ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Kansas
(State or other jurisdiction of
incorporation or organization)
|
|
48-0905805
(IRS Employer
Identification No.)
|
1707 Market Place Blvd
Irving, Texas
|
|
75063
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
¨
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
ý
|
Smaller reporting company
|
¨
|
Emerging growth company
|
¨
|
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
ASSETS
|
|
|
|
|
||||
Current assets:
|
|
|
|
|
||||
Cash and cash equivalents
|
|
$
|
84,429
|
|
|
$
|
67,200
|
|
Restricted cash
|
|
23
|
|
|
112
|
|
||
Accounts receivable
|
|
18,898
|
|
|
20,061
|
|
||
Income taxes receivable
|
|
9,749
|
|
|
10,960
|
|
||
Inventories
|
|
22,069
|
|
|
22,000
|
|
||
Prepaid expenses
|
|
24,579
|
|
|
20,398
|
|
||
Total current assets
|
|
159,747
|
|
|
140,731
|
|
||
Property and equipment, net
|
|
542,896
|
|
|
570,021
|
|
||
Goodwill
|
|
484,438
|
|
|
484,438
|
|
||
Intangible assets, net
|
|
477,872
|
|
|
480,377
|
|
||
Other noncurrent assets
|
|
21,104
|
|
|
19,477
|
|
||
Total assets
|
|
$
|
1,686,057
|
|
|
$
|
1,695,044
|
|
LIABILITIES AND STOCKHOLDER’S EQUITY
|
|
|
|
|
||||
Current liabilities:
|
|
|
|
|
||||
Bank indebtedness and other long-term debt, current portion
|
|
$
|
7,600
|
|
|
$
|
7,600
|
|
Capital lease obligations, current portion
|
|
634
|
|
|
596
|
|
||
Accounts payable
|
|
36,140
|
|
|
31,374
|
|
||
Accrued expenses
|
|
37,927
|
|
|
36,616
|
|
||
Unearned revenues
|
|
17,787
|
|
|
21,050
|
|
||
Accrued interest
|
|
2,760
|
|
|
8,277
|
|
||
Other current liabilities
|
|
5,000
|
|
|
4,776
|
|
||
Total current liabilities
|
|
107,848
|
|
|
110,289
|
|
||
Capital lease obligations, less current portion
|
|
12,528
|
|
|
13,010
|
|
||
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion
|
|
962,402
|
|
|
965,213
|
|
||
Deferred tax liability
|
|
110,921
|
|
|
114,186
|
|
||
Accrued insurance
|
|
9,484
|
|
|
8,311
|
|
||
Other noncurrent liabilities
|
|
226,652
|
|
|
221,887
|
|
||
Total liabilities
|
|
1,429,835
|
|
|
1,432,896
|
|
||
Stockholder’s equity:
|
|
|
|
|
||||
Common stock, $0.01 par value; authorized 1,000 shares; 200 shares issued as of September 30, 2018 and December 31, 2017
|
|
—
|
|
|
—
|
|
||
Capital in excess of par value
|
|
359,411
|
|
|
359,233
|
|
||
Accumulated deficit
|
|
(101,430
|
)
|
|
(95,199
|
)
|
||
Accumulated other comprehensive loss
|
|
(1,759
|
)
|
|
(1,886
|
)
|
||
Total stockholder’s equity
|
|
256,222
|
|
|
262,148
|
|
||
Total liabilities and stockholder’s equity
|
|
$
|
1,686,057
|
|
|
$
|
1,695,044
|
|
|
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
|
|
|
$
|
98,255
|
|
|
$
|
308,658
|
|
|
$
|
320,085
|
|
Entertainment and merchandise sales
|
121,611
|
|
|
110,633
|
|
|
368,633
|
|
|
356,274
|
|
||||
Total company venue sales
|
215,634
|
|
|
208,888
|
|
|
677,291
|
|
|
676,359
|
|
||||
Franchise fees and royalties
|
5,311
|
|
|
4,459
|
|
|
15,917
|
|
|
13,731
|
|
||||
Total revenues
|
220,945
|
|
|
213,347
|
|
|
693,208
|
|
|
690,090
|
|
||||
OPERATING COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Company venue operating costs (excluding Depreciation and amortization)
:
|
|
|
|
|
|
|
|
||||||||
Cost of food and beverage
|
22,520
|
|
|
23,974
|
|
|
72,774
|
|
|
75,014
|
|
||||
Cost of entertainment and merchandise
|
9,874
|
|
|
7,430
|
|
|
27,676
|
|
|
22,771
|
|
||||
Total cost of food, beverage, entertainment and merchandise
|
32,394
|
|
|
31,404
|
|
|
100,450
|
|
|
97,785
|
|
||||
Labor expenses
|
65,028
|
|
|
61,220
|
|
|
194,994
|
|
|
187,958
|
|
||||
Rent expense
|
23,851
|
|
|
24,259
|
|
|
72,615
|
|
|
71,484
|
|
||||
Other venue operating expenses
|
38,232
|
|
|
40,561
|
|
|
113,363
|
|
|
113,277
|
|
||||
Total company venue operating costs
|
159,505
|
|
|
157,444
|
|
|
481,422
|
|
|
470,504
|
|
||||
Other costs and expenses
:
|
|
|
|
|
|
|
|
||||||||
Advertising expense
|
11,058
|
|
|
12,083
|
|
|
38,010
|
|
|
37,702
|
|
||||
General and administrative expenses
|
13,193
|
|
|
13,575
|
|
|
39,519
|
|
|
42,665
|
|
||||
Depreciation and amortization
|
24,739
|
|
|
27,136
|
|
|
76,804
|
|
|
83,064
|
|
||||
Transaction, severance and related litigation costs
|
(263
|
)
|
|
128
|
|
|
463
|
|
|
698
|
|
||||
Asset impairments
|
5,344
|
|
|
1,843
|
|
|
6,935
|
|
|
1,843
|
|
||||
Total operating costs and expenses
|
213,576
|
|
|
212,209
|
|
|
643,153
|
|
|
636,476
|
|
||||
Operating income
|
7,369
|
|
|
1,138
|
|
|
50,055
|
|
|
53,614
|
|
||||
Interest expense
|
19,069
|
|
|
17,451
|
|
|
56,740
|
|
|
51,574
|
|
||||
Income (loss) before income taxes
|
(11,700
|
)
|
|
(16,313
|
)
|
|
(6,685
|
)
|
|
2,040
|
|
||||
Income tax expense (benefit)
|
(2,213
|
)
|
|
(5,221
|
)
|
|
(454
|
)
|
|
1,840
|
|
||||
Net income (loss)
|
$
|
(9,487
|
)
|
|
$
|
(11,092
|
)
|
|
$
|
(6,231
|
)
|
|
$
|
200
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||||||
Net income (loss)
|
$
|
(9,487
|
)
|
|
$
|
(11,092
|
)
|
|
$
|
(6,231
|
)
|
|
$
|
200
|
|
Components of other comprehensive income (loss), net of tax
:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(172
|
)
|
|
648
|
|
|
127
|
|
|
1,187
|
|
||||
Comprehensive income (loss)
|
$
|
(9,659
|
)
|
|
$
|
(10,444
|
)
|
