Document and Entity Information
Document and Entity Information Document and Entity Information - shares | 6 Months Ended | |
Jun. 28, 2016 | Aug. 01, 2016 | |
Document Information [Line Items] | ||
Entity Registrant Name | NOODLES & Co | |
Entity Central Index Key | 1,275,158 | |
Current Fiscal Year End Date | --01-03 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 28, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Common Class A [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 26,324,707 | |
Common Class B [Member] | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 1,522,098 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 28, 2016 | Dec. 29, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 1,893 | $ 1,912 |
Accounts receivable | 5,446 | 4,990 |
Inventories | 10,795 | 10,494 |
Prepaid expenses and other assets | 3,030 | 7,185 |
Income tax receivable | 778 | 820 |
Total current assets | 21,942 | 25,401 |
Property and equipment, net | 201,831 | 203,713 |
Deferred tax assets, net | 0 | 664 |
Goodwill | 6,400 | 6,400 |
Intangibles | 1,761 | 1,809 |
Other assets, net | 1,958 | 1,974 |
Total long-term assets | 211,950 | 214,560 |
Total assets | 233,892 | 239,961 |
Current liabilities: | ||
Accounts payable | 9,584 | 15,073 |
Accrued payroll and benefits | 7,157 | 5,417 |
Accrued expenses and other current liabilities | 11,348 | 12,424 |
Total current liabilities | 28,089 | 32,914 |
Long-term debt | 78,503 | 67,732 |
Deferred rent | 42,432 | 39,597 |
Deferred tax liabilities, net | 419 | 0 |
Other long-term liabilities | 5,161 | 5,946 |
Total liabilities | 154,604 | 146,189 |
Stockholders’ equity: | ||
Preferred stock—$0.01 par value, authorized 1,000,000 shares as of June 28, 2016 and December 29, 2015; no shares issued or outstanding | 0 | 0 |
Common stock—$0.01 par value, authorized 180,000,000 shares as of June 28, 2016 and December 29, 2015; 30,249,197 issued and 27,825,326 outstanding as of June 28, 2016 and 30,138,672 issued and 27,714,801 outstanding as of December 29, 2015 | 302 | 301 |
Treasury stock, at cost, 2,423,871 shares as of June 28, 2016 and December 29, 2015 | (35,000) | (35,000) |
Additional paid-in capital | 122,482 | 120,634 |
Accumulated other comprehensive loss | (7) | (134) |
(Accumulated deficit) retained earnings | (8,489) | 7,971 |
Total stockholders’ equity | 79,288 | 93,772 |
Total liabilities and stockholders’ equity | $ 233,892 | $ 239,961 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 28, 2016 | Dec. 29, 2015 |
Preferred stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock, shares, issued | 30,249,197 | 30,138,672 |
Common stock, shares, outstanding | 27,825,326 | 27,714,801 |
Treasury stock, shares | 2,423,871 | 2,423,871 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2016 | Jun. 30, 2015 | Jun. 28, 2016 | Jun. 30, 2015 | |
Revenue: | ||||
Restaurant revenue | $ 120,204 | $ 113,834 | $ 233,069 | $ 218,616 |
Franchising royalties and fees | 1,203 | 1,399 | 2,324 | 2,378 |
Total revenue | 121,407 | 115,233 | 235,393 | 220,994 |
Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||
Cost of sales | 32,164 | 29,863 | 62,353 | 57,674 |
Labor | 39,316 | 35,149 | 76,750 | 68,178 |
Occupancy | 13,688 | 12,480 | 27,002 | 24,698 |
Other restaurant operating costs | 18,596 | 15,158 | 35,488 | 29,875 |
General and administrative | 9,840 | 9,232 | 19,877 | 17,650 |
Depreciation and amortization | 7,071 | 6,923 | 13,977 | 13,843 |
Pre-opening | 796 | 1,162 | 1,833 | 2,042 |
Restaurant impairments, closure costs and asset disposals | 11,248 | 250 | 12,264 | 6,336 |
Total costs and expenses | 132,719 | 110,217 | 249,544 | 220,296 |
(Loss) income from operations | (11,312) | 5,016 | (14,151) | 698 |
Interest expense, net | 598 | 198 | 1,226 | 427 |
(Loss) income before income taxes | (11,910) | 4,818 | (15,377) | 271 |
Provision (benefit) for income taxes | 2,177 | 1,756 | 1,083 | (39) |
Net (loss) income | $ (14,087) | $ 3,062 | $ (16,460) | $ 310 |
(Loss) earnings per share of Class A and Class B common stock, combined: | ||||
Basic (USD per share) | $ (0.51) | $ 0.10 | $ (0.59) | $ 0.01 |
Diluted (USD per share) | $ (0.51) | $ 0.10 | $ (0.59) | $ 0.01 |
Weighted average shares of Class A and Class B common stock outstanding, combined: | ||||
Basic (in shares) | 27,776,094 | 29,950,122 | 27,754,615 | 29,896,663 |
Diluted (in shares) | 27,776,094 | 30,720,102 | 27,754,615 | 30,792,278 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2016 | Jun. 30, 2015 | Jun. 28, 2016 | Jun. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net (loss) income | $ (14,087) | $ 3,062 | $ (16,460) | $ 310 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustments | 22 | (1) | 127 | (12) |
