1,883,022 | $1,795,265 | | Total costs and expenses | $891,003 | $845,350 | $1,766,241 | $1,697,280 | | Income from operations | $64,822 | $58,692 | $116,781 | $97,985 | | Net income | $54,812 | $52,444 | $87,753 | $85,635 | | Diluted net income per share | $1.14 | $1.08 | $1.80 | $1.76 | - For the thirteen weeks ended July 1, 2025, revenues increased by 5.7% year-over-year, and net income increased by 4.5%. Diluted EPS grew from $1.08 to $1.14[10] - For the twenty-six weeks ended July 1, 2025, revenues increased by 4.9% year-over-year, and net income increased by 2.5%. Diluted EPS grew from $1.76 to $1.80[10] Condensed Consolidated Statements of Comprehensive Income (Unaudited) Condensed Consolidated Statements of Comprehensive Income (Unaudited) | Metric (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $54,812 | $52,444 | $87,753 | $85,635 | | Foreign currency translation adjustment | $616 | $(124) | $626 | $(377) | | Total comprehensive income | $55,428 | $52,320 | $88,379 | $85,258 | - The company reported a positive foreign currency translation adjustment of $616 thousand for the thirteen weeks ended July 1, 2025, compared to a loss of $124 thousand in the prior year, contributing to higher total comprehensive income[12] Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Condensed Consolidated Statements of Stockholders' Equity (Unaudited) | Stockholders' Equity (in thousands) | December 31, 2024 | July 1, 2025 | | :---------------------------------- | :---------------- | :----------- | | Total Stockholders' Equity | $443,455 | $400,948 | | Net income | | $87,753 | | Cash dividends declared | | $(26,419) | | Treasury stock purchases | | $(142,358) | - Total stockholders' equity decreased from $443.5 million at December 31, 2024, to $400.9 million at July 1, 2025, primarily due to significant treasury stock purchases ($142.4 million) and cash dividends declared ($26.4 million), partially offset by net income ($87.8 million) and stock-based compensation[14] Condensed Consolidated Statements of Cash Flows (Unaudited) Condensed Consolidated Statements of Cash Flows (Unaudited) | Cash Flow Activity (in thousands) | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Cash provided by operating activities | $135,763 | $94,445 | | Cash used in investing activities | $(84,902) | $(66,804) | | Cash provided by/(used in) financing activities | $13,380 | $(43,058) | | Net change in cash and cash equivalents | $64,587 | $(15,636) | | Cash and cash equivalents at end of period | $148,763 | $40,654 | - Cash provided by operating activities significantly increased to $135.8 million for the first six months of fiscal 2025, up from $94.4 million in the prior year, primarily due to higher net income and changes in working capital[16][137] - Financing activities shifted from a net cash outflow of $43.1 million in 2024 to a net inflow of $13.4 million in 2025, driven by proceeds from new long-term convertible debt ($575.0 million) partially offset by debt repayments and treasury stock purchases[16] Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Significant Accounting Policies Outlines the basis of presentation for financial statements, impact of macroeconomic events, and recent FASB Accounting Standards Updates - The company's fiscal year is 52/53 weeks, ending on the Tuesday closest to December 31. Fiscal year 2025 is 52 weeks, ending December 30, 2025[18] - Geopolitical and macroeconomic events continue to pose risks, including potential wage and product cost inflation, supply chain disruptions, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings[22] - Management is evaluating new ASUs (2023-09, 2024-03, 2024-04) related to income tax disclosures, expense disaggregation, and convertible debt instruments to determine their impact on financial statements and disclosures[23][24][25] 2. Fair Value Measurements Details fair value measurements, categorizing assets and liabilities into Level 1, Level 2, and Level 3 based on input observability Assets/(Liabilities) (in thousands) | Assets/(Liabilities) (in thousands) | July 1, 2025 (Level 1) | December 31, 2024 (Level 1) | | :---------------------------------- | :--------------------- | :-------------------------- | | Non-qualified deferred compensation assets | $116,084 | $108,093 | | Non-qualified deferred compensation liabilities | $(116,177) | $(108,166) | Acquisition-related contingent