CEC Entertainment, Inc. Reports Financial Results for the 2016 Fourth Quarter
Total revenues increased 3.1% over the prior year fiscal fourth quarter, excluding the impact of the extra week of operations in 2015, to $204.6 million
CEC Entertainment, Inc. today announced financial results for its fourth quarter ended January 1, 2017.
- Total revenues increased 3.1% over the prior year fiscal fourth quarter, excluding the impact of the extra week of operations in 2015 (1), to $204.6 million
- On a fiscal period basis, excluding an extra week of operations in 2015, fourth quarter same venue sales for our Chuck E. Cheese's and Peter Piper Pizza venues increased 3.1% over the 2015 fiscal fourth quarter
- Fourth quarter same venue sales for our Chuck E. Cheese's and Peter Piper Pizza venues, excluding the extra week of operations in 2015, decreased 1.6% on a same calendar week basis, compared to the prior year
- Fiscal year 2016 same venue sales, excluding the impact of the extra week of operations, finished up 2.8% on a calendar week basis and 3.0% on a fiscal week basis
- The new PlayPass system was deployed in 268 venues as of January 1, 2017
"In the fourth quarter, we continued to make great progress in advancing our brand and enhancing the experience we deliver to our guests," said Tom Leverton, Chief Executive Officer. "Throughout 2016 we introduced PlayPass to 227 venues, implemented our labor and inventory management systems, launched a national lunchtime buffet program and continued to refine our marketing messaging. Additionally, we successfully opened the first four new Company-operated Peter Piper Pizza venues since we purchased the brand in 2014, and our franchisees opened 14 new international locations. Looking into 2017, we expect to complete the PlayPass implementation nationwide and expand our Peter Piper presence further, while continuing to further refine our food and entertainment offerings and continually enhance our in-store experience."
Fourth Quarter Results (1)
Same venue sales for our Company operated venues increased 3.1%, and total revenues increased $6.3 million to $204.6 millionduring the fourth quarter of 2016, excluding the impact of the additional week of operations in the fourth quarter of 2015. The extra week contributed $24.7 million of revenue to the 2015 quarter which resulted in total revenue in the 2015 quarter of $223.1 million. In addition to the extra week, the shift of the Christmas and New Year's holidays from Friday in 2015 to a Sunday in 2016 negatively impacted revenue, offset by the increase in same venue sales at both our Chuck E. Cheese's and Peter Piper Pizza brands on a 52-week fiscal period basis. Additionally, Company venue sales for the fourth quarter of 2016 were impacted by approximately $2.5 millionof incremental deferred revenue compared to the 2015 quarter, as a result of the implementation of our proprietary PlayPass card system.
The Company reported a net loss of $10.1 million for the fourth quarter of 2016, compared to a net loss of $14.2 million for the fourth quarter of 2015. The Company estimates the extra week of operations in fiscal 2015 benefited the fourth quarter of 2015 net income by $3.5 million. In addition to the extra week of operations in 2015, net income was impacted by improved results of operations on a 52-week basis, and a decrease in Merger related litigation costs and marketing costs, offset by $2.5 million in incremental deferred revenue as a result of the implementation of PlayPass.
Fourth quarter 2016 Adjusted EBITDA increased $3.2 million, or 9.5%, to $36.9 million excluding the estimated $11.5 million attributable to the extra week of operations in 2015. For the 14-week period in the fourth quarter of 2015, Adjusted EBITDA was $45.2 million.
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_______________________ |
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(1) |
Our fiscal year ending January 1, 2017 (fiscal 2016) consisted of 52 weeks and our fiscal year ended January 3, 2016 (fiscal 2015) consisted of 53 weeks. As a result of the 53-week fiscal year in 2015, our 2016 fiscal year began one calendar week later than our 2015 fiscal year. In order to provide useful information and to better analyze our business, we have provided same venue sales presented on both a fiscal week basis and calendar week basis. Same venue sales change on a calendar week basis compares the results for the period from October 3, 2016 through January 1, 2017 (weeks 40 through 52 of our 2016 fiscal year) to the results for the period from October 5, 2015 through January 3, 2016 (weeks 41 through 53 of our 2015 fiscal year). We believe same venue sales change calculated on a same calendar week basis, excluding the additional week of operations in fiscal 2015, is more indicative of the operating trends in our business. However, we also recognize that same venue sales change calculated on a fiscal week basis is a useful measure when analyzing year-over-year changes in our financial results. |
|
(2) |
For our definition of Adjusted EBITDA, see the financial table "Reconciliation of Non-GAAP Financial Measures" included within this press release. |
Balance Sheet and Liquidity
As of January 1, 2017, cash and cash equivalents were $61.0 million, and the principal outstanding on our debt was $1.0 billion, with net availability of $140.1 million on our undrawn revolving credit facility. During the fourth quarter of 2016, we had capital expenditures of $23.8 million, of which $7.5 million related to our PlayPass initiative and another $10.0 million related to other growth initiatives. In addition, we had $1.5 million in capital expenditures related to IT initiatives.