Other comprehensive income (loss) | 22 | (1) | 127 | (12) |
Comprehensive (loss) income | $ (14,065) | $ 3,061 | $ (16,333) | $ 298 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 28, 2016 | Jun. 30, 2015 | |
Operating activities | ||
Net (loss) income | $ (16,460) | $ 310 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation and amortization | 13,977 | 13,843 |
Deferred income taxes | 1,083 | (1,544) |
Restaurant impairments, closure costs and asset disposals | 11,889 | 6,296 |
Amortization of debt issuance costs | 58 | 49 |
Stock-based compensation | 849 | 625 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (383) | 242 |
Inventories | (301) | (473) |
Prepaid expenses and other assets | 4,171 | (754) |
Accounts payable | (4,802) | (329) |
Deferred rent | 2,835 | 3,322 |
Income taxes | 42 | 1,130 |
Accrued expenses and other liabilities | (677) | (61) |
Net cash provided by operating activities | 12,281 | 22,656 |
Investing activities | ||
Purchases of property and equipment | (24,016) | (21,861) |
Acquisition of franchise restaurant | 0 | 628 |
Net cash used in investing activities | (24,016) | (22,489) |
Financing activities | ||
Proceeds from issuance of long-term debt | 205,620 | 182,326 |
Payments on long-term debt | (194,905) | (179,904) |
Proceeds from exercise of stock options, warrants and employee stock purchase plan | 876 | 1,792 |
Acquisition of treasury stock | 0 | 4,136 |
Other financing activities | (2) | (138) |
Net cash provided by (used in) financing activities | 11,589 | (60) |
Effect of exchange rate changes on cash | 127 | (12) |
Net (decrease) increase in cash and cash equivalents | (19) | 95 |
Cash and cash equivalents | ||
Beginning of period | 1,912 | 1,906 |
End of period | $ 1,893 | $ 2,001 |
Business Summary and Basis of P
Business Summary and Basis of Presentation | 6 Months Ended |
Jun. 28, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business Summary and Basis of Presentation | Business Summary and Basis of Presentation Business Noodles & Company (the “Company” or “Noodles & Company”), a Delaware corporation, develops and operates fast casual restaurants that serve globally inspired noodle and pasta dishes, soups, salads and sandwiches. As of June 28, 2016 , we had 443 company-owned restaurants and 71 franchise restaurants in 35 states, the District of Columbia and one Canadian province. The Company operates its business as one operating and reportable segment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Noodles & Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of December 29, 2015 was derived from audited financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2015 . Fiscal Year The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal year 2016 , which ends on January 3, 2017 , contains 53 weeks and fiscal year 2015 , which ended on December 29, 2015 , contained 52 weeks. Our fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. The Company’s fiscal quarter that ended June 28, 2016 is referred to as the second quarter of 2016, and the fiscal quarter ended June 30, 2015 is referred to as the second quarter of 2015. Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” The pronouncement amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheet and making targeted changes to lessor accounting. The pronouncement will be effective beginning in the first quarter of fiscal 2019, with early adoption permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact the adoption of this accounting standard will have on its financial position or results of operations and cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification of awards on the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016 and interim periods therein. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this accounting standard will have on its financial position or results of operations and cash flows and related disclosures. |
Supplemental Financial Informat
Supplemental Financial Information | 6 Months Ended |
Jun. 28, 2016 | |
Supplemental Financial Information [Abstract] | |
Supplemental Financial Information | Supplemental Financial Information Property and equipment, net, consists of the following (in thousands): June 28, December 29, Leasehold improvements $ 220,863 $ 216,474 Furniture, fixtures and equipment 124,662 120,132 Construction in progress 9,705 11,485 355,230 348,091 Accumulated depreciation and amortization (153,399 ) (144,378 ) $ 201,831 $ 203,713 |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 28, 2016 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt The Company has a credit facility with a borrowing capacity on the revolving line of credit of $100.0 million , expiring in June 2020. As of June 28, 2016 , the Company had $79.0 million outstanding and $18.3 million available for borrowing under the credit facility, which is net of outstanding letters of credit aggregating $2.7 million that reduces the amount available to borrow. The credit facility bore interest between 2.59% and 4.50% during the first two quarters of 2016 . On August 2, 2016, the Company entered into an amendment to its credit facility to revise the financial covenant levels and related definitions and make certain other changes, including an increase in the interest rate and commitment fee. All other material terms remained the same. We also maintain outstanding letters of credit to secure obligations under our workers’ compensation program and certain lease obligations. Giving effect to the amendment of our credit facility, as of June 28, 2016, we were in compliance with all of our debt covenants. |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 28, 2016 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and all other current liabilities approximate their fair values due to the short maturities of these instruments. The carrying amounts of borrowings approximate fair value as the line of credit and term borrowings vary with market interest rates and negotiated terms and conditions are consistent with current market rates. The fair value of the Company’s line of credit borrowings is measured using Level 2 inputs. Adjustments to the fair value of non-financial assets measured at fair value on a non-recurring basis as of June 28, 2016 and June 30, 2015 are discussed in Note 7, Restaurant Impairments, Closure Costs and Asset Disposals. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 28, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The following table presents the Company’s provision (benefit) for income taxes (in thousands): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Provision (benefit) for income taxes $ 2,177 $ 1,756 $ 1,083 $ (39 ) Effective tax rate (18.3 )% 36.5 % (7.0 )% 14.3 % During the second quarter of 2016, the Company determined that it was appropriate to record a valuation allowance against U.S. deferred tax assets due to uncertainty regarding the realizability of future tax benefits. During the second quarter of 2016, the Company recorded a valuation allowance of $0.7 million against U.S. deferred tax assets, reversed the benefit for income taxes recognized during the first quarter of 2016 of $1.3 million (exclusive of the Canadian valuation allowance recorded during the first quarter of 2016), and recognized a provision for income taxes for discrete and certain other items. This resulted in the Company recording a net provision for income taxes of $2.2 million during the second quarter of 2016. During the first two quarters of 2016, the Company recorded a valuation allowance of $0.9 million against U.S. and Canadian deferred tax assets and recognized a provision for income taxes for for discrete and certain other items. This resulted in the Company recording a net provision for income taxes of $1.1 million during the first two quarters of 2016. The Company will maintain the valuation allowance against deferred tax assets until there is sufficient evidence to support a full or partial reversal. The reversal of a previously recorded valuation allowance will generally result in a benefit to the effective tax rate. The effective tax rate for the second quarter of 2016 and the first two quarters of 2016 reflects the impact of a valuation allowance on deferred tax assets, which was not recorded during the second quarter of 2015 or the first two quarters of 2015. For the remainder of fiscal 2016, the Company does not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 28, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company’s Stock Incentive Plan, as amended and restated in May of 2013, authorizes the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and incentive bonuses to employees, officers, nonemployee directors and other service providers. The number of shares of common stock available for issuance pursuant to awards granted under the Stock Incentive Plan on or after the IPO shall not exceed 3,750,500 shares. The following table shows total stock-based compensation expense (in thousands): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Stock-based compensation expense $ 564 $ 512 $ 973 $ 699 Capitalized stock-based compensation expense $ 63 $ 59 $ 124 $ 99 |
Restaurant Impairment, Closure
Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals | 6 Months Ended |
Jun. 28, 2016 | |
Property, Plant and Equipment Impairment or Disposal [Abstract] | |
