-----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, OeX3ZS8M2/WDL5cBOhu/QH0/rUq8K0bh4e1MH2vp55A8/q+3C6N4ebp91njdk8gy XG1l7RC5ZXPtkTCDkSYDTQ== 0000813920-98-000006.txt : 19981118 0000813920-98-000006.hdr.sgml : 19981118 ACCESSION NUMBER: 0000813920-98-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981004 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOWBIZ PIZZA TIME INC CENTRAL INDEX KEY: 0000813920 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 480905805 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13687 FILM NUMBER: 98751718 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 10-Q 1 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 October 4, 1998 - 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 October 4, 1998, an aggregate of 18,021,890 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 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS CEC Entertainment, Inc.: Page ---- Consolidated balance sheets as of October 4, 1998 (unaudited) and January 2, 1998 . . . . . . . . . . . . . . . . . . . . 2 Unaudited consolidated statements of earnings for the three months ended October 4, 1998 and September 26, 1997. . . . . . . . . 3 Unaudited consolidated statements of earnings for the nine months ended October 4, 1998 and September 26, 1997. . . . . . . . . 4 Unaudited consolidated statement of shareholders' equity for the nine months ended October 4, 1998 . . . . . . . . . . . . . . 5 Unaudited consolidated statements of cash flows for the nine months ended October 4, 1998 and September 26, 1997. . . . . . . . . 6 Notes to consolidated financial statements . . . . . . . . . . . . 7 CEC ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEETS OCTOBER 4, 1998 AND JANUARY 2, 1998 (Thousands, except share data) ASSETS October 4, January 2, 1998 1998 ---------- ---------- (unaudited) Current assets: Cash and cash equivalents. . . . . . . . . . . $ 10,271 $ 7,275 Accounts receivable, including receivables from related parties of $240 in 1997 . . . . . . . . . . . . . . . . 5,939 2,996 Current portion of notes receivable, including receivables from related parties of $199 in 1997 . . . . . . . . . . . . . . . . . . . 51 259 Inventories. . . . . . . . . . . . . . . . . . . 5,351 3,975 Prepaid expenses . . . . . . . . . . . . . . . . 3,524 3,550 Current portion of deferred tax asset. . . . . . 2,721 7,237 -------- ------- Total current assets. . . . . . . . . . . . . . 27,857 25,292 -------- ------- Investments in related parties . . . . . . . . . . 668 ------- Property and equipment . . . . . . . . . . . . . . 210,868 187,433 -------- -------- Deferred tax asset . . . . . . . . . . . . . . . . 5,988 -------- Other assets: Notes receivable, less current portion, including receivables from related parties of $156 and $2,516, respectively . . . . 176 2,579 Other. . . . . . . . . . . . . . . . . . . . . . . 5,527 4,408 -------- -------- 5,703 6,987 -------- -------- $ 244,428 $ 226,368 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt. . . . . . . . $ 9,381 $ 3,376 Accounts payable and accrued liabilities . . . . 33,370 35,665 -------- -------- Total current liabilities . . . . . . . . . . . 42,751 39,041 -------- -------- Long-term debt, less current portion . . . . . . . 15,289 23,826 -------- -------- Deferred credits . . . . . . . . . . . . . . . . . 4,064 4,052 -------- -------- Other liabilities. . . . . . . . . . . . . . . . . 1,300 1,300 -------- -------- Redeemable preferred stock, $60 par value, redeemable for $2,974 in 2005. . . . . . . . . . 2,287 2,211 -------- -------- Shareholders' equity: Common stock, $.10 par value; authorized 100,000,000 shares; 22,256,566 and 21,912,277 shares issued, respectively . . . 2,226 2,191 Capital in excess of par value . . . . . . . . . . 164,038 158,696 Retained earnings . . . . . . . . . . . . . . . . 70,209 42,768 Deferred compensation. . . . . . . . . . . . . . . (1,710) (2,280) Less treasury shares of 4,234,676 and 3,827,676, respectively, at cost . . . . . . . . . . . . . (56,026) (45,437) ------- ------- 178,737 155,938 -------- -------- $ 244,428 $ 226,368 ======== ========
