Delaware | 84-1303469 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
520 Zang Street, Suite D | ||
Broomfield, CO | 80021 | |
(Address of principal executive offices) | (Zip Code) | |
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o | Smaller reporting company o | |
(Do not check if a smaller reporting company) | Emerging growth company x | |
Class | Outstanding at July 16, 2018 | |
Class A Common Stock, $0.01 par value per share | ||
Page | |||
July 3, 2018 | January 2, 2018 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable | ||||||||
Inventories | ||||||||
Prepaid expenses and other assets | ||||||||
Income tax receivable | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Goodwill | ||||||||
Intangibles, net | ||||||||
Other assets, net | ||||||||
Total long-term assets | ||||||||
Total assets | $ | $ | ||||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | $ | ||||||
Accrued payroll and benefits | ||||||||
Accrued expenses and other current liabilities | ||||||||
Current portion of long-term debt | ||||||||
Total current liabilities | ||||||||
Long-term debt, net | ||||||||
Deferred rent | ||||||||
Deferred tax liabilities, net | ||||||||
Other long-term liabilities | ||||||||
Total liabilities | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of July 3, 2018 and January 2, 2018; no shares issued or outstanding | ||||||||
Common stock—$0.01 par value, 180,000,000 shares authorized as of July 3, 2018 and January 2, 2018; 43,690,395 issued and 41,266,524 outstanding as of July 3, 2018 and 43,550,329 issued and 41,126,458 outstanding as of January 2, 2018 | ||||||||
Treasury stock, at cost, 2,423,871 shares as of July 3, 2018 and January 2, 2018 | ( | ) | ( | ) | ||||
Additional paid-in capital | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ | ||||||
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||||||
Revenue: | ||||||||||||||||
Restaurant revenue | $ | $ | $ | $ | ||||||||||||
Franchising royalties and fees | ||||||||||||||||
Total revenue | ||||||||||||||||
Costs and expenses: | ||||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||||
Cost of sales | ||||||||||||||||
Labor | ||||||||||||||||
Occupancy | ||||||||||||||||
Other restaurant operating costs | ||||||||||||||||
General and administrative | ||||||||||||||||
Depreciation and amortization | ||||||||||||||||
Pre-opening | ||||||||||||||||
Restaurant impairments, closure costs and asset disposals | ||||||||||||||||
Total costs and expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Loss on extinguishment of debt | ||||||||||||||||
Interest expense, net | ||||||||||||||||
Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
(Benefit) provision for income taxes | ( | ) | ( | ) | ||||||||||||
Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Accretion of preferred stock to redemption value | ( | ) | ( | ) | ||||||||||||
Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Loss per share of Class A and Class B common stock, combined: | ||||||||||||||||
Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted average shares of Class A and Class B common stock outstanding, combined: | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||||||
Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Other comprehensive loss: | ||||||||||||||||
Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
Other comprehensive loss | ( | ) | ( | ) | ||||||||||||
Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Two Fiscal Quarters Ended | ||||||||
July 3, 2018 | July 4, 2017 | |||||||
Operating activities | ||||||||
Net loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | ||||||||
Deferred income taxes | ( | ) | ||||||
Restaurant impairments, closure costs and asset disposals | ||||||||
Loss on extinguishment of debt | ||||||||
Amortization of debt issuance costs | ||||||||
Stock-based compensation | ||||||||
Non-cash gain on litigation settlement | ( | ) | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | ||||||||
Inventories | ( | ) | ( | ) | ||||
Prepaid expenses and other assets | ( | ) | ||||||
Accounts payable | ( | ) | ||||||
Deferred rent | ( | ) | ||||||
Income taxes | ( | ) | ||||||
Accrued expenses and other liabilities | ( | ) | ( | ) | ||||
Net cash provided by (used in) operating activities | ( | ) | ||||||
Investing activities | ||||||||
Purchases of property and equipment | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Financing activities | ||||||||
Net (payments) borrowings from swing line loan | ( | ) | ||||||
Proceeds from issuance of long-term debt | ||||||||
Payments on long-term debt | ( | ) | ( | ) | ||||
Issuance of preferred stock and common stock warrants, net of transaction expenses (see Note 9) | ||||||||
Issuance of common stock, net of transaction expenses (see Note 9) | ||||||||
Proceeds from exercise of stock options and employee stock purchase plan | ( | ) | ||||||
Debt issuance costs | ( | ) | ( | ) | ||||
Net cash provided by financing activities | ||||||||
Effect of exchange rate changes on cash | ||||||||
Net increase in cash and cash equivalents | ||||||||
Cash and cash equivalents | ||||||||
Beginning of period | ||||||||
End of period | $ | $ | ||||||
July 3, 2018 | January 2, 2018 | |||||||
Leasehold improvements | $ | $ | ||||||
Furniture, fixtures and equipment | ||||||||
Construction in progress | ||||||||
Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
$ | $ | |||||||
July 3, 2018 | January 2, 2018 | |||||||
Gift card liability | $ | $ | ||||||
Occupancy related | ||||||||
Utilities | ||||||||
Data breach liabilities | ||||||||
Other accrued expenses | ||||||||
$ | $ | |||||||
Year 1 | $ | ||
Year 2 | |||
Year 3 | |||
Year 4 | |||
Total | $ | ||
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||||||
(Benefit) provision for income taxes | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Effective tax rate | % | ( | )% | % | ( | )% | ||||||||||
Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | ||||||||||||
Stock-based compensation expense | $ | $ | $ | $ | |||||||||||
Capitalized stock-based compensation expense | $ | $ | $ | $ | |||||||||||
Fiscal Quarter Ended | Two Fiscal Quarters Ended | ||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | ||||||||||||
Restaurant impairments (1) | $ | $ | $ | $ | |||||||||||
Closure costs (1) | ( | ) | |||||||||||||
Loss on disposal of assets and other | |||||||||||||||
$ | $ | $ | $ | ||||||||||||
(1) | Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed. |
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||||||
Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Shares: | ||||||||||||||||
Basic weighted average shares outstanding | ||||||||||||||||
Effect of dilutive securities | ||||||||||||||||
Diluted weighted average shares outstanding | ||||||||||||||||
Loss per share: | ||||||||||||||||
Basic loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Diluted loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
July 3, 2018 | July 4, 2017 | |||||||
Interest paid (net of amounts capitalized) | $ | $ | ||||||
Income taxes paid (refunded) | ( | ) | ||||||
Changes in purchases of property and equipment accrued in accounts payable, net | ( | ) | ( | ) | ||||
Conversion of Series A convertible preferred stock to common stock | ||||||||
• | consumer recognition of our brand and our ability to respond to changing consumer preferences; |
• | overall economic trends, particularly those related to consumer spending; |
• | our ability to operate restaurants effectively and efficiently to meet consumer expectations; |
• | pricing; |
• | the number of restaurant transactions, per-person spend and average check amount; |
• | marketing and promotional efforts; |
• | weather; |
• | food safety and foodborne illness concerns; |
• | local competition; |
• | trade area dynamics; |
• | introduction of new and seasonal menu items and limited time offerings; and |
• | opening new restaurants in the vicinity of existing locations. |
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||||||
(in thousands, unaudited) | ||||||||||||||||
Net loss | $ | (5,935 | ) | $ | (1,815 | ) | $ | (9,510 | ) | $ | (28,660 | ) | ||||
Depreciation and amortization | 5,797 | 6,279 | 11,617 | 12,546 | ||||||||||||
Interest expense, net | 1,154 | 927 | 2,292 | 1,935 | ||||||||||||
(Benefit) provision for income taxes | (7 | ) | 80 | (248 | ) | 271 | ||||||||||
EBITDA | $ | 1,009 | $ | 5,471 | $ | 4,151 | $ | (13,908 | ) | |||||||
Restaurant impairments, closure costs and asset disposals (1) | 2,580 | 2,830 | 4,160 | 24,884 | ||||||||||||
Litigation settlement (2) | 3,796 | (421 | ) | 3,796 | (421 | ) | ||||||||||
Fees and costs related to registration statements and related transactions (3) | 53 | 40 | 53 | 679 | ||||||||||||
Loss on extinguishment of debt (4) | 626 | — | 626 | — | ||||||||||||
Severance costs (5) | — | 129 | 278 | 332 | ||||||||||||
Stock-based compensation expense | 1,012 | 647 | 1,592 | 945 | ||||||||||||
Adjusted EBITDA | $ | 9,076 | $ | 8,696 | $ | 14,656 | $ | 12,511 | ||||||||
(1) | Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed. Additionally, the first two quarters of 2018 includes closure costs of the nine restaurants closed in the first two quarters of 2018, most of which were approaching the expiration of their leases, and the impairment of one restaurant, and the first two quarters of 2017 includes the closure costs related to the 55 restaurants closed in the first quarter of 2017 and the impairment of 13 restaurants. See Note 7, Restaurant Impairments, Closure Costs and Asset Disposals. |
(2) | The second quarter of 2018 includes a charge of $3.4 million for the final assessment related to data breach liabilities, and a $0.3 million charge for a litigation settlement related to the Delaware gift card matter. The second quarter of 2017 includes a gain on an employment-related litigation settlement due to final settlement being less than what the Company had previously accrued. |
(3) | The second quarter of 2018 includes expenses related to the registration statement the Company filed in the second quarter of 2018. The first two quarters of 2017 includes expenses related to the registration statement the Company filed in the first quarter of 2017, which registration statement was later withdrawn. |
(4) | The second quarter of 2018 includes the loss on extinguishment of debt which resulted from writing off the remaining unamortized balance of debt issuance costs related to the prior credit facility when it was repaid in full in the second quarter of 2018. |
(5) | The first two quarters of 2018 and 2017 include severance costs from departmental structural changes. |
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||
Company-Owned Restaurant Activity | ||||||||||||
Beginning of period | 411 | 409 | 412 | 457 | ||||||||
Openings | — | 4 | 1 | 11 | ||||||||
Closures | (7 | ) | — | (9 | ) | (55 | ) | |||||
Restaurants at end of period | 404 | 413 | 404 | 413 | ||||||||
Franchise Restaurant Activity | ||||||||||||
Beginning of period | 65 | 73 | 66 | 75 | ||||||||
Openings | — | 1 | — | 2 | ||||||||
Closures | — | (1 | ) | (1 | ) | (4 | ) | |||||
Restaurants at end of period | 65 | 73 | 65 | 73 | ||||||||
Total restaurants | 469 | 486 | 469 | 486 | ||||||||
Fiscal Quarter Ended | Two Fiscal Quarters Ended | |||||||||||
July 3, 2018 | July 4, 2017 | July 3, 2018 | July 4, 2017 | |||||||||
Revenue: | ||||||||||||
Restaurant revenue | 99.2 | % | 99.0 | % | 99.2 | % | 99.0 | % | ||||
Franchising royalties and fees | 0.8 | % | 1.0 | % | 0.8 | % | 1.0 | % | ||||
Total revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||
Costs and expenses: | ||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): (1) | ||||||||||||
Cost of sales | 26.7 | % | 26.5 | % | 26.7 | % | 27.2 | % | ||||
Labor | 32.7 | % | 32.6 | % | 33.0 | % | 33.5 | % | ||||
Occupancy | 10.6 | % | 11.3 | % | 11.1 | % | 11.7 | % | ||||
Other restaurant operating costs | 14.5 | % | 14.5 | % | 14.9 | % | 14.7 | % | ||||
General and administrative | 12.6 | % | 8.3 | % | 11.0 | % | 8.7 | % | ||||
Depreciation and amortization | 4.9 | % | 5.6 | % | 5.1 | % | 5.5 | % | ||||
Pre-opening | — | % | 0.2 | % | — | % | 0.3 | % | ||||
Restaurant impairments, closure costs and asset disposals | 2.2 | % | 2.5 | % | 1.8 | % | 10.8 | % | ||||
Total costs and expenses | 103.5 | % | 100.7 | % | 103.0 | % | 111.5 | % | ||||
Loss from operations | (3.5 | )% | (0.7 | )% | (3.0 | )% | (11.5 | )% | ||||
Loss on extinguishment of debt | 0.5 | % | — | % | 0.3 | % | — | % | ||||
Interest expense, net | 1.0 | % | 0.8 | % | 1.0 | % | 0.8 | % | ||||
Loss before income taxes | (5.1 | )% | (1.5 | )% | (4.3 | )% | (12.4 | )% | ||||
(Benefit) provision for income taxes | — | % | 0.1 | % | (0.1 | )% | 0.1 | % | ||||
Net loss | (5.1 | )% | (1.6 | )% | (4.2 | )% | (12.5 | )% | ||||
(1) | As a percentage of restaurant revenue. |
Fiscal Quarter Ended | Increase / (Decrease) | ||||||||||||||
July 3, 2018 | July 4, 2017 | $ | % | ||||||||||||
(in thousands) | |||||||||||||||
Revenue: | |||||||||||||||
