-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hja494Xfx4hFy0egGUFBHW3jd8qHduNKlV/+DGg0xvHKwfnuVdr9QaZGC3WQgVp1 Xc3g3FQNrvyias5xbkf+kA== /in/edgar/work/20000811/0000813920-00-000006/0000813920-00-000006.txt : 20000921 0000813920-00-000006.hdr.sgml : 20000921 ACCESSION NUMBER: 0000813920-00-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000702 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEC ENTERTAINMENT INC CENTRAL INDEX KEY: 0000813920 STANDARD INDUSTRIAL CLASSIFICATION: [5812 ] IRS NUMBER: 480905805 STATE OF INCORPORATION: KS FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13687 FILM NUMBER: 693863 BUSINESS ADDRESS: STREET 1: PO BOX 152077 STREET 2: 4441 W AIRPORT FREEWAY CITY: IRVING STATE: TX ZIP: 75015 BUSINESS PHONE: 2142588507 MAIL ADDRESS: STREET 1: PO BOX 152077 CITY: IRVING STATE: TX ZIP: 75015 FORMER COMPANY: FORMER CONFORMED NAME: SHOWBIZ PIZZA TIME INC DATE OF NAME CHANGE: 19920703 10-Q 1 0001.txt 10QDOCUMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended July 2, 2000. - Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ------ to -----. Commission File Number 0-15782 CEC ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) Kansas 48-0905805 (State or other jurisdiction of(I.R.S. Employer incorporation or organization)Identification No.) 4441 West Airport Freeway Irving, Texas 75062 (Address of principal executive offices, including zip code) (972) 258-8507 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No - At July 2, 2000, an aggregate of 26,852,389 shares of the registrant's Common Stock, par value of $.10 each (being the registrant's only class of common stock), were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CEC ENTERTAINMENT, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated balance sheets. . . . . . . . . . . . . . . . 2 Consolidated statements of earnings and comprehensive income . . . . . . . . . . . . . . . . . . . 3 Consolidated statement of shareholders' equity . . . . . . 5 Consolidated statements of cash flows . . . . . . . . . . 6 Notes to consolidated financial statements . . . . . . . . 7 Page 1 CEC ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEETS (Thousands, except share data) ASSETS July 2, January 2, 2000 2000 ------- --------- (unaudited) Current assets: Cash and cash equivalents . . . . . . . . . . . $ 4,138 $ 2,731 Accounts receivable . . . . . . . . . . . . . . 4,653 6,451 Current portion of notes receivable . . . . . . 7 Inventories . . . . . . . . . . . . . . . . . . 8,301 7,895 Prepaid expenses. . . . . . . . . . . . . . . . 5,416 4,727 Current portion of deferred tax asset . . . . . 776 776 Assets held for resale. . . . . . . . . . . . . 10,369 13,070 ------- ------- Total current assets . . . . . . . . . . . . . 33,653 35,657 ------- ------- Property and equipment, net. . . . . . . . . . . 306,948 280,624 ------- ------- Notes receivable from related parties, less current portion . . . . . . . . . . . . . . . . 1,073 491 -------- -------- Other assets . . . . . . . . . . . . . . . . . . 7,341 8,396 -------- -------- $ 349,015 $ 325,168 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . . . . . $ 6,083 $ 7,729 Accounts payable and accrued liabilities. . . . 36,715 34,294 ------- ------- Total current liabilities. . . . . . . . . . 42,798 42,023 ------- ------- Long-term debt, less current portion . . . . . . 45,968 51,567 ------- ------- Deferred rent. . . . . . . . . . . . . . . . . . 4,108 4,110 ------- ------- Long-term deferred tax liability . . . . . . . . 4,031 2,167 ------- ------- Other liabilities. . . . . . . . . . . . . . . . 1,725 1,725 ------- ------- Redeemable preferred stock, $60 par value, redeemable for $2,911 in 2005 . . . . . . . . . . . . . . . 2,387 2,348 ------- ------- Shareholders' equity: Common stock, $.10 par value; authorized 100,000,000 shares; 33,891,895 and 33,791,217 shares issued, respectively . . . . . . . . . 3,389 3,379 Capital in excess of par value. . . . . . . . . 168,342 166,594 Retained earnings . . . . . . . . . . . . . . . 150,869 120,194 Deferred compensation . . . . . . . . . . . . . (379) (759) Accumulated other comprehensive income . . . . (21) 42 Less treasury shares of 7,039,506 and 6,777,614, respectively, at cost. . . . . . . (74,202) (68,222) ------- ------- 247,998 221,228 ------- ------- $ 349,015 $ 325,168 ======= ======= See notes to consolidated financial statements.
