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 April 2, 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 April 2, 2000, an aggregate of 26,791,971 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
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 . . . . . . . 4
Consolidated statements of cash flows . . . . . . . . . . . . 5
Notes to consolidated financial statements. . . . . . . . . . 6
Page 1
CEC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands, except share data)
ASSETS
<TABLE>
April 2, January 2,
2000 2000
-------- ----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 9,046 $ 2,731
Accounts receivable . . . . . . . . . . . . . 4,129 6,451
Current portion of notes receivable . . . . . 5 7
Inventories . . . . . . . . . . . . . . . . . 8,846 7,895
Prepaid expenses. . . . . . . . . . . . . . . 5,327 4,727
Current portion of deferred tax asset. . . . 776 776
Assets held for resale . . . . . . . . . . . 12,473 13,070
------- -------
Total current assets . . . . . . . . . . . . 40,602 35,657
------- -------
Property and equipment, net. . . . . . . . . . 291,397 280,624
------- -------
Notes receivable from related parties,
less current portion . . . . . . . . . . . 983 491
------- -------
Other assets . . . . . . . . . . . . . . . . . 7,248 8,396
------- -------
$340,230 $325,168
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . $ 6,905 $ 7,729
Accounts payable and accrued liabilities. . . 48,360 34,294
------- -------
Total current liabilities. . . . . . . . . 55,265 42,023
------- -------
Long-term debt, less current portion . . . . . 38,695 51,567
------- -------
Deferred rent. . . . . . . . . . . . . . . . . 4,104 4,110
------- -------
Long-term deferred tax liability . . . . . . . 3,299 2,167
------- -------
Other liabilities. . . . . . . . . . . . . . . 1,725 1,725
------- -------
Redeemable preferred stock, $60 par value,
redeemable for $2,911 in 2005 . . . . . . . 2,374 2,348
------- -------
Shareholders' equity:
Common stock, $.10 par value; authorized
100,000,000 shares; 33,831,577
and 33,791,217 shares issued,
respectively . . . . . . . . . . . . . . . 3,383 3,379
Capital in excess of par value. . . . . . . . 167,295 166,594
Retained earnings . . . . . . . . . . . . . . 138,853 120,194
Deferred compensation . . . . . . . . . . . . (569) (759)
Accumulated other comprehensive income . . 8 42
Less treasury shares of 7,039,606 and 6,777,614,
respectively, at cost. . . . . . . . . . . (74,202) (68,222)
------- -------
234,768 221,228
------- -------
$ 340,230 $ 325,168
======= =======
</TABLE>
See notes to consolidated financial statements.
Page 2
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited)
(Thousands, except per share data)
<TABLE>
Three Months Ended
----------------------------------
April 2, 2000 April 4,1999
------------- ------------
<S> <C> <C>
Food and beverage revenues . . . . . . . . $ 93,779 $ 76,544
Games and merchandise revenues . . . . . . 46,567 40,992
Franchise fees and royalties . . . . . . . 942 812
Interest income, including related party
income of $23 and $17,
respectively. . . . . . . . . . . . . . 59 49
------- -------
141,347 118,397
------- -------
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . 61,550 51,610
Selling, general and administrative
expenses . . . . . . . . . . . . . . . 19,996 17,087
Depreciation and amortization . . . . . . 8,096 7,467
Interest expense. . . . . . . . . . . . 761 695
Other operating expenses. . . . . . . . . 20,318 17,885
------- -------
110,721 94,744
------- -------
Income before income taxes . . . . . . . . . 30,626 23,653
Income taxes:
Current expense . . . . . . . . . . . . . . 10,750 8,846
Deferred expense. . . . . . . . . . . . . . 1,132 426
------- -------
11,882 9,272
------- -------
Net income . . . . . . . . . . . . . . . . . 18,744 14,381
Other comprehensive income, net of tax:
Foreign currency translation. . . . . . . . 34 3
Comprehensive income . . . . . . . . . . . . $ 18,778 $ 14,384
======= =======
Earnings per share:
Basic:
Net income . . . . . . . . . . . . . . . . $ .69 $ .53
======= =======
Weighted average shares outstanding. . . . 26,868 26,979
======= =======
Diluted:
Net income . . . . . . . . . . . . . . . $ .68 $ .52
======= =======
Weighted average shares outstanding. . . . 27,639 27,623
======= =======
</TABLE>
See notes to consolidated financial statements.