Restaurant Impairment, Closure Costs and Asset Disposals | Restaurant Impairments, Closure Costs and Asset Disposals The following table presents restaurant impairments, closure costs and asset disposals (in thousands): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Restaurant impairments (1) $ 10,346 $ 31 $ 10,541 $ 5,944 Closure costs (1) 538 32 1,087 71 Loss on disposal of assets and other 364 187 636 321 $ 11,248 $ 250 $ 12,264 $ 6,336 _____________________________ (1) Restaurant impairments and closure costs can include expenditures related to restaurants previously impaired or closed. During the first two quarters of 2016 , 12 restaurants were identified as impaired compared to eight restaurants during the first two quarters of 2015, primarily related to management’s current assessment of the expected future cash flows of various restaurants based on recent results. Impairment expense is a Level 3 fair value measure and was determined by comparing the carrying value of restaurant assets to the estimated fair market value of the restaurant assets at resale value. The closure costs of $0.5 million recognized during the second quarter of 2016 and $1.1 million recognized during the first two quarters of 2016 are related to the ongoing costs of the restaurants closed in the fourth quarter of 2015. These expenses are included in the “Restaurant impairments, closure costs and asset disposals” line in the Condensed Consolidated Statements of Operations. |
Earnings (Loss) Per Share
Earnings (Loss) Per Share | 6 Months Ended |
Jun. 28, 2016 | |
Earnings Per Share [Abstract] | |
Loss Per Share | arnings (Loss) Per Share Basic earnings per share (“EPS”) is calculated by dividing net income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during each period. Diluted EPS is calculated using net income (loss) available to common stockholders divided by diluted weighted-average shares of common stock outstanding during each period. Potentially dilutive securities include shares of common stock underlying stock options and restricted common stock. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Net (loss) income $ (14,087 ) $ 3,062 $ (16,460 ) $ 310 Shares: Basic weighted average shares outstanding 27,776,094 29,950,122 27,754,615 29,896,663 Effect of dilutive securities — 769,980 — 895,615 Diluted weighted average shares outstanding 27,776,094 30,720,102 27,754,615 30,792,278 (Loss) earnings per share: Basic (loss) earnings per share $ (0.51 ) $ 0.10 $ (0.59 ) $ 0.01 Diluted (loss) earnings per share $ (0.51 ) $ 0.10 $ (0.59 ) $ 0.01 The Company computes the effect of dilutive securities using the treasury stock method and average market prices during the period. Potential common shares are excluded from the computation of diluted earnings (loss) per share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss. The number of shares issuable on the exercise of share based awards excluded from the calculation of diluted earnings (loss) per share because the effect of their inclusion would have been anti-dilutive totaled 1,561,256 and 1,214,159 for the second quarters of 2016 and 2015, respectively, and totaled 1,559,515 and 809,711 for first two quarters of 2016 and 2015, respectively. |
Supplemental Disclosures to Con
Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows | 6 Months Ended |
Jun. 28, 2016 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows | Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows The following table presents the supplemental disclosures to the Condensed Consolidated Statements of Cash Flows for the two quarters ended June 28, 2016 and June 30, 2015 (in thousands): June 28, June 30, Interest paid (net of amounts capitalized) $ 860 $ 571 Income taxes (refunded) paid (42 ) 376 Changes in purchases of property and equipment accrued in accounts payable, net 873 827 |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 28, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Data Security Incident On June 28, 2016, the Company announced that a data security incident may have compromised the security of payment information of some customers who used debit or credit cards at certain Noodles & Company locations between January 31, 2016 and June 2, 2016. Credit and debit cards used at the affected locations are no longer at risk from the malware involved in this incident. The Company has been working to implement additional security procedures to further secure customers’ debit and credit card information. The Company has incurred costs associated with this security incident as of June 28, 2016, including legal fees, investigative fees and costs of communications with customers. In addition, payment card companies may issue assessments to the Company’s processor for card replacement and card issuer losses alleged to