Good Times Restaurants Inc. (Nasdaq: GTIM) today provided an
update in connection with the COVID-19 pandemic and reported
financial results for the fiscal second quarter ended March 31,
2020.
Business update from Ryan Zink, President and CEO of Good
Times Restaurants:
As the restaurant industry has been flipped upside down by the
COVID-19 pandemic, our restaurant-level and support teams have been
nimble and quick to respond in an ever-changing environment. The
early stage of this crisis was a formidable challenge through which
our team was able to transform the business to meet the immediate
need, but more importantly this pandemic has been an experience
where our team members have truly shown their values, capabilities,
and mostly, their endurance.
We entered this quarter with high hopes, looking to change our
focus from one of unit development, to one of operations excellence
and improved operating results. We were well along that path two
months into the quarter and then the world found itself in a crisis
unlike my generation has ever seen. With a large amount of debt
already on the books from five years of developing Bad Daddy’s, I
made the decision to draw most of our remaining available line of
credit to provide immediate liquidity in what was looking to be a
contraction in sales beyond what anyone could have imagined even a
few days earlier.
The weeks that ensued thereafter included many difficult
decisions, including pay reductions at all levels of management,
including significant reductions among executive officers, as well
as employee lay-offs, all in the name of survival. The Company’s
Board of Directors also waived fees to be paid to its members
during the third fiscal quarter. The quality of the people in this
organization, and of the people among the many partners of our
Company, is unmatched in our industry and has enabled us to
continue to be fighting strong today. We did not close any of our
restaurants completely, offering our drive-thru service at Good
Times and delivery and carryout at each of our Bad Daddy’s. I am
hopeful that the worst has passed, and we are now engaged in
re-building our restaurant teams as we have re-opened dining rooms
in Alabama, Georgia, Oklahoma, South Carolina, and Tennessee, and
prepare to reopen in North Carolina and Colorado.
Given our limited liquidity, we were not able to provide as much
support to our employees as some other larger organizations with
stronger balance sheets were able to do. We applied for PPP loans,
which were funded on May 7th, and we will use these funds to
increase payroll as we re-hire employees and restore pay for
restaurant management and support staff that was reduced in March.
Without this funding, we would not be able to do so.
I would like to thank all those who have helped us through this
period of time, including first and foremost our team members, who
have demonstrated grit and perseverance, working amidst an overall
uncertainty around the nature of the pandemic and with
ever-changing regulations. I would also like to thank our lender,
our landlords, suppliers, and vendor partners who have provided us
their confidence and support in various ways throughout this
difficult time. As our partners have found, we are not a team that
gives up in the face of adversity, but rather one who rises to the
occasion and plays to win against what appear to be impossible
odds.
To my team members – thank you yet once again for your fighting
spirit.
-Ryan
Key highlights of the Company’s financial results
include:
- Total Revenues decreased 3.6% to $26.2 million for the
quarter
- Total Restaurant Sales for Good Times restaurants increased to
$6.7 million for the quarter
- Same Store Sales for company-owned Good Times restaurants
increased 3.0% for the quarter
- Same Store Sales for company-owned Bad Daddy’s restaurants
decreased 15.7% for the quarter
- Net Loss Attributable to Common Shareholders was $14.9 million
for the quarter, reflecting goodwill impairment of $10.0 million
and long-lived asset impairment of $4.4 million
- Adjusted EBITDA*, a non-GAAP measure, for the quarter was $0.8
million
- The Company ended the quarter with $4.1 million in cash and
$16.8 million drawn against its senior credit facility
*For a reconciliation of restaurant level operating profit and
Adjusted EBITDA to the most directly comparable financial measures
presented in accordance with GAAP and a discussion of why the
Company considers them useful, see the financial information
schedules accompanying this release.