Restaurant revenue | $ | 116,451 | $ | 111,628 | $ | 4,823 | 4.3 | % | |||||||
Franchising royalties and fees | 944 | 1,164 | (220 | ) | (18.9 | )% | |||||||||
Total revenue | 117,395 | 112,792 | 4,603 | 4.1 | % | ||||||||||
Costs and expenses: | |||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | |||||||||||||||
Cost of sales | 31,089 | 29,598 | 1,491 | 5.0 | % | ||||||||||
Labor | 38,043 | 36,430 | 1,613 | 4.4 | % | ||||||||||
Occupancy | 12,357 | 12,630 | (273 | ) | (2.2 | )% | |||||||||
Other restaurant operating costs | 16,875 | 16,194 | 681 | 4.2 | % | ||||||||||
General and administrative | 14,813 | 9,393 | 5,420 | 57.7 | % | ||||||||||
Depreciation and amortization | 5,797 | 6,279 | (482 | ) | (7.7 | )% | |||||||||
Pre-opening | 3 | 246 | (243 | ) | (98.8 | )% | |||||||||
Restaurant impairments, asset disposals and closure costs | 2,580 | 2,830 | (250 | ) | (8.8 | )% | |||||||||
Total costs and expenses | 121,557 | 113,600 | 7,957 | 7.0 | % | ||||||||||
Loss from operations | (4,162 | ) | (808 | ) | (3,354 | ) | * | ||||||||
Loss on extinguishment of debt | 626 | — | 626 | 100.0 | % | ||||||||||
Interest expense, net | 1,154 | 927 | 227 | 24.5 | % | ||||||||||
Loss before income taxes | (5,942 | ) | (1,735 | ) | (4,207 | ) | * | ||||||||
(Benefit) provision for income taxes | (7 | ) | 80 | (87 | ) | * | |||||||||
Net loss | $ | (5,935 | ) | $ | (1,815 | ) | $ | (4,120 | ) | * | |||||
Company-owned: | |||||||||||||||
Average unit volumes | $ | 1,092 | $ | 1,065 | $ | 27 | 2.5 | % | |||||||
Comparable restaurant sales | 5.0 | % | (3.9 | )% | |||||||||||
* | Not meaningful. |
Two Fiscal Quarters Ended | Increase / (Decrease) | ||||||||||||||
July 3, 2018 | July 4, 2017 | $ | % | ||||||||||||
(in thousands, except percentages) | |||||||||||||||
Revenue: | |||||||||||||||
Restaurant revenue | $ | 226,064 | $ | 227,155 | $ | (1,091 | ) | (0.5 | )% | ||||||
Franchising royalties and fees | 1,857 | 2,352 | (495 | ) | (21.0 | )% | |||||||||
Total revenue | 227,921 | 229,507 | (1,586 | ) | (0.7 | )% | |||||||||
Costs and expenses: | |||||||||||||||
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | |||||||||||||||
Cost of sales | 60,345 | 61,685 | (1,340 | ) | (2.2 | )% | |||||||||
Labor | 74,615 | 76,024 | (1,409 | ) | (1.9 | )% | |||||||||
Occupancy | 25,120 | 26,631 | (1,511 | ) | (5.7 | )% | |||||||||
Other restaurant operating costs | 33,773 | 33,341 | 432 | 1.3 | % | ||||||||||
General and administrative | 25,081 | 20,059 | 5,022 | 25.0 | % | ||||||||||
Depreciation and amortization | 11,617 | 12,546 | (929 | ) | (7.4 | )% | |||||||||
Pre-opening | 50 | 791 | (741 | ) | (93.7 | )% | |||||||||
Restaurant impairments, asset disposals and closure costs | 4,160 | 24,884 | (20,724 | ) | (83.3 | )% | |||||||||
Total costs and expenses | 234,761 | 255,961 | (21,200 | ) | (8.3 | )% | |||||||||
Loss from operations | (6,840 | ) | (26,454 | ) | 19,614 | 74.1 | % | ||||||||
Loss on extinguishment of debt | 626 | — | 626 | 100.0 | % | ||||||||||
Interest expense, net | 2,292 | 1,935 | 357 | 18.4 | % | ||||||||||
Loss before income taxes | (9,758 | ) | (28,389 | ) | 19,257 | 65.6 | % | ||||||||
(Benefit) provision for income taxes | (248 | ) | 271 | (519 | ) | * | |||||||||
Net loss | $ | (9,510 | ) | $ | (28,660 | ) | $ | 19,150 | 66.8 | % | |||||
Company-owned: | |||||||||||||||
Average unit volumes | $ | 1,092 | $ | 1,065 | $ | 27 | 2.5 | % | |||||||
Comparable restaurant sales | 2.4 | % | (3.2 | )% | |||||||||||
* | Not meaningful. |
Two Fiscal Quarters Ended | ||||||||
July 3, 2018 | July 4, 2017 | |||||||
Net cash provided by (used in) operating activities | $ | 2,837 | $ | (8,231 | ) | |||
Net cash used in investing activities | (7,051 | ) | (12,213 | ) | ||||
Net cash provided by financing activities | 4,493 | 21,763 | ||||||
Effect of exchange rate changes on cash | $ | — | $ | 2 | ||||
Net increase in cash and cash equivalents | $ | 279 | $ | 1,321 | ||||
Exhibit Number | Description of Exhibit | ||
10.1 | |||
31.1 | |||
32.1 | |||
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||
NOODLES & COMPANY | |
By: | /s/ DAVE BOENNIGHAUSEN |
Dave Boennighausen Chief Executive Officer and Principal Financial Officer | |
Date | July 19, 2018 |
• | Sales Growth of less than 0.33%: None of the Sales-Based PSUs will be earned or eligible to vest. |
• | Sales Growth of at least 0.33% (“Threshold Sales Growth Goal”): 25% of Sales-Based PSUs will be earned and eligible to vest. |
• | Sales Growth of at least 2.0% (“Target Sales Growth Goal”): 100% of Sales-Based PSUs will be earned and eligible to vest. |
• | Sales Growth of at least 4.0% (“Maximum Sales Growth Goal”): 200% of Sales-Based PSUs will be earned and eligible to vest. |
• | Adjusted EBITDA of less than $95,400,000: None of the EBITDA-Based PSUs will be earned and be eligible to vest. |
• | Adjusted EBITDA of at least $95,400,000 (“Threshold EBITDA Goal”): 25% of EBITDA-Based PSUs will be earned and eligible to vest. |
• | Adjusted EBITDA of at least $106,300,000 (“Target EBITDA Goal”): 100% of EBITDA-Based PSUs will be earned and eligible to vest. |
• | Adjusted EBITDA of at least $124,000,000 (“Maximum EBITDA Goal”): 200% of EBITDA-Based PSUs will be earned and eligible to vest. |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and | |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and | |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. | |
/s/ DAVE BOENNIGHAUSEN | ||
Dave Boennighausen | ||
Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) | ||
By: | /s/ DAVE BOENNIGHAUSEN | ||
Name: | Dave Boennighausen | ||
Title: | Chief Executive Officer and Principal Financial Officer | ||
Document and Entity Information Document and Entity Information - shares |
6 Months Ended | |
|---|---|---|
Jul. 03, 2018 |
Jul. 16, 2018 |
|
| Document Information [Line Items] | ||
| Entity Registrant Name | NOODLES & COMPANY | |
| Entity Central Index Key | 0001275158 | |
| Current Fiscal Year End Date | --01-01 | |
| Entity Filer Category | Accelerated Filer | |
| Document Type | 10-Q | |
| Document Period End Date | Jul. 03, 2018 | |
| Document Fiscal Year Focus | 2018 | |
| Document Fiscal Period Focus | Q2 | |
| Amendment Flag | false | |
| Common Class A | ||
| Document Information [Line Items] | ||
| Entity Common Stock, Shares Outstanding | 41,298,464 |
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 03, 2018 |
Jul. 04, 2017 |
Jul. 03, 2018 |
Jul. 04, 2017 |
|
| Revenue: | ||||
| Restaurant revenue | $ 116,451 | $ 111,628 | $ 226,064 | $ 227,155 |