As of January 1, 2017, the Company's system-wide portfolio consisted of:
|
Chuck E. Cheese's |
Peter Piper Pizza |
Total |
|||||||
|
Company operated |
523 |
36 |
559 |
||||||
|
Domestic franchised |
29 |
62 |
91 |
||||||
|
International franchised |
51 |
46 |
97 |
||||||
|
Total |
603 |
144 |
747 |
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About CEC Entertainment, Inc.
For 40 years, CEC Entertainment has served as the nationally recognized leader in family dining and entertainment with both its Chuck E. Cheese's and Peter Piper Pizza restaurants. As the place where a million happy birthdays are celebrated every year, Chuck E. Cheese's goal is to create positive, lifelong memories for families through fun, food, and play and is the place Where A Kid Can Be A Kid®. Committed to providing a fun, safe environment, Chuck E. Cheese's helps protect families through industry-leading programs such as Kid Check®. As a strong advocate for its local communities, Chuck E. Cheese's has donated more than $14 million to schools through its fundraising programs and supports its national charity partner, Big Brothers Big Sisters. Peter Piper Pizza, with its neighborhood pizzeria feel, features dining, entertainment and carryout. The solution to 'family night out', Peter Piper Pizza takes pride in delivering a food first, parent friendly experience that reconnects family and friends. Expanding nationally, Peter Piper Pizza recently opened locations in Oklahoma and Nevada featuring an all new prototype design. As of January 1, 2017 the Company and its franchisees operated a system of 603 Chuck E. Cheese's and 144 Peter Piper Pizza venues, with locations in 47 states and 12 foreign countries and territories.
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CEC ENTERTAINMENT, INC. |
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Three Months Ended |
Twelve Months Ended |
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January 1, 2017 |
January 3, 2016 |
January 1, 2017 |
January 3, 2016 |
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REVENUES: |
||||||||||||||||||||||||||
|
Food and beverage sales |
$ |
93,469 |
45.7% |
$ |
99,170 |
44.5% |
$ |
415,059 |
44.9% |
$ |
408,095 |
44.2% |
||||||||||||||
|
Entertainment and merchandise sales |
106,277 |
51.9% |
119,657 |
53.6% |
490,255 |
53.1% |
497,015 |
53.9% |
||||||||||||||||||
|
Total Company venue sales |
199,746 |
97.6% |
218,827 |
98.1% |
905,314 |
98.0% |
905,110 |
98.1% |
||||||||||||||||||
|
Franchise fees and royalties |
4,898 |
2.4% |
4,238 |
1.9% |
18,339 |
2.0% |
17,479 |
1.9% |
||||||||||||||||||
|
Total revenues |
204,644 |
100.0% |
223,065 |
100.0% |
923,653 |
100.0% |
922,589 |
100.0% |
||||||||||||||||||
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OPERATING COSTS AND EXPENSES: |
||||||||||||||||||||||||||
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Company venue operating costs: |
||||||||||||||||||||||||||
|
Cost of food and beverage (exclusive of items shown separately below) (1) |
23,613 |
25.3% |
26,225 |
26.4% |
104,315 |
25.1% |
104,434 |
25.6% |
||||||||||||||||||
|
Cost of entertainment and merchandise (exclusive of items shown separately below) (2) |
7,010 |
6.6% |
8,120 |
6.8% |
32,014 |
6.5% |
31,519 |
6.3% |
||||||||||||||||||
|
Total cost of food, beverage, entertainment and merchandise (3) |
30,623 |
15.3% |
34,345 |
15.7% |
136,329 |
15.1% |
135,953 |
15.0% |
||||||||||||||||||
|
Labor expenses (3) |
60,256 |
30.2% |
64,179 |
29.3% |
251,426 |
27.8% |
250,584 |
27.7% |
||||||||||||||||||
|
Depreciation and amortization (3) |
28,287 |
14.2% |
28,630 |
13.1% |
113,316 |
12.5% |
115,236 |
12.7% |
||||||||||||||||||
|
Rent expense (3) |
23,688 |
11.9% |
23,971 |
11.0% |
96,006 |
10.6% |
96,669 |
10.7% |
||||||||||||||||||
|
Other venue operating expenses (3) |
36,726 |
18.4% |
37,643 |
17.2% |
148,869 |
16.4% |
143,078 |
15.8% |
||||||||||||||||||
|
Total Company venue operating costs (3) |
