POTBELLY CORPORATION Forward-Looking Statements
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year endedDecember 27, 2020 . This discussion 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 (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995, and involves numerous risks and uncertainties. Forward-looking statements may include, among others, statements relating to: our future financial position and results of operations, estimated costs associated with our closure of underperforming shops, and the implementation and results of strategic initiatives. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and generally contain words such as "believes," "expects," "may," "will," "should," "seeks," "intends," "plans," "strives," "goal," "estimates," "forecasts," "projects" or "anticipates" and the negative of these terms or similar expressions. Our forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ materially from those projected or implied by the forward-looking statement, due to reasons including, but not limited to, the potential future impact of COVID-19 on our business and results of operations; compliance with covenants in our credit facility; competition; general economic conditions; our ability to successfully implement our business strategy; the success of our initiatives to increase sales and traffic; changes in commodity, energy and other costs; our ability to attract and retain management and employees; consumer reaction to industry-related public health issues and perceptions of food safety; our ability to manage our growth; reputational and brand issues; price and availability of commodities; consumer confidence and spending patterns; and weather conditions. 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 Note Regarding Forward-Looking Statements" included in our Annual Report on Form 10-K for the fiscal year endedDecember 27, 2020 , for a discussion of factors that could cause our actual results to differ from those expressed or implied by forward-looking statements. We undertake 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.
Business
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 owns and operatesPotbelly Sandwich Shop concepts inthe United States . We also have domestic franchise operations ofPotbelly Sandwich Shop concepts.Potbelly 's chief operating decision maker is our Chief Executive Officer. Based on how our Chief Executive Officer reviews financial performance and allocates resources on a recurring basis, we have one operating segment and one reportable segment.
Our new "Traffic-Driven Profitability" 5-pillar strategic plan includes a prioritized set of low-cost strategic investments that we believe will deliver strong returns. The 5 pillars are:
• Craveable Quality Food at a Great Value • People Creating Good Vibes • Customer Experiences that Drive Traffic Growth • Digitally Driven Awareness, Connection and Traffic •Franchise Focused Development Our shop model is designed to generate, and has generated, strong cash flow, attractive shop-level financial results and high returns on investment. We operate our shops successfully in a wide range of geographic markets, population densities and real estate settings. We aim to generate average shop-level profit margins, a non-GAAP measure, that range from the high teens to above 20%. Our ability to achieve such margins and returns depends on a number of factors. For example, we face increasing labor and commodity costs, which we have partially offset by increasing menu prices. Although there is no guarantee that we will be able to maintain these returns, we believe our attractive shop economics support our ability to profitably grow our brand in new and existing markets. 17 -------------------------------------------------------------------------------- The table below sets forth a rollforward of company-operated and franchise operated activities: Company- Franchise- Total Operated Operated Company Shops as of December 29, 2019 428 46 474 Shops opened 3 - 3 Shops closed (4 ) - (4 ) Shops as of March 29, 2020 427 46 473 Shops as of December 27, 2020 400 46 446 Shops opened - - - Shops closed (1 ) (1 ) (2 ) Shops as of March 28, 2021 399 45 444
Impact of COVID-19 on Our Business
