Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 28, 2014 | Oct. 31, 2014 | |
Document And Entity Information [Abstract] | ' | ' |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 28-Sep-14 | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
Trading Symbol | 'PBPB | ' |
Entity Registrant Name | 'Potbelly Corporation | ' |
Entity Central Index Key | '0001195734 | ' |
Current Fiscal Year End Date | '--12-28 | ' |
Entity Filer Category | 'Non-accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 28,965,043 |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (Unaudited) (USD $) | Sep. 28, 2014 | Dec. 29, 2013 |
In Thousands, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $69,403 | $69,579 |
Accounts receivable, net of allowances of $26 and $6 as of September 28, 2014 and December 29, 2013, respectively | 4,563 | 2,991 |
Inventories | 2,447 | 2,263 |
Prepaid expenses and other current assets | 8,876 | 6,965 |
Total current assets | 85,289 | 81,798 |
Property and equipment, net | 83,401 | 78,983 |
Intangible assets, net | 3,404 | 3,404 |
Goodwill | 1,428 | 1,428 |
Deferred income taxes | 17,181 | 17,297 |
Deferred expenses, net and other assets | 3,147 | 3,170 |
Total assets | 193,850 | 186,080 |
Current liabilities | ' | ' |
Accounts payable | 3,317 | 2,078 |
Accrued expenses | 17,802 | 16,337 |
Accrued income taxes | 1,512 | 216 |
Current portion of long-term debt | 74 | 74 |
Total current liabilities | 22,705 | 18,705 |
Long-term debt, net of current portion | 955 | 1,018 |
Deferred rent and landlord allowances | 13,374 | 12,288 |
Other long-term liabilities | 717 | 796 |
Total liabilities | 37,751 | 32,807 |
Equity | ' | ' |
Common stock, $0.01 par value-authorized, 200,000,000 shares; outstanding 29,043,925 and 29,148,029 shares as of September 28, 2014, and December 29, 2013, respectively | 295 | 291 |
Warrants | 909 | 909 |
Additional paid-in-capital | 388,063 | 383,077 |
Treasury stock, held at cost, 471,290 and no shares as of September 28, 2014, and December 29, 2013, respectively | -5,797 | 0 |
Accumulated deficit | -227,576 | -231,232 |
Total stockholders' equity | 155,894 | 153,045 |
Non-controlling interest | 205 | 228 |
Total equity | 156,099 | 153,273 |
Total liabilities and equity | $193,850 | $186,080 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 28, 2014 | Dec. 29, 2013 |
In Thousands, except Share data, unless otherwise specified | ||
Condensed Consolidated Balance Sheet [Abstract] | ' | ' |
Allowances on accounts receivable | $26 | $6 |
Common stock, par value | $0.01 | $0.01 |
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, outstanding | 29,043,925 | 29,148,029 |
Treasury stock, shares | 471,290 | 0 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Revenues | ' | ' | ' | ' |
Sandwich shop sales, net | $84,340 | $77,747 | $241,131 | $224,214 |
Franchise royalties and fees | 335 | 274 | 1,045 | 737 |
Total revenues | 84,675 | 78,021 | 242,176 | 224,951 |
Sandwich shop operating expenses | ' | ' | ' | ' |
Cost of goods sold, excluding depreciation | 24,044 | 23,014 | 69,066 | 65,767 |
Labor and related expenses | 23,772 | 21,223 | 68,637 | 62,217 |
Occupancy expenses | 10,467 | 9,295 | 30,629 | 26,826 |
Other operating expenses | 8,847 | 7,946 | 25,696 | 23,058 |
General and administrative expenses | 7,623 | 8,293 | 24,310 | 24,298 |
Depreciation expense | 5,039 | 4,460 | 14,540 | 13,284 |
Pre-opening costs | 314 | 364 | 839 | 1,083 |
Asset impairment and loss on disposal of property and equipment | 1,315 | 250 | 2,192 | 329 |
Total expenses | 81,421 | 74,845 | 235,909 | 216,862 |
Income from operations | 3,254 | 3,176 | 6,267 | 8,089 |
Interest expense | 42 | 97 | 124 | 330 |
Other expense | 0 | 0 | 0 | 2 |
Income before income taxes | 3,212 | 3,079 | 6,143 | 7,757 |
Income tax expense | 1,260 | 905 | 2,476 | 2,792 |
Net income | 1,952 | 2,174 | 3,667 | 4,965 |
Net income attributable to non-controlling interest | 5 | 9 | 11 | 24 |
Net income attributable to Potbelly Corporation | 1,947 | 2,165 | 3,656 | 4,941 |
Cash dividends declared | 0 | -49,854 | 0 | -49,854 |
Accretion of redeemable convertible preferred stock to maximum redemption value | 0 | -4,796 | 0 | -15,097 |
Net income (loss) attributable to common stockholders | $1,947 | ($52,485) | $3,656 | ($60,010) |
Net income (loss) per common share attributable to common stockholders: | ' | ' | ' | ' |
Basic | $0.07 | ($12.29) | $0.12 | ($14.12) |
Diluted | $0.06 | ($12.29) | $0.12 | ($14.12) |
Weighted average shares outstanding: | ' | ' | ' | ' |
Basic | 29,358,822 | 4,268,953 | 29,284,058 | 4,250,819 |
Diluted | 30,044,456 | 4,268,953 | 30,463,093 | 4,250,819 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Equity (Deficit) (Unaudited) (USD $) | Total | Series A [Member] | Series B [Member] | Series C [Member] | Series D [Member] | Series E [Member] | Series F [Member] | Redeemable Convertible Preferred Stock [Member] | Common Stock [Member] | Treasury Stock [Member] | Warrants [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Noncontrolling Interest [Member] |
In Thousands, except Share data | ||||||||||||||
Beginning Balance at Dec. 30, 2012 | ($168,728) | $52,796 | $46,983 | $23,715 | $18,319 | $79,861 | $28,669 | $250,343 | $42 | ' | $1,552 | ' | ($170,518) | $196 |
Beginning Balance, Common Shares at Dec. 30, 2012 | ' | ' | ' | ' | ' | ' | ' | ' | 4,233,977 | ' | ' | ' | ' | ' |