Page 2 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited) (Thousands, except per share data) Three Months Ended -------------------------------- July 2, 2000 July 4,1999 ------------ ----------- Food and beverage revenues . . . . . . . . . $ 78,654 $ 67,242 Games and merchandise revenues . . . . . . . 39,463 36,858 Franchise fees and royalties . . . . . . . . 862 775 Interest income, including related party income of $26 and $10,respectively . . . . 54 60 ------- ------- 119,033 104,935 ------- ------- Costs and expenses: Cost of sales . . . . . . . . . . . . . . . 53,915 47,829 Selling, general and administrative expenses . . . . . . . . . . . . . . . . 16,939 15,238 Depreciation and amortization . . . . . . . 8,122 7,851 Interest expense. . . . . . . . . . . . . . 880 600 Other operating expenses. . . . . . . . . . 19,404 17,841 ------- ------- 99,260 89,359 ------- ------- Income before income taxes . . . . . . . . . 19,773 15,576 ------- ------- Income taxes: Current expense . . . . . . . . . . . . . . 6,940 5,824 Deferred expense. . . . . . . . . . . . . . 732 281 ------- ------- 7,672 6,105 ------- ------- Net income . . . . . . . . . . . . . . . . . 12,101 9,471 Other comprehensive income, net of tax: Foreign currency translation. . . . . . . . 29 37 ------- ------- Comprehensive income . . . . . . . . . . . . $ 12,130 $ 9,508 ======= ======= Earnings per share: Basic: Net income . . . . . . . . . . . . . . . . $ .45 $ .35 ======= ======= Weighted average shares outstanding. . . . 26,768 27,056 ======= ======= Diluted: Net income . . . . . . . . . . . . . . . $ .44 $ .34 ======= ======= Weighted average shares outstanding. . . . 27,612 27,797 ======= =======
See notes to consolidated financial statements. Page 3 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited) (Thousands, except per share data) Six Months Ended ----------------------------- July 2, 2000 July 4, 1999 ------------ ------------ Food and beverage revenues . . . . . . . . . . $ 172,483 $ 143,785 Games and merchandise revenues . . . . . . . . 86,030 77,850 Franchise fees and royalties . . . . . . . . . 1,754 1,587 Interest income, including related party income of $49 and $27, respectively . . . . . . . . . . . . . . . . 113 109 ------- ------- 260,380 223,331 ------- ------- Costs and expenses: Cost of sales . . . . . . . . . . . . . . . . 115,465 99,439 Selling, general and administrative expenses . . . . . . . . . . . . . . . . . 36,935 32,274 Depreciation and amortization . . . . . . . . 16,218 15,317 Interest expense. . . . . . . . . . . . . . . 1,641 1,295 Other operating expenses. . . . . . . . . . . 39,722 35,777 ------- ------- 209,981 184,102 ------- ------- Income before income taxes . . . . . . . . . . 50,399 39,229 ------- ------- Income taxes: Current expense . . . . . . . . . . . . . . . 17,690 14,671 Deferred expense. . . . . . . . . . . . . . . 1,864 706 ------- ------- 19,554 15,377 ------- ------- Net income . . . . . . . . . . . . . . . . . . 30,845 23,852 Other comprehensive income, net of tax: Foreign currency translation. . . . . . . . . 63 40 ------- ------- Comprehensive income . . . . . . . . . . . . . $ 30,908 $ 23,892 ======= ======= Earnings per share: Basic: Net income . . . . . . . . . . . . . . . . . $ 1.14 $ .88 ======= ======= Weighted average shares outstanding. . . . . 26,819 27,018 ======= ======= Diluted: Net income . . . . . . . . . . . . . . . . . $ 1.11 $ .85 ======= ======= Weighted average shares outstanding. . . . . 27,618 27,837 ======= =======
See notes to consolidated financial statements. Page 4 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) (Thousands, except per share data) Amounts Shares ------- ------ Common stock and capital in excess of par value Balance, beginning of year. . . . . . . . . . . $ 169,973 33,791 Stock options exercised . . . . . . . . . . . . 1,213 96 Net tax benefit from exercise of options and stock grants . . . . . . . . . . . . . . . . 390 Stock issued under 401(k) plan. . . . . . . . . 155 5 ------- ------- Balance, July 2, 2000 . . . . . . . . . . . . . 171,731 33,892 ------- ------- Retained earnings: Balance, beginning of year. . . . . . . . . . . 120,194 Net income. . . . . . . . . . . . . . . . . . . 30,845 Redeemable preferred stock accretion. . . . . . (51) Redeemable preferred stock dividend, $2.40 per share . . . . . . . . . . . . . . . . . . (119) ------- Balance, July 2, 2000 . . . . . . . . . . . . . 