179,580 |
89.9% |
188,768 |
86.3% |
745,946 |
82.4% |
741,520 |
81.9% |
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Other costs and expenses: |
||||||||||||||||||||||||||
|
Advertising expense |
9,365 |
4.6% |
10,807 |
4.8% |
46,142 |
5.0% |
47,146 |
5.1% |
||||||||||||||||||
|
General and administrative expenses |
16,041 |
7.8% |
17,381 |
7.8% |
67,264 |
7.3% |
66,003 |
7.2% |
||||||||||||||||||
|
Transaction, severance and related litigation costs |
(50) |
— % |
7,976 |
3.6% |
1,299 |
0.1% |
11,914 |
1.3% |
||||||||||||||||||
|
Asset impairments |
778 |
0.4% |
— |
— % |
1,550 |
0.2% |
875 |
0.1% |
||||||||||||||||||
|
Total operating costs and expenses |
205,714 |
100.5% |
224,932 |
100.8% |
862,201 |
93.3% |
867,458 |
94.0% |
||||||||||||||||||
|
Operating income (loss) |
(1,070) |
(0.5)% |
(1,867) |
(0.8)% |
61,452 |
6.7% |
55,131 |
6.0% |
||||||||||||||||||
|
Interest expense |
16,326 |
8.0% |
18,550 |
8.3% |
67,745 |
7.3% |
70,582 |
7.7% |
||||||||||||||||||
|
Loss before income taxes |
(17,396) |
(8.5)% |
(20,417) |
(9.2)% |
(6,293) |
(0.7)% |
(15,451) |
(1.7)% |
||||||||||||||||||
|
Income tax benefit |
(7,270) |
(3.6)% |
(6,259) |
(2.8)% |
(2,626) |
(0.3)% |
(2,941) |
(0.3)% |
||||||||||||||||||
|
Net loss |
$ |
(10,126) |
(4.9)% |
$ |
(14,158) |
(6.3)% |
$ |
(3,667) |
(0.4)% |
$ |
(12,510) |
(1.4)% |
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________________________ |
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Percentages are expressed as a percent of total revenues (except as otherwise noted). |
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|
(1) |
Percentage amount expressed as a percentage of food and beverage sales. |
|
|
(2) |
Percentage amount expressed as a percentage of entertainment and merchandise sales. |
|
|
(3) |
Percentage amount expressed as a percentage of total Company venue sales. |
|
|
Due to rounding, percentages presented in the table above may not sum to total. The percentage amounts for the components of cost of food and beverage and the cost of entertainment and merchandise may not sum to total due to the fact that cost of food and beverage and cost of entertainment and merchandise are expressed as a percentage of related food and beverage sales and entertainment and merchandise sales, as opposed to total Company venue sales. |
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CEC ENTERTAINMENT, INC. |
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January 1, |
January 3, |
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|
ASSETS |
||||||
|
Current assets: |
||||||
|
Cash and cash equivalents |
$ |
61,023 |
$ |
50,654 |
||
|
Other current assets |
63,938 |
67,434 |
||||
|
Total current assets |
124,961 |
118,088 |
||||
|
Property and equipment, net |
592,886 |
629,047 |
||||
|
Goodwill |
483,876 |
483,876 |
||||
|
Intangible assets, net |
484,083 |
488,095 |
||||
|
Other noncurrent assets |
24,306 |
13,929 |
||||
|
Total assets |
$ |
1,710,112 |
$ |
1,733,035 |
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|
LIABILITIES AND STOCKHOLDER'S EQUITY |
||||||
|
Current liabilities: |
||||||
|
Bank indebtedness and other long-term debt, current portion |
$ |
7,613 |
$ |
7,650 |
||
|
Other current liabilities |
102,578 |
106,463 |
||||
|
Total current liabilities |
110,191 |
114,113 |
||||
|
Capital lease obligations, less current portion |
13,602 |
15,044 |
||||
|
Bank indebtedness and other long term debt, net of deferred financing costs, less current portion |
968,266 |
971,333 |
||||
|
Deferred tax liability |
186,290 |
201,734 |
||||
|
Other noncurrent liabilities |
225,758 |
222,265 |
||||
|
Total liabilities |
1,504,107 |
1,524,489 |
||||
|
Stockholder's equity: |
||||||
|
Common stock, $0.01 par value; authorized 1,000 shares; 200 shares issued as of January 1, 2017 and January 3, 2016 |
— |
— |
||||
|
Capital in excess of par value |
357,166 |
356,460 |
||||
|
Accumulated deficit |
(148,265) |
(144,598) |