Beginning Balance, Preferred Shares at Dec. 30, 2012 | ' | 3,697,377 | 3,290,294 | 1,646,595 | 1,250,000 | 4,194,366 | 2,007,743 | 16,086,375 | ' | ' | ' | ' | ' | ' |
Net income | 4,965 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 4,941 | 24 |
Beneficial Conversion Charge. | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 50 | -50 | ' |
Exercise of stock warrants | 2 | ' | ' | ' | ' | ' | ' | ' | 2 | ' | -610 | ' | ' | ' |
Exercise of stock warrants, additional paid in capital | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 610 | ' | ' |
Exercise of stock warrants, Shares | ' | ' | ' | ' | ' | ' | ' | ' | 117,892 | ' | ' | ' | ' | ' |
Cash dividends declared | -49,854 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -49,854 | ' | ' |
Changes in redemption value of preferred stock | -15,097 | 3,582 | 3,188 | 1,609 | 1,251 | 3,523 | 1,944 | 15,097 | ' | ' | ' | 46,824 | -61,921 | ' |
Amortization of stock-based compensation | 2,370 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 2,370 | ' | ' |
Ending Balance at Sep. 29, 2013 | -226,342 | 56,378 | 50,171 | 25,324 | 19,570 | 83,384 | 30,613 | 265,440 | 44 | ' | 942 | ' | -227,548 | 220 |
Ending Balance, Common Shares at Sep. 29, 2013 | ' | ' | ' | ' | ' | ' | ' | ' | 4,351,869 | ' | ' | ' | ' | ' |
Ending Balance, Preferred Shares at Sep. 29, 2013 | ' | 3,697,377 | 3,290,294 | 1,646,595 | 1,250,000 | 4,194,366 | 2,007,743 | 16,086,375 | ' | ' | ' | ' | ' | ' |
Beginning Balance at Dec. 29, 2013 | 153,273 | ' | ' | ' | ' | ' | ' | ' | 291 | ' | 909 | 383,077 | -231,232 | 228 |
Beginning Balance, Common Shares at Dec. 29, 2013 | 29,148,029 | ' | ' | ' | ' | ' | ' | ' | 29,148,029 | ' | ' | ' | ' | ' |
Net income | 3,667 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 3,656 | 11 |
Issuance of unrestricted common stock | 432 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 432 | ' | ' |
Issuance of unrestricted common stock, Shares | 28,240 | ' | ' | ' | ' | ' | ' | ' | 28,240 | ' | ' | ' | ' | ' |
Exercise of stock options | 2,968 | ' | ' | ' | ' | ' | ' | ' | 4 | ' | ' | 2,964 | ' | ' |
Exercise of stock options, Shares | 339,000 | ' | ' | ' | ' | ' | ' | ' | 338,946 | ' | ' | ' | ' | ' |
Repurchases of common stock | -5,797 | ' | ' | ' | ' | ' | ' | ' | ' | -5,797 | ' | ' | ' | ' |
Cash dividends declared | 0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Repurchases of common stock, Shares | ' | ' | ' | ' | ' | ' | ' | ' | -471,290 | ' | ' | ' | ' | ' |
Distribution to non-controlling interest | -34 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | -34 |
Amortization of stock-based compensation | 1,590 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 1,590 | ' | ' |
Ending Balance at Sep. 28, 2014 | $156,099 | ' | ' | ' | ' | ' | ' | ' | $295 | ($5,797) | $909 | $388,063 | ($227,576) | $205 |
Ending Balance, Common Shares at Sep. 28, 2014 | 29,043,925 | ' | ' | ' | ' | ' | ' | ' | 29,043,925 | ' | ' | ' | ' | ' |
Condensed_Consolidated_Stateme2
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | 9 Months Ended | |
In Thousands, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: | ' | ' |
Net income | $3,667 | $4,965 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation | 14,540 | 13,284 |
Deferred income tax | 116 | 1,683 |
Deferred rent and landlord allowances | 1,086 | 258 |
Stock compensation expense | 2,022 | 2,370 |
Asset impairment and loss on disposal of property and equipment | 2,192 | 329 |
Amortization of debt issuance costs | 53 | 46 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable, net | -1,572 | -735 |
Inventories | -184 | -215 |
Prepaid expenses and other assets | -2,125 | -1,475 |
Accounts payable | 1,235 | 602 |
Accrued and other liabilities | 2,264 | 3,267 |
Net cash provided by operating activities | 23,294 | 24,379 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ' | ' |
Purchases of property and equipment | -20,544 | -21,265 |
Net cash (used in) investing activities | -20,544 | -21,265 |
CASH FLOWS FROM FINANCING ACTIVITIES | ' | ' |
Proceeds from exercise of Series F warrants | 0 | 2 |
Proceeds from exercise of stock options | 3,780 | 0 |
Payment of payroll taxes related to stock-based compensation awards | -812 | 0 |
Treasury stock repurchase | -5,797 | 0 |
Payment of costs associated with initial public offering | 0 | -533 |
Distribution to non-controlling interest | -34 | 0 |
Payments on note payable | -63 | -59 |
Net cash (used in) financing activities | -2,926 | -590 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | -176 | 2,524 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 69,579 | 22,595 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 69,403 | 25,119 |
Supplemental cash flow information: | ' | ' |
Income taxes paid | 867 | 727 |
Interest paid | 124 | 261 |
Supplemental non-cash investing and financing activities: | ' | ' |
Unpaid liability for purchases of property and equipment | 3,059 | 2,561 |
Accretion of redeemable convertible preferred stock to maximum redemption value | 0 | 15,097 |
Accrued dividend payable | $0 | $49,854 |
Organization_and_Other_Matters
Organization and Other Matters | 9 Months Ended |
Sep. 28, 2014 | |
Accounting Policies [Abstract] | ' |
Organization and Other Matters | ' |
(1) Organization and Other Matters | |
Business | |
