Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 28, 2015 | Jul. 31, 2015 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 28, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | PBPB | |
Entity Registrant Name | Potbelly Corporation | |
Entity Central Index Key | 1,195,734 | |
Current Fiscal Year End Date | --12-27 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 30,213,562 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Current assets | ||
Cash and cash equivalents | $ 54,105 | $ 63,005 |
Accounts receivable, net of allowances of $43 and $19 as of June 28, 2015 and December 28, 2014, respectively | 5,034 | 4,016 |
Inventories | 2,820 | 2,768 |
Deferred income taxes, current | 541 | 507 |
Prepaid expenses and other current assets | 8,529 | 9,922 |
Total current assets | 71,029 | 80,218 |
Property and equipment, net | 92,615 | 85,704 |
Indefinite-lived intangible assets | 3,404 | 3,404 |
Goodwill | 1,428 | 1,428 |
Deferred income taxes, non-current | 17,860 | 17,860 |
Deferred expenses, net and other assets | 3,673 | 3,333 |
Total assets | 190,009 | 191,947 |
Current liabilities | ||
Accounts payable | 2,228 | 3,301 |
Accrued expenses | 19,694 | 16,349 |
Accrued income taxes | 100 | 226 |
Current portion of long-term debt | 1,008 | |
Total current liabilities | 22,022 | 20,884 |
Deferred rent and landlord allowances | 15,781 | 14,012 |
Other long-term liabilities | 699 | 726 |
Total liabilities | 38,502 | 35,622 |
Equity | ||
Common stock, $0.01 par value-authorized, 200,000,000 shares; outstanding 28,371,178 and 28,934,700 shares as of June 28, 2015, and December 28, 2014, respectively | 301 | 298 |
Warrants | 909 | 909 |
Additional paid-in-capital | 396,385 | 391,972 |
Treasury stock, held at cost, 1,749,406 and 827,090 shares as of June 28, 2015, and December 28, 2014, respectively | (22,792) | (10,246) |
Accumulated deficit | (223,882) | (226,874) |
Total stockholders' equity | 150,921 | 156,059 |
Non-controlling interest | 586 | 266 |
Total equity | 151,507 | 156,325 |
Total liabilities and equity | $ 190,009 | $ 191,947 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 28, 2015 | Dec. 28, 2014 |
Condensed Consolidated Balance Sheet [Abstract] | ||
Allowances on accounts receivable | $ 43 | $ 19 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, outstanding | 28,371,178 | 28,934,700 |
Treasury stock, shares | 1,749,406 | 827,090 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Revenues | ||||
Sandwich shop sales, net | $ 95,566 | $ 83,268 | $ 180,963 | $ 156,791 |
Franchise royalties and fees | 383 | 352 | 754 | 710 |
Total revenues | 95,949 | 83,620 | 181,717 | 157,501 |
Sandwich shop operating expenses | ||||
Cost of goods sold, excluding depreciation | 27,253 | 23,936 | 51,598 | 45,022 |
Labor and related expenses | 27,152 | 23,405 | 51,752 | 44,865 |
Occupancy expenses | 11,539 | 10,183 | 22,886 | 20,162 |
Other operating expenses | 9,970 | 8,691 | 19,627 | 16,849 |
General and administrative expenses | 9,643 | 8,865 | 18,474 | 16,687 |
Depreciation expense | 5,288 | 4,784 | 10,439 | 9,501 |
Pre-opening costs | 536 | 273 | 1,077 | 525 |
Impairment and loss on disposal of property and equipment | 484 | 29 | 832 | 877 |
Total expenses | 91,865 | 80,166 | 176,685 | 154,488 |
Income from operations | 4,084 | 3,454 | 5,032 | 3,013 |
Interest expense | 63 | 40 | 124 | 82 |
Income before income taxes | 4,021 | 3,414 | 4,908 | 2,931 |
Income tax expense | 1,563 | 1,407 | 1,914 | 1,216 |
Net income | 2,458 | 2,007 | 2,994 | 1,715 |
Net (loss) income attributable to non-controlling interest | (3) | (3) | 2 | 6 |
Net income attributable to Potbelly Corporation | $ 2,461 | $ 2,010 | $ 2,992 | $ 1,709 |
Net income per common share attributable to common stockholders: | ||||
Basic | $ 0.09 | $ 0.07 | $ 0.10 | $ 0.06 |
Diluted | $ 0.08 | $ 0.07 | $ 0.10 | $ 0.06 |
Weighted average shares outstanding: | ||||
Basic | 28,594,712 | 29,342,528 | 28,749,898 | 29,246,676 |
Diluted | 29,364,689 | 30,509,553 | 29,520,163 | 30,642,892 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Equity (Unaudited) - USD ($) $ in Thousands | Total | Common Stock [Member] | Treasury Stock [Member] | Warrants [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Non Controlling Interest [Member] |
