CEC Entertainment, Inc. Reports Preliminary Second Quarter Results; Announces Review of Stock Option Granting Practices.IRVING, Texas Irving (pronounced 'er-ving') is a city located in the U.S. state of Texas within Dallas County. According to the 2000 U.S. Census, the city population was 191,615; the 2006 estimate was 201,927 according to the North Central Texas Council of Governments, and 196,084 according to -- CEC (Central Electronic Complex) The set of hardware that defines a mainframe, which includes the CPU(s), memory, channels, controllers and power supplies included in the box. Some CECs, such as IBM's Multiprise 2000 and 3000, include data storage devices as well. Entertainment, Inc. (NYSE NYSE See: New York Stock Exchange :CEC) today announced preliminary results for the second quarter and six months ended July July: see month. 2, 2006. The Company also announced that it has revised its strategic plan in order to provide a greater emphasis on achieving a higher return on investment by focusing on growing sales in existing restaurants and slowing new restaurant development. Revenues for the second quarter of 2006 increased to $176.2 million from $168.4 million in the second quarter of 2005. Net income in the second quarter of 2006 decreased to $12.6 million from $13.1 million in the same period of 2005 but diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of in the second quarter of 2006 increased to $0.38 per share compared to $0.36 per share in the second quarter of 2005. Revenues for the first six months of 2006 increased to $403.2 million from $382.5 million in the first six months of 2005. Net income was $41.8 million in the first six months of 2006 and $44.4 million in the same period of 2005 but diluted earnings per share in the first six months of 2006 increased to $1.23 per share compared to $1.20 per share in the first six months of 2005. Total revenues increased 4.6% in the second quarter of 2006 over the prior year due to new store development and an increase in comparable store sales of 1.2%. Insurance expense decreased $7.2 million in the second quarter from the prior year due to a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. development of workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. and general liability claims primarily relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc claims originating in the last 24 months. However, this benefit was partially offset by a $3.5 million asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge for 4 small market restaurants, a $1.1 million write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. of inventory and development costs for abandoned sites, and increased utility costs in the second quarter of this year. During the first six months of 2006, the Company generated operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of $87.7 million, invested $52.4 million primarily in new and existing stores and repurchased $66.8 million of its common stock. Outstanding borrowings on the Company's credit facility increased $25.7 million to $162.8 million at the end of the quarter. Following an in-depth in-depth adj. Detailed; thorough: an in-depth study. in-depth Adjective detailed or thorough: an in-depth analysis evaluation, the Company revised its strategic plan to provide a greater focus on growing comparable store sales and achieving a higher return on investment. The Company plans to increase its capital investment in existing restaurants to approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $48 million in 2006 compared to an average of $24 million over the past four years. The Company also plans to reduce the pace of new restaurant openings and intends to target development in densely dense adj. dens·er, dens·est 1. a. Having relatively high density. b. Crowded closely together; compact: a dense population. 2. populated pop·u·late tr.v. pop·u·lat·ed, pop·u·lat·ing, pop·u·lates 1. To supply with inhabitants, as by colonization; people. 2. areas that offer the potential for higher sales and returns on investment. Beginning in 2007, the Company expects to open approximately 8 to 12 new restaurants per year. The Company continues to focus on increasing the value to its guests with improved offers and increased distribution of coupons COUPONS. Those parts of a commercial instrument which are. to be cut, and which are evidence of something connected with the contract mentioned in the instrument. They are generally attached to certificates of loan, where the interest is payable at particular periods, and, when the , cross promotions and direct e-marketing. Richard Ri·chard , Joseph Henri Maurice Known as "Rocket." 1921-2000. Canadian hockey player. A right wing for the Montreal Canadiens (1942-1960), he led his team to eight Stanley Cup championships and was the first player to score 50 goals in a M. Frank, Chairman and Chief Executive Officer, stated that, "We are pleased with the solid comparable store sales performance of our restaurants in a difficult consumer environment, providing evidence that our strategic initiatives are taking hold and the Chuck chuck a hand grip to be attached to intramedullary pins to enable the surgeon to rotate or drive them into bone. E. Cheese brand is vibrant. As we move forward, our primary objective will continue to be building sales momentum in existing restaurants. We believe our strategic plan will allow the Company to enhance return on investment and increase free cash flow." Based on current estimates and excluding any potential impact resulting from our Audit Committee's review of stock option practices, the Company expects diluted earnings per share to range from $0.45 to $0.47 per share for the third quarter of 2006 and reaffirms its fiscal year guidance of $1.94 to $2.02 per share. In 2006, comparable store sales are expected to increase 2.0%-3.0% over the prior year and the Company plans to open 16-18 new restaurants, including 3 to 4 relocations. Mr. Frank added, "Our Company remains committed to returning capital to our shareholders as evidenced by our stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program. Since 2003, the Company has repurchased over $380 million of its common stock. We are confident that our focus on growing comparable store sales and achieving higher returns on invested capital, led by our talented and motivated mo·ti·vate tr.v. mo·ti·vat·ed, mo·ti·vat·ing, mo·ti·vates To provide with an incentive; move to action; impel. mo management team and employees, will allow us to continue to generate strong cash flow and deliver long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. value to our shareholders." Review of Stock Option Granting Practices The Company also announced today that the Audit Committee of its Board of Directors, which is comprised solely of independent directors, is reviewing the Company's practices relating to its stock option grants. This voluntary review was initiated in light of the recent media coverage regarding the stock option granting practices of publicly traded companies publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. . The Audit Committee plans to engage independent outside legal counsel to assist in the review. The Company will not be able to comment on any aspect of the review or possible outcome until after the Audit Committee completes its review. Results for the second quarter are preliminary until the review is completed. The timely filing of the Company's current report on Form 10-Q Form 10-Q See 10-Q. to be filed with the Securities Exchange Commission for the period ended July 2, 2006 due on August 11, 2006, is uncertain pending completion of the review. Certain statements in this press release, other than historical information, may be considered forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, and is subject to various risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or should underlying assumptions prove incorrect Incorrect means to not be correct and may also refer to:
CEC Entertainment, Inc. operates a system of 522 Chuck E. Cheese's <noinclude></noinclude> Chuck E. Cheese's is a chain of family entertainment centers. The concept centers around a basic sit-down pizza restaurant, complemented by arcade games, small rides, animatronic characters, and other popular diversions for young restaurants in 48 states, of which 477 are owned and operated by the Company.
