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 5, 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 July 5, 1998, an aggregate of 18,388,044 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 July 5, 1998 (unaudited)
and January 2, 1998 . . . . . . . . . . . . . . . . . . . . . 2
Unaudited consolidated statements of earnings for the three
months ended July 5, 1998 and June 27, 1997 . . . . . . . . . 3
Unaudited consolidated statements of earnings for the six
months ended July 5, 1998 and June 27, 1997 . . . . . . . . . 4
Unaudited consolidated statement of shareholders' equity
for the six months ended July 5, 1998 . . . . . . . . . . . . 5
Unaudited consolidated statements of cash flows for the
six months ended July 5, 1998 and June 27, 1997 . . . . . . . 6
Notes to consolidated financial statements . . . . . . . . . . . 7
page 1
CEC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
JULY 5, 1998 AND JANUARY 2, 1998
(Thousands, except share data)
ASSETS
<TABLE>
July 5, January 2,
1998 1998
------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $ 13,233 $ 7,275
Accounts receivable, including receivables
from related parties of $240 in 1997. . . . . 3,749 2,996
Current portion of notes receivable, including
receivables from related parties of $199
in 1997 . . . . . . . . . . . . . . . . . . . 48 259
Inventories . . . . . . . . . . . . . . . . . . 4,805 3,975
Prepaid expenses. . . . . . . . . . . . . . . . 3,096 3,550
Current portion of deferred tax asset . . . . . 5,094 7,237
----- -----
Total current assets . . . . . . . . . . . . . 30,025 25,292
----- -----
Investments in related parties . . . . . . . . . 668
Property and equipment . . . . . . . . . . . . . 202,784 187,433
------- -------
Deferred tax asset . . . . . . . . . . . . . . . 3,042 5,988
------- ------
Other assets:
Notes receivable, less current portion,
including receivables from related
parties of $456 and $2,516, respectively . . 492 2,579
Other. . . . . . . . . . . . . . . . . . . . . . 7,108 4,408
------ ------
7,600 6,987
------ ------
$ 243,451 $ 226,368
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . $ 9,379 $ 3,376
Accounts payable and accrued liabilities. . . . 30,209 35,665
------ -------
Total current liabilities. . . . . . . . . . 39,588 39,041
------ ------
Long-term debt, less current portion . . . . . . 16,137 23,826
------ ------
Deferred credits . . . . . . . . . . . . . . . . 4,089 4,052
------ ------
Other liabilities. . . . . . . . . . . . . . . . 1,300 1,300
------ ------
Redeemable preferred stock, $60 par value,
redeemable for $2,974 in 2005. . . . . . . . . 2,262 2,211
------ ------
Shareholders' equity:
Common stock, $.10 par value; authorized
100,000,000 shares; 22,215,720 and
21,912,277 shares issued, respectively . . . . 2,222 2,191
Capital in excess of par value. . . . . . . . . 163,569 158,696
Retained earnings . . . . . . . . . . . . . . . 61,621 42,768
Deferred compensation . . . . . . . . . . . . . (1,900) (2,280)
Less treasury shares of 3,827,676 at both
dates, at cost . . . . . . . . . . . . . . . . (45,437) (45,437)
------ ------
180,075 155,938
------- -------
$243,451 $226,368
======== ========
</TABLE>
See notes to consolidated financial statements.
page 2
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share data)
<TABLE>
Three Months Ended
--------------------
July 5, 1998 June 27,1997
------------ ------------
<S> <C> <C>
Food and beverage revenues . . . . . . . . . . $ 56,810 $ 56,585
Games and merchandise revenues . . . . . . . . 31,050 26,261
Franchise fees and royalties . . . . . . . . . 809 777
Interest income, including related party
income of $13 and $50, respectively . . . . 232 296
Joint venture income . . . . . . . . . . . . . 112
------ ------
88,901 84,031
------ ------
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . 41,085 39,388
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . . 13,136 12,321
Depreciation and amortization . . . . . . . . 6,769 6,327
Interest expense. . . . . . . . . . . . . . 680 727
Other operating expenses. . . . . . . . . . . 15,419 15,344
------ ------
77,089 74,107
------ ------
Income before income taxes . . . . . . . . . . 11,812 9,924
------- ------
Income taxes:
Current expense . . . . . . . . . . . . . . . 2,149 1,092
Deferred expense. . . . . . . . . . . . . . . 2,322 2,927
------ ------
4,471 4,019
------ ------
Net income . . . . . . . . . . . . . . . . . . $ 7,341 $ 5,905
====== =======
Net income applicable to common shares . . . . $ 7,256 $ 5,821
====== ======
Earnings per share:
Basic:
Net income . . . . . . . . . . . . . . . . . $ .40 $ .31
====== ======
Weighted average shares outstanding . . . . . 18,240 18,478
====== ======
Diluted:
Net income . . . . . . . . . . . . . . . . . $ .39 $ .31
====== ======
Weighted average shares outstanding . . . . . 18,820 18,908
====== ======
</TABLE>
See notes to consolidated financial statements.
page 3
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share data)
<TABLE>
Six Months Ended
------------------------
July 5, 1998 June 27, 1997
------------- ------------
<S> <C> <C>
Food and beverage revenues . . . . . . . . . . $ 127,907 $ 119,039
Games and merchandise revenues . . . . . . . . 63,975 54,087
Franchise fees and royalties . . . . . . . . . 1,679 1,698
Interest income, including related party
income of $60 and $107, respectively . . . . 369 524
Joint venture income . . . . . . . . . . . . . 20 277
------ ------
193,950 175,625
------ ------
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . 88,248 81,582
Selling, general and administrative
expenses, including related party
expense of $31 in 1997 . . . . . . . . . . . 28,111 26,042
Depreciation and amortization . . . . . . . . 13,412 12,644
Interest expense. . . . . . . . . . . . . . . 1,379 1,417
Other operating expenses. . . . . . . . . . . 31,773 30,683
------- -------
162,923 152,368
------- -------
Income before income taxes . . . . . . . . . . 31,027 23,257
------- -------
Income taxes:
Current expense. . . . . . . . . . . . . . . 6,914 2,559
Deferred expense . . . . . . . . . . . . . . 5,089 6,860
------ ------
12,003 9,419
------ ------
Net income . . . . . . . . . . . . . . . . . . $19,024 $13,838
======= =======
Net income applicable to common shares . . . . $18,853 $13,668
======= =======
Earnings per share:
Basic:
Net income . . . . . . . . . . . . . . . . . $ 1.04 $ .74
====== ======
Weighted average shares outstanding . . . . . 18,143 18,453
====== ======
Diluted:
Net income . . . . . . . . . . . . . . . . . $ 1.01 $ .72
====== ======
Weighted average shares outstanding . . . . . 18,700 18,862
====== ======
</TABLE>
See notes to consolidated financial statements.
Page 4
CEC ENTERTAINMENT, 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, January 2, 1998 . .
21,912 $ 2,191 $158,696 $ 42,768 $(2,280) 3,828 $(45,437)
Net income . . . . . . . . .
