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 29, 1996
- 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 29, 1996, an aggregate of 12,233,427 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 29, 1996
(unaudited)and December 29, 1995 . . . . . . . . . . . . . 2
Consolidated statements of earnings for the three
months ended March 29, 1996
and March 31, 1995 (unaudited). . . . . . . . . . . . . . . . 3
Consolidated statement of shareholders' equity
for the three months ended
March 29, 1996 (unaudited) . . . . . . . . . . . . . . . . . . 4
Consolidated statements of cash flows
for the three months ended March 29, 1996
and March 31, 1995 (unaudited) . . . . . . . . . . . . . . . . 5
Notes to consolidated financial statements . . . . . . . . . . . . 6
PAGE 1
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 29, 1996 AND DECEMBER 29, 1995
(Thousands, except share data)
<TABLE>
ASSETS
March 29, December 29,
1996 1995
--------- --------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . $ 11,100 $ 5,589
Accounts receivable, including
receivables from related parties
of $427 and $415, respectively . . . . 2,505 3,327
Current portion of notes receivable,
including receivables from
related parties of $372 and $327,
respectively . . . . . . . . . . . 584 608
Inventories . . . . . . . . . . . . . 4,000 3,589
Prepaid expenses. . . . . . . . . . . 3,280 2,781
Current portion of deferred
tax asset . . . . . . . . . . . . . 5,681 4,147
------- ------
Total current assets. . . . . . . . 27,150 20,041
------- ------
Investments in related parties . . . . 773 761
------- ------
Property and equipment . . . . . . . . 142,325 137,181
Deferred tax asset . . . . . . . . . . 24,395 28,582
------- ------
Other assets:
Notes receivable, less current
portion, including receivables
from related parties of $1,974
and $1,983, respectively . . . . 6,991 7,072
Deferred charges, less
amortization . . . . . . . . . . . 2,357 2,599
Other 2,892 2,774
------ ------
12,240 12,445
------ ------
$ 206,883 $ 199,010
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt . . . . . . . . . . . $ 98 $ 95
Accounts payable and accrued
liabilities. . . . . . . . . . . . . 33,745 29,836
------ ------
Total current liabilities . . . . . 33,843 29,931
------ -------
Long-term debt, less current
portion. . . . . . . . . . . . . . . 34,031 35,753
------ -------
Deferred credits . . . . . . . . . . . 3,562 3,443
------ ------
Other liabilities. . . . . . . . . . . 1,396 1,391
------ -------
Redeemable preferred stock,
$60 par value, redeemable
for $2,974 in 2005. . . . . . . . . . 2,030 2,005
------ ------
Shareholders' equity:
Common stock, $.10 par value;
authorized 30,000,000 shares;
14,306,211 and 14,290,061 shares
issued, respectively . . . . . . . 1,431 1,429
Capital in excess of
par value. . . . . . . . . . . . . 154,219 154,230
Retained earnings. . . . . . . . . . 9,821 4,733
Deferred compensation (3,187) (3,642)
Less treasury shares of 2,072,784
at both dates, at cost. . . . . . . (30,263) (30,263)
------ ------
132,021 126,487
------ ------
$ 206,883 $ 199,010
======== =======
</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 29, 1996 March 31, 1995
--------------- --------------
<S> <C> <C>
Food and beverage revenues . . . . . . . $ 54,276 $ 49,866
Games and merchandise revenues . . . . . 22,684 21,550
Franchise fees and royalties . . . . . . 1,141 1,046
Joint venture income . . . . . . . . . . 95 60
Interest income, including
related party income of $66 and $49,
respectively. . . . . . . . . . . . . . 256 229
------ ------
78,452 72,751
------ ------
Costs and expenses:
Costs of sales . . . . . . . . . . . . 37,460 37,401
Selling, general and administrative
expenses, including related party
expenses of $31 in both periods. . . . . 11,416 11,297
Depreciation and amortization. . . . . . . 5,881 5,364
Interest expense . . . . . . . . . . . . . 891 713
(Gain) loss on property transactions . . . 89 (71)
Other operating expenses . . . . . . . . . 13,944 13,781
------ ------
69,681 68,485
------ ------
Income before income taxes . . . . . . . . . 8,771 4,266
------ ------
Income taxes:
Current expense . . . . . . . . . . . . . 1,114 388
Deferred expense. . . . . . . . . . . . . 2,482 1,313
------ ------
3,596 1,701
------ ------
Net income . . . . . . . . . . . . . . . . . $ 5,175 $ 2,565
======= ========
Earnings per common and common equivalent share:
Primary:
Net income . . . . . . . . . . . . . . . $ .42 $ .21
====== ======
Weighted average shares outstanding . . . 12,206 12,049
====== =======
Fully diluted:
Net income . . . . . . . . . . . . . . . $ .42 $ .21
====== ======
Weighted average shares outstanding . . . 12,251 12,050
====== ======
</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 Capital in Deferred Treasury
Stock Excess of Retained Compen- Stock
Shares Par Value Par Value Earnings sation Shares Cost
------ --------- --------- -------- ------ ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
Dec. 29, 1995. . . . . . . . . .
