Good Times Reports 3rd Quarter Results

2014-08-11
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  • Good Times Restaurant-Level Operating Profit Increases 37% - Sixteenth Consecutive Quarter of Increased Same Store Sales - Fiscal Year 2014 Guidance Affirmed

    Good Times Restaurants Inc. (NASDAQ: GTIM), operator of Good Times Burgers & Frozen Custard, a regional quick service restaurant chain focused on fresh, high quality, all natural products and of Bad Daddy’s Burger Bar, a full service, upscale concept, today announced its unaudited financial results for the third fiscal quarter ended June 30, 2014.

    Key highlights of the Company’s report include:

    • Same store sales for company-owned Good Times restaurants increased 12.5% for the quarter on top of last year’s increase of 15.2% which was the sixteenth consecutive quarter of increasing same store sales
    • Restaurant Level Operating Profit for Good Times restaurants (see schedule below) increased 37% or $380,000 over last year during the quarter
    • The restaurant level operating margin for Good Times restaurants increased by 380 basis points to 19.7% from 15.9% last year during the quarter (see schedule below)
    • Preopening costs related to the development of the initial Bad Daddy’s Burger Bar restaurants in Colorado were $80,000 during the quarter
    • Subsequent to the quarter’s end, the Company announced the second Bad Daddy’s restaurant in Colorado had opened at a weekly sales volume for the concept that was an all-time high for weekly sales for any Bad Daddy’s restaurant, which is also over 3 times higher than the average weekly sales at the first Colorado Bad Daddy’s
    • The Affiliate Investment Loss from the Company’s 48% ownership of Bad Daddy’s Franchise Development LLC was $44,000 during the quarter related to initial development costs for the Bad Daddy’s franchise program
    • Income from Operations for the quarter increased to $316,000 this year, up from $235,000 in the prior year, including an increase in General and Administrative expenses this year related to the Company’s expanded Investor Relations expenses and Bad Daddy’s of Colorado initial operating losses and preopening expenses
    • Net Income for the quarter increased to $272,000 from $208,000 last year, even with an increase in General and Administrative expenses of $159,000 from last year and with losses attributable to the initial Bad Daddy’s development of $237,000 higher than in the same quarter last year
    • The Company ended the quarter with $8.2 million in cash with minimal long term debt which includes the net proceeds from the exercise of approximately 97% of the B warrants

    “Continuing our trend at Good Times, our sales gains continue to leverage our fixed and semi-fixed operating costs, translating into large increases in our restaurant profitability. While we have certain commodity cost pressures in beef, bacon and dairy, we’ve been able to maintain our gross profit margin through price increases and menu engineering. We again expect our Restaurant Level Operating Profit (see schedule below) from our Good Times Drive Thru Inc. subsidiary to exceed $4 million this fiscal year with Earnings Before Interest, Depreciation and Amortization (EBITDA) from Good Times Drive Thru Inc. of $1,300,000 to $1,500,000 compared to $496,000 last year, even with higher General and Administrative expenses related to expanded investor relations and professional services,” said Boyd Hoback, President and CEO. “As we add additional Good Times restaurants to the Colorado market and allocate increased General and Administrative expenses to our BD of Colorado subsidiary and as those expenses are reduced as a percentage of total sales from the two concepts, we expect our Good Times Drive Thru Inc. subsidiary will continue to increase in profitability in fiscal 2015.”

    Hoback added, “The opening of our second Bad Daddy’s at much higher sales levels than the system average is very gratifying and we expect it will significantly accelerate our achievement of profitability from the BD of Colorado subsidiary as early as our fourth fiscal quarter this year, but certainly in fiscal 2015 as the first store matures and we bring several new stores online. In our view, the third quarter margins are not representative of where we’ll be with the concept as significant training costs are included in labor and our first store sales potential won’t be fully realized until the area disruption is complete, but we wanted to break them out for full transparency. The rooftop patio and bar are unique to the second location; however, the overall customer response to the food and concept has been overwhelmingly positive, which we believe bodes particularly well for other similarly positioned sites we have in the pipeline for fiscal 2015. We plan to open our third store in Colorado prior to Thanksgiving in a large, upscale lifestyle shopping center in which we operate a high volume Good Times restaurant. The additional sites we have signed and that are under development more closely align with the site dynamics and characteristics of both our second store and the Bad Daddy’s stores in North Carolina which have high levels of retail, daytime employment, traffic and visibility.”

    Regarding the Company’s development plans for unit growth, Hoback said, “We have two of the anticipated three Good Times new stores under development and are negotiating the final terms for the third. After we open our third Bad Daddy’s in Colorado this fall, we plan to open between five and eight Bad Daddy’s in 2015, depending on the timing of new retail developments in which we are negotiating leases. On July 30, 2014 we closed on a development loan for $2.1 million at the Good Times Drive Thru Inc. subsidiary level specifically for the implementation of our new point of sale system and the development of three new restaurants. We anticipate using a portion of our cash flow generated from Good Times to complete the remodeling of existing restaurants in fiscal 2015 and allocate most of our cash on hand for the development of new Bad Daddy’s restaurants. We also anticipate our existing franchisee in South Carolina will be developing additional Bad Daddy’s stores in 2015 as well as signing other new multi-unit franchisees for new markets. However, at the same time, we believe we can rapidly add significant shareholder value through focusing on company-owned development of Bad Daddy’s in BD of Colorado LLC.”