||||
|
Accumulated other comprehensive loss |
(2,896) |
(3,316) |
||||
|
Total stockholder's equity |
206,005 |
208,546 |
||||
|
Total liabilities and stockholder's equity |
$ |
1,710,112 |
$ |
1,733,035 |
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CEC ENTERTAINMENT, INC. |
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Twelve Months Ended |
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|
January 1, |
January 3, |
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|
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
|
Net loss |
$ |
(3,667) |
$ |
(12,510) |
||
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||
|
Depreciation and amortization |
119,569 |
119,294 |
||||
|
Deferred income taxes |
(15,521) |
(16,748) |
||||
|
Stock-based compensation expense |
689 |
838 |
||||
|
Amortization of lease related liabilities |
(448) |
87 |
||||
|
Amortization of original issue discount and deferred debt financing costs |
4,546 |
4,634 |
||||
|
Loss on asset disposals, net |
8,520 |
7,729 |
||||
|
Asset impairments |
1,550 |
875 |
||||
|
Non-cash rent expense |
6,873 |
8,218 |
||||
|
Other adjustments |
(70) |
(951) |
||||
|
Changes in operating assets and liabilities: |
||||||
|
Operating assets |
(5,036) |
(6,433) |
||||
|
Operating liabilities |
1,682 |
(4,420) |
||||
|
Net cash provided by operating activities |
118,687 |
100,613 |
||||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
|
Acquisition of Peter Piper Pizza |
— |
(663) |
||||
|
Purchases of property and equipment |
(88,680) |
(73,034) |
||||
|
Development of internal use software |
(10,455) |
(4,802) |
||||
|
Proceeds from sale of property and equipment |
696 |
308 |
||||
|
Net cash used in investing activities |
(98,439) |
(78,191) |
||||
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
|
Repayments on senior term loan |
(7,600) |
(9,500) |
||||
|
Other financing activities |
(2,495) |
(72,099) |
||||
|
Net cash used in financing activities |
(10,095) |
(81,599) |
||||
|
Effect of foreign exchange rate changes on cash |
216 |
(1,163) |
||||
|
Change in cash and cash equivalents |
10,369 |
(60,340) |
||||
|
Cash and cash equivalents at beginning of period |
50,654 |
110,994 |
||||
|
Cash and cash equivalents at end of period |
$ |
61,023 |
$ |
50,654 |
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CEC ENTERTAINMENT, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
(in thousands, except percentages)
Non-GAAP Financial Measures
Certain financial measures presented in this press release, such as Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA") and Adjusted EBITDA as a percentage of revenues ("Adjusted EBITDA Margin") are not recognized terms under accounting principles generally accepted in the United States ("GAAP"). The Company believes that the presentation of these measures is appropriate to provide additional information to investors about certain material non-cash items and about unusual items that the Company's management does not expect to continue at the same level in the future, as well as other items. Further, the Company believes that these measures provide a meaningful measure of operating profitability because the Company's management uses them for performance evaluations and compensation measures for the Company's executives, to supplement GAAP measures of performance in the evaluation of the effectiveness of the Company's business strategies, to make budgeting decisions and to compare the Company's performance against that of other peer companies using similar measures. The Company also presents Adjusted EBITDA because it is substantially similar to Credit Agreement EBITDA, a measure used in calculating financial ratios and other calculations under our debt agreements, except for the Change in deferred amusement revenue. By reporting Adjusted EBITDA, the Company provides a basis for comparison of its business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.