consideration and compensation liabilities (Level 3, in thousands) | Acquisition-related contingent consideration and compensation liabilities (Level 3, in thousands) | July 1, 2025 | December 31, 2024 | | :-------------------------------------------------------------------------------- | :----------- | :---------------- | | Balance | $(12,821) | $(20,155) | - The fair value of acquisition-related contingent consideration and compensation liabilities (Level 3) decreased from $20.155 million at December 31, 2024, to $12.821 million at July 1, 2025, primarily due to payments of $8.7 million during the first six months of fiscal 2025[26][28] - The estimated fair value of the 2026 Notes was approximately $69.7 million (principal $69.0 million) and the 2030 Notes was approximately $629.6 million (principal $575.0 million) as of July 1, 2025, both showing an increase primarily due to the company's stock price increase[30] 3. Inventories Provides a breakdown of inventory components, including restaurant food and supplies, bakery finished goods, and raw materials Inventories (in thousands) | Inventories (in thousands) | July 1, 2025 | December 31, 2024 | | :------------------------- | :----------- | :---------------- | | Restaurant food and supplies | $34,174 | $35,141 | | Bakery finished goods and work in progress | $22,399 | $20,210 | | Bakery raw materials and supplies | $9,840 | $9,175 | | Total | $66,413 | $64,526 | - Total inventories increased by $1.9 million from $64.5 million at December 31, 2024, to $66.4 million at July 1, 2025, primarily driven by an increase in bakery finished goods and raw materials[31] 4. Gift Cards Presents information on gift card liabilities and contract assets, detailing activations, redemptions, breakage, deferrals, and amortization Gift Card Liabilities (in thousands) | Gift Card Liabilities (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $199,855 | $196,236 | $226,810 | $222,915 | | Activations | $29,471 | $28,074 | $50,144 | $48,642 | | Redemptions and breakage | $(33,033) | $(31,966) | $(80,661) | $(79,213) | | Ending balance | $196,293 | $192,344 | $196,293 | $192,344 | Gift Card Contract Assets (in thousands) | Gift Card Contract Assets (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $17,080 | $17,598 | $18,447 | $19,111 | | Deferrals | $2,833 | $3,135 | $5,201 | $5,559 | | Amortization | $(3,624) | $(3,833) | $(7,359) | $(7,770) | | Ending balance | $16,289 | $16,900 | $16,289 | $16,900 | - Gift card liabilities decreased by $30.5 million for the twenty-six weeks ended July 1, 2025, primarily due to redemptions and breakage exceeding activations[32] 5. Debt Provides detailed information on the company's debt instruments, including the Revolving Credit Facility, 2030 Convertible Senior Notes, and 2026 Convertible Senior Notes - The Revolver Facility provides $400 million in revolving loan commitments, with $366.5 million net availability as of July 1, 2025, after repaying $110.0 million in Q1 fiscal 2025[33][34] - The company issued $575.0 million in 2030 Convertible Senior Notes on February 28, 2025, with a 2.00% interest rate, maturing March 15, 2030. The initial conversion rate is 14.1377 shares per $1,000 principal amount[38][40] - Approximately $276.0 million of the 2026 Convertible Senior Notes were repurchased on February 28, 2025, resulting in a $15.9 million loss on early debt extinguishment. $69.0 million principal amount of 2026 Notes remain outstanding, maturing June 15, 2026[47][55] 6. Leases Presents components of lease expense and supplemental information related to leases, including cash paid for operating leases and right-of-use assets obtained Lease Expense (in thousands) | Lease Expense (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating | $41,871 | $38,158 | $82,983 | $75,548 | | Variable | $24,102 | $23,438 | $46,934 | $45,901 | | Short-term | $43 | $38 | $82 | $82 | | Total | $66,016 | $61,634 | $129,999 | $121,531 | - Total lease expense increased by $4.4 million for the thirteen weeks ended July 1, 2025, and by $8.5 million for the twenty-six weeks ended July 1, 2025, primarily driven by higher operating lease expenses[56] - Cash paid for operating leases increased to $95.3 million for the first six months of fiscal 2025, up from $76.6 million in the prior year, reflecting increased lease activity[56] 7. Commitments and Contingencies Addresses the