OnJanuary 30, 2020 , the WHO announced a global health emergency because of COVID-19 and the risks to the international community as the virus spreads globally. OnMarch 11, 2020 , the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The COVID-19 pandemic has significantly impacted economic conditions inthe United States where all our shops are located. In response to the pandemic, many states and jurisdictions in which we operate issued stay-at-home orders and other measures aimed at slowing the spread of the coronavirus. While most of our company-owned shops remained open in accordance with guidance from local authorities, these measures resulted in us closing the vast majority our dining rooms and shifting to off-premise operations only, and we experienced a sudden and drastic decrease in revenues. While the pandemic continues to have an impact on our business, the distribution of COVID-19 vaccines and a decline in positive cases and hospitalizations has resulted in a gradual improvement in our sales during the first quarter of 2021. Nearly all of our shops have reopened their dining rooms with some restrictions depending on local regulations, such as social distancing and limited capacities, to ensure the health and safety of our guests and employees. We continue to follow guidance from local authorities in determining the appropriate restrictions to put in place for each shop, including the suspension or reduction of in-shop dining if required due to changes in the pandemic response in each jurisdiction. The COVID-19 pandemic has adversely affected, and will continue to adversely affect, our operations and financial results for the foreseeable future. There are many uncertainties regarding the current COVID-19 pandemic, and we are closely monitoring the impact of the pandemic on all aspects of our business, including how it will impact our customers, employees, suppliers, vendors, business partners, and distribution channels. We are unable to predict the impact that COVID-19 will have on our financial position and operating results due to numerous uncertainties, however, we are continually assessing the evolving impact of the COVID-19 pandemic and intend to make adjustments to our responses accordingly. As the COVID-19 pandemic emerged, our first priority was and continues to be ensuring the health and safety of our employees as we serve our customers and communities. We have provided masks, gloves, and other personal protective equipment to our shop employees and implemented daily temperature checks and screening before each shift. We continue to adhere to our stringent food safety and quality assurance programs. We have implemented strict sanitation protocols for our shops including disinfecting high-touch areas and providing tamper-evident stickers on all pickup and delivery orders. We are monitoring recommendations from theCenters for Disease Control and will make necessary adjustments to align with emerging best practices. We have been in regular contact with our supply chain partners and we have not experienced, nor do we foresee, material disruptions in our supply chain. As ofMarch 28, 2021 , 15 of our shops remain temporarily closed. Revenue - As our shops have been subject to COVID-19 restrictions on dine-in capacity, our shops have increased off-premise operations, continuing to provide delivery, in-shop pick-up, drive-thru, or curbside pick-up services. We continue to follow guidance from local authorities in determining the appropriate restrictions to put in place for each shop. The majority of our shops have reopened their dining rooms with restrictions, such as social distancing and limited capacities, to ensure the health and safety of our guests and employees. Customers can place off-premise orders through Potbelly.com and thePotbelly app, or through DoorDash, Grubhub,Postmates ,Uber Eats and other marketplaces nationwide. We continue to evaluate our product offerings and service methods to ensure we are aligned with the preferences of our customers as the pandemic evolves. Operating Costs - We have implemented measures to reduce operating costs and general and administrative expenses in response to the negative impact the pandemic has had on our business. We continually adjust shop-level labor and purchases of inventory to align with current levels of demand. At the onset of the pandemic, we implemented a strategy to reduce costs and preserve cash. We continue to be thoughtful and judicious regarding our operating expenses during the uncertainty of the pandemic. Additionally, we announced a corporate restructuring plan that was executed during the fourth quarter of 2020 that is expected to 18
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reduce annual general and administrative expenses by
Beginning in fiscal year 2020, we suspended the payment of rent on the majority of our leases and entered into discussions with our landlords regarding the restructuring of those leases in light of various contractual and legal defenses. As ofMarch 28, 2021 , we have amended approximately 319 of the lease agreements for our shops, which include rent abatements, rent deferrals, and/or modified lease terms to reduce ongoing rent, and we have completed early terminations of leases for 29 of our shops.
We will continue to actively monitor the evolving situation and may take further
actions that alter our business operations as may be required by federal, state
or local authorities or that we determine are in the best interests of our
employees, customers, franchisees, stakeholders and communities.
