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 March 31, 1995.
- 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
SHOWBIZ PIZZA TIME, 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.)
P.O. Box 152077
4441 West Airport Freeway
Irving, Texas 75015
(Address of principal executive offices,
including zip code)
(214) 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 March 31, 1995, an aggregate of 12,215,177 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
ShowBiz Pizza Time, Inc.:
Page
----
Consolidated balance sheets as of March 31, 1995 (unaudited)
and December 30, 1994
2
Consolidated statements of earnings for the three months ended
March 31, 1995 and April 1, 1994 (unaudited)
3
Consolidated statement of shareholders' equity for the three
months ended March 31, 1995 (unaudited)
4
Consolidated statements of cash flows for the three months
ended March 31, 1995 and April 1, 1994 (unaudited)
5
Notes to consolidated financial statements
6
<PAGE> 1
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND DECEMBER 30, 1994
(Thousands, except share data)
<TABLE>
ASSETS
March 31, December 30,
1995 1994
------------ --------------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . $ 7,358 $ 2,381
Accounts receivable, including receivables
from related parties of $421
and $416, respectively. . . . . . . . . . 2,815 3,361
Current portion of notes receivable,
including receivables from related parties
of $310 and $300, respectively. . . . . 580 529
Inventories. . . . . . . . . . . . . . . . . . 3,347 3,107
Prepaid expenses . . . . . . . . . . . . . . . 2,677 2,900
Current portion of deferred tax asset. . . . . 2,666 3,583
--------- --------
Total current assets. . . . . . . . . 19,443 15,861
--------- --------
Investments in related parties. . . . . . . . . 712 699
--------- --------
Property and equipment . . . . . . . . . . . . 129,863 130,190
--------- --------
Deferred tax asset. . . . . . . . . . . . . . . 28,848 29,414
--------- --------
Other assets:
Notes receivable, less current portion,
including receivables from
related parties of $2,338
and $1,708, respectively . . . . . . . . 7,418 6,705
Deferred charges, less amortization . . . . 2,176 2,083
Other. . . . . . . . . . . . . . . . . . . . 3,652 3,356
------- -------
13,246 12,144
------- -------
$ 192,112 $ 188,308
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt. . . . . $ 29,269 $ 10,060
Accounts payable and accrued liabilities . . 26,839 26,545
-------- --------
Total current liabilities . . . . . . 56,108 36,605
-------- --------
Long-term debt, less current portion. . . . . . 1,125 19,947
-------- --------
Deferred credits. . . . . . . . . . . . . . . . 3,181 3,025
-------- --------
Other liabilities . . . . . . . . . . . . . . . 1,427 1,314
-------- --------
Redeemable preferred stock, $60 par value,
redeemable for $2,974 in 2005 . . . . . . . . 1,927 1,902
-------- --------
Shareholders' equity:
Common stock, $.10 par value; authorized
30,000,000 shares; 14,287,961 and
14,337,235 shares issued, respectively . . 1,429 1,434
Capital in excess of par value . . . . . . . 154,694 156,532
Retained earnings. . . . . . . . . . . . . . 7,492 5,012
Deferred compensation. . . . . . . . . . . . (5,008) (7,200)
Less treasury shares of 2,072,784 at
both dates, at cost. . . . . . . . . . . . (30,263) (30,263)
-------- --------
128,344 125,515
-------- ---------
$ 192,112 $ 188,308
========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 2
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share data)
<TABLE>
Three Months Ended
----------------------------------
March 31, 1995 April 1, 1994
-------------- --------------
<S> <C> <C>
Food and beverage revenues. . . . . . . . . $ 49,866 $ 55,146
Games and merchandise revenues. . . . . . . 21,550 19,904
Franchise fees and royalties. . . . . . . . 1,046 1,233
Joint venture income. . . . . . . . . . . . 60 87
-------- --------
72,522 76,370
-------- --------
Costs and expenses:
Costs of sales . . . . . . . . . . . . . 37,401 37,993
Selling, general and administrative
expenses, including related party
expenses of $31 in both periods . . . 11,297 12,090
Depreciation and amortization. . . . . . 5,364 6,284
(Gain) loss on property transactions . . (71) 10
Other operating expenses . . . . . . . . 13,781 14,249
------- -------
67,772 70,626
------- -------
Operating income . . . . . . . . . . . . . 4,750 5,744
------- -------
Other income (expenses):
Interest income, including related
party income of $49 and $47,
respectively . . . . . . . . . . . . . 229 99
Interest expense . . . . . . . . . . . . . (713) (362)
------- -------
(484) (263)
------- -------
Income before income taxes . . . . . . . . . 4,266 5,481
------- -------
Income taxes:
Current expense . . . . . . . . . . . . . . 388 498
Deferred expense. . . . . . . . . . . . . . 1,313 1,558
------- ------
1,701 2,056
------- -------
Net income. . . . . . . . . . . . . . . . . . $ 2,565 $ 3,425
======== ========
Earnings per common and common equivalent share:
Primary:
Net income . . . . . . . . . . . . . . . . $ .21 $ .27
======== ========
Weighted average shares outstanding. . . . 12,049 12,574
======== ========
Fully diluted:
Net income . . . . . . . . . . . . . . . . $ .21 $ .27
======== ========
Weighted average shares outstanding. . . . 12,050 12,578
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 3
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
(Thousands, except per share data)
<TABLE>
Common Treasury
Stock Capital in Deferred Stock
------------------- Excess of Retained Compen- ------------------
Shares Par Value Par Value Earnings sation Shares Cost
------ --------- --------- --------- -------- ------ ------
<S><C> <C> <C> <C> <C> <C> <C>
Balances,
12/30/94 . . . . . . .