|
$
|
(6,104
|
)
|
|
$
|
1,387
|
|
|
Nine Months Ended
|
||||||
|
September 30,
2018 |
|
October 1,
2017 |
||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
||||
Net income (loss)
|
$
|
(6,231
|
)
|
|
$
|
200
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
76,804
|
|
|
83,064
|
|
||
Deferred income taxes
|
(3,314
|
)
|
|
(5,220
|
)
|
||
Stock-based compensation expense
|
169
|
|
|
520
|
|
||
Amortization of lease related liabilities
|
(749
|
)
|
|
(411
|
)
|
||
Amortization of original issue discount and deferred debt financing costs
|
3,284
|
|
|
3,410
|
|
||
Loss on asset disposals, net
|
2,551
|
|
|
5,457
|
|
||
Asset impairments
|
6,935
|
|
|
1,843
|
|
||
Non-cash rent expense
|
4,109
|
|
|
3,562
|
|
||
Other adjustments
|
531
|
|
|
18
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
2,016
|
|
|
2,678
|
|
||
Inventories
|
(84
|
)
|
|
(4,499
|
)
|
||
Prepaid expenses
|
(3,479
|
)
|
|
1,195
|
|
||
Accounts payable
|
886
|
|
|
1,775
|
|
||
Accrued expenses
|
3,847
|
|
|
(2,097
|
)
|
||
Unearned revenues
|
(3,263
|
)
|
|
5,952
|
|
||
Accrued interest
|
(5,291
|
)
|
|
(4,891
|
)
|
||
Income taxes receivable
|
1,994
|
|
|
425
|
|
||
Deferred landlord contributions
|
1,760
|
|
|
1,210
|
|
||
Net cash provided by operating activities
|
82,475
|
|
|
94,191
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
||||
Purchases of property and equipment
|
(55,202
|
)
|
|
(71,910
|
)
|
||
Development of internal use software
|
(1,992
|
)
|
|
(2,520
|
)
|
||
Proceeds from sale of property and equipment
|
464
|
|
|
424
|
|
||
Net cash used in investing activities
|
(56,730
|
)
|
|
(74,006
|
)
|
||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
||||
Repayments on senior term loan
|
(5,700
|
)
|
|
(5,700
|
)
|
||
Repayments on note payable
|
—
|
|
|
(13
|
)
|
||
Proceeds from sale leaseback transaction
|
—
|
|
|
4,073
|
|
||
Payment of debt financing costs
|
(395
|
)
|
|
—
|
|
||
Payments on capital lease obligations
|
(442
|
)
|
|
(340
|
)
|
||
Payments on sale leaseback obligations
|
(2,119
|
)
|
|
(1,789
|
)
|
Return of capital
|
—
|
|
|
1,447
|
|
||
Net cash used in financing activities
|
(8,656
|
)
|
|
(2,322
|
)
|
||
Effect of foreign exchange rate changes on cash
|
51
|
|
|
492
|
|
||
Change in cash, cash equivalents and restricted cash
|
17,140
|
|
|
18,355
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
67,312
|
|
|
61,291
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
84,452
|
|
|
$
|
79,646
|
|
|
|
|
|
||||
|
|
|
|
||||
|
Nine Months Ended
|
||||||
|
September 30,
2018 |
|
October 1,
2017 |
||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
|
|
|
||||
Interest paid
|
$
|
59,229
|
|
|
$
|
53,076
|
|
Income taxes paid, net
|
$
|
867
|
|
|
$
|
6,635
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
||||
Accrued construction costs
|
$
|
1,659
|
|
|
$
|
2,772
|
|
|
September 30, 2018
|
|
December 31, 2017
|
|
October 1, 2017
|
|
January 1, 2017
|
||||||||
|
(in thousands)
|
||||||||||||||
Cash and cash equivalents
|
$
|
84,429
|
|
|
$
|
67,200
|
|
|
$
|
79,427
|
|
|
$
|
61,023
|
|
Restricted cash
|
23
|
|
|
112
|
|
|
219
|
|
|
268
|
|
||||
Cash, cash equivalents and restricted cash
|
$
|
84,452
|
|
|
$
|
67,312
|
|
|
$
|
79,646
|
|
|
$
|
61,291
|
|
(1)
|
Restricted cash represents cash balances held by the Association that are restricted for use in our advertising, entertainment and media programs (see Note 1 “Description of Business and Summary of Significant Accounting Policies” for further discussion of the Association Funds).
|
|
Balance at
|
|
|
|
|
|
Balance at
|
||||||||
|
January 1, 2018
|
|
Revenue Deferred
|
|
Revenue Recognized
|
|
September 30, 2018
|
||||||||
|
(in thousands)
|
||||||||||||||
PlayPass related deferred revenue
|
$
|
12,035
|
|
|
$
|
48,368
|
|
|
$
|
(52,119
|
)
|
|
$
|
8,284
|
|
Gift card related deferred revenue
|
3,868
|
|
|
4,215
|
|
|
(4,912
|
)
|
|
3,171
|
|
||||
Unearned franchise and development fees
|
4,274
|
|
|
534
|
|
|
(62
|
)
|
|
4,746
|
|
||||
Other unearned revenues
|
873
|
|
|
19,726
|
|
|
(19,013
|
)
|
|
1,586
|
|
||||
Total unearned revenue
|
$
|
21,050
|
|
|
$
|
72,843
|
|
|
$
|
(76,106
|
)
|
|
$
|
17,787
|
|
|
Weighted Average Life (Years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||
|
|
|
(in thousands)
|
||||||||||
Chuck E. Cheese's tradename
|
Indefinite
|
|
$
|
400,000
|
|
|
|
|
$
|
400,000
|
|
||
Peter Piper Pizza tradename
|
Indefinite
|
|
26,700
|
|
|
|
|
26,700
|
|
||||
Favorable lease agreements
(1)
|
10
|
|
14,880
|
|
|
(8,274
|
)
|
|
6,606
|
|
|||
Franchise agreements
|
25
|
|
53,300
|
|
|
(8,734
|
)
|
|
44,566
|
|
|||
|
|
|
$
|
494,880
|
|
|
$
|
(17,008
|
)
|
|
$
|
477,872
|
|
(1)
|
In connection with the Merger, as defined in Note 12 “Consolidating Guarantor Financial Information”, and the acquisition of Peter Piper Pizza in October 2014, we also recorded unfavorable lease liabilities of
$10.2 million
and
$3.9 million
, respectively, which are included in “Other current liabilities” and “Other noncurrent liabilities” in our Consolidated Balance Sheets. Such amounts are being amortized over a weighted average life of
10 years
, and are included in “Rent expense” in our Consolidated Statements of Earnings.
