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

Noodles & Company Announces Fourth Quarter and Fiscal Year 2013 Financial Results  BROOMFIELD, Colo., Feb. 26, 2014 (GLOBE NEWSWIRE) -- Noodles & Company (Nasdaq:NDLS) today announced financial results for the fourth quarter and fiscal year ended December 31, 2013.  Key highlights for the fourth quarter of 2013 compared to the fourth quarter of 2012 include:    *Adjusted net income^(1) increased 65.9% to $3.5 million, or $0.11 per     diluted share, from $2.1 million.   *GAAP net income increased to $2.4 million, from $1.6 million.   *Adjusted EBITDA^(1) increased 31.8% to $12.0 million, from $9.1 million.   *Total revenue increased 17.4% to $91.5 million from $77.9 million.   *Comparable restaurant sales increased 4.3% for company-owned restaurants,     1.5% for franchise restaurants and 3.9% system-wide.   *Restaurant contribution margin decreased 30 basis points to 21.0%.   *12 new restaurants opened system-wide, including eight company-owned and     four franchise restaurants.  Key highlights for the fiscal year of 2013 compared to the fiscal year of 2012 include:    *Adjusted net income^(1) increased 30.9% to $12.1 million, or $0.40 per     diluted share, from $9.3 million, or $0.32 per diluted share.   *GAAP net income increased to $6.7 million, or $0.24 per diluted share,     from $5.2 million.   *Adjusted EBITDA^(1) increased 30.1% to $47.2 million, from $36.3 million.   *Total revenue increased 16.8% to $350.9 million from $300.4 million.   *Comparable restaurant sales increased 3.4% for company-owned restaurants,     0.6% for franchise restaurants and 3.0% system-wide.   *Restaurant contribution margin decreased 50 basis points to 20.7%.   *53 net new restaurants opened system-wide, including 42 company-owned and     11 franchise restaurants, resulting in 16.2% system-wide unit growth.  (1) Adjusted net income and Adjusted EBITDA are non-GAAP measures. A reconciliation of US GAAP net income to each of these measures is included in the accompanying financial data. See "Non-GAAP Financial Measures."  "We're pleased to have maintained our operating momentum in the fourth quarter with our 18^th straight quarter of comparable restaurant sales growth and a 66% increase in our adjusted net income for the quarter," said Kevin Reddy, Chairman and Chief Executive Officer of Noodles & Company. "Our ongoing success is a testament to the hard work of our entire team to deliver our globally inspired menu with an elevated level of service at an exceptional value, which we believe has distinguished Noodles as a 'Category of One' in the restaurant industry."  Reddy continued, "Looking ahead to 2014, we have faced an unusual amount of severe winter weather during the first quarter to date. Nearly 80% of our restaurants are located in areas severely impacted by atypical weather, including the Mid-Atlantic, Upper Midwest and Rocky Mountain West. In fact, over 30% of our operating days thus far have seen either measurable precipitation or temperatures at least twenty degrees below normal. As a result, in the first quarter we anticipate a roughly 300 to 350 bps negative impact to revenue and $0.03 impact to diluted earnings per share. Still, we remain confident that we can deliver on our 25% annual adjusted diluted earnings per share growth goal for 2014. We have tested and begun implementing a number of initiatives over the past year, centered on our dinner daypart strength, the introduction of catering and improving throughput and operational efficiency, which we believe will continue to move our brand forward. Additionally, our development pipeline is in great shape with plans to open 42 to 50 new company-owned restaurants this year while our franchisees expect to open 10 to 15 new restaurants, representing approximately 16% new unit growth system-wide. With a long runway of expansion potential, and a consistent track record of sales and earnings growth, we are excited about 2014 and beyond."  Fourth Quarter 2013 Financial Results  Revenue Growth of 17.4%  Total revenue increased $13.5 million in the fourth quarter of 2013, or 17.4%, to $91.5 million, compared with $77.9 million in the fourth quarter of 2012. This increase was the result of new restaurants opened system-wide since the beginning of the fourth quarter of 2012, in addition to an increase in sales at our comparable base restaurants. In the fourth quarter of 2013, comparable restaurant sales increased 4.3% for company-owned restaurants, 1.5% for franchise restaurants and 3.9% system-wide.  The company-owned comparable restaurant sales increase of 4.3% in the fourth quarter 2013 was comprised of a price increase of approximately 2.5% and a combination of traffic and menu mix increases.  Adjusted Net Income^(2) Growth of 65.9%  Adjusted net income increased 65.9% to $3.5 million, from $2.1 million in the prior period. GAAP Net income was $2.4 million in the fourth quarter of 2013, compared with net income of $1.6 million in the fourth quarter of 2012.  