Page 3
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 . . . . . . . . . . . . . 484 36
Net tax benefit from exercise of options
and stock grants . . . . . . . . . . . . . . . 67
Stock issued under 401(k) plan. . . . . . . . . . 154 5
------- -------
Balance, April 2, 2000. . . . . . . . . . . . . . 170,678 33,832
------- =======
Retained earnings:
Balance, beginning of year. . . . . . . . . . . . 120,194
Net income. . . . . . . . . . . . . . . . . . . . 18,744
Redeemable preferred stock accretion. . . . . . . (26)
Redeemable preferred stock dividend,
$1.20 per share. . . . . . . . . . . . . . . . (59)
-------
Balance, April 2, 2000. . . . . . . . . . . . . . 138,853
-------
Deferred compensation:
Balance, beginning of year. . . . . . . . . . . . (759)
Amortization of deferred compensation . . . . . . 190
-------
Balance, April 2, 2000. . . . . . . . . . . . . . (569)
-------
Accumulated other comprehensive income:
Balance, beginning of year. . . . . . . . . . . . 42
Foreign currency translation. . . . . . . . . . . (34)
-------
Balance, April 2, 2000. . . . . . . . . . . . . . 8
-------
Treasury shares:
Balance, beginning of year. . . . . . . . . . . . (68,222) 6,778
Treasury stock acquired . . . . . . . . . . . . (5,980) 262
------- -------
Balance, April 2, 2000. . . . . . . . . . . . . . (74,202) 7,040
------- =======
Total shareholder's equity . . . . . . . . . . . . $ 234,768
=======
</TABLE>
See notes to consolidated financial statements.
Page 4
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
Three Months Ended
----------------------------------
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . . . . $ 18,744 $ 14,381
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization . . . . . 8,096 7,467
Deferred tax expense. . . . . . . . . . 1,132 426
Compensation expense under stock
grant plan. . . . . . . . . . . . . . 190 191
Other . . . . . . . . . . . . . . . . . (6) (22)
Net change in receivables, inventory,
prepaids, payables and
accrued liabilities. . . . . . . . . . 14,837 6,679
------- -------
Cash provided by operations. . . . . 42,993 29,122
------- -------
Investing activities:
Purchases of property and equipment . . (18,849) (19,249)
Additions to notes receivable . . . . . (696) (876)
Payments received on notes receivable . 206 753
(Increase) decrease in assets held for
resale, investments, deferred charges
and other assets . . . . . . . . . . . 1,725 (618)
------- -------
Cash used in investing activities. . . . (17,614) (19,990)
------- -------
Financing activities:
Payments on debt and line of credit . . . (13,696) (10,845)
Proceeds on long term debt. . . . . . . . 5,521
Exercise of stock options . . . . . . . . 484 774
Redeemable preferred stock dividends. . . (59) (60)
Treasury stock acquired . . . . . . . . . (5,980)
Other . . . . . . . . . . . . . . . . . . 187 533
-------- --------
Cash used in financing activities. . . . (19,064) (4,077)
-------- --------
Increase in cash and cash equivalents . . 6,315 5,055
Cash and cash equivalents, beginning
of period . . . . . . . . . . . . . . . 2,731 3,210
------- -------
Cash and cash equivalents, end of period . $ 9,046 $ 8,265
======= ========
See notes to consolidated financial statements.
</TABLE>
Page 5
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 April 2, 2000 and April 4, 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 April 2, 2000 and
April 4, 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
---------------------------
April 2, April 4,
2000 1999
------- --------
<S> <C> <C>
Net income . . . . . . . . . . . . . . $18,744 $14,381
Accretion of redeemable
preferred stock . . . . . . . . . . (26) (25)
Redeemable preferred
stock dividends . . . . . . . . . . (59) (60)
------- -------
Adjusted income applicable to common
and potential common shares. . . . . $18,659 $14,296
======= =======
Basic:
Weighted average common shares
outstanding. . . . . . . . . . . 26,868 26,979
======= =======
Earnings per common share. . . . . $ .69 $ .53
======= =======
Diluted:
Weighted average common shares
outstanding . . . . . . . . . . 26,868 26,979
Potential common shares for stock
options and stock grants . . . 771 644
------- -------
Weighted average shares outstanding. 27,639 27,623
======= =======
Earnings per common and potential
common share . . . . . . . . . $ .68 $ .52
======= =======
</TABLE>
Page 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
First Quarter 2000 Compared to First Quarter 1999
- -------------------------------------------------
A summary of the results of operations of the Company as a
percentage of revenues for the first quarters of 2000 and 1999 is
shown below.