COVID-19 Business Update:
During the month of March our service model at Bad Daddy’s
transitioned from primarily table-service dining to a fully
off-premise model as our dining rooms were forced to close due to
government orders. Both Good Times and Bad Daddy’s were affected by
stay-at-home orders and reduced economic activity. The following
table presents average weekly sales and comparable restaurant sales
for our Good Times and Bad Daddy’s concepts:
Week Ended
3/3/2020
3/10/2020
3/17/2020
3/24/2020
3/31/2020
4/7/2020
4/14/2020
4/21/2020
4/28/2020
Good Times:
Comparable restaurant sales
16.6%
13.0%
10.3%
-22.4%
-16.6%
-19.2%
-8.1%
-1.6%
9.0%
Average weekly sales
23,355
24,717
20,810
17,621
18,204
20,063
20,474
24,585
28,060
Bad Daddy's:
Comparable restaurant sales
1.9%
-5.6%
-27.2%
-68.3%
-64.6%
-65.1%
-60.3%
-48.6%
-49.6%
Average weekly sales
48,615
48,048
36,573
15,715
17,021
16,903
18,843
23,664
24,542
The Company has taken extraordinary measures to preserve cash
and at the end of April (prior to any funding of PPP loans) had
approximately $4 million of cash on hand. The Good Times concept,
with its recently elevated sales, has provided a buffer for the
reduced traffic accompanying dining room closures at Bad Daddy’s,
and in-turn has had the effect of minimizing net cash usage.
The Company continues to monitor state and federal guidelines
related to the health and wellness of our employees and customers,
including regulations around on-premise service. While we have
taken a stance that we intend to re-initiate on-premise service as
soon as allowed by state and local regulations, we do so at each
restaurant on a case-by-case basis including the readiness of the
local team. We currently operate some model of on-premise service
at eleven of our Bad Daddy’s restaurants.
The COVID-19 pandemic was an indication of impairment of
long-lived assets associated with individual restaurants, and
additionally, in conjunction with a sustained decrease in the
Company’s market capitalization, was an indicator of impairment of
goodwill associated with our reporting units. We recorded a $10.0
million non-cash charge against the goodwill attributable to the
Company’s Bad Daddy’s reporting unit. This non-cash charge reduces
goodwill but has no impact on the Company’s cash flow from
operating activities or cash position, neither does it have any
impact on the Company’s future operations. We recorded $4.4 million
of impairment charges against the long-lived assets related to five
Bad Daddy’s restaurants. Currently each of those restaurants
continues to operate, either under a delivery and carry-out model,
or in a traditional model additionally offering dining room
service, depending upon the jurisdictional regulations applicable
to each restaurant.
Fiscal 2020 Outlook:
Due to continuing unprecedented economic conditions associated
with the COVID-19 pandemic, the Company has withdrawn its prior
financial outlook. At this time, the Company is not able to
reasonably estimate the full impact of the pandemic and is unable
to provide an updated outlook.
Conference Call: At 5:00 p.m. (ET) today, the Company
will host a conference call to discuss its current quarter
earnings. The conference call will be webcast on the Company’s
Investor Relations website www.goodtimesburgers.com or via
telephone by dialing (888) 339-0806 and requesting the Good Times
Restaurants (GTIM) call. An archive of the webcast will be
available at the same location on the corporate website shortly
after the call has concluded.
About Good Times Restaurants Inc.: Good Times Restaurants
Inc. (GTIM) owns, operates, franchises and licenses 39 Bad Daddy’s
Burger Bar restaurants through its wholly owned subsidiaries. Bad
Daddy’s Burger Bar is a full-service “small box” restaurant concept
featuring a chef-driven menu of gourmet signature burgers, chopped
salads, appetizers and sandwiches with a full bar and a focus on a
selection of craft microbrew beers in a high-energy atmosphere that
appeals to a broad consumer base. Additionally, through its wholly
owned subsidiaries, Good Times Restaurants Inc. operates and
franchises a regional quick-service restaurant chain consisting of
33 Good Times Burgers & Frozen Custard restaurants focused on
fresh, high quality, all-natural products which are located
primarily in Colorado.