company's commitments and contingencies, including an ongoing IRS examination and various private lawsuits, government audits, and claims - The IRS proposed disallowing a portion of depreciation and domestic production activity deductions for tax years 2015-2020, with the case now under Appeals jurisdiction. An immaterial amount has been reserved[57] - The company is subject to various lawsuits, audits, and claims in the ordinary course of business, including operational, employment, and intellectual property issues[58] - Management believes that the final disposition of pending legal matters will not materially adversely affect the company's financial position, results of operations, or liquidity[59] 8. Stockholders' Equity Details common stock activities, including quarterly cash dividends and share repurchases, subject to operating performance and debt covenants - A quarterly cash dividend of $0.27 per share was declared on April 24, 2025, and paid on May 27, 2025[60] - The company cumulatively repurchased 59.7 million shares at a total cost of $1,971.2 million through July 1, 2025, under a 61.0 million share authorization[60] - Share repurchases in the second quarter of fiscal 2025 totaled 2,525 shares at a cost of $0.1 million, excluding excise tax[62] 9. Stock-Based Compensation Provides information on stock-based incentive plans, including types of awards, authorized shares, and total compensation expense recognized - The Board approved an amendment to the Stock Incentive Plan on March 26, 2025, increasing authorized shares by 6.0 million to 13.15 million, approved by stockholders on May 22, 2025[65] Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total stock-based compensation | $7,189 | $6,826 | $14,770 | $14,475 | - Total unrecognized stock-based compensation expense for unvested stock options was $1.1 million (over 3.4 years) and for unvested restricted shares/units was $72.6 million (over 3.0 years) as of July 1, 2025[68][69] 10. Net Income Per Share Explains the calculation of basic and diluted net income per share, detailing weighted-average shares outstanding and dilutive effects Net Income Per Share (in thousands, except per share data) | Net Income Per Share (in thousands, except per share data) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :--------------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $54,812 | $52,444 | $87,753 | $85,635 | | Basic weighted-average shares outstanding | 46,391 | 47,702 | 46,958 | 47,726 | | Diluted weighted-average shares outstanding | 48,102 | 48,775 | 48,679 | 48,685 | | Basic net income per share | $1.18 | $1.10 | $1.87 | $1.79 | | Diluted net income per share | $1.14 | $1.08 | $1.80 | $1.76 | - Diluted EPS increased to $1.14 for the thirteen weeks ended July 1, 2025, from $1.08 in the prior year, and to $1.80 for the twenty-six weeks ended July 1, 2025, from $1.76 in the prior year[72] - Common stock equivalents related to outstanding stock options, restricted stock, and restricted stock units (0.8 million shares for July 1, 2025) were excluded from diluted EPS calculation due to their anti-dilutive effect[72] 11. Segment Information Provides financial information by operating segment, including revenues, costs, income from operations, capital expenditures, and total assets - The Cheesecake Factory Restaurants, North Italia, and Other FRC brands are identified as reportable operating segments[74] Segment Revenues (in thousands) | Segment Revenues (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | The Cheesecake Factory Restaurants | $683,257 | $676,697 | $1,355,991 | $1,344,491 | | North Italia | $90,830 | $75,514 | $174,240 | $146,388 | | Other FRC | $90,178 | $73,637 | $177,602 | $147,866 | | Other | $91,560 | $78,194 | $175,189 | $156,520 | | Total | $955,825 | $904,042 | $1,883,022 | $1,795,265 | Segment Income/(Loss) from Operations (in thousands) | Segment Income/(Loss) from Operations (in thousands) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :--------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | The Cheesecake Factory Restaurants | $106,547 | $101,035 | $205,980 | $187,106 | | North Italia | $8,399 | $5,507 | $13,379 | $8,677 | | Other FRC | $3,914 | $3,590 | $8,618 | $9,882 | | Other | $(54,038) | $(51,440) | $(111,196) | $(107,680) | | Total | $64,822 | $58,692 | $116,781 | $97,985 | Segment Total Assets (in thousands) | Segment Total