Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 27, 2016 | Apr. 29, 2016 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 27, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | PBPB | |
Entity Registrant Name | Potbelly Corporation | |
Entity Central Index Key | 1,195,734 | |
Current Fiscal Year End Date | --12-25 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 25,978,704 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 27, 2016 | Dec. 27, 2015 |
Current assets | ||
Cash and cash equivalents | $ 33,486 | $ 32,006 |
Accounts receivable, net of allowances of $20 and $14 as of March 27, 2016 and December 27, 2015, respectively | 4,157 | 4,461 |
Inventories | 2,951 | 3,159 |
Prepaid expenses and other current assets | 8,939 | 10,155 |
Total current assets | 49,533 | 49,781 |
Property and equipment, net | 96,478 | 97,434 |
Indefinite-lived intangible assets | 3,404 | 3,404 |
Goodwill | 1,428 | 1,428 |
Deferred income taxes, non-current | 18,375 | 18,439 |
Deferred expenses, net and other assets | 4,000 | 4,021 |
Total assets | 173,218 | 174,507 |
Current liabilities | ||
Accounts payable | 3,230 | 5,762 |
Accrued expenses | 22,423 | 19,277 |
Accrued income taxes | 35 | 143 |
Total current liabilities | 25,688 | 25,182 |
Deferred rent and landlord allowances | 18,027 | 17,820 |
Other long-term liabilities | 1,280 | 1,292 |
Total liabilities | 44,995 | 44,294 |
Equity | ||
Common stock, $0.01 par value—authorized, 200,000,000 shares; outstanding 26,029,282 and 26,304,261 shares as of March 27, 2016 and December 27, 2015, respectively | 304 | 303 |
Warrants | 909 | 909 |
Additional paid-in-capital | 400,698 | 399,458 |
Treasury stock, held at cost, 4,367,860 and 4,033,910 shares as of March 27, 2016, and December 27, 2015, respectively | (54,359) | (50,000) |
Accumulated deficit | (220,158) | (221,246) |
Total stockholders’ equity | 127,394 | 129,424 |
Non-controlling interest | 829 | 789 |
Total equity | 128,223 | 130,213 |
Total liabilities and equity | $ 173,218 | $ 174,507 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 27, 2016 | Dec. 27, 2015 |
Statement Of Financial Position [Abstract] | ||
Allowances on accounts receivable | $ 20 | $ 14 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, outstanding | 26,029,282 | 26,304,261 |
Treasury stock, shares | 4,367,860 | 4,033,910 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Revenues | ||
Sandwich shop sales, net | $ 95,426 | $ 85,397 |
Franchise royalties and fees | 529 | 371 |
Total revenues | 95,955 | 85,768 |
Sandwich shop operating expenses | ||
Cost of goods sold, excluding depreciation | 26,246 | 24,345 |
Labor and related expenses | 28,162 | 24,600 |
Occupancy expenses | 12,757 | 11,347 |
Other operating expenses | 10,545 | 9,657 |
General and administrative expenses | 10,523 | 8,831 |
Depreciation expense | 5,664 | 5,151 |
Pre-opening costs | 152 | 541 |
Impairment and loss on disposal of property and equipment | 17 | 348 |
Total expenses | 94,066 | 84,820 |
Income from operations | 1,889 | 948 |
Interest expense | 28 | 61 |
Income before income taxes | 1,861 | 887 |
Income tax expense | 733 | 351 |
Net income | 1,128 | 536 |
Net income attributable to non-controlling interest | 40 | 5 |
Net income attributable to Potbelly Corporation | $ 1,088 | $ 531 |
Net income per common share attributable to common stockholders: | ||
Basic | $ 0.04 | $ 0.02 |
Diluted | $ 0.04 | $ 0.02 |
Weighted average shares outstanding: | ||
Basic | 26,259,593 | 28,905,084 |
Diluted | 26,733,055 | 29,675,032 |
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. 28, 2014 | $ 156,325 | $ 298 | $ (10,246) | $ 909 | $ 391,972 | $ (226,874) | $ 266 |
Beginning Balance, Common Shares at Dec. 28, 2014 | 28,934,700 | ||||||
Net income | 536 | 531 | 5 | ||||
Exercise of stock options | 1,070 | $ 1 | 1,069 | ||||
Exercise of stock options, Shares | 110,042 | ||||||
Repurchases of common stock | (4,406) | (4,406) | |||||
Repurchases of common stock, Shares | (334,686) | ||||||
Contributions from non-controlling interest | 88 | 88 | |||||
Amortization of stock-based compensation | 538 | 538 | |||||
Ending Balance at Mar. 29, 2015 | 154,151 | $ 299 | (14,652) | 909 | 393,579 | (226,343) | 359 |
Ending Balance, Common Shares at Mar. 29, 2015 | 28,710,056 | ||||||
Beginning Balance at Dec. 27, 2015 | $ 130,213 | $ 303 | (50,000) | 909 | 399,458 | (221,246) | 789 |