Potbelly Corporation (the “Company” or “Potbelly”), through its wholly owned subsidiaries, operates Potbelly Sandwich Works sandwich shops in 23 states and the District of Columbia. As of September 28, 2014, the Company had 319 company-operated shops. During the 39 weeks ended September 28, 2014, the Company opened 23 new company-operated shops and closed no shops. | |
The Company also sells and administers franchises of new Potbelly Sandwich Works sandwich shops. The first domestic and international franchise locations administered by the Company opened during February 2011. As of September 28, 2014, 14 franchised shops were in operation domestically and 12 franchised shops were in operation internationally. During the 39 weeks ended September 28, 2014, the Company opened four franchised shops and closed one franchised shop. | |
Basis of Presentation | |
The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Potbelly Corporation and its subsidiaries and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2013. The unaudited condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly the Company’s financial position as of December 29, 2013 and September 28, 2014, its statement of operations for the 13 and 39 weeks ended September 29, 2013 and September 28, 2014 and its statement of cash flows for the 39 weeks ended September 29, 2013 and September 28, 2014 have been included. The consolidated statements of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year. | |
The Company does not have any components of other comprehensive income (loss) recorded within its consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements. | |
Principles of Consolidation | |
The unaudited condensed consolidated financial statements include the accounts of Potbelly Corporation; its wholly owned subsidiary, Potbelly Illinois, Inc. (“PII”); PII’s wholly owned subsidiaries, Potbelly Franchising, LLC, Potbelly Sandwich Works, LLC (“LLC”) and 16 of LLC’s wholly owned subsidiaries and the LLC’s two joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For the Company’s consolidated joint ventures, non-controlling interest represents the non-controlling partners’ share of the assets, liabilities and operations related to their respective joint venture investments. The Company has ownership interests ranging from 65-75% in these consolidated joint ventures. | |
Use of Estimates | |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, primarily related to long-lived assets, income taxes, stock-based compensation and common stock equity valuations, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Fiscal Year | |
The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar year. Approximately every five or six years a 53rd week is added. Fiscal 2013 and 2014 each consist of 52 weeks. The fiscal quarters ended September 29, 2013 and September 28, 2014 each consisted of 13 weeks. |
Fair_Value_Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 28, 2014 | |
Fair Value Disclosures [Abstract] | ' |
Fair Value Measurements | ' |
(2) Fair Value Measurements | |
The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate fair values due to the short maturities of these balances. | |
The Company assesses potential impairments to its long-lived assets, which includes property and equipment, whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Shop-level assets are grouped at the individual shop-level for the purpose of the impairment assessment. Recoverability of an asset is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset exceeds the fair value of the asset. The fair value of the shop assets was determined using the discounted future cash flow method of anticipated cash flows through the shop’s lease-end date using fair value measurement inputs classified as Level 3. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. After performing a periodic review of our shops during each quarter of 2014, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance of shop profitability. We performed an impairment analysis related to these shops and recorded impairment charges of $1.3 million and $2.1 million for the 13 and 39 weeks ended September 28, 2014, respectively, related to the excess of the carrying amounts recorded on our balance sheet over the identified shops’ estimated fair values. | |
In the third fiscal quarter of 2014, the Company established a non-qualified deferred compensation plan, “Potbelly Non-Qualified Deferred Compensation Plan,” which allows highly compensated employees to defer a portion of their base salary and variable compensation each plan year. The Company maintains a rabbi trust to fund obligations under the deferred compensation plan. Amounts in the rabbi trust are invested in mutual funds. The investments in the rabbi trust are designated as trading securities and carried at fair value. Fair market value of investments in the rabbi trust is measured using Level 1 inputs (quoted prices for identical assets in active markets). As of September 28, 2014, the fair value of the investments in the rabbi trust was $16 thousand, which is included in other assets in the condensed consolidated balance sheet. The Company records trading gains and losses in general and administrative expenses in the condensed consolidated statement of operations, along with the offsetting amount related to the increase or decrease in deferred compensation to reflect its exposure to liabilities for payment under the deferred plan. For the three months ended September 28, 2014, the Company recorded an immaterial amount of unrealized losses on investments held in the rabbi trust. |