14,337 $ 1,434 $156,532 $ 5,012 $ (7,200) 2,073 $(30,263)
Net income . . . . . 2,565
Redeemable preferred
stock accretion . . (25)
Redeemable preferred
stock dividends,
$1.20 per share. . . . (60)
Stock options exercised. .
11 1 68
Tax expense from the
exercise of stock
options and stock grants. (169)
Stock grants forfeited .
(60) (6) (1,737) 1,737
Amortization of deferred
compensation . . . . . . 455
------- ------- -------- ------- ------- ------ ------
Balances,
3/31/95 . . . . . . . . . .
14,288 $ 1,429 $154,694 $ 7,492 $ (5,008) 2,073 $(30,263)
======= ======= ========= ======= ======== ====== =======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
SHOWBIZ PIZZA TIME, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
Three Months Ended
-----------------------------------
March 31, 1995 April 1, 1994
---------------- --------------
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . . . $ 2,565 $ 3,425
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization . . . . 5,364 6,284
Deferred income tax expense . . . . . 1,313 1,558
(Gain) loss on property transactions. . (71) 10
Compensation expense under
stock grant plan . . . . . . . . . . 455 683
Other . . . . . . . . . . . . . . . . . 157 184
Net change in receivables, inventory,
prepaids, payables and
accrued liabilities . . . . . . . . . 825 2,649
------- -------
Cash provided by operations . . . 10,608 14,793
------- -------
Investing activities:
Purchases of property and equipment . . . (4,932) (6,760)
Additions to notes receivable . . . . . . (1,540) (515)
Payments received on notes receivable . . 775 1,007
Change in investments, deferred
charges and other assets. . . . . . . . (426) (635)
------- -------
Cash used in investing activities . (6,123) (6,903)
------- -------
Financing activities:
Payments on line of credit. . . . . . . . (2,000)
Proceeds on line of credit. . . . . . . . 400 4,650
Payments on capital lease obligations . . (13) (10)
Exercise of stock options . . . . . . . . 69 82
Treasury stock acquired . . . . . . . . . (11,485)
Redeemable preferred stock dividends. . . (60) (60)
Other . . . . . . . . . . . . . . . . . . 96 3
------- -------
Cash used in financing activities. . . 492 (8,820)
------- -------
Increase (decrease) in cash
and cash equivalents . . . . . . . . . . 4,977 (930)
Cash and cash equivalents,
beginning of period. . . . . . . . . . . 2,381 4,511
------- -------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . $ 7,358 $ 3,581
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1995 AND APRIL 1, 1994
(Unaudited)
1. Interim financial statements:
In the opinion of management, the accompanying financial statements for
the three month periods ended March 31, 1995 and April 1, 1994 reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the Company's financial condition, results of operations and
cash flows.
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 December 30, 1994. Results of operations for the periods
ended March 31, 1995 and April 1, 1994 are not necessarily indicative of the
results for the year.
