pbpb-8k_20180930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 9, 2018

 

Potbelly Corporation

(Exact name of registrant as specified in its charter)

 

Commission File Number: 001-36104

 

 

 

 

Delaware

 

36-4466837

(State or other jurisdiction

of incorporation)

 

(IRS Employer

Identification No.)

111 N. Canal Street, Suite 850

Chicago, Illinois 60606

(Address of principal executive offices, including zip code)

(312) 951-0600

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 


Item 2.02.

Results of Operations and Financial Condition.

On November 9, 2018, Potbelly Corporation ("Potbelly") issued a press release disclosing earnings and other financial results for its third fiscal quarter ended September 30, 2018, and that as previously announced, its management would review these results in a conference call at 8:00 a.m. Eastern Time on November 9, 2018. The full text of the press release is furnished hereto as Exhibit 99.1.

 

 

 

Item 9.01.

Financial Statements and Exhibits.

(d)

Exhibits.

 

Exhibit
No.

  

Description

 

 

99.1

 

Potbelly Corporation Press Release dated November 9, 2018


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 9, 2018

 

Potbelly Corporation

 

 

 

 

 

 

 

By:

 

/s/ Christopher Carlson

 

 

Name:

 

Christopher Carlson

 

 

Title:

 

Vice President, Controller

 

 

 

 

(Principal Financial Officer)

 

pbpb-ex991_6.htm

Exhibit 99.1

POTBELLY CORPORATION REPORTS RESULTS

FOR THIRD FISCAL QUARTER 2018

Chicago, IL. November 9, 2018 – Potbelly Corporation (NASDAQ: PBPB) today reported financial results for the third fiscal quarter ended September 30, 2018.

 

 

Key highlights for the thirteen weeks ended September 30, 2018 compared to the thirteen weeks ended September 24, 2017 include:

 

Total revenues increased 0.8% to $107.0 million from $106.1 million.

 

Company-operated comparable store sales decreased 0.2%.

 

1 new company-operated shop opened; 7 shops closed, including 2 company-operated shops and 5 franchised shops.

 

GAAP net loss attributable to Potbelly Corporation was $2.0 million, inclusive of a $4.4 million impairment charge compared to loss of $0.2 million, inclusive of a $1.5 million impairment charge. GAAP diluted loss per share increased to $0.08 from $0.01.

 

Adjusted net income1 attributable to Potbelly Corporation increased 29.8% to $2.4 million from adjusted net income of $1.9 million. Adjusted diluted EPS1 increased 28.6% to $0.09 from $0.07.

 

EBITDA1 decreased 46.1% to $3.0 million from $5.6 million.

 

Adjusted EBITDA1 decreased 9.0% to $8.8 million from $9.6 million.

 

 

Key highlights for the thirty-nine weeks ended September 30, 2018 compared to the thirty-nine weeks ended September 24, 2017 include:

 

Total revenues increased 1.4% to $320.3 million from $316.0 million.

 

Company-operated comparable store sales decreased 1.3%.

 

10 new shops opened, including 6 company-operated shops and 4 franchised shops; 14 shops closed, including 8 company-operated shops and 6 franchised shops.

 

GAAP net loss attributable to Potbelly Corporation was $4.5 million, inclusive of a $8.5 million impairment charge compared to net income of $0.3 million, inclusive of a $5.8 million impairment charge. GAAP diluted loss per share was $0.18 compared to GAAP diluted EPS of $0.01.

 

Adjusted net income1 attributable to Potbelly Corporation increased 8.2% to $6.4 million from adjusted net income of $5.9 million. Adjusted diluted EPS1 increased 8.7% to $0.25 from $0.23.

 

EBITDA1 decreased 38.8% to $12.0 million from $19.6 million.

 

Adjusted EBITDA1 decreased 9.2% to $27.8 million from $30.6 million.


1


Alan Johnson, President and Chief Executive Officer of Potbelly Corporation, commented, “We have been incredibly focused on executing our transition plan, and are pleased with our progress on reversing our traffic trends.  During the third quarter, we achieved an 850 basis point improvement year-over-year in traffic, and outperformed the broader industry within our markets.  Our performance demonstrates our ability to meaningfully drive traffic through the investments and resources that we have dedicated, which we believe are building the foundation to drive improved traffic and profitability over the long-term.”