Earnings_per_share
Earnings per share | 9 Months Ended | ||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Earnings per share | ' | ||||||||||||||||
(3) Earnings per share | |||||||||||||||||
Basic income (loss) per common share attributable to common stockholders is calculated using the weighted average number of common shares outstanding for the period. For the 13 and 39 weeks ended September 29, 2013, diluted (loss) per common share attributable to common stockholders was computed by dividing the (loss) allocated to common stockholders utilizing the two-class method by the weighted average number of fully diluted common shares outstanding. In periods with net income attributable to common stockholders, the Company’s redeemable convertible preferred stock were all considered participating securities requiring the two-class method to calculate basic and diluted earnings per share. However, in periods of a net (loss) attributable to common stockholders, the redeemable convertible preferred stock were excluded from the computation of basic earnings per share due to the fact that they were not required to fund losses and the redemption amount was not reduced as a result of losses. For the 13 and 39 weeks ended September 29, 2013, the dilutive securities did not include stock options awarded to employees that had a performance condition requiring the completion of an initial public offering of common stock, as that performance condition was not satisfied at the reporting date and the holders of these options had no rights in our undistributed earnings until that time. On October 9, 2013, the Company completed an initial public offering. Effective upon the closing of such offering, all of the shares of preferred stock and non-voting common stock converted into common stock. As a result of the conversion, for subsequent reporting periods, the Company no longer utilized the two-class method in its calculation of diluted income (loss) per common share attributable to common stockholders. For the 13 and 39 weeks ended September 28, 2014, diluted income (loss) per common share attributable to common stockholders was calculated using income available to common shareholders divided by diluted weighted-average shares of common stock outstanding during the period. | |||||||||||||||||
For the 13 Weeks Ended | For the 39 Weeks Ended | ||||||||||||||||
September 28, | September 29, | September 28, | September 29, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Calculation of undistributed income (loss) for basic and diluted shares: | |||||||||||||||||
Net income attributable to Potbelly Corporation | $ | 1,947 | $ | 2,165 | $ | 3,656 | $ | 4,941 | |||||||||
Less: Dividend declared to common and preferred stockholders | — | (49,854 | ) | — | (49,854 | ) | |||||||||||
Less: Accretion of redeemable convertible preferred stock to maximum redemption value | — | (4,796 | ) | — | (15,097 | ) | |||||||||||
Undistributed income (loss) for basic and diluted shares | $ | 1,947 | $ | (52,485 | ) | $ | 3,656 | $ | (60,010 | ) | |||||||
Allocation of undistributed income (loss) to participating securities: | |||||||||||||||||
Common shares | $ | 1,947 | $ | (52,485 | ) | $ | 3,656 | $ | (60,010 | ) | |||||||
Redeemable convertible preferred shares | — | — | — | — | |||||||||||||
Undistributed income (loss) | $ | 1,947 | $ | (52,485 | ) | $ | 3,656 | $ | (60,010 | ) | |||||||
Weighted average common shares outstanding-basic | 29,358,822 | 4,268,953 | 29,284,058 | 4,250,819 | |||||||||||||
Plus: Effect of potential stock options exercise | 602,982 | — | 1,054,632 | — | |||||||||||||
Plus: Effect of potential warrant exercise | 82,652 | — | 124,403 | — | |||||||||||||
Weighted average common shares outstanding-diluted | 30,044,456 | 4,268,953 | 30,463,093 | 4,250,819 | |||||||||||||
Income (loss) per share available to common stockholders-basic | $ | 0.07 | $ | (12.29 | ) | $ | 0.12 | $ | (14.12 | ) | |||||||
Income (loss) per share available to common stockholders-diluted | $ | 0.06 | $ | (12.29 | ) | $ | 0.12 | $ | (14.12 | ) | |||||||
Potentially dilutive shares that are considered anti-dilutive: | |||||||||||||||||
Common share options | 869,317 | 4,744,664 | 537,318 | 4,744,664 | |||||||||||||
Warrants | — | 241,704 | — | 241,704 | |||||||||||||
For the 13 and 39 weeks ended September 29, 2013, the Company’s potential common stock instruments such as common stock options and warrants were not included in the computation of diluted (loss) per common share as the effect of including these shares in the calculation would have been anti-dilutive. |
Income_Taxes
Income Taxes | 9 Months Ended |
Sep. 28, 2014 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
(4) Income Taxes | |