See notes to consolidated financial statements. Page 2 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Thousands, except per share data) Three Months Ended ------------------------------------ October 4, 1998 September 26. 1997 --------------- ------------------ Food and beverage revenues . . . . . . . . $ 63,403 $ 56,649 Games and merchandise revenues . . . . . . 33,807 27,732 Franchise fees and royalties . . . . . . . 780 811 Interest income, including related party income of $10 and $49, respectively . . . 116 294 Joint venture income . . . . . . . . . . . . 116 -------- -------- 98,106 85,602 -------- -------- Costs and expenses: Cost of sales. . . . . . . . . . . . . . . 44,842 39,803 Selling, general and administrative expenses. . . . . . . . . . . . . . . . 13,990 12,896 Depreciation and amortization. . . . . . . . 7,036 6,412 Interest expense. . . . . . . . . . . . . . 640 731 Other operating expenses . . . . . . . . . . 17,334 15,619 ------- ------- 83,842 75,461 ------- ------- Income before income taxes . . . . . . . . . . 14,264 10,141 Income taxes: Current expense . . . . . . . . . . . . . . 1,280 781 Deferred expense. . . . . . . . . . . . . . 4,311 3,259 ------- ------- 5,591 4,040 ------- ------- Net Income . . . . . . . . . . . . . . . . . $ 8,673 $ 6,101 ======= ======= Net income applicable to common shares . . . $ 8,588 $ 6,015 ======= ======= Earnings per share: Basic: Net income . . . . . . . . . . . . . . . . $ .48 $ .32 ======= ======= Weighted average shares outstanding. . . . 18,032 18,584 ======= ======= Diluted: Net income . . . . . . . . . . . . . . . . $ .47 $ .32 ======= ======= Weighted average shares outstanding. . . . . 18,417 19,016 ======= =======
See notes to consolidated financial statements. page 3 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (Thousands, except per share data) Nine Months Ended ------------------------------------- October 4, 1998 September 26, 1997 --------------- ------------------ Food and beverage revenues . . . . . . . $ 191,310 $ 175,688 Games and merchandise revenues . . . . . 97,782 81,819 Franchise fees and royalties . . . . . . 2,459 2,509 Interest income, including related party income of $70 and $156, respectively. . . . . . . . . . . . 485 818 Joint venture income . . . . . . . . . . . 20 393 -------- -------- 292,056 261,227 -------- -------- Costs and expenses: Cost of sales. . . . . . . . . . . . . . 133,090 121,385 Selling, general and administrative expenses, including related party expense of $31 in 1997 . . . . . . . . 42,101 38,938 Depreciation and amortization. . . . . . . 20,448 19,056 Interest expense. . . . . . . . . . . . . . 2,019 2,148 Other operating expenses . . . . . . . . . . 49,107 46,302 -------- -------- 246,765 227,829 -------- -------- Income before income taxes . . . . . . . . . 45,291 33,398 -------- -------- Income taxes: Current expense. . . . . . . . . . . . . . 8,194 3,340 Deferred expense . . . . . . . . . . . . . 9,400 10,119 ------- ------- 17,594 13,459 ------- ------- Net income . . . . . . . . . . . . . . . . . $ 27,697 $ 19,939 ======= ======= Net income applicable to common shares . . . $ 27,441 $ 19,683 ======= ======= Earnings per share: Basic: Net income . . . . . . . . . . . . . . . . $ 1.52 $ 1.06 ======= ======= Weighted average shares outstanding. . . . 18,104 18,491 ======= ======= Diluted: Net income . . . . . . . . . . . . . . . . $ 1.48 $ 1.04 ======= ======= Weighted average shares outstanding. . . . 18,591 18,885 ======= ======= See notes to consolidated financial statements.
