10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_____________________________________________________________

FORM 10-Q

_____________________________________________________________

    x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended April 2, 2019

or

    o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number: 001-35987

___________________________________________________________

NOODLES & COMPANY

(Exact name of registrant as specified in its charter)

_____________________________________________________________

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)

(720) 214-1900

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	NDLS	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes  x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o	Smaller reporting company x
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o  No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at May 3, 2019
Class A Common Stock, $0.01 par value per share	43,947,080 shares

TABLE OF CONTENTS

			Page
PART I
	Item 1.	Financial Statements (unaudited)	2
		Condensed Consolidated Balance Sheets	2
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Stockholders’ Equity	4
		Condensed Consolidated Statements of Cash Flows	5
		Notes to Condensed Consolidated Financial Statements	6
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
	Item 4.	Controls and Procedures	28
PART II
	Item 1.	Legal Proceedings	29
	Item 1A.	Risk Factors	29
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
	Item 3.	Defaults Upon Senior Securities	29
	Item 4.	Mine Safety Disclosures	29
	Item 5.	Other Information	29
	Item 6.	Exhibits	30
SIGNATURES			31

1

PART I

Item 1. Financial Statements

Noodles & Company

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	April 2, 2019			January 1, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,800		$	4,655
Accounts receivable	2,254			2,391
Inventories	9,870			9,646
Prepaid expenses and other assets	3,066			6,474
Income tax receivable	191			185
Total current assets	17,181			23,351
Property and equipment, net	138,381			138,774
Operating lease assets, net	218,311			—
Goodwill	7,154			6,400
Intangibles, net	1,179			1,291
Other assets, net	2,360			2,216
Total long-term assets	367,385			148,681
Total assets	$	384,566		$	172,032
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	10,563		$	7,854
Accrued payroll and benefits	7,833			13,391
Accrued expenses and other current liabilities	8,524			11,183
Current operating lease liabilities	21,528			—
Current portion of long-term debt	750			719
Total current liabilities	49,198			33,147
Long-term debt, net	47,035			44,183
Long-term operating lease liabilities, net	237,341			—
Deferred rent	—			37,334
Deferred tax liabilities, net	133			133
Other long-term liabilities	5,263			4,554
Total liabilities	338,970			119,351
Stockholders’ equity:
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of April 2, 2019 and January 1, 2019; no shares issued or outstanding	—			—
Common stock—$0.01 par value, 180,000,000 shares authorized as of April 2, 2019 and January 1, 2019; 46,370,951 issued and 43,947,080 outstanding as of April 2, 2019 and 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019	464			464
Treasury stock, at cost, 2,423,871 shares as of April 2, 2019 and January 1, 2019	(35,000		)	(35,000		)
Additional paid-in capital	199,110			198,352
Accumulated deficit	(118,978		)	(111,135		)
Total stockholders’ equity	45,596			52,681
Total liabilities and stockholders’ equity	$	384,566		$	172,032

   See accompanying notes to condensed consolidated financial statements.

2

Noodles & Company

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data, unaudited)

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Revenue:
Restaurant revenue	$	108,765		$	109,613
Franchising royalties and fees, and other	1,281			913
Total revenue	110,046			110,526
Costs and expenses:
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of sales	29,091			29,256
Labor	37,092			36,572
Occupancy	12,430			12,763
Other restaurant operating costs	16,456			16,898
General and administrative	10,140			10,268
Depreciation and amortization	5,507			5,820
Pre-opening	—			47
Restaurant impairments, closure costs and asset disposals	420			1,580
Total costs and expenses	111,136			113,204
Loss from operations	(1,090		)	(2,678		)
Interest expense, net	761			1,138
Loss before income taxes	(1,851		)	(3,816		)
Provision (benefit) for income taxes	—			(241		)
Net loss and comprehensive loss	$	(1,851	)	$	(3,575	)
Loss per share of Class A and Class B common stock, combined:
Basic	$	(0.04	)	$	(0.09	)
Diluted	$	(0.04	)	$	(0.09	)
Weighted average shares of Class A and Class B common stock outstanding, combined:
Basic	43,933,235			41,128,473
Diluted	43,933,235			41,128,473

See accompanying notes to condensed consolidated financial statements.

3

Noodles & Company

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data, unaudited)

	Common Stock(1)			Treasury				Additional Paid-In Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Shares	Amount
Balance—January 1, 2019	46,353,309	$	464	2,423,871	$	(35,000	)	$	198,352	$	(111,135	)	$	52,681
Proceeds from exercise of stock options and employee stock purchase plan	17,642	—		—	—			21		—			21
Stock-based compensation expense	—	—		—	—			737		—			737
Adoption of ASU No. 2016-02, Leases (Topic 842)	—	—		—	—			—		(5,992		)	(5,992		)
Net loss	—	—		—	—			—		(1,851		)	(1,851		)
Balance—April 2, 2019	46,370,951	$	464	2,423,871	$	(35,000	)	$	199,110	$	(118,978	)	$	45,596
Balance—January 2, 2018	43,550,329	$	436	2,423,871	$	(35,000	)	$	171,613	$	(101,188	)	$	35,861
Proceeds from exercise of stock options and employee stock purchase plan	8,983	—		—	—			35		—			35
Stock-based compensation expense	—	—		—	—			592		—			592
Adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606)	—	—		—	—			—		(1,506		)	(1,506		)
Net loss	—	—		—	—			—		(3,575		)	(3,575		)
Balance—April 3, 2018	43,559,312	$	436	2,423,871	$	(35,000	)	$	172,240	$	(106,269	)	$	31,407

_____________

(1) Unless otherwise noted, activity relates to Class A common stock.

See accompanying notes to condensed consolidated financial statements.

4

Noodles & Company

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Operating activities
Net loss	$	(1,851	)	$	(3,575	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	5,507			5,820
Deferred income taxes	—			(245		)
Restaurant impairments, closure costs and asset disposals	145			1,419
Amortization of debt issuance costs	125			210
Stock-based compensation	726			580
Changes in operating assets and liabilities:
Accounts receivable	362			745
Inventories	(223		)	(44		)
Prepaid expenses and other assets	50			651
Accounts payable	2,798			539
Deferred rent	15			(288		)
Income taxes	(6		)	(26		)
Operating lease assets and liabilities	(343		)	—
Accrued expenses and other liabilities	(7,191		)	(6,790		)
Net cash provided by (used in) operating activities	114			(1,004		)
Investing activities
Purchases of property and equipment	(4,164		)	(4,805		)
Franchise restaurant acquisition, net of cash acquired	(1,387		)	—
Net cash used in investing activities	(5,551		)	(4,805		)
Financing activities
Net borrowings from swing line loan	3,071			5,038
Payments on long-term debt	(313		)	—
Payments on finance leases	(197		)	—
Proceeds from exercise of stock options and employee stock purchase plan	21			35
Debt issuance costs	—			(1		)
Net cash provided by financing activities	2,582			5,072
Net decrease in cash and cash equivalents	(2,855		)	(737		)
Cash and cash equivalents
Beginning of period	4,655			3,361
End of period	$	1,800		$	2,624

See accompanying notes to condensed consolidated financial statements.

5

NOODLES & COMPANY

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. 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 April 2, 2019, the Company had 395 company-owned restaurants and 64 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 1, 2019 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 1, 2019.

Fiscal Year

The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. 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. Fiscal year 2019, which ends on December 31, 2019, and fiscal year 2018, which ended on January 1, 2019, both contain 52 weeks. The Company’s fiscal quarter that ended April 2, 2019 is referred to as the first quarter of 2019, and the fiscal quarter ended April 3, 2018 is referred to as the first quarter of 2018.

Recent Accounting Pronouncements

The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on the Company’s financial position or results of operations and cash flows.

Recently Adopted Accounting Pronouncements

On January 2, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” along with related clarifications and improvements. This pronouncement requires a lessee to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use asset on the balance sheet. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. The Company elected the alternative transition method to apply the standard as of the beginning of the period of adoption; therefore, the Company has not applied the standard to the comparative periods presented on its condensed consolidated financial statements.

The adoption of this lease guidance did have a material impact on the Company’s Consolidated Balance Sheets by materially increasing its non-current assets and current and non-current liabilities due to the recognition of the right-of-use assets and related lease liabilities primarily related to the Company’s restaurant operating leases and corporate office space. Upon adoption, the right-of-use assets were based upon the operating lease liabilities adjusted for prepaid and deferred rent, liabilities associated with lease termination costs and impairment of right-of-use assets. The impairment of right-of-use assets upon adoption was recognized in retained earnings as of January 2, 2019.

6

The adoption of the standard did not have a material impact on the Company’s Condensed Consolidated Statements of Operations in the first quarter of 2019. The adoption also included the enhancement of the Company’s disclosures related to leases. See disclosure in Note 9, Leases.

The impact on the Condensed Consolidated Balance Sheet on the date of adoption was as follows:

	January 1, 2019			Adjustments Due to the Adoption of Topic 842 (unaudited)			January 2, 2019 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,655		$	—		$	4,655
Accounts receivable	2,391			225			2,616
Inventories	9,646			—			9,646
Prepaid expenses and other assets	6,474			(3,243		)	3,231
Income tax receivable	185			—			185
Total current assets	23,351			(3,018		)	20,333
Property and equipment, net	138,774			844			139,618
Operating lease assets, net	—			219,883			219,883
Goodwill	6,400			—			6,400
Intangibles, net	1,291			(67		)	1,224
Other assets, net	2,216			—			2,216
Total long-term assets	148,681			220,660			369,341
Total assets	$	172,032		$	217,642		$	389,674
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,854		$	—		$	7,854
Accrued payroll and benefits	13,391			—			13,391
Accrued expenses and other current liabilities	11,183			(553		)	10,630
Current operating lease liabilities	—			—			—
Current portion of long-term debt	719			—			719
Total current liabilities	33,147			(553		)	32,594
Long-term debt, net	44,183			—			44,183
Long-term operating lease liabilities, net	—			260,931			260,931
Deferred rent	37,334			(37,186		)	148
Deferred tax liabilities, net	133			—			133
Other long-term liabilities	4,554			442			4,996
Total liabilities	119,351			223,634			342,985
Stockholders’ equity:
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of January 1, 2019; no shares issued or outstanding	—			—			—
Common stock—$0.01 par value, 180,000,000 shares authorized as of January 1, 2019; 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019	464			—			464
Treasury stock, at cost, 2,423,871 shares as of January 1, 2019	(35,000		)	—			(35,000		)
Additional paid-in capital	198,352			—			198,352
Accumulated deficit	(111,135		)	(5,992		)	(117,127		)
Total stockholders’ equity	52,681			(5,992		)	46,689
Total liabilities and stockholders’ equity	$	172,032		$	217,642		$	389,674

7

2. Supplemental Financial Information

Property and equipment, net, consists of the following (in thousands):

	April 2, 2019			January 1, 2019
Leasehold improvements	$	197,812		$	197,571
Furniture, fixtures and equipment	122,939			121,479
Construction in progress	5,501			3,620
	326,252			322,670
Accumulated depreciation and amortization	(187,871		)	(183,896		)
	$	138,381		$	138,774

Accrued expenses and other current liabilities consist of the following (in thousands):

	April 2, 2019		January 1, 2019
Gift card liability	$	1,906	$	3,284
Occupancy related - other	1,164		2,600
Utilities	1,491		1,582
Other accrued expenses	3,963		3,717
	$	8,524	$	11,183

3. Long-Term Debt

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 April 2, 2019, the Company had $49.3 million of indebtedness (excluding $1.5 million of unamortized debt issuance costs) and $3.2 million of letters of credit outstanding under the 2018 Credit Facility. The term loan requires principal payments of $156,250 per quarter 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 April 2, 2019 are as follows (in thousands):

Year 1	$	750
Year 2	1,500
Year 3	2,125
Year 4	44,959
Total	$	49,334

The Company’s outstanding indebtedness bore interest at rates between 5.59% to 7.25% during the first quarter of 2019.