CEC ENTERTAINMENT, INC.
PRELIMINARY CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(Thousands, except per share date)
Quarter Ended Year Ended
07/02/06 07/03/05 07/02/06 07/03/05
---------- --------- --------- ---------
Revenues:
Food and beverage $110,283 $109,455 $258,883 $248,499
Games and merchandise 65,139 58,253 142,644 132,495
Franchise fees and
royalties 747 685 1,631 1,480
Interest income 11 8 13 13
---------- --------- --------- ---------
176,180 168,401 403,171 382,487
---------- --------- --------- ---------
Costs and expenses:
Cost of sales:
Food, beverage and
related supplies 20,533 19,837 47,955 45,405
Games and merchandise 7,875 6,707 17,937 15,031
Labor 50,866 48,622 110,492 102,447
Selling, general and
administrative expenses 25,732 23,605 54,404 50,499
Depreciation and
amortization 16,145 15,780 32,064 30,177
Interest expense 2,246 984 3,949 1,707
Other operating expenses 32,488 31,659 69,098 65,214
---------- --------- --------- ---------
155,885 147,194 335,899 310,480
---------- --------- --------- ---------
Income before income taxes 20,295 21,207 67,272 72,007
Income taxes 7,671 8,122 25,429 27,579
---------- --------- --------- ---------
Net income $12,624 $13,085 $41,843 $44,428
========== ========= ========= =========
Earnings per share:
Basic $.39 $.37 $1.26 $1.24
Diluted $.38 $.36 $1.23 $1.20
Weighted average shares
outstanding:
Basic 32,745 35,255 33,182 35,736
Diluted 33,545 36,473 34,035 36,963
Note: 2005 earnings have been adjusted for equity based compensation
expense.
CEC ENTERTAINMENT, INC.
PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands, except share amounts)
July 2, January 1,
2006 2006
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $13,573 $12,184
Accounts receivable 16,983 20,323
Inventories 15,310 13,659
Prepaid expenses 9,439 7,882
Deferred tax asset 1,824 1,824
----------- -----------
Total current assets 57,129 55,872
----------- -----------
Property and equipment, net 607,426 592,255
----------- -----------
Other assets 1,792 2,201
----------- -----------
$666,347 $650,328
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $639 $594
Accounts payable 28,025 30,264
Accrued liabilities 34,530 27,791
----------- -----------
Total current liabilities 63,194 58,649
----------- -----------
Long-term debt, less current portion 174,749 148,974
----------- -----------
Deferred rent 66,224 61,877
----------- -----------
Deferred tax liability 18,114 15,388
----------- -----------
Accrued insurance 9,600 17,000
----------- -----------
Shareholders' equity:
Common stock, $.10 par value; authorized
100,000,000 shares; 56,667,433 and
56,115,658 shares issued, respectively 5,667 5,612
Capital in excess of par value 324,677 314,476
Retained earnings 510,241 468,398
Accumulated other comprehensive income 3,149 2,446
Less treasury shares of 24,459,450 and
22,499,815, respectively, at cost (509,268) (442,492)
----------- -----------
334,466 348,440
----------- -----------
$666,347 $650,328
=========== ===========
CEC ENTERTAINMENT, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
(Thousands)
Quarter Ended Year Ended
07/02/06 07/03/05 07/02/06 07/03/05
--------- --------- --------- ---------
Number of Company-owned
stores:
Beginning of period 477 453 475 449
New 1 3 5
Company purchased franchise
stores 1 1
Closed (1) (2)
--------- --------- --------- ---------
End of period 476 455 476 455
Number of franchise stores:
Beginning of period 45 45 44 46
New 1 1 1
Company purchased franchise
stores (1) (1)
Closed (1)
--------- --------- --------- ---------
End of period 45 45 45 45
|
|
||||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion