Document and Entity Information
Document and Entity Information - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 25, 2016 | Feb. 17, 2017 | Jun. 26, 2016 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 25, 2016 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | PBPB | ||
Entity Registrant Name | Potbelly Corporation | ||
Entity Central Index Key | 1,195,734 | ||
Current Fiscal Year End Date | --12-25 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 25,071,577 | ||
Entity Public Float | $ 250.6 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 25, 2016 | Dec. 27, 2015 |
Current assets | ||
Cash and cash equivalents | $ 23,379 | $ 32,006 |
Accounts receivable, net of allowances of $78 and $14 as of December 25, 2016 and December 27, 2015, respectively | 3,787 | 4,461 |
Inventories | 3,365 | 3,159 |
Prepaid expenses and other current assets | 8,020 | 10,155 |
Total current assets | 38,551 | 49,781 |
Property and equipment, net | 107,074 | 97,434 |
Indefinite-lived intangible assets | 3,404 | 3,404 |
Goodwill | 2,222 | 1,428 |
Deferred income taxes, non-current | 19,410 | 18,439 |
Deferred expenses, net and other assets | 4,784 | 4,021 |
Total assets | 175,445 | 174,507 |
Current liabilities | ||
Accounts payable | 3,111 | 5,762 |
Accrued expenses | 23,082 | 19,277 |
Accrued income taxes | 1,622 | 143 |
Total current liabilities | 27,815 | 25,182 |
Deferred rent and landlord allowances | 21,076 | 17,820 |
Other long-term liabilities | 2,318 | 1,292 |
Total liabilities | 51,209 | 44,294 |
Equity | ||
Common stock, $0.01 par value—authorized, 200,000,000 shares; outstanding 25,139,127 and 26,304,261 shares as of December 25, 2016 and December 27, 2015, respectively | 309 | 303 |
Warrants | 909 | 909 |
Additional paid-in-capital | 407,622 | 399,458 |
Treasury stock, held at cost, 5,753,412 and 4,033,910 shares as of December 25, 2016, and December 27, 2015, respectively | (72,321) | (50,000) |
Accumulated deficit | (213,034) | (221,246) |
Total stockholders’ equity | 123,485 | 129,424 |
Non-controlling interest | 751 | 789 |
Total equity | 124,236 | 130,213 |
Total liabilities and equity | $ 175,445 | $ 174,507 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 25, 2016 | Dec. 27, 2015 |
Statement Of Financial Position [Abstract] | ||
Allowances on accounts receivable | $ 78 | $ 14 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 200,000,000 | 200,000,000 |
Common stock, outstanding | 25,139,127 | 26,304,261 |
Treasury stock, shares | 5,753,412 | 4,033,910 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Revenues | |||
Sandwich shop sales, net | $ 404,874 | $ 370,954 | $ 325,464 |
Franchise royalties and fees | 2,257 | 1,895 | 1,515 |
Total revenues | 407,131 | 372,849 | 326,979 |
Sandwich shop operating expenses | |||
Cost of goods sold, excluding depreciation | 111,026 | 105,614 | 93,688 |
Labor and related expenses | 117,838 | 106,628 | 93,165 |
Occupancy expenses | 52,444 | 46,762 | 41,389 |
Other operating expenses | 43,738 | 39,869 | 34,669 |
General and administrative expenses | 40,411 | 37,322 | 32,420 |
Depreciation expense | 22,734 | 21,476 | 19,615 |
Pre-opening costs | 1,786 | 2,160 | 1,634 |
Impairment and loss on disposal of property and equipment | 4,141 | 3,589 | 3,128 |
Total expenses | 394,118 | 363,420 | 319,708 |
Income from operations | 13,013 | 9,429 | 7,271 |
Interest expense | 134 | 221 | 179 |
Income before income taxes | 12,879 | 9,208 | 7,092 |
Income tax expense | 4,443 | 3,466 | 2,748 |
Net income | 8,436 | 5,742 | 4,344 |
Net income (loss) attributable to non-controlling interest | 224 | 114 | (14) |
Net income attributable to Potbelly Corporation | $ 8,212 | $ 5,628 | $ 4,358 |
Net income per common share attributable to common stockholders: | |||
Basic | $ 0.32 | $ 0.20 | $ 0.15 |
Diluted | $ 0.31 | $ 0.20 | $ 0.14 |
Weighted average shares outstanding: | |||
Basic | 25,623,809 | 28,002,005 | 29,209,298 |
Diluted | 26,231,367 | 28,634,396 | 30,275,061 |
Consolidated Statements of Equi
Consolidated Statements of Equity - 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 | 4,344 | 4,358 | (14) | ||||
Issuance of unrestricted common stock | 432 | 432 | |||||
Issuance of unrestricted common stock, Shares | 28,240 | ||||||
Exercise of stock options | $ 5,059 | $ 7 | 5,052 | ||||
Exercise of stock options, Shares | 586,000 | 585,521 | |||||
Excess tax benefits associated with exercise of stock options | $ 1,300 | 1,300 | |||||
Repurchases of common stock | (10,246) | $ (10,246) | |||||
Repurchases of common stock, Shares | (827,090) | ||||||
Distributions to non-controlling interest | (46) | (46) | |||||
Contributions from non-controlling interest | 98 | 98 | |||||
Amortization of stock-based compensation | 2,111 | 2,111 | |||||
Ending Balance at Dec. 28, 2014 | 156,325 | $ 298 | (10,246) | 909 | 391,972 | (226,874) | 266 |
Ending Balance, Common Shares at Dec. 28, 2014 | 28,934,700 | ||||||
Net income | 5,742 | 5,628 | 114 | ||||
Exercise of stock options | $ 4,784 | $ 5 | 4,779 | ||||
Exercise of stock options, Shares | 576,000 | 576,381 | |||||
Excess tax benefits associated with exercise of stock options | $ 308 | 308 | |||||
Repurchases of common stock | (39,754) | (39,754) | |||||
Repurchases of common stock, Shares | (3,206,820) | ||||||
Distributions to non-controlling interest | (198) | (198) | |||||
Contributions from non-controlling interest | 607 | 607 | |||||
Amortization of stock-based compensation | 2,399 | 2,399 | |||||
Ending Balance at Dec. 27, 2015 | $ 130,213 | $ 303 | (50,000) | 909 | 399,458 | (221,246) | 789 |
Ending Balance, Common Shares at Dec. 27, 2015 | 26,304,261 | 26,304,261 | |||||
Net income | $ 8,436 | 8,212 | 224 | ||||
Exercise of stock options | $ 5,776 | $ 6 | 5,770 | ||||
Exercise of stock options, Shares | 536,000 | 536,332 | |||||
Common stock issued for stock-based compensation plans, Shares | 18,036 | ||||||
Excess tax deficiencies associated with exercise of stock options | $ (663) | (663) | |||||
Repurchases of common stock | $ (22,321) | (22,321) | |||||
Repurchases of common stock, Shares | (1,719,502) | (1,719,502) | |||||
Distributions to non-controlling interest | $ (413) | (413) | |||||
Contributions from non-controlling interest | 151 | 151 | |||||
Amortization of stock-based compensation | 3,057 | 3,057 | |||||
Ending Balance at Dec. 25, 2016 | $ 124,236 | $ 309 | $ (72,321) | $ 909 | $ 407,622 | $ (213,034) | $ 751 |
Ending Balance, Common Shares at Dec. 25, 2016 | 25,139,127 | 25,139,127 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ 8,436 | $ 5,742 | $ 4,344 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation | 22,734 | 21,476 | 19,615 |
Deferred income tax | (1,659) | (72) | (289) |
Deferred rent and landlord allowances | 3,256 | 3,808 | 1,787 |
Amortization of stock-based compensation | 3,057 | 2,399 | 2,543 |
Excess tax benefit from stock-based compensation | (31) | (308) | (1,300) |
Asset impairment, store closure and disposal of property and equipment | 4,243 | 3,818 | 3,679 |
Amortization of debt issuance costs | 34 | 11 | 70 |
Changes in operating assets and liabilities: | |||
Accounts receivable, net | 674 | (445) | (1,013) |
Inventories | (188) | (388) | (505) |
Prepaid expenses and other assets | 3,204 | (1,155) | (4,216) |
Accounts payable | (1,899) | 1,876 | 1,301 |
Accrued and other liabilities | 4,108 | 3,558 | 538 |
Net cash provided by operating activities | 45,969 | 40,320 | 26,554 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Acquisition of franchise shop | (1,108) | (333) | |
Purchases of property and equipment | (36,712) | (35,725) | (29,209) |
Net cash used in investing activities | (37,820) | (36,058) | (29,209) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Payments on note payable | (1,008) | (84) | |
Proceeds from exercise of stock options | 6,165 | 5,825 | 6,137 |
Payment of payroll taxes related to stock-based compensation awards | (389) | (1,041) | (1,078) |
Excess tax benefit from stock-based compensation | 31 | 308 | 1,300 |
Treasury stock repurchase | (22,321) | (39,754) | (10,246) |
Contributions from non-controlling interest | 151 | 607 | 98 |
Distributions to non-controlling interest | (413) | (198) | (46) |
Net cash used in financing activities | (16,776) | (35,261) | (3,919) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (8,627) | (30,999) | (6,574) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 32,006 | 63,005 | 69,579 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | 23,379 | 32,006 | 63,005 |
Supplemental cash flow information : | |||
Income taxes paid | 3,663 | 2,376 | 3,232 |
Interest paid | 108 | 183 | 179 |
Supplemental non-cash investing and financing activities : | |||
Unpaid liability for purchases of property and equipment | $ 2,727 | $ 3,395 | $ 2,690 |
Organization and Other Matters
Organization and Other Matters | 12 Months Ended |
Dec. 25, 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 29 states and the District of Columbia. The Company also sells and administers franchises of Potbelly Sandwich Works sandwich shops. The first franchise locations administered by the Company opened during February 2011. In July 2015, the Company opened its first franchise shop in the United Kingdom, and in October 2016, the Company opened its first franchise shop in Canada. Additionally, during each of July 2015 and April 2016, the Company transitioned one franchise shop into a company-operated shop for a purchase price of $0.3 million and $1.1 million, respectively. The Company did not record any goodwill related to the July 2015 transaction and recorded $0.8 million of goodwill related to the April 2016 transaction. The Company believes both acquisitions are immaterial. Initial Public Offering On October 9, 2013, the Company completed an initial public offering (“IPO”) of 8,625,000 shares of common stock, which included 1,125,000 shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares. The Company sold 8,474,869 shares of common stock and certain stockholders sold 150,131 shares of common stock. The Company received net proceeds from the offering of approximately $108.8 million, after deducting the underwriting discount and other offering expenses. The Company did not receive any proceeds from the shares sold by the selling stockholders. The Company used the net proceeds received from the sale of its shares to pay a previously-declared one-time cash dividend of $49.9 million on shares outstanding on October 8, 2013 and also to repay borrowings of approximately $14.0 million under its senior credit facility. During fiscal year 2014, the Company used approximately $10.2 million of the net proceeds to repurchase common stock pursuant to the share repurchase program authorized by the Company’s Board of Directors on August 1, 2014. The remaining proceeds were used in fiscal year 2015 for share repurchases, working capital, and general corporate purposes. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 25, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | (2) Summary of Significant Accounting Policies (a) Principles of Consolidation The 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”); eight of LLC’s wholly owned subsidiaries and LLC’s five 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 five joint venture investments. The Company has ownership interests ranging from 51-80% in these consolidated joint ventures. 