8

Upon execution of the 2018 Credit Facility, the Company repaid in full its outstanding indebtedness under its existing credit facility using funds drawn on its 2018 Credit Facility. Upon repayment, the existing credit facility and all related agreements were terminated.

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 April 2, 2019.

9

4. 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 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 borrowings is measured using Level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis include items such as leasehold improvements, property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired or when acquired.

Adjustments to the fair value of assets measured at fair value on a non-recurring basis as of April 2, 2019 and April 3, 2018 are discussed in Note 7, Restaurant Impairments, Closure Costs and Asset Disposals.

5. Income Taxes

The following table presents the Company’s provision (benefit) for income taxes (in thousands):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Provision (benefit) for income taxes	$	—		$	(241	)
Effective tax rate	—		%	6.3		%

The effective tax rate for the first quarter of 2019 reflects the impact of the previously recorded valuation allowance. For the remainder of fiscal 2019, the Company does not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. The Company will maintain the 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. The effective tax rate for the first quarter of 2018 reflected changes made by the Tax Cuts and Jobs Act (“Tax Act”), which was signed into law in December 2017.

10

6. Stock-Based Compensation

The Company’s Stock Incentive Plan (the “Plan”), as amended and restated in May of 2013, authorizes the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and incentive bonuses to employees, officers, non-employee directors and other service providers. As of April 2, 2019, approximately 3.5 million share-based awards were available to be granted under the Plan.

The following table shows total stock-based compensation expense (in thousands):

	Fiscal Quarter Ended
	April 2, 2019		April 3, 2018
Stock-based compensation expense	$	726	$	580
Capitalized stock-based compensation expense	$	11	$	12

7. Restaurant Impairments, Closure Costs and Asset Disposals

The following table presents restaurant impairments, closure costs and asset disposals (in thousands):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Restaurant impairments (1)	$	189		$	598
Closure costs (1)	(39		)	554
Loss on disposal of assets and other	270			428
	$	420		$	1,580

_____________________________

(1) Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed.

During the first quarter of 2019, there were no restaurants identified as impaired, compared to one restaurant impairment during the first quarter of 2018. Both periods include ongoing equipment costs for restaurants previously impaired. 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.

Closure costs in the first quarter of 2019 were comprised of a $0.3 million gain primarily relating to changes in the Company’s assessment of remaining operating lease terms, offset by $0.3 million of ongoing costs related to restaurants closed in previous years. The first quarter of 2018 included $0.6 million related to the ongoing costs of restaurants closed in previous years. These ongoing costs include adjustments to the liabilities to landlords as lease terminations occur.

These expenses are included in the “Restaurant impairments, closure costs and asset disposals” line in the Condensed Consolidated Statements of Operations.

11

8. 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):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Net loss	$	(1,851	)	$	(3,575	)
Shares:
Basic weighted average shares outstanding	43,933,235			41,128,473
Effect of dilutive securities	—			—
Diluted weighted average shares outstanding	43,933,235			41,128,473
Loss per share:
Basic loss per share	$	(0.04	)	$	(0.09	)
Diluted loss per share	$	(0.04	)	$	(0.09	)

The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. Potential common shares are excluded from the computation of diluted earnings per share when the effect would be anti-dilutive. The shares issuable on the vesting or exercise of share-based awards or exercise of outstanding warrants that were excluded from the calculation of diluted loss per share because the effect of their inclusion would have been anti-dilutive totaled 3,245,418 and 3,106,710 for the first quarter of 2019 and 2018, respectively.

12

9. Leases

The Company leases restaurant facilities, office space and certain equipment that expire on various dates through September 2034. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of five to 15 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The Company’s leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Supplemental balance sheet information related to leases is as follows (in thousands):

Classification		April 2, 2019
Assets
Operating	Operating lease assets, net	$	218,311
Finance	Finance lease assets, net (1)	1,057
Total leased assets		$	219,368
Liabilities
Current lease liabilities
Operating	Current operating lease liabilities	$	21,528
Finance	Current finance lease liabilities (2)	811
Long-term lease liabilities
Operating	Long-term operating lease liabilities	237,341
Finance	Long-term finance lease liabilities (2)	271
Total lease liabilities		$	259,951

_____________________

(1) The finance lease assets are included in property and equipment, net in the Consolidated Balance Sheets.

(2) The current portion of the finance lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in other long-term liabilities in the Consolidated Balance Sheets.

The components of lease costs are as follows (in thousands):

Classification		April 2, 2019
Operating lease cost	Occupancy, other restaurant operating costs, and general and administrative expenses	$	10,144
Finance lease cost
Amortization of lease assets	Depreciation and amortization	171
Interest on lease liabilities	Interest expense, net	20
		10,335
Sublease income	Franchising royalties and fees, and other	(112		)
Total lease cost, net		$	10,223

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Future minimum lease payments required under existing leases as of April 2, 2019 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
Remainder of 2019	$	32,178	$	497	$	32,675
2020	42,686		471		43,157
2021	42,188		151		42,339
2022	42,024		23		42,047
2023	40,695		14		40,709
Thereafter	182,453		9		182,462
Total lease payments	382,224		1,165		383,389
Less: Imputed interest	123,355		83		123,438
Present value of lease liabilities	$	258,869	$	1,082	$	259,951

Operating lease payments include $92.3 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $10.7 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease term and discount rate for the first quarter ended April 2, 2019 are as follows:

	April 2, 2019
Weighted average remaining lease term (years):
Operating	9.4
Finance	2.2
Weighted average discount rate:
Operating	8.66	%
Finance	7.11	%

Supplemental disclosures of cash flow information related to leases for the first quarter ended April 2, 2019 are as follows (in thousands):

	April 2, 2019
Cash paid for lease liabilities:
Operating leases	$	10,693
Finance leases	217
	$	10,910
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	3,161
Finance leases	50
	$	3,211

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10. 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 first quarter ended April 2, 2019 and April 3, 2018 (in thousands):

	April 2, 2019			April 3, 2018
Interest paid (net of amounts capitalized)	$	713		$	1,315
Income taxes paid	6			29
Changes in purchases of property and equipment accrued in accounts payable, net	(68		)	(1,753		)

11. Revenue Recognition

Revenue

Revenue consists of sales from restaurant operations, franchise royalties and fees, and sublease income. 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.

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 9% of gift cards will not be redeemed and recognizes gift card breakage ratably over the estimated redemption period of the gift card, which is approximately 24 months. Gift card liability balances are typically highest at the end of each calendar year following increased gift card purchases during the holiday season.

As of April 2, 2019 and January 1, 2019, the current portion of the gift card liability, $1.9 million and $3.3 million, respectively, is included in accrued expenses and other current liabilities, and the long-term portion, $0.7 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 was $1.8 million during both the first quarters of 2019 and 2018.

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 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 are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years.

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12. Commitments and Contingencies

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 April 2, 2019. 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.

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NOODLES & COMPANY

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Noodles & Company is a Delaware corporation that was organized in 2002. Noodles & Company and its subsidiaries are sometimes referred to as “we,” “us,” “our” and the “Company” in this report. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended January 1, 2019. We operate on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Our 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. Fiscal years 2019 and 2018 each contain 52 weeks.    

Cautionary Note Regarding Forward-Looking Statements

In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding estimated costs associated with our closure of underperforming restaurants, the implementation and results of strategic initiatives and our future financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including new restaurant initiatives and operational strategies to improve the performance of our restaurant portfolio; our ability to maintain compliance with debt covenants and continue to access financing necessary to execute our business strategy; the success of our marketing efforts; our ability to open new restaurants on schedule; current economic conditions; price and availability of commodities; our ability to adequately staff our restaurants; changes in labor costs; consumer confidence and spending patterns; consumer reaction to industry related public health issues and perceptions of food safety; seasonal factors; weather; and those discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors” as filed in our Annual Report on Form 10-K for our fiscal year ended January 1, 2019.

Recent Trends, Risks and Uncertainties

Comparable Restaurant Sales. In the first quarter of 2019, system-wide comparable restaurant sales increased 3.0%, comprised of a 3.0% increase for company-owned restaurants and a 2.8% increase for franchise restaurants. Our ability to continue to increase comparable restaurant sales depends in part on our ability to successfully implement our operational strategies and initiatives.

Increased Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent periods. In the first quarter of 2019, we were able to mitigate the impact of increased base labor costs through labor efficiencies; however, we expect that labor costs will continue to rise as wage rates and benefit costs increase. Some jurisdictions in which we operate have recently increased their minimum wage by a significant amount and other jurisdictions are considering similar actions. Significant additional government-imposed increases could materially affect our labor costs.

Certain Restaurant Closures. We closed 19 company-owned restaurants in 2018, most of which were at or approaching the expiration of their leases, and did not close any restaurants in the first quarter of 2019. We currently do not anticipate significant restaurant closures for the foreseeable future; however, we may from time to time close certain restaurants, including closures at, or near, the expiration of their leases.

Restaurant Development. In the first quarter of 2019, we did not open any new company-owned restaurants but did acquire one franchise restaurant. As of April 2, 2019, we had 395 company-owned restaurants and 64 franchise restaurants in 29 states and the District of Columbia. Given recent improvement in performance, operating effectiveness and liquidity, we are currently pursuing a disciplined development pipeline to execute a modest new unit growth rate in the near term. In 2019, we plan to open between four and six company-owned restaurants.

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Key Measures We Use to Evaluate Our Performance

To evaluate the performance of our business, we utilize a variety of financial and performance measures. These key measures include revenue, average unit volume (“AUV”), comparable restaurant sales, restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA.

Revenue

Restaurant revenue represents sales of food and beverages in company-owned restaurants. Several factors affect our restaurant revenue in any period, including the number of restaurants in operation and per-restaurant sales.

Franchise royalties and fees represent royalty income and initial franchise fees. While we expect that the majority of our revenue and net income growth will be driven by company-owned restaurants, our franchise restaurants remain an important factor impacting our revenue and financial performance.

Seasonal factors cause our revenue to fluctuate from quarter to quarter. Our revenue per restaurant is typically lower in the first and fourth quarters, due to reduced winter and holiday traffic, and is higher in the second and third quarters. As a result of these factors, our quarterly and annual operating results and comparable restaurant sales may fluctuate significantly.

Average Unit Volume

AUV consists of the average annualized sales of all company-owned restaurants for the trailing 12 periods. AUV is calculated by dividing restaurant revenue by the number of operating days within each time period and multiplying by the number of operating days we have in a typical year. This measurement allows management to assess changes in consumer traffic and per person spending patterns at our restaurants.

Comparable Restaurant Sales

Comparable restaurant sales refer to year-over-year sales comparisons for the comparable restaurant base. We define the comparable restaurant base to include restaurants open for at least 18 full periods. This measure highlights performance of existing restaurants, as the impact of new restaurant openings is excluded. Changes in comparable restaurant sales are generated by changes in traffic, which we calculate as the number of entrées sold, or changes in per-person spend, calculated as sales divided by traffic. Per-person spend can be influenced by changes in menu prices and the mix and number of items sold per person.

