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Stockholders' Equity and Series A Convertible Preferred Stock | 12 Months Ended
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Dec. 29, 2020
Stockholders' Equity and Series A Convertible Preferred Stock |
Stockholders' Equity and Series A Convertible Preferred Stock | 17. Stockholders’ Equity and Series A Convertible Preferred Stock Common Stock - Dividends and Share Repurchases To preserve liquidity during the COVID-19 pandemic and in conjunction with the terms of our Amended Facility, in March 2020, our Board suspended the quarterly dividend on our common stock, as well as share repurchases. Prior to this suspension, our Board declared cash dividends of $0.36 per common share for the first quarter of fiscal 2020. Cash dividends of $1.38 and $1.24 per common share were declared during fiscal 2019 and 2018, respectively. Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will be dependent on our operating performance, financial condition, capital expenditure requirements, limitations on cash distributions pursuant to the terms and conditions of the Amended Facility and applicable law, and such other factors that the Board considers relevant. (See Note 12 for further discussion of our long-term debt.) Under authorization by our Board to repurchase up to 56.0 million shares of our common stock, we have cumulatively repurchased 53.0 million shares at a total cost of $1,696.7 million through December 29, 2020. During fiscal 2020, 2019 and 2018, we repurchased 0.1 million, 1.1 million and 2.3 million shares of our common stock at a cost of $3.6 million, $51.0 million and $109.3 million, respectively. Our objectives with regard to share repurchases have been to offset the dilution to our shares outstanding that results from equity compensation grants and to supplement our earnings per share growth. Repurchased common stock is reflected as a reduction of stockholders’ equity in treasury stock. Our share repurchase authorization does not have an expiration date, does not require us to purchase a specific number of shares and may be modified, suspended or terminated at any time. Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us. Future decisions to repurchase shares are at the discretion of the Board and are based on several factors, including current and forecasted operating cash flows, capital needs associated with new restaurant development and maintenance of existing locations, dividend payments, debt levels and cost of borrowing, obligations associated with the Acquisition, our share price and current market conditions. (See Note 2 for further discussion of the Acquisition.) The timing and number of shares repurchased are also subject to legal constraints and financial covenants under the Amended Facility that limit share repurchases based on a defined ratio. (See Note 12 for further discussion of our long-term debt.) ​ Series A Convertible Preferred Stock ​ On April 20, 2020, to increase our liquidity given the impact of the COVID-19 pandemic on our operations, we issued 200,000 shares of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A preferred stock”) for an aggregate purchase price of $200 million, or $1,000 per share. In connection with the issuance, we incurred direct and incremental costs of $10.3 million, including financial advisory fees, closing costs, legal expenses, a commitment fee and other offering-related expenses. These direct and incremental costs reduced the Series A preferred stock balance at the issuance date and were recognized through retained earnings on June 30, 2020, the first measurement date. ​ The Series A preferred stock ranks senior to our common stock with respect to dividends and distributions on liquidation, winding-up and dissolution upon which each share of Series A preferred stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price (without giving effect to the commitment fee), plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the holder of the Series A preferred stock would have been entitled to receive at such time if the Series A preferred stock were converted into common stock. At December 29, 2020, the Liquidation Preference was $1,042.66 per share. ​ Dividend Rights ​ The holders of Series A preferred stock are entitled to dividends on the Liquidation Preference at the rate of 9.5% per annum, payable in cash or, at our option, paid in-kind. Such holders are also entitled to participate in dividends declared or paid on our common stock on an as-converted basis. We recorded in-kind dividends of $13.5 million during fiscal 2020. ​ Conversion Rights ​ Each holder has the right, at its option, to convert its Series A preferred stock, in whole or in part, into fully paid and non-assessable shares of our common stock at a conversion price equal to $22.23 per share, subject to customary anti-dilution adjustments, including in the event of any stock split, stock dividend, recapitalization or similar events and certain anti-dilutive offerings if they occur on or prior to April 19, 2021. As of December 29, 2020, the number of common shares that would be required to be issued upon conversion of the outstanding shares of Series A preferred stock was 9.4 million. Pursuant to the terms of the Certificate of Designations, unless and until approval of our stockholders is obtained as contemplated by Nasdaq listing rules (the “Stockholder Approval”), no holder may convert shares of Series A preferred stock through either an optional or a mandatory conversion into shares of common stock if and solely to the extent that such conversion would result in the holder beneficially owning in excess of 19.9% of