Assets (in thousands) | July 1, 2025 | December 31, 2024 | | :---------------------------------- | :----------- | :---------------- | | The Cheesecake Factory Restaurants | $1,600,431 | $1,545,227 | | North Italia | $434,688 | $419,812 | | Other FRC | $441,432 | $420,957 | | Other | $675,353 | $655,764 | | Total | $3,151,904 | $3,041,760 | 12. Subsequent Events Discloses events occurring after the reporting period, including a declared cash dividend and the enactment of H.R. 1 with tax provisions - On July 23, 2025, the Board declared a quarterly cash dividend of $0.27 per share, payable on August 26, 2025[79] - H.R. 1, enacted on July 4, 2025, includes tax provisions that may impact the timing and magnitude of certain tax deductions and permanently extends several business tax benefits. Management is evaluating its impact[80] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition and results, including forward-looking statements, macroeconomic impacts, and liquidity Forward-Looking Statements Highlights that the report contains forward-looking statements regarding performance trends, growth plans, and business goals, subject to various risks - Forward-looking statements cover performance trends, growth plans, financial guidance, sales, cash flows, dividends, share repurchases, and expansion strategies[82] - These statements are subject to risks including economic conditions, supply chain disruptions, inflation, geopolitical events, and changes in consumer behavior[82] - The company cautions against undue reliance on forward-looking statements, as actual results may differ materially due to identified factors, risks, and uncertainties[83] Geopolitical and Other Macroeconomic Impacts to our Operating Environment Discusses the ongoing influence of geopolitical and macroeconomic events on the company's operating environment, including inflation and supply chain risks - Operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and increased commodity and wage inflation in recent years[85] - Commodity and wage inflationary environment began returning to more historical levels in fiscal 2024[85] - Ongoing geopolitical and macroeconomic events could lead to further wage/cost inflation, supply chain disruptions, staffing challenges, shifts in consumer behavior, and delays in new restaurant openings[86] General Provides a general overview of The Cheesecake Factory Incorporated, highlighting its restaurant brands, international licensed locations, and bakery division - The Cheesecake Factory Incorporated operates 363 restaurants in the U.S. and Canada under brands including The Cheesecake Factory (216), North Italia (46), Flower Child (42), and other FRC brands (52)[87] - 34 The Cheesecake Factory restaurants operate internationally under licensing agreements[87] - The bakery division produces cheesecakes and baked products for its restaurants, international licensees, and third-party customers[87] Overview Outlines the company's strategic priorities, focusing on customer satisfaction, expense management, and new restaurant development as a top capital allocation priority - The company's strategy focuses on menu innovation, service, and operational execution to drive competitive performance and customer satisfaction[88] - Investing in new Company-owned restaurant development is the top long-term capital allocation priority, with plans to expand The Cheesecake Factory, North Italia, and Flower Child concepts[89] - A balanced capital allocation strategy includes new restaurant investments, managing debt, and returning capital to shareholders through dividends and share repurchases[94] Results of Operations Provides a detailed analysis of financial performance, comparing current and prior year periods, covering revenues, expenses, and their impact on net income Metric (% of revenues) | Metric (% of revenues) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Revenues | 100.0% | 100.0% | 100.0% | 100.0% | | Food and beverage costs | 21.6% | 22.3% | 21.7% | 22.6% | | Labor expenses | 34.9% | 35.1% | 35.3% | 35.5% | | Other operating costs and expenses | 26.8% | 26.4% | 26.7% | 26.3% | | Income from operations | 6.8% | 6.5% | 6.2% | 5.5% | | Net income | 5.7% | 5.8% | 4.7% | 4.8% | Thirteen Weeks Ended July 1, 2025 Compared to Thirteen Weeks Ended July 2, 2024 Revenues increased by 5.7% to $955.8 million, driven by new restaurant openings and