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 | ||||||
Net income | 1,715 | 1,709 | 6 | ||||
Issuance of unrestricted common stock | 400 | 400 | |||||
Issuance of unrestricted common stock, Shares | 25,663 | ||||||
Exercise of stock options | 2,628 | $ 4 | 2,624 | ||||
Exercise of stock options, Shares | 297,002 | ||||||
Capital distribution to non-controlling interest | (26) | (26) | |||||
Amortization of stock-based compensation | 1,041 | 1,041 | |||||
Ending Balance at Jun. 29, 2014 | 159,031 | $ 295 | 909 | 387,142 | (229,523) | 208 | |
Ending Balance, Common Shares at Jun. 29, 2014 | 29,470,694 | ||||||
Beginning Balance at Dec. 28, 2014 | $ 156,325 | $ 298 | $ (10,246) | 909 | 391,972 | (226,874) | 266 |
Beginning Balance, Common Shares at Dec. 28, 2014 | 28,934,700 | 28,934,700 | |||||
Net income | $ 2,994 | 2,992 | 2 | ||||
Exercise of stock options | $ 3,065 | $ 3 | 3,062 | ||||
Exercise of stock options, Shares | 359,000 | 358,794 | |||||
Excess tax benefits associated with exercise of stock options | $ 224 | 224 | |||||
Repurchases of common stock | $ (12,546) | (12,546) | |||||
Repurchases of common stock, Shares | (922,316) | (922,316) | |||||
Capital distribution to non-controlling interest | $ (8) | (8) | |||||
Contributions from non-controlling interest | 326 | 326 | |||||
Amortization of stock-based compensation | 1,127 | 1,127 | |||||
Ending Balance at Jun. 28, 2015 | $ 151,507 | $ 301 | $ (22,792) | $ 909 | $ 396,385 | $ (223,882) | $ 586 |
Ending Balance, Common Shares at Jun. 28, 2015 | 28,371,178 | 28,371,178 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 28, 2015 | Jun. 29, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 2,994 | $ 1,715 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 10,439 | 9,501 |
Deferred income tax | 190 | 121 |
Deferred rent and landlord allowances | 1,769 | 723 |
Amortization of stock compensation expense | 1,127 | 1,441 |
Excess tax benefit from stock-based compensation | (224) | |
Asset impairment, store closure and disposal of property and equipment | 887 | 877 |
Amortization of debt issuance costs | 35 | 35 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | (1,018) | (958) |
Inventories | (52) | (90) |
Prepaid expenses and other assets | 904 | (2,035) |
Accounts payable | (730) | 1,351 |
Accrued and other liabilities | 2,641 | (910) |
Net cash provided by operating activities | 18,962 | 11,771 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (17,901) | (13,386) |
Net cash (used in) investing activities | (17,901) | (13,386) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on note payable | (1,022) | (42) |
Proceeds from exercise of stock options | 3,743 | 3,337 |
Payment of payroll taxes related to stock-based compensation awards | (678) | (709) |
Treasury stock repurchase | (12,546) | |
Excess tax benefit from stock-based compensation | 224 | |
Contributions from non-controlling interest | 326 | |
Distribution to non-controlling interest | (8) | (26) |
Net cash (used in) provided by financing activities | (9,961) | 2,560 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (8,900) | 945 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 63,005 | 69,579 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 54,105 | 70,524 |
Supplemental cash flow information: | ||
Income taxes paid | 230 | 700 |
Interest paid | 114 | 84 |
Supplemental non-cash investing and financing activities: | ||
Unpaid liability for purchases of property and equipment | $ 2,931 | $ 2,424 |
Organization and Other Matters
Organization and Other Matters | 6 Months Ended |