| Franchising royalties and fees | 944 | 1,164 | 1,857 | 2,352 |
| Total revenue | 117,395 | 112,792 | 227,921 | 229,507 |
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||
| Cost of sales | 31,089 | 29,598 | 60,345 | 61,685 |
| Labor | 38,043 | 36,430 | 74,615 | 76,024 |
| Occupancy | 12,357 | 12,630 | 25,120 | 26,631 |
| Other restaurant operating costs | 16,875 | 16,194 | 33,773 | 33,341 |
| General and administrative | 14,813 | 9,393 | 25,081 | 20,059 |
| Depreciation and amortization | 5,797 | 6,279 | 11,617 | 12,546 |
| Pre-opening | 3 | 246 | 50 | 791 |
| Restaurant impairments, closure costs and asset disposals | 2,580 | 2,830 | 4,160 | 24,884 |
| Total costs and expenses | 121,557 | 113,600 | 234,761 | 255,961 |
| Loss from operations | (4,162) | (808) | (6,840) | (26,454) |
| Loss on extinguishment of debt | 626 | 0 | 626 | 0 |
| Interest expense, net | 1,154 | 927 | 2,292 | 1,935 |
| Loss before income taxes | (5,942) | (1,735) | (9,758) | (28,389) |
| (Benefit) provision for income taxes | (7) | 80 | (248) | 271 |
| Net loss | (5,935) | (1,815) | (9,510) | (28,660) |
| Accretion of preferred stock to redemption value | 0 | (7,001) | 0 | (7,967) |
| Net loss attributable to common stockholders | $ (5,935) | $ (8,816) | $ (9,510) | $ (36,627) |
| Loss per share of Class A and Class B common stock, combined: | ||||
| Basic (USD per share) | $ (0.14) | $ (0.22) | $ (0.23) | $ (1.06) |
| Diluted (USD per share) | $ (0.14) | $ (0.22) | $ (0.23) | $ (1.06) |
| Weighted average shares of Class A and Class B common stock outstanding, combined: | ||||
| Basic (in shares) | 41,172,924 | 40,779,277 | 41,150,698 | 34,404,222 |
| Diluted (in shares) | 41,172,924 | 40,779,277 | 41,150,698 | 34,404,222 |
Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jul. 03, 2018 |
Jan. 02, 2018 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
| Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
| Preferred stock, shares issued (in shares) | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
| Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 180,000,000 | 180,000,000 |
| Common stock, shares, issued (in shares) | 43,690,395 | 43,550,329 |
| Common stock, shares, outstanding | 41,266,524 | 41,126,458 |
| Treasury stock, shares | 2,423,871 | 2,423,871 |
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 03, 2018 |
Jul. 04, 2017 |
Jul. 03, 2018 |
Jul. 04, 2017 |
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| Statement of Comprehensive Income [Abstract] | ||||
| Net loss | $ (5,935) | $ (1,815) | $ (9,510) | $ (28,660) |
| Other comprehensive loss: | ||||
| Foreign currency translation adjustments | 0 | (9) | 0 | (9) |
| Other comprehensive loss | 0 | (9) | 0 | (9) |
| Comprehensive loss | $ (5,935) | $ (1,824) | $ (9,510) | $ (28,669) |
Business Summary and Basis of Presentation |
6 Months Ended |
|---|---|
Jul. 03, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Business Summary and Basis of Presentation | Business Summary and Basis of Presentation Business Noodles & Company (the “Company”), a Delaware corporation, develops and operates fast casual restaurants that serve globally inspired noodle and pasta dishes, soups, salads and appetizers. As of July 3, 2018, the Company had 404 company-owned restaurants and 65 franchise restaurants in 29 states and the District of Columbia. The Company operates its business as one operating and reportable segment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Noodles & Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of January 2, 2018 was derived from audited financial statements. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2018. Fiscal Year The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal year 2018, which ends on January 1, 2019, and fiscal year 2017, which ended on January 2, 2018, both contain 52 weeks. The Company’s fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. The Company’s fiscal quarter that ended July 3, 2018 is referred to as the second quarter of 2018, and the fiscal quarter ended July 4, 2017 is referred to as the second quarter of 2017. Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The pronouncement amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheet and making targeted changes to lessor accounting. This pronouncement will be effective for interim and annual periods beginning after December 15, 2018 (the Company’s first quarter of fiscal 2019), with early adoption permitted. The new lease standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company believes the adoption of ASU No. 2016-02 will have a significant impact on its consolidated balance sheets by significantly increasing its non-current assets and non-current liabilities in order to record the right of use assets and related lease liabilities for its existing operating leases. The Company is currently evaluating the impact the adoption of this accounting standard will have on its results of operations and cash flows and related disclosures. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition.” This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the new revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are effective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method. |
Supplemental Financial Information |
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| Supplemental Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Financial Information | Supplemental Financial Information Property and equipment, net, consists of the following (in thousands):
Accrued expenses and other current liabilities consist of the following (in thousands):
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Long-Term Debt |
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Jul. 03, 2018 | |||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||