Restaurant contribution margin decreased to 21.0% in the fourth quarter of 2013, compared with 21.3% in the fourth quarter of 2012. The decrease was primarily due to increased operating and occupancy costs, resulting from investment in our limited-time offering, repairs and maintenance, as well as expenses related to the increased number of new restaurants.  Follow-on Offering  On December 5, 2013, we completed a follow-on offering of 4,500,000 shares of our Class A common stock at a price of $39.50 per share. All of the shares in the offering were offered by selling stockholders, except for 108,267 shares offered by us, the net proceeds of which were used to repurchase the same number of shares from certain officers at the same net price per share. We did not receive any of the proceeds from the offering. The selling stockholders paid all of the underwriting discounts and commissions associated with the sale of their shares; however, we incurred approximately $696,000 in costs and expenses related to this offering during the fourth quarter of 2013.  Fiscal Year Ended 2013 Financial Results  Revenue Growth of 16.8%  Total revenue increased $50.5 million during fiscal year 2013, or 16.8%, to $350.9 million, compared with $300.4 million in the same period of 2012. This increase was the result of new restaurants opened system-wide since the beginning of the fourth quarter of 2012, in addition to an increase in sales at our comparable base restaurants. Comparable restaurant sales increased 3.4% for company-owned restaurants, 0.6% for franchise restaurants and 3.0% system-wide.  Adjusted Net Income^(2) Growth of 30.9%  Adjusted net income increased 30.9% to $12.1 million. GAAP Net income was $6.7 million during fiscal year 2013, compared to net income of $5.2 million in the same period of 2012.  Restaurant contribution margin was 20.7% as a percentage of restaurant revenue during fiscal year 2013, compared with 21.2% in the same period of 2012, due primarily to increases in occupancy and restaurant operating costs as a percentage of revenue.  (2) Adjusted net income is a non-GAAP measure. A reconciliation of US GAAP net income to adjusted net income is included in the accompanying financial data. See "Non-GAAP Financial Measures."  2014 Outlook  For 2014, management expects the following:    *42 to 50 new company-owned restaurant openings, reflecting 13% to 16% unit     growth   *10 to 15 new franchise restaurant openings, reflecting 16% to 24% unit     growth   *2.5% to 3.0% comparable restaurant sales growth   *Total revenue between $406 million and $412 million   *Approximately 25% adjusted diluted earnings per share growth   *An estimated tax rate between 39% and 40%  Key Definitions:  Comparable Restaurant Sales represent year-over-year sales comparisons for restaurants open for at least 18 full periods.  Restaurant Contribution Margin represents restaurant revenue less restaurant operating costs which are costs of sales, labor, occupancy and other restaurant operating costs.  Adjusted EBITDA represents net income before interest expense, debt extinguishment expense, provision for income taxes, asset disposals, closure costs and restaurant impairments, depreciation and amortization, stock-based compensation expense, management fees, IPO related expenses and follow-on offering expenses. Adjusted EBITDA is presented because: (i) management believes it is a useful measure for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and asset disposals, closure costs and restaurant impairments and (ii) management uses it internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare performance to that of the competitors. See "Non-GAAP Financial Measures" below.  Adjusted Net Income represents net income plus: i) a net savings in interest expense as a result of the pay down of debt using IPO proceeds, ii) IPO related expenses, iii) follow-on offering expenses, iv) pre-IPO management fees v) the tax impact of follow-on offering expenses and other miscellaneous tax items; less: i) estimated incremental costs of being a public company and ii) the tax effects of these adjustments. Adjusted net income is presented because management believes it helps convey supplemental information to investors regarding the Company's performance excluding the impact of the IPO and other special items that affect the comparability of results in past quarters and expected in future quarters. See "Non-GAAP Financial Measures" below.  Conference Call  Noodles & Company will host a conference call to discuss the fourth quarter financial results on Wednesday, February 26, 2014 at 4:30 PM Eastern Time.  