19
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13 Weeks Ended
The following table presents information comparing the components of net income for the periods indicated (dollars in thousands):
For the 13 Weeks Ended
March 28, % of March 29, % of Increase Percent
2021 Revenues 2020 Revenues (Decrease) Change
Revenues
Sandwich shop sales,
net $ 77,501 99.3 % $ 86,961 99.3 % $ (9,460 ) (10.9 )%
Franchise royalties and
fees 562 0.7 629 0.7 (67 ) (10.7 )
Total revenues 78,063 100.0 87,590 100.0 (9,527 ) (10.9 )
Expenses
(Percentages stated as
a percent of
sandwich shop sales,
net)
Sandwich shop operating
expenses
Cost of goods sold, excluding depreciation 21,469 27.7 24,174 27.8 (2,705 ) (11.2 ) Labor and related expenses 28,614 36.9 30,397 35.0 (1,783 ) (5.9 ) Occupancy expenses 13,599 17.5 15,028 17.3 (1,429 ) (9.5 ) Other operating expenses 13,335 17.2 12,765 14.7 570 4.5 (Percentages stated as a percent of total revenues) Advertising 460 0.6 441 0.5 19 4.3 General and administrative expenses 7,423 9.5 9,834 11.2 (2,411 ) (24.5 ) Depreciation expense 4,174 5.3 5,456 6.2 (1,282 ) (23.5 ) Pre-opening costs - * 64 * (64 ) 0.0 Impairment, loss on disposal of property and equipment and shop closures 3,122 4.0 6,416 7.3 (3,294 ) (51.3 ) Total expenses 92,196 >100 104,575 >100 (12,379 ) (11.8 )
Loss from operations (14,133 ) (18.1 ) (16,985 )
(19.4 ) 2,852 (16.8 ) Interest expense, net 288 0.4 74 * 214 >100 Loss before income taxes (14,421 ) (18.5 ) (17,059 ) (19.5 ) 2,638 (15.5 ) Income tax expense (benefit) 53 0.1 (3,709 ) * 3,762 >(100) Net loss (14,474 ) (18.5 ) (13,350 ) (15.2 ) (1,124 ) >100 Net income (loss) attributable to non-controlling interest (2 ) (0.0 ) (14 ) * 12 >(100) Net loss attributable toPotbelly Corporation $ (14,472 ) (18.5 )%$ (13,336 ) (15.2 )%$ (1,136 ) 8.5 % * Amount is less than 0.1% Revenues Total revenues decreased by$9.5 million , or 10.9%, to$78.1 million during the 13 weeks endedMarch 28, 2021 , from$87.6 million during the 13 weeks endedMarch 29, 2020 . This decrease was primarily driven by the COVID-19 pandemic and related government restrictions imposed by federal, state and local governments. This resulted in a decrease for the quarter of$2.5 million , or 3.1%, in company-operated comparable store sales, a decrease in sales of$3.9 million due to shops that have permanently closed during the last year, and a decrease in sales of$3.4 million due to shops that were temporarily closed during the first quarter of 2021. These decreases were partially offset by increases in sales from recently opened shops that were not yet in our company-operated comparable store sales population during 2020. The decrease in company-operated comparable store sales resulted from a decrease in traffic partially offset by an increase in average check and certain menu price increases. 20 --------------------------------------------------------------------------------
Cost of Goods Sold
Cost of goods sold decreased by$2.7 million , or 11.2%, to$21.5 million during the 13 weeks endedMarch 28, 2021 , from$24.2 million during the 13 weeks endedMarch 29, 2020 . This decrease was primarily driven by a decrease in shop revenue. As a percentage of sandwich shop sales, cost of goods sold decreased to 27.7% during the 13 weeks endedMarch 28, 2021 , from 27.8% during the 13 weeks endedMarch 29, 2020 . Labor and Related Expenses Labor and related expenses decreased by$1.8 million , or 5.9%, to$28.6 million during the 13 weeks endedMarch 28, 2021 , from$30.4 million for the 13 weeks endedMarch 29, 2020 , primarily due to labor management amid a decrease in shop revenue and a decrease in expense from closed shops, partially offset by wage inflation. As a percentage of sandwich shop sales, labor and related expenses increased to 36.9% during the 13 weeks endedMarch 28, 2021 , from 35.0% for the 13 weeks endedMarch 29, 2020 , primarily driven by sales deleverage in certain labor related costs not directly variable with sales.
Occupancy Expenses
Occupancy expenses decreased by$1.4 million , or 9.5%, to$13.6 million during the 13 weeks endedMarch 28, 2021 , from$15.0 million during the 13 weeks endedMarch 29, 2020 primarily due to a decrease in expenses related to closed shops. As a percentage of sandwich shop sales, occupancy expenses increased to 17.5% for the 13 weeks endedMarch 28, 2021 , from 17.3% for the 13 weeks endedMarch 29, 2020 , primarily due to sales deleverage and inflation in certain occupancy related costs, including lease renewals, real estate taxes and common area maintenance.