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. (b) Reporting Period 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 years 2014, 2015 and 2016 each consisted of 52 weeks. (c) Segment Reporting The Company owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company also has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. As the CODM reviews financial performance and allocates resources at a consolidated level on a recurring basis, the Company has one operating segment and one reportable segment. (d) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“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. (e) Fair Value Measurements The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company assumes the highest and best use of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs other than quoted prices in active markets for identical assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3—Inputs that are both unobservable and significant to the overall fair value measurement reflect an entity’s estimates of assumptions that market participants would use in pricing the asset or liability. (f) Financial Instruments The Company records all financial instruments at cost, which is the fair value at the date of transaction. The amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate their fair value because of the short-term maturities of these instruments. (g) Cash and Cash Equivalents The Company considers all highly liquid investment instruments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits; however, the Company has not experienced any losses in these accounts. The Company believes it is not exposed to any significant credit risk. These are valued within the fair value hierarchy as Level 1 measurements. (h) Accounts Receivable, net Accounts receivable, net consists of credit card receivables, amounts owed from vendors and miscellaneous receivables. The Company had credit card receivables of $2.0 million and $1.6 million as of December 27, 2015 and December 25, 2016, respectively. (i) Inventories Inventories, which consist of food products, paper goods and supplies, and promotional items, are valued at the lower of cost (first-in, first-out) or market. No adjustment is deemed necessary to reduce inventory to the lower of cost or market value due to the rapid turnover and high utilization of inventory. (j) Property and Equipment Property and equipment acquired is recorded at cost less accumulated depreciation. Property and equipment is depreciated based on the straight-line method over the estimated useful lives, generally ranging from three to five years for furniture and fixtures, computer equipment, computer software, and machinery and equipment. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease life, generally 10 to 15 years. For leases with renewal periods at the Company’s option, the Company determines the expected lease period based on whether the renewal of any options are reasonably assured at the inception of the lease. Direct costs and expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized, whereas the costs of repairs and maintenance are expensed when incurred. The Company capitalizes certain internal costs associated with the development, design, and construction of new shop locations as these costs have a future benefit to the Company. The Company capitalized costs of $0.9 million, $0.6 million and $0.6 million for the fiscal years ended December 28, 2014, December 27, 2015 and December 25, 2016, respectively. Capitalized costs are recorded as part of the asset to which they relate, primarily to leasehold improvements, and such costs are amortized over the asset’s useful life. When assets are retired or sold, the asset cost and related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss is recorded in the consolidated statement of operations. 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 used a weighted average cost of capital to discount the future cash flows. After performing periodic reviews of the company-operated shops during each quarter of 2014, 2015 and 2016, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance. The Company performed an impairment analysis related to these shops and recorded impairment charges of $2.9 million, $3.4 million and $4.0 million for the fiscal years 2014, 2015 and 2016, respectively, which is included in impairment and loss on disposal of property and equipment in the consolidated statements of operations. (k) Intangible Assets The Company reviews indefinite-lived intangible assets, which includes goodwill and tradenames, annually at fiscal year-end for impairment or more frequently if events or circumstances indicate that the carrying value may not be recoverable. An impaired asset is written down to its estimated fair value based on the most recent information available. The Company assesses the fair values of its intangible assets, and its reporting unit for goodwill testing purposes, using both an income-based approach and a market approach. Under the income approach, fair value is based on the present value of estimated future cash flows. The income approach is dependent on a number of factors, including forecasted revenues and expenses, appropriate discount rates and other variables. The market approach measures fair value by comparison to the observed fair values of comparable companies, adjusted for the relative size and profitability of these comparable companies. The annual impairment review utilizes the estimated fair value of the intangible assets and the overall reporting unit and compares the estimated fair values to the carrying values as of the testing date. If the carrying value of these intangible assets or the reporting unit exceeds the fair values, the Company would then use the fair values to measure the amount of any required impairment charge. No impairment charge was recognized for intangible assets for any of the fiscal periods presented. (l) Pre-opening Costs Pre-opening costs consist of costs incurred prior to opening a new shop and are made up primarily of travel, employee payroll and training costs incurred prior to the shop opening, as well as occupancy costs incurred from when the Company takes site possession to shop opening. Shop pre-opening costs are expensed as incurred. (m) Advertising Expenses Advertising costs are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations. Advertising expenses were $2.2 million, $2.9 million and $3.0 million in fiscal years 2014, 2015 and 2016, respectively. (n) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are attributable to differences between financial statement and income tax reporting. Deferred tax assets, net of any valuation allowances, represent the future tax return consequences of those differences and for operating loss and tax credit carryforwards, which will be deductible when the assets are recovered. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment of realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. The Company accounts for uncertain tax positions under current accounting guidance, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by tax authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. (o) Stock-Based Compensation The Company has granted stock options under its 2001 Equity Incentive Plan (the “2001 Plan”), 2004 Equity Incentive Plan (the “2004 Plan”) and 2013 Long-Term Incentive Plan, as amended (the “2013 Plan” and together with the 2004 Plan and 2001 Plan, the “Plans”). The Plans permit the granting of awards to employees and non-employee officers, consultants, agents, and independent contractors of the Company in the form of stock appreciation rights, stock awards, and stock options. The Plans give broad powers to the Company’s board of directors to administer and interpret the Plans, including the authority to select the individuals to be granted options and rights and to prescribe the particular form and conditions of each option to be granted. In September 2011, the 2001 Plan expired with options outstanding under the plan still available for exercise. On July 31, 2013, the Company’s board of directors approved the adoption of the 2013 Plan, which replaced the 2004 Plan in conjunction with the Company’s IPO. Upon approval of the 2013 Plan, the Company no longer issued awards under the 2004 Plan. The 2004 Plan expired in February 2014, but will continue to govern outstanding awards granted prior to its termination. The Company accounts for its stock-based employee compensation in accordance with Accounting Standards Codification (“ASC”) 718, Stock Based Compensation (p) Leases The Company leases retail shops, warehouse and office space under operating leases. Most lease agreements contain tenant improvement allowances, rent holidays, lease premiums, rent escalation clauses, and/or contingent rent provisions. For purposes of recognizing incentives, premiums, and minimum rental expenses on a straight-line basis over the terms of the leases, the Company uses the date it takes possession of the leased space for construction purposes as the beginning of the term, which is generally two to three months prior to a shop’s opening date. For leases with renewal periods at the Company’s option, the Company determines the expected lease period based on whether the renewal of any options are reasonably assured at the inception of the lease. In addition to rental expense, certain leases require the Company to pay a portion of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. For tenant improvement allowances, rent escalations, and rent holidays, the Company records a deferred rent liability in its consolidated balance sheets and amortizes the deferred rent over the terms of the leases as reductions to occupancy expense in the consolidated statements of operations. (q) Revenue Recognition Revenue from retail shops are presented net of discounts and recognized when food and beverage products are sold. Sales taxes collected from customers are excluded from revenues and the obligation is included in accrued liabilities until the taxes are remitted to the appropriate taxing authorities. Revenues from the Company’s gift cards are deferred and were previously recognized upon redemption or after a period of 36 months of inactivity on gift card balances (“gift card breakage”) and the Company does not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions. The Company monitors its actual patterns of redemption and updates its estimates and assumptions regarding redemption as the actual pattern changes. The Company estimates and records gift card breakage income based on its historical redemption pattern. The Company recognized an immaterial amount of gift card breakage income for the fiscal years ended 2014, 2015 and 2016, which is recorded within other operating expenses in the consolidated statements of operations. The Company earns an initial franchise fee, a franchise development agreement fee and ongoing royalty fees under the Company’s franchise agreements. Initial franchise fee revenue is recognized at the point a franchise shop opens for business to the public, as this is the point in time when the Company has substantially performed all initial services required under the franchise agreement. The Company recognized franchise fee revenue of $0.3 million, $0.4 million and $0.4 million in fiscal year 2014, 2015 and 2016, respectively. Initial franchise fee payments received by the Company before the shop opens are recorded as deferred revenue in the consolidated balance sheet. The Company had deferred revenue related to initial franchise fees of $0.5 million and $0.7 million included in accrued expenses as of December 27, 2015 and December 25, 2016, respectively. Franchise development agreement fee represents the exclusivity rights for a geographical area paid by a third party to develop Potbelly shops for a certain period of time. Franchise development agreement fee payments received by the Company are recorded as deferred revenue in the consolidated balance sheet and amortized over the life of the franchise development agreement. The Company had deferred revenue related to franchise development agreement fees of $0.4 million recorded as accrued expenses as of December 27, 2015 and December 25, 2016. Royalty fees are based on a percentage of sales and are recorded as revenue as the fees are earned and become receivable from the franchisee. The Company recognized royalty fees revenue of $1.2 million, $1.5 million and $1.9 million for fiscal years 2014, 2015, and 2016, respectively. (r) Recent Accounting Pronouncements 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 beginning after December 15, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20 in March 2016, April 2016, May 2016, and December 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the overall impact that ASU 2014-09 will have on the Company's consolidated financial statements, as well as the expected timing and method of adoption. Based on a preliminary assessment, the Company has determined that the adoption will not have a material impact on sandwich shop sales, but may impact gift card breakage income. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related 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 currently evaluating the impact ASU 2016-02 will have on its financial position, results of operations and cash flows but expect that it will result in a material increase in its long-term assets and liabilities given the Company has a significant number of leases. 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. If the Company would have adopted this standard for fiscal 2016, it would have had the effect of increasing income tax expense by $0.7 million for the year. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The objective of this pronouncement is to eliminate the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. The pronouncement is effective for annual periods beginning after December 15, 2017, including annual and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2016-15 is not expected to have a material effect on the Company’s financial statements and disclosures. (s) Commitments and Contingencies As previously disclosed in prior reports filed with the SEC, the Company received notice of a potential claim alleging that the Company violated the Fair Labor Standards Act by not paying overtime to its assistant managers, whom the Company has classified as exempt employees. Although the Company has always believed that its assistant managers are properly classified as exempt under both federal and state laws, and have always intended to defend any such lawsuits vigorously, the Company agreed to mediate the matter. On February 20, 2017, the parties entered into a Settlement Agreement and Release whereby participating assistant managers will release the Company from all federal and/or state wage and hour claims in exchange for a gross settlement amount of $1.3 million. As part of the settlement process, a complaint was filed on February 17, 2017 in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, and a motion seeking the Court's preliminary approval of the settlement was filed on February 21, 2017. As of December 25, 2016, the Company recorded a liability of $1.3 million for this matter. The settlement of this action did not have a material adverse effect on our financial position or results of operations and cash flows. The Company is subject to legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to those actions should not have a material adverse impact on the Company’s financial position, results of operations or cash flows. Many of the food products the Company purchases are subject to changes in the price and availability of food commodities, including, among other things, beef, poultry, grains, dairy and produce. The Company works with its suppliers and uses a mix of forward pricing protocols for certain items including agreements with its supplier on fixed prices for deliveries at some time in the future and agreements on a fixed price with its supplier for the duration of that protocol. The Company also utilizes formula pricing protocols under which the prices the Company pays are based on a specified formula related to the prices of the goods, such as spot prices. The Company’s use of any forward pricing arrangements varies substantially from time to time and these arrangements tend to cover relatively short periods (i.e., typically twelve months or less). Such contracts are used in the normal purchases of the Company’s food products and not for speculative purposes, and as such are not required to be evaluated as derivative instruments. The Company does not enter into futures contracts or other derivative instruments. |
Fair Value Measurement
Fair Value Measurement | 12 Months Ended |
Dec. 25, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | (3) 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 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 the Company’s shops during each quarter of 2014, 2015 and 2016, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance of shop profitability. The Company performed an impairment analysis related to these shops and recorded impairment charges of $2.9 million, $3.4 million and $4.0 million for the fiscal years 2014, 2015 and 2016, respectively, related to the excess of the carrying amounts recorded on the Company’s consolidated balance sheet over the identified shops’ estimated fair values. |
Earnings per Share
Earnings per Share | 12 Months Ended |
Dec. 25, 2016 | |
Earnings Per Share [Abstract] | |
Earnings per Share | (4) Earnings per share Basic and diluted income per common share attributable to common stockholders are calculated using the weighted average number of common shares outstanding for the period. Diluted income per common share attributable to common stockholders is computed by dividing the income allocated to common stockholders by the weighted average number of fully diluted common shares outstanding. Fiscal Year 2016 2015 2014 Net income attributable to Potbelly Corporation $ 8,212 $ 5,628 $ 4,358 Weighted average common shares outstanding-basic 25,623,809 28,002,005 29,209,298 Plus: Effect of potential stock options exercise 549,578 577,156 949,142 Plus: Effect of potential warrant exercise 57,980 55,235 116,621 Weighted average common shares outstanding-diluted 26,231,367 28,634,396 30,275,061 Income per share available to common stockholders-basic $ 0.32 $ 0.20 $ 0.15 Income per share available to common stockholders-diluted $ 0.31 $ 0.20 $ 0.14 Potentially dilutive shares that are considered anti-dilutive: Common share options 1,164,047 898,966 622,879 Warrants — — — |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 25, 2016 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | (5) Property and Equipment Property and equipment, net consisted of the following (in thousands): December 25, December 27, 2016 2015 Leasehold improvements $ 170,196 $ 157,556 Machinery and equipment 47,668 42,840 Furniture and fixtures 32,561 28,605 Computer equipment and software 23,162 20,077 Construction in progress 5,601 3,074 279,188 252,152 Less: Accumulated depreciation (172,114 ) (154,718 ) $ 107,074 $ 97,434 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 25, 2016 | |
Accrued Liabilities Current [Abstract] | |
Accrued Expenses | (6) Accrued Expenses Accrued expenses consisted of the following (in thousands): December 25, December 27, 2016 2015 Accrued labor and related expenses $ 6,120 $ 7,482 Deferred gift card revenue 2,292 1,843 Accrued occupancy expenses 1,538 672 Deferred rent—current 706 813 Accrued corporate and shop expenses 2,255 1,961 Accrued utilities 1,094 1,035 Accrued sales and use tax 1,857 1,820 Accrued construction 2,329 2,271 Accrued contract termination costs (a) 28 21 Accrued legal and professional fees 1,756 136 Accrued other 3,107 1,223 Total $ 23,082 $ 19,277 (a) The Company incurs expenses associated with exit activity for certain signed lease agreements, which are recognized in general and administrative expenses. Accrued contract termination costs consisted of the following (in thousands): December 25, December 27, 2016 2015 Accrued contract termination costs—beginning balance $ 21 $ 801 Contract termination costs incurred 24 — Contract termination costs settled and paid (17 ) (780 ) Accrued contract termination costs—ending balance $ 28 $ 21 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 25, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | (7) Income Taxes Income before income taxes for the Company’s domestic and foreign operations was as follows (in thousands): Fiscal Year 2016 2015 2014 Domestic operations $ 12,411 $ 8,660 $ 6,627 Foreign operations 468 548 465 Total $ 12,879 $ 9,208 $ 7,092 Income tax expense consisted of the following (in thousands): Fiscal Year 2016 2015 2014 Federal: Current $ 4,652 $ 2,450 $ 2,386 Deferred (1,386 ) 209 (467 ) 3,266 2,659 1,919 State and Local: Current 1,426 1,047 622 Deferred (273 ) (281 ) 178 1,153 766 800 Foreign: Current 24 41 29 Deferred — — — 24 41 29 Income tax expense $ 4,443 $ 3,466 $ 2,748 Income tax expense differed from the amounts computed by applying the U.S. federal income tax rates to income before income taxes as a result of the following (in thousands): Fiscal Year 2016 2015 2014 Computed “expected” tax expense $ 4,508 $ 3,223 $ 2,411 Increase (reduction) resulting from: Minority interest (89 ) (45 ) — Permanent differences 131 51 97 State and local income taxes, net of federal income tax effect 673 533 460 FICA and other tax credits (556 ) (392 ) (222 ) Rate change and true-ups (a) (224 ) 164 2 Change in valuation allowance — (68 ) — $ 4,443 $ 3,466 $ 2,748 (a) The $(224) of rate changes and true-ups relates primarily to a favorable provision-to-return adjustment related to WOTC credits. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities reflected in the consolidated balance sheets are presented below (in thousands): December 25, December 27, 2016 2015 Deferred tax assets: Accrued liabilities $ 1,848 $ 2,074 Deferred revenue on gift certificates and gift cards 323 141 Stock-based compensation 8,104 8,261 Property and equipment depreciation 6,293 5,805 Deferred rent and start-up amortization 5,656 4,650 Other timing differences 234 273 FICA and other tax credits — 43 Total deferred tax assets 22,458 21,247 Less: valuation allowance — — Net deferred tax assets 22,458 21,247 Deferred tax liabilities: Prepaids (635 ) (547 ) Intangible asset (1,351 ) (1,226 ) Smallwares (801 ) (733 ) Other timing differences (261 ) (302 ) Total gross deferred tax liabilities (3,048 ) (2,808 ) Net deferred tax assets $ 19,410 $ 18,439 As of December 27, 2015 and December 25, 2016, the Company has no valuation allowances recorded based on management’s assessment of the amount of its deferred tax assets that are more likely than not to be realized. In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 27, 2015 and December 25, 2016, the Company had no interest or penalties accrued. The tax years prior to 2013 are generally closed for examination by the United States Internal Revenue Service. However, certain of these tax years are open for examination as a result of net operating losses generated in these years and utilized in subsequent years. The Company is currently under examination with the IRS for the 2014 tax year; no other IRS audits are currently ongoing. State statutes are generally open for audit for the 2012 to 2016 tax years. Additionally, certain tax years through 2016 are open for examination by certain state tax authorities. |
Long-term Debt
Long-term Debt | 12 Months Ended |
Dec. 25, 2016 | |
Debt Disclosure [Abstract] | |
Long-term Debt | (8) Long-term debt Note payable On March 15, 2007, the Company entered into a long-term note payable associated with the acquisition of certain assets of Pot Belly Deli, Inc., an unrelated California company, including the Pot Belly trade name, certain design marks, and other related assets. The Company records interest on the note payable under the effective interest method at an annual interest rate of 6.2% and recorded interest expense of $0.1 million in fiscal year 2014. The Company recorded an immaterial amount of interest expense on the note payable in fiscal year 2015. Payment of interest and principal is made monthly. The final repayment of the note was made on April 1, 2015. Credit facility JPMorgan Chase Bank, N.A. On December 9, 2015, the Company entered into an amended and restated five-year revolving credit facility agreement that expires in November 2020. The credit agreement provides, among other things, for a revolving credit facility in a maximum principal amount of $50 million, with possible future increases to $75 million under an expansion feature. Borrowings under the credit facility generally bear interest at the Company’s option at either (i) a eurocurrency rate determined by reference to the applicable LIBOR rate plus a margin ranging from 1.00% to 1.75% or (ii) a prime rate as announced by JP Morgan Chase plus a margin ranging from 0.00% to 0.50%. The applicable margin is determined based upon the Company’s consolidated total leverage ratio. On the last day of each calendar quarter, the Company is required to pay a commitment fee ranging from 0.125% to 0.20% per annum in respect of any unused commitments under the credit facility, with the specific rate determined based upon the Company’s consolidated total leverage ratio. So long as certain total leverage ratios are met, there is no limit on the “restricted payments” (primarily distributions and equity repurchases) that the Company may make. As of December 25, 2016, the Company has no amounts outstanding under the credit facility. As of and for the year ended December 25, 2016, the Company has $49.3 million available for borrowing under the credit facility after reductions for outstanding letters of credit. |
Capital Stock and Warrants
Capital Stock and Warrants | 12 Months Ended |
Dec. 25, 2016 | |
Equity [Abstract] | |