Beginning Balance, Common Shares at Dec. 27, 2015 | 26,304,261 | 26,304,261 | |||||
Net income | $ 1,128 | 1,088 | 40 | ||||
Exercise of stock options | $ 558 | $ 1 | 557 | ||||
Exercise of stock options, Shares | 59,000 | 58,971 | |||||
Excess tax benefits associated with exercise of stock options | $ 6 | 6 | |||||
Repurchases of common stock | $ (4,359) | (4,359) | |||||
Repurchases of common stock, Shares | (333,950) | (333,950) | |||||
Amortization of stock-based compensation | $ 677 | 677 | |||||
Ending Balance at Mar. 27, 2016 | $ 128,223 | $ 304 | $ (54,359) | $ 909 | $ 400,698 | $ (220,158) | $ 829 |
Ending Balance, Common Shares at Mar. 27, 2016 | 26,029,282 | 26,029,282 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 1,128 | $ 536 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation | 5,664 | 5,151 |
Deferred income tax | 70 | 34 |
Deferred rent and landlord allowances | 207 | 602 |
Amortization of stock compensation expense | 677 | 538 |
Excess tax benefit from stock-based compensation | (6) | |
Asset impairment, store closure and disposal of property and equipment | 17 | 399 |
Amortization of debt issuance costs | 7 | 18 |
Changes in operating assets and liabilities: | ||
Accounts receivable, net | 304 | (1,195) |
Inventories | 208 | 170 |
Prepaid expenses and other assets | 1,180 | (155) |
Accounts payable | (2,068) | (52) |
Accrued and other liabilities | 4,505 | 4,107 |
Net cash provided by operating activities | 11,893 | 10,153 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (6,618) | (8,163) |
Net cash (used in) investing activities | (6,618) | (8,163) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Payments on note payable | (21) | |
Proceeds from exercise of stock options | 627 | 1,284 |
Payment of payroll taxes related to stock-based compensation awards | (69) | (214) |
Treasury stock repurchase | (4,359) | (4,406) |
Excess tax benefit from stock-based compensation | 6 | |
Contributions from non-controlling interest | 88 | |
Net cash (used in) financing activities | (3,795) | (3,269) |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 1,480 | (1,279) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 32,006 | 63,005 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 33,486 | 61,726 |
Supplemental cash flow information: | ||
Income taxes paid | 429 | 17 |
Interest paid | 22 | 58 |
Supplemental non-cash investing and financing activities: | ||
Unpaid liability for purchases of property and equipment | $ 1,457 | $ 4,138 |
Organization and Other Matters
Organization and Other Matters | 3 Months Ended |
Mar. 27, 2016 | |
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 28 states and the District of Columbia. 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, and in July 2015, the Company opened its first franchise shop in the United Kingdom. The table below sets forth a rollforward of company-operated and franchise-operated activities: Company- Franchise-Operated Total Operated Domestic International Total Company Shops as of December 28, 2014 334 17 12 29 363 Shops opened 7 — — — 7 Shops closed (2 ) — — — (2 ) Shops as of March 29, 2015 339 17 12 29 368 Shops as of December 27, 2015 372 24 12 36 408 Shops opened 5 2 — 2 7 Shops as of March 27, 2016 377 26 12 38 415 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 27, 2015. 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 March 27, 2016 and December 27, 2015, its statement of operations for the 13 weeks ended March 27, 2016 and March 29, 2015 and its statement of cash flows for the 13 weeks ended March 27, 2016 and March 29, 2015 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 recorded within its consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income 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”); 18 of LLC’s wholly owned subsidiaries and LLC’s four 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 four 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 2016 and 2015 each consist of 52 weeks. The fiscal quarters ended March 27, 2016 and March 29, 2015 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 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 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. The Company is evaluating the effect this guidance will have on the Company’s consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its financial statements and disclosures. 