Good Times Forward-Looking Statements: This press release
contains forward-looking statements within the meaning of federal
securities laws. The words “intend,” “may,” “believe,” “will,”
“should,” “anticipate,” “expect,” “seek” and similar expressions
are intended to identify forward-looking statements. These
statements involve known and unknown risks, which may cause the
Company’s actual results to differ materially from results
expressed or implied by the forward-looking statements. These risks
include such factors as the disruption to our business from the
novel coronavirus (COVID-19) pandemic and the impact of the
pandemic on our results of operations, financial condition and
prospects which may vary depending on the duration and extent of
the pandemic and the impact of federal, state and local
governmental actions and customer behavior in response to the
pandemic, the uncertain nature of current restaurant development
plans and the ability to implement those plans and integrate new
restaurants, delays in developing and opening new restaurants
because of weather, local permitting or other reasons, increased
competition, cost increases or shortages in raw food products, and
other matters discussed under the Risk Factors section of Good
Times’ Annual Report on Form 10-K for the fiscal year ended
September 24, 2019 as well as subsequent SEC filings. Although Good
Times may from time to time voluntarily update its forward-looking
statements, it disclaims any commitment to do so except as required
by securities laws.
Category: Financial
Good Times Restaurants
Inc.
Unaudited Supplemental
Information
(In thousands, except per share
amounts
Quarter Ended
Year-to-Date
March 31, 2020
(13 Weeks)
March 26, 2019
(13 Weeks)
March 31, 2020
(27 Weeks)
March 26, 2019
(26 Weeks)
Statement of Operations
Net revenues:
Restaurant sales
$
25,998
$
26,954
$
56,591
$
52,101
Franchise revenues
184
213
405
431
Total net revenues
26,182
27,167
56,996
52,532
Restaurant Operating Costs:
Food and packaging costs
7,620
7,903
16,652
15,426
Payroll and other employee benefit
costs
9,874
10,228
21,693
19,781
Restaurant occupancy costs
2,212
2,165
4,650
4,130
Other restaurant operating costs
3,233
2,968
6,509
5,638
Pre-opening costs
159
193
961
820
Depreciation and amortization
1,113
1,089
2,192
2,123
Total restaurant operating costs
24,211
24,546
52,657
47,918
General and administrative costs
1,636
2,054
3,849
4,028
Advertising costs
510
542
1,056
1,165
Franchise costs
8
16
8
23
Impairment of goodwill
10,000
-
10,000
-
Impairment of long-lived assets
4,359
-
4,359
-
Gain on restaurant asset sale
(9
)
(9
)
(28
)
(39
)
Income (Loss) from operations
(14,533
)
18
(14,905
)
(563
)
Other expense:
Interest expense, net
(209
)
(199
)
(436
)
(359
)
Other income
-
1
-
-
Total other expense, net
(209
)
(198
)
(436
)
(359
)
Net loss
$
(14,742
)
$
(180
)
$
(15,341
)
$
(922
)
Income attributable to non-controlling
interests
(174
)
(270
)
(386
)
(579
)
Net loss attributable to common
shareholders
$
(14,916
)
$
(450
)
$
(15,727
)
$
(1,501
)
Basic and diluted loss per share
$
(1.19
)
$
(0.04
)
$
(1.25
)
$
(.12
)
Basic and diluted weighted average common
shares outstanding
12,583,643
12,522,778
12,590,549
12,513,844
Good Times Restaurants
Inc.
Unaudited Supplemental
Information
(In thousands)
March 31, 2020
September 24, 2019
Balance Sheet Data
Cash and cash equivalents
$
4,056
$
2,745
Total assets1
$
97,120
$
59,905
Current maturities of long-term debt
$
16,750
$
-
Long-term debt due after one year
-
12,850
Stockholders’ equity
$
11,745
$
27,398
1 Includes approximately $50.9 million of
operating lease right of use assets recorded during the first
quarter of 2020 as a result of the adoption of Accounting Standards
Update 2016-02, Leases (Topic 842).
Supplemental Information for
Company-Owned Restaurants (dollars in thousands):
Bad Daddy’s Burger Bar
Good Times Burgers &
Frozen Custard
Second Fiscal Quarter
Year-to-Date
Second Fiscal Quarter
Year-to-Date
2020
(13 weeks)
2019
(13 weeks)
2020
(27 weeks)
2019
(26 weeks)
2020
(13 weeks)
2019
(13 weeks)
2020
(27 weeks)
2019
(26 weeks)
Restaurant sales
$
19,300
$
20,384
$
42,113
$
38,634
$
6,698
$
6,570
$
14,478
$
13,467
Restaurants opened during period
-
1
-
-
-
-
-
-
Restaurants closed during period
-
-
-
-
1
-
1
-
Restaurants open at period end
37
32
37
32
25
26
25
26
Restaurant operating weeks
481.0
428.0
989.6
838.3
325.0
338.0
689.0
676.0
Average weekly sales per restaurant
$
40.1
$
47.6
$
42.6
$
46.1
$
20.6
$
19.4
$
21.0
$
19.9
Reconciliation of
Non-GAAP Measurements to U.S. GAAP Results
Reconciliation of Non-GAAP
Restaurant-Level Operating Profit to Income from Operations
(In thousands, except percentage
data)
Bad Daddy’s Burger Bar
Good Times Burgers &
Frozen Custard
Good Times
Restaurants Inc.
