<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the quarterly
period ended October 1, 2000.
- Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from _________ to __________.
Commission File Number 0-15782
CEC ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0905805
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4441 West Airport Freeway
Irving, Texas 75062
(Address of principal executive offices,
including zip code)
(972) 258-8507
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
At October 1, 2000, an aggregate of 27,110,243 shares of the
registrant's Common Stock, par value of $.10 each (being the
registrant's only class of common stock), were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CEC ENTERTAINMENT, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Consolidated balance sheets. . . . . . . . . . . . . . . . . . . . . 2
Consolidated statements of earnings and comprehensive income . . . . 3
Consolidated statement of shareholders' equity . . . . . . . . . . . 5
Consolidated statements of cash flows. . . . . . . . . . . . . . . . 6
Notes to consolidated financial statements . . . . . . . . . . . . . 7
1
<PAGE>
CEC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands, except share data)
ASSETS
<TABLE>
October 1, January 2,
2000 2000
---------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . $ 16,097 $ 2,731
Accounts receivable . . . . . . . . . . . 6,021 6,451
Current portion of notes receivable . . . 7
Inventories . . . . . . . . . . . . . . . 8,875 7,895
Prepaid expenses. . . . . . . . . . . . . 3,865 4,727
Current portion of deferred tax asset . . 776 776
Assets held for resale. . . . . . . . . . 6,308 13,070
-------- --------
Total current assets . . . . . . . . 41,942 35,657
-------- --------
Property and equipment, net . . . . . . . 319,677 280,624
-------- --------
Notes receivable from related parties,
less current portion. . . . . . . . . . 1,468 491
-------- --------
Other assets. . . . . . . . . . . . . . . 10,509 8,396
-------- --------
$373,596 $325,168
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . $ 6,093 $ 7,729
Accounts payable and accrued liabilities 38,470 34,294
-------- --------
Total current liabilities. . . . . . . 44,563 42,023
-------- --------
Long-term debt, less current portion . . . 49,354 51,567
-------- --------
Deferred rent. . . . . . . . . . . . . . . 3,570 4,110
-------- --------
Long-term deferred tax liability . . . . . 4,953 2,167
-------- --------
Other liabilities. . . . . . . . . . . . . 1,725 1,725
-------- --------
Redeemable preferred stock, $60 par value,
redeemable for $2,911 in 2005 . . . . . 2,411 2,348
-------- --------
Shareholders' equity:
Common stock, $.10 par value; authorized
100,000,000 shares; 34,149,749 and
33,791,217 shares issued, respectively 3,415 3,379
Capital in excess of par value. . . . . . 171,969 166,594
Retained earnings . . . . . . . . . . . . 166,040 120,194
Deferred compensation . . . . . . . . . . (188) (759)
Accumulated other comprehensive
income (loss). . . . . . . . . . . . . (14) 42
Less treasury shares of 7,039,506 and
6,777,614, respectively, at cost . . . (74,202) (68,222)
-------- --------
267,020 221,228
-------- --------
$373,596 $325,168
======== ========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited)
(Thousands, except per share data)
<TABLE>
Three Months Ended
-----------------------------------
Oct. 1, 2000 Oct. 3. 1999
------------ ------------
<S> <C> <C>
Food and beverage revenues . . . . . . . . $ 85,450 $ 73,523
Games and merchandise revenues . . . . . . 44,032 41,225
Franchise fees and royalties . . . . . . . 782 802
Interest income, including related party
income of $25 and $18, respectively . . 37 33
-------- --------
130,301 115,583
-------- --------
Costs and expenses:
Cost of sales. . . . . . . . . . . . . 57,295 51,955
Selling, general and administrative
expenses . . . . . . . . . . . . . . 17,727 16,377
Depreciation and amortization. . . . . 8,787 7,638
Interest expense. . . . . . . .. . . . 832 569
Other operating expenses . . . . . . . 20,731 18,817
-------- --------
105,372 95,356
-------- --------
Income before income taxes . . . . . . . . 24,929 20,227
-------- --------
Income taxes:
Current expense. . . . . . . . . . . . . 8,750 6,496
Deferred expense . . . . . . . . . . . . 922 1,434
-------- --------
9,672 7,930