The Company recognized income tax expense of $2.5 million on pre-tax income of $6.1 million, or an effective tax rate of 40.3%, for the 39 weeks ended September 28, 2014, compared to income tax expense of $2.8 million on pre-tax income of $7.8 million or an effective tax rate of 36.0%, for the 39 weeks ended September 29, 2013. The difference between the statutory rate and the effective tax rate is primarily attributable to state income taxes offset by certain federal and state tax credits. The increase in the effective tax rate primarily relates to the expiration of certain federal income tax credits for 2014 that were available in prior years as well as provision to return adjustments. |
Capital_Stock
Capital Stock | 9 Months Ended |
Sep. 28, 2014 | |
Equity [Abstract] | ' |
Capital Stock | ' |
(5) Capital Stock | |
On October 9, 2013, the Company completed an initial public offering. Effective upon the closing of such offering, all shares of preferred stock and non-voting common stock converted into common stock. The terms of the non-voting common stock provided that all shares of non-voting common stock would convert into voting common stock on a 1:1 basis immediately prior to the closing of an underwritten IPO or sale of the Company. The redeemable convertible preferred stock included down-round provisions which would adjust the conversion price for any additional stock issued without consideration or for a consideration per share less than the respective conversion price for one or more of the series of preferred stock in effect immediately prior to the issuance of such additional stock. Each share of common stock has the same relative rights and was identical in all respects to each other share of common stock. Each holder of shares of common stock is entitled to one vote for each share held by such holder at all meetings of stockholders. | |
On August 1, 2014, the Company’s Board of Directors authorized a share repurchase program of up to $35.0 million of the Company’s common stock. Under this program, the Company may, from time to time, purchase shares in the open market (including in pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Securities Exchange Act of 1934 as amended) or in privately negotiated transactions. During the 13 weeks ended September 28, 2014, the Company repurchased 471,290 shares of its common stock for approximately $5.8 million in open market transactions. As of September 28, 2014, the remaining dollar value of authorization under the share repurchase program was $29.2 million. Repurchased shares are included as treasury stock in the Condensed Consolidated Balance Sheets and the Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Equity. |
StockBased_Compensation
Stock-Based Compensation | 9 Months Ended | ||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||||
Stock-Based Compensation | ' | ||||||||||||||||||
(6) Stock-Based Compensation | |||||||||||||||||||
Throughout the 39 weeks ending September 28, 2014, the Company issued 292,767 stock options under the 2013 Long-Term Incentive Plan to eligible employees and key executives. The fair value of the options was determined using the Black-Scholes option pricing model. The weighted average common stock fair value of options granted during the 39 weeks ended September 28, 2014 was $19.58 per share, as estimated using the following weighted average assumptions: expected life of options – seven years; volatility- 49.36%; risk-free interest rate – 1.28%; and dividend yield – 0.00%. The Company used the simplified method for determining the expected life of the options. Due to the lack of historical data as a newly public company, the Company calculated the specific stock price volatility using a blended volatility rate based on comparable publicly traded companies. | |||||||||||||||||||
A summary of activity for the 39 weeks ended September 28, 2014 is as follows: | |||||||||||||||||||
Options | Shares | Weighted | Aggregate | Weighted | |||||||||||||||
(Thousands) | Average | Intrinsic | Average | ||||||||||||||||
Exercise | Value | Remaining | |||||||||||||||||
Price | (Thousands) | Term | |||||||||||||||||
(Years) | |||||||||||||||||||
Outstanding—December 29, 2013 | 5,030 | $ | 9.41 | $ | 78,575 | 6.31 | |||||||||||||
Granted | 293 | 19.58 | |||||||||||||||||
Exercised | (339 | ) | 8.81 | ||||||||||||||||
Canceled | (105 | ) | 11.64 | ||||||||||||||||
Outstanding—September 28, 2014 | 4,879 | 10.01 | $ | 12,136 | 5.81 | ||||||||||||||
Exercisable—September 28, 2014 | 3,680 | 8.99 | $ | 11,910 | 5.94 | ||||||||||||||
During the 39 weeks ended September 28, 2014, the Company issued 28,240 shares of unrestricted common stock to certain non-employee members of its Board of Directors. The unrestricted stock had a weighted average grant-date share price of $15.29 upon issuance. The Company recorded $0.4 million in stock-based compensation expense, with a corresponding increase to additional paid-in capital, related to the issuance of common stock. | |||||||||||||||||||
In accordance with ASC Topic 718, Compensation—Stock Compensation, stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period, which is generally the vesting period of the grant, with a corresponding increase to additional paid-in-capital. For the 13 and 39 weeks ended September 28, 2014, the Company recognized stock-based compensation expense of $0.6 million and $2.0 million, respectively, which includes $32 thousand and $0.4 million related to the unrestricted common stock granted during 2014, respectively. For the 13 and 39 weeks ended September 29, 2013, the Company recognized stock-based compensation expense of $1.2 million and $2.4 million, respectively. As of September 28, 2014, the unrecognized stock-based compensation expense was $6.0 million, which will be recognized through fiscal year 2018. The Company records stock-based compensation expense within general and administrative expenses in the consolidated statements of operations. |