Fiscal Quarter Ended (13
Weeks)
March 31, 2020
March 26, 2019
March 31, 2020
March 26, 2019
March 31,
2020
March 26,
2019
Restaurant sales
$
19,300
100.0%
$
20,384
100.0%
$
6,698
100.0%
$
6,570
100.0%
$
25,998
$
26,954
Restaurant operating costs (exclusive of
depreciation and amortization shown separately below):
Food and packaging costs
5,559
28.8%
5,804
28.5%
2,061
30.8%
2,099
31.9%
7,620
7,903
Payroll and benefits costs
7,351
38.1%
7,669
37.6%
2,523
37.7%
2,559
39.0%
9,874
10,228
Restaurant occupancy costs
1,471
7.6%
1,354
6.6%
741
11.1%
811
12.3%
2,212
2,165
Other restaurant operating costs
2,565
13.3%
2,333
11.4%
668
10.0%
635
9.7%
3,233
2,968
Restaurant-level operating profit
$
2,354
12.2%
$
3,224
15.8%
$
705
10.5%
$
466
7.1%
$
3,059
$
3,690
Franchise revenues
184
213
Deduct - Other operating:
Depreciation and amortization
1,113
1,089
General and administrative
1,636
2,054
Advertising costs
510
542
Franchise costs
8
16
Impairment of goodwill
10,000
-
Impairment of long-lived assets
4,359
-
Gain on restaurant asset sale
(9
)
(9
)
Pre-opening costs
159
193
Total other operating
17,776
3,885
Income (loss) from operations
$
(14,533
)
$
18
Certain percentage amounts in the
table above do not total due to rounding as well as the fact that
restaurant operating costs are expressed as a percentage of
restaurant revenues (as opposed to total revenues).
Reconciliation of
Non-GAAP Measurements to U.S. GAAP Results
Reconciliation of Non-GAAP
Restaurant-Level Operating Profit to Income from Operations
(In thousands, except percentage
data)
Bad Daddy’s Burger Bar
Good Times Burgers &
Frozen Custard
Good Times
Restaurants Inc.
Year-to-Date Period
Ended
March 31, 2020
(27 Weeks)
March 26, 2019
(26 Weeks)
March 31, 2020
(27 Weeks)
March 26, 2019
(26 Weeks)
March 31,
2020
(27 Wks)
March 26,
2019
(26 Wks)
Restaurant sales
$
42,113
100.0%
$
38,634
100.0%
$
14,478
100.0%
$
13,467
100.0%
$
56,591
$
52,101
Restaurant operating costs (exclusive of
depreciation and amortization shown separately below):
Food and packaging costs
12,177
28.9%
11,073
28.7%
4,475
30.9%
4,353
32.3%
16,652
15,426
Payroll and benefits costs
16,192
38.4%
14,651
37.9%
5,501
38.0%
5,130
38.1%
21,693
19,781
Restaurant occupancy costs
3,115
7.4%
2,632
6.8%
1,535
10.6%
1,498
11.1%
4,650
4,130
Other restaurant operating costs
5,130
12.2%
4,374
11.3%
1,379
9.5%
1,264
9.4%
6,509
5,638
Restaurant-level operating profit
$
5,499
13.1%
$
5,904
15.3%
$
1,588
11.0%
$
1,222
9.1%
$
7,087
$
7,126
Franchise revenues
405
431
Deduct - Other operating:
Depreciation and amortization
2,192
2,123
General and administrative
3,849
4,028
Advertising costs
1,056
1,165
Franchise costs
8
23
Impairment of goodwill
10,000
-
Impairment of long-lived assets
4,359
-
Gain on restaurant asset sale
(28
)
(39
)
Pre-opening costs
961
820
Total other operating
22,397
8,120
Loss from operations
$
(14,905
)
$
(563
)
Certain percentage amounts in the
table above do not total due to rounding as well as the fact that
restaurant operating costs are expressed as a percentage of
restaurant revenues (as opposed to total revenues).