-------- --------
Net income . . . . . . . . . . . . . . . . 15,257 12,297
Other comprehensive income, net of tax:
Foreign currency translation . . . . . . 7 (42)
-------- --------
Comprehensive income . . . . . . . . . . . $ 15,264 $ 12,255
======== ========
Earnings per share:
Basic:
Net income . . . . . . . . . . . . . . $ .56 $ .45
======== ========
Weighted average shares outstanding. . 27,004 27,001
======== ========
Diluted:
Net income . . . . . . . . . . . . . $ .55 $ .44
======== ========
Weighted average shares outstanding. 27,818 28,028
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited)
(Thousands, except per share data)
<TABLE>
Nine Months Ended
---------------------------------
Oct. 1 ,2000 Oct. 3. 1999
------------ ------------
<S> <C> <C>
Food and beverage revenues . . . . . . . . $ 257,933 $ 217,308
Games and merchandise revenues . . . . . . 130,062 119,075
Franchise fees and royalties . . . . . . . 2,536 2,389
Interest income, including related party
income of $74 and $27, respectively. . . 150 142
--------- ---------
390,681 338,914
--------- ---------
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . 172,760 151,394
Selling, general and administrative
expenses. . . . . . . . . . . . . . . . 54,662 48,698
Depreciation and amortization . . . . . . 25,005 22,955
Interest expense. . . . . . . . . . . . . 2,473 1,864
Other operating expenses . .. . . . . . . 60,453 54,547
--------- ---------
315,353 279,458
--------- ---------
Income before income taxes . . . . . . . . 75,328 59,456
--------- ---------
Income taxes:
Current expense. . . . . . . . . . . . . 26,440 21,167
Deferred expense . . . . . . . . . . . . 2,786 2,140
--------- ---------
29,226 23,307
--------- ---------
Net income . . . . . . . . . . . . . . . . 46,102 36,149
Other comprehensive income, net of tax:
Foreign currency translation . . . . . . . (56) (2)
--------- ---------
Comprehensive income . . . . . . . . . . . $ 46,046 $ 36,147
========= =========
Earnings per share:
Basic:
Net income . . . . . . . . . . . . . . . $ 1.71 $ 1.33
========= =========
Weighted average shares outstanding. . . 26,886 27,020
========= =========
Diluted:
Net income. . . . . . . . . . . . . . . $ 1.66 $ 1.29
========= =========
Weighted average shares outstanding . . 27,690 27,904
========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
(Thousands, except per share data)
<TABLE>
Amounts Shares
--------- --------
<S> <C> <C>
Common stock and capital in excess of par value
Balance, beginning of year . . . . . . . . . . $169,973 33,791
Stock options exercised . . . . . . . . . . . 3,826 354
Net tax benefit from exercise of options
and stock grants . . . . . . . . . . . . . 1,431
Stock issued under 401(k) plan. . . . .. . . . 154 5
-------- -------
Balance, October 1, 2000 . . . . . . . . . . . 175,384 34,150
-------- -------
Retained earnings:
Balance, beginning of year . . . . . . . . . . 120,194
Net income . . . . . . . . . . . . . . . . . . 46,102
Redeemable preferred stock accretion . . . . . (78)
Redeemable preferred stock dividend, $3.60
per share. . . . . . . . . . . . . . . . . . (178)
--------
Balance, October 1, 2000 . . . . . . . . . . . 166,040
--------
Deferred compensation:
Balance, beginning of year . . . . . . . . . . (759)
Amortization of deferred compensation. . . . . 571
--------
Balance, October 1, 2000 . . . . . . . . . . . (188)
--------
Accumulated other comprehensive income:
Balance, beginning of year . . . . . . . . . . 42
Foreign currency translation . . . . . . . . . (56)
--------
Balance, October 1, 2000 . . . . . . . . . . . (14)
--------
Treasury shares:
Balance, beginning of year . . . . . . . . . . (68,222) 6,778
Treasury stock acquired. . . . . . . . . . . . (5,980) 262
------- -------
Balance, October 1, 2000 . . . . . . . . . . . (74,202) 7,040
-------- =======
Total shareholders' equity . . . . . . . . . . . $267,020
========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
Nine Months Ended
--------------------------------
Oct. 1 ,2000 Oct. 3, 1999
------------ ------------
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . . . . . $46,102 $36,149
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization. . . . . . 25,005 22,955
Deferred tax expense . . . . . . . . . . 2,786 2,140
Compensation expense under stock
grant plan . . . . . . . . . . . . . . 571 571