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
(in thousands)
|
||||||
Trade and other amounts payable
|
$
|
25,476
|
|
|
$
|
20,492
|
|
Book overdraft
|
10,664
|
|
|
10,882
|
|
||
Accounts payable
|
$
|
36,140
|
|
|
$
|
31,374
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
(in thousands)
|
||||||
Term loan facility
|
$
|
725,800
|
|
|
$
|
731,500
|
|
Senior notes
|
255,000
|
|
|
255,000
|
|
||
Total debt outstanding
|
980,800
|
|
|
986,500
|
|
||
Less:
|
|
|
|
||||
Unamortized original issue discount
|
(1,288
|
)
|
|
(1,694
|
)
|
||
Deferred financing costs, net
|
(9,510
|
)
|
|
(11,993
|
)
|
||
Current portion of term loan facility
|
(7,600
|
)
|
|
(7,600
|
)
|
||
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion
|
$
|
962,402
|
|
|
$
|
965,213
|
|
|
Three Months Ended
|
||||||
|
September 30, 2018
|
|
October 1, 2017
|
||||
|
(in thousands)
|
||||||
Term loan facility
(1)
|
$
|
9,946
|
|
|
$
|
8,014
|
|
Senior notes
|
5,083
|
|
|
5,083
|
|
||
Capital lease obligations
|
394
|
|
|
434
|
|
||
Sale leaseback obligations
|
2,628
|
|
|
2,647
|
|
||
Amortization of deferred financing costs
|
923
|
|
|
1,001
|
|
||
Other
|
95
|
|
|
272
|
|
||
Total interest expense
|
$
|
19,069
|
|
|
$
|
17,451
|
|
|
Nine Months Ended
|
||||||
|
September 30, 2018
|
|
October 1, 2017
|
||||
|
(in thousands)
|
||||||
Term loan facility
(1)
|
$
|
28,747
|
|
|
$
|
23,240
|
|
Senior notes
|
15,248
|
|
|
15,248
|
|
||
Capital lease obligations
|
1,253
|
|
|
1,264
|
|
||
Sale leaseback obligations
|
7,880
|
|
|
7,949
|
|
||
Amortization of deferred financing costs
|
2,878
|
|
|
3,004
|
|
||
Other
|
734
|
|
|
869
|
|
||
Total interest expense
|
$
|
56,740
|
|
|
$
|
51,574
|
|
|
|
September 30, 2018
|
|
|
December 31, 2017
|
||||||||||||
|
|
Carrying Amount
(1)
|
|
Estimated Fair Value
|
|
|
Carrying Amount
(1)
|
|
Estimated Fair Value
|
||||||||
|
|
(in thousands)
|
|||||||||||||||
Financial Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||
Bank indebtedness and other long-term debt:
|
|
|
|
|
|
|
|
|
|
||||||||
Current portion
|
|
$
|
7,600
|
|
|
$
|
7,366
|
|
|
|
$
|
7,600
|
|
|
$
|
7,220
|
|
Long-term portion
(2)
|
|
971,912
|
|
|
930,715
|
|
|
|
977,206
|
|
|
937,662
|
|
||||
Bank indebtedness and other long-term debt:
|
|
$
|
979,512
|
|
|
$
|
938,081
|
|
|
|
$
|
984,806
|
|
|
$
|
944,882
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
|
|
(in thousands)
|
||||||
Sale leaseback obligations, less current portion
|
|
$
|
175,589
|
|
|
$
|
177,933
|
|
Deferred rent liability
|
|
30,946
|
|
|
27,951
|
|
||
Deferred landlord contributions
|
|
8,276
|
|
|
6,282
|
|
||
Long-term portion of unfavorable leases
|
|
4,176
|
|
|
5,453
|
|
||
Other
|
|
7,665
|
|
|
4,268
|
|
||
Total other noncurrent liabilities
|
|
$
|
226,652
|
|
|
$
|
221,887
|
|
|
Three Months Ended
|
||||||
|
September 30, 2018
|
|
October 1, 2017
|
||||
|
(in thousands)
|
||||||
Federal and state income taxes
|
$
|
(2,451
|
)
|
|
$
|
(5,533
|
)
|
Foreign income taxes
(1)
|
238
|
|
|
312
|
|
||
Income tax benefit
|
$
|
(2,213
|
)
|
|
$
|
(5,221
|
)
|
|
Nine Months Ended
|
||||||
|
September 30, 2018
|
|
October 1, 2017
|
||||
|
(in thousands)
|
||||||
Federal and state income taxes
|
$
|
(1,167
|
)
|
|
$
|
1,145
|
|
Foreign income taxes
(1)
|
713
|
|
|
695
|
|
||
Income tax expense (benefit)
|
$
|
(454
|
)
|
|
$
|
1,840
|
|
|
Stock Options
|
Weighted Average Exercise Price
(1)
|
Weighted Average Remaining Contractual Term
|
Aggregate Intrinsic Value
|
|||
|
|
($ per share)
|
|
($ in thousands)
|
|||
Outstanding stock options, December 31, 2017
|
2,349,288
|
|
$9.00
|
|
|
||
Options Granted
|
112,769
|
|
$13.73
|
|
|
||
Options Exercised
|
(7,745
|
)
|
$9.96
|
|
|
||
Options Forfeited
|
(421,614
|
)
|
$10.47
|
|
|
||
Outstanding stock options, September 30, 2018
|
2,032,698
|
|
$8.93
|
5.8
|
$
|
—
|
|
Stock options expected to vest, September 30, 2018
|
1,386,999
|
|
$9.12
|
5.9
|
$
|
—
|
|
Exercisable stock options, September 30, 2018
|
491,588
|
|
$8.32
|
5.5
|
$
|
—
|
|
|
|
|
|
|
|
Three Months Ended
|
||||||
|
September 30,
2018 |
|
October 1,
2017 |
||||
|
(in thousands)
|
||||||
Stock-based compensation costs
|
$
|
(55
|
)
|
|
$
|
187
|
|
Portion capitalized as property and equipment
(1)
|
(3
|
)
|
|
(3
|
)
|
||
Stock-based compensation expense recognized
|
$
|
(58
|
)
|
|
$
|
184
|
|
|
Nine Months Ended
|
||||||
|
September 30,
2018 |
|
October 1,
2017 |
||||
|
(in thousands)
|
||||||
Stock-based compensation costs
|
$
|
178
|
|
|
$
|
531
|
|
Portion capitalized as property and equipment
(1)
|
(9
|
)
|
|
(11
|
)
|
||
Stock-based compensation expense recognized
|
$
|
169
|
|
|
$
|
520
|
|
(1)
|
We capitalize the portion of stock-based compensation costs related to our design, construction, facilities and legal departments that are directly attributable to our venue development projects, such as the design and construction of a new venue and the remodeling and expansion of our existing venues. Capitalized stock-based compensation costs attributable to our venue development projects are included in “Property and equipment, net” in the Consolidated Balance Sheets.
