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Good Times Reports 2nd Quarter Results

By: Good Times |  1,014 Shares     72 Reads

Restaurant-Level Operating Profit Increases 155%
Fifteenth Consecutive Quarter of Increased Same Store Sales
Fiscal Year Guidance Provided

GOLDEN, Colo. - May 07, 2014 - (BUSINESS WIRE) - 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 first fiscal quarter ended March 31, 2014.

Key highlights of the Company’s report include:

• Same store sales for company-owned Good Times restaurants increased 17.8% for the quarter, which was the fifteenth consecutive quarter of increasing same store sales
• Restaurant Level Operating Profit for Good Times restaurants (see schedule below) increased 155% or $495,000 over last year during the quarter, which historically has the lowest sales and profitability seasonality of the Company’s fiscal year
• The restaurant level operating margin for Good Times restaurants increased by 750 basis points to 13.9% from 6.4% last year during the quarter (see schedule below)
• Preopen costs related to the development of the initial Bad Daddy Burger Bar restaurants in Colorado were $221,000 during the quarter
• The Affiliate Investment Loss from the Company’s 48% ownership of Bad Daddy’s Franchise Development LLC was $41,000 during the quarter related to initial development costs for the Bad Daddy’s franchise program
• Loss from Operations was ($382,000) this year from ($325,,000) in the prior year, including an increase in General & 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

"Our sales gains at Good Times continue to translate into dramatic increases in our restaurant profitability and we 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. "The last two quarters of our fiscal year have historically been a far higher contribution to our annual profitability and we expect that to be the case this year as well. We continue to see synergistic effects from our product strategy, breakfast day part sales, television marketing campaign and reimaging of older restaurants and we are excited to build new Good Times restaurants in Colorado again. We are targeting a unit level cash on cash return on investment (defined as restaurant level operating profit divided by the total investment net of any leased real estate) of at least 30% for new Good Times restaurants, including conversions of other restaurants and ground up development, assuming a new unit sales average of $1.2 million to $1.4 million."

Hoback added, "We opened our first Bad Daddy’s Burger Bar restaurant in Colorado on February 3, 2014, which is a difficult time of year to open, particularly given our winter weather this year and a pedestrian driven site, but happened to be how the entitlement and development schedule came together. We are building our sales, are under construction on the second Bad Daddy’s in Colorado and expect it to open in July, 2014 which will help to amortize the heavy management and labor investment expenses we had during this quarter. The first store is in a non-traditional, more pedestrian driven urban site compared to the North Carolina locations and is in an area of Denver that is undergoing massive development with several hundred million dollars of new office, retail and residential under construction, which we believe bodes well for this location’s future sales but has made it difficult in the short term. The additional sites we have signed and under development more closely align with the site dynamics of the Bad Daddy’s in North Carolina which have high levels of retail, daytime employment, traffic and visibility."

Regarding Bad Daddy’s unit economic model and the Company’s expectations Hoback said, "As we get more experience and open additional Bad Daddy’s restaurants and based on the historical performance of the North Carolina Bad Daddy’s restaurants that have been open for more than one year, we expect the food and beverage cost of sales to be between 30% and 32% of sales with total payroll and benefits expenses between 31% and 34% of sales, depending on the sales volume of the restaurant. Our goal is have these two prime costs in the low 60%’s as a percentage of sales. At sales of $2.0 million to $2.5 million in a mature Bad Daddy’s restaurant and an estimated total investment of $850,000 to $1,100,000 for each restaurant we are targeting a unit level cash on cash return on investment (defined as restaurant level operating profit divided by the total investment net of any leased real estate) of between 20% and 40% before general and administrative expenses. While that is a wide range of sales and returns, we believe the concept has the potential to provide an above average return on investment for full service restaurants in a relatively small facility of approximately 3600 square feet. Based on those expectations and as we open additional restaurants, we believe we will be able to more effectively amortize our existing and incremental general and administrative expenses between BD of Colorado and Good Times Drive Thru Inc., the Company’s two wholly owned subsidiaries, and continue to rapidly increase the Company’s overall profitability and cash flow from operations."

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 37 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 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 uncertain nature of current restaurant development plans and the ability to implement those plans, 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 30, 2013 filed with the SEC. 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.