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 the Company’s management to evaluate whether there is substantial doubt about the Company’s 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 the Company’s financial statements and disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which will replace the existing guidance in ASC 840, “Leases”. The pronouncement requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The pronouncement is effective for fiscal years beginning after December 15, 2018, including annual and interim periods thereafter. In addition, the pronouncement requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. The Company is evaluating the impact this standard will have on its financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-04, “Recognition of Breakage for Certain Prepaid Stored-Value Products”. This pronouncement clarifies when it is acceptable to recognize the unredeemed portion of prepaid gift cards into income. This pronouncement is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is evaluating the impact this standard will have on its financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The pronouncement simplifies the accounting for the taxes related to stock-based compensation, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification within the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016, including annual and interim periods thereafter. The Company is evaluating the impact this standard will have on its financial statements and disclosures. |
Fair Value Measurement
Fair Value Measurement | 3 Months Ended |
Mar. 27, 2016 | |
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, on a quarterly basis or 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 is 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. The Company did not record an impairment charge for the 13 weeks ended March 27, 2016 and recorded an impairment charge of $0.3 million for the 13 weeks ended March 29, 2015. 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 March 27, 2016, the fair value of the investments in the rabbi trust was $0.1 million, 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 13 weeks ended March 27, 2016 and March 29, 2015, the Company recorded no gains or losses on investments held in the rabbi trust. |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 27, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Share | (3) Earnings per share Basic and diluted income per share are calculated using the weighted average number of shares outstanding for the period as follows: For the 13 Weeks Ended March 27, March 29, 2016 2015 Net income attributable to Potbelly Corporation $ 1,088 $ 531 Weighted average common shares outstanding-basic 26,259,593 28,905,084 Plus: Effect of potential stock options exercise 427,550 710,280 Plus: Effect of potential warrant exercise 45,912 59,668 Weighted average common shares outstanding-diluted 26,733,055 29,675,032 Income per share available to common stockholders-basic $ 0.04 $ 0.02 Income per share available to common stockholders-diluted $ 0.04 $ 0.02 Potentially dilutive shares that are considered anti-dilutive: Common share options 1,472,785 726,673 Warrants — — |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 27, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (4) Income Taxes The Company recognized income tax expense of $0.7 million on pre-tax income of $1.9 million, or an effective tax rate of 39.4%, for the 13 weeks ended March 27, 2016, compared to income tax expense of $0.4 million on pre-tax income of $0.9 million, or an effective tax rate of 39.6%, for the 13 weeks ended March 29, 2015. The difference between the federal 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 | 3 Months Ended |
Mar. 27, 2016 | |
Equity [Abstract] | |
Capital Stock | (5) Capital Stock On September 8, 2015, the Company’s Board of Directors authorized a share repurchase program of up to $35.0 million of the Company’s common stock. This program replaced the previously authorized share repurchase program, which was completed in the third quarter of 2015. Under the current 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 March 27, 2016, the Company repurchased 333,950 shares of its common stock for approximately $4.4 million, including cost and commission, in open market transactions. As of March 27, 2016, the remaining dollar value of authorization under the new share repurchase program was $15.7 million, which does not include commission. 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 | 3 Months Ended |
