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Noodles & Company Announces Fourth Quarter And Fiscal Year 2013 Financial Results

For more information on the non-GAAP financial measures, please see the Reconciliation of GAAP to non-GAAP Financial Measures tables in this press release. These accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

About Noodles & Company

Founded in 1995, Noodles & Company is a fast-casual restaurant chain that serves classic noodle and pasta dishes from around the world with 380 locations system-wide in 29 states and the District of Columbia as of December 31, 2013. Known as Your World Kitchen, Noodles & Company's globally inspired menu consists of more than 25 fresh, customizable noodle bowls, salads, soups and sandwiches that are prepared quickly using quality ingredients. From healthy to indulgent, spicy to comforting, the menu provides favorites for everyone from kids to adults. Popular dishes include the Med Salad with naturally raised pork, Spicy Indonesian Peanut Sauté, and creamy Wisconsin Mac & Cheese.

Forward-Looking Statements

This press release contains a number of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words, and variations of words, such as "believe," "estimate," "anticipate," "expect," "intend," "may," "will," "would" and similar expressions are intended to identify our forward-looking statements. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding 2014 guidance, comparable restaurant sales and operating margins, new restaurant development, expected public company expense, and our outlook, in particular, our target and adjusted net income, targeted restaurant openings and effective tax rate. By their nature, forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the Company's forward-looking statements. These risks and uncertainties include: our ability to maintain increases in comparable restaurant sales and to successfully execute our growth strategy; our ability to open new restaurants on schedule; current economic conditions; price and availability of commodities; consumer confidence and spending patterns; the assumptions used in the adjustment of interest expense and the adjustments for certain incremental legal, accounting, insurance and other compliance costs used in the calculation of adjusted net income; changes in consumer tastes and the level of acceptance of the Company's restaurant concepts (including consumer acceptance of prices); consumer reaction to public health issues and perception of food safety; seasonal factors; and weather. For additional information on these and other factors that could affect the Company's forward-looking statements, see the Company's risk factors, as they may be amended from time to time, set forth in its filings with the SEC, including our final prospectus filed December 9, 2013. The Company disclaims and does not undertake any obligation to update or revise any forward-looking statement in this press release, except as may be required by applicable law or regulation.

 
Noodles & Company
Consolidated Statements of Income
(in thousands, except share and per share data, unaudited)
         
  Fiscal Quarter Ended Fiscal Year Ended
  December 31, January 1, December 31, January 1,
  2013 2013 2013 2013
Revenue:        
Restaurant revenue $ 90,396 $ 77,003 $ 347,140 $ 297,264
Franchising royalties and fees 1,072 926 3,784 3,146
Total revenue 91,468 77,929 350,924 300,410
Costs and expenses:        
Restaurant operating costs (exclusive of depreciation and amortization shown separately below):        
Cost of sales 24,367 20,574 91,892 78,997
Labor 26,576 23,433 104,040 89,435
Occupancy 9,349 7,654 35,173 29,323
Other restaurant operating costs (1) 11,116 8,930 44,078 36,380
General and administrative (1) (2) 8,084 7,656 35,893 29,081
Depreciation and amortization 5,550 4,556 20,623 16,719
Pre-opening 936 1,145 3,809 3,145
Asset disposals, closure costs and restaurant impairments 328 613 1,164 1,278
Total costs and expenses 86,306 74,561 336,672 284,358
Income from operations 5,162 3,368 14,252 16,052
Debt extinguishment expense 579 624 2,646
Interest expense 42 1,133 2,196 5,028
Income before income taxes 4,541 2,235 11,432 8,378
Provision for income taxes 2,134 676 4,767 3,215
Net income $ 2,407 $ 1,559 $ 6,665 $ 5,163
Earnings per share of Class A and Class B common stock, combined:        
Basic $ 0.08 $ 0.07 $ 0.25 $ 0.22
Diluted $ 0.08 $ 0.07 $ 0.24 $ 0.22
Weighted average shares of Class A and Class B common stock outstanding, combined:        
Basic 29,479,084 23,238,984 26,406,904 23,238,984
Diluted 31,068,792 23,512,182 27,688,629 23,265,542
         
(1)  In the third quarter of 2013, we changed the manner in which we report marketing expenses between general and administrative expenses and other restaurant operating costs to more appropriately reflect only those costs directly related to restaurant-level marketing in other restaurant operating costs.  Marketing costs previously reported as restaurant operating costs, that were not directly related to restaurant-level marketing, have been reclassified to general and administrative expense.  The reclassification is reflected in all periods presented herein, as well as by historical quarter in the accompanying selected operating data and did not impact income from operations.
         
(2)  In the second quarter of 2013, we incurred $5.7 million of IPO related expenses: $2.0 million of stock-based compensation related to accelerated vesting of outstanding stock options, $1.2 million of stock-based compensation related to stock options granted to our Chief Executive Officer and President and Chief Operating Officer of which 50% were vested at grant, $1.7 million of transaction bonuses and related payroll taxes and $0.8 million in transaction payments to our Equity Sponsors. Additionally, the fourth quarter of 2012 and the full years of 2013 and 2012 included $250,000, $500,000 and $1.0 million, respectively, of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock. In connection with our IPO, the management services agreement expired and the one share of Class C common stock was redeemed. In the fourth quarter of 2013, we incurred $0.7 million of offering expenses related to our follow-on offering which closed in December of 2013.
 