150,869 ------- Deferred compensation: Balance, beginning of year. . . . . . . . . . . (759) Amortization of deferred compensation . . . . . 380 ------- Balance, July 2, 2000 . . . . . . . . . . . . . (379) ------- Accumulated other comprehensive income: Balance, beginning of year. . . . . . . . . . . 42 Foreign currency translation. . . . . . . . . . (63) ------- Balance, July 2, 2000 . . . . . . . . . . . . . (21) ------- Treasury shares: Balance, beginning of year. . . . . . . . . . . (68,222) 6,778 Treasury stock acquired . . . . . . . . . . . (5,980) 262 ------- ------- Balance, July 2, 2000 . . . . . . . . . . . . . (74,202) 7,040 ------- ------- Total shareholder's equity . . . . . . . . . . . $ 247,998 ========
See notes to consolidated financial statements. Page 5 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands) Six Months Ended -------------------------------- July 2, 2000 July 4, 1999 ------------ ------------ Operating activities: Net income . . . . . . . . . . . . . . . $30,845 $23,852 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization . . . . . . 16,218 15,317 Deferred tax expense. . . . . . . . . . . 1,864 706 Compensation expense under stock grant plan 380 380 Other . . . . . . . . . . . . . . . . . . (117) 21 Net change in receivables, inventory, prepaids, payables and accrued liabilities 3,124 1,991 ------- ------- Cash provided by operations. . . . . . . 52,314 42,267 ------- ------- Investing activities: Purchases of property and equipment . . . . (43,224) (30,786) Proceeds from disposition of property and equipment . . . . . . . . . . . . . . 835 Additions to notes receivable . . . . . . . (834) (976) Payments received on notes receivable . . . 259 754 Decrease in assets held for resale. . . . . 2,850 (Increase) decrease in other assets . . . . 868 (1,777) ------- ------- Cash used in investing activities. . . . . (39,246) (32,785) ------- ------- Financing activities: Payments on debt . . . . . . . . . . . . . (20,840) (17,689) Proceeds on debt. . . . . . . . . . . . . . 13,595 10,520 Exercise of stock options . . . . . . . . . 1,213 1,455 Redeemable preferred stock dividends. . . . (119) (119) Treasury stock acquired . . . . . . . . . . (5,980) (1,659) Other . . . . . . . . . . . . . . . . . . . 470 673 ------- ------- Cash used in financing activities. . . . . (11,661) (6,819) ------- ------- Increase in cash and cash equivalents . . . 1,407 2,663 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . 2,731 3,210 ------- ------- Cash and cash equivalents, end of period . . $ 4,138 $ 5,873 ======= =======
See notes to consolidated financial statements. Page 6 CEC ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Interim financial statements: In the opinion of management, the accompanying financial statements for the periods ended July 2, 2000 and July 4, 1999 reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial condition, results of operations and cash flows in accordance with generally accepted accounting principles. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited consolidated financial statements referred to above should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended January 2, 2000. Results of operations for the periods ended July 2, 2000 and July 4, 1999 are not necessarily indicative of the results for the year. 2. Earnings per common share: Earnings per common share were computed based on the weighted average number of common and potential common shares outstanding during the period. Net income available per common share has been adjusted for the items indicated below, and earnings per common and potential common share were computed as follows (thousands, except per share data): Three Months Ended Six Months Ended -------------------- -------------------- July 2, July 4, July 2, July 4, 2000 1999 2000 1999 ------- ------- ------- ------- Net income . . . . . . . . . . . $ 12,101 $ 9,471 $ 30,845 $ 23,852 Accretion of redeemable preferred stock. . . . . . . . (25) (26) (51) (51) Redeemable preferred stock dividends. . . . . . . . . . . (60) (59) (119) (119) ------- ------- ------- ------- Adjusted income applicable to common and potential common shares . . . . . . . . . . . . $ 12,016 $ 9,386 $ 30,675 $ 23,682 ======= ======= ======= ======= Basic: Weighted average common shares outstanding. . . . . . . . 26,768 27,056 26,819 27,018 ======= ======= ======= ======= Earnings per common share. . $ .45 $ .35 $ 1.14 $ .88 ======= ======= ======= ======= Diluted: Weighted average common shares outstanding. . . . . . . . . 26,768 27,056 26,819 27,018 Potential common shares for stock options and stock grants . . . . . 844 741 799 819 ------- ------- ------- ------- Weighted average shares outstanding . . . . . . 27,612 27,797 27,618 27,837 ======= ======= ======= ======= Earnings per common and potential common share . $ .44 $ .34 $ 1.11 $ .85 ======= ======= ======= =======