19,024
Redeemable preferred stock accretion. . (52)
Redeemable preferred stock dividends,
$2.40 per share. . . . . . (119)
Stock options exercised. . .
300 30 2 ,110
Tax benefit from the exercise of stock
options and stock grants . .
2,667
Stock issued under 401(k) plan . .
4 1 96
Amortization of deferred compensation . . 380
Balances, July 5, 1998 . . . .
------- ------ -------- ------- ------- ----- --------
22,216 $2,222 $163,569 $61,621 $(1,900) 3,828 $(45,437)
======= ====== ======== ======= ======= ===== =======
</TABLE>
See notes to consolidated financial statements.
Page 5
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
Six Months Ended
---------------------------------
July 5, 1998 June 27, 1997
------------- -------------
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . . . . $19,024 $13,838
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization. . . . . . . . 13,412 12,644
Deferred tax expense . . . . . . . . . . . . 5,089 6,860
Compensation expense under stock grant
plan. . . . . . . . . . . . . . . . . . . . 380 910
Other. . . . . . . . . . . . . . . . . . . . 53 163
Net change in receivables, inventory,
prepaids, payables and
accrued liabilities. . . . . . . . . . . . (4,142) 1,903
------ ------
Cash provided by operations. . . . . 33,816 36,318
------ ------
Investing activities:
Purchases of property and equipment. . . . . (26,974) (21,525)
Additions to notes receivable. . . . . . . . (235) (759)
Payments received on notes receivable. . . . 1,923 1,626
Increase in investments, deferred
charges and other assets. . . . . . . . . . (3,003) (668)
------ ------
Cash used in investing
activities . . . . . . . . . . . . (28,289) (21,326)
------ ------
Financing activities:
Payments on debt and line of credit. . . . . (1,686) (7,456)
Exercise of stock options . . . . . . . . . 2,140 1,725
Redeemable preferred stock dividends . . . . (119) (119)
Other. . . . . . . . . . . . . . . . . . . . 96 133
------ ------
Cash provided by (used in)
financing activities. . . . . . . . 431 (5,717)
------ ------
Increase in cash and cash equivalents . . . . 5,958 9,275
Cash and cash equivalents, beginning
of period. . . . . . . . . . . . . . . . . . 7,275 3,402
------ ------
Cash and cash equivalents, end of period . . . $ 13,233 $ 12,677
====== ======
</TABLE>
See notes to consolidated financial statements.
page 6
CEC ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JULY 5,1998 AND JUNE 27, 1997
(Unaudited)
1. Interim financial statements:
In the opinion of management, the accompanying financial
statements for the periods ended July 5, 1998 and June 27, 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 July 5, 1998 and
June 27, 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):
<TABLE>
Three Months Ended Six Months Ended
------------------ ----------------
July 5, June 27, July 5, June 27,
1998 1997 1998 1997
------ ------ ------ -------
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . $7,341 $ 5,905 $19,024 $13,838
Accretion of redeemable
preferred stock . . . . . . (26) (25) (52) (51)
Redeemable preferred stock
dividends . . . . . . . . . (59) (59) (119) (119)
----- ----- ----- -----
Adjusted income applicable to
common and potential common
shares . . . . . . . . . . . $ 7,256 $ 5,821 $18,853 $13,668
======= ======= ======= =======
Basic:
Weighted average common shares
outstanding. . . . . . . 18,240 18,478 18,143 18,453
====== ====== ====== ======
Earnings per common share. $ .40 $ .31 $ 1.04 $ .74
====== ====== ====== ======
Diluted:
Weighted average common shares
outstanding. . . . . . . 18,240 18,478 18,143 18,453
Potential common shares for
stock options
and stock grants . . . 580 430 557 409
------ ------ ------ ------
Weighted average shares
outstanding. . . . . . . 18,820 18,908 18,700 18,862
====== ====== ====== ======
Earnings per common and potential
common share . . . . . $ .39 $ .31 $ 1.01 $ .72
====== ====== ======= ======
</TABLE>
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
Second Quarter 1998 Compared to Second Quarter 1997
- ---------------------------------------------------
A summary of the results of operations of the Company as a
percentage of revenues for the second quarters of 1998 and 1997 is
shown below.
<TABLE>
Three Months Ended
------------------------------
July 5, 1998 June 27, 1996
------------ -------------
<S> <C> <C>
Revenue. . . . . . . . . . . . . 100.0% 100.0%
----- -----
Costs and expenses:
Cost of sales. . . . . . . . . 46.2 46.9
Selling, general and administrative 14.8 14.6
Depreciation and amortization 7.6 7.5
Interest expense . . . . . . . .8 .9
Other operating expenses 17.3 18.3
----- -----
86.7 88.2
----- -----
Income before income taxes 13.3 11.8
Income tax expense . . . . . . . 5.0 4.8
----- -----
Net income . . . . . . . . . . . 8.3% 7.0%
===== =====
</TABLE>
Revenues
--------
Revenues increased to $88.9 million in the second quarter of
1998 from $84.0 million in the second quarter of 1997 due to the
addition of seven new restaurants and eight restaurants acquired
from franchisees or joint venture partners between the periods.
Comparable store sales of the Company's Chuck E. Cheese's
restaurants which were open during all of the second quarters of
both 1998 and 1997 declined 0.6%. Management believes that sales
comparisons during the second quarter were unfavorably impacted by
holidays and weather conditions. Menu prices increased
approximately 2.1% between the periods.
Costs and Expenses
-------------------
Costs and expenses as a percentage of revenues decreased to
86.7% in the second quarter of 1998 from 88.2% in the second quarter
of 1997.
Cost of sales decreased as a percentage of revenues to 46.2% in
the second quarter of 1998 from 46.9% in the comparable period of
1997. Cost of food, beverage, prize and merchandise items as a
percentage of restaurant sales decreased to 15.9% in the second
quarter of 1998 from 16.5% in the second quarter of 1997 primarily
due to an increase in menu prices, reduced costs of certain food and
beverage products and an increase in game sales, partially offset by
higher cheese costs. Restaurant labor expenses as a percentage of
restaurant sales remained constant at 27.5% during both the second
quarters of 1998 and 1997.
Selling, general and administrative expenses as a percentage of
revenues increased slightly to 14.8% in the second quarter of 1998
from 14.6% in the second quarter of 1997 due primarily to an
increase in advertising expenses which was partially offset by a
decline in corporate overhead costs.
Depreciation and amortization expenses as a percentage of
revenues increased slightly to 7.6% in the second quarter of 1998
from 7.5% in the second quarter of 1997 primarily due to the
addition of new restaurants with higher depreciation expense than
existing restaurants.
Other operating expenses decreased as a percentage of revenues
to 17.3% in the second quarter of 1998 from 18.3% in the second
quarter of 1997 primarily due to a decline in insurance costs and,
to a lesser extent, a decline in rent expense as a percentage of
revenues.
page 8
Net Income
-----------
The Company had net income of $7.3 million in the second
quarter of 1998 compared to $5.9 million in the second quarter of
1997 due to the changes in revenues and expenses discussed above.