Other Operating Expenses
Other operating expenses increased by$0.5 million , or 4.5%, to$13.3 million during the 13 weeks endedMarch 28, 2021 , from$12.8 million during the 13 weeks endedMarch 29, 2020 . The increase was primarily related to third-party delivery partnerships driven by increased sales in that channel, partially offset by a decrease in certain items variable with sales. As a percentage of sandwich shop sales, other operating expenses increased to 17.2% for the 13 weeks endedMarch 28, 2021 , from 14.7% for the 13 weeks endedMarch 29, 2020 , primarily driven by sales deleverage in operating expense items such as utilities, higher expenses related to third-party delivery partnerships driven by increased sales in that channel and other expenses not directly variable with sales. Advertising
Advertising expenses increased by 4.3% to
General and Administrative Expenses
General and administrative expenses decreased by$2.4 million , or 24.5%, to$7.4 million during the 13 weeks endedMarch 28, 2021 , from$9.8 million during the 13 weeks endedMarch 29, 2020 . The decrease was driven primarily by a decrease in payroll costs as a result of furloughs of corporate employees enacted during the second quarter of 2020 as well as the restructuring plan enacted during the fourth quarter of 2020. As a percentage of revenues, general and administrative expenses decreased to 9.5% for the 13 weeks endedMarch 28, 2021 , from 11.2% for the 13 weeks endedMarch 29, 2020 , primarily driven by reductions in payroll costs noted above, partially offset by a decrease in shop revenue.
Depreciation Expense
Depreciation expense decreased by$1.3 million , or 23.5%, to$4.2 million during the 13 weeks endedMarch 28, 2021 , from$5.5 million during the 13 weeks endedMarch 29, 2020 . The decrease was driven primarily by a lower depreciable base related to a decrease in the number of company-operated shops and impairment charges taken in prior periods. As a percentage of revenues, depreciation was 5.3% during the 13 weeks endedMarch 28, 2021 and was 6.2% for the 13 weeks endedMarch 29, 2020 .
Pre-Opening Costs
There were no pre-opening costs during the 13 weeks ended
21
--------------------------------------------------------------------------------Impairment, Loss on Disposal of Property and Equipment and Shop Closures
Impairment, loss on disposal of property and equipment and shop closures
decreased by
We assess potential impairments to our long-lived assets, which includes property and equipment and lease right-of-use assets, on a quarterly basis or whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Shop-level assets and right-of-use assets are grouped at the individual shop-level for the purpose of the impairment assessment. Recoverability of an asset group is measured by a comparison of the carrying amount of an asset group to its estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of the asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The fair value of the shop assets is determined using the discounted future cash flow method of anticipated cash flows through the shop's lease-end date using fair value measurement inputs classified as Level 3. The fair value of right-of-use assets is estimated using market comparative information for similar properties. Level 3 inputs are derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. After performing a periodic review of our shops during the 13 weeks endedMarch 28, 2021 , it was determined that indicators of impairment were present for certain shops as a result of continued underperformance. We performed an impairment analysis related to these shops and recorded an impairment charge of$148 thousand for the 13 weeks endedMarch 28, 2021 . The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material. During the 13 weeks endedMarch 28, 2021 , we terminated 2 leases. We incurred$0.2 million in lease termination fees related to these leases for the 13 weeks endedMarch 28, 2021 . Upon termination of leases during the 13 weeks endedMarch 28, 2021 , we derecognized ROU assets of$0.6 million and lease liabilities of$0.7 million that resulted in a net gain of$0.1 million that is recorded in impairment, loss on disposal of property and equipment and shop closures. During the first quarter of 2021, we amended the lease for our corporate Support Center office inChicago to relocate to a different office space. As a result of this relocation, the leasehold improvements of the original office space were disposed, resulting in a loss on disposal of$2.5 million .
Interest Expense, Net
Net interest expense was$288 thousand during the 13 weeks endedMarch 28, 2021 and$74 thousand during the 13 weeks endedMarch 29, 2020 . The increase was primarily driven by an increase in average outstanding borrowings and a higher interest rate on our revolving credit facility.
Income Tax Expense
We recognized income tax expense of$53 thousand for the 13 weeks endedMarch 28, 2021 . We recognized an income tax benefit of$3.7 million for the thirteen weeks endedMarch 29, 2020 primarily due to a discrete tax benefit recorded for the carryback of NOLs and a refund of prior AMT credits allowed under the CARES Act.