be associated with the security incident. The processor may then seek indemnity from the Company for these costs pursuant to contract. The Company expects that certain of such costs and assessments will be covered under the Company’s cyber liability insurance coverage. At this point, the Company is unable to predict the developments in, outcome of, and economic and other consequences of future litigation or regulatory investigations related to, and other costs associated with, this matter. The Company will continue to evaluate these matters in light of subsequent events, new information and future circumstances. Currently, the Company cannot reasonably estimate a loss associated with settlements of the payment card networks’ expected claims for non-ordinary course operating expenses or any amounts associated with the networks’ expected claims for alleged card issuer losses and/or card replacement costs because a loss associated with settling such claims, while probable in the Company’s judgment, is not reasonably estimable, in part because the Company has not yet received third-party card issuer loss reporting from the payment card networks. The Company is not able to reasonably estimate a range of possible losses related to an expected settlement of the payment card networks’ claims because the investigation into the matter is ongoing and there are significant factual and legal issues to be resolved. The Company believes that it is possible that the ultimate amount paid on payment card network claims, to the extent not covered by, or in excess of the limits of, the Company’s cyber liability insurance, could be material to its results of operations in future periods. The Company will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times when it is both probable that a loss has been incurred and the amount of the loss is reasonably estimable. In addition, the Company expects to incur significant legal and other professional services expenses associated with the data security incident in future periods. The Company will recognize these expenses as such services are received. Costs related to the data security incident that may be incurred in future periods may also include liabilities to payment card networks for reimbursements of credit card issuer losses and card reissuance costs; liabilities from future civil litigation, governmental investigations and enforcement proceedings; future expenses for legal, investigative and consulting fees and incremental expenses and capital investments for remediation activities. The Company believes that the ultimate amount paid on these services and claims could be material to the Company’s consolidated financial condition, results of operations or cash flows in future periods. To limit its exposure to losses arising from matters such as the data security incident, the Company maintained cyber liability insurance coverage during the period that the data security incident occurred. This coverage, and certain other customary business insurance coverage, has reduced the Company’s exposure related to the data security incident. The Company will pursue recoveries to the maximum extent available under these policies. Legal As the Company reported in our Quarterly Report on Form 10-Q for the quarter ended March 29, 2016, on March 10, 2016, Carrie Castillo, Anastassia Letourneau and Jacquelyn Myhre, former employees of the Company, filed a purported collective and class action lawsuit against the Company alleging violations of the Fair Labor Standards Act and Illinois and Minnesota wage laws (the “Labor Laws”) in the United States District Court for the Northern District of Illinois. The plaintiffs filed the case on their behalf and on behalf of all assistant general managers employed by the Company since January 5, 2013 whom the Company classified as exempt employees, and they allege that the Company violated the Labor Laws by not paying overtime compensation to its assistant general managers. The plaintiffs are seeking, on behalf of themselves and members of the putative class, unpaid overtime compensation, liquidated damages and available penalties under applicable state laws, a declaratory judgment, an injunction, and attorneys’ fees and costs. This case is at an early stage, and the Company is therefore unable to make a reasonable estimate of the probable loss or range of losses, if any, that might arise from this matter. The Company intends to vigorously defend this action. On February 10, 2016, Tammie Carter, a former employee of the Company, filed a purported collective and class action lawsuit against the Company alleging violations of the Fair Labor Standards Act and the Colorado Wage Order in the United States District