 

Johnson, continued, “While we are encouraged by the improving trends in our business, we recognize that there is still much work to be done to turn around the business.  Despite the pressure on near term results, we believe it is necessary to make the upfront investments required to drive brand awareness, interest and purchase intent, to support our topline, margin, profitability and growth aspirations over the long term. We remain committed to testing new ideas to improve our traffic-driving tactics. Further, we remain determined to learn from these tests and strike the right balance to drive profitable growth. 2018 remains a transition year for Potbelly, but I believe we are executing on the appropriate traffic building initiatives to build the proper foundation for long term sustainable and profitable growth.”

 

 

2018 Outlook

For the full fiscal year of 2018, management currently expects:

 

18-21 total shop openings, including 10-11 company operated shop openings;

 

Company-operated comparable store sales growth in range of -1.5% to -2.0%;

 

An effective tax rate that is in a range of 29%-31%, excluding the impact of ASU 2016-09; and

 

Adjusted diluted earnings per share to range from $0.26-$0.27.

 

Projected adjusted diluted earnings per share set forth above is a measure not recognized under GAAP. Please see “Non-GAAP Financial Measures” below.

 

 

Conference Call

A conference call and audio webcast has been scheduled for 8:00 a.m. Eastern Time today to discuss these results. Details of the conference call are as follows:

 

 

 

 

Date:

 

Friday, November 9, 2018

Time:

 

8:00 a.m. Eastern Time

Dial-In #:

 

877-407-0784 U.S. & Canada

 

 

201-689-8560  International

Confirmation code:

 

13683812

Alternatively, the conference call will be webcast at www.potbelly.com on the “Investor Relations” webpage. For those unable to participate, an audio replay will be available from 11:00 a.m. Eastern Time on Friday, November 9, 2018 through midnight Friday, November 16, 2018. To access the replay, please call 844-512-2921 (U.S. & Canada) or 412-317-6671 (International) and enter confirmation code 13683812.  A web-based archive of the conference call will also be available at the above website.

 

 

About Potbelly

Potbelly Corporation is a neighborhood sandwich concept that has been feeding customers’ smiles with warm, toasty sandwiches, signature salads, hand-dipped shakes and other fresh menu items, customized just the way customers want them, for more than 40 years.  Potbelly promises Fresh, Fast & Friendly service in an environment that reflects the local neighborhood.  Since opening its first shop in Chicago in 1977, Potbelly has expanded to neighborhoods across the country - with more than 400 company-owned shops in the United States. Additionally, Potbelly franchisees operate more than 50 shops domestically, in the Middle East, Canada and India.  For more information, please visit our website at www.potbelly.com.

 

 

Definitions

The following definitions apply to these terms as used throughout this press release:

2


 

Revenues – represents net company-operated sandwich shop sales and our franchise operations. Net company-operated shop sales consist of food and beverage sales, net of promotional allowances and employee meals. Franchise royalties and fees consist of an initial franchise fee, a franchise development agreement fee and royalty income from the franchisee.

 

Company-operated comparable store sales – represents the change in year-over-year sales for the comparable company-operated store base open for 15 months or longer.

 

EBITDA – represents income before depreciation and amortization expense, interest expense and the provision for income taxes.

 

Adjusted EBITDA – represents income before depreciation and amortization expense, interest expense and the provision for income taxes, adjusted to eliminate the impact of other items, including certain non-cash as well as other items that we do not consider representative of our ongoing operating performance.

 

Adjusted net income – represents net income, excluding impairment, gain or loss on the disposal of property and equipment and store closure expense, as well as other items that we do not consider representative of our ongoing operating performance.

 

Shop-level profit – represents income from operations less franchise royalties and fees, general and administrative expenses, depreciation expense, pre-opening costs and impairment and loss on the disposal of property and equipment.

 

Shop-level profit margin – represents shop-level profit expressed as a percentage of net company-operated sandwich shop sales.