|
|
|
Common Stock
|
|
Capital In
Excess of Par Value |
|
Accumulated Deficit
|
|
Accumulated
Other Comprehensive Loss |
|
|
|||||||||||||
|
|
Shares
|
|
Amount
|
|
|
|
|
Total
|
||||||||||||||
|
|
(in thousands, except share information)
|
|||||||||||||||||||||
Balance at December 31, 2017
|
|
200
|
|
|
$
|
—
|
|
|
$
|
359,233
|
|
|
$
|
(95,199
|
)
|
|
$
|
(1,886
|
)
|
|
$
|
262,148
|
|
Net loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,231
|
)
|
|
—
|
|
|
(6,231
|
)
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
127
|
|
|
127
|
|
|||||
Stock-based compensation costs
|
|
—
|
|
|
—
|
|
|
178
|
|
|
—
|
|
|
—
|
|
|
178
|
|
|||||
Balance September 30, 2018
|
|
200
|
|
|
$
|
—
|
|
|
$
|
359,411
|
|
|
$
|
(101,430
|
)
|
|
$
|
(1,759
|
)
|
|
$
|
256,222
|
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Condensed Consolidating Balance Sheet
|
||||||||||||||||||||
As of September 30, 2018
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
80,543
|
|
|
$
|
2,278
|
|
|
$
|
1,608
|
|
|
$
|
—
|
|
|
$
|
84,429
|
|
Restricted cash
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
23
|
|
|||||
Accounts receivable
|
|
24,805
|
|
|
3,058
|
|
|
4,465
|
|
|
(3,681
|
)
|
|
28,647
|
|
|||||
Inventories
|
|
16,854
|
|
|
4,937
|
|
|
278
|
|
|
—
|
|
|
22,069
|
|
|||||
Prepaid expenses
|
|
13,867
|
|
|
10,062
|
|
|
650
|
|
|
—
|
|
|
24,579
|
|
|||||
Total current assets
|
|
136,069
|
|
|
20,335
|
|
|
7,024
|
|
|
(3,681
|
)
|
|
159,747
|
|
|||||
Property and equipment, net
|
|
467,580
|
|
|
68,992
|
|
|
6,324
|
|
|
—
|
|
|
542,896
|
|
|||||
Goodwill
|
|
433,024
|
|
|
51,414
|
|
|
—
|
|
|
—
|
|
|
484,438
|
|
|||||
Intangible assets, net
|
|
15,193
|
|
|
462,679
|
|
|
—
|
|
|
—
|
|
|
477,872
|
|
|||||
Intercompany
|
|
67,181
|
|
|
77,548
|
|
|
—
|
|
|
(144,729
|
)
|
|
—
|
|
|||||
Investment in subsidiaries
|
|
482,913
|
|
|
—
|
|
|
—
|
|
|
(482,913
|
)
|
|
—
|
|
|||||
Other noncurrent assets
|
|
7,641
|
|
|
13,429
|
|
|
34
|
|
|
—
|
|
|
21,104
|
|
|||||
Total assets
|
|
$
|
1,609,601
|
|
|
$
|
694,397
|
|
|
$
|
13,382
|
|
|
$
|
(631,323
|
)
|
|
$
|
1,686,057
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Bank indebtedness and other long-term debt, current portion
|
|
$
|
7,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,600
|
|
Capital lease obligations, current portion
|
|
624
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
634
|
|
|||||
Accounts payable and accrued expenses
|
|
50,629
|
|
|
40,261
|
|
|
3,724
|
|
|
—
|
|
|
94,614
|
|
|||||
Other current liabilities
|
|
4,489
|
|
|
511
|
|
|
—
|
|
|
—
|
|
|
5,000
|
|
|||||
Total current liabilities
|
|
63,342
|
|
|
40,772
|
|
|
3,734
|
|
|
—
|
|
|
107,848
|
|
|||||
Capital lease obligations, less current portion
|
|
12,482
|
|
|
—
|
|
|
46
|
|
|
|
|
|
12,528
|
|
|||||
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion
|
|
962,402
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
962,402
|
|
|||||
Deferred tax liability
|
|
97,698
|
|
|
15,265
|
|
|
(2,042
|
)
|
|
—
|
|
|
110,921
|
|
|||||
Intercompany
|
|
—
|
|
|
121,193
|
|
|
27,217
|
|
|
(148,410
|
)
|
|
—
|
|
|||||
Other noncurrent liabilities
|
|
217,455
|
|
|
18,188
|
|
|
493
|
|
|
—
|
|
|
236,136
|
|
|||||
Total liabilities
|
|
1,353,379
|
|
|
195,418
|
|
|
29,448
|
|
|
(148,410
|
)
|
|
1,429,835
|
|
|||||
Stockholder's equity:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital in excess of par value
|
|
359,411
|
|
|
466,114
|
|
|
3,241
|
|
|
(469,355
|
)
|
|
359,411
|
|
|||||
Retained earnings (deficit)
|
|
(101,430
|
)
|
|
32,865
|
|
|
(17,675
|
)
|
|
(15,190
|
)
|
|
(101,430
|
)
|
|||||
Accumulated other comprehensive income (loss)
|
|
(1,759
|
)
|
|
—
|
|
|
(1,632
|
)
|
|
1,632
|
|
|
(1,759
|
)
|
|||||
Total stockholder's equity
|
|
256,222
|
|
|
498,979
|
|
|
(16,066
|
)
|
|
(482,913
|
)
|
|
256,222
|
|
|||||
Total liabilities and stockholder's equity
|
|
$
|
1,609,601
|
|
|
$
|
694,397
|
|
|
$
|
13,382
|
|
|
$
|
(631,323
|
)
|
|
$
|
1,686,057
|
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Condensed Consolidating Balance Sheet
|
||||||||||||||||||||
As of December 31, 2017
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
59,948
|
|
|
$
|
410
|
|
|
$
|
6,842
|
|
|
$
|
—
|
|
|
$
|
67,200
|
|
Restricted cash
|
|
—
|
|
|
—
|
|
|
112
|
|
|
—
|
|
|
112
|
|
|||||
Accounts receivable
|
|
27,098
|
|
|
3,283
|
|
|
2,563
|
|
|
(1,923
|
)
|
|
31,021
|
|
|||||
Inventories
|
|
17,104
|
|
|
4,614
|
|
|
282
|
|
|
—
|
|
|
22,000
|
|
|||||
Prepaid expenses
|
|
13,766
|
|
|
5,549
|
|
|
1,083
|
|
|
—
|
|
|
20,398
|
|
|||||
Total current assets
|
|
117,916
|
|
|
13,856
|
|
|
10,882
|
|
|
(1,923
|
)
|
|
140,731
|
|
|||||
Property and equipment, net
|
|
496,725
|
|
|
66,669
|
|
|
6,627
|
|
|
—
|
|
|
570,021
|
|
|||||
Goodwill
|
|
433,024
|
|
|
51,414
|
|
|
—
|
|
|
—
|
|
|
484,438
|
|
|||||
Intangible assets, net
|
|
16,764
|
|
|
463,613
|
|
|
—
|
|
|
—
|
|
|
480,377
|
|
|||||
Intercompany
|
|
90,937
|
|
|
10,770
|
|
|
—
|
|
|
(101,707
|
)
|
|
—
|
|
|||||
Investment in subsidiaries
|
|
462,873
|
|
|
—
|
|
|
—
|
|
|
(462,873
|
)
|
|
—
|
|
|||||
Other noncurrent assets
|
|
7,913
|
|
|
11,359
|
|
|
205
|
|
|
—
|
|
|
19,477
|
|
|||||
Total assets
|
|
$
|
1,626,152
|
|
|
$
|
617,681
|
|
|
$
|
17,714
|
|
|
$
|
(566,503
|
)
|
|
$
|
1,695,044
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Bank indebtedness and other long-term debt, current portion
|
|
$
|
7,600
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,600
|
|
Capital lease obligations, current portion
|
|
586
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