The conference call can be accessed live over the phone by dialing (877) 303-1298 or for international callers by dialing (253) 237-1032. A replay will be available after the call and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the passcode is 76657739. The replay will be available until Tuesday, March 11, 2014. The conference call will also be webcast live from the Company's corporate website at investor.noodles.com, under the "Events & Presentations" page. An archive of the webcast will be available at the same location on the corporate website shortly after the call has concluded.  Non-GAAP Financial Measures  To supplement its consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles ("GAAP"), the Company uses the following non-GAAP financial measures: adjusted EBITDA, adjusted net income and adjusted EPS (collectively the "non-GAAP financial measures"). The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. The Company believes that they provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by management in its financial and operational decision making. Adjusted net income is presented because management believes it helps convey supplemental information to investors regarding the Company's performance excluding the impact of the IPO and follow-on offering as well as other special items that affect the comparability of results in past quarters and expected in future quarters, such as the adjustment to eliminate the historical interest expense for all periods presented that were based upon actual outstanding balances before the application of the net proceeds from our IPO. The non-GAAP measures used by the Company in this press release may be different from the methods used by other companies.  For more information on the non-GAAP financial measures, please 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                      December31,    January1,   December31,   January1,                      2013            2013         2013           2013 Revenue:                                                        Restaurant revenue    $ 90,396        $ 77,003     $ 347,140      $ 297,264 Franchising royalties 1,072           926          3,784          3,146 and fees 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      11,116          8,930        44,078         36,380 operating costs ^(1) General and administrative ^(1)   8,084           7,656        35,893         29,081 (2) Depreciation and      5,550           4,556        20,623         16,719 amortization Pre-opening           936             1,145        3,809          3,145 Asset disposals, closure costs and     328             613          1,164          1,278 restaurant impairments Total costs and       86,306          74,561       336,672        284,358 expenses Income from           5,162           3,368        14,252         16,052 operations Debt extinguishment   579             —            624            2,646 expense Interest expense      42              1,133        2,196          5,028 Income before income  4,541           2,235        11,432         8,378 taxes Provision for income  2,134           676          4,767          3,215 taxes Net income            $ 2,407         $ 1,559      $ 6,665        $ 5,163 Earnings per share of ClassA and ClassB                                             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 ClassA and ClassB 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 ClassC common stock dividend paid to the holder of the one outstanding share of our ClassC 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                      December31,    January1,   December31,   January1,                       2013           2013        2013          2013 Revenue:                                                        Restaurant revenue    98.8%           98.8%        98.9%          99.0% Franchising royalties 1.2             1.2          1.1            1.0 and fees 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     12.3            11.6         12.7           12.2 operating costs ^(2) General and administrative ^(2)   8.8             9.8          10.2           9.7 (3) Depreciation and      6.1             5.8          5.9            5.6 amortization Pre-opening           1.0             1.5          1.1            1.0 Asset disposals, closure costs and     0.4             0.8          0.3            0.4 restaurant impairments Total costs and       94.4            95.7         95.9           94.7 expenses Income from           5.6             4.3          4.1            5.3 operations Debt extinguishment   0.6             —            0.2            0.9 expense Interest expense      —               1.5          0.6            1.7 Income before income  5.0             2.9          3.3            2.8 taxes Provision for income  2.3             0.9          1.4            1.1 taxes 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 ClassC common stock dividend paid to the holder of the one outstanding share of our ClassC 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 of                                       