 

Adjusted diluted earnings per share – represents net income, excluding impairment, gain or loss on the disposal of property and equipment and store closure expense on a fully diluted per share basis as well as other items that we do not consider representative of our ongoing operating performance.

 

 

1Non-GAAP Financial Measures

We prepare our financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). Within this press release, we make reference to EBITDA, adjusted EBITDA, adjusted net income, shop-level profit and shop-level profit margin, which are non-GAAP financial measures. The Company includes these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

Management uses adjusted EBITDA and adjusted net income to evaluate the Company’s performance and in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter. Adjusted EBITDA and adjusted net income exclude the impact of certain non-cash charges and other special items that affect the comparability of results in past quarters. Management uses shop-level profit and shop-level profit margin as key metrics to evaluate the profitability of incremental sales at our shops, to evaluate our shop performance across periods and to evaluate our shop financial performance against our competitors.

Accordingly, the Company believes the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the Company’s operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. This analysis, as well as the other information in this press release, should be read in conjunction with the Company’s financial statements and footnotes contained in the documents that the Company files with the U.S. Securities and Exchange Commission. The non-GAAP financial measures used by the Company in this press release may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please refer to the table, “Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures.”

 

This press release includes certain non-GAAP forward-looking information (including, but not limited to under the heading “2018 Outlook”), namely adjusted net income and adjusted diluted earnings per share. The Company believes that a quantitative reconciliation of such forward-looking information to the most comparable financial measure calculated and presented in accordance with GAAP cannot be made available without unreasonable efforts. A reconciliation of these non-GAAP financial measures would require the Company to predict the timing and likelihood of outcomes that determine future impairments and the tax benefit of any such future impairments. Neither of these measures, nor their probable significance, can be reliably quantified due to the inability to forecast future impairments.

 

 


3


Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended and the Private Securities Litigation Reform Act of 1995. Forward-looking statements, written, oral or otherwise made, represent the Company’s expectation or belief concerning future events. Without limiting the foregoing, the words “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “strives,” “goal,” “estimates,” “forecasts,” “projects” or “anticipates” or the negative of these terms and similar expressions are intended to identify forward-looking statements. Forward-looking statements may include, among others, statements relating to: our future financial position and results of operations, business strategy, budgets, projected costs and plans and objectives of management for future operations. By nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statement, due to reasons including, but not limited to, our ability to manage our growth and successfully implement our business strategy; price and availability of commodities; changes in labor costs; consumer confidence and spending patterns; consumer reaction to industry-related public health issues and perceptions of food safety; and weather conditions. In addition, there may be other factors of which we are presently unaware or that we currently deem immaterial that could cause our actual results to be materially different from the results referenced in the forward-looking statements. All forward-looking statements contained in this press release are qualified in their entirety by this cautionary statement. Although we believe that our plans, intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations. Forward-looking statements are based on current expectations and assumptions and currently available data and are neither predictions nor guarantees of future events or performance. You should not place undue reliance on forward-looking statements, which speak only as of the date hereof. See “Risk Factors” and “Cautionary Statement on Forward-Looking Statements” included in our most recent annual report on Form 10-K and other risk factors described from time to time in subsequent quarterly reports on Form 10-Q, all of which are available on our website at www.potbelly.com. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

###

 

 

 

 

Contact:

 

Investor Relations

 

 

 

 

Investors@Potbelly.com

 

 

 

 

312-428-2950

4


Potbelly Corporation

Consolidated Statements of Operations and Margin Analysis – Unaudited

(Amounts in thousands, except share and per share data)

 

 

For the 13 Weeks Ended

 

 

For the 39 Weeks Ended

 

 

 

 

September 30,

 

 

% of

 

 

September 24,

 

 

% of

 

 

September 30,

 

 

% of

 

 

September 24,

 

 

% of

 

 

 

 

2018

 

 

Revenue

 

 

2017

 

 

Revenue

 

 

2018

 

 

Revenue

 

 

2017

 

 

Revenue

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sandwich shop sales, net

 

$

106,238

 

 

 

99.3

%

 

$

105,327

 

 

 

99.2

%

 

$

317,866

 

 

 

99.3

%

 

$

313,568

 

 

 

99.2

%

 

Franchise royalties and fees

 

