NOODLES & Co
For the period ended Oct 1, 2024. Filed Nov 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Oct 1, 2024 · Filed Nov 7, 2024
NDLS$14.05-6.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-07-02; filed 2024-08-08.
0001275158-24-000084
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-10-01; filed 2024-11-07.
0001275158-24-000098
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 126 previous paragraphs and 128 current paragraphs.
86 unchanged; 35 reworded; 7 added; 4 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
Restaurant industry sales remain volatile with elevated levels of discounting targeting increasingly price-sensitive consumers. Our sales have been impacted by the challenging consumer environment and we have responded with added promotional support late in the third quarter and extending into the fourth quarter of 2024. Our sales deceleration in the third quarter compared to the second quarter of 2024 was also impacted by a decline in our third-party delivery channel. The consumer environment has caused many companies in the restaurant industry to report a decreased level of same store sales in 2024, and our sales trends have followed. We are focusing on revitalizing our menu options starting late in the third quarter and continuing in the fourth quarter of 2024 and into 2025 as the new menu is introduced nationally.
Current report
Other restaurant operating costs increased by $1.6 million, or 6.9%, in the third quarter of 2024 compared to the third quarter of 2023. As a percentage of restaurant revenue, other restaurant operating costs increased to 20.1% in the third quarter of 2024 compared to 18.0% in the third quarter of 2023 primarily due tosales deleverage, and increases in marketing expenses and third-party delivery fees.
Current report
General and administrative expense increased by $1.0 million, or 8.7%, in the third quarter of 2024 compared to the third quarter of 2023, primarily due to costs from the Company’s bi-annual national summit, and an increase in expenses as a result of obsolete warehouse inventory related to menu transformation. As a percentage of revenue, general and administrative expense increased to 10.5% in the third quarter of 2024 from 9.3% in the third quarter of 2023.
Current report
Restaurant impairments, closure costs and asset disposals increased $0.1 million in the third quarter of 2024 compared to the third quarter of 2023. The increase was largely due to an increase in impairment charges related to leased assets. There were no restaurants impaired during either the third quarter of 2024 or the third quarter of 2023.
Current report
Other restaurant operating costs increased by $2.4 million, or 3.4%, in the first three quarters of 2024 compared to the first three quarters of 2023. As a percentage of restaurant revenue, other restaurant operating costs increased to 19.7% in the first three quarters of 2024, compared to 18.7% in the first three quarters of 2023, primarily due to sales deleverage and increases in delivery fees and marketing expenses.
Current report
On October 29, 2024, we amended our A&R Credit Agreement, by entering into that certain Second Amendment to Amended and Restated Credit Agreement (the “Second Amendment”). Among the modifications, the Second Amendment: (i) increased the maximum applicable rate ranges (A) with respect to SOFR loans, from 1.75% - 3.00% to 1.75% - 3.75% per annum and (B) with respect to base rate loans, from 0.75% - 2.00% to 0.75% - 2.75% per annum, in each case as determined by the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement), (ii) conditioned the use of the general restricted payment basket on satisfaction of a Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) of less than or equal to 4.00 to 1.00 and a Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) of greater than or equal to 1.25 to 1.00, (iii) restricted entry into new lease agreements so long as the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the Credit Agreement is greater than or equal to 4.50 to 1.00, (iv) increased the Consolidated Total Lease Adjusted Leverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(a) of the Credit Agreement to be no greater than (x) 5.50 to 1.00 for the fiscal quarter ending on October 1, 2024 until and including the last day of the fiscal quarter ending September 30, 2025 and (y) stepping down to (1) 5.25 to 1.00 per annum for the fiscal quarter ending December 30, 2025, (2) 5.00 to 1.00 per annum for the fiscal quarters ending March 31, 2026 and June 30, 2026, (3) 4.75 to 1.00 for the fiscal quarters ending September 29, 2026 and December 29, 2026 and (4) 4.50 to 1.00 per annum for the fiscal quarter ended March 30, 2027 and thereafter and (v)
Current report
amended the Consolidated Fixed Charge Coverage Ratio (as defined in the A&R Credit Agreement) in Section 7.11(b) of the Credit Agreement to be no less than (x) 1.05 to 1.00 for the fiscal quarter ending on October 1, 2024 until and including the last day of the fiscal quarter ending September 30, 2025 and (y) stepping up to (1) 1.15 to 1.00 for the fiscal quarters ending December 30, 2025 and March 31, 2026 and (2) 1.25 to 1.00 for the fiscal quarter ending June 30, 2026 and thereafter.