Page 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Second Quarter 2000 Compared to Second Quarter 1999 - --------------------------------------------------- A summary of the results of operations of the Company as a percentage of revenues for the second quarters of 2000 and 1999 is shown below. Three Months Ended ---------------------------------- July 2, 2000 July 4, 1999 ------------ ------------ Revenue. . . . . . . . . . . . . . 100.0% 100.0% ----- ----- Costs and expenses: Cost of sales. . . . . . . . . . . 45.4 45.6 Selling, general and administrative 14.2 14.5 Depreciation and amortization 6.8 7.5 Interest expense .7 .6 Other operating expenses 16.3 17.0 ------ ----- 83.4 85.2 ------ ----- Income before income taxes 16.6 14.8 Income tax expense . . . . . . 6.4 5.8 ----- ----- Net income . . . . . . . . . . . . 10.2% 9.0% ===== =====
Revenues -------- Revenues increased 13.4% to $119.0 million in the second quarter of 2000 from $104.9 million in the second quarter of 1999 due to an increase in the number of Company-operated stores and an increase of 1.8% in comparable store sales of the Company's Chuck E. Cheese's stores which were open during all of the second quarters of both 2000 and 1999. During 1999, the Company opened 23 new restaurants and acquired one restaurant from a franchisee. During the first six months of 2000, the Company opened 14 new restaurants. Menu prices increased approximately 2.0% between the periods. Costs and Expenses ------------------ Costs and expenses as a percentage of revenues decreased to 83.4% in the second quarter of 2000 from 85.2% in the second quarter of 1999. Cost of sales decreased as a percentage of revenues to 45.4% in the second quarter of 2000 from 45.6% in the comparable period of 1999. Cost of food, beverage, prize and merchandise items as a percentage of restaurant sales decreased to 15.2% in the second quarter of 2000 from 15.4% in the second quarter of 1999 primarily due to a decrease in cheese costs and an increase in menu prices. Store labor expenses as a percentage of store sales increased to 27.6% during the second quarter of 2000 compared to 27.3% in the second quarter of 1999 primarily due to wage increases and new store staffing. Selling, general and administrative expenses as a percentage of revenues decreased to 14.2% in the second quarter of 2000 from 14.5% in the second quarter of 1999 due primarily to a decrease in advertising expense as a percentage of revenues. Depreciation and amortization expenses as a percentage of revenues decreased to 6.8% in the second quarter of 2000 from 7.5% in the second quarter of 1999 primarily due to the increase in comparable store sales and new restaurants with higher sales volumes. Interest expense as a percentage of revenues increased to .7% in the second quarter of 2000 from .6% in the second quarter of 1999 due primarily to an increase in the amount of long-term debt outstanding. Interest expense on incremental debt incurred to finance assets held for resale has been allocated to the basis of such assets. Page 8 Other operating expenses decreased as a percentage of revenues to 16.3% in the second quarter of 2000 from 17.0% in the second quarter of 1999 primarily due to the increase in comparable store sales and the fact that a significant portion of operating costs are fixed. The Company's effective income tax rate was 38.8% in the second quarter of 2000 compared to 39.2% in the second quarter of 1999 primarily due to lower estimated state tax rates. Net Income ---------- The Company had net income of $12.1 million in the second quarter of 2000 compared to $9.5 million in the second quarter of 1999 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share increased 29.4% to $.44 per share in the second quarter of 2000 from $.34 per share in the second quarter of 1999. First Six Months of 2000 Compared to First Six Months of 1999 - ------------------------------------------------------------- A summary of the results of operations of the Company as a percentage of revenues for the first six months of 2000 and 1999 is shown below. Six Months Ended ------------------------------ July 2, 2000 July 4, 1999 ------------ ------------ Revenue. . . . . . . . . . . . . 