Measuring our comparable restaurant sales allows us to evaluate the performance of our existing restaurant base. Various factors impact comparable restaurant sales, including:

• 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;

• abnormal weather patterns;

• 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.

Consistent with common industry practice, we present comparable restaurant sales on a calendar-adjusted basis that aligns current year sales weeks with comparable periods in the prior year, regardless of whether they belong to the same fiscal period or not.

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Since opening new company-owned and franchise restaurants is a part of our growth strategy and we anticipate new restaurants will be a component of our revenue growth (albeit to a lesser extent in future periods, as discussed below), comparable restaurant sales is only one measure of how we evaluate our performance.

Restaurant Contribution and Restaurant Contribution Margin

Restaurant contribution represents restaurant revenue less restaurant operating costs which are cost of sales, labor, occupancy and other restaurant operating costs. Restaurant contribution margin represents restaurant contribution as a percentage of restaurant revenue. We expect restaurant contribution to increase in proportion to the number of new restaurants we open and our comparable restaurant sales growth.

We believe that restaurant contribution and restaurant contribution margin are important tools for investors and other interested parties because they are widely-used metrics within the restaurant industry to evaluate restaurant-level productivity, efficiency and performance. We also use restaurant contribution and restaurant contribution margin as metrics to evaluate the profitability of incremental sales at our restaurants, restaurant performance across periods and restaurant financial performance compared with competitors. Restaurant contribution and restaurant contribution margin are supplemental measures of the operating performance of our restaurants and are not reflective of the underlying performance of our business because corporate-level expenses are excluded from these measures.

EBITDA and Adjusted EBITDA

We define EBITDA as net income (loss) before interest expense, provision (benefit) for income taxes and depreciation and amortization. We define adjusted EBITDA as net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization, restaurant impairments, closure costs and asset disposals, acquisition costs, severance costs and stock-based compensation expense.

We believe that EBITDA and adjusted EBITDA provide clear pictures of our operating results by eliminating certain non-recurring and non-cash expenses that may vary widely from period to period and are not reflective of the underlying business performance.

The presentation of restaurant contribution, restaurant contribution margin, EBITDA and adjusted EBITDA is not intended to be considered in isolation or as a substitute for, or to be superior to, the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. We believe that they provide useful information to management and investors about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making.

Results of Operations

The following table presents a reconciliation of net loss to EBITDA and adjusted EBITDA:

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
	(in thousands, unaudited)
Net loss	$	(1,851	)	$	(3,575	)
Depreciation and amortization	5,507			5,820
Interest expense, net	761			1,138
Provision (benefit) for income taxes	—			(241		)
EBITDA (1)	$	4,417		$	3,142
Restaurant impairments, closure costs and asset disposals (2)	420			1,580
Acquisition costs (3)	36			—
Severance costs (4)	—			278
Stock-based compensation expense	726			580
Adjusted EBITDA	$	5,599		$	5,580

_____________________

(1) The first quarter of 2019 includes a $0.2 million positive impact on EBITDA from the adoption of ASU 2016-02, “Leases (Topic 842),” the new lease standard.

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(2) Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed. Additionally, the first quarter of 2018 includes the impairment of one restaurant. See Note 7, Restaurant Impairments, Closure Costs and Asset Disposals.

(3) The first quarter of 2019 includes acquisition costs related to the acquisition of one franchise restaurant.

(4) The first quarter of 2018 includes severance costs from departmental structural changes.

Restaurant Openings, Closures and Relocations

The following table shows restaurants opened or closed during the periods indicated:

	Fiscal Quarter Ended
	April 2, 2019		April 3, 2018
Company-Owned Restaurant Activity
Beginning of period	394		412
Openings	—		1
Acquisition (1)	1		—
Closures	—		(2	)
Restaurants at end of period	395		411
Franchise Restaurant Activity
Beginning of period	65		66
Openings	—		—
Divestiture (1)	(1	)	—
Closures	—		(1	)
Restaurants at end of period	64		65
Total restaurants	459		476

_____________________________

(1) Represents one franchise restaurant acquired by us.

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Statement of Operations as a Percentage of Revenue

The following table summarizes key components of our results of operations for the periods indicated as a percentage of our total revenue, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenue.

	Fiscal Quarter Ended
	April 2, 2019		April 3, 2018
	(unaudited)
Revenue:
Restaurant revenue	98.8	%	99.2	%
Franchising royalties and fees, and other	1.2	%	0.8	%
Total revenue	100.0	%	100.0	%
Costs and expenses:
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of sales	26.7	%	26.7	%
Labor	34.1	%	33.4	%
Occupancy	11.4	%	11.6	%
Other restaurant operating costs	15.1	%	15.4	%
General and administrative	9.2	%	9.3	%
Depreciation and amortization	5.0	%	5.3	%
Pre-opening	—	%	—	%
Restaurant impairments, closure costs and asset disposals	0.4	%	1.4	%
Total costs and expenses	101.0	%	102.4	%
Loss from operations	(1.0	)%	(2.4	)%
Interest expense, net	0.7	%	1.0	%
Loss before income taxes	(1.7	)%	(3.4	)%
Provision (benefit) for income taxes	—	%	(0.2	)%
Net loss	(1.7	)%	(3.2	)%

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First Quarter Ended April 2, 2019 Compared to First Quarter Ended April 3, 2018

The table below presents our unaudited operating results for the first quarters of 2019 and 2018, and the related quarter-over-quarter changes.

	Fiscal Quarter Ended						Increase / (Decrease)
	April 2, 2019			April 3, 2018			$			%
	(in thousands, unaudited)
Revenue:
Restaurant revenue	$	108,765		$	109,613		$	(848	)	(0.8	)%
Franchising royalties and fees, and other	1,281			913			368			40.3	%
Total revenue	110,046			110,526			(480		)	(0.4	)%
Costs and expenses:
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of sales	29,091			29,256			(165		)	(0.6	)%
Labor	37,092			36,572			520			1.4	%
Occupancy	12,430			12,763			(333		)	(2.6	)%
Other restaurant operating costs	16,456			16,898			(442		)	(2.6	)%
General and administrative	10,140			10,268			(128		)	(1.2	)%
Depreciation and amortization	5,507			5,820			(313		)	(5.4	)%
Pre-opening	—			47			(47		)	(100.0	)%
Restaurant impairments, asset disposals and closure costs	420			1,580			(1,160		)	(73.4	)%
Total costs and expenses	111,136			113,204			(2,068		)	(1.8	)%
Loss from operations	(1,090		)	(2,678		)	1,588			*
Interest expense, net	761			1,138			(377		)	(33.1	)%
Loss before income taxes	(1,851		)	(3,816		)	1,965			*
Provision (benefit) from income taxes	—			(241		)	241			(100.0	)%
Net loss	$	(1,851	)	$	(3,575	)	$	1,724		*
Company-owned:
Average unit volume	$	1,131		$	1,080		$	51		4.7	%
Comparable restaurant sales	3.0		%	(0.3		)%

________________

* Not meaningful.

Revenue

Total revenue decreased $0.5 million in the first quarter of 2019, or 0.4%, to $110.0 million, compared to $110.5 million in the first quarter of 2018. This decrease was primarily due to the impact of closing 19 company-owned restaurants since the beginning of 2018, mostly offset by the increase in comparable restaurant sales.

AUV increased $51,000 compared to the prior year. AUV for the trailing twelve months was $1,131,000.

System-wide comparable restaurant sales growth was 3.0% in the first quarter of 2019, comprised of a 3.0% increase at company-owned restaurants and a 2.8% increase at franchise-owned restaurants. Comparable sales in the first quarter of 2019 benefited by approximately 50 bps due to a shift in the timing of the Easter holiday.

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Cost of Sales

Cost of sales decreased by $0.2 million, or 0.6%, in the first quarter of 2019 compared to the same period of 2018, due primarily to the decrease in restaurant revenue in the first quarter of 2019. As a percentage of restaurant revenue, cost of sales remained flat at 26.7% in the first quarter of 2019 compared to the first quarter of 2018 due to the nationwide launch of zucchini noodles in the second quarter of 2018, which have a higher cost of goods sold than the balance of our menu offerings, offset by supply chain initiatives.

Labor Costs

Labor costs increased by $0.5 million, or 1.4%, in the first quarter of 2019 compared to the same period of 2018. As a percentage of restaurant revenue, labor costs increased to 34.1% in the first quarter of 2019 from 33.4% in the first quarter of 2018. The increase as a percentage of restaurant revenue was driven by higher benefit costs due to certain individual high dollar claims incurred during the first quarter of 2019 and wage inflation.

Occupancy Costs

Occupancy costs decreased by $0.3 million, or 2.6%, in the first quarter of 2019 compared to the first quarter of 2018, due primarily to the impact of restaurants closed since the beginning of 2018. As a percentage of revenue, occupancy costs decreased to 11.4% in the first quarter of 2019, compared to 11.6% in the first quarter of 2018 due to leverage on higher AUV.

Other Restaurant Operating Costs

Other restaurant operating costs decreased by $0.4 million, or 2.6%, in the first quarter of 2019 compared to the first quarter of 2018, due primarily to lower marketing spend, partially offset by increased third-party delivery fees associated with higher delivery revenues. As a percentage of restaurant revenue, other restaurant operating costs decreased to 15.1% in the first quarter of 2019 compared to 15.4% in the first quarter of 2018.

General and Administrative Expense

General and administrative expense decreased by $0.1 million, or 1.2%, in the first quarter of 2019 compared to the first quarter of 2018, primarily due to severance costs from departmental structural changes in the first quarter of 2018. As a percentage of revenue, general and administrative expense decreased to 9.2% in the first quarter of 2019 from 9.3% in the first quarter of 2018.

Depreciation and Amortization

Depreciation and amortization decreased by $0.3 million, or 5.4%, in the first quarter of 2019 compared to the first quarter of 2018, due primarily to restaurants closed or impaired in prior quarters. As a percentage of revenue, depreciation and amortization decreased to 5.0% in the first quarter of 2019 from 5.3% in the first quarter of 2018.

Restaurant Impairments, Closure Costs and Asset Disposals

Restaurant impairments, closure costs and asset disposals decreased by $1.2 million in the first quarter of 2019 compared to the first quarter of 2018. In the first quarter of 2019, no restaurants were impaired and closure costs were comprised of a $0.3 million gain, primarily relating to changes in our assessment of remaining operating lease terms, offset by $0.3 million of ongoing costs related to restaurants closed in previous years. In the first quarter of 2018, we impaired one restaurant and recognized $0.6 million of closure costs related to restaurants closed in previous years.

Interest Expense

Interest expense decreased by $0.4 million in the first quarter of 2019 compared to the first quarter of 2018. The decrease was due to lower average borrowings partially offset by a higher average interest rate during the first quarter of 2019 compared to the first quarter of 2018.

Provision (Benefit) from Income Taxes

The effective tax rate was 0.0% for the first quarter of 2019 compared to 6.3% for the first quarter of 2018. The effective tax rate for the first quarter of 2019 reflects the impact of the previously recorded valuation allowance. The effective tax rate for the first quarter of 2018 was primarily related to a benefit from a reduction to the valuation allowance. For the remainder of fiscal 2019, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a 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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Liquidity and Capital Resources

Summary of Cash Flows

As of April 2, 2019, our available cash and cash equivalents balance was $1.8 million and $36.8 million was available for future borrowings under our 2018 Credit Facility.