596
|
|
|||||
Accounts payable and accrued expenses
|
|
58,014
|
|
|
35,134
|
|
|
4,169
|
|
|
—
|
|
|
97,317
|
|
|||||
Other current liabilities
|
|
4,265
|
|
|
511
|
|
|
—
|
|
|
—
|
|
|
4,776
|
|
|||||
Total current liabilities
|
|
70,465
|
|
|
35,645
|
|
|
4,179
|
|
|
—
|
|
|
110,289
|
|
|||||
Capital lease obligations, less current portion
|
|
12,956
|
|
|
—
|
|
|
54
|
|
|
—
|
|
|
13,010
|
|
|||||
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion
|
|
965,213
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
965,213
|
|
|||||
Deferred tax liability
|
|
99,083
|
|
|
16,697
|
|
|
(1,594
|
)
|
|
—
|
|
|
114,186
|
|
|||||
Intercompany
|
|
—
|
|
|
75,052
|
|
|
28,578
|
|
|
(103,630
|
)
|
|
—
|
|
|||||
Other noncurrent liabilities
|
|
216,287
|
|
|
13,465
|
|
|
446
|
|
|
—
|
|
|
230,198
|
|
|||||
Total liabilities
|
|
1,364,004
|
|
|
140,859
|
|
|
31,663
|
|
|
(103,630
|
)
|
|
1,432,896
|
|
|||||
Stockholder's equity:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Capital in excess of par value
|
|
359,233
|
|
|
466,114
|
|
|
3,241
|
|
|
(469,355
|
)
|
|
359,233
|
|
|||||
Retained earnings (deficit)
|
|
(95,199
|
)
|
|
10,708
|
|
|
(15,304
|
)
|
|
4,596
|
|
|
(95,199
|
)
|
|||||
Accumulated other comprehensive income (loss)
|
|
(1,886
|
)
|
|
—
|
|
|
(1,886
|
)
|
|
1,886
|
|
|
(1,886
|
)
|
|||||
Total stockholder's equity
|
|
262,148
|
|
|
476,822
|
|
|
(13,949
|
)
|
|
(462,873
|
)
|
|
262,148
|
|
|||||
Total liabilities and stockholder's equity
|
|
$
|
1,626,152
|
|
|
$
|
617,681
|
|
|
$
|
17,714
|
|
|
$
|
(566,503
|
)
|
|
$
|
1,695,044
|
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Consolidating Statement of Comprehensive Income (Loss)
|
||||||||||||||||||||
For the Three Months Ended September 30, 2018
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
||||||||||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Food and beverage sales
|
|
$
|
79,871
|
|
|
$
|
12,854
|
|
|
$
|
1,298
|
|
|
$
|
—
|
|
|
$
|
94,023
|
|
Entertainment and merchandise sales
|
|
108,461
|
|
|
10,380
|
|
|
2,770
|
|
|
—
|
|
|
121,611
|
|
|||||
Total company venue sales
|
|
188,332
|
|
|
23,234
|
|
|
4,068
|
|
|
—
|
|
|
215,634
|
|
|||||
Franchise fees and royalties
|
|
441
|
|
|
4,302
|
|
|
568
|
|
|
—
|
|
|
5,311
|
|
|||||
International Association assessments and other fees
|
|
221
|
|
|
9,588
|
|
|
8,862
|
|
|
(18,671
|
)
|
|
—
|
|
|||||
Total revenues
|
|
188,994
|
|
|
37,124
|
|
|
13,498
|
|
|
(18,671
|
)
|
|
220,945
|
|
|||||
Operating Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Company venue operating costs:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of food and beverage
|
|
18,700
|
|
|
3,348
|
|
|
472
|
|
|
—
|
|
|
22,520
|
|
|||||
Cost of entertainment and merchandise
|
|
9,306
|
|
|
391
|
|
|
177
|
|
|
—
|
|
|
9,874
|
|
|||||
Total cost of food, beverage, entertainment and merchandise
|
|
28,006
|
|
|
3,739
|
|
|
649
|
|
|
—
|
|
|
32,394
|
|
|||||
Labor expenses
|
|
58,818
|
|
|
4,976
|
|
|
1,234
|
|
|
—
|
|
|
65,028
|
|
|||||
Rent expense
|
|
21,719
|
|
|
1,630
|
|
|
502
|
|
|
—
|
|
|
23,851
|
|
|||||
Other venue operating expenses
|
|
43,711
|
|
|
3,500
|
|
|
830
|
|
|
(9,809
|
)
|
|
38,232
|
|
|||||
Total company venue operating costs
|
|
152,254
|
|
|
13,845
|
|
|
3,215
|
|
|
(9,809
|
)
|
|
159,505
|
|
|||||
Advertising expense
|
|
8,984
|
|
|
1,150
|
|
|
9,786
|
|
|
(8,862
|
)
|
|
11,058
|
|
|||||
General and administrative expenses
|
|
5,017
|
|
|
8,499
|
|
|
(323
|
)
|
|
—
|
|
|
13,193
|
|
|||||
Depreciation and amortization
|
|
21,429
|
|
|
2,807
|
|
|
503
|
|
|
—
|
|
|
24,739
|
|
|||||
Transaction, severance and related litigation costs
|
|
(262
|
)
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(263
|
)
|
|||||
Asset impairments
|
|
2,505
|
|
|
2,836
|
|
|
3
|
|
|
—
|
|
|
5,344
|
|
|||||
Total operating costs and expenses
|
|
189,927
|
|
|
29,136
|
|
|
13,184
|
|
|
(18,671
|
)
|
|
213,576
|
|
|||||
Operating income (loss)
|
|
(933
|
)
|
|
7,988
|
|
|
314
|
|
|
—
|
|
|
7,369
|
|
|||||
Equity in earnings (loss) in affiliates
|
|
5,444
|
|
|
—
|
|
|
—
|
|
|
(5,444
|
)
|
|
—
|
|
|||||
Interest expense
|
|
18,205
|
|
|
692
|
|
|
172
|
|
|
—
|
|
|
19,069
|
|
|||||
Income (loss) before income taxes
|
|
(13,694
|
)
|
|
7,296
|
|
|
142
|
|
|
(5,444
|
)
|
|
(11,700
|
)
|
|||||
Income tax expense (benefit)
|
|
(4,207
|
)
|
|
2,113
|
|
|
(119
|
)
|
|
—
|
|
|
(2,213
|
)
|
|||||
Net income (loss)
|
|
$
|
(9,487
|
)
|
|
$
|
5,183
|
|
|
$
|
261
|
|
|
$
|
(5,444
|
)
|
|
$
|
(9,487
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Components of other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign currency translation adjustments
|
|
(172
|
)
|
|
—
|
|
|
(172
|
)
|
|
172
|
|
|
(172
|
)
|
|||||
Comprehensive income (loss)
|
|
$
|
(9,659
|
)
|
|
$
|
5,183
|
|
|
$
|
89
|
|
|
$
|
(5,272
|
)
|
|
$
|
(9,659
|
)
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Consolidating Statement of Comprehensive Income (Loss)
|
||||||||||||||||||||
For the Three Months Ended October 1, 2017
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
||||||||||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Food and beverage sales
|
|
$
|
83,413
|
|
|
$
|
13,234
|
|
|
$
|
1,608
|
|
|
$
|
—
|
|
|
$
|
98,255
|
|
Entertainment and merchandise sales
|
|
88,551
|
|
|
19,174
|
|
|
2,908
|
|
|
—
|
|
|
110,633
|
|
|||||
Total company venue sales
|
|
171,964
|
|
|
32,408
|
|
|
4,516
|
|
|
—
|
|
|
208,888
|
|
|||||
Franchise fees and royalties
|
|
506
|
|
|
3,953
|
|
|
—
|
|
|
—
|
|
|
4,459
|
|
|||||
International Association assessments and other fees