Mar. 27, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock-Based Compensation | (6) Stock-Based Compensation Throughout the 13 weeks ended March 27, 2016, the Company issued 317,789 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 13 weeks ended March 27, 2016 was $7.10 per share, as estimated using the following weighted average assumptions: expected life of options – seven years; volatility – 49.49%; risk-free interest rate – 1.69%; and dividend yield – 0.0%. The Company used the simplified method for determining the expected life of the options. Beginning October 2015, expected volatility of the options was calculated using the Company’s historical data since its initial public offering. Prior to October 2015, the Company calculated expected volatility of the options based on historical data from selected peer public company restaurants. A summary of activity for the 13 weeks ended March 27, 2016 is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 27, 2015 4,368 $ 10.53 $ 9,742 5.10 Granted 318 13.71 Exercised (59 ) 9.46 Canceled (31 ) 14.03 Outstanding—March 27, 2016 4,596 10.74 $ 12,952 5.20 Exercisable—March 27, 2016 3,318 9.70 $ 12,120 3.85 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 fair value 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. In August 2015, the Company issued 5,221 shares of RSUs to the new non-employee member of its Board of Directors. The RSUs had a grant-date fair value of $11.88 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. |
Organization and Other Matters
Organization and Other Matters (Policies) | 3 Months Ended |
Mar. 27, 2016 | |
Accounting Policies [Abstract] | |
Business | Business Potbelly Corporation (the “Company” or “Potbelly”), through its wholly-owned subsidiaries, operates Potbelly Sandwich Works sandwich shops in 28 states and the District of Columbia. 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, and in July 2015, the Company opened its first franchise shop in the United Kingdom. The table below sets forth a rollforward of company-operated and franchise-operated activities: Company- Franchise-Operated Total Operated Domestic International Total Company Shops as of December 28, 2014 334 17 12 29 363 Shops opened 7 — — — 7 Shops closed (2 ) — — — (2 ) Shops as of March 29, 2015 339 17 12 29 368 Shops as of December 27, 2015 372 24 12 36 408 Shops opened 5 2 — 2 7 Shops as of March 27, 2016 377 26 12 38 415 |
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 27, 2015. 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 March 27, 2016 and December 27, 2015, its statement of operations for the 13 weeks ended March 27, 2016 and March 29, 2015 and its statement of cash flows for the 13 weeks ended March 27, 2016 and March 29, 2015 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 recorded within its consolidated financial statements, and, therefore, does not separately present a statement of comprehensive income 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”); 18 of LLC’s wholly owned subsidiaries and LLC’s four 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 four 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 2016 and 2015 each consist of 52 weeks. The fiscal quarters ended March 27, 2016 and March 29, 2015 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 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 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. The Company is evaluating the effect this guidance will have on the Company’s consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its financial statements and disclosures. 