100.0% 100.0% ------ ------- Costs and expenses: Cost of sales . . . . . . . . . 44.3 44.5 Selling, general and administrative 14.2 14.4 Depreciation and amortization 6.2 6.9 Interest expense. . . . . . . . .6 .6 Other operating expenses 15.3 16.0 ------ ------ 80.6 82.4 ------ ------ Income before income taxes 19.4 17.6 Income tax expense . . . . . . . 7.6 6.9 ------ ------ Net income . . . . . . . . . . . 11.8% 10.7% ======= ======
Revenues -------- Revenues increased 16.6% to $260.4 million in the first six months of 2000 from $223.3 million in the first six months of 1999 primarily due an increase in the number of Company-operated stores and an increase of 4.9% in comparable store sales of the Company's Chuck E. Cheese's restaurants which were open during all of the first six months of both 2000 and 1999. During 1999, the Company opened 23 new restaurants and acquired one restaurant from a franchisee. During the first six months of 2000, the Company opened 14 new restaurants. Menu prices increased approximately 1.8% between the periods. Costs and Expenses ------------------ Costs and expenses as a percentage of revenues decreased to 80.6% in the first six months of 2000 from 82.4%in the first six months of 1999. Cost of sales decreased as a percentage of revenues to 44.3% in the first six months of 2000 from 44.5% in the comparable period of 1999. Cost of food, beverage, prize and merchandise items as a percentage of restaurant sales decreased to 15.0% in the first six months of 2000 from 15.4% in the first six months of 1999 primarily due to a decrease in cheese costs and an increase in menu prices. Store labor expenses as a percentage of restaurant sales increased to 26.6% during the first six months of 2000 from 26.3% in the first six months of 1999 primarily due to wage increases and new store staffing. Selling, general and administrative expenses as a percentage of revenues decreased to 14.2% in the first six months of 2000 from 14.4% in the first six months of 1999 due a reduction in advertising expenses as a percentage of revenues. Page 9 Depreciation and amortization expenses as a percentage of revenues were 6.2% in the first six months of 2000 compared to 6.9% in the first six months of 1999 primarily due to the increase in comparable store sales and new restaurants with higher sales volumes. Interest expense as a percentage of revenues remained constant at .6% in both the first six months of 2000 and the first six months of 1999. Interest expense on incremental debt incurred to finance assets held for resale has been allocated to the basis of such assets. Other operating expenses decreased as a percentage of revenues to 15.3% in the first six months of 2000 from 16.0% in the first six months of 1999 primarily due to the increase in comparable store sales and the fact that a significant portion of operating costs are fixed. The Company's effective income tax rate was 38.8% in the first six months of 2000 compared to 39.2% in the first six months of 1999 primarily due to lower estimated state tax rates. Net Income ---------- The Company had net income of $30.8 million in the first six months of 2000 compared to $23.9 million in the first six months of 1999 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share increased 30.6% to $1.11 per share in the first six months of 2000 compared to $.85 per share in the first six months of 1999. Financial Condition, Liquidity and Capital Resources - ---------------------------------------------------- Cash provided by operations increased to $52.3 million in the first six months of 2000 from $42.3 million in the comparable period of 1999. Cash outflows from investing activities for the first six months of 2000 were $39.2 million primarily related to capital expenditures. Cash outflows from financing activities for the first six months of 2000 were $11.7 million primarily related to the repayment of long-term debt and the repurchase of the Company's common stock. The Company's primary