Capital Stock and Warrants | (9) Capital Stock and Warrants As of December 25, 2016 and December 27, 2015, the Company had authorized an aggregate of 210,000,000 shares of capital stock, of which 200,000,000 shares were designated as common stock and 10,000,000 shares were designated as preferred stock. As of December 25, 2016, the Company had issued and outstanding 30,892,539 and 25,139,127 shares of common stock, respectively. As of December 27, 2015, the Company had issued and outstanding 30,338,171 and 26,304,261 shares of common stock, respectively. Common Stock As of December 25, 2016, 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 September 8, 2016, the Company announced that its Board of Directors authorized a share repurchase program of up to $30.0 million of the Company’s common stock. The Company’s previous $35.0 million share repurchase program, authorized in September 2015, was completed in July 2016. The new program permits the Company, from time to time, to 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 fiscal year ended December 25, 2016, the Company repurchased 1,719,502 shares of its common stock for approximately $22.3 million, including cost and commission, in open market transactions. As of December 25, 2016, the remaining dollar value of authorization under the share repurchase program was $27.7 million, which does not include commission. Repurchased shares are included as treasury stock in the consolidated balance sheets and the consolidated statements of equity. Warrants As of December 27, 2015 and December 25, 2016, the Company had 241,704 warrants outstanding. During 2013, the Company modified 241,704 of warrants issued to Oxford Capital Partners, Inc. that were set to expire upon the consummation of an IPO to extend the expiration date of such warrants to five years from the date of the consummation of an IPO. In accordance with ASC Topic 718, Compensation—Stock Compensation |
Operating Leases
Operating Leases | 12 Months Ended |
Dec. 25, 2016 | |
Leases [Abstract] | |
Operating Leases | (10) Operating Leases The Company leases office space for its corporate office and commercial spaces for its shops under various long-term operating lease agreements. The leases for the Company’s shop locations generally have initial terms of 10 years and typically provide for two renewal options in five-year increments as well as for rent escalations. These leases expire or become subject to renewal clauses at various dates from 2017 to 2029. Some of the leases provide for base rent, plus additional rent based on gross sales, as defined in each lease agreement. The Company is also generally obligated to pay certain real estate taxes, utilities, building operating expenses, insurance, and various other expenses related to properties. Rental expense under operating lease agreements were as follows (in thousands): Fiscal Year 2016 2015 2014 Minimum rentals $ 40,252 $ 36,955 $ 33,032 Contingent rentals 1,755 1,827 1,765 Less: sublease rentals (94 ) (94 ) (94 ) Total $ 41,913 $ 38,688 $ 34,703 A schedule by year of future minimum rental payments required under operating leases, excluding contingent rent, that have initial or remaining non-cancelable lease terms in excess of one year, as of December 25, 2016, is as follows (in thousands): Years Ending Minimum 2017 $ 46,035 2018 42,583 2019 38,947 2020 36,818 2021 32,911 Thereafter 96,078 Total minimum payments required* $ 293,372 * Minimum payments have not been reduced by minimum sublease rentals of $0.2 million due in the future. Certain leases have outstanding letters of credit in lieu of rent deposits expiring at various dates through September 2017. The letters of credit were $0.6 million in aggregate for each of the years ended December 28, 2014 and December 27, 2015, and $0.7 million in aggregate for the year ended December 25, 2016. Under the credit facility, outstanding letters of credit are subject to an annual fee of 1.50% and reduce the available borrowing to the Company. |
Employee Benefit Plan
Employee Benefit Plan | 12 Months Ended |
Dec. 25, 2016 | |
Postemployment Benefits [Abstract] | |
Employee Benefit Plan | (11) Employee Benefit Plan The Company sponsors a 401(k) profit sharing plan for all employees who are eligible based upon age and length of service. The Company made matching contributions of $0.3 million for fiscal year 2014 and $0.4 million for fiscal years 2015 and 2016. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Dec. 25, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock Based Compensation | (12) Stock Based Compensation Stock Based Compensation Granted Under the 2001 and 2004 Equity Incentive Plans and 2013 Long-Term Incentive Plan The Company has granted stock options under its 2001 Equity Incentive Plan (the “2001 Plan”), 2004 Equity Incentive Plan (the “2004 Plan”) and 2013 Long-Term Incentive Plan, as amended (the “2013 Plan” and together with the 2004 Plan and 2001 Plan, the “Plans”). The Plans permit the granting of awards to employees and non-employee officers, consultants, agents, and independent contractors of the Company in the form of stock appreciation rights, stock awards, and stock options. The Plans give broad powers to the Company’s board of directors to administer and interpret the Plans, including the authority to select the individuals to be granted options and rights and to prescribe the particular form and conditions of each option to be granted. Under the 2001 Plan, the Company had 746,749 shares reserved for issuance. In 2007, the Company entered into a Stock Option Agreement (the “Agreement”), which granted a certain key executive 500,000 options of non-voting common stock. In September 2011, the 2001 Plan expired with options outstanding under the plan still available for exercise. As a result of the IPO, all shares of the non-voting common stock converted into voting common stock on a 1:1 basis upon exercise. On July 31, 2013, the Company’s board of directors approved the adoption of the 2013 Plan, which replaced the 2004 Plan in conjunction with the Company’s IPO. Upon approval of the 2013 Plan, the Company no longer issued awards under the 2004 Plan. The 2004 Plan expired in February 2014, but will continue to govern outstanding awards granted prior to its termination. As of December 25, 2016, there have been 1,646,991 options, 28,240 shares of unrestricted common stock and 88,635 shares of restricted stock units (“RSUs”) granted under the 2013 Plan and 1,099,191 shares are reserved for future issuance. Under the Plans, the number of shares and exercise price of each option are determined by the committee designated by the Company’s board of directors. The options granted are generally exercisable within a 10-year period from the date of grant. Certain options have been issued to key executives. Options issued and outstanding expire on various dates through the year 2026. The range of exercise prices of options outstanding as of December 25, 2016, is $7.00 to $20.53 per option, and the options vest over a range of immediately to five-year periods. Activity under the Plans and the Agreement is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 29, 2013 5,030 $ 9.41 $ 78,575 6.31 Granted 318 19.16 Exercised (586 ) 8.67 Canceled (149 ) 11.68 Outstanding—December 28, 2014 4,613 $ 10.10 $ 12,731 5.62 Granted 565 13.21 Exercised (576 ) 8.30 Canceled (234 ) 13.89 Outstanding—December 27, 2015 4,368 $ 10.53 $ 9,742 5.10 Granted 369 13.65 Exercised (536 ) 10.77 Canceled (188 ) 14.40 Outstanding—December 25, 2016 4,013 $ 10.61 $ 13,455 4.78 Vested and expected to vest—December 25, 2016 2,965 9.62 $ 10,182 3.54 Exercisable—December 25, 2016 2,989 $ 9.61 $ 12,675 3.60 The following table reflects the average assumptions utilized in the Black-Scholes option-pricing model to value the options granted for each year: 2016 2015 2014 Risk-free interest rate 1.7 % 1.9 % 1.3 % Expected life (years) 7.00 7.00 7.00 Expected dividend yield — — — Volatility 49.4 % 45.3 % 49.2 % Weighted average common stock fair value $ 13.65 $ 13.21 $ 19.16 The risk-free rate is based on U.S. Treasury rates in effect at the time of the grant with a similar duration of the expected life of the options. The expected life of options granted is derived from the average of the vesting period and the term of the option. The Company has not paid dividends to date (with exception to the one-time dividend paid to stockholders prior to the initial public offering) and does not plan to pay dividends in the near future. 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. During fiscal year 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 the common stock. In May 2015, the Company issued 30,856 shares of “RSUs” to certain non-employee members of its Board of Directors. The RSUs had a grant-date fair value of $14.26 upon issuance. 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. In May 2016, the Company issued 52,558 shares of RSUs to certain non-employee members of its Board of Directors. The RSUs had a grant-date fair value of $13.27 upon issuance. All issued RSUs have a vesting schedule of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date. Stock-based Compensation Expense In accordance with ASC Topic 718, Compensation—Stock Compensation |
Quarterly Financial Data (Unaud
Quarterly Financial Data (Unaudited) | 12 Months Ended |
Dec. 25, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Quarterly Financial Data (Unaudited) | (13) Quarterly Financial Data (Unaudited) The unaudited quarterly information includes all normal recurring adjustments that the Company considers necessary for a fair presentation of the information shown. The Company’s quarterly results have been and will continue to be affected by the timing of new shop openings and their associated pre-opening costs. As a result of these and other factors, the financial results for any quarter may not be indicative of the results for any future period. The following table presents selected unaudited quarterly financial data for periods indicated (in thousands, except per share data): Fiscal Year 2016 (1) March 27 June 26 September 25 December 25 Total revenues $ 95,955 $ 105,036 $ 103,782 $ 102,358 Income from operations 1,889 5,512 2,842 2,770 Net income attributable to Potbelly Corporation 1,088 3,373 1,795 1,956 Income per share available to common stockholders-basic 0.04 0.13 0.07 0.08 Income per share available to common stockholders-diluted 0.04 0.13 0.07 0.08 Fiscal Year 2015 (1) March 29 June 28 September 27 December 27 Total revenues $ 85,768 $ 95,949 $ 96,039 $ 95,093 Income from operations 948 4,084 2,379 2,018 Net income attributable to Potbelly Corporation 531 2,461 1,401 1,235 Income per share available to common stockholders-basic 0.02 0.09 0.05 0.05 Income per share available to common stockholders-diluted 0.02 0.08 0.05 0.05 (1) Fiscal years 2016 and 2015 were 52-week years. Each quarter of the fiscal year consists of 13 weeks. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 25, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | (14) Commitments and Contingencies As previously disclosed in prior reports filed with the SEC, the Company received notice of a potential claim alleging that the Company violated the Fair Labor Standards Act by not paying overtime to its assistant managers, whom the Company has classified as exempt employees. Although the Company has always believed that its assistant managers are properly classified as exempt under both federal and state laws, and have always intended to defend any such lawsuits vigorously, the Company agreed to mediate the matter. On February 20, 2017, the parties entered into a Settlement Agreement and Release whereby participating assistant managers will release the Company from all federal and/or state wage and hour claims in exchange for a gross settlement amount of $1.3 million. As part of the settlement process, a complaint was filed on February 17, 2017 in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, and a motion seeking the Court's preliminary approval of the settlement was filed on February 21, 2017. As of December 25, 2016, the Company recorded a liability of $1.3 million for this matter. The settlement of this action did not have a material adverse effect on our financial position or results of operations and cash flows. The Company is subject to legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to those actions should not have a material adverse impact on the Company’s financial position or results of operations and cash flows. |
Summary of Significant Accoun21