The Company's diluted earnings per share was $.39 per share in the
second quarter of 1998 compared to $.31 per share in the second
quarter of 1997.
First Six Months of 1998 Compared to First Six Months of 1997
- -------------------------------------------------------------
A summary of the results of operations of the Company as a
percentage of revenues for the first six months of 1998 and 1997 is
shown below.
<TABLE>
Six Months Ended
------------------------------
July 5, 1998 June 27, 1997
-------------- ---------------
<S> <C> <C>
Revenue. . . . . . . . . . . . . 100.0% 100.0%
------ ------
Costs and expenses:
Cost of sales. . . . . . . . . 45.5 46.5
Selling, general and administrative 14.5 14.8
Depreciation and amortization 6.9 7.2
Interest expense . . . . . . . .7 .8
Other operating expenses 16.4 17.5
------- ------
84.0 86.8
Income before income taxes 16.0 13.2
Income tax expense . . . . . . . 6.2 5.3
------- -------
Net income . . . . . . . . . . . 9.8% 7.9%
======= ======
</TABLE>
Revenues
---------
Revenues increased to $194.0 million in the first six months of
1998 from $175.6 million in the first six months of 1997 primarily
due to an increase of 5.1% 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 1998 and 1997. In addition, the
Company opened seven new restaurants and acquired eight 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 1.9% between the periods.
Costs and Expenses
-------------------
Costs and expenses as a percentage of revenues decreased to
84.0% in the first six months of 1998 from 86.8% in the first six
months of 1997.
Cost of sales decreased as a percentage of revenues to 45.5% in
the first six 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 six
months of 1998 from 16.5% in the first six months of 1997 primarily
due to an increase in menu prices, reduced costs of certain food and
beverage products and an increase in games sales, partially offset
by higher cheese costs. Restaurant labor expenses as a percentage
of restaurant sales decreased to 26.6% during the first six months
of 1998 from 27.1% in the first six 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 14.5% in the first six months of 1998 from
14.8% in the comparable period of 1997 primarily due to a reduction
in corporate overhead costs.
Depreciation and amortization expenses as a percentage of
revenues declined to 6.9% in the first six months of 1998 from 7.2%
in the first six months of 1997 primarily due to the increase in
comparable store sales.
page 9
Other operating expenses decreased as a percentage of
revenues to 16.4% in the first six months of 1998 from 17.5% in the
first six months of 1997 primarily due to a decrease in insurance
costs, 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 $19.0 million in the first six
months of 1998 compared to $13.8 million in the first six months of
1997 due to the changes in revenues and expenses discussed above.
The Company's diluted earnings per share was $1.01 per share in the
first six months of 1998 compared to $.72 per share in the first six
months of 1997.
Financial Condition, Liquidity and Capital Resources
- -----------------------------------------------------
Cash provided by operations decreased to $33.8 million in the
first six months of 1998 from $36.3 million in the comparable period
of 1997. Cash outflows from investing activities for the first six
months of 1998 were $28.3 million. Cash inflows from financing
activities for the first six months of 1998 were $431,000. 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 six months of 1998, the
Company opened five new restaurants, acquired five restaurants from
franchisees or joint venture partners, expanded six restaurants and
completed Phase II upgrades in 43 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. As of August 14, 1998, the Company completed this
plan with the purchase of 882,500 shares of its common stock in the
open market for an aggregate purchase price of approximately $20
million. In July 1998, the Company 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 August 14, 1998, the
Company has purchased shares of its common stock under this plan at
an aggregate purchase price of approximately $4.0 million.
The Company's total credit facility of $39.7 million consists
of $24.7 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 $6.7 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 July 5, 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
On June 25, 1998, at the Company's annual meeting of
shareholders, the Company's shareholders re-elected Richard M.
Frank, Michael H. Magusiak, and Walter Tyree to serve the Company as
directors. The following votes were cast with respect to the
election of these directors:
For Withheld
------ -------------
Richard M. Frank 15,496,946 819,243
Michael H. Magusiak 15,497,069 819,130
Walter Tyree 15,496,465 819,734
Tim T. Morris, Louis P. Neeb, Cynthia I. Pharr and Raymond El
Wooldridge's terms of office as directors of the Company continued
after the meeting. The shareholders also approved an amendment to
the Restated Articles of Incorporation to change the name of the
corporation from ShowBiz Pizza Time, Inc. to CEC Entertainment, Inc.
The votes cast with respect to this proposal to authorize the
amendment to the Restated Articles of Incorporation were as follows:
For Against Abstain No Vote
----- ------- ------- -------
16,268,523 27,858 19,818 0
The shareholders also approved an amendment to the Restated
Articles of Incorporation to increase the authorized number of
shares of its Common Stock from 50,000,000 shares to 100,000,000
shares. The votes cast with respect to this proposal to authorize
an amendment to the Restated Articles of Incorporation were as
follows:
For Against Abstain No Vote
----- --------- --------- ---------
13,505,583 2,707,247 40,369 0
Item 5. Other Information.
None to report during quarter for which this report is filed.
page 12
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
3(a) Certificate of Amendment to the Restated Articles
of Incorporation of the Company.
10(a)(1) Second Modification and Extension Agreement in the
stated amount of $15,000,000, dated June 14, 1998
between Bank One, Texas, N.A.and the Company.
10(a)(2) Second Restated Revolving Credit Note, in the
stated amount of $15,000,000.00,dated June 14,
1998 between Bank One, Texas, N.A.
and the Company.
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 14, 1998 By: /s/ Larry G. Page
Larry G. Page
Executive Vice President
and Chief Financial Officer
page 14
EXHIBIT INDEX
Exhibit
Number Description Page No.
- ------- ----------- --------
3(a) Certificate of Amendment to the Restated
Articles of Incorporation
of the Company.
10(a)(1) Second Modification and Extension Agreement in the
stated amount of $15,000,000, dated June 14, 1998
between Bank One, Texas, N.A.
and the Company.
10(a)(2) Second Restated Revolving Credit Note, in the
stated amount of $15,000,000.00, dated June 14,
1998 between Bank One, Texas, N.A.
and the Company.
EX-27 Financial Data Schedule
page 15
Exhibit 3(a)
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
SHOWBIZ PIZZA TIME, INC.
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing
under and by virtue of the laws of the State of Kansas, does hereby
certify:
FIRST: That at a meeting of the Board of Directors of said
corporation on April 16, 1998, resolutions were duly adopted
setting forth proposed amendments to the Restated Articles of
Incorporation of said corporation, declaring their advisability,
and further declaring that said amendments be submitted for
approval at the annual meeting of stockholders to be held on June
25, 1998, with the recommendation by the Board of Directors that
the stockholders approve said amendments. The proposed amendments
set forth in said resolutions of the Board of Directors are as
follows:
Amendment No. 1 to Restated Articles of Incorporation.
------------------------------------------------------
ARTICLE FIRST of the Restated Articles of Incorporation shall
be amended to read in its entirety as follows:
FIRST. The name of the corporation is:
CEC Entertainment, Inc.
Amendment No. 2 to Restated Articles of Incorporation.