Jun. 28, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [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 27 states and the District of Columbia. As of June 28, 2015 and June 29, 2014, the Company had 349 and 312 company-operated shops, respectively. During the 26 weeks ended June 28, 2015, the Company opened 17 new company-operated shops and closed 2 shops. During the 26 weeks ended June 29, 2014, the Company opened 16 new company-operated shops and closed no shops. The Company also sells and administers franchises of Potbelly Sandwich Works sandwich shops. The first domestic and international franchise locations administered by the Company opened during February 2011. As of June 28, 2015, 17 franchised shops were in operation domestically and 12 franchised shops were in operation internationally. During the 26 weeks ended June 28, 2015, the Company opened one franchised shop and closed one franchised shop. During the 26 weeks ended June 29, 2014, the Company opened three franchised shops and closed no franchised shops. 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 28, 2014. 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 June 28, 2015 and December 28, 2014, its statement of operations for the 13 and 26 weeks ended June 28, 2015 and June 29, 2014 and its statement of cash flows for the 26 weeks ended June 28, 2015 and June 29, 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 and Potbelly Sandwich Works LLC (“LLC”) and 17 of LLC’s wholly owned subsidiaries and the LLC’s 4 joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For consolidated joint ventures, non-controlling interest represents a non-controlling partner’s share of the assets, liabilities and operations related to the 4 joint venture investments. The Company has ownership interests ranging from 65-80% in these consolidated joint ventures. Fiscal Year The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar period. Approximately every five or six years a 53rd week is added. Fiscal years 2015 and 2014 each consist of 52 weeks. The fiscal quarters ended June 28, 2015 and June 29, 2014 each consisted of 13 weeks. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, primarily related to the long-lived assets and income taxes, 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. New and Revised Financial Accounting Standards We qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. However, we have chosen to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period is irrevocable. In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The pronouncement changes the criteria for reporting discontinued operations while enhancing disclosures in this area. Pursuant to ASU 2014-08, only disposals representing a strategic shift, such as a major line of business, a major geographical area or a major equity investment, which were not expected to have continuing cash flows should be presented as a discontinued operation. If the disposal does qualify as a discontinued operation under ASU 2014-08, the entity will be required to provide expanded disclosures. ASU 2014-08 is effective for fiscal and interim periods beginning on or after December 15, 2014. Early adoption is permitted. The adoption of ASU 2014-08 is not expected to have a significant impact on our consolidated financial statements or disclosures. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The FASB has approved a one-year deferral of the effective date of ASU 2014-09, such that it will become effective for the annual period ending after December 15, 2017. We are evaluating the expected adoption method of ASU 2014-09 and the adoption is not expected to have a significant impact on our consolidated balance sheet or consolidated statement of operations. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The pronouncement requires our management to evaluate whether there is substantial doubt about our ability to continue as a going concern. The pronouncement is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated balance sheet or consolidated statement of operations. |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 28, 2015 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | (2) Fair Value Measurement 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. After performing a periodic review of our shops during the first and second fiscal quarter of 2015, 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 $0.3 million and $0.6 million for the 13 weeks and 26 weeks ended June 28, 2015, respectively, related to the excess of the carrying amounts recorded on our balance sheet over the identified shops’ estimated fair values. 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. In fiscal 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 June 28, 2015, the fair value of the investments in the rabbi trust was $71 thousand, which is included in other assets in the condensed consolidated balance sheet. The associated liability is recorded within other long-term liabilities 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 June 28, 2015, the Company recorded an immaterial amount of unrealized losses on investments held in the rabbi trust. |