Removed paragraphs (4)
Previous report
Other restaurant operating costs increased by $1.3 million, or 5.9%, in the second quarter of 2024 compared to the second quarter of 2023. As a percentage of restaurant revenue, other restaurant operating costs increased to 19.2% in the second quarter of 2024 compared to 18.5% in the second quarter of 2023 primarily due to an increase in third-party delivery fees. Third-party delivery fees were 6.2% and 5.5% of restaurant revenue in the second quarter of 2024 and 2023, respectively.
Previous report
General and administrative expense increased by $1.1 million, or 8.9%, in the second quarter of 2024 compared to the second quarter of 2023, due primarily to increases in severance and executive transition costs and marketing spend. As a percentage of revenue, general and administrative expense increased to 10.7% in the second quarter of 2024 from 10.0% in the second quarter of 2023.
Previous report
Comparable restaurant sales decreased 2.2% at company-owned restaurants, decreased 0.1% at franchise-owned restaurants and decreased 1.8% system-wide in the first two quarters of 2024.
Previous report
Other restaurant operating costs increased by $0.8 million, or 1.7%, in the first two quarters of 2024 compared to the first two quarters of 2023. As a percentage of restaurant revenue, other restaurant operating costs increased to 19.4% in the first two quarters of 2024, compared to 19.0% in the first two quarters of 2023, due primarily to increased delivery fees. Third-party delivery fees were 6.2% and 5.8% of restaurant revenue for the first two quarters of 2024 and 2023, respectively.
Reworded paragraphs (35)
Previous wording
In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding expectations with respect to unit growth and planned restaurant openings and projected capital expenditures. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, our ability to sustain our overall growth, including, our digital sales growth; our ability to open new restaurants on schedule and cause those newly opened restaurants to be successful; our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including new restaurant initiatives and operational strategies to improve the performance of our restaurant portfolio; the success of our marketing efforts, including our ability to introduce new products; current economic conditions including any impact from inflation, an economic recession or a continued elevated interest rate environment; price and availability of commodities and other supply chain challenges; our ability to adequately staff our restaurants; changes in labor costs; other conditions beyond our control such as domestic or global conflicts, wars, terrorist activity, weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customer or food supplies; and consumer reaction to industry related public health issues and health pandemics, including perceptions of food safety and those discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors” as filed in our Annual Report on Form 10-K for our fiscal year ended January 2, 2024.
Current wording
In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties such as the number of restaurants we intend to open, projected capital expenditures and estimates of our effective tax rates. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on currently available operating, financial and competitive information. Examples of forward-looking statements include all matters that are not historical facts, such as statements regarding expectations with respect to unit growth and planned restaurant openings and projected capital expenditures. Our actual results may differ materially from those anticipated in these forward-looking statements due to reasons including, but not limited to, our ability to sustain our overall growth, including, our digital sales growth; our ability to open new restaurants on schedule and cause those newly opened restaurants to be successful; our ability to achieve and maintain increases in comparable restaurant sales and to successfully execute our business strategy, including new restaurant initiatives and operational strategies to improve the performance of our restaurant portfolio; the success of our marketing efforts, including our ability to introduce new products; economic conditions, including inflation, an economic recession or an elevated interest rate environment; price and availability of commodities and other supply chain challenges; our ability to adequately staff our restaurants; changes in labor costs; other conditions beyond our control such as domestic or global conflicts, wars, terrorist activity, weather, natural disasters, disease outbreaks, epidemics or pandemics impacting our customers or food supplies; and consumer reaction to industry related public health issues and health pandemics, including perceptions of food safety and those discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors” as filed in our Annual Report on Form 10-K for our fiscal year ended January 2, 2024.