------------------------------------------------------
The first paragraph of ARTICLE FOURTH of the Restated Articles
of Incorporation of the Corporation shall be amended to read in its
entirety as follows:
FOURTH. The total number of shares of stock that
the corporation shall have authority to issue is One
Hundred Million Five Hundred Forty-Nine Thousand Five
Hundred Seventy (100,549,570) shares, which shall be
divided into three (3) classes as follows: (I) Forty-Nine
Thousand Five Hundred Seventy (49,570) shares of
Class A Preferred Stock, of the par value of Sixty
Dollars ($60.00) each (hereinafter "Preferred A Shares");
(ii) Five Hundred Thousand (500,000) shares of Class B
Preferred Stock, of the par value of One Hundred Dollars
($100.00) each (hereinafter "Preferred B Shares"); and
One Hundred Million (100,000,000) shares of Common Stock,
of the par value of Ten Cents ($0.10) each (hereinafter
"Common Shares"). The designations, powers, preferences,
and rights of each class, and the qualifications,
limitations, or restrictions thereof, shall be as set
forth in this ARTICLE FOURTH.
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the annual meeting of the stockholders of said
corporation was duly called and held on June 25, 1998, upon notice
in accordance with Section 17-6512 of the Kansas General
Corporation Code, at which meeting the necessary number of shares
as required by statute were voted in favor of said amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of Section 17-6602 of the Kansas General
Corporation Code.
IN WITNESS WHEREOF, ShowBiz Pizza Time, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be
signed by Richard M. Frank, its Chairman of the Board and Chief
Executive Officer, and Marshall R. Fisco, Jr., its Secretary, and
each of them does hereby affirm and acknowledge, under penalty of
perjury, that to the best of their knowledge this Certificate of
Amendment is the act and deed of said corporation and that the
facts stated herein are true.
DATED: June 25, 1998
SHOWBIZ PIZZA TIME, INC.
[SEAL]
By: /s/ Richard M. Frank
------------------------
Richard M. Frank
Chairman of the Board and
Chief Executive Officer
ATTEST:
/s/ Marshall R. Fisco, Jr.
- --------------------------
Marshall R. Fisco, Jr.
Secretary
THE STATE OF TEXAS s
S
COUNTY OF DALLAS s
BEFORE ME, the undersigned authority, on this day personally
appeared Richard M. Frank, and Marshall R. Fisco, Jr., Chairman of
the Board and Chief Executive Officer, and Secretary, respectively,
of ShowBiz Pizza Time, Inc., a Kansas corporation, known to me to
be the persons and officers whose names are subscribed to the
foregoing instrument, and acknowledged to me that they executed the
same for the purposes and consideration therein expressed, in the
capacity therein stated and as the act and deed of said
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 25th day of
June, 1998.
-----------------------
Notary Public in and for
the State of Texas
My commission expires:
- ---------------------
Exhibit 10(a)(1)
SECOND MODIFICATION AND EXTENSION AGREEMENT
-------------------------------------------
Date: Effective June 14, 1998
Bank One: BANK ONE, TEXAS, NATIONAL
ASSOCIATION, a national banking
association
Bank One's Address: 1717 Main Street, 3rd Floor
Dallas, Texas 75201
Company: SHOWBIZ PIZZA TIME, INC., a
Kansas corporation
Company's Address: 4441 W. Airport Freeway
Irving, Texas 75062
R E C I T A L S:
A. Bank One and Company entered into a loan evidenced, inter
alia, by the following documents:
1. Loan Agreement dated as of June 27, 1995 by and between
Company and Bank One for an aggregate loan in the amount
of $5,000,000.
2. Revolving Credit Note dated June 27, 1995 in the original
principal amount of $5,000,000 signed by Company and
payable to Bank One.
B. Bank One and Company modified the Loan to increase its
principal balance to $15,000,000, extend the maturity date to
June 15, 1998 and make certain other changes in the terms and
conditions of the Loan evidenced, inter alia, by the following
documents:
1. Modification and Extension Agreement dated August 1, 1996
by and between Company and Bank One for an aggregate loan
in the amount of $15,000,000.
2. Restated Revolving Credit Note dated August 1, 1996 in
the original principal amount of $15,000,000 signed by
Company and payable to Bank One.
C. Bank One and Company modified the Loan to allow for transfer
of certain assets and make certain other changes in the terms
and conditions of the Loan evidenced, inter alia, by the
following documents:
1. Supplemental Agreement ("Supplemental Agreement") dated
as of September 29, 1997 by and between Company and Bank
One.
2. Guarantee Agreement - ShowBiz Nevada, Inc. dated as of
September 29, 1997 made by ShowBiz Nevada, Inc. in favor
of Bank One.
3. Guarantee Agreement - ShowBiz Merchandising, Inc. dated
as of September 29, 1997 made by ShowBiz Merchandising,
Inc. in favor of Bank One.
4. Guarantee Agreement - SPT Properties Company, Inc. dated
as of September 29, 1997 made by SPT Properties Company,
Inc. in favor of Bank One.
5. Guarantee Agreement - ShowBiz Cayman Islands, Inc. dated
as of September 29, 1997 made by ShowBiz Cayman Islands,
Inc. in favor of Bank One.
D. Bank One is the owner and holder of the Note, Loan Agreement,
and other Loan Documents.
E. Company has requested that Bank One extend the Note's maturity
date to June 1, 2000 and modify certain other terms of the
Note or Loan Documents and Bank One is willing to do so on the
terms set out in this Agreement.
IT IS AGREED:
1. Definitions. The definition of terms used in the Loan
Agreement and Supplemental Agreement shall have the same meanings
in this Agreement unless otherwise defined. The term "Loan
Documents" in Section 1.1 of the Loan Agreement shall be amended to
include all the documents described above and described in such
documents, this Agreement and the Second Restated Revolving Credit
Note.
2. Principal Balance. Bank One and Company acknowledge that
as of the date hereof the outstanding principal balance of the Note
is Zero Dollars ($-0-).
3. Extension of Maturity of Note and Loan Documents. The
definition of Initial Term in Section 1.1 of the Loan Agreement
shall be amended as follows:
"Initial Term" shall mean the period from the Effective Date
to and including June 1, 2000.
4. Restated Note. The Note shall be restated in a form
entitled "Second Restated Revolving Credit Note" which shall state
its original principal amount as being Fifteen Million and No/100
Dollars ($15,000,000.00), a copy of the form is attached as Exhibit
"A". The terms "Note(s)" or "Revolving Credit Note(s)" shall
include the Second Restated Revolving Credit Note for all purposes
and in all Loan Documents. Bank One shall retain the written
instrument evidencing the original Revolving Credit Note dated June
27, 1995 in the original principal amount of $5,000,000 and the
original Restated Revolving Credit Note dated August 1, 1996 in the
original principal amount of $15,000,000, both of which shall be
deemed to be superseded by the written instrument evidencing the
Second Restated Revolving Credit Note dated on even date with this
Agreement in the original principal amount of $15,000,000. Each
such note shall be marked "Superseded by the Written Instrument
Evidencing the Second Restated Revolving Credit Note dated
effective June 14, 1998" and copies of such notes will be delivered
to Company contemporaneously with the execution of this Agreement.