2. Earnings per common and common equivalent share:
Earnings per common and common equivalent share were computed based on
the weighted average number of common and common equivalent shares
outstanding during the period. Net income available per common share has
been adjusted for the items indicated below, and earnings per common and
common equivalent share were computed as follows (thousands, except per
share data):
<TABLE>
Three Months Ended
-----------------------------------
March 31, April 1,
1995 1994
---------- -------------
<S> <C> <C>
Net income. . . . . . . . . . . . . . . . . $ 2,565 $ 3,425
Accretion of redeemable preferred stock . . (25) (25)
Redeemable preferred stock dividends. . . . (60) (60)
------- -------
Adjusted income applicable to common and
common equivalent shares. . . . . . . . . $ 2,480 $ 3,340
======= =======
Primary:
Weighted average number of common
shares outstanding. . . . . . . . . . 12,025 12,455
Common stock equivalents:
Stock options. . . . . . . . . . . . 24 119
-------- ---------
Weighted average number of
shares outstanding. . . . . . . . . . 12,049 12,574
======== ========
Earnings per common and
common equivalent share . . . . . . . $ .21 $ .27
======== ========
Fully diluted:
Weighted average number of common
shares outstanding. . . . . . . . . . 12,025 12,455
Common stock equivalents:
Stock options. . . . . . . . . . . . 25 123
-------- --------
Weighted average number of
shares outstanding. . . . . . . . . . 12,050 12,578
======== ========
Earnings per common and common
equivalent share . . . . . . . . . . $ .21 $ .27
======== ========
</TABLE>
<PAGE> 6
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED MARCH 31, 1995 AND APRIL 1, 1994
(Unaudited)
3. Income taxes:
Income taxes have been provided at the expected annual federal
tax rate during the year (35% for 1995) plus an estimated provision
for state income taxes and state franchise taxes.
4. Supplemental cash flow information:
<TABLE>
Three Months Ended
-----------------------------------
March 31, 1995 April 1, 1994
-------------- -------------
(thousands)
<S> <C> <C>
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . $ 791 $ 325
Income taxes . . . . . . . . . . . . . 41 125
</TABLE>
5. Significant transactions:
During the first quarter of 1995, the Company changed its
estimate of the useful lives of certain fixed assets as follows:
<TABLE>
Previous New
Lives Lives
--------- -------
<S> <C> <C>
Land and improvements. . . . . . . . . . . . . . 0-10 0-20
Leasehold improvements . . . . . . . . . . . . . 4-15 4-20
Buildings and improvements . . . . . . . . . . . 4-25 4-25
Furniture, fixtures and equipment. . . . . . . . 2-10 2-15
Property based under capital leases. . . . . . . 10-15 10-15
</TABLE>
During the first quarter of 1995, the Company's Chairman of the
Board and Chief Executive Officer forfeited 60,000 shares of
unvested common stock of the Company previously awarded to him
under the Company's stock grant plan. As a result of this
forfeiture, deferred compensation and capital in excess of par
value were reduced by approximately $1.7 million. Amortization of
the remaining deferred compensation is provided by the straight-
line method over the remaining term of the employment agreement.
<PAGE> 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
First Quarter 1995 Compared to First Quarter 1994
- --------------------------------------------------
Revenues for the first quarter of 1995 decreased 5.0% to $72.5
million from $76.4 million in the first quarter of 1994. The
decline in total revenues is attributable to the sale of the
Company's Monterey's Tex-Mex Cafe restaurants in May 1994. Revenues
from the Company's Monterey's Tex-Mex Cafe restaurants were $4.7
million in the first quarter of 1994. Revenues generated by the
Company's Chuck E. Cheese's restaurants increased to $72.5 million
in the first quarter of 1995 from $71.7 million in 1994, due to the
addition of one Company restaurant in the first quarter of 1995 and
12 Company restaurants in 1994. Comparable store sales from the
Company's Chuck E. Cheese's restaurants for the quarter ended March
31, 1995 declined by 3.2% over the comparable period of the prior
year.
Operating income decreased to $4.8 million in the first quarter
of 1995 from $5.7 million in the first quarter of 1994 primarily
due to the decline in comparable store sales and operating margins
in the Company's Chuck E. Cheese's restaurants. A material portion
of operating costs are fixed resulting in an erosion of operating
margins at lower sales levels.
A summary of the results of operations of the Company as a
percentage of revenues for the two quarters is shown below.