Good Times Restaurants Inc. Unaudited Supplemental Information (In thousands, except per share amounts)
		Three Months Ended March 31,
Statement of Operations			2014						2013
Net Revenues:
Restaurant sales		$	6,080					$	4,977
Area development and franchise fees			0						0
Franchise revenues			84						78
Total net revenues			6,164						5,055
Restaurant Operating Costs:
Food and packaging costs			2,040						1,753
Payroll and other employee benefit costs			2,153						1,842
Restaurant occupancy costs			874						818
Other restaurant operating costs			285						244
New store preopening costs			221						0
Depreciation and amortization			160						167
Total restaurant operating costs			5,733						4,824
General and administrative costs			546						396
Advertising costs			253						218
Franchise costs			20						16
Loss (Gain) on disposal of restaurants and equipment			(6	)					(74	)
Loss from Operations			(382	)					(325	)
Other Income (Expenses):
Interest expense, net			1						(11	)
Other income (expense)			(3	)					(1	)
Affiliate investment loss			(41	)					0
Total other expenses, net			(43	)					(12	)
Net Loss			($425	)					($337	)
Income attributable to non-controlling interest			(55	)					12
Net Loss attributable to Good Times Rest Inc			($480	)					($325	)
Preferred stock dividends			29						30
Net Loss attributable to common shareholders			($509	)					($355	)
Basic and diluted income (loss) per share:
Net Loss attributable to common shareholders			($0.10	)					($0.13	)
Weighted Average Common Shares Outstanding:
Basic and Diluted			5,153						2,726

		March 31,			September 30,
Balance Sheet Data		2014			2012
		(In thousands)
Cash & cash equivalents		$	5,594		$	6,143
Current assets			5,996			6,641
Property and Equipment, net			3,674			2,851
Total assets		$	10,310		$	9,875
Current liabilities, including capital lease obligations and long-term debt due within one year			1,977			1,807
Long-term debt due after one year			12			20
Capital lease obligations due after one year			59			74
Total liabilities		$	2,696		$	2,554
Stockholders’ equity		$	7,614		$	7,321

Reconciliation of Non-GAAP Restaurant-Level Operating Profit to Income
from Operations and Net Income
(In thousands, except percentage data)

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 March 31, 2014 and March 31, 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
		March 31, 2014									March 31, 2013										March 31, 2014
Restaurant Sales		$	5,872			98.6	%				$	4,977			98.5	%					$	208					100	%
Restaurant Operating Costs (exclusive of depreciation and amortization shown separately below):
Food and packaging costs			1,956			33.3	%					1,753			35.2	%						84					40.4	%
Payroll and other employee benefit costs			2,002			34.1	%					1,842			37.0	%						151					72.6	%
Restaurant occupancy costs			836			14.2	%					818			16.4	%						38					18.3	%
Other restaurant operating costs			263			4.5	%					244			4.9	%						22					10.6	%
Restaurant-level operating profit		$	815			13.9	%				$	320			6.4	%					$	(87	)				(41.8	%)
Add - Franchise royalties and fees			84			1.4	%					78			1.5	%
Deduct - Other operating:
Depreciation and amortization			147			2.5	%					167			3.3	%						13					6.3	%
General and administrative			506			8.5	%					396			7.8	%						40					19.2	%
Advertising costs			233			3.9	%					218			4.3	%						20					9.6	%
Franchise costs			20			0.3	%					16			0.3	%						0					0.0	%
Gain on disposal of restaurants and equipment			(6	)		(0.1	%)					(74	)		(1.5	%)						0					0.0	%
Preopening costs			0			0.0	%					0			0.0	%						221					106.3	%
Total other operating		$	900			15.1	%				$	723			14.3	%					$	294					141.3	%
Loss from Operations		$	(1	)		0.0	%				$	(325	)		(6.4	%)					$	(381	)				(183.2	%)

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.

Investor Relations Contacts:

Boyd E. Hoback
Good Times Restaurants Inc.
President and CEO
303-384-1411

Christi Pennington
Good Times Restaurants Inc.
303-384-1440

Gary Heller
Good Times Restaurants Inc.
914-813-8547

Mike Porter
Porter, LeVay & Rose
212-546-4700

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