5. Applicable Margin. The definition of "Applicable Margin"
in Section 1.1 of the Loan Agreement shall be amended as follows:
"Applicable Margin" shall mean, at all times during the
applicable periods or portions thereof (I) unless an
Event of Default has occurred and is continuing, the
following listed percentage rates per annum with respect
to Prime Rate Loans and LIBO Rate Loans for the
applicable ratio of (A) Consolidated Indebtedness to (B)
the difference equal to EBITDA minus income and profit
taxes:
Ratio Prime Rate Loans LIBO Rate Loans
----- ---------------- ---------------
Greater than 2.00 0.50% 2.50%
1.50 to 1.99 0.25% 2.00%
1.00 to 1.49 0.00% 1.50%
0.75 to 0.99 (0.25%) 1.25%
Less than 0.74 (0.50%) 1.00%
and (ii) during the continuance of an Event of Default
and prior to the earlier of Maturity or the expiration of
the applicable Interest Period, if any, (A) 2.50% per
annum with respect to Prime Rate Loans and (B) 5.00% per
annum with respect to LIBO Rate Loans. The ratio of (A)
Consolidated Indebtedness to (B) the difference equal to
EBITDA minus income and profit taxes, shall be determined
at the end of each calendar quarter for the immediately
preceding four consecutive calendar quarters.
6. Consolidated Fixed Charge Coverage Ratio. The
Consolidated Fixed Charge Coverage Ratio requirements in Section
7.1 of the Loan Agreement shall be amended as follows:
SECTION 7.1. Consolidated Fixed Charge Coverage Ratio.
Suffer or permit the Consolidated Fixed Charge Coverage
Ratio as of the last day of any quarterly accounting
period (commencing with such accounting period ending on
or about June 30, 1998) to be less than 2.00 to 1.00 for
the four (4) consecutive quarterly accounting periods
then ended.
7. Minimum Net Worth. The Consolidated Net Worth
requirements in Section 7.2 of the Loan Agreement shall be amended
as follows:
SECTION 7.2. Minimum Net Worth. Suffer or permit at any
time on or after January 2, 1998, Consolidated Net Worth
to be less than the sum of (A) $145,000,000 plus (B) 75%
of Consolidated Net Income (provided however that
Consolidated Net Income for any period shall never be
less than zero for purposes of this calculation) plus
100% of the net cash proceeds of all sales of equity
securities by Company.
8. Maximum Indebtedness. The Consolidated Indebtedness
requirements in Section 7.3 of the Loan Agreement shall be amended
as follows:
SECTION 7.3 Maximum Indebtedness. Suffer or permit
Consolidated Indebtedness as of the last day of any
quarterly accounting period (commencing with such
accounting period ending on or about June 30, 1998) to
exceed 175% of EBITDA for the four (4) consecutive
quarterly accounting periods then ended.
9. Consolidated Debt Service Ratio. The Consolidated Debt
Service Ratio requirements in Section 7.4 of the Loan Agreement (as
added by the Modification and Extension Agreement dated August 1,
1996) shall be amended as follows:
SECTION 7.4. Consolidated Debt Service Ratio. Suffer or
permit the Consolidated Debt Service Ratio as of the last
day of any quarterly accounting period (commencing with
such accounting period ending on or about June 30, 1998),
to be less than 1.50 to 1 for the four (4) consecutive
quarterly accounting periods then ended.
10. Amendment of Supplemental Agreement. Section 3 of the
Supplemental Agreement shall be amended as follows:
SECTION 3. Subsidiary Indebtedness. Except for the
Subsidiary Guarantees, the Company will not permit any of the
Subsidiary Guarantors to create, assume, incur, guarantee or
otherwise become liabile in respect for any Indebtedness (as
defined in the Note Purchase Agreements) other than
Indebtedness of such Subsidiary Guarantors owing to the
Company.
11. Arbitration. Bank One and Company agree that upon the
written demand of either party, made before the institution of any
legal proceedings, all disputes, claims and controversies between
them, whether individual, joint, or class in nature, arising from
the Note, any Loan Document or otherwise, including without
limitation contract disputes and tort claims, shall be resolved by
binding arbitration pursuant to the Commercial Rules of the
American Arbitration Association. Any arbitration proceeding held
pursuant to this arbitration shall be conducted in the city nearest
Company's address having an AAA regional office, or at any other
place selected by mutual agreement of the parties. No act to take
or dispose of any collateral shall constitute a waiver of this
arbitration agreement or be prohibited by this arbitration
agreement. This arbitration provision shall not limit the right of
either party during any dispute, claim or controversy to seek, use,
and employ ancillary, or preliminary rights and/or remedies,
judicial or otherwise, for the purposes of realizing upon,
preserving, protecting, foreclosing upon or proceeding under
forcible entry and detainer for possession of, any real or personal
property, and any such action shall not be deemed an election of
remedies. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act, or exercise of any right or
remedy concerning any collateral, including any claim to rescind,
reform, or otherwise modify any agreement relating to the
collateral, shall also be arbitrated; provided, however that no
arbitrator shall have the right or the power to enjoin or restrain
any act of either party. Judgment upon any award rendered by any
arbitrator may be entered in any court having jurisdiction.
Nothing in this arbitration provision shall preclude either party
from seeking equitable relief from a court of competent
jurisdiction. The statute of limitations, estoppel, waiver, laches
and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration
proceeding, and the commencement of an arbitration proceeding shall
be deemed the commencement of any action for these purposes. The
Federal Arbitration Act (Title 9 of the United States Code) shall
apply to the construction, interpretation, and enforcement of this
arbitration provision.
THE AUTHORIZED REPRESENTATIVES OF COMPANY AND BANK ONE HAVE
SIGNED THEIR INITIALS BELOW TO EVIDENCE COMPANY'S AND BANK ONE'S
ACKNOWLEDGMENT OF THIS ARBITRATION CLAUSE.
COMPANY: ---------------- BANK ONE: -------------------
12. Jury Waiver. COMPANY AND BANK ONE (BY ITS ACCEPTANCE
HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG COMPANY AND BANK ONE ARISING OUT OF OR
IN ANY WAY RELATED TO THIS DOCUMENT OR ANY OTHER LOAN DOCUMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK ONE TO PROVIDE THE
FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.
13. Acknowledgment of Indebtedness. Company acknowledges
that as of the date of this Agreement, it is well and truly
indebted to Bank One pursuant to the terms of the Note, as modified
hereby. Company hereby promises to pay to Bank One the
indebtedness evidenced by the Note in accordance with the terms
thereof, as modified hereby, and shall observe, comply with, and
perform all of the obligations, terms, and conditions under or in
connection with the Note and all other Loan Documents.
14. Ratification of Loan Documents. Except as provided
herein, the terms and provisions of the Note and the other Loan
Documents shall remain unchanged and shall remain in full force and
effect. Any modification herein of the Note, Loan Agreement and
the other Loan Documents shall in no way impair the security of the
Loan Documents for the payment of the Note. The promissory notes
defined herein and in all other Loan Documents as the "Note" or
"Revolving Credit Note(s)" shall hereafter mean the Note as
modified by this Agreement. The Loan Agreement, the Note and the
other Loan Documents as modified and amended hereby are hereby
ratified and confirmed in all respects.