December31,         January1,                                        2013                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                              December31, October1, July2, April2, Jan.1,                               2013         2013      2013   2013    2013 Selected Operating Data                                             Restaurant Activity:                                                Company-owned restaurants at  318          310        295     284      276 end of period Franchise restaurants at end  62           58         53      51       51 of period Revenue Data:                                                       Company-owned average unit    $1,179       1,181      1,184   1,180    1,178 volumes Franchise average unit        $1,133       1,132      1,123   1,121    1,128 volumes Company-owned comparable      4.3%         2.4%       4.7%    2.2%     4.2% restaurant sales Franchise comparable          1.5%         0.5%       2.3%    (1.9)%   2.9% restaurant sales System-wide comparable        3.9%         2.1%       4.4%    1.5%     4.0% restaurant sales                                                                     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 Ended    Fiscal Year Ended                               December 31, January 1, December 31, January 1,                                2013         2013       2013         2013                               (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 328          613        1,164        1,278 and restaurant impairment Management fees^(a)            —            250        500          1,000 Stock-based compensation       254          313        4,318        1,234 expense IPO related expenses^(b)       —            —          5,667        — Follow-on offering expenses    696          —          696          — ^(c) 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 USGAAP 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.  EBITDA is calculated as net income before interest expense, provision for income taxes and depreciation and amortization. Adjusted EBITDA further adjusts EBITDA to reflect the additions and eliminations described below.  EBITDA and adjusted EBITDA are presented because: (i)we believe they are useful measures for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and asset disposals, closure costs and restaurant impairments and (ii)we use adjusted EBITDA internally as a benchmark for certain of our cash incentive plans and to evaluate our operating performance or compare our performance to that of our competitors. The use of adjusted EBITDA as a performance measure permits a comparative assessment of our operating performance relative to our performance based on our USGAAP results, while isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. Companies within our industry exhibit significant variations with respect to capital structures and cost of capital (which affect interest expense and income tax rates) and differences in book depreciation of property, plant and equipment (which affect relative depreciation expense), including significant differences in the depreciable lives of similar assets among various companies. Our management believes that adjusted EBITDA facilitates company-to-company comparisons within our industry by eliminating some of these foregoing variations. Adjusted EBITDA as presented may not be comparable to other similarly-titled measures of other companies, and our presentation of adjusted EBITDA should not be construed as an inference that our future results will be unaffected by excluded or unusual items.  (a)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 ClassC common stock dividend paid to the holder of the one outstanding share of our ClassC common stock. In connection with our IPO, the management services agreement expired and the one share of Class C common stock was redeemed.  (b)Reflects certain expenses incurred in conjunction with our initial public offering. Amount includes $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 Operations Officer of which 50% were vested at grant, $1.7 million of transaction bonuses and related payroll tax and $0.8 million in transaction payments to our Equity Sponsors.  (c) Reflects $0.7 million of offering expenses related to our follow-on offering completed in December of 2013.    