| Long-Term Debt | Long-Term Debt 2018 Credit Facility On May 9, 2018, the Company entered into a credit facility with U.S. Bank National Association (the “2018 Credit Facility”). The 2018 Credit Facility consists of a term loan facility in an aggregate principal amount of $25.0 million and a revolving line of credit of $65.0 million (which may be increased to $75.0 million), which includes a letter of credit subfacility in the amount of $15.0 million and a swingline subfacility in the amount of $10.0 million. The 2018 Credit Facility has a four-year term and matures on May 9, 2022. Borrowings under the 2018 Credit Facility, including the term loan facility, bear interest annually, at the Company’s option, at either (i) LIBOR plus a margin of 2.25% to 3.25% per annum, based upon the consolidated total lease-adjusted leverage ratio or (ii) the highest of the following base rates plus a margin of 1.25% to 2.25% per annum: (a) the federal funds rate plus 0.50%; (b) the U.S. Bank prime rate or (c) the one-month LIBOR plus 1.00%. The 2018 Credit Facility includes a commitment fee of 0.30% to 0.50% per annum, based upon the consolidated total lease-adjusted leverage ratio, on any unused portion of the revolving credit facility. As of July 3, 2018, the Company had $65.2 million of indebtedness and $3.8 million of letters of credit outstanding under the 2018 Credit Facility. The term loan requires principal payments of $156,250 per quarter starting in the second quarter of 2018 through the first quarter of 2019, $187,500 per quarter through the first quarter of 2020, $375,000 per quarter through the first quarter of 2021, and $531,250 per quarter through maturity in the second quarter of 2022. Aggregate maturities for debt outstanding as of July 3, 2018 are as follows (in thousands):
The Company’s outstanding indebtedness bore interest between 4.95% to 7.25% during the first two quarters of 2018. The Company also maintains outstanding letters of credit to secure obligations under its workers’ compensation program and certain lease obligations. The Company was in compliance with all of its debt covenants as of July 3, 2018. Prior Credit Facility Upon execution of the 2018 Credit Facility, the Company repaid in full its outstanding indebtedness with Bank of America, N.A. (the “Prior Credit Facility”) using funds drawn on the 2018 Credit Facility. Upon repayment, the Prior Credit Facility and all related agreements were terminated. A loss on extinguishment of debt in the amount of $0.6 million was recorded during the second quarter of 2018 in connection with this repayment.
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Fair Value Measurements |
6 Months Ended |
|---|---|
Jul. 03, 2018 | |
| Fair Value Disclosures [Abstract] | |
| Fair Value Measurements | Fair Value Measurements The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate their fair values due to their short-term nature. The carrying amounts of borrowings under the credit facility approximate fair value as the line of credit and term borrowings vary with market interest rates and negotiated terms and conditions are consistent with current market rates. The fair value of the Company’s line of credit and term borrowings are measured using Level 2 inputs. |
Income Taxes |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | Income Taxes The following table presents the Company’s (benefit) provision for income taxes (in thousands):
The effective tax rates for the second quarter of 2018 and the first two quarters of 2018, reflect changes made by the Tax Cuts and Jobs Act (“Tax Act”), which was signed into law in December 2017. The primary change from the Tax Act that impacts fiscal 2018 is related to an indefinite carry forward for federal and conforming states’ net operating losses, which enabled the Company to release a portion of the previously recorded valuation allowance. For the remainder of fiscal 2018, the Company does not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. The Company will maintain the remaining valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit from income tax. |
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Stock-Based Compensation |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation | Stock-Based Compensation The Company’s Stock Incentive Plan, as amended and restated in May of 2013, authorizes the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and incentive bonuses to employees, officers, nonemployee directors and other service providers. The number of shares of common stock available for issuance pursuant to awards granted under the Stock Incentive Plan on or after the Company’s initial public offering shall not exceed 3,750,500 shares. The following table shows total stock-based compensation expense (in thousands):
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Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals |
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| Property, Plant and Equipment Impairment or Disposal [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Restaurant Impairment, Closure Costs and Asset Disposals | Restaurant Impairments, Closure Costs and Asset Disposals The following table presents restaurant impairments, closure costs and asset disposals (in thousands):
_____________________________
During the second quarter of 2018, there were no restaurants identified as impaired, compared to nine restaurant impairments during the second quarter of 2017. During the first two quarters of 2018, one restaurant was identified as impaired compared to 13 restaurant impairments during the first two quarters of 2017. Impairment is based on management’s current assessment of the expected future cash flows of a restaurant based on recent results and other specific market factors. Impairment expense is a Level 3 fair value measure and is determined by comparing the carrying value of restaurant assets to the estimated fair market value of the restaurant assets at resale value. The closure costs of $1.5 million recognized during the second quarter of 2018 and $2.1 million during the first two quarters of 2018 are related to the seven restaurants closed in the second quarter of 2018 and nine restaurants closed in the first two quarters of 2018, most of which were approaching the expiration of their leases, as well as ongoing costs from restaurants closed in previous years. These ongoing costs include adjustments to the liabilities to landlords as lease terminations occur. During the second quarter of 2017, a gain of $3.6 million was recognized related to closures primarily due to adjustments to the liabilities to landlords as lease terminations occurred for 21 of the 55 restaurants closed during the first quarter of 2017, partially offset by $2.0 million of costs related to restaurants closed in the first quarter of 2017. During the first two quarters of 2017, $18.4 million of closure costs were recognized related to the 55 restaurants closed during the first quarter of 2017, as well as ongoing costs of restaurants closed in the fourth quarter of 2015. These expenses are included in the “Restaurant impairments, closure costs and asset disposals” line in the Condensed Consolidated Statements of Operations.