The Company believes that restaurant-level operating profit is
an important measure for management and investors because it is
widely regarded in the restaurant industry as a useful metric by
which to evaluate restaurant-level operating efficiency and
performance. The Company defines restaurant-level operating profit
to be restaurant revenues minus restaurant-level operating costs,
excluding restaurant closures and impairment costs. The measure
includes restaurant-level occupancy costs, which include fixed
rents, percentage rents, common area maintenance charges, real
estate and personal property taxes, general liability insurance and
other property costs, but excludes depreciation. The measure
excludes depreciation and amortization expense, substantially all
of which is related to restaurant level assets, because such
expenses represent historical sunk costs which do not reflect
current cash outlay for the restaurants. The measure also excludes
selling, general and administrative costs, and therefore excludes
occupancy costs associated with selling, general and administrative
functions, and pre-opening costs. The Company excludes restaurant
closure costs as they do not represent a component of the
efficiency of continuing operations. Restaurant impairment costs
are excluded, because like depreciation and amortization, they
represent a non-cash charge for the Company’s investment in its
restaurants and not a component of the efficiency of restaurant
operations. Restaurant-level operating profit is not a measurement
determined in accordance with generally accepted accounting
principles (“GAAP”) and should not be considered in isolation, or
as an alternative, to income from operations or net income as
indicators of financial performance. Restaurant-level operating
profit as presented may not be comparable to other similarly titled
measures of other companies. The tables above set forth certain
unaudited information for the current and prior year fiscal
quarters and year-to-date periods for fiscal 2020 and fiscal 2019,
expressed as a percentage of total revenues, except for the
components of restaurant operating costs, which are expressed as a
percentage of restaurant revenues.
Reconciliation of Net Income (Loss) to
Non-GAAP Adjusted EBITDA (Thousands of US Dollars)
Fiscal Quarter Ended
Year-to-Date
March 31, 2020
(13 Weeks)
March 26, 2019
(13 Weeks)
March 31, 2020
(26 Weeks)
March 26, 2019
(27 Weeks)
Adjusted EBITDA:
Net loss, as reported
$
(14,916
)
$
(450
)
$
(15,727
)
$
(1,501
)
Depreciation and amortization 1
1,103
1,068
2,172
2,061
Interest expense, net
209
199
436
359
EBITDA
(13,604
)
817
13,119
919
Pre-opening expense 1
159
193
961
799
Non-recurring severance costs
-
-
41
-
Non-cash stock-based compensation
75
109
149
221
GAAP rent-cash rent difference
(144
)
37
(23
)
(6
)
Gain on disposal of assets
(9
)
(9
)
(28
)
(39
)
Impairment of goodwill
10,000
-
10,000
-
Impairment of long-lived assets
4,359
-
4,359
-
Adjusted EBITDA
$
836
$
1,147
$
2,340
$
1,894
_______________
1 Depreciation and amortization, and
preopening expense have been reduced by any amounts attributable to
non-controlling interests.
Adjusted EBITDA is a supplemental measure of operating
performance that does not represent and should not be considered as
an alternative to net income or cash flow from operations, as
determined by GAAP, and our calculation thereof may not be
comparable to that reported by other companies. This measure is
presented because we believe that investors' understanding of our
performance is enhanced by including this non-GAAP financial
measure as a reasonable basis for evaluating our ongoing results of
operations.
Adjusted EBITDA is calculated as net income before interest
expense, provision for income taxes and depreciation and
amortization and further adjustments to reflect the additions and
eliminations presented in the table above.
Adjusted EBITDA is presented because: (i) we believe 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) 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 GAAP
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200514005731/en/
GOOD TIMES RESTAURANTS INC. Ryan M. Zink, Chief Executive
Officer (303) 384-1432 Christi Pennington (303) 384-1440
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