then outstanding common stock. We have the right to settle any conversion in cash. As of December 29, 2020, the Series A preferred stock was convertible into approximately 17.1% of our outstanding common stock, on an as-converted basis. ​ After April 20, 2023 and subject to certain conditions, we may, at our option, require conversion of all of the outstanding shares of Series A preferred stock to common stock if, for at least 20 trading days during the 30 consecutive trading days immediately preceding the date we notify the holders of Series A preferred stock of the election to convert, the closing price of the common stock is at least 200% of the conversion price. We will not exercise our right to mandatorily convert all outstanding shares of Series A preferred stock unless certain liquidity conditions with regard to the shares of common stock to be issued upon such conversion are satisfied. ​ We determined that the nature of the Series A preferred stock was more akin to an equity instrument than a debt instrument and that the economic characteristics and risks of the embedded conversion options were clearly and closely related to the Series A preferred stock. As such, the conversion options were not required to be bifurcated from the host under FASB Accounting Standards Codification (“ASC 815”), Derivatives and Hedging. We also determined that the Series A preferred stock did not contain a beneficial conversion feature (“BCF”) upon issuance. However, the associated dividends for fiscal 2020 generated a BCF of $4.8 million based on the fair value of our stock price on the commitment date (the date the dividends were declared to be paid in-kind) as compared to the conversion price. Any BCF determined to exist is recorded as a debit to retained earnings and an increase to preferred stock. ​ Redemption Rights ​ On and after October 20, 2027, holders of the Series A preferred stock have the right to require redemption of all or any part of the Series A preferred stock for an amount equal to the Liquidation Preference. Upon certain change of control events, we are required to redeem, subject to conversion rights of the holders of Series A preferred stock, all of the outstanding shares of Series A preferred stock for cash consideration equal to the greater of (i) the Liquidation Preference and (ii) the amount that such holder would have been entitled to receive at such time if the Series A preferred stock were converted into common stock. We may redeem any or all of the Series A preferred stock for an amount equal to (i) 120% of the Liquidation Preference thereof at any time between April 21, 2025 and April 19, 2026 and (ii) 100% of the Liquidation Preference at any time beginning on April 20, 2026, provided that such holder will have the right to convert the Series A preferred stock immediately prior to and in lieu of such redemption. To the extent such holder elects to convert the Series A preferred stock in lieu of such redemption and the number of shares of common stock issuable upon such conversion would exceed 19.9% of the outstanding shares of common stock, and the Stockholder Approval has not been obtained as of such date, any portion in excess of such limit will remain outstanding as Series A preferred stock. ​ Since the redemption of the Series A preferred stock is contingently redeemable and therefore not certain to occur, the Series A preferred stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Series A preferred stock is redeemable in certain circumstances at the option of the holder and is redeemable in certain circumstances upon the occurrence of an event that is not solely within our control, we have classified the Series A preferred stock separately from stockholders’ equity in the consolidated balance sheets. ​ As noted above, we determined that the nature of the Series A preferred stock was more akin to an equity instrument than a debt instrument. However, we determined that the economic characteristics and risks of the embedded put option, call option and redemption upon change of control provision were not clearly and closely related to the Series A preferred stock. Therefore, we assessed these items further and determined they did not meet the definition of a derivative under ASC 815, Derivatives and Hedging. ​ Voting Rights ​ Holders of Series A preferred stock are generally entitled to vote with the holders of the common stock on an as-converted basis. Holders of Series A preferred stock are entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series A preferred stock, issuances of securities that are senior to, or equal in priority with, the Series A preferred stock and certain business combinations and binding or statutory share exchanges or reclassification involving the Series A preferred stock unless such events do not adversely affect the rights, preferences or voting powers of such preferred stock. In addition, for so long as the holders of Series A preferred stock hold record and beneficial ownership of 25% of the Series A preferred stock issued to them, such holders will have the right to designate one member to our board of directors. If the holders cease to have such designation right, for so long as the holders have record and beneficial ownership of shares of common stock issued upon conversion of the Series A preferred stock that constitute at least 5% of the outstanding common stock, the holders will have the right to nominate one person for election to our board of directors.

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- Definition The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 + Details
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