Other. . . . . . . . . . . . . . . . . . (842) 63
Net change in receivables, inventory,
prepaids, payables and
accrued liabilities . . . . . . . . . 4,488 1,245
------- -------
Cash provided by operations . . . . . 78,110 63,123
------- -------
Investing activities:
Purchases of property and equipment. . . (64,492) (51,719)
Proceeds from disposition of property
and equipment. . . . . . . . . . . . 835
Additions to notes receivable. . . . . . (1,524) (1,438)
Payments received on notes receivable. . 554 1,103
(Increase) decrease in assets held
for resale . . . . . . . . . . . . . 6,912 (13,728)
Increase in other assets . . . . . . . . (2,362) (3,039)
------- -------
Cash used in investing activities . . . (60,077) (68,821)
------- -------
Financing activities:
Payments on debt . . . . . . . . . . . . (31,347) (19,433)
Proceeds on debt . . . . . . . . . . . . 27,498 34,270
Exercise of stock options. . . . . . . . 3,826 2,003
Redeemable preferred stock dividends . . (178) (179)
Treasury stock acquired. . . . . . . . . (5,980) (9,233)
Other. . . . . . . . . . . . . . . . . . 1,514 1,788
------- -------
Cash provided by (used in) financing
activities . . . . . . . . . . . . . (4,667) 9,216
------- -------
Increase in cash and cash equivalents. . . 13,366 3,518
Cash and cash equivalents, beginning of
period. . . . . . . . . . . . . . . . . 2,731 3,210
------- ------
Cash and cash equivalents, end of
period . . . . . . . . . . . . . . . . . $ 16,097 $ 6,728
======= =======
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
CEC ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Interim financial statements:
In the opinion of management, the accompanying financial statements for the
periods ended October 1,2000 and October 3, 1999 reflect all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the Company's financial condition, results of operations and cash flows in
accordance with generally accepted accounting principles.
Certain information and footnote disclosures normally included in the
consolidated financial statements prepared in accordance with generally accepted
accounting principles have been omitted. The unaudited consolidated financial
statements referred to above should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K filed with the
Securities and Exchange Commission for the year ended January 2, 2000. Results
of operations for the periods ended October 1, 2000 and October 3, 1999 are not
necessarily indicative of the results for the year.
2. Earnings per common share:
Earnings per common share were computed based on the weighted average
number of common and potential common shares outstanding during the period. Net
income available per common share has been adjusted for the items indicated
below, and earnings per common and potential common share were computed as
follows (thousands, except per share data):
<TABLE>
Three Months Ended Nine Months Ended
------------------ ------------------
Oct. 1, Oct. 3, Oct. 1, Oct.3,
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income. . . . . . . . . . . $15,257 $12,297 $46,102 $36,149
Accretion of redeemable
preferred stock. . . . . . . (27) (26) (78) (77)
Redeemable preferred stock
dividends. . . . . . . . . . (59) (60) (178) (179)
------- ------- ------- -------
Adjusted income applicable to
common and potential
common shares. . . . . . . . $15,171 $12,211 $45,846 $35,893
======= ======= ======= =======
Basic:
Weighted average common
shares outstanding . . . . 27,004 27,001 26,886 27,020
======= ======= ======= =======
Earnings per common share $ .56 $ .45 $ 1.71 $ 1.33
======= ======= ======= =======
Diluted:
Weighted average common
shares outstanding. . . . 27,004 27,001 26,886 27,020
Potential common shares
for stock options and
stock grants. . . . . . . 814 1,027 804 884
------- ------- ------- -------
Weighted average shares
outstanding . . . . . . . 27,818 28,028 27,690 27,904
======= ======= ======= =======
Earnings per common and
potential common share. . $ .55 $ .44 $ 1.66 $ 1.29
======= ======= ======= =======
</TABLE>
7
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Third Quarter 2000 Compared to Third Quarter 1999
-------------------------------------------------
A summary of the results of operations of the Company as a percentage of
revenues for the third quarters of 2000 and 1999 is shown below.
