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CEC Entertainment, Inc. Reports Financial Results for the 2018 Third Quarter

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News From CEC Entertainment, Inc.

Transmitted by PR Newswire for Journalists on November 09, 2018 02:54 AM CET
         
 

CEC Entertainment, Inc. Reports Financial Results for the 2018 Third Quarter

 
 

IRVING, Texas, Nov. 8, 2018 - CEC Entertainment, Inc. (the “Company”) today announced financial results for its third quarter ended September 30, 2018.


Third quarter Results (1)


Comparable venue sales increased 2.2% in the third quarter of 2018 compared to the third quarter of 2017, and total revenues increased $7.6 million or 3.6% to $220.9 million in the third quarter. The increase in comparable venue sales was offset by a $1.5 million decrease in revenue due to temporary store closures and a net reduction of four Company-operated venues.


The Company reported a net loss of $9.5 million for the third quarter of 2018, compared to a net loss of $11.1 million for the third quarter of 2017. The net loss was positively impacted by the increase in Company-operated venue sales, a reduction in overhead expenses as a result of savings initiatives and cost reduction efforts, and lower marketing expenses. These favorable impacts were partially offset by higher labor expenses from wage inflation and increased merchandise costs related to the national launch of All You Can Play and “More Tickets” in the third quarter of 2018. Additionally, the net loss was impacted by a $5.3 million impairment charge related to some of our less profitable locations and a $1.6 million increase in interest expense driven by the impact of the increase in LIBOR rates on our variable rate debt.


“We were encouraged to be able to increase comparable venue sales for the second consecutive quarter,” said Tom Leverton, Chief Executive Officer. “We are focused on continuing the positive comparable venue sales growth momentum while driving profitability.  We were excited by the positive impact of the new All You Can Play game packages and More Tickets Per Play initiatives we launched nationally in the third quarter, and we are optimistic about additional planned initiatives and tests to drive even more improvements to the business.”


Adjusted EBITDA(1) for the third quarter of 2018 was $38.5 million, an increase of $4.0 million from the third quarter of 2017.


Balance Sheet and Liquidity


As of September 30, 2018, the Company had cash and cash equivalents of $84.4 million with net availability of $141.0 million on the undrawn revolving credit facility. There is $980.8 million principal outstanding on the Company’s long-term debt.


During the third quarter of 2018, the Company made $19.3 million of capital expenditures, of which $10.4 million related to growth initiatives, $1.1 million related to IT initiatives, and $7.8 million related to maintenance capital expenditures, primarily consisting of game enhancements and general venue capital expenditures.


                                       





(1)    

For our definition of Adjusted EBITDA, see the financial table “Reconciliation of Non-GAAP Financial Measures” included within this press release.

As of September 30, 2018, the Company’s system-wide portfolio consisted of:


                   


Chuck E. Cheese’s


Peter Piper Pizza


Total

Company operated


516


41


557

Domestic franchised


26


61


87

International franchised


65


45


110

Total


607


147


754

Conference Call Information:


The Company will host a conference call beginning at 9:00 a.m. Central Time on Friday, November 9, 2018. The call can be accessed by dialing (855) 743-8451 or (330) 968-0151 for international participants and conference code 4191749.


A replay of the call will be available from 12:00 p.m. Central Time on November 9, 2018 through 10:59 p.m. Central Time on November 21, 2018. The replay of the call can be accessed by dialing (800) 585-8367 or (404) 537-3406 for international participants and conference code 4191749.


About CEC Entertainment, Inc.


CEC Entertainment is the nationally recognized leader in family dining and entertainment with both its Chuck E. Cheese’s and Peter Piper Pizza venues. As America’s #1 place for birthdays, 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 $16 million to schools through its fundraising programs and supports its new national charity partner, Boys and Girls Clubs of America. Peter Piper Pizza, with its neighborhood pizzeria feel, features dining, entertainment and carryout. The solution to “the family night out”, Peter Piper Pizza takes pride in delivering a food first, parent friendly experience that reconnects family and friends. As of September 30, 2018, the Company and its franchisees operated a system of 607 Chuck E. Cheese’s and 147 Peter Piper Pizza venues, with locations in 47 states and 14 foreign countries and territories. For more information, visit chuckecheese.com and peterpiperpizza.com.


           

Investor Inquiries:         

Media Inquiries:

Jim Howell                     

Erin Gordon

EVP & CFO                        

Current Marketing

CEC Entertainment, Inc.         

