Company: CAVA
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001628280-25-007882
Chunk: 162

Company: CAVA GROUP, INC.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 1
Chunk 162
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 that could be implemented to realize the net deferred tax assets.

The Company has assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective positive evidence evaluated is the cumulative income earned over the most recent three-year period. Such objective evidence in addition to other subjective evidence, such as our projections for future growth, supports a more likely than not conclusion that all deferred tax assets will be realized. On the basis of this evaluation, the full valuation allowance was released in fiscal 2024, as further described in Item 8. “Financial Statements and Supplementary Data,” Note 7 (Income Taxes).  Key assumptions utilized within the projections include the Company’s sales, growth rates, gross margins, operating expenses in relation to the current economic conditions and the Company’s future expectations, market competition, inflation, consumer trends, and other relevant economic factors. The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective positive evidence in the form of cumulative income is no longer present. 

Equity-based Compensation

The Company has issued stock options and RSUs. Equity-based compensation expense is measured based on the grant date fair value of those awards and is recognized on a straight-line basis over the requisite service period. Equity-based compensation expense is based on awards outstanding, and forfeitures are recognized as they occur. 

The Company uses the Black-Scholes-Merton (“Black-Scholes”) option-pricing model to estimate the fair value of stock options at the grant date. The use of the Black-Scholes option-pricing model requires the use of subjective 

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assumptions, including the expected term, risk-free interest rate, expected volatility, and expected dividend yield of the underlying common stock. The fair value of RSUs is equal to the fair value of our common stock at the date of grant.

Recent Accounting Pronouncements 

Refer to Item 8. “Financial Statements and Supplementary Data,” Note 2 (Basis of Presentation and Significant Accounting Policies).  

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to market risks, including commodity and food price risks, labor costs, effects of inflation, and interest rate risk. We currently do not enter into derivatives or other financial instruments for trading or speculative purposes. We currently have operations only in the United States and do not have material