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 the Company’s management to evaluate whether there is substantial doubt about the Company’s 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 the Company’s financial statements and disclosures. In February 2016, the FASB issued ASU No. 2016-02, “Leases”, which will replace the existing guidance in ASC 840, “Leases”. The pronouncement requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use asset and a corresponding lease liability. For finance leases, the lessee would recognize interest expense and amortization of the right-of-use asset, and for operating leases, the lessee would recognize a straight-line total lease expense. The pronouncement is effective for fiscal years beginning after December 15, 2018, including annual and interim periods thereafter. In addition, the pronouncement requires the use of the modified retrospective method, which will require adjustment to all comparative periods presented in the consolidated financial statements. The Company is evaluating the impact this standard will have on its financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-04, “Recognition of Breakage for Certain Prepaid Stored-Value Products”. This pronouncement clarifies when it is acceptable to recognize the unredeemed portion of prepaid gift cards into income. This pronouncement is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is evaluating the impact this standard will have on its financial statements and disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The pronouncement simplifies the accounting for the taxes related to stock-based compensation, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification within the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016, including annual and interim periods thereafter. The Company is evaluating the impact this standard will have on its financial statements and disclosures. |
Organization and Other Matter14
Organization and Other Matters (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Summary of Company-Operated and Franchise-Operated Activities | The table below sets forth a rollforward of company-operated and franchise-operated activities: Company- Franchise-Operated Total Operated Domestic International Total Company Shops as of December 28, 2014 334 17 12 29 363 Shops opened 7 — — — 7 Shops closed (2 ) — — — (2 ) Shops as of March 29, 2015 339 17 12 29 368 Shops as of December 27, 2015 372 24 12 36 408 Shops opened 5 2 — 2 7 Shops as of March 27, 2016 377 26 12 38 415 |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of the Calculation of Weighted Average Shares Outstanding for Basic and Diluted Earnings per Share | Basic and diluted income per share are calculated using the weighted average number of shares outstanding for the period as follows: For the 13 Weeks Ended March 27, March 29, 2016 2015 Net income attributable to Potbelly Corporation $ 1,088 $ 531 Weighted average common shares outstanding-basic 26,259,593 28,905,084 Plus: Effect of potential stock options exercise 427,550 710,280 Plus: Effect of potential warrant exercise 45,912 59,668 Weighted average common shares outstanding-diluted 26,733,055 29,675,032 Income per share available to common stockholders-basic $ 0.04 $ 0.02 Income per share available to common stockholders-diluted $ 0.04 $ 0.02 Potentially dilutive shares that are considered anti-dilutive: Common share options 1,472,785 726,673 Warrants — — |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 27, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Summary of Activity Under Plans and Agreement | A summary of activity for the 13 weeks ended March 27, 2016 is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 27, 2015 4,368 $ 10.53 $ 9,742 5.10 Granted 318 13.71 Exercised (59 ) 9.46 Canceled (31 ) 14.03 Outstanding—March 27, 2016 4,596 10.74 $ 12,952 5.20 Exercisable—March 27, 2016 3,318 9.70 $ 12,120 3.85 |
Organization and Other Matter17
Organization and Other Matters - Additional Information (Detail) | 3 Months Ended |
Mar. 27, 2016StateSubsidiaryJointVenture | |
Nature Of Business And Basis Of Presentation [Line Items] | |
Number of sandwich works and shops operation states | State | 28 |
Number of wholly owned subsidiaries | Subsidiary | 18 |
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% |
Organization and Other Matter18
Organization and Other Matters - Summary of Company-Operated and Franchise-Operated Activities (Detail) - Store | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Franchisor Disclosure [Line Items] | ||
Shops at beginning | 408 | 363 |
Shops opened | 7 | 7 |
Shops closed | (2) | |
Shops at ending | 415 | 368 |
Company-Operated Shops [Member] | ||
Franchisor Disclosure [Line Items] | ||
Shops at beginning | 372 | 334 |
Shops opened | 5 | 7 |
Shops closed | (2) | |
Shops at ending | 377 | 339 |
Franchise-Operated Shops [Member] | ||
Franchisor Disclosure [Line Items] | ||
Shops at beginning | 36 | 29 |
Shops opened | 2 | |