We have historically used cash to fund capital expenditures for new restaurant openings, reinvest in our existing restaurants, invest in infrastructure and information technology and maintain working capital; however, due to our anticipated modest unit growth, cash required for new restaurant openings has been correspondingly reduced. Our working capital position benefits from the fact that we generally collect cash from sales to customers the same day, or in the case of credit or debit card transactions, within several days of the related sale, and we typically have up to 30 days to pay our vendors.

We believe that we have sufficient sources of cash to meet our liquidity needs and capital resource requirements for the next twelve months, primarily through currently available cash and cash equivalents, cash flows from operations and undrawn capacity under our revolving credit line.

Cash flows from operating, investing and financing activities are shown in the following table (in thousands):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Net cash provided by (used in) operating activities	$	114		$	(1,004	)
Net cash used in investing activities	(5,551		)	(4,805		)
Net cash provided by financing activities	2,582			5,072
Net decrease in cash and cash equivalents	$	(2,855	)	$	(737	)

Operating Activities

Net cash provided by operating activities was $0.1 million in the first quarter of 2019 compared to net cash used in operating activities of $1.0 million in the first quarter of 2018. The improvement in operating cash flows resulted primarily from lower net loss during the first quarter of 2019 compared to first quarter of 2018, adjusted for non-cash items such as depreciation and amortization, restaurant impairments, closure costs and asset disposals, and changes in working capital due to timing.

Investing Activities

Net cash used in investing activities in both periods was primarily related to reinvestments in existing restaurants and investments in technology. Additionally, in the first quarter of 2019 we purchased one franchise restaurant for total cash consideration of $1.4 million.

Financing Activities

Net cash provided by financing activities in both periods is the result of borrowings, net of repayments on long-term debt.

Capital Resources

Future Capital Expenditure Requirements. Our capital expenditure requirements are primarily dependent upon the pace of our real estate development program and resulting new restaurant openings, costs for maintenance and remodeling of our existing restaurants, as well as information technology expenses and other general corporate capital expenditures.

We estimate capital expenditures for the remainder of 2019 to be approximately $10.5 million to $15.0 million for a total of approximately $14.5 million to $19.0 million for the fiscal year, of which $4.0 million to $7.0 million relates to our construction of new restaurants before any reductions for landlord reimbursements. We expect such capital expenditures to be funded by a combination of cash from operations and borrowings under our revolving credit facility.

Current Resources. Our operations have not required significant working capital and, like many restaurant companies, we operate with negative working capital. Restaurant sales are primarily paid for in cash or by credit or debit card, and restaurant operations do not require significant inventories or receivables. In addition, we receive trade credit for the purchase of food, beverages and supplies, therefore reducing the need for incremental working capital to support growth.

Liquidity. We believe that our current cash and cash equivalents, the expected cash flows from company-owned restaurant operations, the expected franchise fees and royalties and borrowings under the credit facility will be sufficient to fund our cash

24

requirements for working capital needs and capital improvements and maintenance of existing restaurants for the next twelve months.

Credit Facility

On May 9, 2018, we entered into the 2018 Credit Facility which 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. Upon execution of the 2018 Credit Facility, the Company repaid in full its outstanding indebtedness under its existing credit facility using funds drawn on its 2018 Credit Facility. Upon repayment, the existing credit facility and all related agreements were terminated.

As of April 2, 2019, we had $49.3 million of indebtedness (excluding $1.5 million of unamortized debt issuance costs) and $3.2 million of letters of credit outstanding under the 2018 Credit Facility. The term loan requires principal payments of $156,250 per quarter 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.

The material terms of the 2018 Credit Facility also include, among other things, the following financial covenants: (i) a maximum consolidated total lease-adjusted leverage ratio covenant; (ii) a minimum consolidated fixed charge coverage ratio covenant; and (iii) a covenant limiting the total capital expenditures by us in any fiscal year. Borrowings under the 2018 Credit Facility bear interest, at our 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.

Availability of borrowings under the 2018 Credit Facility is conditioned upon our compliance with the terms of the 2018 Credit Facility, including the financial covenants and other customary affirmative and negative covenants, such as limitations on additional borrowings, acquisitions, dividend payments and lease commitments, and customary representations and warranties.

We expect that we will meet all applicable financial covenants in our 2018 Credit Facility, including the maximum consolidated total lease-adjusted leverage ratio, through at least the fiscal year ending December 31, 2019. However, there can be no assurance we will meet such financial covenants. If such covenants are not met, we would be required to seek a waiver or amendment from the banks participating in the credit facility. There can be no assurance that such waiver or amendment would be granted, which could have a material adverse impact on our liquidity.

Our 2018 Credit Facility is secured by a pledge of stock of substantially all of our subsidiaries and a lien on substantially all of our and our subsidiaries’ personal property assets.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements or obligations as of April 2, 2019.

Critical Accounting Policies and Estimates

With the adoption of ASU 2016-02, “Leases (Topic 842),” the right-of-use assets in our operating and finance leases are subject to the impairment guidance in ASC 360, “Property, Plant, and Equipment.” The operating and finance lease assets are long-lived non-financial assets and are accounted for similar to our other long-lived non-financial assets, such as property and equipment and intangibles, subject to amortization. Therefore, we will review operating and finance lease assets for impairment when events or circumstances indicate the carrying value of the assets may not be recoverable.

In performing our impairment testing, we forecast our future undiscounted cash flows by looking at recent restaurant level performance, restaurant level operating plans, sales trends and cost trends for cost of sales, labor and operating expenses. We believe that this combination of information gives us a fair benchmark to estimate future undiscounted cash flows. We compare this cash flow forecast to the asset’s carrying value at the restaurant. Based on this analysis, if the carrying amount of the assets is greater than the estimated future undiscounted cash flows, an impairment charge is recognized, measured as the amount by which the carrying amount exceeds the fair value of the asset.

When determining the fair value of our right-of-use assets, we will consider what market participants would pay to lease the asset (i.e., what a market participant would pay up front in one payment for the right-of-use asset, assuming no additional lease payments would be due) for its highest and best use, even if that use differs from the current or intended use by us.

25

Our condensed consolidated financial statements and accompanying notes are prepared in accordance with GAAP. Preparing consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by the application of our accounting policies. Our significant accounting policies are described in our Annual Report on Form 10-K for the year ended January 1, 2019. Critical accounting estimates are those that require application of management’s most difficult, subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. While we apply our judgment based on assumptions believed to be reasonable under the circumstances, actual results could vary from these assumptions. It is possible that materially different amounts would be reported using different assumptions. Our critical accounting estimates are identified and described in our annual consolidated financial statements and the related notes included in our Annual Report on Form 10-K for our fiscal year ended January 1, 2019.

26

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are exposed to market risk from changes in interest rates on debt. Our exposure to interest rate fluctuations is limited to our outstanding bank debt, which bears interest at variable rates. As of April 2, 2019, we had $49.3 million of outstanding borrowings under our credit facility. An increase or decrease of 1.0% in the effective interest rate applied on these loans would have resulted in a pre-tax interest expense fluctuation of approximately $0.5 million on an annualized basis.

Commodity Price Risk

We purchase certain products that are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions and other factors which are not considered predictable or within our control. Although these products are subject to changes in commodity prices, certain purchasing contracts or pricing arrangements contain risk management techniques designed to minimize price volatility. Typically, we use these types of purchasing techniques to control costs as an alternative to directly managing financial instruments to hedge commodity prices. In many cases, we believe we will be able to address material commodity cost increases by adjusting our menu pricing or changing our product delivery strategy. However, increases in commodity prices, without adjustments to our menu prices, could increase restaurant operating costs as a percentage of restaurant revenue.

Inflation

The primary inflationary factors affecting our operations are food, labor costs, energy costs and materials used in the construction of new restaurants. Increases in the minimum wage requirements directly affect our labor costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Finally, the cost of constructing our restaurants is subject to inflationary increases in the costs of labor and material. Over the past five years, inflation has not significantly affected our operating results with the exception of increased wage inflation that affected our results from 2015 through the first quarter of 2019. We expect wage inflation to continue to affect our results in the near future.

27

Item 4. Controls and Procedures

Our management carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of April 2, 2019, pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended April 2, 2019, we implemented controls to ensure we properly assessed the impact of the new lease accounting standard on our consolidated financial statements to facilitate adoption of the standard on January 2, 2019. We further completed upgrades to our existing lease system to support our accounting for leases and have integrated the new system functionality with our processes and controls.

There have been no other changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

28

PART II

Item 1. Legal Proceedings

In the normal course of business, we are subject to other proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, we are unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of April 2, 2019. These matters could affect the operating results of any one financial reporting period when resolved in future periods. We believe that an unfavorable outcome with respect to these matters is remote or a potential range of loss is not material to our consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than we currently anticipate, could materially adversely affect our business, financial condition, results of operations or cash flows.

Item 1A. Risk Factors

A description of the risk factors associated with our business is contained in the “Risk Factors” section of our Annual Report on Form 10-K for our fiscal year ended January 1, 2019.  There have been no material changes to our Risk Factors as previously reported.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

29

Item 6. Exhibit Index

Exhibit Number	Description of Exhibit
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)
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

30

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NOODLES & COMPANY
By:	/s/ KEN KUICK
	Ken Kuick Chief Financial Officer (principal financial officer and duly authorized signatory for the registrant)
Date	May 10, 2019

31

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Dave Boennighausen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Noodles and Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(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

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(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.

Date: May 10, 2019

/s/     DAVE BOENNIGHAUSEN

Dave Boennighausen

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

                                            Exhibit 31.2        

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Ken Kuick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Noodles and Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(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

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(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.

Date: May 10, 2019

/s/     KEN KUICK

Ken Kuick

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

I, Dave Boennighausen, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Noodles & Company on Form 10-Q for the fiscal quarter ended April 2, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Noodles & Company.

Date: May 10, 2019

By:	/s/ DAVE BOENNIGHAUSEN
Name:	Dave Boennighausen
Title:	Chief Executive Officer

I, Ken Kuick, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Noodles & Company on Form 10-Q for the fiscal quarter ended April 2, 2019 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Noodles & Company.