The Company's definition of Adjusted EBITDA allows for the exclusion of certain non-cash and other income and expense items that are used in calculating net income from continuing operations. However, these are items that may recur, vary greatly and can be difficult to predict. They can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these items can represent the reduction of cash that could be used for other corporate purposes. These measures should not be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures have important limitations as analytical tools, and users should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, the Company relies primarily on its GAAP results and uses Adjusted EBITDA and Adjusted EBITDA Margin only supplementally.
The following table sets forth a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA Margin for the periods shown:
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Three Months Ended |
Twelve Months Ended |
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|
January 1, |
January 3, |
January 1, |
January 3, |
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|
Total revenues |
$ |
204,644 |
$ |
223,065 |
$ |
923,653 |
$ |
922,589 |
||||||||
|
Net loss as reported |
$ |
(10,126) |
$ |
(14,158) |
$ |
(3,667) |
$ |
(12,510) |
||||||||
|
Interest expense |
16,326 |
18,550 |
67,745 |
70,582 |
||||||||||||
|
Income tax benefit |
(7,270) |
(6,259) |
(2,626) |
(2,941) |
||||||||||||
|
Depreciation and amortization |
29,402 |
29,697 |
119,569 |
119,294 |
||||||||||||
|
Non-cash impairments, gain or loss on disposal |
3,001 |
3,191 |
10,070 |
8,934 |
||||||||||||
|
Non-cash stock-based compensation |
167 |
106 |
689 |
838 |
||||||||||||
|
Rent expense book to cash |
1,375 |
2,021 |
7,852 |
9,100 |
||||||||||||
|
Franchise revenue, net cash received |
(14) |
895 |
113 |
1,217 |
||||||||||||
|
Impact of purchase accounting |
654 |
398 |
1,380 |
995 |
||||||||||||
|
Venue pre-opening costs |
702 |
253 |
1,591 |
792 |
||||||||||||
|
One-time items |
686 |
10,333 |
5,146 |
22,448 |
||||||||||||
|
Cost savings initiatives |
— |
682 |
62 |
2,187 |
||||||||||||
|
Change in deferred amusement revenue |
2,033 |
(512) |
4,388 |
851 |
||||||||||||
|
Adjusted EBITDA |
$ |
36,936 |
$ |
45,197 |
$ |
212,312 |
$ |
221,787 |
||||||||
|
Adjusted EBITDA Margin |
18.0% |
20.3% |
23.0% |
24.0% |
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|
CEC ENTERTAINMENT, INC. |
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|
Three Months Ended |
Twelve Months Ended |
||||||||||
|
January 1, |
January 3, |
January 1, |
January 3, |
||||||||
|
Number of Company-owned venues: |
|||||||||||
|
Beginning of period |
557 |
556 |
556 |
559 |
|||||||
|
New (1) |
2 |
2 |
6 |
5 |
|||||||
|
Closed (1) |
— |
(2) |
(3) |
(8) |
|||||||
|
End of period |
559 |
556 |
559 |
556 |
|||||||
|
Number of franchised venues: |
|||||||||||
|
Beginning of period |
185 |
173 |
176 |
172 |
|||||||
|
New (2) |
5 |
4 |
16 |
12 |
|||||||
|
Closed (2) |
(2) |
(1) |
(4) |
(8) |
|||||||
|
End of period |
188 |
176 |
188 |
176 |
|||||||
|
Total number of venues: |
|||||||||||
|
Beginning of period |
742 |
729 |
732 |
731 |
|||||||
|
New (3) |
7 |
6 |
22 |
17 |
|||||||
|
Closed (3) |
(2) |
(3) |
(7) |
(16) |
|||||||
|
End of period |
747 |
732 |
747 |
732 |
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|
____________________ |
|
|
(1) |
The number of new and closed Company-operated venues during the fourth quarter of 2015 and the 2015 fiscal year included one and two venues, respectively, that were relocated. |
|
(2) |
The number of new and closed franchise venues during the 2015 fiscal year included two venues that were relocated. |
|
(3) |
The number of new and closed venues during the fourth quarter of 2015 and the 2015 fiscal year included one and four venues, respectively, that were relocated. |