Liquidity and Capital Resources
General
Potbelly 's ongoing primary sources of liquidity and capital resources are cash provided from operating activities, existing cash and cash equivalents, and our credit facility.Potbelly 's primary requirements for liquidity and capital are new shop openings, existing shop capital investments, maintenance, lease obligations, working capital and general corporate needs.Potbelly 's requirement for working capital is not significant since our customers pay for their food and beverage purchases in cash or payment cards (credit or debit) at the time of sale. Thus,Potbelly is able to sell certain inventory items before we need to pay our suppliers for such items. Company shops do not require significant inventories or receivables. The COVID-19 pandemic's impact on our operations and revenues had significantly affected our ability to generate cash from operations in 2020. To preserve financial flexibility, we have utilized our revolving credit facility to fund operations. We ended the first quarter of 2021 with a cash balance of$11.5 million and total liquidity (cash plus amounts available on our Revolving Credit Facility) of$33.5 million compared to a balance of$11.1 million and total liquidity of$44.6 million atDecember 27, 2020 . This decrease is primarily driven by Amendment No. 5 to our Credit Agreement which decreased the revolving credit commitment from$40 million to$25 million . We believe that cash from our operations and borrowings under our revolving credit facility will be provide liquidity through fiscal year 2021. 22 -------------------------------------------------------------------------------- OnFebruary 9, 2021 , we closed on a Securities Purchase Agreement (the "SPA") for the sale of 3,249,668 shares of our common stock at a par value of$0.01 per share and the issuance of warrants to purchase 1,299,861 shares of common stock at an exercise price of$5.45 per warrant for gross proceeds of$16.0 million , before deducting placement agent fees and offering expenses of approximately$1.0 million . The warrants are initially exercisable commencingAugust 13, 2021 through their expiration date ofAugust 12, 2026 .
Cash Flows
The following table presents summary cash flow information for the periods
indicated (in thousands):
For the 13 Weeks Ended
March 28, March 29,
2021 2020
Net cash provided by (used in):
Operating activities $ (9,700 ) $ (7,816 )
Investing activities (1,300 ) (4,860 )
Financing activities 11,381 39,686
Net increase (decrease) in cash
Operating Activities Net cash used in operating activities increased to$9.7 million for the 13 weeks endedMarch 28, 2021 , from cash provided by operating activities of$7.8 million for the 13 weeks endedMarch 28, 2020 . The$1.9 million change in operating cash was primarily driven by an increase in loss from operations, a decrease in depreciation and noncash lease expense and by the timing of payment for certain liabilities, including the deferral of rent for many of our shops in the prior year. This was partially offset by a decrease in asset impairment, store closure and disposal of property and equipment compared to the prior year.
Investing Activities
Net cash used in investing activities decreased to$1.3 million for the 13 weeks endedMarch 28, 2021 , from$4.9 million for the 13 weeks endedMarch 29, 2020 . The decrease was primarily due to a reduction of capital expenditures related to new shop construction. Due to the COVID-19 pandemic, capital expenditures have been limited to essential maintenance and safety.