Date: May 10, 2019

By:	/s/ KEN KUICK
Name:	Ken Kuick
Title:	Chief Financial Officer

This certification accompanies this Quarterly Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

XML

Document and Entity Information Document and Entity Information - shares	3 Months Ended
	Apr. 02, 2019	May 03, 2019
Document Information [Line Items]
Entity Registrant Name	NOODLES & COMPANY
Entity Central Index Key	0001275158
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Document Type	10-Q
Document Period End Date	Apr. 02, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	true
Common Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		43,947,080

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 02, 2019	Jan. 02, 2019	Jan. 01, 2019	Apr. 03, 2018	Jan. 02, 2018
Current assets:
Cash and cash equivalents	$ 1,800	$ 4,655	$ 4,655	$ 2,624	$ 3,361
Accounts receivable	2,254	2,616	2,391
Inventories	9,870	9,646	9,646
Prepaid expenses and other assets	3,066	3,231	6,474
Income tax receivable	191	185	185
Total current assets	17,181	20,333	23,351
Property and equipment, net	138,381	139,618	138,774
Operating lease assets, net	218,311	219,883	0
Goodwill	7,154	6,400	6,400
Intangibles, net	1,179	1,224	1,291
Other assets, net	2,360	2,216	2,216
Total long-term assets	367,385	369,341	148,681
Total assets	384,566	389,674	172,032
Current liabilities:
Accounts payable	10,563	7,854	7,854
Accrued payroll and benefits	7,833	13,391	13,391
Accrued expenses and other current liabilities	8,524	10,630	11,183
Current operating lease liabilities	21,528	0	0
Current portion of long-term debt	750	719	719
Total current liabilities	49,198	32,594	33,147
Long-term debt, net	47,035	44,183	44,183
Long-term operating lease liabilities, net	237,341	260,931	0
Deferred rent	0	148	37,334
Deferred tax liabilities, net	133	133	133
Other long-term liabilities	5,263	4,996	4,554
Total liabilities	338,970	342,985	119,351
Stockholders’ equity:
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of October 2, 2018 and January 2, 2018; no shares issued or outstanding	0	0	0
Common stock—$0.01 par value, 180,000,000 shares authorized as of October 2, 2018 and January 2, 2018; 46,340,013 issued and 43,916,142 outstanding as of October 2, 2018 and 43,550,329 issued and 41,126,458 outstanding as of January 2, 2018	464	464	464
Treasury stock, at cost, 2,423,871 shares as of October 2, 2018 and January 2, 2018	(35,000)	(35,000)	(35,000)
Additional paid-in capital	199,110	198,352	198,352
Accumulated deficit	(118,978)	(117,127)	(111,135)
Total stockholders’ equity	45,596	46,689	52,681	$ 31,407	$ 35,861
Total liabilities and stockholders’ equity	$ 384,566	$ 389,674	$ 172,032

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018
Revenue:
Total revenue	$ 110,046	$ 110,526
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Occupancy	12,430	12,763
Other restaurant operating costs	16,456	16,898
General and administrative	10,140	10,268
Depreciation and amortization	5,507	5,820
Pre-opening	0	47
Restaurant impairments, closure costs and asset disposals	420	1,580
Total costs and expenses	111,136	113,204
Income (loss) from operations	(1,090)	(2,678)
Interest expense, net	761	1,138
Income (loss) before income taxes	(1,851)	(3,816)
(Benefit) provision for income taxes	0	(241)
Net income (loss)	(1,851)	(3,575)
Net income (loss) attributable to common stockholders	$ (1,851)	$ (3,575)
Earnings (loss) per share of Class A and Class B common stock, combined:
Basic (USD per share)	$ (0.04)	$ (0.09)
Diluted (USD per share)	$ (0.04)	$ (0.09)
Weighted average shares of Class A and Class B common stock outstanding, combined:
Basic (in shares)	43,933,235	41,128,473
Diluted (in shares)	43,933,235	41,128,473
Restaurant revenue
Revenue:
Total revenue	$ 108,765	$ 109,613
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of goods and services sold	29,091	29,256
Franchising royalties and fees, and other
Revenue:
Total revenue	1,281	913
Labor
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):
Cost of goods and services sold	$ 37,092	$ 36,572

XML

Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Apr. 02, 2019	Jan. 01, 2019
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)	46,370,951	46,353,309
Common stock, shares, outstanding	43,947,080	43,929,438
Treasury stock, shares	2,423,871	2,423,871

XML

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018
Statement of Comprehensive Income [Abstract]
Net loss	$ (1,851)	$ (3,575)

XML

Condensed Consolidated Statements of Stockholders’ Equity - USD ($) $ in Thousands	Total	Common Stock	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings (Accumulated Deficit) [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative catch-up adjustment for ASC 842 | Accounting Standards Update 2014-09	$ (1,506)			$ (1,506)
Beginning balance, shares at Jan. 02, 2018		43,550,329	2,423,871
Beginning balance at Jan. 02, 2018	$ 35,861	$ 436	$ (35,000)	171,613	$ (101,188)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Proceeds from exercise of stock options, warrants and employee stock purchase plan (in shares)	35,000	8,983
Proceeds from exercise of stock options, warrants and employee stock purchase plan		$ 0		35
Stock-based compensation expense				592
Net loss	$ (3,575)				(3,575)
Ending balance at Apr. 03, 2018	31,407	$ 436	$ (35,000)	172,240	(106,269)
Ending balance, shares at Apr. 03, 2018		43,559,312	2,423,871
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative catch-up adjustment for ASC 842 | Accounting Standards Update 2016-02	(5,992)			(5,992)
Beginning balance, shares at Jan. 01, 2019		46,353,309	2,423,871
Beginning balance at Jan. 01, 2019	$ 52,681	$ 464	$ (35,000)	198,352	(111,135)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Proceeds from exercise of stock options, warrants and employee stock purchase plan (in shares)	21,000	17,642
Proceeds from exercise of stock options, warrants and employee stock purchase plan		$ 0		21
Stock-based compensation expense	$ 737			737
Net loss	(1,851)				(1,851)
Ending balance at Apr. 02, 2019	$ 45,596	$ 464	$ (35,000)	$ 199,110	$ (118,978)
Ending balance, shares at Apr. 02, 2019		46,370,951	2,423,871

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018
Operating activities
Net loss	$ (1,851)	$ (3,575)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	5,507	5,820
Deferred income taxes	0	(245)
Restaurant impairments, closure costs and asset disposals	145	1,419
Amortization of debt issuance costs	125	210
Stock-based compensation	726	580
Changes in operating assets and liabilities:
Accounts receivable	362	745
Inventories	(223)	(44)
Prepaid expenses and other assets	50	651
Accounts payable	2,798	539
Deferred rent	15	(288)
Income taxes	(6)	(26)
Operating lease assets and liabilities	(343)	0
Accrued expenses and other liabilities	(7,191)	(6,790)
Net cash used in operating activities	114	(1,004)
Investing activities
Purchases of property and equipment	(4,164)	(4,805)
Franchise restaurant acquisition, net of cash acquired	(1,387)	0
Net cash used in investing activities	(5,551)	(4,805)
Financing activities
Net (payments) borrowings from swing line loan	3,071	5,038
Payments on long-term debt	(313)	0
Payments on finance leases	(197)	0
Proceeds from exercise of stock options and employee stock purchase plan	21	35
Debt issuance costs	0	(1)
Net cash provided by financing activities	2,582	5,072
Net (decrease) increase in cash and cash equivalents	(2,855)	(737)
Cash and cash equivalents
Beginning of period	4,655	3,361
End of period	$ 1,800	$ 2,624

XML

Business Summary and Basis of Presentation

3 Months Ended

Apr. 02, 2019

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 April 2, 2019, the Company had 395 company-owned restaurants and 64 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 1, 2019 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 1, 2019.

Fiscal Year

The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. 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. Fiscal year 2019, which ends on December 31, 2019, and fiscal year 2018, which ended on January 1, 2019, both contain 52 weeks. The Company’s fiscal quarter that ended April 2, 2019 is referred to as the first quarter of 2019, and the fiscal quarter ended April 3, 2018 is referred to as the first quarter of 2018.

Recent Accounting Pronouncements

The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on the Company’s financial position or results of operations and cash flows.

Recently Adopted Accounting Pronouncements

On January 2, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” along with related clarifications and improvements. This pronouncement requires a lessee to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use asset on the balance sheet. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. The Company elected the alternative transition method to apply the standard as of the beginning of the period of adoption; therefore, the Company has not applied the standard to the comparative periods presented on its condensed consolidated financial statements.

The adoption of this lease guidance did have a material impact on the Company’s Consolidated Balance Sheets by materially increasing its non-current assets and current and non-current liabilities due to the recognition of the right-of-use assets and related lease liabilities primarily related to the Company’s restaurant operating leases and corporate office space. Upon adoption, the right-of-use assets were based upon the operating lease liabilities adjusted for prepaid and deferred rent, liabilities associated with lease termination costs and impairment of right-of-use assets. The impairment of right-of-use assets upon adoption was recognized in retained earnings as of January 2, 2019.

The adoption of the standard did not have a material impact on the Company’s Condensed Consolidated Statements of Operations in the first quarter of 2019. The adoption also included the enhancement of the Company’s disclosures related to leases. See disclosure in Note 9, Leases.

The impact on the Condensed Consolidated Balance Sheet on the date of adoption was as follows:

	January 1, 2019			Adjustments Due to the Adoption of Topic 842 (unaudited)			January 2, 2019 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,655		$	—		$	4,655
Accounts receivable	2,391			225			2,616
Inventories	9,646			—			9,646
Prepaid expenses and other assets	6,474			(3,243		)	3,231
Income tax receivable	185			—			185
Total current assets	23,351			(3,018		)	20,333
Property and equipment, net	138,774			844			139,618
Operating lease assets, net	—			219,883			219,883
Goodwill	6,400			—			6,400
Intangibles, net	1,291			(67		)	1,224
Other assets, net	2,216			—			2,216
Total long-term assets	148,681			220,660			369,341
Total assets	$	172,032		$	217,642		$	389,674
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,854		$	—		$	7,854
Accrued payroll and benefits	13,391			—			13,391
Accrued expenses and other current liabilities	11,183			(553		)	10,630
Current operating lease liabilities	—			—			—
Current portion of long-term debt	719			—			719
Total current liabilities	33,147			(553		)	32,594
Long-term debt, net	44,183			—			44,183
Long-term operating lease liabilities, net	—			260,931			260,931
Deferred rent	37,334			(37,186		)	148
Deferred tax liabilities, net	133			—			133
Other long-term liabilities	4,554			442			4,996
Total liabilities	119,351			223,634			342,985
Stockholders’ equity:
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of January 1, 2019; no shares issued or outstanding	—			—			—
Common stock—$0.01 par value, 180,000,000 shares authorized as of January 1, 2019; 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019	464			—			464
Treasury stock, at cost, 2,423,871 shares as of January 1, 2019	(35,000		)	—			(35,000		)
Additional paid-in capital	198,352			—			198,352
Accumulated deficit	(111,135		)	(5,992		)	(117,127		)
Total stockholders’ equity	52,681			(5,992		)	46,689
Total liabilities and stockholders’ equity	$	172,032		$	217,642		$	389,674

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Supplemental Financial Information

3 Months Ended

Apr. 02, 2019

Supplemental Financial Information [Abstract]

Supplemental Financial Information

Supplemental Financial Information

Property and equipment, net, consists of the following (in thousands):

	April 2, 2019			January 1, 2019
Leasehold improvements	$	197,812		$	197,571
Furniture, fixtures and equipment	122,939			121,479
Construction in progress	5,501			3,620
	326,252			322,670
Accumulated depreciation and amortization	(187,871		)	(183,896		)
	$	138,381		$	138,774

Accrued expenses and other current liabilities consist of the following (in thousands):

	April 2, 2019		January 1, 2019
Gift card liability	$	1,906	$	3,284
Occupancy related - other	1,164		2,600
Utilities	1,491		1,582
Other accrued expenses	3,963		3,717
	$	8,524	$	11,183

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Long-Term Debt

3 Months Ended

Apr. 02, 2019

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

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 April 2, 2019, the Company had $49.3 million of indebtedness (excluding $1.5 million of unamortized debt issuance costs) and $3.2 million of letters of credit outstanding under the 2018 Credit Facility. The term loan requires principal payments of $156,250 per quarter 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 April 2, 2019 are as follows (in thousands):

Year 1	$	750
Year 2	1,500
Year 3	2,125
Year 4	44,959
Total	$	49,334

The Company’s outstanding indebtedness bore interest at rates between 5.59% to 7.25% during the first quarter of 2019.

Upon execution of the 2018 Credit Facility, the Company repaid in full its outstanding indebtedness under its existing credit facility using funds drawn on its 2018 Credit Facility. Upon repayment, the existing credit facility and all related agreements were terminated.

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 April 2, 2019.