comparable sales growth, with improved food and beverage and labor costs as a percentage of revenues - Revenues increased 5.7% to $955.8 million, primarily due to new restaurant openings and increased comparable restaurant sales[98] Segment Comparable Sales Change (13 Weeks) | Segment Comparable Sales Change (13 Weeks) | July 1, 2025 vs. July 2, 2024 | | :----------------------------------------- | :---------------------------- | | The Cheesecake Factory Restaurants | +1.2% | | North Italia | -1.0% | | Flower Child | +4.0% | - Food and beverage costs as a percentage of revenues decreased from 22.3% to 21.6%, mainly due to favorable commodity inflation (0.6%)[106] - Labor expenses as a percentage of revenues decreased from 35.1% to 34.9%, driven by menu price increases exceeding wage rate inflation and improved staffing/productivity (0.7%), partially offset by higher group medical costs (0.5%)[107] - Preopening costs increased to $9.0 million from $7.0 million, reflecting the opening of 8 new locations in Q2 fiscal 2025 compared to 5 in Q2 fiscal 2024[110] Twenty-Six Weeks Ended July 1, 2025 Compared to Twenty-Six Weeks Ended July 2, 2024 Revenues increased by 4.9% to $1,883.0 million, driven by new restaurant openings and comparable sales growth, with a $15.9 million loss on extinguishment of debt - Revenues increased 4.9% to $1,883.0 million, primarily due to new restaurant openings and increased comparable restaurant sales[114] Segment Comparable Sales Change (26 Weeks) | Segment Comparable Sales Change (26 Weeks) | July 1, 2025 vs. July 2, 2024 | | :----------------------------------------- | :---------------------------- | | The Cheesecake Factory Restaurants | +1.1% | | North Italia | -1.0% | | Flower Child | +5.0% | - Food and beverage costs as a percentage of revenues decreased from 22.6% to 21.7%, mainly due to favorable commodity inflation (0.6%) and a shift in sales mix (0.2%)[119] - Labor expenses as a percentage of revenues decreased from 35.5% to 35.3%, driven by menu price increases exceeding wage rate inflation and improved staffing/productivity (0.8%), partially offset by higher group medical costs (0.3%) and payroll taxes (0.1%)[120][122] - A $15.9 million loss on early debt extinguishment was recorded in Q1 fiscal 2025 due to the repurchase of $276.0 million of 2026 Notes[126] Non-GAAP Measures Presents reconciliations of non-GAAP financial measures, including adjusted net income, adjusted diluted net income per share, and adjusted EBITDA, to their GAAP counterparts - Adjusted net income and adjusted diluted net income per share exclude impairment of assets, lease termination expenses, acquisition-related contingent consideration, compensation and amortization expenses, and loss on extinguishment of debt, along with their tax effects[128][129] Non-GAAP Metric (in thousands, except per share data) | Non-GAAP Metric (in thousands, except per share data) | 13 Weeks Ended July 1, 2025 | 13 Weeks Ended July 2, 2024 | 26 Weeks Ended July 1, 2025 | 26 Weeks Ended July 2, 2024 | | :---------------------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Adjusted net income | $55,725 | $53,153 | $101,443 | $88,715 | | Adjusted diluted net income per share | $1.16 | $1.09 | $2.08 | $1.82 | | Adjusted EBITDA | $100,385 | $91,849 | $188,126 | $167,768 | - Adjusted EBITDA increased to $100.4 million for the thirteen weeks ended July 1, 2025, from $91.8 million in the prior year, and to $188.1 million for the twenty-six weeks ended July 1, 2025, from $167.8 million in the prior year[131] Liquidity and Capital Resources Discusses financial objectives, primary liquidity sources, and capital allocation strategy, including cash flow activities, capital expenditures, and debt management - Cash flows from operating activities are the principal source of liquidity, used to finance restaurant expansion, maintenance, and infrastructure investments[134] - Cash and cash equivalents increased by $64.6 million to $148.8 million during the first six months of fiscal 2025[136] - Capital expenditures for the first six months of fiscal 2025 totaled $84.4 million, including $44.0 million for new restaurants and $33.6 million for existing restaurants[138] - The company expects to open as many as 25 new restaurants in fiscal 2025, with anticipated capital expenditures of $190 million to $200 million[139] - The company repurchased 2.6 million shares at