Earnings per Share
Earnings per Share | 6 Months Ended |
Jun. 28, 2015 | |
Earnings Per Share [Abstract] | |
Earnings per Share | (3) Earnings per share Basic and diluted income (loss) per share are calculated using the weighted average number of shares outstanding for the period as follows: For the 13 Weeks Ended For the 26 Weeks Ended June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Net income attributable to Potbelly Corporation $ 2,461 $ 2,010 $ 2,992 $ 1,709 Weighted average common shares outstanding-basic 28,594,712 29,342,528 28,749,898 29,246,676 Plus: Effect of potential stock options exercise 708,271 1,046,198 709,276 1,258,203 Plus: Effect of potential warrant exercise 61,706 120,827 60,989 138,013 Weighted average common shares outstanding-diluted 29,364,689 30,509,553 29,520,163 30,642,892 Income per share available to common stockholders-basic $ 0.09 $ 0.07 $ 0.10 $ 0.06 Income per share available to common stockholders-diluted $ 0.08 $ 0.07 $ 0.10 $ 0.06 Potentially dilutive shares that are considered anti-dilutive: Common share options 491,494 242,636 609,084 242,636 Warrants — — — — |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 28, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (4) Income Taxes The Company recognized income tax expense of $1.9 million on pre-tax income of $4.9 million, or an effective tax rate of 39.0%, for the 26 weeks ended June 28, 2015, compared to income tax expense of $1.2 million on pre-tax income of $2.9 million, or an effective tax rate of 41.5%, for the 26 weeks ended June 29, 2014. 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. |
Capital Stock
Capital Stock | 6 Months Ended |
Jun. 28, 2015 | |
Equity [Abstract] | |
Capital Stock | (5) Capital Stock 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 26 weeks ended June 28, 2015, the Company repurchased 922,316 shares of its common stock for approximately $12.5 million in open market transactions. As of June 28, 2015, the remaining dollar value of authorization under the share repurchase program was $12.2 million. Repurchased shares are included as treasury stock in the condensed consolidated balance sheets and the condensed consolidated statement of equity. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 28, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | (6) Stock-Based Compensation Throughout the 26 weeks ending June 28, 2015, the Company issued 498,479 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 fair value of options granted during the 26 weeks ended June 28, 2015 was $6.65 per share, as estimated using the following weighted average assumptions: expected life of options – seven years; volatility- 45.47%; risk-free interest rate – 1.90%; 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 26 weeks ended June 28, 2015 is as follows: Options Shares Weighted Aggregate Weighted Outstanding—December 28, 2014 4,613 $ 10.10 $ 12,731 5.62 Granted 498 13.59 Exercised (359 ) 8.54 Canceled (141 ) 14.18 Outstanding—June 28, 2015 4,611 10.47 $ 12,653 5.61 Exercisable—June 28, 2015 3,337 6.79 $ 11,549 3.19 In accordance with ASC Topic 718, Compensation—Stock Compensation In May 2015, the Company issued 30,856 shares of restricted stock units (“RSUs”) to certain non-employee members of its Board of Directors. The RSUs had a grant-date share price of $14.26 upon issuance and have a vesting schedule of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date. The Company recorded an immaterial amount of stock-based compensation expense related to the issuance of the RSUs. |
Organization and Other Matters
Organization and Other Matters (Policies) | 6 Months Ended |
