Business Context and Reporting Period
This Form 8-K Current Report is filed by Noodles & Company (NDLS) on March 20, 2020. The filing addresses precautionary financial actions taken in response to global market uncertainty caused by the COVID-19 outbreak.
Key Financial Metrics
- Credit Facility: The company operates under an Amended Credit Facility with a total borrowing capacity of $75.0 million.
- Existing Indebtedness: As of December 31, 2019, the company had $42.6 million in indebtedness (excluding $1.4 million of unamortized debt issuance costs) and $3.2 million in outstanding letters of credit.
- New Borrowing: On March 20, 2020, the company drew down an incremental $20.0 million under the credit facility.
- Liquidity: Following the drawdown and including existing cash, the company reported over $25.0 million in cash and cash equivalents on hand.
- Covenant Compliance: The company remains in compliance with all financial covenants set forth in the Amended Credit Facility.
Material Changes
The primary material change is the increase in debt by $20.0 million as a precautionary measure to bolster the cash position. This action was taken despite the company previously reporting a healthy cash balance in its 2019 Annual Report on Form 10-K.
Guidance, Outlook, and Risks
- Guidance Withdrawal: Due to unprecedented global market and economic conditions, the company is withdrawing its financial guidance for the fiscal year ended December 29, 2020.
- Future Outlook: Management plans to provide an update on the business during the First Quarter earnings call. Updated financial guidance will be provided only when the impact of the outbreak and changing market conditions can be reasonably estimated.
- Use of Proceeds: Proceeds from the new borrowing are held on the balance sheet for general corporate purposes, including working capital and capital expenditures.
Investor Verification Checklist
- Verify the total outstanding debt and remaining availability under the $75.0 million credit facility post-drawdown.
- Monitor the upcoming First Quarter earnings call for updated financial guidance and specific operational impacts of COVID-19.
- Review the Press Release dated March 20, 2020 (Exhibit 99.1) for additional details on the withdrawal of guidance.
- Confirm continued compliance with financial covenants in subsequent filings given the increased debt load.