a cost of $141.5 million in the first six months of fiscal 2025, primarily to offset dilution from equity compensation and support EPS growth[146][147] Critical Accounting Estimates States that critical accounting estimates, involving significant judgments and assumptions, have not materially changed from the prior fiscal year's Annual Report on Form 10-K - The preparation of financial statements requires estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[150] - Critical accounting estimates have not materially changed from those reported in the Annual Report on Form 10-K for fiscal year ended December 31, 2024[150] Recent Accounting Pronouncements Refers to Note 1 of the Condensed Consolidated Financial Statements for a summary of new accounting standards and their potential impact - A summary of new accounting standards is provided in Note 1 of the Notes to Condensed Consolidated Financial Statements[151] Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses the company's exposure to market risks, primarily from commodity price volatility and interest rate changes on funded debt, with no hedging contracts in place - The company is exposed to market risk from volatility in commodity costs (food, supplies) due to factors like labor, distribution, weather, and geopolitical events[153] - A hypothetical 1% increase in food costs would have negatively impacted cost of sales by $2.0 million for both the second quarter of fiscal 2025 and 2024[155] - The company is exposed to interest rate risk on its funded debt, but had no outstanding borrowings under the Revolver Facility as of July 1, 2025[156] Item 4. Controls and Procedures Details the company's disclosure controls and procedures, confirming their effectiveness, and states no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of July 1, 2025[157] - No material changes in internal control over financial reporting occurred during the fiscal quarter ended July 1, 2025[158] PART II OTHER INFORMATION Item 1. Legal Proceedings Refers to Note 7 of the Notes to Condensed Consolidated Financial Statements for information regarding legal proceedings, commitments, and contingencies - Information regarding legal proceedings is detailed in Note 7 of the Notes to Condensed Consolidated Financial Statements[159] Item 1A. Risk Factors Directs readers to the company's Annual Report on Form 10-K for a comprehensive description of risk factors and to previous quarterly reports for additional cautionary statements - A description of risk factors is contained in Part I, Item 1A of the Annual Report on Form 10-K for fiscal year ended December 31, 2024, and Part II, Item 1A of the Quarterly Report on Form 10-Q for the quarter ended April 1, 2025[160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Provides a table detailing common stock purchases during the fiscal quarter and reiterates the company's flexible share repurchase program Common Stock Purchases | Period | Total Number of Shares Purchased (1) | Average Price Paid per Share | | :---------------------- | :----------------------------------- | :--------------------------- | | April 2 — May 6, 2025 | 3 | $51.65 | | May 7 — June 3, 2025 | — | — | | June 4 — July 1, 2025 | — | — | | Total | 3 | | - The company cumulatively repurchased 59.7 million shares at a total cost of $1,971.2 million through July 1, 2025, under a 61.0 million share authorization[163] - The share repurchase program has no expiration date, no specific purchase requirement, and can be modified or terminated at any time, subject to legal constraints and financial covenants[163] Item 5. Other Information States that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended July 1, 2025[164] Item 6. Exhibits Lists all exhibits filed with the Form 10-Q, including organizational documents, stock incentive plans, certifications, and XBRL formatted financial statements - Exhibits include the Restated Certificate of Incorporation, Bylaws, Stock Incentive Plan, Rule 13a-14(a)/15d-14(a) Certifications, Section 906 Certifications, and iXBRL formatted financial statements[165] Signatures Contains the required signatures of the registrant's authorized officers, certifying the filing of the report - The report is signed by David Overton, Chairman of the Board and Chief Executive Officer, and Matthew E. Clark, Executive Vice President and Chief Financial Officer, on August 4, 2025[168]