Jun. 28, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business | Business Potbelly Corporation (the “Company” or “Potbelly”), through its wholly-owned subsidiaries, operates Potbelly Sandwich Works sandwich shops in 27 states and the District of Columbia. As of June 28, 2015 and June 29, 2014, the Company had 349 and 312 company-operated shops, respectively. During the 26 weeks ended June 28, 2015, the Company opened 17 new company-operated shops and closed 2 shops. During the 26 weeks ended June 29, 2014, the Company opened 16 new company-operated shops and closed no shops. The Company also sells and administers franchises of Potbelly Sandwich Works sandwich shops. The first domestic and international franchise locations administered by the Company opened during February 2011. As of June 28, 2015, 17 franchised shops were in operation domestically and 12 franchised shops were in operation internationally. During the 26 weeks ended June 28, 2015, the Company opened one franchised shop and closed one franchised shop. During the 26 weeks ended June 29, 2014, the Company opened three franchised shops and closed no franchised shops. |
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 28, 2014. 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 June 28, 2015 and December 28, 2014, its statement of operations for the 13 and 26 weeks ended June 28, 2015 and June 29, 2014 and its statement of cash flows for the 26 weeks ended June 28, 2015 and June 29, 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 and Potbelly Sandwich Works LLC (“LLC”) and 17 of LLC’s wholly owned subsidiaries and the LLC’s 4 joint ventures, collectively, the “Company.” All significant intercompany balances and transactions have been eliminated in consolidation. For consolidated joint ventures, non-controlling interest represents a non-controlling partner’s share of the assets, liabilities and operations related to the 4 joint venture investments. The Company has ownership interests ranging from 65-80% in these consolidated joint ventures. |
Fiscal Year | Fiscal Year The Company uses a 52/53-week fiscal year that ends on the last Sunday of the calendar period. Approximately every five or six years a 53rd week is added. Fiscal years 2015 and 2014 each consist of 52 weeks. The fiscal quarters ended June 28, 2015 and June 29, 2014 each consisted of 13 weeks. |
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 the long-lived assets and income taxes, 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. |
New and Revised Financial Accounting Standards | New and Revised Financial Accounting Standards We qualify as an “emerging growth company” pursuant to the provisions of the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, enacted on April 5, 2012. Section 102 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. However, we have chosen to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period is irrevocable. In April 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” The pronouncement changes the criteria for reporting discontinued operations while enhancing disclosures in this area. Pursuant to ASU 2014-08, only disposals representing a strategic shift, such as a major line of business, a major geographical area or a major equity investment, which were not expected to have continuing cash flows should be presented as a discontinued operation. If the disposal does qualify as a discontinued operation under ASU 2014-08, the entity will be required to provide expanded disclosures. ASU 2014-08 is effective for fiscal and interim periods beginning on or after December 15, 2014. Early adoption is permitted. The adoption of ASU 2014-08 is not expected to have a significant impact on our consolidated financial statements or disclosures. In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” The pronouncement was issued to clarify the principles for recognizing revenue and to develop a common revenue standard and disclosure requirements for U.S. GAAP and IFRS. The FASB has approved a one-year deferral of the effective date of ASU 2014-09, such that it will become effective for the annual period ending after December 15, 2017. We are evaluating the expected adoption method of ASU 2014-09 and the adoption is not expected to have a significant impact on our consolidated balance sheet or consolidated statement of operations. In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The pronouncement requires our management to evaluate whether there is substantial doubt about our ability to continue as a going concern. The pronouncement is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2014-15 is not expected to have a material effect on our consolidated balance sheet or consolidated statement of operations. |