15. Ratification by Guarantors. Each of ShowBiz Nevada,
Inc., a Nevada corporation, ShowBiz Merchandizing, Inc., a Nevada
corporation, SPT Properties Company, Inc., a Nevada corporation,
and ShowBiz Cayman Islands, Inc., a Cayman Islands corporation,
ratifies and confirms its respective Guarantee Agreements dated as
of September 29, 1997, as being binding and continuing and consent
to the terms of this Agreement.
16. No Waiver. Company acknowledges that the execution of
this Agreement by Bank One is not intended nor shall it be
construed as (I) an actual or implied waiver of any default under
the Note or any other Loan Document or (ii) an actual or implied
waiver of any condition or obligation imposed upon Company pursuant
to the Note or any other Loan Document, except to the extent
expressly set forth herein.
17. Expenses. Contemporaneously with the execution and
delivery hereof, Company shall pay, or cause to be paid, all
reasonable costs and expenses incident to the preparation hereof
and the consummation of the transactions specified herein,
including without limitation fees and expenses of legal counsel to
Bank One.
18. Counterparts. This Agreement may be executed in any
number of counterparts with the same effect as if all parties
hereto had signed the same document. All such counterparts shall
be construed together and shall constitute one instrument; but in
making proof hereof it shall only be necessary to produce one such
counterpart.
19. Benefit. The terms and provisions hereof shall be
binding upon and inure to the benefit of the parties hereto, their
heirs, representatives, successors and permitted assigns.
20. Release and Waiver of Usury Claim. Company hereby
releases Bank One, its successors and assigns, from all claims,
demands, liabilities and causes of action which Company may be
entitled to assert (although no such claims are known to exist)
against Bank One by reason of Bank One's contracting, charging or
receiving for the use, forbearance or detention of money, interest
on the Loan evidenced by the Note prior to the execution of this
Agreement in excess of that permitted to be charged to Company
under applicable law.
21. Release and Waiver of Other Claims. In consideration of
the terms, conditions and provisions of this Agreement and the
other benefits received by Company hereunder, Company further
hereby releases, relinquishes and forever discharges Bank One, as
well as its parent and subsidiary corporations, predecessors,
successors, assigns, agents, officers, directors, employees,
representatives, attorneys and accountants of and from any and all
claims, demands, actions, causes of action of any and every kind or
character, whether known or unknown, which Company may have against
Bank One and its parent and subsidiary corporations, predecessors,
successors, assigns, agents, officers, directors, employees,
representatives, attorneys or accountants arising out of or with
respect to any and all transactions solely relating to the Note or
any renewal thereof, and/or the Loan Documents, but excluding any
other transactions between the parties, occurring prior to the date
hereof, including any other loss, expense and/or detriment, of any
kind or character, growing out of or in any way connected with or
in any way resulting from the acts, actions or omissions of Bank
One and its parent and subsidiary corporations, predecessors,
successors, assigns, agents, officers, directors, employees,
representatives, attorneys, or accountants, and including any loss,
cost or damage in connection with any breach of fiduciary duty,
breach of any duty of fair dealing, breach of confidence, breach of
funding commitment, undue influence, duress, economic coercion,
conflict of interest, negligence, bad faith, malpractice,
violations of the racketeer influenced and corrupt organizations
act, intentional or negligent infliction of mental duress, tortious
interference with contractual relations, tortious interference with
corporate governance or prospective business advantage, breach of
contract, deceptive trade practices, libel, slander or conspiracy.
22. Construction. The parties acknowledge that the parties
and their counsel have reviewed and had the opportunity to revise
this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting
party shall not be employed in the interpretation of this Agreement
or any amendments or exhibits hereto.
23. Entire Agreement. THIS AGREEMENT, THE NOTE AND THE
WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, this Agreement is executed effective as of
the date first above written.
BANK ONE, TEXAS, National Association
By: /s/ Paul C. Koch
----------------------
Name: Paul C. Koch
Title: Vice President
SHOWBIZ PIZZA TIME, INC., INC.
By: /s/ Larry G. Page
-----------------------
Name: Larry G. Page
Title: Executive Vice President,
Chief Financial Officer and
Treasurer
SHOWBIZ NEVADA, INC.
By: /s/ Don McKechnie
-----------------------
Name: Don McKechnie
Title: Director and President
SHOWBIZ MERCHANDISING, INC.
By: /s/ Don McKechnie
-----------------------
Name: Don McKechnie
Title: Director and President
SPT PROPERTIES COMPANY, INC.
By: /s/ Don McKechnie
-----------------------
Name: Don McKechnie
Title: Director and President
SHOWBIZ CAYMAN ISLANDS, INC.
By: /s/ Don McKechnie
----------------------
Name: Don McKechnie
Title: Director and President
STATE OF TEXAS s
S
COUNTY OF DALLAS s
This instrument was acknowledged before me on June --------,
1998, by Paul C. Koch, Vice President of BANK ONE, TEXAS, NATIONAL
ASSOCIATION, a national banking association, on behalf of said
national association.
---------------------------
Notary Public, State of Texas
(SEAL)
----------------------------
(Please Print Name of Notary)
My Commission expires:
- ---------------------
STATE OF TEXAS s
s
COUNTY OF DALLAS s
This instrument was acknowledged before me on June 13, 1998,
by Larry G. Page, Executive Vice President, Chief Financial Officer
and Treasurer of SHOWBIZ PIZZA TIME, INC., a Kansas corporation, on
behalf of said corporation.
-----------------------------
Notary Public, State of Texas
(SEAL)
-----------------------------
(Please Print Name of Notary)
My Commission expires:
- ----------------------
STATE OF TEXAS s
s
COUNTY OF DALLAS s
This instrument was acknowledged before me on June 13, 1998,
by Don McKechnie, Director and President of SHOWBIZ NEVADA, INC. a
Nevada corporation, on behalf of said corporation.
-----------------------------
Notary Public, State of Texas
(SEAL)
-----------------------------
(Please Print Name of Notary)
My Commission expires:
- ----------------------
STATE OF TEXAS s
s
COUNTY OF DALLAS s
This instrument was acknowledged before me on June 13, 1998,
by Don McKechnie, Director and President of SPT PROPERTIES COMPANY,
INC. a Nevada corporation, on behalf of said corporation.
-------------------------------
Notary Public, State of Texas
(SEAL)
________________________________
(Please Print Name of Notary)
My Commission expires:
_______________________
STATE OF TEXAS s
s
COUNTY OF DALLAS s
This instrument was acknowledged before me on June 13, 1998,
by Don McKechnie, Director and President of SHOWBIZ CAYMAN ISLANDS,
INC. a Cayman Islands corporation, on behalf of said corporation.