<TABLE>
Three Months Ended
-------------------------------
April 2, 2000 April 4, 1999
------------- -------------
<S> <C> <C>
Revenues . . . . . . . . . . . . . 100.0% 100.0%
Costs and expenses:
Cost of sales. . . . . . . . . . 43.5 43.6
Selling, general and
administrative . . . . . . . . 14.1 14.4
Depreciation and amortization 5.7 6.3
Interest expense . . . . . . . . .5 .6
Other operating expenses 14.5 15.1
----- -----
78.3 80.0
----- -----
Income before income taxes 21.7 20.0
Income tax expense . . . . . . 8.4 7.9
------- -------
Net income . . . . . . . . . . . . 13.3% 12.1%
======= =======
</TABLE>
Revenues
--------
Revenues increased to $141.3 million in the first quarter of
2000 from $118.4 million in the first quarter of 1999 due to an
increase in the number of Company-operated stores and an increase
of 7.7% in comparable store sales of the Company's Chuck E.
Cheese's stores which were open during all of the first quarters of
both 2000 and 1999. During 1999, the Company opened 23 new
restaurants and acquired one restaurant from a franchisee. During
the first three months of 2000, the Company opened nine new stores.
Management believes that sales comparisons during the first quarter
were favorably impacted by the timing of the Easter holiday. Menu
prices increased 1.5% between the periods.
Costs and Expenses
-------------------
Costs and expenses as a percentage of revenues decreased to
78.3% in the first quarter of 2000 from 80.0% in the first quarter
of 1999.
Cost of sales decreased as a percentage of revenues to 43.5% in
the first quarter of 2000 from 43.6% in the comparable period of
1999. Cost of food, beverage, prize and merchandise items as a
percentage of restaurant sales decreased to 14.9% in the first
quarter of 2000 from 15.3% in the first quarter of 1999 primarily
due to a decrease in cheese costs. Store labor expenses as a
percentage of store sales increased to 25.7% in the first quarter
of 2000 from 25.4% in the first quarter of 1999 primarily due to
wage increases and new store staffing.
Selling, general and administrative expenses as a percentage of
revenues decreased to 14.1% in the first quarter of 2000 from
14.4% in the first quarter of 1999 due primarily to a decrease in
advertising and corporate overhead costs as a percentage of
revenues.
Depreciation and amortization expenses as a percentage of
revenues decreased to 5.7% in the first quarter of 2000 from 6.3%
in the first quarter of 1999 primarily due to the increase in
comparable store sales.
Interest expense as a percentage of revenues decreased to .5% in
the first quarter of 2000 from .6% in the first quarter of 1999 due
to increased revenues and lower interest rates. Interest expense
on incremental debt incurred to finance assets held for resale has
been allocated to the basis of such assets.
Other operating expenses decreased as a percentage of revenues
to 14.5% in the first quarter of 2000 from 15.1% in the first
quarter of 1999 primarily due to the increase in comparable store
sales and the fact that a significant portion of operating costs
are fixed.
Page 7
The Company's effective income tax rate was 38.8% in the first
quarter of 2000 compared to 39.2% in the first quarter of 1999
primarily due to lower estimated state tax rates.
Net Income
-----------
The Company had net income of $18.8 million in the first quarter
of 2000 compared to $14.4 million in the first quarter of 1999 due
to the changes in revenues and expenses discussed above. The
Company's diluted earnings per share increased to $.68 per share in
the first quarter of 2000 from $.52 per share in the first quarter
of 1999.
