DENVER - (BUSINESS WIRE) - May 14, 2020 - 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:
*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:
View Original for Full Data Table
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.
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 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.
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
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.
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.
SOURCE Good Times
Good Times provides a menu of high quality all natural hamburgers, 100% all natural chicken tenderloins, fresh frozen custard, natural cut fries, fresh lemonades and other unique offerings.