14,290 $ 1,429 $154,230 $ 4,733 $ (3,642) 2,073 $(30,263)
Net income . . . . . . . . . . .
5,175
Redeemable preferred
stock accretion. . . . . . . . (27)
Redeemable preferred
stock dividends,
$1.20 per share. . . . . . . . (60)
Stock options exercised. . . . .
16 2 159
Tax expense from the exercise
of stock options and
stock grants . . . . . . . . (170)
Amortization of deferred
compensation . . . . . . . . . .
455
Balances,
March 29, 1996 . . . . . . . . .
14,306 $ 1,431 $154,219 $ 9,821 $ (3,187) 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 29, 1996 March 31, 1995
-------------- ---------------
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . $ 5,175 $ 2,565
Adjustments to reconcile
net income to cash
provided by operations:
Depreciation and amortization. . . 5,881 5,364
Deferred income tax expense. . . . 2,482 1,313
(Gain) loss on property transactions . 89 (71)
Compensation expense under
stock grant plan . . . . . . . . . . 455 455
Other. . . . . . . . . . . . . . . . . 119 157
Net change in receivables, inventory,
prepaids, payables and
accrued liabilities. . . . . . . . . 3,821 825
------ ------
Cash provided by operations . . . . . 18,022 10,608
------ ------
Investing activities:
Purchases of property and equipment. . (10,892) (4,932)
Additions to notes receivable. . . . . (623) (1,540)
Payments received on notes receivable. . 728 775
Change in investments, deferred
charges and other assets . . . . . . . (111) (426)
------ ------
Cash used in investing activities . . . (10,898) (6,123)
------ ------
Financing activities:
Payments on line of credit . . . . . . (1,700)
Proceeds on line of credit . . . . . . 400
Payments on capital lease obligations . (19) (13)
Exercise of stock options. . . . . . . . 161 69
Redeemable preferred stock dividends . . (60) (60)
Other . . . . . . . . . . . . . . . . 5 96
------- -------
Cash provided (used) in financing
activities . . . . . . . . . . . . . . . (1,613) 492
------ ------
Increase in cash and cash equivalents . . 5,511 4,977
Cash and cash equivalents,
beginning of period. . . . . . . . . . . 5,589 2,381
------ ------
Cash and cash equivalents,
end of period. . . . . . . . . . . . . $ 11,100 $ 7,358
====== ======
</TABLE>
See notes to consolidated financial statements.
PAGE 5
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 29, 1996 AND MARCH 31, 1995
(Unaudited)
1. Interim financial statements:
In the opinion of management, the accompanying financial
statements for the three month periods ended March 29, 1996 and
March 31, 1995 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 29,
1995. Results of operations for the periods ended March 29, 1996
and March 31, 1995 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 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
Net income . . . . . . . . . . . . . . . . . $ 5,175 $ 2,565
Accretion of redeemable preferred stock. . . (27) (25)
Redeemable preferred stock dividends . . . . (60) (60)
------ ------
Adjusted income applicable to common
and common
equivalent shares . . . . . . . . . . . . . $ 5,088 $ 2,480
======= ======
Primary:
Weighted average number of
common shares outstanding. . . . . . . . 12,105 12,025
Common stock equivalents:
Stock options. . . . . . . . . . . . . . 101 24
------ ------
Weighted average number of
shares outstanding . . . . . . . . . . . 12,206 12,049
====== ======
Earnings per common and common
equivalent share . . . . . . . . . . . . $ .42 $ .21
====== ======
Fully diluted:
Weighted average number of
common shares outstanding. . . . . . . . 12,105 12,025
Common stock equivalents:
Stock options. . . . . . . . . . . . . . 146 25
------- -------
Weighted average number of
shares outstanding . . . . . . . . . . . 12,251 12,050
====== ======
Earnings per common and
common equivalent share. . . . . . . . . $ .42 $ .21
</TABLE>
PAGE 6
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
THREE MONTHS ENDED MARCH 29, 1996 AND MARCH 31, 1995
(Unaudited)
3. Income taxes:
Income taxes have been provided at the expected annual federal
tax rate during the year (35% for 1996) plus an estimated provision
for state income taxes and state franchise taxes.