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 25, 2016 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | (a) Principles of Consolidation The 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”); eight of LLC’s wholly owned subsidiaries and LLC’s five 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 five joint venture investments. The Company has ownership interests ranging from 51-80% in these consolidated joint ventures. 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. |
Reporting Period | (b) Reporting Period 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 years 2014, 2015 and 2016 each consisted of 52 weeks. |
Segment Reporting | (c) Segment Reporting The Company owns and operates Potbelly Sandwich Works sandwich shops in the United States. The Company also has domestic and international franchise operations of Potbelly Sandwich Works sandwich shops. The Company’s chief operating decision maker (the “CODM”) is its Chief Executive Officer. As the CODM reviews financial performance and allocates resources at a consolidated level on a recurring basis, the Company has one operating segment and one reportable segment. |
Use of Estimates | (d) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States (“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. |
Fair Value Measurements | (e) Fair Value Measurements The Company applies fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company assumes the highest and best use of the asset by market participants in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: • Level 1—Quoted prices in active markets for identical assets or liabilities. • Level 2—Observable inputs other than quoted prices in active markets for identical assets or liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3—Inputs that are both unobservable and significant to the overall fair value measurement reflect an entity’s estimates of assumptions that market participants would use in pricing the asset or liability. |
Financial Instruments | (f) Financial Instruments The Company records all financial instruments at cost, which is the fair value at the date of transaction. The amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate their fair value because of the short-term maturities of these instruments. |
Cash and Cash Equivalents | (g) Cash and Cash Equivalents The Company considers all highly liquid investment instruments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash in bank deposit accounts that, at times, may exceed federally insured limits; however, the Company has not experienced any losses in these accounts. The Company believes it is not exposed to any significant credit risk. These are valued within the fair value hierarchy as Level 1 measurements. |
Accounts Receivable, net | (h) Accounts Receivable, net Accounts receivable, net consists of credit card receivables, amounts owed from vendors and miscellaneous receivables. The Company had credit card receivables of $2.0 million and $1.6 million as of December 27, 2015 and December 25, 2016, respectively. |
Inventories | (i) Inventories Inventories, which consist of food products, paper goods and supplies, and promotional items, are valued at the lower of cost (first-in, first-out) or market. No adjustment is deemed necessary to reduce inventory to the lower of cost or market value due to the rapid turnover and high utilization of inventory. |
Property and Equipment | (j) Property and Equipment Property and equipment acquired is recorded at cost less accumulated depreciation. Property and equipment is depreciated based on the straight-line method over the estimated useful lives, generally ranging from three to five years for furniture and fixtures, computer equipment, computer software, and machinery and equipment. Leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease life, generally 10 to 15 years. For leases with renewal periods at the Company’s option, the Company determines the expected lease period based on whether the renewal of any options are reasonably assured at the inception of the lease. Direct costs and expenditures for refurbishments and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized, whereas the costs of repairs and maintenance are expensed when incurred. The Company capitalizes certain internal costs associated with the development, design, and construction of new shop locations as these costs have a future benefit to the Company. The Company capitalized costs of $0.9 million, $0.6 million and $0.6 million for the fiscal years ended December 28, 2014, December 27, 2015 and December 25, 2016, respectively. Capitalized costs are recorded as part of the asset to which they relate, primarily to leasehold improvements, and such costs are amortized over the asset’s useful life. When assets are retired or sold, the asset cost and related accumulated depreciation are removed from the consolidated balance sheet and any gain or loss is recorded in the consolidated statement of operations. 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 used a weighted average cost of capital to discount the future cash flows. After performing periodic reviews of the company-operated shops during each quarter of 2014, 2015 and 2016, it was determined that indicators of impairment were present for certain shops as a result of continued underperformance. The Company performed an impairment analysis related to these shops and recorded impairment charges of $2.9 million, $3.4 million and $4.0 million for the fiscal years 2014, 2015 and 2016, respectively, which is included in impairment and loss on disposal of property and equipment in the consolidated statements of operations. |
Intangible Assets | (k) Intangible Assets The Company reviews indefinite-lived intangible assets, which includes goodwill and tradenames, annually at fiscal year-end for impairment or more frequently if events or circumstances indicate that the carrying value may not be recoverable. An impaired asset is written down to its estimated fair value based on the most recent information available. The Company assesses the fair values of its intangible assets, and its reporting unit for goodwill testing purposes, using both an income-based approach and a market approach. Under the income approach, fair value is based on the present value of estimated future cash flows. The income approach is dependent on a number of factors, including forecasted revenues and expenses, appropriate discount rates and other variables. The market approach measures fair value by comparison to the observed fair values of comparable companies, adjusted for the relative size and profitability of these comparable companies. The annual impairment review utilizes the estimated fair value of the intangible assets and the overall reporting unit and compares the estimated fair values to the carrying values as of the testing date. If the carrying value of these intangible assets or the reporting unit exceeds the fair values, the Company would then use the fair values to measure the amount of any required impairment charge. No impairment charge was recognized for intangible assets for any of the fiscal periods presented. |
Pre-opening Costs | (l) Pre-opening Costs Pre-opening costs consist of costs incurred prior to opening a new shop and are made up primarily of travel, employee payroll and training costs incurred prior to the shop opening, as well as occupancy costs incurred from when the Company takes site possession to shop opening. Shop pre-opening costs are expensed as incurred. |
Advertising Expenses | (m) Advertising Expenses Advertising costs are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations. Advertising expenses were $2.2 million, $2.9 million and $3.0 million in fiscal years 2014, 2015 and 2016, respectively. |
Income Taxes | (n) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are attributable to differences between financial statement and income tax reporting. Deferred tax assets, net of any valuation allowances, represent the future tax return consequences of those differences and for operating loss and tax credit carryforwards, which will be deductible when the assets are recovered. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment of realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. The Company accounts for uncertain tax positions under current accounting guidance, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by tax authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. |
Stock-Based Compensation | (o) Stock-Based Compensation The Company has granted stock options under its 2001 Equity Incentive Plan (the “2001 Plan”), 2004 Equity Incentive Plan (the “2004 Plan”) and 2013 Long-Term Incentive Plan, as amended (the “2013 Plan” and together with the 2004 Plan and 2001 Plan, the “Plans”). The Plans permit the granting of awards to employees and non-employee officers, consultants, agents, and independent contractors of the Company in the form of stock appreciation rights, stock awards, and stock options. The Plans give broad powers to the Company’s board of directors to administer and interpret the Plans, including the authority to select the individuals to be granted options and rights and to prescribe the particular form and conditions of each option to be granted. In September 2011, the 2001 Plan expired with options outstanding under the plan still available for exercise. On July 31, 2013, the Company’s board of directors approved the adoption of the 2013 Plan, which replaced the 2004 Plan in conjunction with the Company’s IPO. Upon approval of the 2013 Plan, the Company no longer issued awards under the 2004 Plan. The 2004 Plan expired in February 2014, but will continue to govern outstanding awards granted prior to its termination. The Company accounts for its stock-based employee compensation in accordance with Accounting Standards Codification (“ASC”) 718, Stock Based Compensation |
Leases | (p) Leases The Company leases retail shops, warehouse and office space under operating leases. Most lease agreements contain tenant improvement allowances, rent holidays, lease premiums, rent escalation clauses, and/or contingent rent provisions. For purposes of recognizing incentives, premiums, and minimum rental expenses on a straight-line basis over the terms of the leases, the Company uses the date it takes possession of the leased space for construction purposes as the beginning of the term, which is generally two to three months prior to a shop’s opening date. For leases with renewal periods at the Company’s option, the Company determines the expected lease period based on whether the renewal of any options are reasonably assured at the inception of the lease. In addition to rental expense, certain leases require the Company to pay a portion of real estate taxes, utilities, building operating expenses, insurance and other charges in addition to rent. For tenant improvement allowances, rent escalations, and rent holidays, the Company records a deferred rent liability in its consolidated balance sheets and amortizes the deferred rent over the terms of the leases as reductions to occupancy expense in the consolidated statements of operations. |