page 4 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) (Thousands, except per share data) Common Capital in Deferred Treasury Stock Excess of Retained Compen- Stock Shares Par Value Par Value Earnings sation Shares Cost ------ --------- ----------- -------- -------- -------- ------- Balances, January 2, 1998 . . 21,912 $ 2,191 $158,696 $ 42,768 $(2,280) 3,828 $(45,437) Net income . . . . . . . . . 27,697 Redeemable preferred stock accretion . . (77) Redeemable preferred stock dividends, $3.60 per share. . . . . . (179) Stock options exercised. . . 341 34 2,477 Tax benefit from the exercise of stock options and stock grants . . . 2,769 Acquisition of treasury stock . . . 407 (10,589) Stock issued under 401(k) plan . . . 4 1 96 Amortization of deferred compensation . . . 570 Balances, October 4, 1998. . . . . ------ ------ -------- ------- ------- ----- -------- 22,257 $2,226 $164,038 $70,209 $(1,710) 4,235 $(56,026) ====== ====== ======== ======= ======== ===== ========
See notes to consolidated financial statements. Page 5 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands) Nine Months Ended ----------------------------------- October 4, 1998 September 26,1997 --------------- ----------------- Operating activities: Net income . . . . . . . . . . . . . . $27,697 $19,939 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization. . . . . . . . 20,448 19,056 Deferred tax expense . . . . . . . . . . . . 9,400 10,119 Compensation expense under stock grant plan. . 570 1,365 Other. . . . . . . . . . . . . . . . . . . . . 71 149 Net change in receivables, inventory, prepaids, payables and accrued liabilities. . . . . (2,939) (986) ------ ------ Cash provided by operations. . . . . . . . . . 55,247 49,642 Investing activities: Purchases of property and equipment. . . . . . (41,985) (29,146) Additions to notes receivable. . . . . . . . . . (235) (1,622) Payments received on notes receivable. . . . . . 2,236 6,874 Increase in investments, deferred charges and other assets. . . . . . . . . . . (1,574) (370) ------- ------- Cash used in investing activities . . . . . (41,558) (24,264) ------- ------- Financing activities: Payments on debt and line of credit. . . . . . . (2,532) (8,298) Exercise of stock options . . . . . . . . . . . 2,511 2,421 Redeemable preferred stock dividends . . . . . . (179) (179) Acquisition of treasury stock. . . . . . . . . . (10,589) (1,786) Other . . . . . . . . . . . . . . . . . . . . 96 160 ------- ------- Cash used in financing activities . . . . . (10,693) (7,682) ------- ------- Increase in cash and cash equivalents . . . . . . 2,996 17,696 Cash and cash equivalents, beginning of period . . 7,275 3,402 -------- -------- Cash and cash equivalents, end of period . . . . . $ 10,271 $ 21,098 ======== ========
See notes to consolidated financial statements. Page 6 CEC ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NINE MONTHS ENDED OCTOBER 4,1998 AND SEPTEMBER 26, 1997 (Unaudited) 1. Interim financial statements: In the opinion of management, the accompanying financial statements for the periods ended October 4, 1998 and September 26, 1997 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, 1998. Results of operations for the periods ended October 4, 1998 and September 26,1997 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. The Company has adopted Statement of Financial Accounting Standards No. 128 Earnings Per Share. The earnings per share data for 1997 has been restated to reflect this adoption. 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 Nine Months Ended -------------------- ------------------- Oct. 4, Sept. 26, Oct. 4, Sept. 26, 1998 1997 1998 1997 ------- -------- ------- --------- Net income . . . . . . . . . . $ 8,673 $ 6,101 $ 27,697 $ 19,939 Accretion of redeemable preferred stock . . . . . . . . . . . . (25) (26) (77) (77) Redeemable preferred stock dividends . . . . . . . . . . (60) (60) (179) (179) ------ ------ ------ ------ Adjusted income applicable to common and potential common shares. . $ 8,588 $ 6,015 $27,441 $19,683 ======= ======= ======= ======= Basic: Weighted average common shares outstanding . . . . . . . . . 18,032 18,584 18,104 18,491 ======= ======= ======= ======= Earnings per common share. . . . $ .48 $ .32 $ 1.52 $ 1.06 ======= ======= ======= ======= Diluted: Weighted average common shares outstanding . . . . . . . . . 18,032 18,584 18,104 18,491 Potential common shares for stock options and stock grants . . . 385 432 487 394 ------- ------- ------- ------- Weighted average shares outstanding . 18,417 19,016 18,591 18,885 ======= ======= ======= ======= Earnings per common and potential common share . . . . . . . . $ .47 $ .32 $ 1.48 $ 1.04 ======= ======= ======= =======