|
|
364
|
|
|
7,702
|
|
|
8,294
|
|
|
(16,360
|
)
|
|
—
|
|
|||||
Total revenues
|
|
172,834
|
|
|
44,063
|
|
|
12,810
|
|
|
(16,360
|
)
|
|
213,347
|
|
|||||
Operating Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Company venue operating costs:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of food and beverage
|
|
19,916
|
|
|
3,519
|
|
|
539
|
|
|
—
|
|
|
23,974
|
|
|||||
Cost of entertainment and merchandise
|
|
6,807
|
|
|
432
|
|
|
191
|
|
|
—
|
|
|
7,430
|
|
|||||
Total cost of food, beverage, entertainment and merchandise
|
|
26,723
|
|
|
3,951
|
|
|
730
|
|
|
—
|
|
|
31,404
|
|
|||||
Labor expenses
|
|
55,252
|
|
|
4,729
|
|
|
1,239
|
|
|
—
|
|
|
61,220
|
|
|||||
Rent expense
|
|
22,066
|
|
|
1,624
|
|
|
569
|
|
|
—
|
|
|
24,259
|
|
|||||
Other venue operating expenses
|
|
43,731
|
|
|
3,817
|
|
|
1,079
|
|
|
(8,066
|
)
|
|
40,561
|
|
|||||
Total company venue operating costs
|
|
147,772
|
|
|
14,121
|
|
|
3,617
|
|
|
(8,066
|
)
|
|
157,444
|
|
|||||
Advertising expense
|
|
8,670
|
|
|
1,085
|
|
|
10,622
|
|
|
(8,294
|
)
|
|
12,083
|
|
|||||
General and administrative expenses
|
|
4,526
|
|
|
9,003
|
|
|
46
|
|
|
—
|
|
|
13,575
|
|
|||||
Depreciation and amortization
|
|
24,126
|
|
|
2,515
|
|
|
495
|
|
|
—
|
|
|
27,136
|
|
|||||
Transaction, severance and related litigation costs
|
|
128
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
128
|
|
|||||
Asset impairments
|
|
1,824
|
|
|
14
|
|
|
5
|
|
|
—
|
|
|
1,843
|
|
|||||
Total operating costs and expenses
|
|
187,046
|
|
|
26,738
|
|
|
14,785
|
|
|
(16,360
|
)
|
|
212,209
|
|
|||||
Operating income (loss)
|
|
(14,212
|
)
|
|
17,325
|
|
|
(1,975
|
)
|
|
—
|
|
|
1,138
|
|
|||||
Equity in earnings (loss) in affiliates
|
|
(10,551
|
)
|
|
—
|
|
|
—
|
|
|
10,551
|
|
|
—
|
|
|||||
Interest expense
|
|
15,902
|
|
|
1,353
|
|
|
196
|
|
|
—
|
|
|
17,451
|
|
|||||
Income (loss) before income taxes
|
|
(40,665
|
)
|
|
15,972
|
|
|
(2,171
|
)
|
|
10,551
|
|
|
(16,313
|
)
|
|||||
Income tax expense (benefit)
|
|
(29,573
|
)
|
|
25,067
|
|
|
(715
|
)
|
|
—
|
|
|
(5,221
|
)
|
|||||
Net income (loss)
|
|
$
|
(11,092
|
)
|
|
$
|
(9,095
|
)
|
|
$
|
(1,456
|
)
|
|
$
|
10,551
|
|
|
$
|
(11,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Components of other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign currency translation adjustments
|
|
648
|
|
|
—
|
|
|
648
|
|
|
(648
|
)
|
|
648
|
|
|||||
Comprehensive income (loss)
|
|
$
|
(10,444
|
)
|
|
$
|
(9,095
|
)
|
|
$
|
(808
|
)
|
|
$
|
9,903
|
|
|
$
|
(10,444
|
)
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Consolidating Statement of Comprehensive Income (Loss)
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2018
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Food and beverage sales
|
|
$
|
264,130
|
|
|
$
|
40,250
|
|
|
$
|
4,278
|
|
|
$
|
—
|
|
|
$
|
308,658
|
|
Entertainment and merchandise sales
|
|
324,231
|
|
|
36,255
|
|
|
8,147
|
|
|
—
|
|
|
368,633
|
|
|||||
Total company venue sales
|
|
588,361
|
|
|
76,505
|
|
|
12,425
|
|
|
—
|
|
|
677,291
|
|
|||||
Franchise fees and royalties
|
|
1,441
|
|
|
12,661
|
|
|
1,815
|
|
|
—
|
|
|
15,917
|
|
|||||
International Association assessments and other fees
|
|
794
|
|
|
28,339
|
|
|
27,951
|
|
|
(57,084
|
)
|
|
—
|
|
|||||
Total revenues
|
|
590,596
|
|
|
117,505
|
|
|
42,191
|
|
|
(57,084
|
)
|
|
693,208
|
|
|||||
Operating Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Company venue operating costs:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of food and beverage
|
|
60,432
|
|
|
10,845
|
|
|
1,497
|
|
|
—
|
|
|
72,774
|
|
|||||
Cost of entertainment and merchandise
|
|
25,972
|
|
|
1,238
|
|
|
466
|
|
|
—
|
|
|
27,676
|
|
|||||
Total cost of food, beverage, entertainment and merchandise
|
|
86,404
|
|
|
12,083
|
|
|
1,963
|
|
|
—
|
|
|
100,450
|
|
|||||
Labor expenses
|
|
176,106
|
|
|
15,065
|
|
|
3,823
|
|
|
—
|
|
|
194,994
|
|
|||||
Rent expense
|
|
65,417
|
|
|
5,638
|
|
|
1,560
|
|
|
—
|
|
|
72,615
|
|
|||||
Other venue operating expenses
|
|
129,006
|
|
|
10,882
|
|
|
2,634
|
|
|
(29,159
|
)
|
|
113,363
|
|
|||||
Total company venue operating costs
|
|
456,933
|
|
|
43,668
|
|
|
9,980
|
|
|
(29,159
|
)
|
|
481,422
|
|
|||||
Advertising expense
|
|
28,742
|
|
|
4,511
|
|
|
32,682
|
|
|
(27,925
|
)
|
|
38,010
|
|
|||||
General and administrative expenses
|
|
13,539
|
|
|
25,336
|
|
|
644
|
|
|
—
|
|
|
39,519
|
|
|||||
Depreciation and amortization
|
|
67,073
|
|
|
8,253
|
|
|
1,478
|
|
|
—
|
|
|
76,804
|
|
|||||
Transaction, severance and related litigation costs
|
|
197
|
|
|
266
|
|
|
—
|
|
|
—
|
|
|
463
|
|
|||||
Asset Impairments
|
|
2,591
|
|
|
4,341
|
|
|
3
|
|
|
—
|
|
|
6,935
|
|
|||||
Total operating costs and expenses
|
|
569,075
|
|
|
86,375
|
|
|
44,787
|
|
|
(57,084
|
)
|
|
643,153
|
|
|||||
Operating income (loss)
|
|
21,521
|
|
|
31,130
|
|
|
(2,596
|
)
|
|
—
|
|
|
50,055
|
|
|||||
Equity in earnings (loss) in affiliates
|
|
19,869
|
|
|
—
|
|
|
—
|
|
|
(19,869
|
)
|
|
—
|
|
|||||
Interest expense
|
|
53,833
|
|
|
2,446
|
|
|
461
|
|
|
—
|
|
|
56,740
|
|
|||||
Income (loss) before income taxes
|
|
(12,443
|
)
|
|
28,684
|
|
|
(3,057
|
)
|
|
(19,869
|
)
|
|
(6,685
|
)
|
|||||
Income tax expense (benefit)
|
|
(6,212
|
)
|
|
6,526
|
|
|
(768
|
)
|
|
—
|
|
|
(454
|
)
|
|||||
Net income (loss)
|
|
$
|
(6,231
|
)
|
|
$
|
22,158
|
|
|
$
|
(2,289
|
)
|
|
$
|
(19,869
|
)
|
|
$
|
(6,231
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Components of other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign currency translation adjustments