 
Noodles & Company
Consolidated Statements of Income as a Percentage of Revenue
(in thousands, unaudited)  
 
  Fiscal Quarter Ended Fiscal Year Ended
  December 31,  2013 January 1,  2013 December 31,  2013 January 1,  2013
Revenue:        
Restaurant revenue 98.8% 98.8% 98.9% 99.0%
Franchising royalties and fees 1.2 1.2 1.1 1.0
Total revenue 100.0 100.0 100.0 100.0
Costs and Expenses:        
Restaurant Operating Costs (exclusive of depreciation and amortization shown separately below): (1)        
Cost of sales 27.0 26.7 26.5 26.6
Labor 29.4 30.4 30.0 30.1
Occupancy 10.3 9.9 10.1 9.9
 Other restaurant operating costs (2) 12.3 11.6 12.7 12.2
General and administrative (2) (3) 8.8 9.8 10.2 9.7
Depreciation and amortization 6.1 5.8 5.9 5.6
Pre-opening 1.0 1.5 1.1 1.0
Asset disposals, closure costs and restaurant impairments 0.4 0.8 0.3 0.4
Total costs and expenses 94.4 95.7 95.9 94.7
Income from operations 5.6 4.3 4.1 5.3
Debt extinguishment expense 0.6 0.2 0.9
Interest expense 1.5 0.6 1.7
Income before income taxes 5.0 2.9 3.3 2.8
Provision for income taxes 2.3 0.9 1.4 1.1
Net income 2.6% 2.0% 1.9% 1.7%
         
(1) As a percentage of restaurant revenue.
 
(2) In the third quarter of 2013, we changed the manner in which we report marketing expenses between general and administrative expenses and other restaurant operating costs to more appropriately reflect only those costs directly related to restaurant-level marketing in other restaurant operating costs.  Marketing costs previously reported as restaurant operating costs, that were not directly related to restaurant-level marketing, have been reclassified to general and administrative expense.  The reclassification is reflected in all periods presented herein, as well as by historical quarter in the accompanying selected operating data and did not impact income from operations.
 
(3) In the second quarter of 2013, we incurred $5.7 million of IPO related expenses: $2.0 million of stock-based compensation related to accelerated vesting of outstanding stock options, $1.2 million of stock-based compensation related to stock options granted to our Chief Executive Officer and President and Chief Operating Officer of which 50% were vested at grant, $1.7 million of transaction bonuses and related payroll taxes and $0.8 million in transaction payments to our Equity Sponsors. Additionally, the fourth quarter of 2012 and the full years of 2013 and 2012 included $250,000, $500,000 and $1.0 million, respectively, of management fee expense in accordance with our management services agreement and through the Class C common stock dividend paid to the holder of the one outstanding share of our Class C common stock. In connection with our IPO, the management services agreement expired and the one share of Class C common stock was redeemed. In the fourth quarter of 2013, we incurred $0.7 million of offering expenses related to our follow-on offering which closed in December of 2013.  
 
 
Noodles & Company
Consolidated Selected Balance Sheet Data and Selected Operating Data
(in thousands, except restaurant activity and comparable restaurant sales, unaudited)
 
  As o f
  December 31 ,  2013 January 1 ,  2013
Balance Sheet Data    
Total current assets $ 18,333 $ 16,154
Total assets 169,469 156,995
Total current liabilities 24,165 23,760
Total long-term debt 6,312 93,731
Total liabilities 63,329 142,987
Temporary equity 3,601
Total stockholders' equity 124,473 10,407
   
   
  Fiscal Quarter Ended
  December 31, 2013 October 1,  2013 July 2,  2013 April 2,  2013 Jan. 1, 2013
Selected Operating Data          
Restaurant Activity:          
Company-owned restaurants at end of period 318 310 295 284 276
Franchise restaurants at end of period 62 58 53 51 51
Revenue Data:          
Company-owned average unit volumes $1,179 1,181 1,184 1,180 1,178
Franchise average unit volumes $1,133 1,132 1,123 1,121 1,128
Company-owned comparable restaurant sales 4.3% 2.4% 4.7% 2.2% 4.2%
Franchise comparable restaurant sales 1.5% 0.5% 2.3% (1.9)% 2.9%
System-wide comparable restaurant sales 3.9% 2.1% 4.4% 1.5% 4.0%
           

Reconciliations of Non-GAAP Measurements to US GAAP Results

 
Noodles & Company
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(in thousands, unaudited)  
 
  Fiscal Quarter Ende d Fiscal Year Ende d
  December 31, 2013 January 1, 201 3 December 31, 2013 January 1, 201 3
  (in thousands, unaudited )
Net income $ 2,407 $ 1,559 $ 6,665 $ 5,163
Depreciation and amortization 5,550 4,556 20,623 16,719
Interest expense 42 1,133 2,196 5,028
Provision for income taxes 2,134 676 4,767 3,215
EBITDA $ 10,133 $ 7,924 $ 34,251 $ 30,125
Debt extinguishment expense 579 624 2,646
Asset disposals, closure costs and restaurant impairment 328 613 1,164 1,278
Management fees (a) 250 500 1,000
Stock-based compensation expense 254 313 4,318 1,234
IPO related expenses (b) 5,667
Follow-on offering expenses (c) 696 696
Adjusted EBITDA $ 11,990 $ 9,100 $ 47,220 $ 36,283
         

EBITDA and adjusted EBITDA are supplemental measures of operating performance that do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined by US GAAP and our calculation thereof may not be comparable to that reported by other companies. These measures are presented because we believe that investors' understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for evaluating our ongoing results of operations.

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