3. Recent Accounting Pronouncements Effective for fiscal years beginning after December 15, 1997, the Financial Accounting Standards Board has issued Statements No. 130 Reporting Comprehensive Income and No. 131 Disclosure about Segments of an Enterprise and Related Information. The adoption of these pronouncements does not have a significant impact on the Company's consolidated financial position, results operations or cash flows. page 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Third Quarter 1998 Compared to Third Quarter 1997 - ------------------------------------------------- A summary of the results of operations of the Company as a percentage of revenues for the third quarters of 1998 and 1997 is shown below. Three Months Ended -------------------------------- Oct. 4, 1998 Sept. 26, 1997 -------------- ---------------- Revenue . . . . . . . . . . . . . . . 100.0% 100.0% ------ ------ Costs and expenses: Cost of sales . . . . . . . . . . . . 45.7 46.5 Selling, general and administrative . 14.3 15.1 Depreciation and amortization . . . . 7.2 7.5 Interest expense . . . . . . . . . . .7 .9 Other operating expenses . . . . . . 17.6 18.2 ------ ------ 85.5 88.2 ------ ------ Income before income taxes . . . . . . . 14.5 11.8 Income tax expense . . . . . . . . . 5.7 4.7 ------ ------ Net income . . . . . . . . . . . . . . . 8.8% 7.1% ====== ======
Revenues -------- Revenues increased to $98.1 million in the third quarter of 1998 from $85.6 million in the third quarter of 1997 due to an increase of 7.7% in comparable store sales of the Company's Chuck E. Cheese's restaurants which were open during all of the third quarters of both 1998 and 1997.In addition, the Company opened nine new restaurants and acquired seven restaurants from franchisees or joint venture partners between the periods. Management believes that several factors contributed to the comparable store sales increase with the primary factor being sales increases at stores upgraded with new game packages. Menu prices increased approximately 2.7% between the periods. Costs and Expenses ------------------ Costs and expenses as a percentage of revenues decreased to 85.5% in the third quarter of 1998 from 88.2% in the third quarter of 1997. Cost of sales decreased as a percentage of revenues to 45.7% in the third quarter of 1998 from 46.5% in the comparable period of 1997. Cost of food, beverage, prize and merchandise items as a percentage of restaurant sales decreased to 16.1% in the third quarter of 1998 from 16.6% in the third quarter of 1997 primarily due to an increase in game sales, reduced costs of certain food and beverage products and an increase in menu prices, partially offset by higher cheese costs. Restaurant labor expenses as a percentage of restaurant sales decreased to 26.7% during the third quarter of 1998 compared to 27.3% in the third quarter of 1997 primarily due to the increase in comparable store sales and more effective utilization of hourly employees. Selling, general and administrative expenses as a percentage of revenues decreased to 14.3% in the third quarter of 1998 from 15.1% in the third quarter of 1997 due primarily to a decrease in advertising expenses as a percentage of revenues. Depreciation and amortization expenses as a percentage of revenues declined to 7.2% in the third quarter of 1998 from 7.5% in the third quarter of 1997 primarily due to the increase in comparable store sales. Other operating expenses decreased as a percentage of revenues to 17.6% in the third quarter of 1998 from 18.2% in the third quarter of 1997 primarily due to a decline in rent expense as a percentage of revenues, the increase in comparable store sales and the fact that a significant portion of operating costs are fixed. page 8 Net Income ---------- The Company had net income of $8.7 million in the third quarter of 1998 compared to $6.1 million in the third quarter of 1997 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share was $.47 per share in the third quarter of 1998 compared to $.32 per share in the third quarter of 1997. First Nine Months of 1998 Compared to First Nine Months of 1997 - --------------------------------------------------------------- A summary of the results of operations of the Company as a percentage of revenues for the first nine months of 1998 and 1997 is shown below. Nine Months Ended ------------------------------------ Oct. 4, 1998 Sept. 26, 1997 ------------ -------------- Revenue . . . . . . . . . . . . . 