Revenue Recognition | (q) Revenue Recognition Revenue from retail shops are presented net of discounts and recognized when food and beverage products are sold. Sales taxes collected from customers are excluded from revenues and the obligation is included in accrued liabilities until the taxes are remitted to the appropriate taxing authorities. Revenues from the Company’s gift cards are deferred and were previously recognized upon redemption or after a period of 36 months of inactivity on gift card balances (“gift card breakage”) and the Company does not have a legal obligation to remit the value of the unredeemed gift cards to the relevant jurisdictions. The Company monitors its actual patterns of redemption and updates its estimates and assumptions regarding redemption as the actual pattern changes. The Company estimates and records gift card breakage income based on its historical redemption pattern. The Company recognized an immaterial amount of gift card breakage income for the fiscal years ended 2014, 2015 and 2016, which is recorded within other operating expenses in the consolidated statements of operations. The Company earns an initial franchise fee, a franchise development agreement fee and ongoing royalty fees under the Company’s franchise agreements. Initial franchise fee revenue is recognized at the point a franchise shop opens for business to the public, as this is the point in time when the Company has substantially performed all initial services required under the franchise agreement. The Company recognized franchise fee revenue of $0.3 million, $0.4 million and $0.4 million in fiscal year 2014, 2015 and 2016, respectively. Initial franchise fee payments received by the Company before the shop opens are recorded as deferred revenue in the consolidated balance sheet. The Company had deferred revenue related to initial franchise fees of $0.5 million and $0.7 million included in accrued expenses as of December 27, 2015 and December 25, 2016, respectively. Franchise development agreement fee represents the exclusivity rights for a geographical area paid by a third party to develop Potbelly shops for a certain period of time. Franchise development agreement fee payments received by the Company are recorded as deferred revenue in the consolidated balance sheet and amortized over the life of the franchise development agreement. The Company had deferred revenue related to franchise development agreement fees of $0.4 million recorded as accrued expenses as of December 27, 2015 and December 25, 2016. Royalty fees are based on a percentage of sales and are recorded as revenue as the fees are earned and become receivable from the franchisee. The Company recognized royalty fees revenue of $1.2 million, $1.5 million and $1.9 million for fiscal years 2014, 2015, and 2016, respectively. |
Recent Accounting Pronouncements | (r) Recent Accounting Pronouncements 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 beginning after December 15, 2017. In addition, the FASB issued ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20 in March 2016, April 2016, May 2016, and December 2016, respectively, to help provide interpretive clarifications on the new guidance in ASC Topic 606. The Company is currently evaluating the overall impact that ASU 2014-09 will have on the Company's consolidated financial statements, as well as the expected timing and method of adoption. Based on a preliminary assessment, the Company has determined that the adoption will not have a material impact on sandwich shop sales, but may impact gift card breakage income. The Company is continuing its assessment, which may identify additional impacts this standard will have on its consolidated financial statements and related 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 currently evaluating the impact ASU 2016-02 will have on its financial position, results of operations and cash flows but expect that it will result in a material increase in its long-term assets and liabilities given the Company has a significant number of leases. 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. If the Company would have adopted this standard for fiscal 2016, it would have had the effect of increasing income tax expense by $0.7 million for the year. In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The objective of this pronouncement is to eliminate the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on eight specific cash flow issues. The pronouncement is effective for annual periods beginning after December 15, 2017, including annual and interim periods thereafter. Early adoption is permitted. The adoption of ASU 2016-15 is not expected to have a material effect on the Company’s financial statements and disclosures. |
Commitments and Contingencies | (s) Commitments and Contingencies As previously disclosed in prior reports filed with the SEC, the Company received notice of a potential claim alleging that the Company violated the Fair Labor Standards Act by not paying overtime to its assistant managers, whom the Company has classified as exempt employees. Although the Company has always believed that its assistant managers are properly classified as exempt under both federal and state laws, and have always intended to defend any such lawsuits vigorously, the Company agreed to mediate the matter. On February 20, 2017, the parties entered into a Settlement Agreement and Release whereby participating assistant managers will release the Company from all federal and/or state wage and hour claims in exchange for a gross settlement amount of $1.3 million. As part of the settlement process, a complaint was filed on February 17, 2017 in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida, and a motion seeking the Court's preliminary approval of the settlement was filed on February 21, 2017. As of December 25, 2016, the Company recorded a liability of $1.3 million for this matter. The settlement of this action did not have a material adverse effect on our financial position or results of operations and cash flows. The Company is subject to legal proceedings, claims and liabilities, such as employment-related claims and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance. In the opinion of management, the amount of ultimate liability with respect to those actions should not have a material adverse impact on the Company’s financial position, results of operations or cash flows. Many of the food products the Company purchases are subject to changes in the price and availability of food commodities, including, among other things, beef, poultry, grains, dairy and produce. The Company works with its suppliers and uses a mix of forward pricing protocols for certain items including agreements with its supplier on fixed prices for deliveries at some time in the future and agreements on a fixed price with its supplier for the duration of that protocol. The Company also utilizes formula pricing protocols under which the prices the Company pays are based on a specified formula related to the prices of the goods, such as spot prices. The Company’s use of any forward pricing arrangements varies substantially from time to time and these arrangements tend to cover relatively short periods (i.e., typically twelve months or less). Such contracts are used in the normal purchases of the Company’s food products and not for speculative purposes, and as such are not required to be evaluated as derivative instruments. The Company does not enter into futures contracts or other derivative instruments. |
Earnings per Share (Tables)
Earnings per Share (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
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 | Fiscal Year 2016 2015 2014 Net income attributable to Potbelly Corporation $ 8,212 $ 5,628 $ 4,358 Weighted average common shares outstanding-basic 25,623,809 28,002,005 29,209,298 Plus: Effect of potential stock options exercise 549,578 577,156 949,142 Plus: Effect of potential warrant exercise 57,980 55,235 116,621 Weighted average common shares outstanding-diluted 26,231,367 28,634,396 30,275,061 Income per share available to common stockholders-basic $ 0.32 $ 0.20 $ 0.15 Income per share available to common stockholders-diluted $ 0.31 $ 0.20 $ 0.14 Potentially dilutive shares that are considered anti-dilutive: Common share options 1,164,047 898,966 622,879 Warrants — — — |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
Property Plant And Equipment [Abstract] | |
Components of Property and Equipment, Net | Property and equipment, net consisted of the following (in thousands): December 25, December 27, 2016 2015 Leasehold improvements $ 170,196 $ 157,556 Machinery and equipment 47,668 42,840 Furniture and fixtures 32,561 28,605 Computer equipment and software 23,162 20,077 Construction in progress 5,601 3,074 279,188 252,152 Less: Accumulated depreciation (172,114 ) (154,718 ) $ 107,074 $ 97,434 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
Accrued Liabilities Current [Abstract] | |
Summary of Accrued Expenses | Accrued expenses consisted of the following (in thousands): December 25, December 27, 2016 2015 Accrued labor and related expenses $ 6,120 $ 7,482 Deferred gift card revenue 2,292 1,843 Accrued occupancy expenses 1,538 672 Deferred rent—current 706 813 Accrued corporate and shop expenses 2,255 1,961 Accrued utilities 1,094 1,035 Accrued sales and use tax 1,857 1,820 Accrued construction 2,329 2,271 Accrued contract termination costs (a) 28 21 Accrued legal and professional fees 1,756 136 Accrued other 3,107 1,223 Total $ 23,082 $ 19,277 (a) The Company incurs expenses associated with exit activity for certain signed lease agreements, which are recognized in general and administrative expenses. Accrued contract termination costs consisted of the following (in thousands): December 25, December 27, 2016 2015 Accrued contract termination costs—beginning balance $ 21 $ 801 Contract termination costs incurred 24 — Contract termination costs settled and paid (17 ) (780 ) Accrued contract termination costs—ending balance $ 28 $ 21 |
Summary of Accrued Contract Termination Costs | Accrued contract termination costs consisted of the following (in thousands): December 25, December 27, 2016 2015 Accrued contract termination costs—beginning balance $ 21 $ 801 Contract termination costs incurred 24 — Contract termination costs settled and paid (17 ) (780 ) Accrued contract termination costs—ending balance $ 28 $ 21 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Before Income Taxes | Income before income taxes for the Company’s domestic and foreign operations was as follows (in thousands): Fiscal Year 2016 2015 2014 Domestic operations $ 12,411 $ 8,660 $ 6,627 Foreign operations 468 548 465 Total $ 12,879 $ 9,208 $ 7,092 |
Components of Income Tax Expense | Income tax expense consisted of the following (in thousands): Fiscal Year 2016 2015 2014 Federal: Current $ 4,652 $ 2,450 $ 2,386 Deferred (1,386 ) 209 (467 ) 3,266 2,659 1,919 State and Local: Current 1,426 1,047 622 Deferred (273 ) (281 ) 178 1,153 766 800 Foreign: Current 24 41 29 Deferred — — — 24 41 29 Income tax expense $ 4,443 $ 3,466 $ 2,748 |
Reconciliation of Differences Between Federal Statutory and Effective Income Tax Rate | Income tax expense differed from the amounts computed by applying the U.S. federal income tax rates to income before income taxes as a result of the following (in thousands): Fiscal Year 2016 2015 2014 Computed “expected” tax expense $ 4,508 $ 3,223 $ 2,411 Increase (reduction) resulting from: Minority interest (89 ) (45 ) — Permanent differences 131 51 97 State and local income taxes, net of federal income tax effect 673 533 460 FICA and other tax credits (556 ) (392 ) (222 ) Rate change and true-ups (a) (224 ) 164 2 Change in valuation allowance — (68 ) — $ 4,443 $ 3,466 $ 2,748 (a) The $(224) of rate changes and true-ups relates primarily to a favorable provision-to-return adjustment related to WOTC credits. |
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities reflected in the consolidated balance sheets are presented below (in thousands): December 25, December 27, 2016 2015 Deferred tax assets: Accrued liabilities $ 1,848 $ 2,074 Deferred revenue on gift certificates and gift cards 323 141 Stock-based compensation 8,104 8,261 Property and equipment depreciation 6,293 5,805 Deferred rent and start-up amortization 5,656 4,650 Other timing differences 234 273 FICA and other tax credits — 43 Total deferred tax assets 22,458 21,247 Less: valuation allowance — — Net deferred tax assets 22,458 21,247 Deferred tax liabilities: Prepaids (635 ) (547 ) Intangible asset (1,351 ) (1,226 ) Smallwares (801 ) (733 ) Other timing differences (261 ) (302 ) Total gross deferred tax liabilities (3,048 ) (2,808 ) Net deferred tax assets $ 19,410 $ 18,439 |
Operating Leases (Tables)
Operating Leases (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
Leases [Abstract] | |
Schedule Of Rental Expenses Under Operating Leases | Rental expense under operating lease agreements were as follows (in thousands): Fiscal Year 2016 2015 2014 Minimum rentals $ 40,252 $ 36,955 $ 33,032 Contingent rentals 1,755 1,827 1,765 Less: sublease rentals (94 ) (94 ) (94 ) Total $ 41,913 $ 38,688 $ 34,703 |