Previous wording
Revenue. Previous to the second quarter of 2024, we experienced system-wide comparable sales declines from the second quarter of 2023 through the first quarter of 2024. During the second quarter of 2024, we saw improvement in system-wide comparable restaurant sales, and correspondingly in total revenue. System-wide comparable restaurant sales increased 2.0% in the second quarter of 2024 compared to the same period of 2023, comprised of a 1.3% increase at company-owned restaurants and a 4.7% increase at franchise-owned restaurants. In the second quarter and into July, restaurant industry indices have shown declining traffic trends.
Current wording
Revenue. In the third quarter we saw a decline in system-wide comparable restaurant sales, and correspondingly in total revenue. System-wide comparable restaurant sales decreased 3.3% in the third quarter of 2024 compared to the same period of 2023, comprised of a 3.4% decrease at company-owned restaurants and a 2.9% decrease at franchise-owned restaurants.
Previous wording
Cost of Sales. The commodity markets underlying our cost of food have improved since the historically high costs in 2022. Throughout these periods of volatility, we have worked with our suppliers to identify ongoing supply chain efficiencies, including adding additional suppliers as necessary.
Current wording
Cost of Sales. The commodity markets underlying our cost of food have improved since the historically high costs in 2022. Our commodity inflation in the third quarter of 2024 was less than 2%. Throughout periods of volatility, we will continue to work with our suppliers to identify ongoing supply chain efficiencies, including adding additional suppliers as necessary.
Previous wording
Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. Recently, we have seen the rate of wage inflation decrease. We have been able to partially mitigate the impact of these market factors through a continued focus on maximizing efficiencies of labor hour usage per restaurant.
Current wording
Labor Costs. Similar to much of the restaurant industry, our base labor costs have risen in recent years. In 2024, we have seen the rate of wage inflation decrease. We have been able to partially mitigate the impact of these market factors through a continued focus on maximizing efficiencies of labor hour usage per restaurant.
Previous wording
Restaurant Development. In the first two quarters of 2024, we opened seven new company-owned restaurants and one new franchise restaurant, and we sold six company-owned restaurants to a franchisee (the “DND Sale”). As part of the DND Sale, we entered into a six-year development plan commitment that includes development of ten new locations throughout Oregon and Washington. As of July 2, 2024, we had 379 company-owned restaurants and 94 franchise restaurants in 31 states. In 2024, we plan to open approximately 10 new company-owned restaurants which is a reduced number of openings relative to recent years and could be reduced further in 2025 as we focus on improvements to our operating model and reducing the cost of new store development.
Current wording
Restaurant Development. In the first three quarters of 2024, we opened ten new company-owned restaurants and two new franchise restaurants, and we sold six company-owned restaurants to a franchisee (the “DND Sale”). As part of the DND Sale, we entered into a six-year development plan commitment that includes development of ten new locations throughout Oregon and Washington. As of October 1, 2024, we had 377 company-owned restaurants and 94 franchise restaurants in 31 states. In 2025, we expect to open two new company-owned restaurants.
Previous wording
Impairments and Certain Restaurant Closures. In the second quarter of 2024, we performed a review of underperforming restaurants. Through this review, we identified a group of restaurants that we will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets. As a result, we impaired twelve restaurants in the second quarter of 2024. We permanently closed two company-owned restaurants in the first two quarters of 2024. We had three franchise restaurants close in the first two quarters of 2024. We continue to evaluate our portfolio of restaurants, which will likely result in more closures over the next twelve months. In 2024, we expect to close a total of 10 to 15 company-owned restaurants.
Current wording
Impairments and Certain Restaurant Closures. In the second quarter of 2024, we performed a review of underperforming restaurants. Through this review, we identified a group of restaurants that we will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets. As a result, we impaired twelve restaurants in the second quarter of 2024. We permanently closed seven company-owned restaurants in the first three quarters of 2024. We hadfour franchise restaurants close in the first three quarters of 2024. We continue to evaluate our portfolio of restaurants, which will likely result in more closures over the next twelve months. In 2024, we expect to close a total of 10 to 15 company-owned restaurants.
Previous wording
The following table presents a reconciliation of net loss to EBITDA and adjusted EBITDA:
Current wording
The following table presents a reconciliation of net (loss) income to EBITDA and adjusted EBITDA:
Previous wording
(1)Amounts for the fiscal quarter and first two fiscal quarters ended July 4, 2023 include modifications to the adjusted EBITDA calculation to remove adjustments for non-cash rent expense related to sub-leases, certain costs associated with closed restaurants and costs related to corporate matters to conform to the current year presentation.