|
|
127
|
|
|
—
|
|
|
127
|
|
|
(127
|
)
|
|
127
|
|
|||||
Comprehensive income (loss)
|
|
$
|
(6,104
|
)
|
|
$
|
22,158
|
|
|
$
|
(2,162
|
)
|
|
$
|
(19,996
|
)
|
|
$
|
(6,104
|
)
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Consolidating Statement of Comprehensive Income (Loss)
|
||||||||||||||||||||
For the Nine Months Ended October 1, 2017
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Food and beverage sales
|
|
$
|
274,411
|
|
|
$
|
40,959
|
|
|
$
|
4,715
|
|
|
$
|
—
|
|
|
$
|
320,085
|
|
Entertainment and merchandise sales
|
|
296,197
|
|
|
52,097
|
|
|
7,980
|
|
|
—
|
|
|
356,274
|
|
|||||
Total company venue sales
|
|
570,608
|
|
|
93,056
|
|
|
12,695
|
|
|
—
|
|
|
676,359
|
|
|||||
Franchise fees and royalties
|
|
1,411
|
|
|
12,320
|
|
|
—
|
|
|
—
|
|
|
13,731
|
|
|||||
International Association assessments and other fees
|
|
1,054
|
|
|
28,791
|
|
|
26,900
|
|
|
(56,745
|
)
|
|
—
|
|
|||||
Total revenues
|
|
573,073
|
|
|
134,167
|
|
|
39,595
|
|
|
(56,745
|
)
|
|
690,090
|
|
|||||
Operating Costs and Expenses:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Company venue operating costs:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of food and beverage
|
|
62,847
|
|
|
10,671
|
|
|
1,496
|
|
|
—
|
|
|
75,014
|
|
|||||
Cost of entertainment and merchandise
|
|
21,037
|
|
|
1,236
|
|
|
498
|
|
|
—
|
|
|
22,771
|
|
|||||
Total cost of food, beverage, entertainment and merchandise
|
|
83,884
|
|
|
11,907
|
|
|
1,994
|
|
|
—
|
|
|
97,785
|
|
|||||
Labor expenses
|
|
170,089
|
|
|
14,108
|
|
|
3,761
|
|
|
—
|
|
|
187,958
|
|
|||||
Rent expense
|
|
65,168
|
|
|
4,678
|
|
|
1,638
|
|
|
—
|
|
|
71,484
|
|
|||||
Other venue operating expenses
|
|
129,415
|
|
|
10,360
|
|
|
3,373
|
|
|
(29,871
|
)
|
|
113,277
|
|
|||||
Total company venue operating costs
|
|
448,556
|
|
|
41,053
|
|
|
10,766
|
|
|
(29,871
|
)
|
|
470,504
|
|
|||||
Advertising expense
|
|
27,921
|
|
|
4,345
|
|
|
32,310
|
|
|
(26,874
|
)
|
|
37,702
|
|
|||||
General and administrative expenses
|
|
14,663
|
|
|
27,806
|
|
|
196
|
|
|
—
|
|
|
42,665
|
|
|||||
Depreciation and amortization
|
|
74,171
|
|
|
7,334
|
|
|
1,559
|
|
|
—
|
|
|
83,064
|
|
|||||
Transaction, severance and related litigation costs
|
|
698
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
698
|
|
|||||
Asset impairment
|
|
1,824
|
|
|
14
|
|
|
5
|
|
|
—
|
|
|
1,843
|
|
|||||
Total operating costs and expenses
|
|
567,833
|
|
|
80,552
|
|
|
44,836
|
|
|
(56,745
|
)
|
|
636,476
|
|
|||||
Operating income (loss)
|
|
5,240
|
|
|
53,615
|
|
|
(5,241
|
)
|
|
—
|
|
|
53,614
|
|
|||||
Equity in earnings (loss) in affiliates
|
|
28,096
|
|
|
—
|
|
|
—
|
|
|
(28,096
|
)
|
|
—
|
|
|||||
Interest expense
|
|
47,730
|
|
|
3,345
|
|
|
499
|
|
|
—
|
|
|
51,574
|
|
|||||
Income (loss) before income taxes
|
|
(14,394
|
)
|
|
50,270
|
|
|
(5,740
|
)
|
|
(28,096
|
)
|
|
2,040
|
|
|||||
Income tax expense (benefit)
|
|
(14,594
|
)
|
|
18,263
|
|
|
(1,829
|
)
|
|
—
|
|
|
1,840
|
|
|||||
Net income (loss)
|
|
$
|
200
|
|
|
$
|
32,007
|
|
|
$
|
(3,911
|
)
|
|
$
|
(28,096
|
)
|
|
$
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Components of other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Foreign currency translation adjustments
|
|
1,187
|
|
|
—
|
|
|
1,187
|
|
|
(1,187
|
)
|
|
1,187
|
|
|||||
Comprehensive income (loss)
|
|
$
|
1,387
|
|
|
$
|
32,007
|
|
|
$
|
(2,724
|
)
|
|
$
|
(29,283
|
)
|
|
$
|
1,387
|
|
CEC Entertainment, Inc.
|
||||||||||||||||||||
Consolidating Statement of Cash Flows
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2018
|
||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||
Cash flows provided by operating activities:
|
|
$
|
68,801
|
|
|
$
|
17,888
|
|
|
$
|
(4,214
|
)
|
|
$
|
—
|
|
|
$
|
82,475
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchases of property and equipment
|
|
(38,536
|
)
|
|
(15,512
|
)
|
|
(1,154
|
)
|
|
—
|
|
|
(55,202
|
)
|
|||||
Development of internal use software
|
|
(1,484
|
)
|
|
(508
|
)
|
|
—
|
|
|
—
|
|
|
(1,992
|
)
|
|||||
Proceeds from sale of property and equipment
|
|
464
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
464
|
|
|||||
Cash flows provided by (used in) investing activities
|
|
(39,556
|
)
|
|
(16,020
|
)
|
|
(1,154
|
)
|
|
—
|
|
|
(56,730
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net proceeds from senior term loan, net of original issue discount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||
Repayments on senior term loan
|
|
(5,700
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,700
|
)
|
|||||
Payment of debt financing costs
|
|
(395
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(395
|
)
|
|||||
Payments on capital lease obligations
|
|
(436
|
)
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(442
|
)
|
|||||
Payments on sale leaseback transactions
|
|
(2,119
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,119
|
)
|
|||||
Cash flows provided by (used in) financing activities
|
|
(8,650
|
)
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(8,656
|
)
|
|||||
Effect of foreign exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
51
|
|
|
—
|
|
|
51
|
|
|||||
Change in cash, cash equivalents and restricted cash
|
|
20,595
|
|
|
1,868
|
|
|
(5,323
|
)
|
|
—
|
|
|
17,140
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of period
|
|
59,948
|
|
|
410
|
|
|
6,954
|
|
|
—
|
|
|
67,312
|
|
|||||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
80,543
|
|
|
$
|
2,278
|
|
|
$
|
1,631
|
|
|
$
|
—
|
|
|
$
|
84,452
|
|
CEC Entertainment, Inc.