Organization_and_Other_Matters1
Organization and Other Matters (Policies) | 9 Months Ended |
Sep. 28, 2014 | |
Accounting Policies [Abstract] | ' |
Business | ' |
Business | |
Potbelly Corporation (the “Company” or “Potbelly”), through its wholly owned subsidiaries, operates Potbelly Sandwich Works sandwich shops in 23 states and the District of Columbia. As of September 28, 2014, the Company had 319 company-operated shops. During the 39 weeks ended September 28, 2014, the Company opened 23 new company-operated shops and closed no shops. | |
The Company also sells and administers franchises of new Potbelly Sandwich Works sandwich shops. The first domestic and international franchise locations administered by the Company opened during February 2011. As of September 28, 2014, 14 franchised shops were in operation domestically and 12 franchised shops were in operation internationally. During the 39 weeks ended September 28, 2014, the Company opened four franchised shops and closed one franchised shop. | |
Basis of Presentation | ' |
Basis of Presentation | |
The unaudited condensed consolidated financial statements and notes herein should be read in conjunction with the audited consolidated financial statements of Potbelly Corporation and its subsidiaries and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 29, 2013. The unaudited condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the SEC regarding interim financial reporting. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations. In the opinion of management, all adjustments, which are of a normal and recurring nature (except as otherwise noted), that are necessary to present fairly the Company’s financial position as of December 29, 2013 and September 28, 2014, its statement of operations for the 13 and 39 weeks ended September 29, 2013 and September 28, 2014 and its statement of cash flows for the 39 weeks ended September 29, 2013 and September 28, 2014 have been included. The consolidated statements of operations for the interim periods presented herein are not necessarily indicative of the results to be expected for the full year. | |
The Company does not have any components of other comprehensive income (loss) recorded within its consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements. | |
Principles of Consolidation | ' |
Principles of Consolidation | |
The unaudited condensed consolidated financial statements include the accounts of Potbelly Corporation; its wholly owned subsidiary, Potbelly Illinois, Inc. (“PII”); PII’s wholly owned subsidiaries, Potbelly Franchising, LLC, Potbelly Sandwich Works, LLC (“LLC”) and 16 of LLC’s wholly owned subsidiaries and the LLC’s two joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For the Company’s consolidated joint ventures, non-controlling interest represents the non-controlling partners’ share of the assets, liabilities and operations related to their respective joint venture investments. The Company has ownership interests ranging from 65-75% in these consolidated joint ventures. | |
Use of Estimates | ' |
Use of Estimates | |
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, primarily related to long-lived assets, income taxes, stock-based compensation and common stock equity valuations, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |
Fiscal Year | ' |
Fiscal Year | |
The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar year. Approximately every five or six years a 53rd week is added. Fiscal 2013 and 2014 each consist of 52 weeks. The fiscal quarters ended September 29, 2013 and September 28, 2014 each consisted of 13 weeks. | |
Stock-based Compensation | ' |
In accordance with ASC Topic 718, Compensation—Stock Compensation, stock-based compensation is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the requisite employee service period, which is generally the vesting period of the grant, with a corresponding increase to additional paid-in-capital. For the 13 and 39 weeks ended September 28, 2014, the Company recognized stock-based compensation expense of $0.6 million and $2.0 million, respectively, which includes $32 thousand and $0.4 million related to the unrestricted common stock granted during 2014, respectively. For the 13 and 39 weeks ended September 29, 2013, the Company recognized stock-based compensation expense of $1.2 million and $2.4 million, respectively. As of September 28, 2014, the unrecognized stock-based compensation expense was $6.0 million, which will be recognized through fiscal year 2018. The Company records stock-based compensation expense within general and administrative expenses in the consolidated statements of operations. |
Earnings_per_share_Tables
Earnings per share (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||
Earnings Per Share [Abstract] | ' | ||||||||||||||||
Schedule of the Calculation of Weighted Average Common Shares Outstanding for Basic and Diluted Earnings per Share Available to Common Stockholders | ' | ||||||||||||||||