----------------------------------
Notary Public, State of Texas
(SEAL)
----------------------------------
(Please Print Name of Notary)
My Commission expires:
- ----------------------
EXHIBIT "A"
SECOND RESTATED REVOLVING CREDIT NOTE
$15,000,000.00 Dallas, Texas June
14, 1998
FOR VALUE RECEIVED, the undersigned, SHOWBIZ PIZZA TIME, INC.,
a Kansas corporation ("Company"), hereby unconditionally promises
to pay to the order of BANK ONE, TEXAS, N.A. ("Bank One") at the
office of Bank One or any successor, currently located at 1717 Main
Street, Dallas, Texas 75201, on June 1, 2000 (or on any annual
anniversary thereof agreed to in writing by Bank One and the
Company), in lawful money of the United States of America and
immediately available funds, an amount equal to the lesser of (a)
FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00), or (b) the
aggregate unpaid principal amount of all Revolving Credit Loans
made by Bank One to the Company pursuant to Section 2.1 of the Loan
Agreement, dated as of June 27, 1995, between Bank One and the
Company (as amended, modified or supplemented from time to time in
accordance with its terms, the "Loan Agreement").
The Company further promises to pay interest (computed on the
basis of a 365-day year for the actual days elapsed) in like money
on the unpaid principal balance of this Note from time to time
outstanding at the annual rates provided in the Loan Agreement.
Interest shall be payable at the times and in the manner provided
in the Loan Agreement.
All Revolving Credit Loans made by Bank One pursuant to
Section 2.1 of the Loan Agreement and all payments of the principal
thereof shall be endorsed by the holder of this Note on the
schedule annexed hereto (including any additional pages such holder
may add to such schedule), which endorsement shall constitute prima
facie evidence of the accuracy of the information so endorsed;
provided, however, that the failure of the holder of this Note to
insert any date or amount or other information on such schedule
shall not in any manner affect the obligation of the Company to
repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof,
this Note shall bear interest until paid in full (whether before or
after the occurrence of any Event of Default described in Sections
9.1(g) and 9.1(h) of the Loan Agreement) at a rate of 2.5% per
annum in excess of the Prime Rate, payable on demand, but in no
event in excess of the maximum rate of interest permitted under
applicable law. Such interest rate shall change when and as the
Prime Rate changes.
This Note is a Revolving Credit Note referred to in the Loan
Agreement, is entitled to the benefits thereof and is subject to
optional and mandatory prepayment, in whole or in part, as provided
therein. Reference is herein made to the Loan Agreement for the
rights of the holder to accelerate the unpaid balance hereof prior
to maturity.
The Company hereby waives diligence, demand, presentment,
protest and notice of any kind, release, surrender or substitution
of security, or forbearance or other indulgence, without notice.
This Note and all of the other Loan Documents are intended to
be performed in accordance with, and only to the extent permitted
by, all applicable usury laws. If any provision hereof or of any
of the other Loan Documents or the application thereof to any
person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision
to any other person or circumstance nor the remainder of the
instrument in which such provision is contained shall be affected
thereby and shall be enforced to the greatest extent permitted by
law. It is expressly stipulated and agreed to be the intent of
Bank One at all times to comply with the usury and other applicable
laws now or hereafter governing the interest payable on the
Indebtedness evidenced by this Note. If the applicable law is ever
revised, repealed or interpreted so as to render usurious any
amount called for under this Note or any of the other Loan
Documents, or contracted for, charged, taken, reserved or received
with respect to the Indebtedness evidenced by this Note, or if Bank
One's exercise of the option to accelerate the maturity of this
Note, or if any prepayment by the Company results in the Company's
having paid any interest in excess of that permitted by law, then
it is the express intent of the Company and Bank One that all
excess amounts theretofore collected by Bank One be credited on the
principal balance of this Note (or, if this Note and all other
Indebtedness arising under or pursuant to the other Loan Documents
have been paid in full, refunded to the Company), and the
provisions of this Note and the other Loan Documents immediately be
deemed reformed and the amounts thereafter collectable hereunder
and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the then applicable law, but
so as to permit the recovery of the fullest amount otherwise called
for hereunder or thereunder. All sums paid, or agreed to be paid,
by the Company for the use, forbearance, detention, taking,
charging, receiving or reserving of the Indebtedness of the Company
to Bank One under this Note or arising under of pursuant to the
other Loan Documents shall, to the maximum extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness until payment in full
so that the rate or amount of interest on account of such
Indebtedness does not exceed the usury ceiling from time to time in
effect and applicable to such Indebtedness for so long as such
Indebtedness is outstanding. To the extent federal law permits
Bank One to contract for, charge, or receive a greater amount of
interest, Bank One will rely upon federal law instead of Texas
Finance Code, as supplemented by Texas Credit Title, for the
purpose of determining the maximum rate or amount. Additionally,
to the maximum extent permitted by applicable law now or hereafter
in effect, Bank One may, at its option and from time to time,
implement any other method of computing the maximum rate under such
Texas Finance Code, as supplemented by Texas Credit Title, or under
other applicable law by giving notice, if required, to the Company
as provided by applicable law now or hereafter in effect.
Notwithstanding anything to the contrary contained herein or in any
of the other Loan Documents, it is not the intention of Bank One to
accelerate the maturity of any interest that has accrued at the
time of such acceleration or to collect unearned interest at the
time of such acceleration.
Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally,
but only by an agreement in writing signed by the party to be
charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING
CREDIT NOTE, COMPANY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE
RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO
INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS (UNLESS SUCH SETOFF,
COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE
FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED
IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND
IMPROPER VENUE. COMPANY HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF
ANY FEDERAL COURT LOCATED IN THE DALLAS, TEXAS, IN CONNECTION WITH
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW AND SHALL BE BINDING UPON
THE SUCCESSORS AND ASSIGNS OF COMPANY AND INURE TO THE BENEFIT OF
BANK ONE AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall
be held invalid, illegal or unenforceable, the validity of all
other terms and provisions herein shall in no way be affected
thereby.
This Note is restated in accordance with the terms of that
certain Second Modification and Extension Agreement dated on even
date herewith by and between Company and Bank One to conform the
terms of this Note to the amended definition of "Revolving Credit
Commitment" contained in the Second Modification and Extension
Agreement.
IN WITNESS WHEREOF, the Company has executed and delivered
this Note as of the date first written above.
SHOWBIZ PIZZA TIME, INC.
By: /s/ Larry G. Page
---------------------------
Name: Larry G. Page
Title:Executive Vice President, Chief
Financial Officer and Treasurer
Exhibit 10(a)(2)
SECOND RESTATED REVOLVING CREDIT NOTE
-------------------------------------
$15,000,000.00 Dallas, Texas June
14, 1998
FOR VALUE RECEIVED, the undersigned, SHOWBIZ PIZZA TIME, INC.,
a Kansas corporation ("Company"), hereby unconditionally promises
to pay to the order of BANK ONE, TEXAS, N.A. ("Bank One") at the
office of Bank One or any successor, currently located at 1717 Main
Street, Dallas, Texas 75201, on June 1, 2000 (or on any annual
anniversary thereof agreed to in writing by Bank One and the
Company), in lawful money of the United States of America and
immediately available funds, an amount equal to the lesser of (a)
FIFTEEN MILLION AND NO/100 DOLLARS ($15,000,000.00), or (b) the
aggregate unpaid principal amount of all Revolving Credit Loans
made by Bank One to the Company pursuant to Section 2.1 of the Loan
Agreement, dated as of June 27, 1995, between Bank One and the
Company (as amended, modified or supplemented from time to time in
accordance with its terms, the "Loan Agreement").