Current wording
(1)Amounts for the fiscal quarter and first three fiscal quarters ended October 3, 2023 include modifications to the adjusted EBITDA calculation to remove adjustments for non-cash rent expense related to sub-leases, certain costs associated with closed restaurants and costs related to corporate matters to conform to the current year presentation.
Previous wording
The following table presents a reconciliation of loss from operations to restaurant contribution:
Current wording
The following table presents a reconciliation of (loss) income from operations to restaurant contribution:
Previous wording
Second Quarter Ended July 2, 2024 Compared to Second Quarter Ended July 4, 2023
Current wording
Third Quarter Ended October 1, 2024 Compared to Third Quarter Ended October 3, 2023
Previous wording
The table below presents our unaudited operating results for the second quarters of 2024 and 2023, and the related quarter-over-quarter changes.
Current wording
The table below presents our unaudited operating results for the third quarters of 2024 and 2023, and the related quarter-over-quarter changes.
Previous wording
Total revenue increased $2.2 million in the second quarter of 2024, or 1.8%, to $127.4 million, compared to $125.2 million in the second quarter of 2023. This increase was primarily due to same store sales increasing and new restaurant openings since the second quarter of 2023. This was partially offset by the refranchising of six company-owned restaurants in the Oregon market with the DND Sale. System-wide comparable restaurant sales increased 2.0% in the second quarter of 2024 compared to the same period of 2023, comprised of a 1.3% increase at company-owned restaurants and a 4.7% increase at franchise-owned restaurants.
Current wording
Total revenue decreased $5.1 million in the third quarter of 2024, or 4.0%, to $122.8 million, compared to $127.9 million in the third quarter of 2023. This decrease was primarily due to same store sales decreasing, restaurant closures and the refranchising of six company-owned restaurants in the Oregon market with the DND Sale, partially offset by new restaurant openings since the third quarter of 2023. System-wide comparable restaurant sales decreased 3.3% in the third quarter of 2024 compared to the same period of 2023, comprised of a 3.4% decrease at company-owned restaurants and a 2.9% decrease at franchise-owned restaurants.
Previous wording
Cost of sales increased by $0.2 million, or 0.5%, in the second quarter of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, cost of sales decreased to 24.7% in the second quarter of 2024 compared to 25.1% in second quarter of 2023 primarily due to a 0.4% impact from an increase in menu prices.
Current wording
Cost of sales decreased by $0.8 million, or 2.5%, in the third quarter of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, cost of sales increased to 25.5% in the third quarter of 2024 compared to 25.1% in third quarter of 2023 primarily due to the impacts from inflation and menu mix shift, partially offset by a benefit from an increase in menu prices.
Previous wording
Labor costs decreased by $0.7 million, or 1.8%, in the second quarter of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, labor cost decreased to 31.2% in the second quarter of 2024 compared to 32.4% in the second quarter of 2023 due to a 1.1% impact from hourly labor efficiency and a 0.5% impact from an increase in menu prices, partially offset by a 0.4% impact from wage inflation.
Current wording
Labor costs decreased by $0.7 million, or 1.8%, in the third quarter of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, labor cost increased to 32.0% in the third quarter of 2024 compared to 31.3% in the third quarter of 2023 due to sales deleverage and wage inflation, partially offset by an increase in menu prices and lower incentive compensation and benefits.
Previous wording
Occupancy costs increased by $0.2 million, or 2.2%, in the second quarter of 2024 compared to the second quarter of 2023, primarily due to new restaurants opened since the second quarter of 2023. As a percentage of restaurant revenue, occupancy costs remained flat at 9.3% in the second quarter of 2024, compared to the second quarter of 2023.
Current wording
Occupancy costs remained flat in the third quarter of 2024 compared to the third quarter of 2023. As a percentage of restaurant revenue, occupancy costs increased to 9.6% in the third quarter of 2024, compared to 9.2% in the third quarter of 2023 primarily due to sales deleverage.