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Leases

3 Months Ended

Apr. 02, 2019

Leases [Abstract]

Leases

Leases

The Company leases restaurant facilities, office space and certain equipment that expire on various dates through September 2034. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of five to 15 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The Company’s leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Supplemental balance sheet information related to leases is as follows (in thousands):

Classification		April 2, 2019
Assets
Operating	Operating lease assets, net	$	218,311
Finance	Finance lease assets, net (1)	1,057
Total leased assets		$	219,368
Liabilities
Current lease liabilities
Operating	Current operating lease liabilities	$	21,528
Finance	Current finance lease liabilities (2)	811
Long-term lease liabilities
Operating	Long-term operating lease liabilities	237,341
Finance	Long-term finance lease liabilities (2)	271
Total lease liabilities		$	259,951

_____________________

(1) The finance lease assets are included in property and equipment, net in the Consolidated Balance Sheets.

(2) The current portion of the finance lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in other long-term liabilities in the Consolidated Balance Sheets.

The components of lease costs are as follows (in thousands):

Classification		April 2, 2019
Operating lease cost	Occupancy, other restaurant operating costs, and general and administrative expenses	$	10,144
Finance lease cost
Amortization of lease assets	Depreciation and amortization	171
Interest on lease liabilities	Interest expense, net	20
		10,335
Sublease income	Franchising royalties and fees, and other	(112		)
Total lease cost, net		$	10,223

Future minimum lease payments required under existing leases as of April 2, 2019 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
Remainder of 2019	$	32,178	$	497	$	32,675
2020	42,686		471		43,157
2021	42,188		151		42,339
2022	42,024		23		42,047
2023	40,695		14		40,709
Thereafter	182,453		9		182,462
Total lease payments	382,224		1,165		383,389
Less: Imputed interest	123,355		83		123,438
Present value of lease liabilities	$	258,869	$	1,082	$	259,951

Operating lease payments include $92.3 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $10.7 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease term and discount rate for the first quarter ended April 2, 2019 are as follows:

	April 2, 2019
Weighted average remaining lease term (years):
Operating	9.4
Finance	2.2
Weighted average discount rate:
Operating	8.66	%
Finance	7.11	%

Supplemental disclosures of cash flow information related to leases for the first quarter ended April 2, 2019 are as follows (in thousands):

	April 2, 2019
Cash paid for lease liabilities:
Operating leases	$	10,693
Finance leases	217
	$	10,910
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	3,161
Finance leases	50
	$	3,211

Leases

Leases

The Company leases restaurant facilities, office space and certain equipment that expire on various dates through September 2034. Lease terms for restaurants in traditional shopping centers generally include a base term of 10 years, with options to extend these leases for additional periods of five to 15 years. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

The Company’s leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

Some of the Company’s leases include rent escalations based on inflation indexes and fair market value adjustments. Certain leases contain contingent rental provisions that include a fixed base rent plus an additional percentage of the restaurant’s sales in excess of stipulated amounts. Operating lease liabilities are calculated using the prevailing index or rate at lease commencement. Subsequent escalations in the index or rate and contingent rental payments are recognized as variable lease expenses. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company elected the practical expedient to account for lease and non-lease components as a single component for substantially all lease types.

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Supplemental balance sheet information related to leases is as follows (in thousands):

Classification		April 2, 2019
Assets
Operating	Operating lease assets, net	$	218,311
Finance	Finance lease assets, net (1)	1,057
Total leased assets		$	219,368
Liabilities
Current lease liabilities
Operating	Current operating lease liabilities	$	21,528
Finance	Current finance lease liabilities (2)	811
Long-term lease liabilities
Operating	Long-term operating lease liabilities	237,341
Finance	Long-term finance lease liabilities (2)	271
Total lease liabilities		$	259,951

_____________________

(1) The finance lease assets are included in property and equipment, net in the Consolidated Balance Sheets.

(2) The current portion of the finance lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in other long-term liabilities in the Consolidated Balance Sheets.

The components of lease costs are as follows (in thousands):

Classification		April 2, 2019
Operating lease cost	Occupancy, other restaurant operating costs, and general and administrative expenses	$	10,144
Finance lease cost
Amortization of lease assets	Depreciation and amortization	171
Interest on lease liabilities	Interest expense, net	20
		10,335
Sublease income	Franchising royalties and fees, and other	(112		)
Total lease cost, net		$	10,223

Future minimum lease payments required under existing leases as of April 2, 2019 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
Remainder of 2019	$	32,178	$	497	$	32,675
2020	42,686		471		43,157
2021	42,188		151		42,339
2022	42,024		23		42,047
2023	40,695		14		40,709
Thereafter	182,453		9		182,462
Total lease payments	382,224		1,165		383,389
Less: Imputed interest	123,355		83		123,438
Present value of lease liabilities	$	258,869	$	1,082	$	259,951

Operating lease payments include $92.3 million related to options to extend lease terms that are reasonably certain of being exercised and exclude $10.7 million of legally binding minimum lease payments for leases signed but not yet commenced.

Lease term and discount rate for the first quarter ended April 2, 2019 are as follows:

	April 2, 2019
Weighted average remaining lease term (years):
Operating	9.4
Finance	2.2
Weighted average discount rate:
Operating	8.66	%
Finance	7.11	%

Supplemental disclosures of cash flow information related to leases for the first quarter ended April 2, 2019 are as follows (in thousands):

	April 2, 2019
Cash paid for lease liabilities:
Operating leases	$	10,693
Finance leases	217
	$	10,910
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	3,161
Finance leases	50
	$	3,211

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Fair Value Measurements

3 Months Ended

Apr. 02, 2019

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 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 borrowings is measured using Level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Assets recognized or disclosed at fair value in the consolidated financial statements on a non-recurring basis include items such as leasehold improvements, property and equipment, operating lease assets, goodwill, and other intangible assets. These assets are measured at fair value if determined to be impaired or when acquired.

Adjustments to the fair value of assets measured at fair value on a non-recurring basis as of April 2, 2019 and April 3, 2018 are discussed in Note 7, Restaurant Impairments, Closure Costs and Asset Disposals.

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Income Taxes

3 Months Ended

Apr. 02, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents the Company’s provision (benefit) for income taxes (in thousands):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Provision (benefit) for income taxes	$	—		$	(241	)
Effective tax rate	—		%	6.3		%

The effective tax rate for the first quarter of 2019 reflects the impact of the previously recorded valuation allowance. For the remainder of fiscal 2019, the Company does not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. The Company will maintain the 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. The effective tax rate for the first quarter of 2018 reflected changes made by the Tax Cuts and Jobs Act (“Tax Act”), which was signed into law in December 2017.

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Stock-Based Compensation

3 Months Ended

Apr. 02, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Company’s Stock Incentive Plan (the “Plan”), as amended and restated in May of 2013, authorizes the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and incentive bonuses to employees, officers, non-employee directors and other service providers. As of April 2, 2019, approximately 3.5 million share-based awards were available to be granted under the Plan.

The following table shows total stock-based compensation expense (in thousands):

	Fiscal Quarter Ended
	April 2, 2019		April 3, 2018
Stock-based compensation expense	$	726	$	580
Capitalized stock-based compensation expense	$	11	$	12

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Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals

3 Months Ended

Apr. 02, 2019

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):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Restaurant impairments (1)	$	189		$	598
Closure costs (1)	(39		)	554
Loss on disposal of assets and other	270			428
	$	420		$	1,580

_____________________________

(1) Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed.

During the first quarter of 2019, there were no restaurants identified as impaired, compared to one restaurant impairment during the first quarter of 2018. Both periods include ongoing equipment costs for restaurants previously impaired. 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.

Closure costs in the first quarter of 2019 were comprised of a $0.3 million gain primarily relating to changes in the Company’s assessment of remaining operating lease terms, offset by $0.3 million of ongoing costs related to restaurants closed in previous years. The first quarter of 2018 included $0.6 million related to the ongoing costs of restaurants closed in previous years. These ongoing costs include adjustments to the liabilities to landlords as lease terminations occur.

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

3 Months Ended

Apr. 02, 2019

Earnings Per Share [Abstract]

Loss Per Share

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):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Net loss	$	(1,851	)	$	(3,575	)
Shares:
Basic weighted average shares outstanding	43,933,235			41,128,473
Effect of dilutive securities	—			—
Diluted weighted average shares outstanding	43,933,235			41,128,473
Loss per share:
Basic loss per share	$	(0.04	)	$	(0.09	)
Diluted loss per share	$	(0.04	)	$	(0.09	)

The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. Potential common shares are excluded from the computation of diluted earnings per share when the effect would be anti-dilutive. The shares issuable on the vesting or exercise of share-based awards or exercise of outstanding warrants that were excluded from the calculation of diluted loss per share because the effect of their inclusion would have been anti-dilutive totaled 3,245,418 and 3,106,710 for the first quarter of 2019 and 2018, respectively.

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Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows

3 Months Ended

Apr. 02, 2019

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 first quarter ended April 2, 2019 and April 3, 2018 (in thousands):

	April 2, 2019			April 3, 2018
Interest paid (net of amounts capitalized)	$	713		$	1,315
Income taxes paid	6			29
Changes in purchases of property and equipment accrued in accounts payable, net	(68		)	(1,753		)

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Revenue Recognition

3 Months Ended

Apr. 02, 2019

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

Revenue

Revenue consists of sales from restaurant operations, franchise royalties and fees, and sublease income. 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.

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 9% of gift cards will not be redeemed and recognizes gift card breakage ratably over the estimated redemption period of the gift card, which is approximately 24 months. Gift card liability balances are typically highest at the end of each calendar year following increased gift card purchases during the holiday season.

As of April 2, 2019 and January 1, 2019, the current portion of the gift card liability, $1.9 million and $3.3 million, respectively, is included in accrued expenses and other current liabilities, and the long-term portion, $0.7 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 was $1.8 million during both the first quarters of 2019 and 2018.

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 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 are recognized as revenue over the term of each respective franchise agreement, which is typically 20 years.

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Commitments and Contingencies	3 Months Ended
	Apr. 02, 2019
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and ContingenciesIn 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 April 2, 2019. 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.

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Business Summary and Basis of Presentation (Policies)

3 Months Ended

Apr. 02, 2019

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 April 2, 2019, the Company had 395 company-owned restaurants and 64 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 1, 2019 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 1, 2019.

Fiscal year

Fiscal YearThe Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. 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. Fiscal year 2019, which ends on December 31, 2019, and fiscal year 2018, which ended on January 1, 2019, both contain 52 weeks. The Company’s fiscal quarter that ended April 2, 2019 is referred to as the first quarter of 2019, and the fiscal quarter ended April 3, 2018 is referred to as the first quarter of 2018.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a material impact on the Company’s financial position or results of operations and cash flows.

Recently Adopted Accounting Pronouncements

On January 2, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842),” along with related clarifications and improvements. This pronouncement requires a lessee to recognize a liability for lease obligations, which represents the discounted obligation to make future lease payments, and a corresponding right-of-use asset on the balance sheet. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. The Company elected the alternative transition method to apply the standard as of the beginning of the period of adoption; therefore, the Company has not applied the standard to the comparative periods presented on its condensed consolidated financial statements.

The adoption of this lease guidance did have a material impact on the Company’s Consolidated Balance Sheets by materially increasing its non-current assets and current and non-current liabilities due to the recognition of the right-of-use assets and related lease liabilities primarily related to the Company’s restaurant operating leases and corporate office space. Upon adoption, the right-of-use assets were based upon the operating lease liabilities adjusted for prepaid and deferred rent, liabilities associated with lease termination costs and impairment of right-of-use assets. The impairment of right-of-use assets upon adoption was recognized in retained earnings as of January 2, 2019.