requirements for cash relate to planned capital expenditures, the repurchase of the Company's common stock and debt service. The Company expects that it will satisfy such requirements from cash provided by operations and, if necessary, funds available under its line of credit. In 2000, the Company plans to add 27 to 32 stores including new stores and acquisitions of existing stores from franchisees. The Company currently anticipates its cost of opening such new stores to average approximately $1.8 million per store which will vary depending upon many factors including the size of the stores and whether the store is an in-line or freestanding building. In addition to such new store openings, the Company plans to expand the seating capacity of 17 to 20 high sales volume stores in 2000 including stores which will receive an enhanced showroom package. The Company also plans to complete Phase III upgrades in 25 stores in the second half of the year at an average cost of approximately $225,000 per store. A Phase III upgrade generally includes a new toddler play area, skill games, kiddie games and rides, sky-tube enhancements, ticket counters and potentially a ticket banking system. During the first six months of 2000, the Company opened 14 new restaurants, expanded 13 restaurants and completed a Phase III upgrade in one restaurant. The Company currently estimates that capital expenditures in 2000, including expenditures for new store openings, existing store expansions and equipment investments, will be approximately $86 million. The Company plans to finance these expenditures through cash flow from operations and borrowings under the Company's line of credit. In 1999, the Company purchased assets previously owned by Discovery Zone, Inc. The preliminary allocation of the purchase price was approximately $7.2 million to property and equipment and $11.8 million to assets held for resale. Subsequent to the purchase, the Company has incurred incremental holding costs of approximately $2.9 million and realized sale proceeds of $4.3 million related to the assets held for resale. While the Company has not yet finalized the purchase price allocation, it is not expected that the final allocation will be materially different from the results reflected herein. In September 1999, the Company announced a plan to purchase shares of the Company's common stock at an aggregate purchase price of up to $25 million. As of August 14, 2000, the Company has purchased shares of its common stock under the $25 million plan at an aggregate purchase price of approximately $8.9 million. Page 10 In July 2000, the Company entered into a bank agreement that increases its revolving credit facility to $75 million from $55 million and extends the maturity date to 2003 from 2001. The Company's total credit facility of $81 million consists of $6 million in term notes and a $75 million line of credit. Term notes totaling $6 million with annual principal payments of $6 million and annual interest of 10.02% mature in 2001. Interest under the $75 million line of credit is dependent on earnings and debt levels of the Company and ranges from prime or, at the Company's option, LIBOR plus 1% to 1.75%. Currently, any borrowings under this line of credit would be at prime rate or LIBOR plus 1/8%. As of July 2, 2000, $45.3 million was borrowed under the line of credit. The Company is required to comply with certain financial ratio tests during the terms of the loan agreements. Forward-Looking Statements - -------------------------- Certain statements may constitute "forward-looking statements" which are subject to known and unknown risks and uncertainties including, among other things, certain economic conditions, competition, development factors and operating costs that may cause the actual results to differ materially from results implied by such forward-looking statements. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to market risk in the form of interest risk and foreign currency risk. Both interest risk and foreign currency risk are immaterial to the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Item 2. Changes in Securities. None to report during quarter for which this report is filed. Item 3. Defaults Upon Senior Securities. None to report during quarter for which this report is filed. Item 4. Submission of Matters to a Vote of Security Holders On June 22, 2000, at the Company's annual meeting of shareholders, the Company's shareholders re-elected Richard M. Frank, Tim T. Morris and Louis P. Neeb to serve the Company as directors. The following votes were cast with respect to the election of these directors: For Withheld ---------- -------- Richard M. Frank 25,159,755 156,916 Tim T. Morris 25,157,663 159,008 Louis P. Neeb 25,147,806 168,865 Richard T. Huston, Michael H. Magusiak, Cynthia I. Pharr, Walter Tyree and Raymond E. Woolridge's terms of office as directors of the Company continued after the meeting. The shareholders also approved an amendment to the Non-Employee Directors Stock Option Plan ("Director's Plan") extending the term thereof for an additional ten (10) years. The votes cast with respect to this proposal to authorize an amendment to the Directors Plan were as follows: For Against Abstain No Vote ---------- ------- ------- --------- 24,417,084 866,546 33,039 0 The shareholders also approved an amendment to the Directors Plan allowing for an adjustment in shares distributable in the event a dividend or stock split is declared. The votes cast with respect to this proposal to authorize an amendment to the Directors Plan were as follows: For Against Abstain No Vote ---------- ------- ------- -------- 24,584,190 697,775 34,706 0 page 12 The shareholders also approved an amendment to 1997 Non- Statutory Employee Stock Option Plan ("Employee Plan") providing that the number of shares of Common Stock which may be issued under the Employee Plan would be increased from 2,737,500 to 3,087,500, and requiring that any amendment to the Employee Plan must be approved by the shareholders of the Company if the amendment would (a) materially increase the aggregate number of shares of stock which may be issued pursuant to options granted under the Employee Plan, (b) materially modify the requirements as to eligibility for participation in the Employee Plan, or materially increase the benefits accruing to holders of options under the Employee Plan. The votes cast with respect to this proposal to authorize an amendment to the Employee Plan were as follows: For Against Abstain No Vote ---------- --------- -------- ------- 24,145,808 1,139,854 31,008 0 The shareholders also approved an incentive bonus program for eligible employees of the Company (excluding Field Operators, and Training and Recruiting managers) to receive a bonus as a percentage of their gross base salary during a particular fiscal year ranging from a high of one hundred percent (100%) for the Chief Executive Officer to a low of two percent (2%) for new management salaried and hourly employees with less than five (5) years tenure with the Company. The incentive bonus program provides that an employee is eligible to receive one hundred percent (100%) of his or her bonus potential if the Company achieves a thirty percent (30%) cash on cash return on capital expenditures. The cash on cash return is equal to the fiscal year's cash flow (income before taxes plus depreciation, amortization, and pre-opening expenses) minus the prior fiscal year's cash flow divided by the weighted average increase in capital expenditures. The bonus potential for employees will increase or decrease four percent (4%) for each one percent (1%) change from a thirty percent (30%) cash on cash return. However, no bonuses will be paid if the cash on cash return is less than twenty percent (20%). The votes cast with respect to this proposal to authorize an incentive bonus program for eligible employees of the Company were as follows: For Against Abstain No Vote ---------- ------- ------- ------- 24,733,365 555,750 27,555 0 Item 5. Other Information. None to report during quarter for which this report is filed. Item 6. Exhibits and Reports on Form 8-K. a) Exhibits None. b) Reports on Form 8-K None filed during the quarter for which this report is filed. Page 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CEC ENTERTAINMENT, INC. Dated: August 11, 2000 By: /s/ Rodney Carter ------------------------ Rodney Carter Executive Vice President and Chief Financial Officer Page 14 EX-27 2 0002.txt
5 1000 6-MOS DEC-31-2000 JUL-02-2000 4,138 0 4,676 23 8,301 33,653 440,073 133,125 349,015 42,798 45,968 3,389 2,387 0 244,609 349,015 258,513 260,380 115,465 209,981 0 0 1,641 50,399 19,554 30,845 0 0 0 30,845 1.14 1.11
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