Previous wording
Depreciation and amortization increased by $0.9 million, or 14.4%, in the second quarter of 2024 compared to the second quarter of 2023, due primarily to new asset additions for restaurants opened and information technology additions, partially offset by restaurant closures since the second quarter of 2023.
Current wording
Depreciation and amortization increased by $0.6 million, or 9.4%, in the third quarter of 2024 compared to the third quarter of 2023, due primarily to new asset additions for restaurants opened and information technology additions, partially offset by restaurant closures since the third quarter of 2023.
Previous wording
Interest expense, net increased $0.9 million in the second quarter of 2024 compared to the second quarter of 2023, due primarily to higher average debt balances and higher interest rates in the second quarter of 2024 as compared to the second quarter of 2023.
Current wording
Interest expense, net increased $0.9 million in the third quarter of 2024 compared to the third quarter of 2023, due primarily to higher average debt balances and higher interest rates in the third quarter of 2024 as compared to the third quarter of 2023.
Previous wording
The effective tax rate for the second quarter of 2024 and for the second quarter of 2023 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2024, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a 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 from income tax.
Current wording
The effective tax rate for the third quarter of 2024 and for the third quarter of 2023 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2024, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a 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 from income tax.
Previous wording
Two Quarters Ended July 2, 2024 Compared to Two Quarters Ended July 4, 2023
Current wording
Three Quarters Ended October 1, 2024 Compared to Three Quarters Ended October 3, 2023
Previous wording
The table below presents our unaudited operating results for the first two quarters of 2024 and 2023, and the related period-over-period changes.
Current wording
The table below presents our unaudited operating results for the first three quarters of 2024 and 2023, and the related period-over-period changes.
Previous wording
Total revenue decreased by $2.5 million, or 1.0%, in the first two quarters of 2024, to $248.7 million compared to $251.2 million in the same period of 2023. This decrease was primarily due a decline in comparable restaurant sales, restaurant closures and the refranchise of six company-owned restaurants in the Oregon market as part of the DND Sale, partially offset by an increase in restaurant openings since the second quarter of 2023.
Current wording
Total revenue decreased by $7.6 million, or 2.0%, in the first three quarters of 2024, to $371.5 million compared to $379.1 million in the same period of 2023. This decrease was primarily due a decline in comparable restaurant sales, restaurant closures and the refranchising of six company-owned restaurants in the Oregon market as part of the DND Sale, partially offset by an increase in restaurant openings since the third quarter of 2023. Comparable restaurant sales decreased 2.3% system-wide in the first three quarters of 2024 compared to the first three quarters of 2023 comprised of a 2.6% decrease at company-owned restaurants and 1.0% decrease at franchise-owned restaurants.
Previous wording
Cost of sales decreased by $1.2 million, or 1.9%, in the first two quarters of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, cost of sales decreased to 24.8% in the first two quarters of 2024 compared to 25.1% in the first two quarters of 2023 primarily due to a 0.4% impact from an increase in menu prices.
Current wording
Cost of sales decreased by $2.0 million, or 2.1%, in the first three quarters of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, cost of sales remained flat at 25.1% in the first three quarters of 2024 compared to the first three quarters of 2023 primarily due to a benefit from an increase in menu prices, offset by inflation and menu mix shift.
Previous wording
Labor costs decreased by $2.1 million, or 2.7%, in the first two quarters of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, labor costs decreased to 31.7% in the first two quarters of 2024 compared to 32.4% in the first two quarters of 2023 primarily due to a 1.0% impact from hourly labor efficiency and a 0.5% impact from an increase in menu prices, partially offset by a 0.5% impact from sales deleverage and a 0.4% impact from wage inflation.
Current wording
Labor costs decreased by $2.8 million, or 2.4%, in the first three quarters of 2024 compared to the same period of 2023. As a percentage of restaurant revenue, labor costs decreased to 31.8% in the first three quarters of 2024 compared to 32.0% in the first three quarters of 2023 primarily due to benefits from hourly labor efficiency and lower incentive compensation and benefits, partially offset by wage inflation and sales deleverage.
Previous wording
Occupancy costs increasedby $0.6 million, or 2.6%, in the first two quarters of 2024 compared to the first two quarters of 2023, due primarily to new restaurants opened. As a percentage of restaurant revenue, occupancy costs increased to 9.6% in the first two quarters of 2024 compared to 9.3% in the first two quarters of 2023 primarily due to sales deleverage.