Earnings per Share (Tables)
Earnings per Share (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Earnings Per Share [Abstract] | |
Schedule of the Calculation of Weighted Average Shares Outstanding for Basic and Diluted Earnings per Share | Basic and diluted income (loss) per share are calculated using the weighted average number of shares outstanding for the period as follows: For the 13 Weeks Ended For the 26 Weeks Ended June 28, 2015 June 29, 2014 June 28, 2015 June 29, 2014 Net income attributable to Potbelly Corporation $ 2,461 $ 2,010 $ 2,992 $ 1,709 Weighted average common shares outstanding-basic 28,594,712 29,342,528 28,749,898 29,246,676 Plus: Effect of potential stock options exercise 708,271 1,046,198 709,276 1,258,203 Plus: Effect of potential warrant exercise 61,706 120,827 60,989 138,013 Weighted average common shares outstanding-diluted 29,364,689 30,509,553 29,520,163 30,642,892 Income per share available to common stockholders-basic $ 0.09 $ 0.07 $ 0.10 $ 0.06 Income per share available to common stockholders-diluted $ 0.08 $ 0.07 $ 0.10 $ 0.06 Potentially dilutive shares that are considered anti-dilutive: Common share options 491,494 242,636 609,084 242,636 Warrants — — — — |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 28, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Activity Under Plans and Agreement | A summary of activity for the 26 weeks ended June 28, 2015 is as follows: Options Shares Weighted Aggregate Weighted Outstanding—December 28, 2014 4,613 $ 10.10 $ 12,731 5.62 Granted 498 13.59 Exercised (359 ) 8.54 Canceled (141 ) 14.18 Outstanding—June 28, 2015 4,611 10.47 $ 12,653 5.61 Exercisable—June 28, 2015 3,337 6.79 $ 11,549 3.19 |
Organization and Other Matter16
Organization and Other Matters - Additional Information (Detail) | 6 Months Ended | |
Jun. 28, 2015StoreStateJointVentureSubsidiaries | Jun. 29, 2014Store | |
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of sandwich works and shops operation states | State | 27 | |
Number of wholly owned subsidiaries | Subsidiaries | 17 | |
Number of joint ventures | JointVenture | 4 | |
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 | 80.00% | |
Company Operated Shops [Member] | ||
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of shops | 349 | 312 |
Number of closed stores | 2 | 0 |
Company Operated Shops [Member] | New Shops [Member] | ||
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of shops | 17 | 16 |
Franchised Shops [Member] | ||
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of closed stores | 1 | 0 |
Franchised Shops [Member] | New Shops [Member] | ||
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of shops | 1 | 3 |
Franchised Shops [Member] | Domestic Operations [Member] | ||
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of shops | 17 | |
Franchised Shops [Member] | International [Member] | ||
Nature Of Business And Basis Of Presentation [Line Items] | ||
Number of shops | 12 |
Fair Value Measurement - Additi
Fair Value Measurement - Additional Information (Detail) - Jun. 28, 2015 - USD ($) $ in Thousands | Total | Total |
Fair Value Disclosures [Abstract] | ||
Impairment charges | $ 300 | $ 600 |
Fair value of investments in rabbi trust | $ 71 | $ 71 |
Earnings Per Share - Schedule o
Earnings Per Share - Schedule of the Calculation of Weighted Average Shares Outstanding for Basic and Diluted Earnings per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||||
Net income attributable to Potbelly Corporation | $ 2,461 | $ 2,010 | $ 2,992 | $ 1,709 |
Weighted average common shares outstanding-basic | 28,594,712 | 29,342,528 | 28,749,898 | 29,246,676 |
Plus: Effect of potential stock options exercise | 708,271 | 1,046,198 | 709,276 | 1,258,203 |
Plus: Effect of potential warrant exercise | 61,706 | 120,827 | 60,989 | 138,013 |
Weighted average common shares outstanding-diluted | 29,364,689 | 30,509,553 | 29,520,163 | 30,642,892 |