 

758

 

 

 

0.7

 

 

 

800

 

 

 

0.8

 

 

 

2,394

 

 

 

0.7

 

 

 

2,394

 

 

 

0.8

 

 

Total revenues

 

 

106,996

 

 

 

100.0

 

 

 

106,127

 

 

 

100.0

 

 

 

320,260

 

 

 

100.0

 

 

 

315,962

 

 

 

100.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sandwich shop operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold, excluding depreciation

 

 

28,455

 

 

 

26.6

 

 

 

28,405

 

 

 

26.8

 

 

 

83,730

 

 

 

26.1

 

 

 

83,703

 

 

 

26.5

 

 

Labor and related expenses

 

 

32,376

 

 

 

30.3

 

 

 

31,187

 

 

 

29.4

 

 

 

96,367

 

 

 

30.1

 

 

 

93,213

 

 

 

29.5

 

 

Occupancy expenses

 

 

15,076

 

 

 

14.1

 

 

 

14,354

 

 

 

13.5

 

 

 

44,787

 

 

 

14.0

 

 

 

42,792

 

 

 

13.5

 

 

Other operating expenses

 

 

13,357

 

 

 

12.5

 

 

 

12,464

 

 

 

11.7

 

 

 

38,650

 

 

 

12.1

 

 

 

36,349

 

 

 

11.5

 

 

General and administrative expenses

 

 

10,087

 

 

 

9.4

 

 

 

12,104

 

 

 

11.4

 

 

 

35,715

 

 

 

11.2

 

 

 

33,375

 

 

 

10.6

 

 

Depreciation expense

 

 

5,847

 

 

 

5.5

 

 

 

6,315

 

 

 

6.0

 

 

 

17,531

 

 

 

5.5

 

 

 

18,960

 

 

 

6.0

 

 

Pre-opening costs

 

 

109

 

 

 

0.1

 

 

 

336

 

 

 

0.3

 

 

 

245

 

 

 

0.1

 

 

 

955

 

 

 

0.3

 

 

Impairment and loss on disposal of property and equipment

 

 

4,386

 

 

 

4.1

 

 

 

1,536

 

 

 

1.4

 

 

 

8,467

 

 

 

2.6

 

 

 

5,762

 

 

 

1.8

 

 

Total expenses

 

 

109,693

 

 

 

102.5

 

 

 

106,701

 

 

 

100.5

 

 

 

325,492

 

 

 

101.6

 

 

 

315,109

 

 

 

99.7

 

 

Income (loss) from operations

 

 

(2,697

)

 

 

(2.5

)

 

 

(574

)

 

 

(0.5

)

 

 

(5,232

)

 

 

(1.6

)

 

 

853

 

 

 

0.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

54

 

 

 

0.1

 

 

 

32

 

 

*

 

 

 

109

 

 

*

 

 

 

101

 

 

*

 

 

Income (loss) before income taxes

 

 

(2,751

)

 

 

(2.6

)

 

 

(606

)

 

 

(0.6

)

 

 

(5,341

)

 

 

(1.7

)

 

 

752

 

 

 

0.2

 

 

Income tax expense (benefit)

 

 

(909

)

 

 

(0.8

)

 

 

(487

)

 

 

(0.5

)

 

 

(1,111

)

 

 

(0.3

)

 

 

252

 

 

 

0.1

 

 

Net income (loss)

 

 

(1,842

)

 

 

(1.7

)

 

 

(119

)

 

 

(0.1

)

 

 

(4,230

)

 

 

(1.3

)

 

 

500

 

 

 

0.2

 

 

Net income attributable to non-controlling interest

 

 

119

 

 

 

0.1

 

 

 

121

 

 

 

0.1

 

 

 

285

 

 

 

0.1

 

 

 

195

 

 

 

0.1

 

 

Net income (loss) attributable to Potbelly Corporation

 

$

(1,961

)

 

 

(1.8

)%

 

$

(240

)

 

 

(0.2

)%

 

$

(4,515

)

 

 

(1.4

)%

 

$

305

 

 

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share attributable to common shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.08

)

 

 

 

 

 

$

(0.01

)

 

 