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Earnings (Loss) Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss Per Share | Earnings (Loss) Per Share Basic earnings (loss) per share (“EPS”) is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted EPS is calculated using net income (loss) available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying stock options, warrants and RSUs. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data):
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Stockholder's Equity |
6 Months Ended |
|---|---|
Jul. 03, 2018 | |
| Equity [Abstract] | |
| Stockholder's Equity | Stockholders’ Equity Securities Purchase Agreement with L Catterton On February 8, 2017, the Company entered into a securities purchase agreement with L Catterton, pursuant to which the Company agreed, in return for aggregate gross proceeds of $18.5 million, to sell to L Catterton an aggregate of 18,500 shares of preferred stock convertible into 4,252,873 shares of the Company’s Class A common stock, par value $0.01 per share, at a price per share of $1,000, plus warrants exercisable for five years beginning six months following their issuance for the purchase of 1,913,793 shares of the Company’s Class A common stock, at a price per share of $4.35 (such transactions, collectively, the “private placement”). The funding of the private placement occurred on February 9, 2017 and the net proceeds from the transaction were $16.6 million during the first two quarters of 2017, after $1.9 million of transaction expenses. The Company determined that the preferred stock was more akin to a temporary equity security than permanent equity primarily because the preferred stock was contingently redeemable upon the occurrence of an event that was outside of the Company’s control. The proceeds were allocated between the three features of the private placement: the warrants, the embedded beneficial conversion feature in the preferred stock, and the preferred stock itself. The fair values of the warrants of $3.1 million and the embedded beneficial conversion feature of $3.1 million were recorded as a discount against the stated value of the preferred stock on the date of issuance. The fair value of the warrants was estimated using a Black-Scholes option pricing model which is a Level 2 estimate of fair value. On April 5, 2017, the Company delivered a notice to L Catterton of its election to exercise the conversion option with respect to the Series A Convertible Preferred Stock. The terms of the preferred stock provided that the Company could, at its option upon the satisfaction of certain conditions, cause all outstanding shares of preferred stock to be automatically converted into the Company’s Class A common stock. The conversion of the preferred stock into 4,252,873 shares of the Company’s Class A Common Stock occurred on April 12, 2017. The discount was amortized, using the interest method, and treated as a deemed dividend through the date of conversion, which resulted in the accretion of the preferred stock to its full redemption value. After the conversion, no shares of preferred stock are outstanding. At the conversion date, all unamortized discounts were recognized immediately as a deemed dividend, which increased the net loss attributable to common stockholders in the second quarter of 2017. The amortized discount, which was treated in the same manner as dividends, was $7.0 million for the second quarter of 2017 and $8.0 million for the first two quarters of 2017. Securities Purchase Agreement with Mill Road Capital On March 13, 2017, the Company entered into a securities purchase agreement with Mill Road Capital II, L.P. (“Mill Road”), pursuant to which the Company agreed, in return for aggregate gross proceeds of $31.5 million, to issue to Mill Road an aggregate of 8,873,240 shares of its Class A common stock, par value $0.01 per share, at a price per share of $3.55, which was equal to the closing sale price for the Company’s Class A common stock on March 10, 2017. On April 3, 2017, such shares were issued and the funding of the private placement occurred. The net proceeds from the transaction were $29.1 million during the first two quarters of 2017, after $2.4 million of transaction expenses. Conversion of Argentia Class B Common Stock On May 24, 2018, Argentia Private Investments Inc. (“Argentia”) converted 1,522,098 shares of the Company’s Class B common stock, par value $0.01, it owned into the same number of shares of the Company’s Class A common stock, par value $0.01. The rights of the holders of the Company’s Class A common stock and Class B common stock are identical in all respects, except that Class B common stock does not vote on the election or removal of directors. No shares of the Company’s Class B common stock were outstanding as of July 3, 2018.
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Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows |
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| Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows | Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows The following table presents the supplemental disclosures to the Condensed Consolidated Statements of Cash Flows for the two quarters ended July 3, 2018 and July 4, 2017 (in thousands):
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Revenue Recognition |
6 Months Ended |
|---|---|
Jul. 03, 2018 | |
| Revenue from Contract with Customer [Abstract] | |
| Revenue Recognition | Revenue Recognition Revenue Revenue consists of sales from restaurant operations and franchise royalties and fees. Revenue from the operation of company-owned restaurants are recognized when sales occur. The Company reports revenue net of sales and use taxes collected from customers and remitted to governmental taxing authorities. The Company adopted the revenue recognition standards under Topic 606 at the beginning of the first quarter of fiscal 2018 using the modified retrospective method. The adoption of these standards did not have an impact on the Company’s recognition of revenue from company-owned restaurants or its recognition of continuing royalty fees from franchisees, which are based on a percentage of restaurant revenues and are recognized in the period the related franchised restaurants’ sales occur. Gift Cards The Company sells gift cards which do not have an expiration date, and it does not deduct non-usage fees from outstanding gift card balances. The Company recognizes revenue from gift cards when the gift card is redeemed by the customer or the Company determines the likelihood of the gift card being redeemed by the customer is remote (“gift card breakage”). The determination of the gift card breakage rate is based upon Company-specific historical redemption patterns. The Company has determined that approximately 8% of gift cards will not be redeemed, which is recognized ratably over the estimated redemption period of the gift card, approximately 18 months. Gift card liability balances are typically highest at the end of each calendar year following increased gift card purchases during the holiday season. The adoption of Topic 606 did not have an impact on the Company’s recognition of revenue from gift cards, including the recognition of gift card breakage, as the new standard requires the use of the “proportionate” method for recognizing breakage, which the Company has historically utilized. As of July 3, 2018 and January 2, 2018, the current portion of the gift card liability, $2.8 million and $4.1 million, respectively, is included in accrued expenses and other current liabilities, and the long-term portion, $0.3 million and $0.4 million, respectively, is included in other long-term liabilities in the Consolidated Balance Sheets. Revenue recognized in the Condensed Consolidated Statements of Operations for the redemption of gift cards that were included in the gift card liability balances at the beginning of each fiscal year was $3.4 million and $3.1 million for the first two quarters of 2018 and 2017, respectively. The revenue recognized from gift cards for the first two quarters of 2018 includes $0.3 million of gift card breakage that resulted from a change in the estimate for gift card unredeemed balances for the years 2014 and after. This change in estimate was a result of the Delaware Gift Card Litigation settlement in the second quarter of 2018 (see Note 12, Commitments and Contingencies). Franchise Fees Royalties from franchise restaurants are based on a percentage of restaurant revenues and are recognized in the period the related franchised restaurants’ sales occur. Development fees and franchise fees, portions of which are collected in advance, are nonrefundable and are recognized in income ratably over the term of the related franchise agreement or recognized upon the termination of the agreement between the Company and the franchisee. The adoption of Topic 606 did impact the Company’s accounting for initial fees charged to franchisees. In the past, the Company recognized initial franchise fees when all material services or conditions relating to the sale of the franchise had been substantially performed or satisfied by the Company, which was generally when a new franchise restaurant opened. In accordance with the new guidance, the Company has determined that the initial franchise services are not distinct from the continuing rights or services offered during the term of the franchise agreement and should be treated as a single performance obligation. Therefore, initial fees received from franchisees will be recognized as revenue over the term of each respective franchise agreement, which is typically 20 years. An adjustment to beginning retained earnings and a corresponding contract liability of $1.5 million was established on the date of adoption, at the beginning of the first quarter of 2018, associated with the initial fees received through January 2, 2018 that would have been deferred and recognized over the term of each respective franchise agreement if the new guidance had been applied in the past. The Company recognized revenue of $0.1 million during the first two quarters of 2018 related to initial fees from franchisees that were included in the contract liability balance at the beginning of the year. This amount included fees recognized upon the termination of one franchise restaurant agreement in the first quarter of 2018. The Company expects to recognize approximately $0.1 million each fiscal year through fiscal 2022 and approximately $0.9 million thereafter related to performance obligations that are unsatisfied as of July 3, 2018.