Income per share available to common stockholders-basic | $ 0.09 | $ 0.07 | $ 0.10 | $ 0.06 |
Income per share available to common stockholders-diluted | $ 0.08 | $ 0.07 | $ 0.10 | $ 0.06 |
Common Share Options [Member] | ||||
Potentially dilutive shares that are considered anti-dilutive: | ||||
Potentially dilutive shares that are considered anti-dilutive | 491,494 | 242,636 | 609,084 | 242,636 |
Warrants [Member] | ||||
Potentially dilutive shares that are considered anti-dilutive: | ||||
Potentially dilutive shares that are considered anti-dilutive | 0 | 0 | 0 | 0 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Income Tax Disclosure [Abstract] | ||||
Income tax expense | $ 1,563 | $ 1,407 | $ 1,914 | $ 1,216 |
Income before income taxes | $ 4,021 | $ 3,414 | $ 4,908 | $ 2,931 |
Effective tax rate | 39.00% | 41.50% |
Capital Stock - Additional Info
Capital Stock - Additional Information (Detail) - USD ($) | 6 Months Ended | |
Jun. 28, 2015 | Aug. 01, 2014 | |
Equity [Abstract] | ||
Stock repurchase program, authorized amount | $ 35,000,000 | |
Common stock shares repurchased | 922,316 | |
Repurchases of common stock | $ 12,546,000 | |
Remaining dollar value of authorization under the share repurchase program | $ 12,200,000 |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
May. 31, 2015 | May. 31, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | Jun. 28, 2015 | Jun. 29, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock options issued | 498,000 | |||||
Weighted average common stock fair value | $ 13.59 | |||||
Recognized stock-based compensation expense | $ 600 | $ 1,000 | $ 1,127 | $ 1,441 | ||
Unrecognized stock compensation expense | $ 7,200 | $ 7,200 | ||||
Unrecognized stock compensation expense, recognition period | Through 2,019 | |||||
Unrestricted Common Stock Granted [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Recognized stock-based compensation expense | $ 400 | |||||
Restricted Stock Units (RSUs) [Member] | Non-Employee Board Of Directors [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Restricted stock units issued | 30,856 | |||||
Grant-date share price | $ 14.26 | |||||
Restricted Stock Units (RSUs) [Member] | First Anniversary [Member] | Non-Employee Board Of Directors [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting percentage | 50.00% | |||||
Restricted Stock Units (RSUs) [Member] | Second Anniversary [Member] | Non-Employee Board Of Directors [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Vesting percentage | 50.00% | |||||
2013 Long Term Incentive Plan [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Stock options issued | 498,479 | |||||
Weighted average common stock fair value | $ 6.65 | |||||
Expected life of options | 7 years | |||||
Volatility | 45.47% | |||||
Risk-free interest rate | 1.90% | |||||
Dividend yield | 0.00% | |||||
Method used to determine fair value of the options | Black-Scholes option pricing model |
Stock Based Compensation - Summ
Stock Based Compensation - Summary of Activity Under Plans and Agreement (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 28, 2015 | Dec. 28, 2014 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Options Outstanding shares, Beginning balance | 4,613 | |
Options Outstanding shares, Granted | 498 | |
Options Outstanding shares, Exercised | (359) | |
Options Outstanding shares, Canceled | (141) | |
Options Outstanding shares, Ending balance | 4,611 | 4,613 |
Options Outstanding shares, Exercisable | 3,337 | |
Options outstanding weighted average exercise price, Granted | $ 13.59 | |
Options outstanding weighted average exercise price, Exercised | 8.54 | |
Options outstanding weighted average exercise price, Canceled | 14.18 | |
Options outstanding weighted average exercise price, Ending balance | 10.47 | $ 10.10 |
Options outstanding weighted average exercise price, Exercisable | $ 6.79 | |
Options Outstanding Aggregate Intrinsic value | $ 12,653 | $ 12,731 |
Options Exercisable Aggregate Intrinsic Value | $ 11,549 | |
Option Outstanding Weighted Average Remaining Term | 5 years 7 months 10 days | 5 years 7 months 13 days |
Options Exercisable Weighted Average Remaining Term | 3 years 2 months 9 days |