<TABLE>
Three Months Ended
------------------------------------
March 31, 1995 April 1, 1994
-------------- --------------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . . . 100.0% 100.0%
------ ------
Costs and expenses:
Costs of sales . . . . . . . . . . . . 51.6 49.8
Selling, general and administrative . . 15.6 15.8
Depreciation and amortization . . . . . 7.4 8.2
Gain on property transactions . . . . . (.1)
Other operating expenses . . . . . . . 19.0 18.7
------- -------
93.5 92.5
------- -------
Operating income . . . . . . . . . . . . . 6.5% 7.5%
======= =======
</TABLE>
Revenues
--------
Revenues from the Company's Chuck E. Cheese's restaurants
increased by 1.2% to $72.5 million in the first quarter of 1995
from $71.7 million in the first quarter of 1994 primarily due to
new restaurant development which occurred throughout 1994 and the
first quarter of 1995. Comparable store sales of such restaurants
which were open during all of the first quarters of both 1995 and
1994 declined by 3.2% between the two periods. Management believes
that several factors may have contributed to the comparable store
sales decline including increased competition and to a lesser
extent, the impact of newly opened Company restaurants on
comparable store sales of existing restaurants in certain markets.
Menu prices were comparable between the two years.
<PAGE> 8
Costs and Expenses
------------------
Costs and expenses as a percentage of revenues increased to
93.5% in the first quarter of 1995 from 92.5% in the first quarter
of 1994.
Cost of sales increased as a percentage of revenues to 51.6% in
the first quarter of 1995 from 49.8% in the comparable period of
1994. Cost of food, beverage, prize and merchandise items for
Chuck E. Cheese's restaurants as a percentage of restaurant sales
decreased to 18.0% in the first quarter of 1995 from 18.1% in the
first quarter of 1994 primarily due to a reduction in cheese costs.
Labor expenses for Chuck E. Cheese's restaurants as a percentage of
restaurant sales increased to 30.4% during the first quarter of
1995 from 28.1% in the first quarter of 1994 primarily due to the
decline in the comparable store sales and increased labor costs.
Selling, general and administrative expenses as a percentage of
revenues declined to 15.6% in the first quarter of 1995 from 15.8%
in the comparable period of 1994 primarily due to a decrease in
advertising expense and corporate overhead costs.
Depreciation and amortization expenses as a percentage of
revenues decreased to 7.4% in the first quarter of 1995 from 8.2%
in the first quarter of 1994. Preopening expense declined due to
the write-off of all unamortized preopening expense in the fourth
quarter of 1994 resulting from a change in the estimated future
benefit of such expenses. Depreciation expense declined due to the
sale of Monterey's Tex-Mex Cafe restaurants in May 1994 and a
change effected in the first quarter of 1995 in the estimated
useful lives of certain fixed assets based on a review of
historical asset utilization. As a result of this change,
depreciation expense decreased approximately $564,000 in the first
quarter of 1995.
Other operating expenses increased as a percentage of revenues
to 19.0% in the first quarter of 1995 from 18.7% in the first
quarter of 1994 primarily due to the decline in comparable store
sales and the sale of Monterey's Tex-Mex Cafe restaurants that
resulted in increased rent cost as a percentage of revenues. The
increase in rent costs was partially offset by a reduction in
insurance costs.
The Company had a net gain on property transactions of $71,000
in the first quarter of 1995 compared with a loss of $10,000 in the
first quarter of 1994. The Company recognized a gain of $100,000
in the first quarter of 1995 from the sale of certain assets which
had been held for resale. The Company also had a loss on property
transactions of $29,000 in the first quarter of 1995 compared to
$10,000 in the first quarter of 1994 primarily due to the
replacement of certain assets in conjunction with the enhancement
of facilities and entertainment packages of restaurants.
Operating Income
----------------
As a result of the changes in revenues and expenses discussed
above, operating income declined to $4.8 million in the first
quarter of 1995 from $5.7 million in the first quarter of 1994.
Operating income for the first quarter of 1994 included $295,000
from the operations of Monterey's Tex-Mex Cafe restaurants.
Net Income
----------
Interest expense increased to $713,000 in the first quarter of
1995 from $362,000 in the first quarter of 1994 due primarily to an
increase in interest rates since the first quarter of 1994. The
Company's net income decreased to $2.6 million in the first quarter
of 1995 from $3.4 million in the first quarter of 1994 due to the
changes in revenues and expenses discussed above. The Company's
primary and fully diluted earnings per share decreased to $.21 per
share in the first quarter of 1995 from $.27 per share in the first
quarter of 1994.