Financial Condition, Liquidity and Capital Resources
Cash provided by operations increased to $43.0 million in the
first three months of 2000 from $29.1 million in the comparable
period of 1999. Cash outflows from investing activities for the
first three months of 2000 were $17.6 million primarily related to
capital expenditures. Cash outflows from financing activities for
the first three months of 2000 were $19.1 million primarily
related to repayment of borrowings on the Company's line of credit
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 Company acquires land or 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 approximately 17
high sales volume stores in 2000 including 12 stores which will
receive an enhanced showroom package. During the first three
months of 2000, the Company opened nine new restaurants and
expanded 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 preliminary allocation of the purchase
price is approximately $7.2 million to property and equipment and
$11.8 million to assets held for resale. Subsequent to the
purchase, the Company has incurred incremental holding costs of
approximately $2.6 million and realized sale proceeds of $4.3
million related to the assets held for resale. While the Company
has not yet finalized the purchase price allocation, it is not
expected that the final allocation will be materially different
from the results reflected herein.
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 May 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 2000, the Company's line of credit agreement was amended to
provide borrowings of up to $55 million with $10 million maturing
in 2000 and $45 million maturing in 2001. The Company's total
credit facility of $67.8 million consists of $12.8 million in term
notes and the $55 million line of credit. Term notes totaling $12
million with annual principal payments of $6 million and annual
interest of 10.02% mature in 2001. Term notes totaling $833,000
with one remaining quarterly principal payment and annual interest
equal to LIBOR plus 3.5% matures in 2000. Interest under the $55
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%. As of April 2, 2000, $32 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. The Company is currently considering increasing
the available borrowings under the line of credit agreement and
extending the maturity date.
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 8
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.
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 to report during quarter for which this report is filed.
Item 5. Other Information.
None to report during quarter for which this report is filed.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
10(a)(1) Fifth Modification and Extension
Agreement, to the Loan Agreement
dated June 27, 1995) in the stated
amount of $10,000,000, between Bank
One, Texas, N.A. and the Company.
10(a)(2) Supplemental Revolving Credit
Note, in the stated amount of
$10,000,000, dated August 1,
1996, between Bank One, Texas,
N.A. and the Company.
27 Financial Data Schedule
b) Reports on Form 8-K
None filed during the quarter for which this report is filed.
Page 9
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: May 16, 2000 By: /s/ Richard M. Frank
----------------------
Richard M. Frank
Chairman of the Board and
Chief Executive Officer
Page 10
EXHIBIT INDEX
Exhibit
Number Description Page No.
- ------- ----------- -----
10(a)(1 Fifth Modification and Extension
Agreement, (to the Loan Agreement
dated June 27, 1995) in the
stated amount of $10,000,000,
dated January 10, 2000,
between Bank One, Texas, N.A.
and the Company. 12
10(a)(2) Supplemental Revolving Credit Note,
in the stated amount of $10,000,000,
dated January 10, 2000, between Bank
One, Texas, N.A. and the Company. 20
Page 11
EXHIBIT 10(b)(1)
FIFTH MODIFICATION AGREEMENT
Date: Effective January 10, 2000
Bank One: BANK ONE, TEXAS, NATIONAL ASSOCIATION,
a national banking association
Bank One's Address: 1717 Main Street, 3rd Floor
Dallas, Texas 75201
Company:
CEC ENTERTAINMENT, INC. (f/k/a 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 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 and Company modified the Loan to extend the maturity
date to June 1, 2000 and make certain other changes in the terms
and conditions of the Loan evidenced, inter alia, by the following
documents:
1. Second Modification and Extension Agreement dated effective
June 14, 1998 by and between Company and Bank One for an aggregate
Loan in the amount of $15,000,000.00.
2. Second Restated Revolving Credit Note dated effective June
14, 1998 in the original principal amount of $15,000,000.00 signed
by Company and payable to Bank One.
E. Bank One and Company modified the Loan to increase its principal
balance to $30,000,000.00 and make certain other changes in the
terms and conditions of the Loan evidenced, inter alia, by the
following documents:
1. Third Modification dated effective December 4, 1998 by and
between Company and Bank One for an aggregate Loan in the amount of
$30,000,000.00.
2. Third Restated Revolving Credit Note dated effective
December 4, 1998 in the original principal amount of $30,000,000.00
signed by Company and payable to Bank One.
Bank One and Company modified the Loan to extend the maturity date
to June 1, 2001, increase its principal balance to $45,000,000.00
and make certain other changes in the terms and conditions of the
Loan evidenced, inter alia, by the following documents:
1. Fourth Modification and Extension Agreement dated effective
July 16, 1999 by and between Company and Bank One for an aggregate
Loan in the amount of $45,000,000.00.
2. Fourth Restated Revolving Credit Note dated effective July
16, 1999 in the original principal amount of $45,000,000.00 signed
by Company and payable to Bank One.