(312) 929-0514

(972) 258-4525      

.(JavaScript must be enabled to view this email address)

.(JavaScript must be enabled to view this email address)  


Cautionary Statement Regarding Forward-Looking Statements


This press release contains forward-looking statements, which involve risks and uncertainties. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other various or comparable terminology.. All statements other than statements of historical facts contained in this press release, including statements regarding our strategy, future operations, objectives of management and expected market growth, are forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future events and, therefore, involve a number of assumptions, risks and uncertainties, including the risk factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission on March 28, 2018. 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. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including but not limited to:


     
  • our strategy, outlook and growth prospects;
  •  
  • our operational and financial targets and dividend policy;
  •  
  • our planned expansion of the venue base and the implementation of the new design in our existing venues;
  •  
  • general economic trends and trends in the industry and markets; and
  •  
  • the competitive environment in which we operate.
  •  

These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause our results to vary from expectations include, but are not limited to:


     
  • negative publicity and changes in consumer preferences;
  •  
  • our ability to successfully expand and update our current venue base;
  •  
  • our ability to successfully implement our marketing strategy;
  •  
  • our ability to compete effectively in an environment of intense competition;
  •  
  • our ability to weather economic uncertainty and changes in consumer discretionary spending;
  •  
  • increases in food, labor and other operating costs;
  •  
  • our ability to successfully open international franchises and to operate under the United States and foreign anti-corruption laws that govern those international ventures;
  •  
  • risks related to our substantial indebtedness;
  •  
  • failure of our information technology systems to support our current and growing businesses;
  •  
  • disruptions to our commodity distribution system;
  •  
  • our dependence on third-party vendors to provide us with sufficient quantities of new entertainment-related equipment, prizes and merchandise at acceptable prices;
  •  
  • risks from product liability claims and product recalls;
  •  
  • the impact of governmental laws and regulations and the outcomes of legal proceedings;
  •  
  • potential liability under certain state property laws;
  •  
  • fluctuations in our financial results due to new venue openings;
  •  
  • local conditions, natural disasters, terrorist attacks and other events and public health issues;
  •  
  • the seasonality of our business;
  •  
  • inadequate insurance coverage;
  •  
  • labor shortages and immigration reform;
  •  
  • loss of certain personnel;
  •  
  • our ability to protect our trademarks or other proprietary rights;
  •  
  • risks associated with owning and leasing real estate, as well as the risks from any forced venue relocation or closure;
  •  
  • our ability to successfully integrate the operations of companies we acquire;
  •  
  • impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets;
  •  
  • our failure to maintain adequate internal controls over our financial and management systems; and
  •  
  • other risks, uncertainties and factors set forth in Part I, Item 1A.. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 28, 2018.
  •  

The forward-looking statements made in this press release reflect our views with respect to future events as of the date of this press release and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, undue reliance should not be placed on these forward-looking statements. These forward-looking statements represent our estimates and assumptions only as of the date of this press release and, except as required by law, we undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this report. We anticipate that subsequent events and developments will cause our views to change. Our forward-looking statements do not reflect the potential impact of any future acquisitions, merger, dispositions, joint ventures or investments we may undertake.. We qualify all of our forward-looking statements by these cautionary statements.


- financial tables follow -


 

           

CEC ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(in thousands, except percentages)



Three Months Ended


Nine Months Ended


September 30,

 2018


October 1,

 2017


September 30,

 2018


October 1,

 2017

REVENUES:
















Food and beverage sales

$

94,023


42.6%


$

98,255


46.1%


$

308,658


44.5%


$

320,085


46.4%

Entertainment and merchandise sales

121,611


55.0%


110,633


51.9%


368,633


53.2%


356,274


51.6%

Total company venue sales

215,634


97.6%


208,888


97.9%


677,291


97.7%


676,359


98.0%

Franchise fees and royalties

5,311


2.4%


4,459


2.1%


15,917


2.3%


13,731


2.0%

Total revenues

220,945


100.0%


213,347


100.0%


693,208


100.0%


690,090


100.0%

OPERATING COSTS AND EXPENSES:
















Company venue operating costs (excluding Depreciation and amortization):
















Cost of food and beverage (1)

22,520


24.0%


23,974


24.4%


72,774


23.6%


75,014


23.4%

Cost of entertainment and merchandise (2)

9,874


8.1%


7,430


6.7%


27,676


7.5%


22,771


6.4%

Total cost of food, beverage, entertainment and merchandise (3)

32,394


15.0%


31,404


15.0%


100,450


14.8%


97,785


14.5%

Labor expenses (3)

65,028


30.2%


61,220


29.3%


194,994


28.8%


187,958


27.8%

Rent expense (3)

23,851


11.1%


24,259


11.6%


72,615


10.7%


71,484


10.6%

Other venue operating expenses (3)

38,232


17.7%


40,561


19.4%


113,363


16.7%


113,277


16.7%

Total company venue operating costs (3)

159,505


74.0%


157,444


75.4%


481,422


71.1%


470,504


69.6%

Other costs and expenses:
















Advertising expense

11,058


5.0%


12,083


5.7%


38,010


5.5%


37,702


5.5%

General and administrative expenses

13,193


6.0%


13,575


6.4%


39,519


5.7%


42,665


6.2%

Depreciation and amortization

24,739


11.2%


27,136


12.7%


76,804


11.1%


83,064


12.0%

Transaction, severance and related litigation costs

(263)


(0.1)%


128


0.1%


463


0.1%


698


0.1%

Asset impairments

5,344


2.4%


1,843


0.9%


6,935


1.0%


1,843


0.3%

Total operating costs and expenses

213,576

Number of visits: 22
Posted on Nov 09, 2018 - 02:58 AM • Print