For the 13 Weeks Ended | For the 39 Weeks Ended | ||||||||||||||||
September 28, | September 29, | September 28, | September 29, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Calculation of undistributed income (loss) for basic and diluted shares: | |||||||||||||||||
Net income attributable to Potbelly Corporation | $ | 1,947 | $ | 2,165 | $ | 3,656 | $ | 4,941 | |||||||||
Less: Dividend declared to common and preferred stockholders | — | (49,854 | ) | — | (49,854 | ) | |||||||||||
Less: Accretion of redeemable convertible preferred stock to maximum redemption value | — | (4,796 | ) | — | (15,097 | ) | |||||||||||
Undistributed income (loss) for basic and diluted shares | $ | 1,947 | $ | (52,485 | ) | $ | 3,656 | $ | (60,010 | ) | |||||||
Allocation of undistributed income (loss) to participating securities: | |||||||||||||||||
Common shares | $ | 1,947 | $ | (52,485 | ) | $ | 3,656 | $ | (60,010 | ) | |||||||
Redeemable convertible preferred shares | — | — | — | — | |||||||||||||
Undistributed income (loss) | $ | 1,947 | $ | (52,485 | ) | $ | 3,656 | $ | (60,010 | ) | |||||||
Weighted average common shares outstanding-basic | 29,358,822 | 4,268,953 | 29,284,058 | 4,250,819 | |||||||||||||
Plus: Effect of potential stock options exercise | 602,982 | — | 1,054,632 | — | |||||||||||||
Plus: Effect of potential warrant exercise | 82,652 | — | 124,403 | — | |||||||||||||
Weighted average common shares outstanding-diluted | 30,044,456 | 4,268,953 | 30,463,093 | 4,250,819 | |||||||||||||
Income (loss) per share available to common stockholders-basic | $ | 0.07 | $ | (12.29 | ) | $ | 0.12 | $ | (14.12 | ) | |||||||
Income (loss) per share available to common stockholders-diluted | $ | 0.06 | $ | (12.29 | ) | $ | 0.12 | $ | (14.12 | ) | |||||||
Potentially dilutive shares that are considered anti-dilutive: | |||||||||||||||||
Common share options | 869,317 | 4,744,664 | 537,318 | 4,744,664 | |||||||||||||
Warrants | — | 241,704 | — | 241,704 |
StockBased_Compensation_Tables
Stock-Based Compensation (Tables) | 9 Months Ended | ||||||||||||||||||
Sep. 28, 2014 | |||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||||
Summary of Activity Under Plans and Agreement | ' | ||||||||||||||||||
A summary of activity for the 39 weeks ended September 28, 2014 is as follows: | |||||||||||||||||||
Options | Shares | Weighted | Aggregate | Weighted | |||||||||||||||
(Thousands) | Average | Intrinsic | Average | ||||||||||||||||
Exercise | Value | Remaining | |||||||||||||||||
Price | (Thousands) | Term | |||||||||||||||||
(Years) | |||||||||||||||||||
Outstanding—December 29, 2013 | 5,030 | $ | 9.41 | $ | 78,575 | 6.31 | |||||||||||||
Granted | 293 | 19.58 | |||||||||||||||||
Exercised | (339 | ) | 8.81 | ||||||||||||||||
Canceled | (105 | ) | 11.64 | ||||||||||||||||
Outstanding—September 28, 2014 | 4,879 | 10.01 | $ | 12,136 | 5.81 | ||||||||||||||
Exercisable—September 28, 2014 | 3,680 | 8.99 | $ | 11,910 | 5.94 | ||||||||||||||
Organization_and_Other_Matters2
Organization and Other Matters - Additional Information (Detail) | 9 Months Ended |
Sep. 28, 2014 | |
Subsidiaries | |
Store | |
State | |
JointVenture | |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Number of sandwich works and shops operation states | 23 |
Number of shops | 4 |
Number of closed stores | 1 |
Number of wholly owned subsidiaries | 16 |
Number of joint ventures | 2 |
Minimum [Member] | ' |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Ownership interest rate | 65.00% |
Maximum [Member] | ' |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Ownership interest rate | 75.00% |
Domestic Operations [Member] | ' |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Number of shops | 14 |
International Operations [Member] | ' |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Number of shops | 12 |
Company Operated Shops [Member] | ' |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Number of shops | 319 |
Number of closed stores | 0 |
New Shops [Member] | ' |
Nature Of Business And Basis Of Presentation [Line Items] | ' |
Number of shops | 23 |
Fair_Value_Measurements_Additi
Fair Value Measurements - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Fair Value Disclosures [Abstract] | ' | ' | ' | ' |
Impairment charges | $1,315 | $250 | $2,192 | $329 |
Fair value of investments in rabbi trust | $16 | ' | $16 | ' |
Earnings_Per_Share_Schedule_of
Earnings Per Share - Schedule of the Calculation of Weighted Average Common Shares Outstanding for Basic and Diluted Earnings per Share Available to Common Stockholders (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Calculation of undistributed income (loss) for basic and diluted shares: | ' | ' | ' | ' |
Net income attributable to Potbelly Corporation | $1,947 | $2,165 | $3,656 | $4,941 |
Less: Dividend declared to common and preferred stockholders | 0 | -49,854 | 0 | -49,854 |
Less: Accretion of redeemable convertible preferred stock to maximum redemption value | 0 | -4,796 | 0 | -15,097 |
Undistributed income (loss) for basic and diluted shares | 1,947 | -52,485 | 3,656 | -60,010 |
Allocation of undistributed income (loss) to participating securities: | ' | ' | ' | ' |
Undistributed income (loss) | 1,947 | -52,485 | 3,656 | -60,010 |
Weighted average common shares outstanding-basic | 29,358,822 | 4,268,953 | 29,284,058 | 4,250,819 |
