Good Times Restaurants Inc. — FY2021 Form 10-K
Business context and period. The filing covers the 52 weeks ended September 28, 2021; the prior fiscal year had 53 weeks and ended September 29, 2020. Good Times operates two restaurant segments: Bad Daddy’s Burger Bar, a full-service casual dining concept, and Good Times Burgers & Frozen Custard, a drive-thru-focused quick-service concept. The results reflect recovery from pandemic-related dining restrictions, especially at Bad Daddy’s.
Financial and operating results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net revenue | $123.953 million | $109.858 million |
| Operating income (loss) | $6.897 million | ($12.041 million) |
| Consolidated net income (loss) | $18.400 million | ($12.794 million) |
| Net income (loss) attributable to common shareholders | $16.787 million | ($13.916 million) |
| Diluted earnings (loss) per share | $1.31 | ($1.10) |
| Cash from operating activities | $9.145 million | $8.369 million |
| Cash and cash equivalents at year-end | $8.856 million | $11.454 million |
- Revenue rose 12.8%. Bad Daddy’s revenue increased to $88.844 million from $76.538 million; Good Times revenue increased to $35.109 million from $33.320 million.
- Same-store sales increased 18.2% at Bad Daddy’s and 10.5% at Good Times. The company attributed much of the Bad Daddy’s increase to comparison with 2020 dining-room closures and capacity limits. The extra week in FY2020 also affects comparisons.
- Segment operating income was $3.408 million at Bad Daddy’s, compared with a $14.837 million loss in FY2020, and $3.623 million at Good Times, compared with $3.035 million. Segment operating margins were 3.8% and 10.3%, respectively, in FY2021.
- Restaurant operating costs were $105.547 million, about 85.2% of revenue. General and administrative expense increased to $9.437 million from $6.781 million, primarily reflecting higher professional and legal fees, health-plan claims, insurance, and compensation costs.
- Adjusted EBITDA, a non-GAAP measure, was $9.637 million versus $7.588 million. The company cautions that this measure excludes significant items and is not a substitute for GAAP results.
Liquidity, debt, and capital
- Year-end cash was $8.856 million. The company reported a $1.442 million working-capital deficit, which it said was largely driven by current operating lease liabilities.
- There was no borrowing outstanding under the $8 million Cadence credit facility, which matures January 31, 2023. Availability was reduced by $157,500 of letters of credit; the company reported compliance with facility covenants. The facility is secured by substantially all company assets.
- The company repaid approximately $5.5 million of debt during FY2021. SBA forgiveness of $11.778 million of PPP loans was recognized as a gain on debt extinguishment and materially increased reported net income. The PPP loan balance was zero after forgiveness.
- Investing cash outflow was $3.185 million, primarily for $3.198 million of property and equipment purchases. Financing cash outflow was $8.558 million, including debt repayments, $1.533 million spent on a tender offer repurchasing 333,241 shares at $4.60 each, and distributions to non-controlling interests.
Changes, outlook, and principal risks
- The return to operating profit compared with FY2020 reflects higher sales and the absence of FY2020 impairment charges, including $10 million of goodwill impairment and $5.606 million of long-lived asset impairment. FY2021 also included the $11.778 million PPP forgiveness gain.
- Management expected to open no more than two additional Bad Daddy’s restaurants in FY2022. It gave no specific Good Times development plan and said unusual raw-material inflation prevented it from reasonably predicting planned menu price increases at either brand.
- Management reported substantial inflation in food, packaging, supplies, energy, and wages, alongside a shortage of qualified workers. It warned that price increases sufficient to offset these costs could reduce customer visits and pressure margins. Staffing constraints had already limited some restaurants’ capacity.
- COVID-19 remained a significant uncertainty: renewed restrictions, changes in customer behavior, supply interruptions, and labor effects could reduce revenue and cash flow. The filing also identifies competition, commodity volatility, wage increases, and dependence on key personnel as risks.
- In a pending lawsuit related to failed negotiations to sell the Good Times Drive Thru subsidiary, plaintiffs sought $18 million in damages. The company said a loss was not probable, recorded no liability, and cited a conditional damages estimate of $332,000 to $3.3 million if liability and damages standards were established.
- The company reported an accumulated deficit of $27.680 million despite FY2021 income, and noted its history of losses. Management believed available resources were adequate for FY2022 working capital and recurring capital needs, but cautioned that future profitability was uncertain.
Key facts for investors to verify
- Separate recurring operating performance from the one-time PPP forgiveness gain when assessing FY2021 earnings and EPS.
- Check subsequent sales, traffic, restaurant-level margins, and comparable-sales trends against the pandemic-affected FY2020 comparison.
- Track whether labor and commodity inflation can be offset without weakening customer demand, and whether staffing limits continue to constrain capacity.
- Review credit-facility availability, covenant headroom, lease obligations, and cash needs as the facility approaches its January 2023 maturity.
- Monitor developments in the Delaware litigation; the company’s no-accrual conclusion and conditional damages estimate are not a final resolution.