    About Good Times Restaurants Inc.: Good Times Restaurants Inc. (NASDAQ: GTIM) operates Good Times Burgers & Frozen Custard, a regional chain of quick service restaurants located primarily in Colorado, in its wholly owned subsidiary, Good Times Drive Thru Inc. Good Times provides a menu of high quality all natural hamburgers, 100% all natural chicken tenderloins, fresh frozen custard, fresh cut fries, fresh lemonades and other unique offerings. Good Times currently operates and franchises 36 restaurants.

    GTIM will also own and operate Bad Daddy’s Burger Bar restaurants through its wholly owned subsidiary, BD of Colorado LLC and will franchise Bad Daddy’s Burger Bar restaurants through its 48% ownership of Bad Daddy’s Franchise Development LLC. Bad Daddy’s Burger Bar is a full service, upscale, “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.

     
    Good Times Restaurants Inc.
    Unaudited Supplemental Information

    (In thousands, except per share amounts)

     
          Three Months Ended
    June 30,
    Statement of Operations 2014     2013
    Net Revenues:
    Restaurant sales $ 7,464 $ 6,394
    Area development and franchise fees 6 0
    Franchise revenues   102     93  
    Total net revenues 7,572 6,487
     
    Restaurant Operating Costs:
    Food and packaging costs 2,493 2,149
    Payroll and other employee benefit costs 2,425 2,104
    Restaurant occupancy costs 906 866
    Other restaurant operating costs 336 260
    New store preopening costs 80 29
    Depreciation and amortization   180     169  
    Total restaurant operating costs 6,420 5,577
     
    General and administrative costs 549 390
    Advertising costs 292 275
    Franchise costs 22 17
    Loss (Gain) on disposal of restaurants and equipment   (7 )   (6 )
    Income from Operations 316 234
     
    Other Income (Expenses):
    Interest expense, net 2 (2 )
    Other income (expense) (2 ) (1 )
    Affiliate investment loss   (44 )   (23 )
    Total other expenses, net   (44 )   (26 )
    Net Income $ 272   $ 208  
    Income attributable to non-controlling interest (110 ) (67 )

    Net Income attributable to Good Times Restaurants Inc.

    $ 162   $ 141  
    Preferred stock dividends 0 30
    Net Income attributable to common shareholders $ 162   $ 111  
     
    Basic and diluted income (loss) per share:
    Net income attributable to common shareholders $ 0.02 $ 0.04
     
    Weighted Average Common Shares Outstanding:
    Basic 6,870 2,726
    Diluted 7,001 2,801
     
             
    June 30, September 30,
    Balance Sheet Data 2014 2013
    (In thousands)
    Cash & cash equivalents $ 8,188 $ 6,143
    Current assets 8,818 6,641
    Property and Equipment, net 4,672 2,851
    Other assets 619 383
    Total assets $ 14,109 $ 9,875
     
    Current liabilities, including capital lease obligations and long-term debt due within one year 2,008 1,807
    Long-term debt due after one year 8 20
    Capital lease obligations due after one year 51 74
    Other liabilities 638 653
    Total liabilities $ 2,705 $ 2,554
    Stockholders’ equity

    $

    11,404

    $

    7,321
     

    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, similar to 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 table below sets forth certain unaudited information for the three months ended June 30, 2014 and June 30, 2013, expressed as a percentage of total revenues, except for the components of restaurant operating costs, which are expressed as a percentage of restaurant revenues.

             
    Good Times Drive Thru Inc. Bad Daddy’s of Colorado, LLC
    Three Months Ended Three Months Ended
    June 30, 2014     June 30, 2013 June 30, 2014
    Restaurant Sales $ 7,076     98.5 % $ 6,394     98.6 % $ 388     100 %
     
    Restaurant Operating Costs (exclusive of depreciation and amortization shown separately below):
    Food and packaging costs 2,353 33.3 % 2,149 33.6 % 140 36.1 %
    Payroll and other employee benefit costs 2,185 30.9 % 2,104 32.9 % 240 61.9 %
    Restaurant occupancy costs 851 12.0 % 866 13.5 % 55 14.2 %
    Other restaurant operating costs   292   4.1 %   260   4.1 %   44   11.3 %
    Restaurant-level operating profit $ 1,395 19.7 % $ 1,015 15.9 % $ (91 ) (23.5 %)
     
    Add - Franchise royalties and fees 108 1.4 % 93 1.4 %
     
    Deduct - Other operating:
    Depreciation and amortization 158 2.2 % 168 2.6 % 22 5.7 %
    General and administrative 488 6.8 % 389 6.0 % 41 10.6 %
    Advertising costs 281 3.9 % 276 4.3 % 11 2.8 %
    Franchise costs 22 0.3 % 17 0.3 % 0 0.0 %
    Gain on disposal of restaurants and equipment (7 ) (0.1 %) (6 ) (.1 %) 0 0.0 %
    Preopening costs   0   0.0 %   0   0.0 %   80   20.6 %
    Total other operating $ 942 13.1 % $ 844 13.1 % $ 154 39.7 %
     
    Income (loss) from Operations $ 561 7.8 % $ 264 4.1 % $ (245 ) (63.1 %)
     

    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.



    Logos, product and company names mentioned are the property of their respective owners.

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