|
Commitments and Contingencies |
6 Months Ended |
|---|---|
Jul. 03, 2018 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Commitments and Contingencies Data Security Incident Overview On June 28, 2016, the Company announced that a data security incident compromised the security of the payment information of some customers who used debit or credit cards at certain Noodles & Company locations between January 31, 2016 and June 2, 2016. The malware involved in the incident has been removed, and the Company believes that it no longer poses a risk to credit or debit cards currently being used at affected locations. The Company has implemented additional security procedures to further secure customers’ debit and credit card information. Card Company Assessments In the fourth quarter of 2016, the Company recorded a charge of $10.6 million for estimated losses, net of $1.0 million of insurance coverage, at the low end of an estimated range, associated with claims and anticipated claims by payment card companies for non-ordinary course operating expenses, card issuer losses and card replacement costs for which it expected to be liable (the “Data Breach Liabilities”). The Company also previously disclosed in prior reports filed with the SEC that it may ultimately be subject to Data Breach Liabilities that are up to $5.5 million greater than that amount. In 2017, the Company made payments of $4.0 million for the Data Breach Liabilities. On June 7, 2018, the Company received the final assessment from the third of the three payment card companies to which it expected to owe Data Breach Liabilities. This assessment was $11.0 million. In the second quarter of 2018, when the final assessment was received, the Company’s recorded a charge of $3.4 million to increase its accrual to cover this final assessment amount (which was within the range disclosed in prior reports filed with the SEC). The assessment was paid early in the third quarter of 2018. Delaware Gift Card Litigation As previously disclosed in prior reports filed with the SEC, the Company was named as a defendant in an action filed in the Superior Court of Delaware in New Castle County (the “Court”), entitled The State of Delaware, William French v. Card Compliant, LLC, et. al. The complaint in this case alleged that a number of large retailers and restaurant companies, including the Company, knowingly refused to fulfill obligations under Delaware’s Abandoned Property Law by failing to report and deliver “unclaimed gift card funds” to the State of Delaware, and knowingly made, used or caused to be made or used, false statements and records to conceal, avoid or decrease an obligation to pay or transmit money to Delaware in violation of the Delaware False Claims and Reporting Act. The complaint sought an order that the Company cease and desist from violating the Delaware Abandoned Property Law, monetary damages (including treble damages under the False Claims and Reporting Act), penalties and attorneys’ fees and costs. In 2015 the Company recorded a loss contingency accrual based on a reasonable estimate of the probable losses that might arise from this matter; this loss contingency accrual did not have a material effect on our results of operations. On July 3, 2018, a settlement was reached in this matter, subject to execution of a definitive settlement agreement, which will dispose of all pending claims included in the litigation. The Company’s results of operations for the second quarter of 2018 include a charge of $0.3 million for the Company’s liability under this settlement. The Company also recorded a loss contingency accrual based on a reasonable estimate of the probable losses that may arise under Delaware’s Abandoned Property Law in resolving claims for unclaimed gift card funds for the years 2011, 2012 and 2013, which were not included as part of the litigation. Other Matters In the normal course of business, the Company is subject to other proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of July 3, 2018. These matters could affect the operating results of any one financial reporting period when resolved in future periods. The Company believes that an unfavorable outcome with respect to these matters is remote or a potential range of loss is not material to its consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than the Company currently anticipates, could materially and adversely affect its business, financial condition, results of operations or cash flows.
|
Business Summary and Basis of Presentation (Policies) |
6 Months Ended |
|---|---|
Jul. 03, 2018 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Business and Basis of Presentation | Business Noodles & Company (the “Company”), a Delaware corporation, develops and operates fast casual restaurants that serve globally inspired noodle and pasta dishes, soups, salads and appetizers. As of July 3, 2018, the Company had 404 company-owned restaurants and 65 franchise restaurants in 29 states and the District of Columbia. The Company operates its business as one operating and reportable segment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Noodles & Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of January 2, 2018 was derived from audited financial statements. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2018.