The adoption of the standard did not have a material impact on the Company’s Condensed Consolidated Statements of Operations in the first quarter of 2019. The adoption also included the enhancement of the Company’s disclosures related to leases. See disclosure in Note 9, Leases.

The impact on the Condensed Consolidated Balance Sheet on the date of adoption was as follows:

	January 1, 2019			Adjustments Due to the Adoption of Topic 842 (unaudited)			January 2, 2019 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,655		$	—		$	4,655
Accounts receivable	2,391			225			2,616
Inventories	9,646			—			9,646
Prepaid expenses and other assets	6,474			(3,243		)	3,231
Income tax receivable	185			—			185
Total current assets	23,351			(3,018		)	20,333
Property and equipment, net	138,774			844			139,618
Operating lease assets, net	—			219,883			219,883
Goodwill	6,400			—			6,400
Intangibles, net	1,291			(67		)	1,224
Other assets, net	2,216			—			2,216
Total long-term assets	148,681			220,660			369,341
Total assets	$	172,032		$	217,642		$	389,674
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,854		$	—		$	7,854
Accrued payroll and benefits	13,391			—			13,391
Accrued expenses and other current liabilities	11,183			(553		)	10,630
Current operating lease liabilities	—			—			—
Current portion of long-term debt	719			—			719
Total current liabilities	33,147			(553		)	32,594
Long-term debt, net	44,183			—			44,183
Long-term operating lease liabilities, net	—			260,931			260,931
Deferred rent	37,334			(37,186		)	148
Deferred tax liabilities, net	133			—			133
Other long-term liabilities	4,554			442			4,996
Total liabilities	119,351			223,634			342,985
Stockholders’ equity:
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of January 1, 2019; no shares issued or outstanding	—			—			—
Common stock—$0.01 par value, 180,000,000 shares authorized as of January 1, 2019; 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019	464			—			464
Treasury stock, at cost, 2,423,871 shares as of January 1, 2019	(35,000		)	—			(35,000		)
Additional paid-in capital	198,352			—			198,352
Accumulated deficit	(111,135		)	(5,992		)	(117,127		)
Total stockholders’ equity	52,681			(5,992		)	46,689
Total liabilities and stockholders’ equity	$	172,032		$	217,642		$	389,674

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Business Summary and Basis of Presentation (Tables)

3 Months Ended

Apr. 02, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

The impact on the Condensed Consolidated Balance Sheet on the date of adoption was as follows:

	January 1, 2019			Adjustments Due to the Adoption of Topic 842 (unaudited)			January 2, 2019 (unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,655		$	—		$	4,655
Accounts receivable	2,391			225			2,616
Inventories	9,646			—			9,646
Prepaid expenses and other assets	6,474			(3,243		)	3,231
Income tax receivable	185			—			185
Total current assets	23,351			(3,018		)	20,333
Property and equipment, net	138,774			844			139,618
Operating lease assets, net	—			219,883			219,883
Goodwill	6,400			—			6,400
Intangibles, net	1,291			(67		)	1,224
Other assets, net	2,216			—			2,216
Total long-term assets	148,681			220,660			369,341
Total assets	$	172,032		$	217,642		$	389,674
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	7,854		$	—		$	7,854
Accrued payroll and benefits	13,391			—			13,391
Accrued expenses and other current liabilities	11,183			(553		)	10,630
Current operating lease liabilities	—			—			—
Current portion of long-term debt	719			—			719
Total current liabilities	33,147			(553		)	32,594
Long-term debt, net	44,183			—			44,183
Long-term operating lease liabilities, net	—			260,931			260,931
Deferred rent	37,334			(37,186		)	148
Deferred tax liabilities, net	133			—			133
Other long-term liabilities	4,554			442			4,996
Total liabilities	119,351			223,634			342,985
Stockholders’ equity:
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of January 1, 2019; no shares issued or outstanding	—			—			—
Common stock—$0.01 par value, 180,000,000 shares authorized as of January 1, 2019; 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019	464			—			464
Treasury stock, at cost, 2,423,871 shares as of January 1, 2019	(35,000		)	—			(35,000		)
Additional paid-in capital	198,352			—			198,352
Accumulated deficit	(111,135		)	(5,992		)	(117,127		)
Total stockholders’ equity	52,681			(5,992		)	46,689
Total liabilities and stockholders’ equity	$	172,032		$	217,642		$	389,674

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Supplemental Financial Information (Tables)

3 Months Ended

Apr. 02, 2019

Supplemental Financial Information [Abstract]

Schedule of Property and Equipment

Property and equipment, net, consists of the following (in thousands):

	April 2, 2019			January 1, 2019
Leasehold improvements	$	197,812		$	197,571
Furniture, fixtures and equipment	122,939			121,479
Construction in progress	5,501			3,620
	326,252			322,670
Accumulated depreciation and amortization	(187,871		)	(183,896		)
	$	138,381		$	138,774

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	April 2, 2019		January 1, 2019
Gift card liability	$	1,906	$	3,284
Occupancy related - other	1,164		2,600
Utilities	1,491		1,582
Other accrued expenses	3,963		3,717
	$	8,524	$	11,183

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Long-Term Debt (Tables)

3 Months Ended

Apr. 02, 2019

Debt Disclosure [Abstract]

Schedule of Maturities of Long-term Debt

Aggregate maturities for debt outstanding as of April 2, 2019 are as follows (in thousands):

Year 1	$	750
Year 2	1,500
Year 3	2,125
Year 4	44,959
Total	$	49,334

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Leases (Tables)

3 Months Ended

Apr. 02, 2019

Leases [Abstract]

Lease, Cost

Supplemental balance sheet information related to leases is as follows (in thousands):

Classification		April 2, 2019
Assets
Operating	Operating lease assets, net	$	218,311
Finance	Finance lease assets, net (1)	1,057
Total leased assets		$	219,368
Liabilities
Current lease liabilities
Operating	Current operating lease liabilities	$	21,528
Finance	Current finance lease liabilities (2)	811
Long-term lease liabilities
Operating	Long-term operating lease liabilities	237,341
Finance	Long-term finance lease liabilities (2)	271
Total lease liabilities		$	259,951

_____________________

(1) The finance lease assets are included in property and equipment, net in the Consolidated Balance Sheets.

(2) The current portion of the finance lease liabilities is included in accrued expenses and other current liabilities, and the long-term portion is included in other long-term liabilities in the Consolidated Balance Sheets.

The components of lease costs are as follows (in thousands):

Classification		April 2, 2019
Operating lease cost	Occupancy, other restaurant operating costs, and general and administrative expenses	$	10,144
Finance lease cost
Amortization of lease assets	Depreciation and amortization	171
Interest on lease liabilities	Interest expense, net	20
		10,335
Sublease income	Franchising royalties and fees, and other	(112		)
Total lease cost, net		$	10,223

Lease term and discount rate for the first quarter ended April 2, 2019 are as follows:

	April 2, 2019
Weighted average remaining lease term (years):
Operating	9.4
Finance	2.2
Weighted average discount rate:
Operating	8.66	%
Finance	7.11	%

Supplemental disclosures of cash flow information related to leases for the first quarter ended April 2, 2019 are as follows (in thousands):

	April 2, 2019
Cash paid for lease liabilities:
Operating leases	$	10,693
Finance leases	217
	$	10,910
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	3,161
Finance leases	50
	$	3,211

Finance Lease, Liability, Maturity

Future minimum lease payments required under existing leases as of April 2, 2019 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
Remainder of 2019	$	32,178	$	497	$	32,675
2020	42,686		471		43,157
2021	42,188		151		42,339
2022	42,024		23		42,047
2023	40,695		14		40,709
Thereafter	182,453		9		182,462
Total lease payments	382,224		1,165		383,389
Less: Imputed interest	123,355		83		123,438
Present value of lease liabilities	$	258,869	$	1,082	$	259,951

Lessee, Operating Lease, Liability, Maturity

Future minimum lease payments required under existing leases as of April 2, 2019 are as follows (in thousands):

	Operating Leases		Finance Leases		Total
Remainder of 2019	$	32,178	$	497	$	32,675
2020	42,686		471		43,157
2021	42,188		151		42,339
2022	42,024		23		42,047
2023	40,695		14		40,709
Thereafter	182,453		9		182,462
Total lease payments	382,224		1,165		383,389
Less: Imputed interest	123,355		83		123,438
Present value of lease liabilities	$	258,869	$	1,082	$	259,951

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Income Taxes (Tables)

3 Months Ended

Apr. 02, 2019

Income Tax Disclosure [Abstract]

Schedule of Provision for Income Taxes

The following table presents the Company’s provision (benefit) for income taxes (in thousands):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Provision (benefit) for income taxes	$	—		$	(241	)
Effective tax rate	—		%	6.3		%

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Stock-Based Compensation (Tables)

3 Months Ended

Apr. 02, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based compensation expense

The following table shows total stock-based compensation expense (in thousands):

	Fiscal Quarter Ended
	April 2, 2019		April 3, 2018
Stock-based compensation expense	$	726	$	580
Capitalized stock-based compensation expense	$	11	$	12

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Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals (Tables)

3 Months Ended

Apr. 02, 2019

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):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Restaurant impairments (1)	$	189		$	598
Closure costs (1)	(39		)	554
Loss on disposal of assets and other	270			428
	$	420		$	1,580

_____________________________

(1) Restaurant impairments and closure costs in all periods presented above include amounts related to restaurants previously impaired or closed.

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Earnings (Loss) Per Share (Tables)

3 Months Ended

Apr. 02, 2019

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):

	Fiscal Quarter Ended
	April 2, 2019			April 3, 2018
Net loss	$	(1,851	)	$	(3,575	)
Shares:
Basic weighted average shares outstanding	43,933,235			41,128,473
Effect of dilutive securities	—			—
Diluted weighted average shares outstanding	43,933,235			41,128,473
Loss per share:
Basic loss per share	$	(0.04	)	$	(0.09	)
Diluted loss per share	$	(0.04	)	$	(0.09	)

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Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows (Tables)

3 Months Ended

Apr. 02, 2019

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 first quarter ended April 2, 2019 and April 3, 2018 (in thousands):

	April 2, 2019			April 3, 2018
Interest paid (net of amounts capitalized)	$	713		$	1,315
Income taxes paid	6			29
Changes in purchases of property and equipment accrued in accounts payable, net	(68		)	(1,753		)

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Business Summary and Basis of Presentation - Narrative (Details)	3 Months Ended
	Apr. 02, 2019 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	395
Franchise [Member]
Franchisor Disclosure [Line Items]
Number of restaurants | restaurant	64