<TABLE>
Three Months Ended
------------------------------------
Oct. 1, 2000 Oct. 3, 1999
------------ ------------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . . . 100.0% 100.0%
------- -------
Costs and expenses:
Cost of sales. . . . . . . . . . . . . 44.0 45.0
Selling, general and administrative. . 13.6 14.1
Depreciation and amortization. . . . . 6.8 6.6
Interest expense . . . . . . . . . . . .6 .5
Other operating expenses . . . . . . . 15.9 16.3
------- -------
80.9 82.5
------- -------
Income before income taxes . . . . . . . 19.1 17.5
Income tax expense . . . . . . . . . . . 7.4 6.9
------- -------
Net income . . . . . . . . . . . . . . . 11.7% 10.6%
======= =======
</TABLE>
Revenues
--------
Revenues increased 12.7% to $130.3 million in the third quarter of 2000
from $115.6 million in the third quarter of 1999 due to an increase in the
number of Company-operated stores. During 1999, the Company opened 23 new
restaurants, acquired one restaurant from a franchisee and closed one
restaurant. During the first nine months of 2000, the Company opened 22 new
restaurants and closed one restaurant. Comparable store sales of the
Company's Chuck E. Cheese's restaurants which were open during all of the
third quarters of both 2000 and 1999 declined 0.5%. Management believes that
the decline in comparable store sales was largely due to the closure of
Discovery Zone stores in June 1999 which benefited prior year comparable store
sales. Menu prices increased approximately 2.0% between the periods.
Costs and Expenses
------------------
Costs and expenses as a percentage of revenues decreased to 80.9% in the
third quarter of 2000 from 82.5% in the third quarter of 1999.
Cost of sales decreased as a percentage of revenues to 44.0% in the third
quarter of 2000 from 45.0% in the comparable period of 1999. Cost of food,
beverage, prize and merchandise items as a percentage of revenues decreased to
14.5% in the third quarter of 2000 from 15.2% in the third quarter of 1999
primarily due to a decrease in cheese costs, adjusted prize ticket categories
and an increase in menu prices. Store labor expenses as a percentage of
revenues decreased to 26.4% during the third quarter of 2000 compared to 26.6%
in the third quarter of 1999 due to labor efficiencies achieved in higher sales
volume new stores.
Selling, general and administrative expenses as a percentage of revenues
decreased to 13.6% in the third quarter of 2000 from 14.1% in the third
quarter of 1999 due primarily to a decrease in advertising and overhead
expenses as a percentage of revenues.
Depreciation and amortization expenses as a percentage of revenues
increased to 6.8% in the third quarter of 2000 from 6.6% in the third quarter
of 1999 primarily due to increased capital expenditures for new restaurants.
8
<PAGE>
Interest expense as a percentage of revenues increased to .6% in the third
quarter of 2000 from .5% in the third quarter of 1999 due primarily to a
decrease in the amount of capitalized interest expense related to assets held
for resale. During the twelve months ended July 2000, interest expense on
incremental debt incurred to finance assets held for resale was allocated to the
basis of such assets.
Other operating expenses decreased as a percentage of revenues to 15.9% in
the third quarter of 2000 from 16.3% in the third quarter of 1999 primarily
due to lower insurance costs and rent expense as a percentage of revenues.
The Company's effective income tax rate was 38.8% in the third quarter of
2000 compared to 39.2% in the third quarter of 1999 primarily due to lower
estimated state tax rates.
Net Income
----------
The Company had net income of $15.3 million in the third quarter of 2000
compared to $12.3 million in the third quarter of 1999 due to the changes in
revenues and expenses discussed above. The Company's diluted earnings per
share increased 25.0% to $.55 per share in the third quarter of 2000 from $.44
per share in the third quarter of 1999.