Court for the District of Colorado. The plaintiff filed the case on her behalf and on behalf of all assistant general managers employed by us during the past three years whom the Company classified as exempt employees, and she alleged that the Company violated the Fair Labor Standards Act and the Colorado Wage Order by not paying overtime compensation to our assistant general managers. The plaintiff sought, on behalf of herself and members of the putative class, unpaid overtime compensation, damages (including liquidated and/or punitive damages), a declaratory judgment, an injunction, and attorneys’ fees and costs. The case was dismissed by the plaintiffs without prejudice on June 29, 2016. In the normal course of business, the Company is subject to other proceedings, lawsuits and claims. Such matters are subject to many uncertainties, and outcomes are not predictable. Consequently, the Company is unable to ascertain the ultimate aggregate amount of monetary liability or financial impact with respect to these matters as of June 28, 2016 . These matters could affect the operating results of any one financial reporting period when resolved in future periods. The Company believes that an unfavorable outcome with respect to these matters is remote or if an unfavorable result occurs, the potential range of loss is not material to its consolidated financial statements. Significant increases in the number of these claims, or one or more successful claims that result in greater liabilities than the Company currently anticipates, could materially and adversely affect our business, financial condition, results of operations or cash flows. |
Subsequent Event
Subsequent Event | 6 Months Ended |
Jun. 28, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Event | Subsequent Event On July 25, 2016, Kevin Reddy resigned as the Company’s Chief Executive Officer, as Chairman of the Company’s board of directors (the “Board”) and as a member of the Board. On the same date, the Board appointed Dave Boennighausen, the Company’s Chief Financial Officer, as the interim Chief Executive Officer of the Company and Robert Hartnett as the Non-Executive Chairman of the Board |
Business Summary and Basis of18
Business Summary and Basis of Presentation (Policies) | 6 Months Ended |
Jun. 28, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Business and Basis of Presentation | Business Noodles & Company (the “Company” or “Noodles & Company”), a Delaware corporation, develops and operates fast casual restaurants that serve globally inspired noodle and pasta dishes, soups, salads and sandwiches. As of June 28, 2016 , we had 443 company-owned restaurants and 71 franchise restaurants in 35 states, the District of Columbia and one Canadian province. The Company operates its business as one operating and reportable segment. Basis of Presentation The accompanying unaudited condensed consolidated financial statements include the accounts of Noodles & Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. In the opinion of the Company, all adjustments considered necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in the Company’s annual consolidated financial statements on Form 10-K have been condensed or omitted. The condensed consolidated balance sheet as of December 29, 2015 was derived from audited financial statements. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the audited financial statements and the related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2015 . |
Fiscal year | Fiscal Year The Company operates on a 52- or 53-week fiscal year ending on the Tuesday closest to December 31. Fiscal year 2016 , which ends on January 3, 2017 , contains 53 weeks and fiscal year 2015 , which ended on December 29, 2015 , contained 52 weeks. Our fiscal quarters each contain 13 operating weeks, with the exception of the fourth quarter of a 53-week fiscal year, which contains 14 operating weeks. The Company’s fiscal quarter that ended June 28, 2016 is referred to as the second quarter of 2016, and the fiscal quarter ended June 30, 2015 is referred to as the second quarter of 2015. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases.” The pronouncement amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheet and making targeted changes to lessor accounting. The pronouncement will be effective beginning in the first quarter of fiscal 2019, with early adoption permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after the date of initial application, with an option to use certain transition relief. The Company is currently evaluating the impact the adoption of this accounting standard will have on its financial position or results of operations and cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification of awards on the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016 and interim periods therein. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this accounting standard will have on its financial position or results of operations and cash flows and related disclosures. In March 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification of awards on the statement of cash flows. The pronouncement is effective for annual periods beginning after December 15, 2016 and interim periods therein. Early adoption is permitted. The Company is currently evaluating the impact the adoption of this accounting standard will have on its financial position or results of operations and cash flows and related disclosures. |
Supplemental Financial Inform19
Supplemental Financial Information (Tables) | 6 Months Ended |
Jun. 28, 2016 | |
Supplemental Financial Information [Abstract] | |
Schedule of Property and Equipment | Property and equipment, net, consists of the following (in thousands): June 28, December 29, Leasehold improvements $ 220,863 $ 216,474 Furniture, fixtures and equipment 124,662 120,132 Construction in progress 9,705 11,485 355,230 348,091 Accumulated depreciation and amortization (153,399 ) (144,378 ) $ 201,831 $ 203,713 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 28, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Provision for Income Taxes | The following table presents the Company’s provision (benefit) for income taxes (in thousands): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Provision (benefit) for income taxes $ 2,177 $ 1,756 $ 1,083 $ (39 ) Effective tax rate (18.3 )% 36.5 % (7.0 )% 14.3 % |
Stock-Based Compensation Stock-
Stock-Based Compensation Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 28, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-based compensation expense | The following table shows total stock-based compensation expense (in thousands): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Stock-based compensation expense $ 564 $ 512 $ 973 $ 699 Capitalized stock-based compensation expense $ 63 $ 59 $ 124 $ 99 |
Restaurant Impairment, Closur22
Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals (Tables) | 6 Months Ended |
Jun. 28, 2016 | |
Property, Plant and Equipment Impairment or Disposal [Abstract] | |
Impaired Assets to be Disposed of by Method Other than Sale | The following table presents restaurant impairments, closure costs and asset disposals (in thousands): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Restaurant impairments (1) $ 10,346 $ 31 $ 10,541 $ 5,944 Closure costs (1) 538 32 1,087 71 Loss on disposal of assets and other 364 187 636 321 $ 11,248 $ 250 $ 12,264 $ 6,336 _____________________________ (1) Restaurant impairments and closure costs can include expenditures related to restaurants previously impaired or closed. |
Earnings (Loss) Per Share (Tabl
Earnings (Loss) Per Share (Tables) | 6 Months Ended |
Jun. 28, 2016 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and Diluted Loss Per Share | The following table sets forth the computations of basic and diluted EPS (in thousands, except share and per share data): Fiscal Quarter Ended Two Fiscal Quarters Ended June 28, June 30, June 28, June 30, Net (loss) income $ (14,087 ) $ 3,062 $ (16,460 ) $ 310 Shares: Basic weighted average shares outstanding 27,776,094 29,950,122 27,754,615 29,896,663 Effect of dilutive securities — 769,980 — 895,615 Diluted weighted average shares outstanding 27,776,094 30,720,102 27,754,615 30,792,278 (Loss) earnings per share: Basic (loss) earnings per share $ (0.51 ) $ 0.10 $ (0.59 ) $ 0.01 Diluted (loss) earnings per share $ (0.51 ) $ 0.10 $ (0.59 ) $ 0.01 |
Supplemental Disclosures to C24
Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows (Tables) | 6 Months Ended |
Jun. 28, 2016 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Disclosures to the Consolidated Statements of Cash Flows | The following table presents the supplemental disclosures to the Condensed Consolidated Statements of Cash Flows for the two quarters ended June 28, 2016 and June 30, 2015 (in thousands): June 28, June 30, Interest paid (net of amounts capitalized) $ 860 $ 571 Income taxes (refunded) paid (42 ) 376 Changes in purchases of property and equipment accrued in accounts payable, net 873 827 |
Business Summary and Basis of25
Business Summary and Basis of Presentation (Details) | 6 Months Ended |
Jun. 28, 2016segmentprovincerestaurantstate | |
Franchisor Disclosure [Line Items] | |
Number of states with operations | state | 35 |
Number of Canadian provinces with operations | province | 1 |
Number of operating segments | segment | 1 |
Number of reportable segments | segment | 1 |