G. Bank One is the owner and holder of the Note, Loan Agreement,
and other Loan Documents.
H. Company has requested that Bank One increase the Revolving
Credit Commitment by extending a supplemental revolving credit
facility to Company in the original principal amount of
$10,000,000.00 to be evidenced by an additional promissory note and
to be subject to the terms of the 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 this Agreement.
2. Principal Balance. Bank One and Company acknowledge that as
of the date hereof the outstanding principal balance of the Note is
FORTY-FIVE MILLION AND NO/100 DOLLARS ($45,000,000.00).
3. Supplemental Credit Facility. Subject to the terms and
conditions set forth in the Loan Agreement and the other
agreements, instruments and documents evidencing, securing,
governing, guaranteeing and/or pertaining to the Loan, and as
modified by this Agreement, Bank One hereby agrees to provide to
Company a Supplemental Revolving Credit Loan (herein referred to as
the "Supplemental Loan"). Subject to the terms and conditions set
forth herein, Bank One agrees to lend to Company, on a revolving
basis from time to time during the period commencing on the date
hereof and continuing through the maturity date of the promissory
note evidencing this Supplemental Loan from time to time, such
amounts as Company may request hereunder; provided, however, the
total principal amount outstanding at any time shall not exceed Ten
Million and No/100 Dollars ($10,000,000.00) (herein referred to as
the "Supplemental Commitment"). Subject to the terms and
conditions hereof, Company may borrow, repay and reborrow
hereunder. The sums advanced under the Supplemental Loan shall be
used for general working capital needs. All advances, whether one
or more, under the Supplemental Loan shall be collectively called
the "Supplemental Loan." The original stated principal amount of
the Supplemental Note shall be included in the definition of
"Revolving Credit Commitment" stated in the Loan Agreement. Except
for the different or unique terms specified and applied to the
Supplemental Loan, Supplemental Note or both by this Agreement, the
Supplemental Loan, Supplemental Note or both shall be subject to
the remainder of the terms of the Loan Documents.
5. Promissory Note. The Supplemental Loan shall be evidenced
by the promissory note (herein referred to as the "Supplemental
Note") duly executed by Company and payable to the order of Bank
One, in form and substance as attached hereto as Exhibit "A".
Interest on the Note shall accrue at the rate set forth therein.
The principal of and interest on the Note shall be due and payable
in accordance with the terms and conditions set forth in the
Supplemental Note and in the Loan Agreement. The interest rate
will not exceed the maximum rate permitted by applicable law.
6. Applicable Margin. The definition of "Applicable Margin" in
Section 1.1 of the Loan Agreement shall be supplemented with an
additional definition solely for calculating the rate of interest
on a Supplemental Loan as follows:
"Applicable Margin" shall mean, solely for calculating the rate
of interest on a Supplemental Loan, 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 0.75% 2.75%
1.50 to 1.99 0.50% 2.25%
1.00 to 1.49 0.25% 1.75%
0.75 to 0.99 0.00% 1.50%
Less than 0.74 (0.25%) 1.25%
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.
7. Facility Fee. The Company shall pay a facility fee to Bank
One equal to 0.375% per annum of the average daily, unused amount
of the Supplemental Commitment for the period from the date of this
Agreement to and including the maturity date of the Supplemental
Note, payable quarterly in arrears beginning on March 31, 2000 and
on the end of each calendar quarter thereafter. The facility fee
shall be calculated on the basis of a 360-day year for the actual
number of days elapsed.
8. 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 and Supplemental Note.
Company hereby promises to pay to Bank One the indebtedness
evidenced by the Note and Supplemental 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, Supplemental Note and all other Loan
Documents.
9. 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 and the Supplemental Note.
The promissory notes defined herein and in all other Loan Documents
as the "Note" or "Revolving Credit Note(s)" shall hereafter include
the Supplemental Note. The Loan Agreement, the Note and the other
Loan Documents are hereby ratified and confirmed in all respects.
10. Ratification by Guarantors. Each of ShowBiz Nevada, Inc.,
a Nevada corporation, ShowBiz Merchandising, 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 Agreement dated as
of September 29, 1997, as being binding and continuing, consents to
the terms of this Agreement and acknowledges that the Indebtedness
evidenced by the Supplemental Note is and shall be part of the
Guaranteed Obligations, as defined in its Guarantee.