First Nine Months of 2000 Compared to First Nine Months of 1999
---------------------------------------------------------------
A summary of the results of operations of the Company as a percentage of
revenues for the first nine months of 2000 and 1999 is shown below.
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------
Oct. 1, 2000 Oct. 3, 1999
------------ ------------
<S> <C> <C>
Revenue. . . . . . . . . . . . . . . . . 100.0% 100.0%
------ ------
Costs and expenses: . . . . . . . . . .
Cost of sales. . . . . . . . . . . . . 44.2 44.7
Selling, general and administrative. . 14.0 14.4
Depreciation and amortization 6.4 6.8
Interest expense . . . . . . . . . . . .6 .5
Other operating expenses . . . . . . . 15.5 16.1
------ ------
80.7 82.5
------ ------
Income before income taxes . . . . . . . 19.3 17.5
Income tax expense . . . . . . . . . . . 7.5 6.8
------ ------
Net income . . . . . . . . . . . . . . . 11.8% 10.7%
====== ======
</TABLE>
Revenues
--------
Revenues increased 15.3% to $390.7 million in the first nine months of
2000 from $338.9 million in the first nine months of 1999 primarily due an
increase in the number of Company-operated stores and an increase of 3.1% in
comparable store sales of the Company's Chuck E. Cheese's restaurants which
were open during all of the first nine months of both 2000 and 1999. During
1999, the Company opened 23 new restaurants, acquired one restaurant from a
franchisee and closed one restaurant. During the first nine months of 2000,
the Company opened 22 new restaurants and closed one restaurant. Menu prices
increased approximately 1.8% between the periods.
Costs and Expenses
------------------
Costs and expenses as a percentage of revenues decreased to 80.7% in the
first nine months of 2000 from 82.5%in the first nine months of 1999.
9
<PAGE>
Cost of sales decreased as a percentage of revenues to 44.2% in the first
nine months of 2000 from 44.7% in the comparable period of 1999. Cost of
food, beverage, prize and merchandise items as a percentage of revenues
decreased to 14.6% in the first nine months of 2000 from 15.1% in the first
nine months of 1999 primarily due to a decrease in cheese costs, adjusted
prize ticket categories and an increase in menu prices. Store labor expenses
as a percentage of revenues increased slightly to 26.5% during the first nine
months of 2000 from 26.4% in the first nine months of 1999 primarily due to
wage increases and new store staffing.
Selling, general and administrative expenses as a percentage of revenues
decreased to 14.0% in the first nine months of 2000 from 14.4% in the first
nine months of 1999 due a reduction in advertising and overhead expenses as a
percentage of revenues.
Depreciation and amortization expenses as a percentage of revenues were
6.4% in the first nine months of 2000 compared to 6.8% in the first nine
months of 1999 primarily due to the increase in comparable store sales.
Interest expense as a percentage of revenues was .6% in the first nine
months of 2000 compared to .5% in the first nine months of 1999. During the
twelve months ended July 2000, interest expense on incremental debt incurred
to finance assets held for resale was allocated to the basis of such assets.
Other operating expenses decreased as a percentage of revenues to 15.5% in
the first nine months of 2000 from 16.1% in the first nine months of 1999
primarily due to the increase in comparable store sales and the fact that a
significant portion of operating costs are fixed.
The Company's effective income tax rate was 38.8% in the first nine months
of 2000 compared to 39.2% in the first nine months of 1999 primarily due to
lower estimated state tax rates.
Net Income
----------
The Company had net income of $46.1 million in the first nine months of
2000 compared to $36.1 million in the first nine months of 1999 due to the
changes in revenues and expenses discussed above. The Company's diluted
earnings per share increased 28.7% to $1.66 per share in the first nine months
of 2000 compared to $1.29 per share in the first nine months of 1999.
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------
Cash provided by operations increased to $78.1 million in the first nine
months of 2000 from $63.1 million in the comparable period of 1999. Cash
outflows from investing activities for the first nine months of 2000 were
$60.1 million primarily related to capital expenditures. Cash outflows from
financing activities for the first nine months of 2000 were $4.7 million
primarily related to the repayment of long-term debt and the repurchase of the
Company's common stock. The Company's primary requirements for cash relate to
planned capital expenditures, the repurchase of the Company's common stock and
debt service. The Company expects that it will satisfy such requirements from
cash provided by operations and, if necessary, funds available under its line
of credit.