PAGE 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
First Quarter 1996 Compared to First Quarter 1995
- -------------------------------------------------
A summary of the results of the Company as a percentage of revenues
for the quarter is shown below.
<TABLE>
Three Months Ended
March 29, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . 100.0% 100.0%
------ ------
Costs and expenses:
Costs of sales . . . . . . . . . . 47.7 51.4
Selling, general and
administrative . . . . . . . . 14.6 15.5
Depreciation and amortization 7.5 7.4
Interest expense . . . . . . . . . 1.1 1.0
(Gain) loss on property
transactions . . . . . . . . . .1 (.1)
Other operating expenses . . . . . 17.8 18.9
88.8 94.1
Income before income taxes . . . . . 11.2 5.9
Income taxes . . . . . . . . . . . . 4.6 2.4
Net income . . . . . . . . . . . . . 6.6% 3.5%
</TABLE>
Revenues
--------
Revenues from the Company's Chuck E. Cheese's restaurants
increased 7.8% to $78.5 million in the first quarter of 1996 from
$72.8 million in the first quarter of 1995 primarily due to an
increase of 7.7% in comparable store sales of such restaurants
which were open during all of the first quarters of both 1996 and
1995. Management believes that several factors contributed to the
comparable store sales increase with the primary factor being sales
increases at repositioned stores. Menu prices increased
approximately 3.0% between the two periods.
Costs and Expenses
-----------------
Costs and expenses as a percentage of revenues decreased to
88.8% in the first quarter of 1996 from 94.1% in the first quarter
of 1995.
Cost of sales decreased as a percentage of revenues to 47.7%
in the first quarter of 1996 from 51.4% in the comparable period of
1995. Cost of food, beverage, prize and merchandise items for
Chuck E. Cheese's restaurants as a percentage of restaurant sales
decreased to 17.2% in the first quarter of 1996 from 18.0% in the
first quarter of 1995 primarily due to the menu price increases.
Labor expenses for Chuck E. Cheese's restaurants as a percentage of
restaurant sales decreased to 27.9% during the first quarter of
1996 from 30.4% in the first quarter of 1995 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 declined to 14.6% in the first quarter of 1996 from
15.5% in the comparable period of 1995 primarily due to the
comparable store sales increases and a reduction in advertising
costs between the two periods.
PAGE 8
Depreciation and amortization expenses as a percentage of
revenues increased slightly to 7.5% in the first quarter of 1996
from 7.4% in the first quarter of 1995 due primarily to increased
capital expenditures related to the repositioning of restaurants.
Interest expense increased to approximately $891,000 in the
first quarter of 1996 from $713,000 in the first quarter of 1995
due primarily to increased borrowing since the first quarter of
1995.
The Company provided for a loss on property transactions of
approximately $89,000 in the first quarter of 1996 compared with a
gain of $71,000 in the first quarter of 1995. The Company had a
net 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 $89,000 in the first quarter of
1996 compared to $29,000 in 1995 due to the replacement of
assets arising from the enhancement of facilities and entertainment
packages of restaurants.
Other operating expenses decreased as a percentage of revenues
to 17.8% in the first quarter of 1996 from 18.9% in the first
quarter of 1995 primarily due to 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 $5.2 million in the first
quarter of 1996 compared to $2.6 million in the first quarter of
1995. The Company's primary and fully diluted earnings per share
was $.42 per share in the first quarter of 1996 compared to $.21
per share in the first quarter of 1995.