Current wording
Occupancy costs increasedby $0.6 million, or 1.8%, in the first three quarters of 2024 compared to the first three quarters of 2023. As a percentage of restaurant revenue, occupancy costs increased to 9.6% in the first three quarters of 2024 compared to 9.3% in the first three quarters of 2023 primarily due to sales deleverage.
Previous wording
General and administrative expense increased by $0.5 million, or 1.9%, in the first two quarters of 2024 compared to the first two quarters of 2023, primarily due to increases in executive transition costs and marketing spend, partially offset by a decline in employee related labor costs. As a percentage of revenue, general and administrative expense increased to 10.7% in the first two quarters of 2024 from 10.4% in the first two quarters of 2023.
Current wording
General and administrative expense increased by $1.5 million, or 4.0%, in the first three quarters of 2024 compared to the first three quarters of 2023, primarily due to costs from the Company’s bi-annual national summit, increases in marketing spend and executive transition costs, partially offset by a decline in employee related labor costs. As a percentage of revenue, general and administrative expense increased to 10.6% in the first three quarters of 2024 from 10.0% in the first three quarters of 2023.
Previous wording
Depreciation and amortization increased by $2.1 million, or 16.2%, in the first two quarters of 2024 compared to the first two quarters of 2023, primarily due to new asset additions for new restaurant openings and information technology, partially offset by restaurant closures.
Current wording
Depreciation and amortization increased by $2.7 million, or 13.8%, in the first three quarters of 2024 compared to the first three quarters of 2023, primarily due to new asset additions for new restaurant openings and information technology, partially offset by restaurant closures.
Previous wording
Restaurant impairments, closure costs and asset disposals increased by $10.1 million in the first two quarters of 2024 compared to the first two quarters of 2023. The increase was largely due to an increase in fixed asset impairment charges with twelve restaurants impaired in the first two quarters of 2024 compared to one restaurant impaired in the first two quarters of 2023. In the second quarter of 2024, we performed a review of underperforming restaurants. Through this review, we identified a group of restaurants that we will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets.
Current wording
Restaurant impairments, closure costs and asset disposals increased by $10.2 million in the first three quarters of 2024 compared to the first three quarters of 2023. The increase was largely due to an increase in fixed asset impairment charges with twelve restaurants impaired in the first three quarters of 2024 compared to one restaurant impaired in the first three quarters of 2023. In the second quarter of 2024, we performed a review of underperforming restaurants. Through this review, we identified a group of restaurants that we will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets.
Previous wording
Interest expense increased by $2.0 million in the first two quarters of 2024 compared to the same period of 2023. The increase was primarily due to higher average borrowings and higher interest rates in the first two quarters of 2024 compared to the first two quarters of 2023.
Current wording
Interest expense increased by $2.9 million in the first three quarters of 2024 compared to the same period of 2023. The increase was primarily due to higher average borrowings and higher interest rates in the first three quarters of 2024 compared to the first three quarters of 2023.
Previous wording
The effective tax rate for the first two quarters of 2024 and for the first two quarters of 2023 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2024, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a 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 from income tax. We estimate the annual effective tax rate for 2024 to be between (1.5%) and (0.5%).
Current wording
The effective tax rate for the first three quarters of 2024 and for the first three quarters of 2023 reflect the impact of the previously recorded valuation allowance. The primary components of the provision for income tax (for both quarters) are related to state tax and the change in our valuation allowance. For the remainder of fiscal 2024, we do not anticipate material income tax expense or benefit as a result of the valuation allowance recorded. We will maintain a 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 from income tax. We estimate the annual effective tax rate for 2024 to be between (1.0%) and (0%).
Previous wording
Net cash provided by operating activities was $11.7 million in the first two quarters of 2024 compared to net cash provided by operating activities of $10.4 million in the first two quarters of 2023. The increase in operating cash flow resulted primarily from changes in working capital related to the timing of accounts payable, payroll and accrued liabilities partially offset by a decrease in net income as adjusted for non cash items including depreciation and impairments.