100.0% 100.0% Costs and expenses: Cost of sales . . . . . . . . . 45.6 46.5 Selling, general and administrative . 14.4 14.9 Depreciation and amortization 7.0 7.3 Interest expense . . . . . . . . .7 .8 Other operating expenses . . . . 16.8 17.7 ------- ------- 84.5 87.2 ------- ------- Income before income taxes . . . . 15.5 12.8 Income tax expense . . . . . . 6.0 5.2 ------- ------- Net income . . . . . . . . . . . . 9.5% 7.6% ======= =======
Revenues -------- Revenues increased to $292.1 million in the first nine months of 1998 from $261.2 million in the first nine months of 1997 primarily due to an increase of 5.9% in comparable store sales of the Company's Chuck E. Cheese's restaurants which were open during all of the first nine months of both 1998 and 1997. In addition, the Company opened nine new restaurants and acquired seven restaurants from franchisees or joint venture partners between the periods. Management believes that several factors contributed to the comparable store sales increase with the primary factor being sales increases at stores upgraded with new game packages. Menu prices increased approximately 2.2% between the periods. Costs and Expenses ----------------- Costs and expenses as a percentage of revenues decreased to 84.5% in the first nine months of 1998 from 87.2% in the first nine months of 1997. Cost of sales decreased as a percentage of revenues to 45.6% in the first nine months of 1998 from 46.5% in the comparable period of 1997. Cost of food, beverage, prize and merchandise items as a percentage of restaurant sales decreased to 16.0% in the first nine months of 1998 from 16.5% in the first nine months of 1997 primarily due to an increase in game sales, reduced costs of certain food and beverage products and an increase in menu prices, partially offset by higher cheese costs. Restaurant labor expenses as a percentage of restaurant sales decreased to 26.6% during the first nine months of 1998 from 27.2% in the first nine months of 1997 primarily due to an increase in comparable store sales and more effective utilization of hourly employees. Selling, general and administrative expenses as a percentage of revenues decreased to 14.4% in the first nine months of 1998 from 14.9% in the comparable period of 1997 primarily due to a reduction in corporate overhead costs as a percentage of revenues. Depreciation and amortization expenses as a percentage of revenues declined to 7.0% in the first nine months of 1998 from 7.3% in the first nine months of 1997 primarily due to the increase in comparable store sales. Page 9 Other operating expenses decreased as a percentage of revenues to 16.8% in the first nine months of 1998 from 17.7% in the first nine months of 1997 primarily due to a decrease in insurance costs, a decrease in rent expense as a percentage of revenues, the increase in comparable store sales and the fact that a significant portion of operating costs are fixed. Net Income ---------- The Company had net income of $27.7 million in the first nine months of 1998 compared to $19.9 million in the first nine months of 1997 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share was $1.48 per share in the first nine months of 1998 compared to $1.04 per share in the first nine months of 1997. Financial Condition, Liquidity and Capital Resources Cash provided by operations increased to $55.2 million in the first nine months of 1998 from $49.6 million in the comparable period of 1997. Cash outflows from investing activities for the first nine months of 1998 were $41.6 million. Cash outflows from financing activities for the first nine months of 1998 were $10.7 million primarily related to the purchase of treasury 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. The Company plans to add an additional 18 to 22 stores in 1998 including new stores and acquisitions of existing stores from franchisees or joint venture partners. The Company currently anticipates its cost of opening such new stores to average approximately $1.5 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 15 to 20 existing stores in 1998 by an average of 1,000 to 4,000 square feet per store. The Company also plans to complete Phase II upgrades in approximately 110 stores in 1998 at an