<PAGE> 9
Financial Condition, Liquidity and Capital Resources
- -----------------------------------------------------
Cash provided by operations decreased to $10.6 million in the
first quarter of 1995 from $14.8 million in the comparable period
of 1994. The Company's primary requirements for cash relate to
planned capital expenditures and debt service. The ability of the
Company to satisfy its capital expenditure and debt service
requirements depends on the availability of sufficient funds for
such purpose. The Company expects that it will satisfy such
requirements from cash provided by operations and funds available
under its revolving loan agreement or from refinancing.
In 1994, the Company's revolving loan agreement was amended to
provide a credit facility of up to $30.8 million due on January 31,
1996. Beginning July 1, 1995, available borrowings under the
credit line reduce each month to $18.3 million by January 1, 1996.
Available borrowings are reduced by outstanding letters of credit
which totaled $1.5 million at March 31, 1995. The Company is
required to comply with certain financial ratio tests during the
term of the revolving loan agreement. The Company is currently
considering refinancing alternatives and believes it will complete
such refinancing prior to the maturity of its current credit
facility. If the Company is unable to complete such refinancing,
it would impair the Company's ability to fully execute its capital
expenditure enhancement plans.
The Company believes that the success of its facility and
entertainment enhancement program in addition to new restaurant
development will continue to be significant factors in its ability
to generate increased revenues over the foreseeable future. The
Company continues to evolve and expand its efforts to significantly
enhance its Chuck E. Cheese's locations. This "repositioning"
program is being carried out on a market by market basis and
involves: an improved exterior identity, a facility upgrade, an
expanded free ball-crawl with tubes and tunnels suspended from or
reaching to the ceiling, and an enhancement of the variety and
number of games and rides offered to its guests. The Company
completed 22 restaurants under this program in 1994. The average
sales growth in these restaurants during the periods following
their repositioning compared to the same periods of the prior year
has increased approximately 20% after giving effect to average sale
trends experienced during the three month periods prior to their
repositioning. The Company has currently completed 13 restaurants
in the Baltimore and Washington, D.C. markets during 1995 and is
underway to reposition an additional 13 restaurants in other
markets. Based on the early sales results of these repositioned
restaurants, the Company currently intends to reposition
approximately 75% of the Company operated restaurants by the end of
1996. The Company anticipates that the repositioning of the
remaining restaurants will cost on the average approximately
$300,000 per restaurant. However, this amount can vary
significantly at a particular restaurant depending on several
factors, including the restaurant's square footage, date of the
most recent remodel and the existing assets at the restaurant. In
the event certain site characteristics considered essential to the
success of a restaurant deteriorate, the Company will consider
closing the restaurant or relocating the restaurant to a more
desirable site.
The Company is implementing several strategies designed to
strengthen the sales vitality of its existing unit base in what
management believes is a competitive market. The Company is
refining its marketing plan; the Company has accelerated its
commitment of capital to existing stores; and the Company is
currently limiting its 1995 new restaurant development to ensure
that the sales vitality of the Company's existing restaurant base
is given immediate priority. The Company believes that certain
operating costs could increase as a result of implementing its
strategies designed to strengthen existing unit sales. If the
declines in comparable store sales of the Company's Chuck E.
Cheese's restaurants experienced since 1992 continue to be
experienced over a longer term, an adverse impact on the Company's
operating margins and results of operations could continue.
<PAGE> 10
The Company is involved in a number of lawsuits. The Company
presently believes that it will continue to incur expense to defend
against and resolve such litigation, and anticipates that it will
satisfy such expense with cash flow from operations.
The Company believes it will realize substantial benefit from
utilization of approximately $72 million in net operating loss
carryforwards to reduce federal income tax liability. The use of
such carryforwards could be limited under certain circumstances,
including substantial ownership changes in the Company's capital
stock. The Company previously adopted an amendment to its Restated
Articles of Incorporation which it intends to enforce on a
prospective basis to prevent changes in ownership of its common
stock that would cause such limitation. The Company also has
investment tax credit, job tax credit and alternative minimum tax
credit carryforwards of approximately $7 million, which are
subject to similar limitations. The investment tax credit and the
job tax credit carryforwards expire in years 1997 through 2002.
Tax credit carryforwards can be utilized by the Company only after
all net operating loss carryforwards have been realized. At March
31, 1995, the Company has an allowance of $1.1 million for the
estimated expiration of tax credit carryforwards in 1997. If the
Company's results of operations continue to decline or fail to
timely achieve levels necessary to utilize the net operating loss
carryforwards, the investment tax credit and job credit
carryforwards and net operating loss carryforwards could expire
prior to utilization, resulting in a charge against income.