The Company further promises to pay interest (computed on the
basis of a 365-day year for the actual days elapsed) in like money
on the unpaid principal balance of this Note from time to time
outstanding at the annual rates provided in the Loan Agreement.
Interest shall be payable at the times and in the manner provided
in the Loan Agreement.
All Revolving Credit Loans made by Bank One pursuant to
Section 2.1 of the Loan Agreement and all payments of the principal
thereof shall be endorsed by the holder of this Note on the
schedule annexed hereto (including any additional pages such holder
may add to such schedule), which endorsement shall constitute prima
facie evidence of the accuracy of the information so endorsed;
provided, however, that the failure of the holder of this Note to
insert any date or amount or other information on such schedule
shall not in any manner affect the obligation of the Company to
repay any Revolving Credit Loans in accordance with the terms of
the Loan Agreement.
On and after the stated or any accelerated maturity hereof,
this Note shall bear interest until paid in full (whether before or
after the occurrence of any Event of Default described in Sections
9.1(g) and 9.1(h) of the Loan Agreement) at a rate of 2.5% per
annum in excess of the Prime Rate, payable on demand, but in no
event in excess of the maximum rate of interest permitted under
applicable law. Such interest rate shall change when and as the
Prime Rate changes.
This Note is a Revolving Credit Note referred to in the Loan
Agreement, is entitled to the benefits thereof and is subject to
optional and mandatory prepayment, in whole or in part, as provided
therein. Reference is herein made to the Loan Agreement for the
rights of the holder to accelerate the unpaid balance hereof prior
to maturity.
The Company hereby waives diligence, demand, presentment,
protest and notice of any kind, release, surrender or substitution
of security, or forbearance or other indulgence, without notice.
This Note and all of the other Loan Documents are intended to
be performed in accordance with, and only to the extent permitted
by, all applicable usury laws. If any provision hereof or of any
of the other Loan Documents or the application thereof to any
person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision
to any other person or circumstance nor the remainder of the
instrument in which such provision is contained shall be affected
thereby and shall be enforced to the greatest extent permitted by
law. It is expressly stipulated and agreed to be the intent of
Bank One at all times to comply with the usury and other applicable
laws now or hereafter governing the interest payable on the
Indebtedness evidenced by this Note. If the applicable law is ever
revised, repealed or interpreted so as to render usurious any
amount called for under this Note or any of the other Loan
Documents, or contracted for, charged, taken, reserved or received
with respect to the Indebtedness evidenced by this Note, or if Bank
One's exercise of the option to accelerate the maturity of this
Note, or if any prepayment by the Company results in the Company's
having paid any interest in excess of that permitted by law, then
it is the express intent of the Company and Bank One that all
excess amounts theretofore collected by Bank One be credited on the
principal balance of this Note (or, if this Note and all other
Indebtedness arising under or pursuant to the other Loan Documents
have been paid in full, refunded to the Company), and the
provisions of this Note and the other Loan Documents immediately be
deemed reformed and the amounts thereafter collectable hereunder
and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the then applicable law, but
so as to permit the recovery of the fullest amount otherwise called
for hereunder or thereunder. All sums paid, or agreed to be paid,
by the Company for the use, forbearance, detention, taking,
charging, receiving or reserving of the Indebtedness of the Company
to Bank One under this Note or arising under of pursuant to the
other Loan Documents shall, to the maximum extent permitted by
applicable law, be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness until payment in full
so that the rate or amount of interest on account of such
Indebtedness does not exceed the usury ceiling from time to time in
effect and applicable to such Indebtedness for so long as such
Indebtedness is outstanding. To the extent federal law permits
Bank One to contract for, charge, or receive a greater amount of
interest, Bank One will rely upon federal law instead of Texas
Finance Code, as supplemented by Texas Credit Title, for the
purpose of determining the maximum rate or amount. Additionally,
to the maximum extent permitted by applicable law now or hereafter
in effect, Bank One may, at its option and from time to time,
implement any other method of computing the maximum rate under such
Texas Finance Code, as supplemented by Texas Credit Title, or under
other applicable law by giving notice, if required, to the Company
as provided by applicable law now or hereafter in effect.
Notwithstanding anything to the contrary contained herein or in any
of the other Loan Documents, it is not the intention of Bank One to
accelerate the maturity of any interest that has accrued at the
time of such acceleration or to collect unearned interest at the
time of such acceleration.
Capitalized terms used herein and not otherwise defined shall
have the meaning ascribed to them in the Loan Agreement.
This Note may not be changed, modified, or terminated orally,
but only by an agreement in writing signed by the party to be
charged.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS REVOLVING
CREDIT NOTE, COMPANY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE
RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO
INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS (UNLESS SUCH SETOFF,
COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE
FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED
IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND
IMPROPER VENUE. COMPANY HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF
ANY FEDERAL COURT LOCATED IN THE DALLAS, TEXAS, IN CONNECTION WITH
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
REVOLVING CREDIT NOTE. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW AND SHALL BE BINDING UPON
THE SUCCESSORS AND ASSIGNS OF COMPANY AND INURE TO THE BENEFIT OF
BANK ONE AND ITS SUCCESSORS AND ASSIGNS.
If any term or provision of this Revolving Credit Note shall
be held invalid, illegal or unenforceable, the validity of all
other terms and provisions herein shall in no way be affected
thereby.
This Note is restated in accordance with the terms of that
certain Second Modification and Extension Agreement dated on even
date herewith by and between Company and Bank One to conform the
terms of this Note to the amended definition of "Revolving Credit
Commitment" contained in the Second Modification and Extension
Agreement.
IN WITNESS WHEREOF, the Company has executed and delivered
this Note as of the date first written above.
SHOWBIZ PIZZA TIME, INC.
By: /s/ Larry G. Page
---------------------------
Name: Larry G. Page
Title:Executive Vice President, Chief
Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> JUL-05-1998
<CASH> 13,233
<SECURITIES> 0
<RECEIVABLES> 3,853
<ALLOWANCES> 56
<INVENTORY> 4,805
<CURRENT-ASSETS> 30,025
<PP&E> 321,572
<DEPRECIATION> 118,788
<TOTAL-ASSETS> 243,451
<CURRENT-LIABILITIES> 39,588
<BONDS> 16,137
<COMMON> 2,222
2,262
0
<OTHER-SE> 177,853
<TOTAL-LIABILITY-AND-EQUITY> 243,451
<SALES> 191,882
<TOTAL-REVENUES> 193,950
<CGS> 88,248
<TOTAL-COSTS> 162,923
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,379
<INCOME-PRETAX> 31,027
<INCOME-TAX> 12,003
<INCOME-CONTINUING> 19,024
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