CEC Entertainment Reports Financial Results for the 2012 Fourth Quarter and Fiscal Year
CEC Entertainment Reports Financial Results for the 2012 Fourth Quarter and Fiscal Year
IRVING, Texas--(BUSINESS WIRE)-- CEC Entertainment, Inc. (NYS: CEC) today announced its financial results for its fourth quarter ended December 30, 2012. Total revenues for the fourth quarter of 2012 decreased 0.4%, or $0.8 million, to $177.8 million from $178.6 million for the fourth quarter of 2011. The decrease primarily related to a 2.2% decrease in comparable store sales, partially offset by additional revenues from thirteen new stores opened or acquired, net of six closed stores, since the end of 2011.
The fourth quarter 2012 was a net loss of $0.6 million compared to net income of $2.7 million for the fourth quarter of 2011. The $0.6 million net loss in the fourth quarter of 2012 includes $2.0 million of asset impairment charges, net of tax. Diluted loss per share was $0.03 for the fourth quarter of 2012 compared to diluted earnings per share of $0.15 for the fourth quarter of 2011.
Total revenues for fiscal year 2012 decreased 2.2%, or $17.7 million, to $803.5 million compared to $821.2 million for the fiscal year 2011. The decrease in total revenues was primarily related to a 2.9% decrease in comparable store sales, partially offset by additional revenues from thirteen new stores opened or acquired, net of six stores closed, since the end of 2011.
Net income for the fiscal year 2012 decreased 20.7%, or $11.4 million, to $43.6 million compared to $55.0 million for the fiscal year 2011. Diluted earnings per share decreased to $2.47 per share in fiscal year 2012 from $2.88 per share in fiscal year 2011. The decrease primarily related to the decrease in net income. Diluted earnings per share for the fiscal year 2012 benefitted approximately $0.17 from our repurchase of 2.7 million shares of our common stock since the beginning of fiscal year 2011.
On February 19, 2013, the Company's Board of Directors declared a cash dividend of $0.24 per share. This cash dividend is scheduled to be paid on April 18, 2013 to stockholders of record as of March 21, 2013.
Michael Magusiak, President and Chief Executive Officer, stated, "I believe that we have developed a very solid sales and earnings plan for 2013. We started the year off with positive comparable store sales in January but had a substantial reversal during the first three weeks of February. We evaluated all of our strategies that could impact sales and determined that we made no significant operating, pricing or marketing shifts since the beginning of the year that could explain the sales decline in February. Therefore, we believe the factors negatively impacting sales are primarily external in nature."
Magusiak continued, "We believe the delay in income tax refunds, the expiration of the payroll tax holiday and the increase in gas prices have had a disproportionate impact on our guests as they are highly sensitive to any changes in their disposable income. Despite the current economic environment, we remain committed to the quality execution of our sales initiatives and are focused on increasing sales in 2013."
Our previous guidance for fiscal year 2013 was a 2% to 3% increase in comparable store sales, resulting in diluted earnings per share in the range of $2.80 to $3.00. Through week seven of 2013, comparable store sales have decreased 3.2%, which we believe can be attributed to the delay in the federal income tax refunds compared to the prior year, the elimination of the 2% payroll tax holiday and increases in gasoline prices.
Given the uncertainty surrounding any potential longer term impacts to comparable store sales from the payroll tax holiday and gasoline prices, we estimate if comparable store sales are up 1% to 2% for fiscal year 2013 we would expect diluted earnings per share to be in a range of $2.70 to $2.85, including the following assumptions:
- 15 new Company-owned stores, including one store relocation;
- Average cheese block prices in the range of $1.70 to $1.80 per pound;
- Depreciation and amortization to remain relatively flat;
- Rent expense to increase approximately 4-5% from the prior year;
- Advertising expense to increase approximately $6 million from the prior year;
- Capital expenditures to range from approximately $82 to $84 million; and
- Payment of four quarterly dividends totaling approximately $17 million.
Fourth Quarter 2012 Conference Call:
The Company will host a conference call Thursday, February 21, 2013, at 3:30 p.m. Central Time to discuss its 2012 fourth quarter and fiscal year financial results and our business outlook. A live webcast of the call (listen only) can be accessed through the Company's website, www.chuckecheese.com. Shortly after its conclusion, a replay of the call will be available on the website for a minimum of 60 days.
Non-GAAP Financial Measures:
The Company reports and discusses its operating results using financial measures consistent with accounting principles generally accepted in the United States ("GAAP"). From time to time in the course of financial presentations, earnings conference calls or otherwise, the Company may disclose certain non-GAAP financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Free Cash Flow. The non-GAAP financial measures presented in this earnings release should not be viewed as alternatives or substitutes for the Company's reported GAAP results. A reconciliation of the most directly comparable GAAP financial measure to EBITDA and Free Cash Flow is set forth in a table accompanying this release.