 

 

 

$

(0.18

)

 

 

 

 

 

$

0.01

 

 

 

 

 

 

Diluted

 

$

(0.08

)

 

 

 

 

 

$

(0.01

)

 

 

 

 

 

$

(0.18

)

 

 

 

 

 

$

0.01

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,369,281

 

 

 

 

 

 

 

24,959,023

 

 

 

 

 

 

 

25,355,174

 

 

 

 

 

 

 

25,030,951

 

 

 

 

 

 

Diluted

 

 

25,369,281

 

 

 

 

 

 

 

24,959,023

 

 

 

 

 

 

 

25,355,174

 

 

 

 

 

 

 

25,857,083

 

 

 

 

 

 

_________________

*

Amount is less than 0.1%

 

5


Potbelly Corporation

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures – Unaudited

(Amounts in thousands, except share and per share data)

 

 

For the 13 Weeks Ended

 

 

For the 39 Weeks Ended

 

 

 

 

September 30,

 

 

September 24,

 

 

September 30,

 

 

September 24,

 

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

Net income (loss) attributable to Potbelly Corporation, as reported

 

$

(1,961

)

 

$

(240

)

 

$

(4,515

)

 

$

305

 

 

Impairment, loss on disposal of property and equipment and closures(1)

 

 

4,541

 

 

 

2,016

 

 

 

9,653

 

 

 

6,392

 

 

CEO transition costs(2)

 

 

573

 

 

 

1,219

 

 

 

1,268

 

 

 

2,193

 

 

Proxy related costs(3)

 

 

109

 

 

 

 

 

 

810

 

 

 

 

 

Restructuring costs(4)

 

 

234

 

 

 

 

 

 

1,557

 

 

 

 

 

Tax impact(5)

 

 

(1,073

)

 

 

(1,129

)

 

 

(2,405

)

 

 

(3,007

)

 

Adjusted net income attributable to Potbelly Corporation

 

$

2,423

 

 

$

1,866

 

 

$

6,368

 

 

$

5,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Potbelly Corporation per share, basic

 

$

(0.08

)

 

$

(0.01

)

 

$

(0.18

)

 

$

0.01

 

 

Net income (loss) attributable to Potbelly Corporation per share, diluted

 

$

(0.08

)

 

$

(0.01

)

 

$

(0.18

)

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income attributable to Potbelly Corporation per share, basic

 

$

0.10

 

 

$

0.07

 

 

$

0.25

 

 

$

0.24

 

 

Adjusted net income attributable to Potbelly Corporation per share, diluted

 

$

0.09

 

 

$

0.07

 

 

$

0.25

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing adjusted net income attributable to Potbelly Corporation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,369,281

 

 

 

24,959,023

 

 

 

25,355,174

 

 

 

25,030,951

 

 

Diluted

 

 

25,874,456

 

 

 

25,608,065

 

 

 

25,965,382

 

 

 

25,857,083

 

 

 

 

 

For the 13 Weeks Ended

 

 

For the 39 Weeks Ended

 

 

 

 

September 30,

 

 

September 24,

 

 

September 30,

 

 

September 24,

 

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

Net income (loss) attributable to Potbelly Corporation, as reported

 

$

(1,961

)

 

$

(240

)

 

$

(4,515

)

 

$

305

 

 

Depreciation expense

 

 

5,847

 

 

 

6,315

 

 

 

17,531

 

 

 

18,960

 

 

Interest expense

 

 

54

 

 

 

32

 

 

 

109

 

 

 

101

 

 

Income tax expense (benefit)

 

 

(909

)

 

 

(487

)

 

 

(1,111

)

 

 

252

 

 

EBITDA

 

$

3,031

 

 

$

5,620

 

 

$

12,014

 

 

$

19,618

 

 

Impairment, loss on disposal of property and equipment and closures(1)

 

 

4,541

 

 

 

2,016

 

 

 

9,653

 

 

 

6,392

 

 

Stock-based compensation

 

 

265

 

 

 

759

 

 

 

2,516

 

 

 

2,435

 

 

CEO transition costs(2)

 

 

573

 

 

 

1,219

 

 

 

1,268

 