Company-Owned [Member] | |
Franchisor Disclosure [Line Items] | |
Number of restaurants | restaurant | 443 |
Franchise [Member] | |
Franchisor Disclosure [Line Items] | |
Number of restaurants | restaurant | 71 |
Supplemental Financial Inform26
Supplemental Financial Information (Details) - USD ($) $ in Thousands | Jun. 28, 2016 | Dec. 29, 2015 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 355,230 | $ 348,091 |
Accumulated depreciation and amortization | (153,399) | (144,378) |
Property and equipment, net | 201,831 | 203,713 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 220,863 | 216,474 |
Furniture, Fixtures, and Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 124,662 | 120,132 |
Construction in Progress [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 9,705 | $ 11,485 |
Long-Term Debt (Details)
Long-Term Debt (Details) | 6 Months Ended |
Jun. 28, 2016USD ($) | |
Line of Credit Facility [Line Items] | |
Maximum borrowing capacity | $ 100,000,000 |
Amount outstanding | 79,000,000 |
Remaining borrowing capacity | 18,300,000 |
Letters of credit outstanding | $ 2,700,000 |
Minimum [Member] | |
Line of Credit Facility [Line Items] | |
Interest rate | 2.59% |
Maximum [Member] | |
Line of Credit Facility [Line Items] | |
Interest rate | 4.50% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2016 | Jun. 30, 2015 | Jun. 28, 2016 | Jun. 30, 2015 | |
Income Tax Disclosure [Abstract] | ||||
Provision (benefit) for income taxes | $ 2,177 | $ 1,756 | $ 1,083 | $ (39) |
Effective tax rate | (18.30%) | 36.50% | (7.00%) | 14.30% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 28, 2016 | Mar. 29, 2016 | Jun. 30, 2015 | Jun. 28, 2016 | Jun. 30, 2015 | |
Tax Credit Carryforward [Line Items] | |||||
Income tax expense (benefit), excluding canada valuation allowance | $ 1,300 | ||||
Provision (benefit) for income taxes | $ 2,177 | $ 1,756 | $ 1,083 | $ (39) | |
UNITED STATES | |||||
Tax Credit Carryforward [Line Items] | |||||
Deferred tax assets, valuation allowance | 700 | 700 | |||
US and Canada | |||||
Tax Credit Carryforward [Line Items] | |||||
Deferred tax assets, valuation allowance | $ 900 | $ 900 |
Stock-Based Compensation Stoc30
Stock-Based Compensation Stock-Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 28, 2016 | Jun. 30, 2015 | Jun. 28, 2016 | Jun. 30, 2015 | May 31, 2013 | |
IPO [Member] | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Maximum shares reserved for issuance | 3,750,500 | ||||
Employee Stock Option [Member] | |||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | |||||
Allocated Share-based Compensation Expense | $ 564 | $ 512 | $ 973 | $ 699 | |
Capitalized stock based compensation expense | $ 63 | $ 59 | $ 124 | $ 99 |
Restaurant Impairment, Closur31
Restaurant Impairment, Closure Costs and Asset Disposals Restaurant Impairment, Closure Costs and Asset Disposals (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2016USD ($) | Jun. 30, 2015USD ($) | Jun. 28, 2016USD ($)restaurant | Jun. 30, 2015USD ($)restaurant | |
Property, Plant and Equipment Impairment or Disposal [Abstract] | ||||
Restaurant impairments | $ 10,346 | $ 31 | $ 10,541 | $ 5,944 |
Costs related to closure of restaurants | 538 | 32 | 1,087 | 71 |
Loss on disposal of assets and other | 364 | 187 | 636 | 321 |
Asset Disposals, Closure Costs and Restaurant Impairments | $ 11,248 | $ 250 | $ 12,264 | $ 6,336 |
Number of restaurants impaired during the comparable periods | restaurant | 12 | 8 |
Earnings (Loss) Per Share (Deta
Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2016 | Jun. 30, 2015 | Jun. 28, 2016 | Jun. 30, 2015 | |
Earnings Per Share [Abstract] | ||||
Net (loss) income | $ (14,087) | $ 3,062 | $ (16,460) | $ 310 |
Shares: | ||||
Basic weighted average shares outstanding (in shares) | 27,776,094 | 29,950,122 | 27,754,615 | 29,896,663 |
Effect of dilutive securities (in shares) | 0 | 769,980 | 0 | 895,615 |
Diluted weighted average number of shares outstanding (in shares) | 27,776,094 | 30,720,102 | 27,754,615 | 30,792,278 |
(Loss) earnings per share: | ||||
Basic loss per share (USD per share) | $ (0.51) | $ 0.10 | $ (0.59) | $ 0.01 |
Diluted loss per share (USD per share) | $ (0.51) | $ 0.10 | $ (0.59) | $ 0.01 |
Antidilutive securities excluded from computation of earnings per share | 1,561,256 | 1,214,159 | 1,559,515 | 809,711 |
Supplemental Disclosures to C33
Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 28, 2016 | Jun. 30, 2015 | |
Supplemental Cash Flow Elements [Abstract] | ||
Interest paid (net of amounts capitalized) | $ 860,000 | $ 571 |
Income taxes (refunded) paid | (42,000) | 376 |
Changes in purchases of property and equipment accrued in accounts payable, net | $ 873,000 | $ 827 |