<PAGE 11>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
In December 1991, the Company, The Hallwood Group Incorporated,
("Hallwood"), Integra-A Hotel and Restaurant Company ("Integra"),
and their individual directors were named defendants in two
separate but related lawsuits brought in the 14th and 134th
District Courts of Dallas County, Texas. In April 1993, the
Company and its two directors who are also employees of the
Company, were dismissed as defendants in the lawsuit brought in the
134th District Court by an Integra common stockholder. Integra
owned approximately 90% of the outstanding Common Stock of the
Company prior to Integra's distribution of such Common Stock in
December 1988 (the "1988 Distribution") to its shareholders of
record. The plaintiffs in the remaining lawsuit constitute certain
holders of warrants, options and preferred stock of Integra who
seek to serve as representatives of proposed classes of other
holders of such securities. The plaintiffs allege that the Company
has (i) violated Texas statutes related to securities fraud and the
fraudulent transfer of assets, (ii) committed common law fraud, and
(iii) breached fiduciary and other duties to the plaintiffs. As
amended, this suit seeks recision of the 1988 distribution actual
damages in excess of $184 million, and punitive damages in excess
of $500 million. The Company believes that the claims made against
it in this suit are without merit. The Company has entered into a
settlement agreement in the lawsuit that is subject to court
approval.
In May 1994, Hermitage Hotel, Ltd., L. P., filed a lawsuit
against the Company, Hallwood and certain directors of the Company
in the 101st District Court of Dallas County, Texas. The lawsuit
seeks recovery on behalf of plaintiff under theories of successor
liability, tortious interference with contract, fraud, negligent
representation and breach of contract. The plaintiff is seeking
approximately $10.2 million in actual damages, $30 million in
exemplary damages, attorneys' fees and court costs. The Company
believes that the claims made against it in this suit are without
merit. The Company has agreed in principle to the settlement of
this lawsuit subject to final documentation.
In June 1993, the Company was named as a nominal defendant in a
shareholders' derivative action in the 68th Judicial District Court
in Dallas County, Texas in which three of the Company's executive
officers, four of the Company's outside directors and Hallwood were
named defendants. The plaintiffs in this lawsuit have alleged the
individual defendants (i) breached their fiduciary duties to
stockholders, (ii) committed constructive fraud and (iii) unjustly
enriched themselves as a result of alleged violations of federal
securities laws and illegal insider trading between July 13, 1992
and June 11, 1993. The Company has agreed in principle to the
settlement of this lawsuit subject to final documentation and court
approval.
<PAGE 12>
In July 1993, the Company was named a defendant in a lawsuit
brought in the Circuit Court for Davidson County, Nashville,
Tennessee by Third National Bank in Nashville, as Trustee pursuant
to a municipal bond issuance of $6.4 million made in 1980, for
which Integra executed a guaranty. The plaintiff has alleged that
Integra's guaranty of the municipal bond issuance was binding on
successors of Integra and that the Company is the legal successor
to Integra. The plaintiff is seeking to recover a judgement
against the Company in the full amount of its claim against
Integra, which is unspecified, as well as attorneys' fees and
costs. In April 1994, the court dismissed the plaintiff's
complaint for failure to state a claim upon which relief can be
granted. Plaintiff has appealed the dismissal to the 6th Circuit
Court of Appeals. The Company believes the allegations made in
this suit to be without merit and will offer a vigorous defense in
this lawsuit.
In January 1994, the Company was named a defendant in a lawsuit
brought in the Supreme Court of the State of New York, County of
Queens, by Big Six Towers, Inc., in its purported capacity as a
landlord to the Company with regard to a restaurant/entertainment
center location in Queens County, New York which the Company had
contracted to lease from the plaintiff. The plaintiff has alleged
that the Company has breached the lease and is seeking total
damages in excess of $4.0 million against the Company. The Company
believes it validly terminated the lease in question pursuant to an
agreement with the plaintiff and believes the allegations made in
this suit to be without merit and therefore intends to vigorously
defend this lawsuit.
Certain other pending legal proceedings exist against the
Company which the Company believes are not material in amount or
have arisen in the ordinary course of its business.
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.
None to report during quarter for which this report is filed.
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
27--- Financial Data Schedule.
b) Reports on Form 8-K
None filed during 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.
SHOWBIZ PIZZA TIME, INC.
Dated: May 15, 1995 By: /s/Larry G. Page
---------------------
Larry G. Page
Executive Vice President
and Chief Financial Officer
<PAGE> 14
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