Shops at ending | 38 | 29 |
Franchise-Operated Shops [Member] | Domestic Operations [Member] | ||
Franchisor Disclosure [Line Items] | ||
Shops at beginning | 24 | 17 |
Shops opened | 2 | |
Shops at ending | 26 | 17 |
Franchise-Operated Shops [Member] | International [Member] | ||
Franchisor Disclosure [Line Items] | ||
Shops at beginning | 12 | 12 |
Shops at ending | 12 | 12 |
Fair Value Measurement - Additi
Fair Value Measurement - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 29, 2015 | Mar. 27, 2016 | |
Fair Value Disclosures [Abstract] | ||
Impairment charges | $ 0.3 | |
Fair value of investments in rabbi trust | $ 0.1 |
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 | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Net income attributable to Potbelly Corporation | $ 1,088 | $ 531 |
Weighted average common shares outstanding-basic | 26,259,593 | 28,905,084 |
Plus: Effect of potential stock options exercise | 427,550 | 710,280 |
Plus: Effect of potential warrant exercise | 45,912 | 59,668 |
Weighted average common shares outstanding-diluted | 26,733,055 | 29,675,032 |
Income per share available to common stockholders-basic | $ 0.04 | $ 0.02 |
Income per share available to common stockholders-diluted | $ 0.04 | $ 0.02 |
Common Share Options [Member] | ||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Potentially dilutive shares that are considered anti-dilutive | 1,472,785 | 726,673 |
Warrants [Member] | ||
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
Potentially dilutive shares that are considered anti-dilutive | 0 | 0 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 27, 2016 | Mar. 29, 2015 | |
Income Tax Disclosure [Abstract] | ||
Income tax expense | $ 733 | $ 351 |
Income before income taxes | $ 1,861 | $ 887 |
Effective tax rate | 39.40% | 39.60% |
Capital Stock - Additional Info
Capital Stock - Additional Information (Detail) - USD ($) | 3 Months Ended | ||
Mar. 27, 2016 | Mar. 29, 2015 | Sep. 08, 2015 | |
Equity [Abstract] | |||
Stock repurchase program, authorized amount | $ 35,000,000 | ||
Common stock shares repurchased | 333,950 | ||
Common stock repurchased value | $ 4,359,000 | $ 4,406,000 | |
Remaining dollar value of authorization under the new share repurchase program | $ 15,700,000 |
Stock-Based Compensation - Addi
Stock-Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Aug. 31, 2015 | May. 31, 2015 | Mar. 27, 2016 | Mar. 29, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options issued | 318,000 | |||
Weighted average common stock fair value | $ 13.71 | |||
Recognized stock-based compensation expense | $ 677 | $ 538 | ||
Unrecognized stock compensation expense | $ 7,100 | |||
Unrecognized stock compensation expense, recognition period | Through 2,020 | |||
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 | 5,221 | 30,856 | ||
Restricted stock units issued, grant-date fair value | $ 11.88 | $ 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% | 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% | 50.00% | ||
2013 Long Term Incentive Plan [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options issued | 317,789 | |||
Weighted average common stock fair value | $ 7.10 | |||
Expected life of options | 7 years | |||
Volatility | 49.49% | |||
Risk-free interest rate | 1.69% | |||
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 | 3 Months Ended | 12 Months Ended |
Mar. 27, 2016 | Dec. 27, 2015 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||
Options Outstanding shares, Beginning balance | 4,368 | |
Options, Granted | 318 | |
Options, Exercised | (59) | |
Options, Canceled | (31) | |
Options Outstanding shares, Ending balance | 4,596 | 4,368 |
Options Outstanding shares, Exercisable | 3,318 | |
Options outstanding weighted average exercise price | $ 10.74 | $ 10.53 |
Options, Weighted Average Exercise Price, Granted | 13.71 | |
Options, Weighted Average Exercise Price, Exercised | 9.46 | |
Options, Weighted Average Exercise Price, Canceled | 14.03 | |
Options outstanding weighted average exercise price, Exercisable | $ 9.70 | |
Options Outstanding Aggregate Intrinsic value | $ 12,952 | $ 9,742 |
Options Exercisable Aggregate Intrinsic Value | $ 12,120 | |
Option Outstanding Weighted Average Remaining Term | 5 years 2 months 12 days | 5 years 1 month 6 days |
Options Exercisable Weighted Average Remaining Term | 3 years 10 months 6 days |