Noodles& Company Reconciliation of Net Income to Adjusted Net 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                               (in thousands, unaudited) Net income                     $ 2,407      $ 1,559    $ 6,665      $ 5,163 Interest expense ^(a)          —            1,133      2,067        5,028 Debt extinguishment expense    579          —          624          2,646 ^(b) Adjusted interest expense using reduced debt balances    —            (86)       (301)        (475) ^(c) Pre-IPO management fees ^(d)   —            250        500          1,000 IPO related expenses ^(e)      —            —          5,667        — Follow-on offering expenses    696          —          696          — ^(f) Tax impact of follow-on offering, other miscellaneous  354          —          286          — ^(g) Estimated incremental public   —            (357)      (714)        (1,428) costs ^(h) Tax effect of adjustments ^(i) (500)        (368)      (3,347)      (2,654) Adjusted net income            $ 3,536      $ 2,131    $ 12,143     $ 9,280                                                                  Adjusted earnings per Class A and Class B common stock,                                         combined ^(i) Basic                          $ 0.12       $ 0.07     $ 0.41       $ 0.32 Diluted                        $ 0.11       $ 0.07     $ 0.40       $ 0.32 Pro forma weighted average Class A and Class B common                                        stock outstanding, combined ^(j) Basic                          29,479,084   29,399,698 29,419,536   29,399,698 Diluted                        31,068,792   29,672,896 30,701,262   29,426,256  Adjusted net income is a supplemental measure of financial performance that is not required by, or presented in accordance with GAAP. We define adjusted net income as net income plus: i) a net savings in interest expense as a result of the pay down of debt using IPO proceeds, ii) IPO related expenses, iii) follow-on offering expenses, iv) pre-IPO management fees v) the tax rate impact follow-on offering expenses and other miscellaneous tax items; less: i) estimated incremental costs of being a public company and ii) the tax effects of these adjustments. Adjusted net income is presented because management believes it helps convey supplemental information to investors regarding our performance excluding the impact of the IPO and other special items that affect the comparability of results in past quarters and expected in future quarters. Adjusted net income as presented may not be comparable to other similarly-titled measures of other companies and our presentation of adjusted net income should not be construed as an inference that our future results will be unaffected by excluded or unusual items. Our management uses this non-GAAP financial measure in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.  (a)Reflects the adjustment to eliminate the historical interest expense for all periods presented that were based upon actual outstanding balances before the application of the net proceeds from our IPO.  (b)Reflects debt extinguishment expense recognized in conjunction with various amendments to our credit facility in 2013 and 2012 to extend the maturity date and to reduce interest rates on borrowings, as well as the repayment of our term loan in 2013.  (c) Reflects interest expense assuming no term loan balance and daily balances outstanding on our revolver adjusted for the repayment of the revolver down to $0.2 million.This balance reflects $100.2 million repayment of both term and revolving debt from the net proceeds of our IPO.The interest adjustment is based on the following assumptions:    (1) Unused facility fees based on the daily revolver balances; and    (2) Lower annual amortization of deferred loan costs due to the repayment of   the term loan.  (d) Reflects the elimination of the management fees and Class C common stock dividend paid to our sponsors for the periods presented.  (e) Reflects certain expenses incurred in conjunction with our initial public offering.Amount includes $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 Operations Officer of which 50% were vested at grant, $1.7 million of transaction bonuses and related payroll tax and $0.8 million in transaction payments to our Equity Sponsors.  (f)Reflects $0.7 million of offering expenses related to our follow-on offering completed in December of 2013.  (g)Reflects the impact follow-on offering expenses had on our effective tax rate, as well as other miscellaneous tax rate adjustments.  (h)Reflects an adjustment of recurring incremental legal, accounting, insurance and other compliance costs we expect to incur as a public company. By its nature, this adjustment involves risks and uncertainties, and the actual costs incurred could be different than this adjustment.  (i)Reflects the tax expense associated with the adjustments in a through f and h above at the normalized tax rate of 39.2%, which reflects our estimated long-term effective tax rate.  (j)Reflects weighted average shares outstanding as if all shares sold in our IPO were outstanding as of the first day of our fiscal year.Adjusted per share amounts are calculated by dividing adjusted net income by the adjusted basic and diluted weighted average shares outstanding.  CONTACT: Investor Relations          investorrelations@noodles.com                   Media          Kristina Jorge          (646) 277-1234          press@noodles.com  Noodles & Company logo