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Business Summary and Basis of Presentation - New Accounting Pronouncements (Details) - USD ($) $ in Thousands	Apr. 02, 2019	Jan. 02, 2019	Jan. 01, 2019	Apr. 03, 2018	Jan. 02, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash and cash equivalents	$ 1,800	$ 4,655	$ 4,655	$ 2,624	$ 3,361
Accounts receivable	2,254	2,616	2,391
Inventories	9,870	9,646	9,646
Prepaid expenses and other assets	3,066	3,231	6,474
Income tax receivable	191	185	185
Total current assets	17,181	20,333	23,351
Property and equipment, net	138,381	139,618	138,774
Operating lease assets, net	218,311	219,883	0
Goodwill	7,154	6,400	6,400
Goodwill	1,179	1,224	1,291
Other assets, net	2,360	2,216	2,216
Total long-term assets	367,385	369,341	148,681
Total assets	384,566	389,674	172,032
Accounts payable	10,563	7,854	7,854
Accrued payroll and benefits	7,833	13,391	13,391
Accrued expenses and other current liabilities	8,524	10,630	11,183
Current operating lease liabilities	21,528	0	0
Current portion of long-term debt	750	719	719
Total current liabilities	49,198	32,594	33,147
Long-term debt, net	47,035	44,183	44,183
Long-term operating lease liabilities, net	237,341	260,931	0
Deferred rent	0	148	37,334
Deferred tax liabilities, net	133	133	133
Other long-term liabilities	5,263	4,996	4,554
Total liabilities	338,970	342,985	119,351
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of January 1, 2019; no shares issued or outstanding	0	0	0
Common stock—$0.01 par value, 180,000,000 shares authorized as of January 1, 2019; 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019	464	464	464
Treasury stock, at cost, 2,423,871 shares as of January 1, 2019	(35,000)	(35,000)	(35,000)
Additional paid-in capital	199,110	198,352	198,352
Accumulated deficit	(118,978)	(117,127)	(111,135)
Total stockholders’ equity	45,596	46,689	52,681	$ 31,407	$ 35,861
Total liabilities and stockholders’ equity	$ 384,566	389,674	$ 172,032
Accounting Standards Update 2016-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cash and cash equivalents		0
Accounts receivable		225
Inventories		0
Prepaid expenses and other assets		(3,243)
Income tax receivable		0
Total current assets		(3,018)
Property and equipment, net		844
Operating lease assets, net		219,883
Goodwill		0
Goodwill		(67)
Other assets, net		0
Total long-term assets		220,660
Total assets		217,642
Accounts payable		0
Accrued payroll and benefits		0
Accrued expenses and other current liabilities		(553)
Current operating lease liabilities		0
Current portion of long-term debt		0
Total current liabilities		(553)
Long-term debt, net		0
Long-term operating lease liabilities, net		260,931
Deferred rent		(37,186)
Deferred tax liabilities, net		0
Other long-term liabilities		442
Total liabilities		223,634
Preferred stock—$0.01 par value, 1,000,000 shares authorized and undesignated as of January 1, 2019; no shares issued or outstanding		0
Common stock—$0.01 par value, 180,000,000 shares authorized as of January 1, 2019; 46,353,309 issued and 43,929,438 outstanding as of January 1, 2019		0
Treasury stock, at cost, 2,423,871 shares as of January 1, 2019		0
Additional paid-in capital		0
Accumulated deficit		(5,992)
Total stockholders’ equity		(5,992)
Total liabilities and stockholders’ equity		$ 217,642

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Supplemental Financial Information (Details) - USD ($) $ in Thousands	Apr. 02, 2019	Jan. 02, 2019	Jan. 01, 2019
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 326,252		$ 322,670
Accumulated depreciation and amortization	(187,871)		(183,896)
Property and equipment, net	138,381	$ 139,618	138,774
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	197,812		197,571
Furniture, Fixtures, and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	122,939		121,479
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 5,501		$ 3,620

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Supplemental Financial Information - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Apr. 02, 2019	Jan. 02, 2019	Jan. 01, 2019
Supplemental Financial Information [Abstract]
Gift card liability	$ 1,906		$ 3,284
Occupancy related	1,164		2,600
Utilities	1,491		1,582
Other accrued expenses	3,963		3,717
Accrued liabilities, current	$ 8,524	$ 10,630	$ 11,183

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Long-Term Debt - Narrative (Details) - USD ($)		3 Months Ended
	May 09, 2018	Apr. 02, 2019	Jun. 28, 2022	Mar. 30, 2021	Mar. 31, 2020
Line of Credit Facility [Line Items]
Amount outstanding		$ 49,300,000
Unamortized debt issuance costs		1,500,000
Letters of credit outstanding		3,200,000
Principal repayments through the first quarter of 2019		750,000
Principal repayments through the first quarter of 2020		1,500,000
Principal repayments through the first quarter of 2021		2,125,000
Principal repayments through the first quarter of 2022		$ 44,959,000
Minimum
Line of Credit Facility [Line Items]
Interest rate		5.59%
Maximum [Member]
Line of Credit Facility [Line Items]
Interest rate		7.25%
2018 Term Loan Facility | Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 25,000,000.0
2018 Credit Facility
Line of Credit Facility [Line Items]
Principal repayments through the first quarter of 2019		$ 156,250
2018 Credit Facility | Minimum
Line of Credit Facility [Line Items]
Commitment fee percentage	0.30%
2018 Credit Facility | Maximum [Member]
Line of Credit Facility [Line Items]
Commitment fee percentage	0.50%
2018 Credit Facility | LIBOR | Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate	2.25%
2018 Credit Facility | LIBOR | Maximum [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	3.25%
2018 Credit Facility | Base Rate | Minimum
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.25%
2018 Credit Facility | Base Rate | Maximum [Member]
Line of Credit Facility [Line Items]
Basis spread on variable rate	2.25%
2018 Credit Facility | Federal Funds Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	0.50%
2018 Credit Facility | Prime Rate
Line of Credit Facility [Line Items]
Basis spread on variable rate	1.00%
2018 Credit Facility | Revolving Credit Facility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 65,000,000.0
2018 Credit Facility | Letter of Credit
Line of Credit Facility [Line Items]
Maximum borrowing capacity	75,000,000.0
Two Thousand and Eighteen Credit Subfacility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	15,000,000.0
Two Thousand and Eighteen Swingline Subfacility
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 10,000,000.0
Scenario, Forecast
Line of Credit Facility [Line Items]
Principal repayments through the first quarter of 2020					$ 187,500
Principal repayments through the first quarter of 2021				$ 375,000
Principal repayments through the first quarter of 2022			$ 531,250

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Long-Term Debt - Schedule of Maturities of Long-term Debt (Details) $ in Thousands	Apr. 02, 2019 USD ($)
Debt Disclosure [Abstract]
Year 1 (payments through third quarter of 2019)	$ 750
2020	1,500
2021	2,125
2022	44,959
Total	$ 49,334

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Leases - Narrative (Details) - USD ($) $ in Millions	Apr. 02, 2019	Apr. 03, 2018
Leases [Abstract]
Term of contract		10 years
Renewal term		15 years
Option to extend lease term	$ 92.3
Minimum lease payments signed but not yet commenced	$ 10.7

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Leases - Schedule of Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Jan. 02, 2019	Jan. 01, 2019	Apr. 03, 2018
Leases [Abstract]
Operating Lease, Payments	$ 10,693
Assets
Operating lease assets, net	218,311	$ 219,883	$ 0
Finance lease assets, net	1,057
Total Leased Asset	219,368
Liabilities [Abstract]
Current operating lease liabilities	21,528	0	0
Current finance lease liabilities	811
Liabilities, Noncurrent [Abstract]
Long-term operating lease liabilities, net	237,341	$ 260,931	$ 0
Long-term finance lease liabilities	271
Present value of lease liabilities	259,951
Operating Lease Cost [Abstract]
Operating lease cost	10,144
Finance lease cost
Amortization of lease assets	171
Interest on lease liabilities	20
Operating And Finance Lease Cost	10,335
Sublease income	(112)
Total lease cost, net	$ 10,223
Operating Lease, Weighted Average Remaining Lease Term				9 years 4 months 24 days
Finance Lease, Weighted Average Remaining Lease Term				2 years 2 months 12 days
Operating Lease, Weighted Average Discount Rate, Percent	8.66%
Finance Lease, Weighted Average Discount Rate, Percent	7.11%
Finance Lease, Principal Payments	$ 217
Cash Paid For Operating And Finance Lease Liabilities	10,910
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability	3,161
Right-of-Use Asset Obtained in Exchange for Finance Lease Liability	50
Right-of-Use Asset Obtained in Exchange for Operating And Finance Lease Liability	$ 3,211

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Leases - Schedule of Lease Maturity (Details) $ in Thousands	Apr. 02, 2019 USD ($)
Operating Lease Liabilities, Payments Due [Abstract]
Remainder of 2019	$ 32,178
2020	42,686
2021	42,188
2022	42,024
2023	40,695
Thereafter	182,453
Total lease payments	382,224
Less: Imputed interest	123,355
Present value of lease liabilities	258,869
Finance Lease Liabilities, Payments, Due [Abstract]
Remainder of 2019	497
2020	471
2021	151
2022	23
2023	14
Thereafter	9
Total lease payments	1,165
Less: Imputed interest	83
Present value of lease liabilities	1,082
Operating And Finance Lease Liabilities Payments Due [Abstract]
Remainder of 2019	32,675
2020	43,157
2021	42,339
2022	42,047
2023	40,709
Thereafter	182,462
Total lease payments	383,389
Less: Imputed interest	123,438
Present value of lease liabilities	$ 259,951

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018
Income Tax Disclosure [Abstract]
(Benefit) provision for income taxes	$ 0	$ (241)
Effective tax rate	0.00%	6.30%

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Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018	May 31, 2013
IPO [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Maximum shares reserved for issuance			3,500,000
Employee Stock Option [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Allocated Share-based Compensation Expense	$ 726	$ 580
Capitalized stock based compensation expense	$ 11	$ 12

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Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals (Details) $ in Thousands	3 Months Ended
	Apr. 02, 2019 USD ($) restaurant	Apr. 03, 2018 USD ($) restaurant
Property, Plant and Equipment Impairment or Disposal [Abstract]
Restaurant impairments	$ 189	$ 598
Closure costs	(39)	554
Loss on disposal of assets and other	(270)	(428)
Asset Disposals, Closure Costs and Restaurant Impairments	$ 420	$ 1,580
Number of restaurants impaired during the comparable periods | restaurant	0	1
Closure costs relating to assessment of operating lease terms	$ (300)
Impairment closure costs and other	300	$ 600
Gain on disposal	$ 400

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Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018	Jan. 01, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Document Period End Date	Apr. 02, 2019
Net Income (Loss) Available to Common Stockholders, Basic	$ (1,851)	$ (3,575)
Net loss	$ (1,851)	$ (3,575)
Shares:
Basic weighted average shares outstanding (in shares)	43,933,235	41,128,473
Effect of dilutive securities (in shares)	0	0
Diluted weighted average number of shares outstanding (in shares)	43,933,235	41,128,473
Earnings (loss) per share:
Basic loss per share (USD per share)	$ (0.04)	$ (0.09)
Diluted loss per share (USD per share)	$ (0.04)	$ (0.09)
Preferred stock, shares issued (in shares)	0		0
Antidilutive securities excluded from computation of earnings per share	3,245,418	3,106,710

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Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018
Class of Stock [Line Items]
Interest paid (net of amounts capitalized)	$ 713	$ 1,315
Income taxes paid (refunded)	6	29
Changes in purchases of property and equipment accrued in accounts payable, net	$ 68	$ 1,753

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Revenue Recognition (Details) - USD ($) $ in Thousands	3 Months Ended
	Apr. 02, 2019	Apr. 03, 2018	Jan. 02, 2019	Jan. 01, 2019
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Expected unredeemed percent	9.00%
Estimated redemption period	24 months
Gift card liability	$ 1,906			$ 3,284
Gift card breakage	$ 1,800	$ 1,800
Period in which initial fees received from franchisees will be recognized as revenue	20 years
Retained earnings	$ (118,978)		$ (117,127)	(111,135)
Accrued Expenses and Other Current Liabilities
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Gift card liability	1,900			3,300
Other Long-term Liabilities
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Gift card liability, non-current	$ 700			$ 400