About CEC Entertainment, Inc.:
For more than 30 years, CEC Entertainment has served as the nationally recognized leader in family dining and entertainment and the place Where a Kid can be a Kid®. The Company and its franchisees operate a system of 565 Chuck E. Cheese's stores located in 47 states and eight foreign countries and territories. Currently, 514 locations in the United States and Canada are owned and operated by the Company. CEC Entertainment, Inc. and its franchises have the common goal of creating lifelong memories for families through fun, food, and play. Each Chuck E. Cheese's features musical and comic robotic entertainment, games, rides, and play areas, as well as a variety of dining options including pizzas, sandwiches, wings, appetizers, a salad bar, and desserts. Committed to providing a fun, safe environment, Chuck E. Cheese's helps protect families through industry-leading programs such as Kid Check®.
Chuck E. Cheese's aims to promote positive, lifelong memories inside and outside of its stores. In addition to providing a fun entertainment experience for millions of families across the world, Chuck E. Cheese's has donated more than $7.7 million to schools and non-profit institutions through its fundraising programs. For more information, see the Company's website at www.chuckecheese.com.
Cautionary Statement Regarding Forward-Looking Statements:
Certain statements in this press release, other than historical information, may be considered "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, and are subject to various risks, uncertainties and assumptions. Statements that are not historical in nature, and which may be identified by the use of words such as "may," "should," "could," "believe," "predict," "potential," "continue," "plan," "intend," "expect," "anticipate," "future," "project," "estimate," and similar expressions (or the negative of such expressions) 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 the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2012, filed on February 21, 2013. 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. Factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to:
- Our ability to successfully implement our strategic plan;
- Competition in both the restaurant and entertainment industries;
- Changes in consumer discretionary spending;
- Impacts on our business and financial results from economic uncertainty in the U.S. and Canada;
- Negative publicity concerning food quality, health, general safety and other issues;
- Increases in food, labor and other operating costs;
- Unanticipated costs and delays in implementing our strategic plan;
- Government regulations, including health care reform;
- Existence or occurrence of certain public health issues;
- Changes in consumers' health, nutrition and dietary preferences;
- Any disruption of our commodity distribution system, which currently utilizes a single distributor for most of our products and supplies;
- Product liability claims and product recalls;
- Inadequate insurance coverage;
- Disruptions of our information technology systems and technologies;
- Litigation risks;
- Our dependence on a limited number of suppliers for our games, rides, redemption prizes and merchandise;
- Adverse effects of local conditions, natural disasters and other events;
- Increases in our leverage;
- Loss of certain key personnel;
- Fluctuations in our quarterly results of operations due to seasonality;
- Our ability to adequately protect our trademarks or other proprietary rights;
- Risks in connection with owning and leasing real estate; and
- Conditions in foreign markets.
The forward-looking statements made in this press release relate only to events as of the date on which the statements were made in this press release. Except as may be required by law, the Company undertakes no obligation to update its forward-looking statements to reflect events and circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events.
- financial tables follow -
|CEC ENTERTAINMENT, INC.|
|CONSOLIDATED STATEMENTS OF EARNINGS|
|(in thousands, except per share information)|
|Quarter Ended||Fiscal Year Ended|
|December 30,||January 1,||December 30,||January 1,|
|Food and beverage sales||$||81,758||46.0||%||$||84,378||47.3||%||$||372,948|
|Entertainment and merchandise sales||94,968||53.4||%||93,241||52.2||%||425,989||53.0||%||426,986||52.0||%|
|Total Company store sales||176,726||99.4||%||177,619||99.5||%||798,937||99.4||%||815,894||99.4||%|
|Franchise fees and royalties||1,031||0.6||%||944||0.5||%||4,543||0.6||%||5,284||0.6||%|
|OPERATING COSTS AND EXPENSES:|
Company store operating costs:
|Cost of food and beverage (exclusive of items shown separately below) (1)||21,554|
|Cost of entertainment and merchandise (exclusive of items shown separately below) (2)||7,007|
|Total cost of food, beverage, entertainment and merchandise(3)||28,561|
|Labor expenses (3)||53,413||30.2||%||53,300||30.0||%||223,605||28.0||%||222,596||27.3||%|
|Depreciation and amortization (3)||20,067||11.4||%||19,229||10.8||%||78,769||9.9||%||80,826||9.9||%|
|Rent expense (3)||17,871||10.1||%||18,506||10.4||%||75,312||9.4||%||74,992||9.2||%|
|Other store operating expenses (3)||31,088||17.6||%||30,057||16.9||%||126,855||15.9||%||126,847||15.5||%|
|Total Company store operating costs (3)||151,000|
Other costs and expenses:
|General and administrative expenses||13,802||7.8||%||13,781||7.7||%||53,437||6.7||%||51,859||6.3||%|
|Total operating costs and expenses||176,473|
|Income (loss) before income taxes||(2,032||)||(1.1||)%||3,809||2.1||%||69,670||8.7||%||89,104||10.9||%|
|Net income (loss)||$||(587||)||(0.3||)%||$||2,728||1.5||%||$||43,590||5.4||%||$||54,962||6.7||%|
Earnings per share:
Weighted average common shares outstanding:
|Cash Dividends Declared Per Share||$||0.24||$||0.22||$||0.90||$||0.82|