Current wording
Net cash provided by operating activities was $17.5 million in the first three quarters of 2024 compared to net cash provided by operating activities of $27.3 million in the first three quarters of 2023. The decrease in operating cash flow resulted primarily from a decrease in net income as adjusted for non cash items including depreciation and impairments, as well as changes in working capital related to the timing of accounts payable, payroll and accrued liabilities.
Previous wording
Net cash used in investing activities decreased $8.0 million to $15.8 million in the first two quarters of 2024 from $23.8 million in the first two quarters of 2023. This decrease was primarily due to decreased spend for new restaurants and restaurant technology and proceeds from refranchising transactions.
Current wording
Net cash used in investing activities decreased $13.7 million to $22.9 million in the first three quarters of 2024 from $36.6 million in the first three quarters of 2023. This decrease was primarily due to decreased spend for new restaurants and restaurant technology and proceeds from refranchising transactions.
Previous wording
Net cash provided by financing activities was $2.8 million in the first two quarters of 2024, compared to $15.0 million in the first two quarters of 2023. The decrease from the first two quarters of 2023 was largely due to a reduction in net borrowings to fund capital spending.
Current wording
Net cash provided by financing activities was $5.7 million in the first three quarters of 2024, compared to $10.3 million in the first three quarters of 2023. The decrease from the first three quarters of 2023 was primarily due to a reduction in net borrowings to fund capital spending in 2024, partially offset by repurchases of common stock in the first three quarters of 2023.
Previous wording
We estimate capital expenditures will be approximately $28.0 million to $32.0 million for fiscal year 2024, including $10.0 million to $14.0 million for the remainder of the year, primarily for the openingof company-owned restaurants before any reductions for landlord reimbursements, reinvestment in existing restaurants and investments in technology. We expect such capital expenditures to be funded by currently available cash and cash equivalents, cash flows from operations and if necessary, undrawn capacity under our revolving credit line.
Current wording
We estimate capital expenditures will be approximately $29.0 million to $31.0 million for fiscal year 2024, including $4.0 million to $6.0 million for the remainder of the year, primarily for the opening of company-owned restaurants before any reductions for landlord reimbursements, reinvestment in existing restaurants and investments in technology. We expect such capital expenditures to be funded by currently available cashand cash equivalents, cash flows from operations and if necessary, undrawn capacity under our revolving credit line.
Previous wording
Liquidity. As of July 2, 2024, we had a cash balance of $1.8 million compared to $3.0 million asof January 2, 2024. The amount available for future borrowings under our A&R Credit Agreement (defined below) was $35.5 million as of July 2, 2024. We believe that our current cash and cash equivalents, the expected cash flows from company-owned restaurant operations, the expected franchise fees and royalties and available borrowings under the credit facility will be sufficient to fund our cash requirements for working capital needs, new restaurant openings, and capital improvements and maintenance of existing restaurants for at least the next twelve months.
Current wording
Liquidity. As of October 1, 2024, we had a cash balance of $3.3 million compared to $3.0 million asof January 2, 2024. The amount available for future borrowings under our A&R Credit Agreement (defined below) was $32.1 million as of October 1, 2024. We believe that our current cash and cash equivalents, the expected cash flows from company-owned restaurant operations, the expected franchise fees and royalties and available borrowings under the credit facility will be sufficient to fund our cash requirements for working capital needs, new restaurant openings, and capital improvements and maintenance of existing restaurants for at least the next twelve months.
Previous wording
As of July 2, 2024, we had $86.5 million of indebtedness (excluding $1.7 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under our A&R Credit Agreement.
Current wording
As of October 1, 2024, we had $89.9 million of indebtedness (excluding $1.6 million of unamortized debt issuance costs) and $3.0 million of letters of credit outstanding under our A&R Credit Agreement.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Restaurant impairments, closure costs and asset disposals increased $10.4 million in the second quarter of 2024 compared to the second quarter of 2023. The increase was largely due to an increase in fixed asset impairment charges with twelve restaurants impaired in the second quarter of 2024 and no restaurants impaired in the second quarter of 2023. In the second quarter of 2024, we performed a review of underperforming restaurants. Through this review, we identified a group of restaurants that we will seek to close on or before their next lease renewal dates, and are unlikely to recover the net book value of their assets.