|
| Fiscal year | Fiscal YearThe Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal year 2018, which ends on January 1, 2019, and fiscal year 2017, which ended on January 2, 2018, both contain 52 weeks. The Company’s fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. The Company’s fiscal quarter that ended July 3, 2018 is referred to as the second quarter of 2018, and the fiscal quarter ended July 4, 2017 is referred to as the second quarter of 2017. |
| Reclassification | |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases.” The pronouncement amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheet and making targeted changes to lessor accounting. This pronouncement will be effective for interim and annual periods beginning after December 15, 2018 (the Company’s first quarter of fiscal 2019), with early adoption permitted. The new lease standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. The Company believes the adoption of ASU No. 2016-02 will have a significant impact on its consolidated balance sheets by significantly increasing its non-current assets and non-current liabilities in order to record the right of use assets and related lease liabilities for its existing operating leases. The Company is currently evaluating the impact the adoption of this accounting standard will have on its results of operations and cash flows and related disclosures. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which supersedes the revenue recognition requirements in Accounting Standards Codification 605, “Revenue Recognition.” This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of the new revenue standard by one year, and allowed entities the option to early adopt the new revenue standard as of the original effective date. There have been multiple standards updates amending this guidance or providing corrections or improvements on issues in the guidance. The requirements for these standards relating to Topic 606 are effective for interim and annual periods beginning after December 15, 2017. This standard permitted adoption using one of two transition methods, either the retrospective or modified retrospective transition method. |
Supplemental Financial Information (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Supplemental Financial Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment | Property and equipment, net, consists of the following (in thousands):
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| Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other current liabilities consist of the following (in thousands):
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Long-Term Debt (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 03, 2018 | |||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||
| Schedule of Maturities of Long-term Debt | Aggregate maturities for debt outstanding as of July 3, 2018 are as follows (in thousands):
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Income Taxes (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Provision for Income Taxes | The following table presents the Company’s (benefit) provision for income taxes (in thousands):
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Stock-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | The following table shows total stock-based compensation expense (in thousands):
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Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals (Tables) |
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Jul. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment Impairment or Disposal [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Impaired Assets to be Disposed of by Method Other than Sale | The following table presents restaurant impairments, closure costs and asset disposals (in thousands):
_____________________________
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Earnings (Loss) Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Basic and Diluted Loss Per Share | The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data):
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Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 03, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Disclosures to the Consolidated Statements of Cash Flows | The following table presents the supplemental disclosures to the Condensed Consolidated Statements of Cash Flows for the two quarters ended July 3, 2018 and July 4, 2017 (in thousands):
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Business Summary and Basis of Presentation (Details) |
3 Months Ended |
|---|---|
|
Jul. 03, 2018
segment
restaurant
state
| |
| Franchisor Disclosure [Line Items] | |
| Number of states with operations | state | 29 |
| Number of operating segments | segment | 1 |
| Number of reportable segments | segment | 1 |
| Company-Owned [Member] | |
| Franchisor Disclosure [Line Items] | |
| Number of restaurants | restaurant | 404 |
| Franchise [Member] | |
| Franchisor Disclosure [Line Items] | |
| Number of restaurants | restaurant | 65 |
Supplemental Financial Information (Details) - USD ($) $ in Thousands |
Jul. 03, 2018 |
Jan. 02, 2018 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 322,110 | $ 322,037 |
| Accumulated depreciation and amortization | (177,503) | (169,444) |
| Property and equipment, net | 144,607 | 152,593 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 198,798 | 199,211 |
| Furniture, Fixtures, and Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 120,587 | 120,234 |
| Construction in Progress [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 2,725 | $ 2,592 |
Supplemental Financial Information - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Jul. 03, 2018 |
Jan. 02, 2018 |
|---|---|---|
| Supplemental Financial Information [Abstract] | ||
| Gift card liability | $ 2,766 | $ 4,078 |
| Occupancy related | 4,283 | 3,733 |
| Utilities | 1,670 | 1,705 |
| Data breach liabilities | 11,016 | 7,605 |
| Other accrued expenses | 4,825 | 4,100 |
| Accrued liabilities, current | $ 24,560 | $ 21,221 |
Long-Term Debt - Schedule of Maturities of Long-term Debt (Details) $ in Thousands |
Jul. 03, 2018
USD ($)
|
|---|---|
| Debt Disclosure [Abstract] | |
| 2019 | $ 656 |
| 2020 | 937 |
| 2021 | 1,656 |
| 2022 | 61,983 |
| Long-term Debt | $ 65,232 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 03, 2018 |
Jul. 04, 2017 |
Jul. 03, 2018 |
Jul. 04, 2017 |
|
| Income Tax Disclosure [Abstract] | ||||
| (Benefit) provision for income taxes | $ (7) | $ 80 | $ (248) | $ 271 |
| Effective tax rate | 0.10% | (4.60%) | 2.50% | (1.00%) |
Stock-Based Compensation (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jul. 03, 2018 |
Jul. 04, 2017 |
Jul. 03, 2018 |
Jul. 04, 2017 |
May 31, 2013 |
|
| IPO [Member] | |||||
| Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
| Maximum shares reserved for issuance | 3,750,500 | ||||
| Employee Stock Option [Member] | |||||
| Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
| Allocated Share-based Compensation Expense | $ 1,012 | $ 648 | $ 1,592 | $ 945 | |
| Capitalized stock based compensation expense | $ 13 | $ 52 | $ 25 | $ 102 | |
Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
|
Jul. 03, 2018
USD ($)
restaurant
|
Jul. 04, 2017
USD ($)
restaurant
|
Apr. 04, 2017
USD ($)
restaurant
|
Jul. 03, 2018
USD ($)
restaurant
|
Jul. 04, 2017
USD ($)
restaurant
|
|
| Property, Plant and Equipment Impairment or Disposal [Abstract] | |||||
| Restaurant impairments | $ 319 | $ 4,037 | $ 917 | $ 5,973 | |
| Closure costs | 1,519 | (1,471) | 2,073 | 18,415 | |
| Loss on disposal of assets and other | (742) | (264) | (1,170) | (496) | |
| Asset Disposals, Closure Costs and Restaurant Impairments | $ 2,580 | $ 2,830 | $ 4,160 | $ 24,884 | |
| Number of restaurants impaired during the comparable periods | restaurant | 0 | 9 | 1 | 13 | |
| Impairment closure costs and other | $ 1,500 | $ 2,000 | $ 2,100 | $ 18,400 | |
| Gain recognized related to closures primarily due to adjustments to the liabilities to landlords | $ 3,600 | ||||
| Number of restaurants closed | restaurant | 7 | 21 | 55 | 9 | 55 |
Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows (Details) - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jul. 03, 2018 |
Jul. 04, 2017 |
|
| Class of Stock [Line Items] | ||
| Interest paid (net of amounts capitalized) | $ 1,973 | $ 2,216 |
| Income taxes paid (refunded) | 49 | (60) |
| Changes in purchases of property and equipment accrued in accounts payable, net | 1,580 | 1,417 |
| Common Stock | Common Class A | ||
| Class of Stock [Line Items] | ||
| Conversion of Series A convertible preferred stock to common stock | $ 0 | $ 18,500 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
Jul. 03, 2018 |
Jan. 02, 2018 |
Jan. 03, 2017 |
|
| Loss Contingencies [Line Items] | |||
| Estimate of possible loss | $ 4.0 | ||
| Loss contingency accrual | 11.0 | ||
| Loss Contingency Accrual, Period Increase (Decrease) | 3.4 | ||
| Liability under settlement | $ 0.3 | ||
| Minimum [Member] | |||
| Loss Contingencies [Line Items] | |||
| Estimate of possible loss | $ 10.6 | ||
| Insurance coverage | $ 1.0 | ||
| Maximum [Member] | |||
| Loss Contingencies [Line Items] | |||
| Estimate of possible loss | $ 5.5 |
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