Plus: Effect of potential stock options exercise | 602,982 | 0 | 1,054,632 | 0 |
Plus: Effect of potential warrant exercise | 82,652 | 0 | 124,403 | 0 |
Weighted average common shares outstanding-diluted | 30,044,456 | 4,268,953 | 30,463,093 | 4,250,819 |
Income (loss) per share available to common stockholders-basic | $0.07 | ($12.29) | $0.12 | ($14.12) |
Income (loss) per share available to common stockholders-diluted | $0.06 | ($12.29) | $0.12 | ($14.12) |
Common Share Options [Member] | ' | ' | ' | ' |
Allocation of undistributed income (loss) to participating securities: | ' | ' | ' | ' |
Potentially dilutive shares that are considered anti-dilutive | 869,317 | 4,744,664 | 537,318 | 4,744,664 |
Common Stock [Member] | ' | ' | ' | ' |
Allocation of undistributed income (loss) to participating securities: | ' | ' | ' | ' |
Undistributed income (loss) | 1,947 | -52,485 | 3,656 | -60,010 |
Warrants [Member] | ' | ' | ' | ' |
Allocation of undistributed income (loss) to participating securities: | ' | ' | ' | ' |
Potentially dilutive shares that are considered anti-dilutive | 0 | 241,704 | 0 | 241,704 |
Redeemable Convertible Preferred Stock [Member] | ' | ' | ' | ' |
Allocation of undistributed income (loss) to participating securities: | ' | ' | ' | ' |
Undistributed income (loss) | $0 | $0 | $0 | $0 |
Income_Taxes_Additional_Inform
Income Taxes - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
In Thousands, unless otherwise specified | Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 |
Income Tax Disclosure [Abstract] | ' | ' | ' | ' |
Income tax expense | $1,260 | $905 | $2,476 | $2,792 |
Pre-tax income | $3,212 | $3,079 | $6,143 | $7,757 |
Effective tax rate | ' | ' | 40.30% | 36.00% |
Capital_Stock_Additional_Infor
Capital Stock - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | |
Sep. 28, 2014 | Sep. 28, 2014 | Aug. 01, 2014 | |
Equity [Abstract] | ' | ' | ' |
Terms of non-voting Common stock conversion basis ratio | ' | 'The terms of the non-voting common stock provided that all shares of non-voting common stock would convert into voting common stock on a 1:1 basis immediately prior to the closing of an underwritten IPO or sale of the Company. | ' |
Non-voting Common stock conversion basis ratio | 1 | 1 | ' |
Stock repurchase program, authorized amount | ' | ' | $35,000,000 |
Common stock shares repurchased | 471,290 | ' | ' |
Common stock repurchased value | 5,797,000 | 5,797,000 | ' |
Shares repurchased under stock repurchase program | $29,200,000 | $29,200,000 | ' |
StockBased_Compensation_Additi
Stock-Based Compensation - Additional Information (Detail) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 28, 2014 | Sep. 29, 2013 | Sep. 28, 2014 | Sep. 29, 2013 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' |
Stock options issued | ' | ' | 293,000 | ' |
Weighted average common stock fair value | ' | ' | $19.58 | ' |
Issuance of unrestricted common stock | ' | ' | 28,240 | ' |
Weighted average grant-date share price | $15.29 | ' | $15.29 | ' |
Weighted average share value of unrestricted common stock | ' | ' | $400,000 | ' |
Recognized stock-based compensation expense | 600,000 | 1,200,000 | 2,022,000 | 2,370,000 |
Unrecognized stock compensation expense | 6,000,000 | ' | 6,000,000 | ' |
Unrecognized stock compensation expense, recognition period | ' | ' | 'Through 2018 | ' |
Unrestricted Common Stock Granted [Member] | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' |
Recognized stock-based compensation expense | $32,000 | ' | $400,000 | ' |
2013 Long Term Incentive Plan [Member] | ' | ' | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' |
Stock options issued | ' | ' | 292,767 | ' |
Weighted average common stock fair value | ' | ' | $19.58 | ' |
Expected life of options | ' | ' | '7 years | ' |
Volatility | ' | ' | 49.36% | ' |
Risk-free interest rate | ' | ' | 1.28% | ' |
Dividend yield | ' | ' | 0.00% | ' |
Method used to determine fair value of the options | ' | ' | 'Black-Scholes option pricing model | ' |
StockBased_Compensation_Summar
Stock-Based Compensation - Summary of Activity Under Plans and Agreement (Detail) (USD $) | 9 Months Ended | 12 Months Ended |
In Thousands, except Per Share data, unless otherwise specified | Sep. 28, 2014 | Dec. 29, 2013 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' |
Options Outstanding shares, Beginning balance | ' | 5,030 |
Options Outstanding shares, Granted | 293 | ' |
Options Outstanding shares, Exercised | -339 | ' |
Options Outstanding shares, Canceled | -105 | ' |
Options Outstanding shares, Ending balance | 4,879 | ' |
Options Outstanding shares, Exercisable | 3,680 | ' |
Options outstanding weighted average exercise price, Granted | $19.58 | ' |
Options outstanding weighted average exercise price, Exercised | $8.81 | ' |
Options outstanding weighted average exercise price, Canceled | $11.64 | ' |
Options outstanding weighted average exercise price, Ending balance | $10.01 | $9.41 |
Options outstanding weighted average exercise price, Exercisable | $8.99 | ' |
Options Outstanding Aggregate Intrinsic value | $12,136 | $78,575 |
Options Exercisable Aggregate Intrinsic Value | $11,910 | ' |
Option Outstanding Weighted Average Remaining Term | '5 years 9 months 22 days | '6 years 3 months 22 days |
Options Exercisable Weighted Average Remaining Term | '5 years 11 months 9 days | ' |