11. 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.
12. Expenses. Contemporaneously with the execution and delivery
thereof, 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.
13. 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.
14. 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.
15. 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.
16. 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, tortuous
interference with contractual relations, tortuous interference with
corporate governance or prospective business advantage, breach of
contract, deceptive trade practices, libel, slander or conspiracy.
17. 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.
18. 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: ---------------------
Name: Paul C. Koch
Title: Vice President
CEC ENTERTAINMENT, INC.
By: ---------------------
Name: Larry G. Page
Title: Executive Vice President, Chief Financial
Officer and Treasurer
SHOWBIZ NEVADA, INC.
By: ---------------------
Name: Don McKechnie
Title: Director and President
SHOWBIZ MERCHANDISING, INC.
By: ---------------------
Name: Don McKechnie
Title: Director and President
SPT PROPERTIES COMPANY, INC.
By: ----------------------
Name: Don McKechnie
Title: Director and President
SHOWBIZ CAYMAN ISLANDS, INC.
By: -----------------------
Name: Don McKechnie
Title: Director and President
STATE OF TEXAS &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January ----,
2000, 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 &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January 10, 2000,
by Larry G. Page, Executive Vice President, Chief Financial Officer
and Treasurer of CEC ENTERTAINMENT, 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 &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January 10, 2000,
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 &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January 10, 2000,
by Don McKechnie, Director and President of SHOWBIZ MERCHANDISING,
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 &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January 10, 2000,
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 &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January 10, 2000,
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 10(b)(2)
SUPPLEMENTAL REVOLVING CREDIT NOTE
$10,000,000.00 Dallas, Texas January 10, 2000
FOR VALUE RECEIVED, the undersigned, CEC ENTERTAINMENT, INC.
(f/k/a SHOWBIZ PIZZA TIME, INC.), a Kansas corporation ("Company"),
hereby unconditionally promises to pay to the order of BANK ONE,
TEXAS, National Association ("Bank One") at the office of Bank One
or any successor, currently located at 1717 Main Street, Third
Floor, Dallas, Texas 75201, on September 30, 2000, in lawful
money of the United States of America and immediately available
funds, an amount equal to the lesser of (a) TEN MILLION AND NO/100
DOLLARS ($10,000,000.00), or (b) the aggregate unpaid principal
amount of all Supplemental Loans made by Bank One to the Company
pursuant to 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 360-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 Supplemental Loans made by Bank One pursuant to 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 the
Supplemental Loan 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 the Supplemental 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 the Texas
Finance Code, 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 the Texas Finance Code, 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 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 DALLAS, TEXAS, IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS 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 Supplemental 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 the Supplemental Note described in that certain
Fifth Modification Agreement dated on even date herewith by and
between the Company and Bank One and is subject to the terms of
that Fifth Modification Agreement which specifies and applies
different or unique terms to this Note which are distinct from
other Revolving Credit Loans or Revolving Credit Notes defined or
described in the Loan Agreement.
IN WITNESS WHEREOF, the Company has executed and delivered this
Note as of the date first written above.
CEC ENTERTAINMENT, INC.
By: ---------------------------------
Name: Larry G. Page
Title: Executive Vice President, Chief Financial
Officer and Treasurer
STATE OF TEXAS &
&
COUNTY OF DALLAS &
This instrument was acknowledged before me on January 10, 2000,
by Larry G. Page, Executive Vice President, Chief Financial Officer
and Treasurer of CEC ENTERTAINMENT, INC., a Kansas corporation, on
behalf of said corporation.
----------------------------------
Notary Public, State of Texas
(SEAL)
----------------------------------
(Please Print Name of Notary)
My Commission expires:
------------------------
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> APR-02-2000
<CASH> 9,046
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<RECEIVABLES> 4,152
<ALLOWANCES> 18
<INVENTORY> 8,846
<CURRENT-ASSETS> 40,602
<PP&E> 444,175
<DEPRECIATION> 152,778
<TOTAL-ASSETS> 340,230
<CURRENT-LIABILITIES> 55,265
<BONDS> 38,695
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2,374
0
<OTHER-SE> 231,385
<TOTAL-LIABILITY-AND-EQUITY> 340,230
<SALES> 140,346
<TOTAL-REVENUES> 141,347
<CGS> 61,550
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