In 2000, the Company plans to add 27 to 32 stores including new stores and
acquisitions of existing stores from franchisees. The Company currently
anticipates its cost of opening such new stores to average approximately $1.8
million per store which will vary depending upon many factors including the
size of the stores and whether the store is an in-line or freestanding
building. In addition to such new store openings, the Company plans to expand
the seating capacity of 20 to 22 high sales volume stores in 2000 including
stores which will receive an enhanced showroom package. The Company also
plans to complete Phase III upgrades in approximately 27 stores this year at an
average cost of approximately $200,000 to $225,000 per store. A Phase III
upgrade generally includes a new toddler play area, skill games and rides,
kiddie games and rides, sky-tube enhancements, and prize area enhancements with
ticket counting machines. During the first nine months of 2000, the Company
opened 22 new restaurants, expanded 16 restaurants and completed Phase III
upgrades in one restaurant. The Company currently estimates that capital
expenditures in 2000, including expenditures for new store openings, existing
store expansions and equipment investments, will be approximately $86 million.
The Company plans to finance these expenditures through cash flow from
operations and borrowings under the Company's line of credit.
In 1999, the Company purchased assets previously owned by Discovery Zone,
Inc. The final allocation of the purchase price was approximately $7.9
million to property and equipment and $11.1 million to assets held for resale.
Subsequent to the purchase, the Company has incurred incremental holding costs
of approximately $3.5 million and realized sale proceeds of $8.3 million
related to the assets held for resale.
10
<PAGE>
In September 1999, the Company announced a plan to purchase shares of the
Company's common stock at an aggregate purchase price of up to $25 million.
As of November 15, 2000, the Company has purchased shares of its common stock
under the $25 million plan at an aggregate purchase price of approximately
$8.9 million.
In July 2000, the Company entered into a bank agreement that increases its
revolving credit facility to $75 million from $55 million and extends the
maturity date to 2003 from 2001. The Company's total credit facility of $81
million consists of $6 million in term notes and a $75 million line of credit.
Term notes totaling $6 million with annual principal payments of $6 million
and annual interest of 10.02% mature in 2001. Interest under the $75 million
line of credit is dependent on earnings and debt levels of the Company and
ranges from prime or, at the Company's option, LIBOR plus 1% to 1.75%.
Currently, any borrowings under this line of credit would be at prime rate or
LIBOR plus 1.125%. As of October 1, 2000, $48.7 million was borrowed under
the line of credit. The Company is required to comply with certain financial
ratio tests during the terms of the loan agreements.
Forward-Looking Statements
--------------------------
Certain statements, other than historical information, may be considered
forward-looking statements, within the meaning of the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, and is subject to
various risks, uncertainties and assumptions. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may differ from those anticipated, estimated or
expected. Among the key factors that may have a direct bearing on CEC
Entertainment's operating results, performance or financial condition are its
ability to implement its growth strategies, national, regional and local
economic conditions affecting the restaurant/entertainment industry,
competition within each of the restaurant and entertainment industries,
success of its franchise operations, negative publicity, fluctuations in
quarterly results of operations, including seasonality and government
regulations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company is subject to market risk in the form of interest risk and
foreign currency risk. Both interest risk and foreign currency risk are
immaterial to the Company.
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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
None.
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) 10 (c) Credit Agreement, in the stated amount of $75,000,000, dated
July 14, 2000, between the Company, Bank One, Texas, National Association,
Suntrust Bank, and the Lenders Party.
10 (d) Employment Agreement dated November 13, 2000, between the
Company and Richard M. Frank.
27 Financial Data Schedule
b) Reports on Form 8-K
None filed during the quarter for which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CEC ENTERTAINMENT, INC.
Dated: November 15, 2000 By: /s/ Rodney Carter
---------------------------------------------
Rodney Carter
Executive Vice President
and Chief Financial Officer
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