 

 

2,193

 

 

Proxy related costs(3)

 

 

109

 

 

 

 

 

 

810

 

 

 

 

 

Restructuring costs(4)

 

 

234

 

 

 

 

 

 

1,557

 

 

 

 

 

Adjusted EBITDA

 

$

8,753

 

 

$

9,614

 

 

$

27,818

 

 

$

30,638

 

 

6


Potbelly Corporation

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures – Unaudited

(Amounts in thousands, except selected operating data)

 

 

For the 13 Weeks Ended

 

 

For the 39 Weeks Ended

 

 

 

 

September 30,

 

 

September 24,

 

 

September 30,

 

 

September 24,

 

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

 

Income (loss) from operations

 

$

(2,697

)

 

$

(574

)

 

$

(5,232

)

 

$

853

 

 

Less: Franchise royalties and fees

 

 

758

 

 

 

800

 

 

 

2,394

 

 

 

2,394

 

 

General and administrative expenses

 

 

10,087

 

 

 

12,104

 

 

 

35,715

 

 

 

33,375

 

 

Depreciation expense

 

 

5,847

 

 

 

6,315

 

 

 

17,531

 

 

 

18,960

 

 

Pre-opening costs

 

 

109

 

 

 

336

 

 

 

245

 

 

 

955

 

 

Impairment and loss on disposal of property and equipment

 

 

4,386

 

 

 

1,536

 

 

 

8,467

 

 

 

5,762

 

 

Shop-level profit [Y]

 

$

16,974

 

 

$

18,917

 

 

$

54,332

 

 

$

57,511

 

 

Total revenues

 

$

106,996

 

 

$

106,127

 

 

$

320,260

 

 

$

315,962

 

 

Less: Franchise royalties and fees

 

 

758

 

 

 

800

 

 

 

2,394

 

 

 

2,394

 

 

Sandwich shop sales, net [X]

 

$

106,238

 

 

$

105,327

 

 

$

317,866

 

 

$

313,568

 

 

Shop-level profit margin [Y÷X]

 

 

16.0

%

 

 

18.0

%

 

 

17.1

%

 

 

18.3

%

 

 

 

 

For the 13 Weeks Ended

 

For the 39 Weeks Ended

 

 

 

September 30,

 

September 24,

 

September 30,

 

September 24,

 

 

 

2018

 

2017

 

2018

 

2017

 

Selected Operating Data

 

 

 

 

 

 

 

 

 

Shop Activity:

 

 

 

 

 

 

 

 

 

Company-operated shops, end of period

 

435

 

426

 

435

 

426

 

Franchise shops, end of period

 

53

 

56

 

53

 

56

 

Revenue Data:

 

 

 

 

 

 

 

 

 

Company-operated comparable store sales

 

(0.2)%

 

(4.8)%

 

(1.3)%

 

(4.3)%

 

7


Footnotes to the Press Release, Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

& Selected Operating Data

 

(1)

This adjustment includes costs related to impairment of long-lived assets, loss on disposal of property and equipment and shop closure expenses. Shop closure expenses are recorded in general and administrative expenses in the consolidated statement of operations.

(2)

The Company incurred certain costs related to the transition between the current and former CEO in 2017 and 2018. Transition costs were included in general and administrative expenses in the consolidated statements of operations and were related to the accelerated vesting of share-based compensation awards, salary related charges in accordance with the former CEO’s employment agreement, relocation related charges, and various other transition costs.

(3)

The Company incurred certain professional and other costs related to the shareholder proxy matter. These costs were included in general and administrative expenses in the consolidated statements of operations.

(4)

The Company incurred certain restructuring costs that were included in general and administrative expenses in the consolidated statements of operations.

(5)

For the thirteen weeks ended September 30, 2018 and September 24, 2017, the tax impact associated with adjustments to net income is based on effective tax rates of 23.0% and 34.9%, respectively, partially offset by the impact of ASU 2016-09. For the thirty-nine weeks ended September 30, 2018 and September 24, 2017, the tax impact associated with adjustments to net income is based on effective tax rates of 23.0% and 35.0%, respectively, partially offset by the impact of ASU 2016-09.

 

8