Financial Condition, Liquidity and Capital Resources
- -----------------------------------------------------
Cash provided by operations increased to $18.0 million in the
first quarter of 1996 from $10.6 million in the comparable period
of 1995. Cash outflow from investing activities for the first
three months of 1996 was $10.9 million. Cash outflow from financing
activities for the first three months of 1996 was $1.6 million.
The Company's primary requirements for cash relate to planned
capital expenditures and debt service. The Company expects that it
will satisfy such requirements from cash provided by operations and
funds available under its loan agreements.
The Company's credit facility of $38 million consists of $33
million in term notes and a $5 million line of credit. The credit
facility includes term notes totaling $18 million with annual
interest of 10.02% maturing in 2001, term notes totaling $10
million with annual interest equal to the London Interbank Offered
Rate ("LIBOR") plus 3.5% maturing in 2000 and term notes of $5.0
million with annual interest equal to LIBOR plus 3.5% maturing in
1997. In addition the Company's $5 million line of credit is due
June 1997 with interest provided at prime plus .5%, or at the
Company's option, LIBOR plus 3%. The Company is required to comply
with certain financial ratio tests during the terms of the loan
agreements.
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
PAGE 9
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 21 and 76 restaurants under this program in 1994 and
1995, respectively, and completed an additional 23 restaurants
during the first quarter of 1996. The Company currently plans to
reposition substantially all Company-operated restaurants by the
end of 1996. The Company anticipates that the repositioning of the
remaining restaurants will cost on the average approximately
$325,000 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 has implemented several strategies, including its
"repositioning" program, to strengthen the sales vitality of its
existing unit base in what management believes is a competitive
market. Through the end of the first quarter of 1996, the Company
has repositioned approximately 53% of all Company operated
restaurants. As a result of its strategies, comparable store sales
increased 2.3% and 7.7% in the fourth quarter of 1995 and the first
quarter of 1996, respectively.
The Company believes it will realize substantial benefit from
utilization of approximately $58 million in net operating loss
carryforwards to reduce its federal income tax liability. Such net
operating loss carryforwards expire from years 1999 through 2002.
Although the use of such carryforwards, could under certain
circumstances, be limited, the Company is presently unaware of the
occurrence of any event which would result in the imposition of
such limitation. In addition, the Company has investment tax
credit, job tax credit and alternative minimum tax credit
carryforwards of approximately $7 million expiring from years 1997
through 2010. Tax credit carryforwards can be utilized by the
Company only after all net operating loss carryforwards have been
realized. If the improvement in the Company's results of
operations does not continue, a portion of the net operating loss
and tax credit carryforwards could expire prior to utilization
resulting in a charge against income. Taxable income for the five
years ending December 29, 1995 was approximately $48 million.
Based on the early results of the repositioned restaurants and the
Company's current plans to reposition substantially all of its
Company-operated restaurants by the end of 1996, the Company
currently projects future taxable income levels sufficient to
realize its net operating loss and tax credit carryforwards prior
to their expiration after considering an allowance of $1.1 million
for the estimated expiration of tax credit carryforwards in 1997.
PAGE 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Certain 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
None.
b Reports on Form 8-K
None filed during the quarter for which this report is
filed.
PAGE 11
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 10, 1996 By:
------------------------------------
Larry G. Page
Executive Vice President
and Chief Financial Officer
PAGE 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> MAR-29-1996
<CASH> 11,100
<SECURITIES> 0
<RECEIVABLES> 3,089
<ALLOWANCES> 46
<INVENTORY> 4,000
<CURRENT-ASSETS> 27,150
<PP&E> 234,523
<DEPRECIATION> 92,198
<TOTAL-ASSETS> 206,883
<CURRENT-LIABILITIES> 33,843
<BONDS> 34,031
<COMMON> 1,431
2,030
0
<OTHER-SE> 130,590
<TOTAL-LIABILITY-AND-EQUITY> 206,883
<SALES> 76,960
<TOTAL-REVENUES> 78,452
<CGS> 37,460
<TOTAL-COSTS> 69,681
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 891
<INCOME-PRETAX> 8,771
<INCOME-TAX> 3,596
<INCOME-CONTINUING> 5,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,175
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