Schedule of Future Minimum Rental Payments Under Operating Leases | A schedule by year of future minimum rental payments required under operating leases, excluding contingent rent, that have initial or remaining non-cancelable lease terms in excess of one year, as of December 25, 2016, is as follows (in thousands): Years Ending Minimum 2017 $ 46,035 2018 42,583 2019 38,947 2020 36,818 2021 32,911 Thereafter 96,078 Total minimum payments required* $ 293,372 * Minimum payments have not been reduced by minimum sublease rentals of $0.2 million due in the future. |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Summary of Activity Under Plans and Agreement | Activity under the Plans and the Agreement is as follows: Options Shares (Thousands) Weighted Average Exercise Price Aggregate Intrinsic Value (Thousands) Weighted Average Remaining Term (Years) Outstanding—December 29, 2013 5,030 $ 9.41 $ 78,575 6.31 Granted 318 19.16 Exercised (586 ) 8.67 Canceled (149 ) 11.68 Outstanding—December 28, 2014 4,613 $ 10.10 $ 12,731 5.62 Granted 565 13.21 Exercised (576 ) 8.30 Canceled (234 ) 13.89 Outstanding—December 27, 2015 4,368 $ 10.53 $ 9,742 5.10 Granted 369 13.65 Exercised (536 ) 10.77 Canceled (188 ) 14.40 Outstanding—December 25, 2016 4,013 $ 10.61 $ 13,455 4.78 Vested and expected to vest—December 25, 2016 2,965 9.62 $ 10,182 3.54 Exercisable—December 25, 2016 2,989 $ 9.61 $ 12,675 3.60 |
Schedule of Average Assumptions to Value Options | The following table reflects the average assumptions utilized in the Black-Scholes option-pricing model to value the options granted for each year: 2016 2015 2014 Risk-free interest rate 1.7 % 1.9 % 1.3 % Expected life (years) 7.00 7.00 7.00 Expected dividend yield — — — Volatility 49.4 % 45.3 % 49.2 % Weighted average common stock fair value $ 13.65 $ 13.21 $ 19.16 |
Quarterly Financial Data (Una28
Quarterly Financial Data (Unaudited) (Tables) | 12 Months Ended |
Dec. 25, 2016 | |
Quarterly Financial Information Disclosure [Abstract] | |
Summary of Unaudited Quarterly Financial Data | The following table presents selected unaudited quarterly financial data for periods indicated (in thousands, except per share data): Fiscal Year 2016 (1) March 27 June 26 September 25 December 25 Total revenues $ 95,955 $ 105,036 $ 103,782 $ 102,358 Income from operations 1,889 5,512 2,842 2,770 Net income attributable to Potbelly Corporation 1,088 3,373 1,795 1,956 Income per share available to common stockholders-basic 0.04 0.13 0.07 0.08 Income per share available to common stockholders-diluted 0.04 0.13 0.07 0.08 Fiscal Year 2015 (1) March 29 June 28 September 27 December 27 Total revenues $ 85,768 $ 95,949 $ 96,039 $ 95,093 Income from operations 948 4,084 2,379 2,018 Net income attributable to Potbelly Corporation 531 2,461 1,401 1,235 Income per share available to common stockholders-basic 0.02 0.09 0.05 0.05 Income per share available to common stockholders-diluted 0.02 0.08 0.05 0.05 (1) Fiscal years 2016 and 2015 were 52-week years. Each quarter of the fiscal year consists of 13 weeks. |
Organization and Other Matters
Organization and Other Matters - Additional Information (Detail) | Oct. 09, 2013USD ($)shares | Oct. 08, 2013USD ($) | Apr. 30, 2016USD ($)Store | Jul. 31, 2015USD ($)Store | Dec. 25, 2016USD ($)State | Dec. 27, 2015USD ($) | Dec. 28, 2014USD ($) |
Nature Of Business And Basis Of Presentation [Line Items] | |||||||
Number of sandwich works and shops operation states | State | 29 | ||||||
Purchase price of transitioned franchise shop | $ 1,100,000 | $ 300,000 | $ 1,108,000 | $ 333,000 | |||
Goodwill | 2,222,000 | 1,428,000 | |||||
Cash dividend paid from proceeds from IPO | $ 49,900,000 | ||||||
Public offering proceeds used for repayments of debt | $ 14,000,000 | ||||||
Net Proceeds to repurchase of common stock | $ 22,321,000 | $ 39,754,000 | $ 10,246,000 | ||||
IPO [Member] | |||||||
Nature Of Business And Basis Of Presentation [Line Items] | |||||||
Public offering shares of common stock | shares | 8,625,000 | ||||||
Share sold by company | shares | 8,474,869 | ||||||
Net proceeds from IPO | $ 108,800,000 | ||||||
IPO [Member] | Underwritten Public Offering [Member] | |||||||
Nature Of Business And Basis Of Presentation [Line Items] | |||||||
Public offering shares of common stock | shares | 1,125,000 | ||||||
IPO [Member] | Shareholders' Equity [Member] | |||||||
Nature Of Business And Basis Of Presentation [Line Items] | |||||||
Share sold by stock holders through public offering | shares | 150,131 | ||||||
Company-Operated Shops [Member] | |||||||
Nature Of Business And Basis Of Presentation [Line Items] | |||||||
Number of franchise shop transitioned | Store | 1 | 1 | |||||
Franchise-Operated Shops [Member] | |||||||
Nature Of Business And Basis Of Presentation [Line Items] | |||||||
Goodwill | $ 800,000 | $ 0 |
Summary of Significant Accoun30
Summary of Significant Accounting Policies - Additional Information (Detail) | Feb. 21, 2017USD ($) | Dec. 25, 2016USD ($)SubsidiaryJointVentureSegment | Dec. 27, 2015USD ($) | Dec. 28, 2014USD ($) |
Summary Of Significant Accounting Policies [Line Items] | ||||
Number of wholly owned subsidiaries | Subsidiary | 8 | |||
Number of joint ventures | JointVenture | 5 | |||
Number of operating segments | Segment | 1 | |||
Number of reportable segments | Segment | 1 | |||
Credit card receivables | $ 1,600,000 | $ 2,000,000 | ||
Capitalized costs | 600,000 | 600,000 | $ 900,000 | |
Impairment charges | 4,000,000 | 3,400,000 | 2,900,000 | |
Recognized impairment for intangible assets | 0 | 0 | 0 | |
Advertising expenses | 3,000,000 | 2,900,000 | 2,200,000 | |
Initial franchise fee | 400,000 | 400,000 | 300,000 | |
Royalty fees revenue | 1,900,000 | 1,500,000 | $ 1,200,000 | |
Company recorded liability | 1,300,000 | |||
Subsequent Event [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Gross settlement amount | $ 1,300,000 | |||
ASU No. 2016-09 [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Effect of increasing income tax expense | 700,000 | |||
Initial Franchise Fees [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Deferred revenue | 700,000 | 500,000 | ||
Franchise Development Agreement [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Deferred revenue | $ 400,000 | $ 400,000 | ||
Minimum [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Ownership interest rate | 51.00% | |||
Estimated period of time between Company's possession of leased space and shop opening date | 2 months | |||
Minimum [Member] | Computer Software [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 3 years | |||
Minimum [Member] | Furniture and Fixtures [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 3 years | |||
Minimum [Member] | Computer Equipment [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 3 years | |||
Minimum [Member] | Machinery and Equipment [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 3 years | |||
Minimum [Member] | Leasehold Improvements [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 10 years | |||
Maximum [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Ownership interest rate | 80.00% | |||
Estimated period of time between Company's possession of leased space and shop opening date | 3 months | |||
Maximum [Member] | Computer Software [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 5 years | |||
Maximum [Member] | Furniture and Fixtures [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 5 years | |||
Maximum [Member] | Computer Equipment [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 5 years | |||
Maximum [Member] | Machinery and Equipment [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 5 years | |||
Maximum [Member] | Leasehold Improvements [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Property and equipment estimated useful life | 15 years |
Fair Value Measurement - Additi
Fair Value Measurement - Additional Information (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Fair Value Disclosures [Abstract] | |||
Impairment charges | $ 4 | $ 3.4 | $ 2.9 |
Earnings Per Share - Schedule o
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 ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 25, 2016 | Sep. 25, 2016 | Jun. 26, 2016 | Mar. 27, 2016 | Dec. 27, 2015 | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |||||||||||
Net income attributable to Potbelly Corporation | $ 1,956 | $ 1,795 | $ 3,373 | $ 1,088 | $ 1,235 | $ 1,401 | $ 2,461 | $ 531 | $ 8,212 | $ 5,628 | $ 4,358 |
Weighted average common shares outstanding-basic | 25,623,809 | 28,002,005 | 29,209,298 | ||||||||
Plus: Effect of potential stock options exercise | 549,578 | 577,156 | 949,142 | ||||||||
Plus: Effect of potential warrant exercise | 57,980 | 55,235 | 116,621 | ||||||||
Weighted average common shares outstanding-diluted | 26,231,367 | 28,634,396 | 30,275,061 | ||||||||
Income per share available to common stockholders-basic | $ 0.08 | $ 0.07 | $ 0.13 | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.09 | $ 0.02 | $ 0.32 | $ 0.20 | $ 0.15 |
Income per share available to common stockholders-diluted | $ 0.08 | $ 0.07 | $ 0.13 | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.08 | $ 0.02 | $ 0.31 | $ 0.20 | $ 0.14 |
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 | 1,164,047 | 898,966 | 622,879 | ||||||||
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 | 0 |
Property and Equipment - Compon
Property and Equipment - Components of Property and Equipment (Detail) - USD ($) $ in Thousands | Dec. 25, 2016 | Dec. 27, 2015 |
Property Plant And Equipment [Abstract] | ||
Leasehold improvements | $ 170,196 | $ 157,556 |
Machinery and equipment | 47,668 | 42,840 |
Furniture and fixtures | 32,561 | 28,605 |
Computer equipment and software | 23,162 | 20,077 |
Construction in progress | 5,601 | 3,074 |
Property and equipment, gross | 279,188 | 252,152 |
Less: Accumulated depreciation | (172,114) | (154,718) |
Property and equipment, net | $ 107,074 | $ 97,434 |
Accrued Expenses - Summary of A
Accrued Expenses - Summary of Accrued Expenses (Detail) - USD ($) $ in Thousands | Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 |
Accrued Liabilities And Other Liabilities [Abstract] | |||
Accrued labor and related expenses | $ 6,120 | $ 7,482 | |
Deferred gift card revenue | 2,292 | 1,843 | |
Accrued occupancy expenses | 1,538 | 672 | |
Deferred rent—current | 706 | 813 | |
Accrued corporate and shop expenses | 2,255 | 1,961 | |
Accrued utilities | 1,094 | 1,035 | |
Accrued sales and use tax | 1,857 | 1,820 | |
Accrued construction | 2,329 | 2,271 | |
Accrued contract termination costs | 28 | 21 | $ 801 |
Accrued legal and professional fees | 1,756 | 136 | |
Accrued other | 3,107 | 1,223 | |
Total | $ 23,082 | $ 19,277 |
Accrued Expenses - Summary of35
Accrued Expenses - Summary of Accrued Contract Termination Costs (Detail) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 25, 2016 | Dec. 27, 2015 | |
Accrued Liabilities And Other Liabilities [Abstract] | ||
Accrued contract termination costs—beginning balance | $ 21 | $ 801 |
Contract termination costs incurred | 24 | |
Contract termination costs settled and paid | (17) | (780) |
Accrued contract termination costs—ending balance | $ 28 | $ 21 |
Income Taxes - Schedule of Inco
Income Taxes - Schedule of Income Before Income Taxes (Detail) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Income Tax Disclosure [Abstract] | |||
Domestic operations | $ 12,411 | $ 8,660 | $ 6,627 |
Foreign operations | 468 | 548 | 465 |
Income before income taxes | $ 12,879 | $ 9,208 | $ 7,092 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Detail) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Income Tax Disclosure [Abstract] | |||
Federal, Current | $ 4,652 | $ 2,450 | $ 2,386 |
Federal, Deferred | (1,386) | 209 | (467) |
Federal, Total | 3,266 | 2,659 | 1,919 |
State and Local, Current | 1,426 | 1,047 | 622 |
State and Local, Deferred | (273) | (281) | 178 |
State and Local, Total | 1,153 | 766 | 800 |
Foreign, Current | 24 | 41 | 29 |
Foreign, Total | 24 | 41 | 29 |
Income tax expense | $ 4,443 | $ 3,466 | $ 2,748 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of Differences Between Federal Statutory and Effective Income Tax Rate (Detail) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Income Tax Disclosure [Abstract] | |||
Computed “expected” tax expense | $ 4,508 | $ 3,223 | $ 2,411 |
Minority interest | (89) | (45) | |
Permanent differences | 131 | 51 | 97 |
State and local income taxes, net of federal income tax effect | 673 | 533 | 460 |
FICA and other tax credits | (556) | (392) | (222) |
Rate change and true-ups | (224) | 164 | 2 |
Change in valuation allowance | (68) | ||
Income tax expense | $ 4,443 | $ 3,466 | $ 2,748 |
Income Taxes - Reconciliation39
Income Taxes - Reconciliation of Differences Between Federal Statutory and Effective Income Tax Rate (Parenthetical) (Detail) $ in Thousands | 12 Months Ended |
Dec. 25, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Favorable provision-to-return adjustment related to WOTC credits | $ (224) |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands | Dec. 25, 2016 | Dec. 27, 2015 |
Deferred tax assets: | ||
Accrued liabilities | $ 1,848 | $ 2,074 |
