pbpb-20220626

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________________

FORM 10-Q

______________________________________________


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 26, 2022


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from ____to ____

Commission File Number: 001-36104

______________________________________________

Potbelly Corporation

(Exact name of registrant as specified in its charter)

______________________________________________


Delaware						36-4466837
(State or Other Jurisdiction of Incorporation)						(IRS Employer Identification Number)
111 N. Canal Street, Suite 325 Chicago, Illinois						60606
(Address of Principal Executive Offices)						(Zip Code)

Registrant’s Telephone Number, Including Area Code: (312) 951-0600

______________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

PBPB

The NASDAQ Stock Market LLC

(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No o

As of July 24, 2022, the registrant had 28,701,112 shares of common stock, $0.01 par value per share, outstanding.

Table of Contents

Potbelly Corporation and Subsidiaries

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations (Unaudited)	4
	Condensed Consolidated Statements of Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
PART II.	OTHER INFORMATION	32
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	32
Item 3.	Defaults Upon Senior Securities	32
Item 4.	Mine Safety Disclosures	32
Item 5.	Other Information	32
Item 6.	Exhibits	33
	Signature	34

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Potbelly Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(amounts in thousands, except par value data, unaudited)


	June 26, 2022		December 26, 2021
Assets
Current assets
Cash and cash equivalents	$	14,657	$	14,353
Accounts receivable, net of allowances of $30 and $27 as of June 26, 2022 and December 26, 2021, respectively	7,410		6,032
Inventories	3,612		3,491
Prepaid expenses and other current assets	3,885		4,178
Total current assets	29,564		28,054

Property and equipment, net	45,545		49,805
Right-of-use assets for operating leases	161,563		166,084
Indefinite-lived intangible assets	3,404		3,404
Goodwill	2,222		2,222
Deferred expenses, net and other assets	3,470		3,668
Total assets	$	245,768	$	253,237

Liabilities and equity (deficit)
Current liabilities
Accounts payable	$	8,865	$	8,140
Accrued expenses	31,918		30,859
Short-term operating lease liabilities	27,704		28,548
Current portion of long-term debt	3,333		2,333
Total current liabilities	71,820		69,880

Long-term debt, net of current portion	18,717		17,517
Long-term operating lease liabilities	162,197		166,291
Other long-term liabilities	1,915		1,966
Total liabilities	254,649		255,654

Commitments and contingencies (Note 11)

Equity (deficit)
Common stock, $0.01 par value—authorized 200,000 shares; outstanding 28,696 and 28,380 shares as of June 26, 2022 and December 26, 2021, respectively	383		380
Warrants	2,566		2,566
Additional paid-in-capital	454,062		452,570
Treasury stock, held at cost, 9,885 and 9,785 shares as of June 26, 2022, and December 26, 2021, respectively	(115,181)		(114,577)
Accumulated deficit	(350,600)		(343,261)
Total stockholders’ equity (deficit)	(8,770)		(2,322)
Non-controlling interest	(111)		(95)
Total equity (deficit)	(8,881)		(2,417)

Total liabilities and equity (deficit)	$	245,768	$	253,237

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Potbelly Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(amounts in thousands, except per share data, unaudited)


	For the Quarter Ended				For the Year to Date Ended
	June 26, 2022		June 27, 2021		June 26, 2022		June 27, 2021
Revenues
Sandwich shop sales, net	$	114,992	$	96,777	$	212,423	$	174,279
Franchise royalties and fees	960		714		1,750		1,277
Total revenues	115,952		97,491		214,173		175,556

Expenses
Sandwich shop operating expenses, excluding depreciation
Food, beverage and packaging costs	32,830		26,341		60,138		47,810
Labor and related expenses	36,121		31,961		69,374		60,575
Occupancy expenses	13,805		13,562		27,650		27,160
Other operating expenses	19,128		15,570		37,233		29,574
Franchise marketing expenses	126		76		246		120
General and administrative expenses	8,827		8,674		17,345		15,847
Depreciation expense	3,030		4,553		6,167		8,727
Impairment, loss on disposal of property and equipment and shop closures	1,044		257		2,363		3,379
Total expenses	114,911		100,994		220,516		193,192
Income (loss) from operations	1,041		(3,503)		(6,343)		(17,636)

Interest expense, net	357		185		683		472

Income (loss) before income taxes	684		(3,688)		(7,026)		(18,108)
Income tax expense (benefit)	(24)		160		153		214
Net income (loss)	708		(3,848)		(7,179)		(18,322)
Net income attributable to non-controlling interest	134		33		160		31
Net income (loss) attributable to Potbelly Corporation	$	574	$	(3,881)	$	(7,339)	$	(18,353)

Net income (loss) per common share attributable to common stockholders:
Basic	$	0.02	$	(0.14)	$	(0.26)	$	(0.68)
Diluted	$	0.02	$	(0.14)	$	(

SEC Form 10-Q filed by Potbelly Corporation