Financing Activities
Net cash provided by financing activities decreased to$11.4 million for the 13 weeks endedMarch 28, 2021 , from$39.7 million for the 13 weeks endedMarch 29, 2020 . The$28.3 million change in financing cash was primarily driven by net borrowings under the Credit Facility, partially offset by the net proceeds from SPA. Revolving Credit Facility OnAugust 7, 2019 , we entered into a second amended and restated revolving credit facility agreement (the "Credit Agreement") withJPMorgan Chase Bank, N.A . ("JPMorgan") that expires inJuly 2022 . The Credit Agreement amends and restates that certain amended and restated revolving credit facility agreement, dated as ofDecember 9, 2015 , and amended onMay 3, 2019 (collectively, the "Prior Credit Agreement") with JPMorgan. The Credit Agreement provided, among other things, for a revolving credit facility in a maximum principal amount$40 million , with possible future increases of up to$20 million under an expansion feature. Borrowings under the credit facility generally bear interest at our option at either (i) a eurocurrency rate determined by reference to the applicable LIBOR rate plus a specified margin or (ii) a prime rate as announced by JP Morgan plus a specified margin. The applicable margin was determined based upon our consolidated total leverage ratio. On the last day of each calendar quarter, we were required to pay a commitment fee of 0.20% per annum in respect of any unused commitments under the credit facility. So long as certain total leverage ratios, EBITDA thresholds and minimum liquidity requirements are met and no default or event of default has occurred or would result, there was no limit on the "restricted payments" (primarily distributions and equity repurchases) that we may make, provided that proceeds of the loans under the Credit Agreement may not be used for purposes of making restricted payments. As disclosed in our Annual Report on Form 10-K for the fiscal year endedDecember 27, 2020 , we drew on the credit facility to increase our cash position and preserve financial flexibility in light of the uncertainty resulting from the COVID-19 pandemic, and we amended the Credit Agreement throughout fiscal year 2020. Most recently, we entered into Amendment No. 5 (the "Fifth Amendment") to the Credit Agreement onFebruary 26, 2021 . As a result of the Amendment (i) the maturity date was extended fromMarch 31, 2022 toJanuary 31, 2023 , (ii) the revolving credit 23
-------------------------------------------------------------------------------- commitment decreased from$40 million to$25 million , (iii) the interest rate margin with respect to any Commercial Bank Floating Rate Loan increased to 2.75%, (iv) the interest rate margin with respect to any Eurodollar Loan increased to 5.00%, (v) the definition of EBITDA was amended to exclude non-cash charges/gains in connection with certain equity interests of the Company, (vi) certain borrowing conditions relating to the Company's Consolidated Cash Balance were instituted, (vii) the Company is permitted to repurchase/redeem its equity interests under certain conditions and (viii) the minimum monthly EBITDA and Liquidity thresholds the Company must maintain were revised.
As of
Paycheck Protection Program Loan
OnAugust 10, 2020 , PSW, an indirect subsidiary of the Company, entered into a loan agreement withHarvest Small Business Finance, LLC in the aggregate amount of$10.0 million (the "Loan"), pursuant to the PPP under the CARES Act. The Loan was necessary to support our ongoing operations due to the economic uncertainty resulting from the COVID-19 pandemic and lack of access to alternative sources of liquidity. The Loan is scheduled to mature five years from the date on which PSW applies for loan forgiveness under the CARES Act, bears interest at a rate of 1% per annum and is subject to the terms and conditions applicable to loans administered by theU.S. Small Business Administration under the CARES Act. The PPP provides that the use of the Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. We have used all of the PPP proceeds toward qualifying expenses and intend to pursue forgiveness of the Loan amount, but we are not able to determine the likelihood or the amount of forgiveness that will be obtained.
We have recorded the amount of the Loan as long-term debt in our condensed
consolidated balance sheet as of
Stock Repurchase Program
OnMay 8, 2018 , we announced that our Board of Directors authorized a stock repurchase program for up to$65.0 million of our outstanding common stock. The program permits us, from time to time, to purchase shares in the open market (including in pre-arranged stock trading plans in accordance with the guidelines specified in Rule 10b5-1 under the Exchange Act) or in privately negotiated transactions. The number of shares of common stock repurchased in the future, and the timing and price of repurchases, will depend upon market conditions, liquidity needs and other factors. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. Repurchased shares are included as treasury stock in the condensed consolidated balance sheets and the condensed consolidated statements of equity. For the 13 endedMarch 28, 2021 , we did not repurchase any shares of our common stock. In light of the COVID-19 pandemic, we do not have plans to repurchase any common stock under our stock repurchase program at this time.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance withU.S. GAAP. The preparation of financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Significant estimates include amounts for long-lived assets and income taxes. Actual results could differ from those estimates. Critical accounting policies are those that management believes are both most important to the portrayal of our financial condition and operating results and require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base estimates on historical experience and other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions.Potbelly had no significant changes in our critical accounting estimates since the last annual report. Our critical accounting estimates are identified and described in our annual consolidated financial statements and related notes. 24 --------------------------------------------------------------------------------
Off-Balance Sheet Arrangements
As of
New and Revised Financial Accounting Standards
See Note 1 to the Consolidated Financial Statements for a description of recently issued Financial Accounting Standards.
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