Deferred revenue on gift certificates and gift cards | 323 | 141 |
Stock-based compensation | 8,104 | 8,261 |
Property and equipment depreciation | 6,293 | 5,805 |
Deferred rent and start-up amortization | 5,656 | 4,650 |
Other timing differences | 234 | 273 |
FICA and other tax credits | 43 | |
Total deferred tax assets | 22,458 | 21,247 |
Net deferred tax assets | 22,458 | 21,247 |
Deferred tax liabilities: | ||
Prepaids | (635) | (547) |
Intangible asset | (1,351) | (1,226) |
Smallwares | (801) | (733) |
Other timing differences | (261) | (302) |
Total gross deferred tax liabilities | (3,048) | (2,808) |
Net deferred tax assets | $ 19,410 | $ 18,439 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) | 12 Months Ended | |
Dec. 25, 2016 | Dec. 27, 2015 | |
Income Tax [Line Items] | ||
Change in valuation allowance | $ (68,000) | |
Unrecognized tax benefits, income tax penalties and interest accrued | $ 0 | 0 |
Valuation Allowance Tax Credit Carryforward | ||
Income Tax [Line Items] | ||
Change in valuation allowance | $ 0 | $ 0 |
Long-term Debt - Additional Inf
Long-term Debt - Additional Information (Detail) - USD ($) | Dec. 09, 2015 | Dec. 25, 2016 | Dec. 28, 2014 |
J P Morgan Chase Bank N A [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Percentage of commitment fees based on credit facility | 0.125% | ||
J P Morgan Chase Bank N A [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Percentage of commitment fees based on credit facility | 0.20% | ||
J P Morgan Chase Bank N A [Member] | Senior Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Revolving credit facility agreement term period | 5 years | ||
Revolving credit facility agreement expiration date | Nov. 30, 2020 | ||
Credit facility, Maximum borrowing capacity | $ 50,000,000 | ||
Credit facility, possible future maximum borrowing capacity | $ 75,000,000 | ||
Credit facility outstanding amount | $ 0 | ||
Credit facility, remaining borrowing capacity | $ 49,300,000 | ||
J P Morgan Chase Bank N A [Member] | Senior Credit Facility [Member] | LIBOR [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 1.00% | ||
J P Morgan Chase Bank N A [Member] | Senior Credit Facility [Member] | LIBOR [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 1.75% | ||
J P Morgan Chase Bank N A [Member] | Senior Credit Facility [Member] | Prime Rate [Member] | Minimum [Member] | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 0.00% | ||
J P Morgan Chase Bank N A [Member] | Senior Credit Facility [Member] | Prime Rate [Member] | Maximum [Member] | |||
Debt Instrument [Line Items] | |||
Debt instrument, basis spread on variable rate | 0.50% | ||
Note Payable [Member] | |||
Debt Instrument [Line Items] | |||
Interest rate on notes payable under effective interest rate method | 6.20% | ||
Interest expense on note payable | $ 100,000 | ||
Final repayment of interest and principal | Apr. 1, 2015 |
Capital Stock and Warrants - Ad
Capital Stock and Warrants - Additional Information (Detail) - USD ($) | Dec. 29, 2013 | Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | Sep. 08, 2016 | Sep. 08, 2015 |
Equity [Abstract] | ||||||
Capital stock, authorized | 210,000,000 | 210,000,000 | ||||
Common stock, authorized | 200,000,000 | 200,000,000 | ||||
Preferred stock, authorized | 10,000,000 | 10,000,000 | ||||
Common stock, issued | 30,892,539 | 30,338,171 | ||||
Common stock, outstanding | 25,139,127 | 26,304,261 | ||||
Stock repurchase program, authorized amount | $ 30,000,000 | $ 35,000,000 | ||||
Common stock shares repurchased | 1,719,502 | |||||
Common stock repurchased value | $ 22,321,000 | $ 39,754,000 | $ 10,246,000 | |||
Remaining dollar value of authorization under the share repurchase program | $ 27,700,000 | |||||
Company warrants outstanding | 241,704 | 241,704 | ||||
Modification of warrants issued | 241,704 | |||||
Expiration date of warrants | 5 years | |||||
Recognized stock compensation expense | $ 100,000 |
Operating Leases - Additional I
Operating Leases - Additional Information (Detail) $ in Millions | 12 Months Ended | ||
Dec. 25, 2016USD ($)Option | Dec. 27, 2015USD ($) | Dec. 28, 2014USD ($) | |
Operating Leased Assets [Line Items] | |||
Initial operating lease period | 10 years | ||
Number of renewal options under operating leases | Option | 2 | ||
Operating lease rent increment term | 5 years | ||
Letters of credit in lieu of rent deposits | $ | $ 0.7 | $ 0.6 | $ 0.6 |
Letters of credit annual fee percentage | 1.50% | ||
Minimum [Member] | |||
Operating Leased Assets [Line Items] | |||
Operating lease period for expiration or renewal | 2,017 | ||
Maximum [Member] | |||
Operating Leased Assets [Line Items] | |||
Operating lease period for expiration or renewal | 2,029 |
Operating Leases - Schedule of
Operating Leases - Schedule of Rental Expenses Under Operating Leases (Detail) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Operating Leases Rent Expense [Abstract] | |||
Minimum rentals | $ 40,252 | $ 36,955 | $ 33,032 |
Contingent rentals | 1,755 | 1,827 | 1,765 |
Less: sublease rentals | (94) | (94) | (94) |
Total | $ 41,913 | $ 38,688 | $ 34,703 |
Operating Leases - Schedule o46
Operating Leases - Schedule of Future Minimum Rental Payments Under Operating Leases (Detail) $ in Thousands | Dec. 25, 2016USD ($) |
Leases [Abstract] | |
2,017 | $ 46,035 |
2,018 | 42,583 |
2,019 | 38,947 |
2,020 | 36,818 |
2,021 | 32,911 |
Thereafter | 96,078 |
Total minimum payments required | $ 293,372 |
Operating Leases - Schedule o47
Operating Leases - Schedule of Future Minimum Rental Payments Under Operating Leases (Parenthetical) (Detail) $ in Millions | Dec. 25, 2016USD ($) |
Leases [Abstract] | |
Minimum sublease rentals due in future | $ 0.2 |
Employee Benefit Plan - Additio
Employee Benefit Plan - Additional Information (Detail) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Defined Benefit Plans And Other Postretirement Benefit Plans Disclosures [Abstract] | |||
Contributions made to profit sharing plan | $ 0.4 | $ 0.4 | $ 0.3 |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 12 Months Ended | ||||
May 31, 2016 | Aug. 31, 2015 | May 31, 2015 | Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Non-voting Common stock conversion basis ratio | 100.00% | |||||
Weighted average share value of unrestricted common stock | $ 100 | |||||
Recognized stock-based compensation expense | 3,057 | $ 2,399 | $ 2,543 | |||
Unrecognized stock compensation expense | $ 5,200 | |||||
Unrecognized stock compensation expense, recognition period | Through 2,020 | |||||
Non-Employee Board Of Directors [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Issuance of unrestricted common stock | 28,240 | |||||
Weighted average grant-date share price | $ 15.29 | |||||
Weighted average share value of unrestricted common stock | $ 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 | 52,558 | 5,221 | 30,856 | |||
Restricted stock units issued, grant-date fair value | $ 13.27 | $ 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% | 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% | 50.00% | |||
Unrestricted Common Stock [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Recognized stock-based compensation expense | $ 400 | |||||
2001 Equity Incentive Plans [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares of common stock reserved for issuance | 746,749 | |||||
2001 Equity Incentive Plans [Member] | Non-Voting Common Stock [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares of common stock issued to key executive | 500,000 | |||||
2013 Long-Term Incentive Plan [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Shares of common stock reserved for issuance | 1,099,191 | |||||
Options granted | 1,646,991 | |||||
2013 Long-Term Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Restricted stock units issued | 88,635 | |||||
2013 Long-Term Incentive Plan [Member] | Unrestricted Common Stock [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Issuance of unrestricted common stock | 28,240 | |||||
2001 and 2004 Equity Incentive Plans and 2013 Long-Term Incentive Plan [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Exercise price of options outstanding, lower limit | $ 7 | |||||
Exercise price of options outstanding, higher limit | $ 20.53 | |||||
2001 and 2004 Equity Incentive Plans and 2013 Long-Term Incentive Plan [Member] | Maximum [Member] | ||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||
Exercisable period from the date of grant | 10 years | |||||
Options issued and outstanding, last expiration date | Dec. 31, 2026 | |||||
Options vesting period | 5 years |
Stock Based Compensation - Summ
Stock Based Compensation - Summary of Activity Under Plans and Agreement (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | |||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | Dec. 29, 2013 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||||
Options Outstanding shares, Beginning balance | 4,368 | 4,613 | 5,030 | |
Options, Granted | 369 | 565 | 318 | |
Options, Exercised | (536) | (576) | (586) | |
Options, Canceled | (188) | (234) | (149) | |
Options Outstanding shares, Ending balance | 4,013 | 4,368 | 4,613 | 5,030 |
Options Outstanding shares, Vested and expected to vest | 2,965 | |||
Options Outstanding shares, Exercisable | 2,989 | |||
Options outstanding weighted average exercise price, Beginning balance | $ 10.53 | $ 10.10 | $ 9.41 | |
Options, Weighted Average Exercise Price, Granted | 13.65 | 13.21 | 19.16 | |
Options, Weighted Average Exercise Price, Exercised | 10.77 | 8.30 | 8.67 | |
Options, Weighted Average Exercise Price, Canceled | 14.40 | 13.89 | 11.68 | |
Options outstanding weighted average exercise price, Ending balance | 10.61 | $ 10.53 | $ 10.10 | $ 9.41 |
Options outstanding weighted average exercise price, vested and expected to vest | 9.62 | |||
Options outstanding weighted average exercise price, Exercisable | $ 9.61 | |||
Options Outstanding Aggregate Intrinsic value | $ 13,455 | $ 9,742 | $ 12,731 | $ 78,575 |
Options Vested and Expected to Vest Aggregate Intrinsic Value | 10,182 | |||
Options Exercisable Aggregate Intrinsic Value | $ 12,675 | |||
Option Outstanding Weighted Average Remaining Term | 4 years 9 months 11 days | 5 years 1 month 6 days | 5 years 7 months 13 days | 6 years 3 months 22 days |
Options Vested and Expected to Vest Weighted Average Remaining Term | 3 years 6 months 15 days | |||
Options Exercisable Weighted Average Remaining Term | 3 years 7 months 6 days |
Stock Based Compensation - Sche
Stock Based Compensation - Schedule of Average Assumptions to Value Options (Detail) - $ / shares | 12 Months Ended | ||
Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Share Based Compensation Arrangement By Share Based Payment Award Fair Value Assumptions And Methodology [Abstract] | |||
Risk-free interest rate | 1.70% | 1.90% | 1.30% |
Expected life (years) | 7 years | 7 years | 7 years |
Expected dividend yield | 0.00% | 0.00% | 0.00% |
Volatility | 49.40% | 45.30% | 49.20% |
Weighted average common stock fair value | $ 13.65 | $ 13.21 | $ 19.16 |
Quarterly Financial Data (Una52
Quarterly Financial Data (Unaudited) - Summary of Unaudited Quarterly Financial Data (Detail) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 25, 2016 | Sep. 25, 2016 | Jun. 26, 2016 | Mar. 27, 2016 | Dec. 27, 2015 | Sep. 27, 2015 | Jun. 28, 2015 | Mar. 29, 2015 | Dec. 25, 2016 | Dec. 27, 2015 | Dec. 28, 2014 | |
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Total revenues | $ 102,358 | $ 103,782 | $ 105,036 | $ 95,955 | $ 95,093 | $ 96,039 | $ 95,949 | $ 85,768 | $ 407,131 | $ 372,849 | $ 326,979 |
Income from operations | 2,770 | 2,842 | 5,512 | 1,889 | 2,018 | 2,379 | 4,084 | 948 | 13,013 | 9,429 | 7,271 |
Net income attributable to Potbelly Corporation | $ 1,956 | $ 1,795 | $ 3,373 | $ 1,088 | $ 1,235 | $ 1,401 | $ 2,461 | $ 531 | $ 8,212 | $ 5,628 | $ 4,358 |
Income per share available to common stockholders-basic | $ 0.08 | $ 0.07 | $ 0.13 | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.09 | $ 0.02 | $ 0.32 | $ 0.20 | $ 0.15 |
Income per share available to common stockholders-diluted | $ 0.08 | $ 0.07 | $ 0.13 | $ 0.04 | $ 0.05 | $ 0.05 | $ 0.08 | $ 0.02 | $ 0.31 | $ 0.20 | $ 0.14 |
Commitment and Contingencies -
Commitment and Contingencies - Additional Information (Detail) - USD ($) $ in Millions | Feb. 21, 2017 | Dec. 25, 2016 |
Loss Contingencies [Line Items] | ||
Company recorded liability | $ 1.3 | |
Subsequent Event [Member] | ||
Loss Contingencies [Line Items] | ||
Gross settlement amount | $ 1.3 |