average cost of $150,000 to $160,000 per store. A Phase II upgrade generally includes a new game package, enhanced prize and merchandise offerings, and improved product presentation and service. During the first nine months of 1998, the Company opened eight new restaurants, acquired five restaurants from franchisees or joint venture partners, expanded ten restaurants and completed Phase II upgrades in 75 restaurants. The Company currently estimates that capital expenditures in 1998, including expenditures for upgrading existing stores, new store openings, existing store expansions and equipment investments, will be approximately $55 to $60 million. The Company plans to finance these expenditures through cash flow from operations and, if necessary, borrowings under the Company's line of credit. In 1997, the Company announced that it plans to purchase shares of the Company's common stock at an aggregate purchase price of up to $20 million. In July 1998, the Company completed this plan and announced an additional plan to purchase shares of the Company's common stock at an aggregate purchase price of up to $15 million. As of October 4, 1998, the Company has purchased shares of its common stock under the $15 million plan at an aggregate purchase price of approximately $5.8 million. The Company's total credit facility of $38.8 million consists of $23.8 million in term notes and a $15 million line of credit. Term notes totaling $18 million with annual principal payments of $6 million beginning in June 1999 and annual interest of 10.02% mature in 2001. Term notes totaling $5.8 million with quarterly principal payments of $833,000 and annual interest equal to LIBOR plus 3.5% mature in 2000. Interest under the $15 million line of credit is dependent on earnings and debt levels of the Company and ranges from prime minus 0.5% to plus 0.5% or, at the Company's option, LIBOR plus 1% to 2.5%. Currently, any borrowings under this line of credit would be at prime rate minus 0.5% or LIBOR plus 1%. In June 1998, the Company's line of credit agreement was amended to extend the maturity date to June 2000. As of October 4, 1998, there were no borrowings under the line of credit. The Company is required to comply with certain financial ratio tests during the terms of the loan agreements. page 10 In 1998, the Company purchased computer software which is Year 2000 compliant. The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Current systems may be unable to accurately process certain date-based information. The cost of the new software will be recorded as an asset and amortized over its estimated useful life. Other maintenance or modification costs will be expensed as incurred. Accordingly, the Company does not expect the amounts required to be expensed over the next two years to have a material effect on its financial position, results of operations or cash flows. The Company expects its Year 2000 date conversion project to be completed in 1999. The Company has initiated formal communication with significant vendors and suppliers to determine their efforts to remediate the Year 2000 issues. 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. Page 11 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 No matters were submitted to a vote of security holders during the third quarter of 1998. 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 EX-27 Financial Data Schedule b) Reports on Form 8-K None filed during the quarter for which this report is filed. Page 12 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: November 16, 1998 By: /s/ Larry G. Page ------------------------ Larry G. Page Executive Vice President and Chief Financial Officer page 13 EX-99 2 [ARTICLE] 5 [PERIOD-TYPE] 3-MOS [FISCAL-YEAR-END] JAN-03-1999 [PERIOD-END] OCT-04-1998 [CASH] 10,271 [SECURITIES] 0 [RECEIVABLES] 6,002 [ALLOWANCES] 63 [INVENTORY] 5,351 [CURRENT-ASSETS] 27,857 [PP&E] 336,531 [DEPRECIATION] 125,663 [TOTAL-ASSETS] 244,428 [CURRENT-LIABILITIES] 42,751 [BONDS] 15,289 [COMMON] 2,226 [PREFERRED-MANDATORY] 2,287 [PREFERRED] 0 [OTHER-SE] 176,511 [TOTAL-LIABILITY-AND-EQUITY] 244,428 [SALES] 289,092 [TOTAL-REVENUES] 292,056 [CGS] 133,090 [TOTAL-COSTS] 246,765 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 0 [INTEREST-EXPENSE] 2,019 [INCOME-PRETAX] 45,291 [INCOME-TAX] 17,594 [INCOME-CONTINUING] 27,697 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] 27,697 [EPS-PRIMARY] 1.52 [EPS-DILUTED] 1.48
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