CHEESECAKE FACTORY INC Fair Value Disclosure
2. Fair Value Measurements
Fair value measurements are estimated based on valuation techniques and inputs categorized as follows:
| ● | Level 1: Quoted prices in active markets for identical assets or liabilities |
| ● | Level 2: Observable inputs other than quoted prices in active markets for identical assets and liabilities |
| ● | Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the Company to develop its own assumptions |
The following tables present the components and classification of our assets and liabilities that are measured at fair value on a recurring basis (in thousands):
| December 30, 2025 | ||||||||
| Level 1 | | Level 2 | | Level 3 | ||||
Assets/(Liabilities) |
| ||||||||
Non-qualified deferred compensation assets | $ | 126,142 | $ | — | $ | — | |||
Non-qualified deferred compensation liabilities | (125,208) | — | — | ||||||
Acquisition-related contingent consideration and compensation liability | — | — | (24,628) | ||||||
| December 31, 2024 | ||||||||
| Level 1 | | Level 2 | | Level 3 | ||||
Assets/(Liabilities) | |||||||||
Non-qualified deferred compensation assets | $ | 108,093 | $ | — | $ | — | |||
Non-qualified deferred compensation liabilities | (108,166) | — | — | ||||||
Acquisition-related contingent consideration and compensation liability | — | — | (20,155) | ||||||
Changes in the fair value of non-qualified deferred compensation assets and liabilities are recognized in other income, net in our consolidated statements of income. Changes in the fair value of the acquisition-related contingent consideration and compensation liability are recognized in acquisition-related contingent consideration, compensation and amortization expenses in our consolidated statements of income.
The following table presents a reconciliation of the beginning and ending amounts of the fair value of the acquisition-related contingent consideration and compensation liability categorized as Level 3 (in thousands):
| Fiscal year ended | |||||
| December 30, 2025 | | December 31, 2024 | |||
Beginning balance | $ | 20,155 | $ | 25,495 | ||
Payment | (8,714) | (6,506) | ||||
Change in fair value |
| 13,187 |
| 1,166 | ||
Ending balance | $ | 24,628 | $ | 20,155 | ||
The fair value of the acquisition-related contingent consideration and compensation liability was based on estimated future revenues, margins and probability of achievement given recent performance, discount rate and has no minimum or maximum payment. During fiscal 2025, the fair value of the contingent consideration and compensation liability increased by $4.5 million due to a $10.5 million increase in the fair value primarily stemming from updating the probability of achievement and $2.7 million of amortization, partially offset by a payment of $8.7 million per the FRC acquisition agreement. During fiscal 2024, the fair value of the contingent consideration and compensation liability decreased by $5.3 million due to a payment of $6.5 million per the FRC acquisition agreement and a $1.9 million decrease in the fair value primarily stemming from a change in the volatility factors, as well as a decrease in estimated fiscal 2025 revenues and future revenues utilized in the calculation, partially offset by $3.1 million of amortization. During fiscal 2023, the fair value of the contingent consideration and compensation liability decreased by $3.1 million due to a payment of $13.0 million per the FRC acquisition agreement, partially offset by $9.9 million increase in the fair value primarily stemming from a change in the volatility factors, as well as an increase in fiscal 2023 revenues and estimated future revenues utilized in the calculation and amortization.
The fair values of our cash and cash equivalents, accounts receivable, income taxes receivable, other receivables, prepaid expenses, accounts payable, income taxes payable and other accrued expenses approximate their carrying amounts due to their short duration. The fair value of our Revolver Facility (as defined below) approximates carrying value due to the variable interest rate.
At December 30, 2025 and December 31, 2024, we had $69.0 million and $345.0 million aggregate principal amount of 2026 Notes outstanding. The estimated fair value of the 2026 Notes based on a market approach as of December 30, 2025 and December 31, 2024 was approximately $67.5 million and $339.5 million, respectively, and determined based on the estimated or actual bids and offers of the 2026 Notes in an over-the-counter market on the last business day of the reporting period. The decrease in the fair value of the 2026 Notes was primarily due to a decrease in our stock price from the date of the issuance of the 2026 Notes. As of December 30, 2025, we had $575.0 million aggregate principal amount of 2030 Notes outstanding. The estimated fair value of the 2030 Notes based on a market approach as of December 30, 2025 was approximately $563.5 million and was determined based on the estimated or actual bids and offers of the 2030 Notes in an over-the-counter market on the last business day of the reporting period. The decrease in the fair value of the 2030 Notes was primarily due to a decrease in our stock price from the date of the issuance of the 2030 Notes. See Note 10 for further discussion of the 2026 Notes and 2030 Notes.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 27, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 24, 2021 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.