|
||||||||||||||||||||||||
Consolidating Statement of Cash Flows
|
||||||||||||||||||||||||
For the Nine Months Ended October 1, 2017
|
||||||||||||||||||||||||
(in thousands)
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Issuer
|
|
Guarantors
|
|
Non-Guarantors
|
|
Eliminations
|
|
Consolidated
|
||||||||||||||
Cash flows provided by (used in) operating activities:
|
|
$
|
68,568
|
|
|
$
|
24,632
|
|
|
$
|
991
|
|
|
$
|
—
|
|
|
$
|
94,191
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Purchases of property and equipment
|
|
(49,735
|
)
|
|
(21,407
|
)
|
|
(768
|
)
|
|
—
|
|
|
(71,910
|
)
|
|||||||||
Development of internal use software
|
|
—
|
|
|
(2,520
|
)
|
|
—
|
|
|
—
|
|
|
(2,520
|
)
|
|||||||||
Proceeds from the sale of property and equipment
|
|
424
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
424
|
|
|||||||||
Cash flows provided by (used in) investing activities
|
|
(49,311
|
)
|
—
|
|
(23,927
|
)
|
—
|
|
(768
|
)
|
—
|
|
—
|
|
—
|
|
(74,006
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Repayments on senior term loan
|
|
(5,700
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,700
|
)
|
|||||||||
Repayments on note payable
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|||||||||
Proceeds from sale leaseback transaction
|
|
4,073
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,073
|
|
|||||||||
Payments on capital lease obligations
|
|
(335
|
)
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
(340
|
)
|
|||||||||
Payments on sale leaseback transactions
|
|
(1,789
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,789
|
)
|
|||||||||
Return of capital
|
|
1,447
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,447
|
|
|||||||||
Cash flows provided by (used in) financing activities
|
|
(2,304
|
)
|
—
|
|
(13
|
)
|
—
|
|
(5
|
)
|
—
|
|
—
|
|
—
|
|
(2,322
|
)
|
|||||
Effect of foreign exchange rate changes on cash
|
|
—
|
|
|
—
|
|
|
492
|
|
|
—
|
|
|
492
|
|
|||||||||
Change in cash, cash equivalents and restricted cash
|
|
16,953
|
|
—
|
|
692
|
|
—
|
|
710
|
|
—
|
|
—
|
|
—
|
|
18,355
|
|
|||||
Cash, cash equivalents and restricted cash at beginning of period
|
|
53,088
|
|
|
1,158
|
|
|
7,045
|
|
|
—
|
|
|
61,291
|
|
|||||||||
Cash, cash equivalents and restricted cash at end of period
|
|
$
|
70,041
|
|
|
$
|
1,850
|
|
|
$
|
7,755
|
|
|
$
|
—
|
|
|
$
|
79,646
|
|
•
|
Presentation of Operating Results;
|
•
|
Executive Summary;
|
•
|
Key Measure of Our Financial Performance and Key Non-GAAP Measures;
|
•
|
Key Income Statement Line Item Descriptions;
|
•
|
Results of Operations;
|
•
|
Financial Condition, Liquidity and Capital Resources;
|
•
|
Off-Balance Sheet Arrangements and Contractual Obligations;
|
•
|
Critical Accounting Policies and Estimates;
|
•
|
Recently Issued Accounting Guidance;
|
•
|
Non-GAAP Financial Measures; and
|
•
|
Cautionary Statement Regarding Forward-Looking Statements.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||
|
|
September 30,
2018 |
|
October 1,
2017 |
|
September 30,
2018 |
|
October 1,
2017 |
||||
Number of Company-operated venues:
|
|
|
|
|
|
|
|
|
||||
Beginning of period
|
|
559
|
|
|
564
|
|
|
562
|
|
|
559
|
|
New
(1)
|
|
1
|
|
|
—
|
|
|
1
|
|
|
3
|
|
Acquired from franchisee
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Closed
(1)
|
|
(3
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(2
|
)
|
End of period
|
|
557
|
|
|
562
|
|
|
557
|
|
|
562
|
|
Number of franchised venues:
|
|
|
|
|
|
|
|
|
||||
Beginning of period
|
|
196
|
|
|
193
|
|
|
192
|
|
|
188
|
|
New
|
|
1
|
|
|
—
|
|
|
7
|
|
|
7
|
|
Acquired from franchisee
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
Closed
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
End of period
|
|
197
|
|
|
191
|
|
|
197
|
|
|
191
|
|
Total number of venues:
|
|
|
|
|
|
|
|
|
||||
Beginning of period
|
|
755
|
|
|
757
|
|
|
754
|
|
|
747
|
|
New
(1)
|
|
2
|
|
|
—
|
|
|
8
|
|
|
10
|
|
Acquired from franchisee
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Closed
(1)
|
|
(3
|
)
|
|
(4
|
)
|
|
(8
|
)
|
|
(4
|
)
|
End of period
|
|
754
|
|
|
753
|
|
|
754
|
|
|
753
|
|
(1)
|
The number of new and closed Company-operated venues during the
three and nine months ended
September 30, 2018
included one store that was relocated.
|
•
|
Cost of food and beverage includes all direct costs of food, beverages and costs of related paper and birthday supplies, less rebates from suppliers;
|
•
|
Cost of entertainment and merchandise includes all direct costs of prizes provided and merchandise sold to our customers, as well as the cost of tickets dispensed to customers;
|
•
|
Labor expenses consist of salaries and wages, bonuses, related payroll taxes and benefits for venue personnel;
|
•
|
Rent expense includes lease costs for Company-operated venues, excluding common occupancy costs (e.g., common area maintenance (“CAM”) charges and property taxes); and
|
•
|
Other venue operating expenses primarily include utilities, repair and maintenance costs, liability and property insurance, CAM charges, property taxes, credit card processing fees, licenses, preopening expenses, venue asset disposal gains and losses and all other costs directly related to the operation of a venue.
|
|
|
Three Months Ended
|
||||||||||||
|
|
September 30, 2018
|
|
October 1, 2017
|
||||||||||
|
|
(in thousands, except percentages)
|
||||||||||||
Food and beverage sales
|
|
$
|
94,023
|
|
|
43.6
|
%
|
|
$
|
98,255
|
|
|
47.0
|
%
|
Entertainment and merchandise sales
|
|
121,611
|
|
|
56.4
|
%
|
|
110,633
|
|
|
53.0
|
%
|
||
Total company venue sales
|
|
$
|
215,634
|
|
|
100.0
|
%
|
|
$
|
208,888
|
|
|
100.0
|
%
|
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30, 2018
|
|
October 1, 2017
|
||||||||||
|
|
(in thousands, except percentages)
|
||||||||||||
Food and beverage sales
|
|
$
|
308,658
|
|
|
45.6
|
%
|
|
$
|
320,085
|
|
|
47.3
|
%
|
Entertainment and merchandise sales
|
|
368,633
|
|
|
54.4
|
%
|
|
356,274
|
|
|
52.7
|
%
|
||
Total company venue sales
|
|
$
|
677,291
|
|
|
100.0
|
%
|
|
$
|
676,359
|
|
|
100.0
|
%
|
(1)
|
Percent amount expressed as a percentage of Food and beverage sales.
|
(2)
|
Percent amount expressed as a percentage of Entertainment and merchandise sales.
|
(3)
|
Percent amount expressed as a percentage of Total company venue sales.
|
(4)
|
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.
|
(1)
|
Percent amount expressed as a percentage of Food and beverage sales.
|
(2)
|
Percent amount expressed as a percentage of Entertainment and merchandise sales.
|
(3)
|
Percent amount expressed as a percentage of Total company venue sales.
|
(4)
|
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.
|
•
|
our guests pay for their purchases in cash or credit cards at the time of the sale and the cash from these sales is typically received before our related accounts payable to suppliers and employee payroll become due;
|
•
|
frequent inventory turnover results in a limited investment required in inventories; and
|
•
|
our accounts payable are generally due within five to 30 days.
|
|
|
Nine Months Ended
|
||||||
|
|
September 30,
2018 |
|
October 1,
2017 |
||||
|
|
(in thousands)
|
||||||
Net cash provided by operating activities
|
|
$
|
82,475
|
|
|
$
|
94,191
|
|
Net cash used in investing activities
|
|
(56,730
|
)
|
|
(74,006
|
)
|
||
Net cash provided by (used in) financing activities
|
|
(8,656
|
)
|
|
(2,322
|
)
|
||
Effect of foreign exchange rate changes on cash
|
|
51
|
|
|
492
|
|
||
Change in cash, cash equivalents and restricted cash
|
|
$
|
17,140
|
|
|
$
|
18,355
|
|
Interest paid
|
|
$
|
59,229
|
|
|
$
|
53,076
|
|
Income taxes paid (refunded), net
|
|
$
|
867
|
|
|
$
|
6,635
|
|
|
|
September 30,
2018 |
|
December 31,
2017 |
||||
|
|
($ in thousands)
|
||||||
Cash and cash equivalents
|
|
$
|
84,429
|
|
|
$
|
67,200
|
|
Restricted cash
|
|
23
|
|
|
112
|
|
||
Term loan facility
|
|
725,800
|
|
|
731,500
|
|
||
Senior notes
|
|
255,000
|
|
|
255,000
|
|
||
Available unused commitments under revolving credit facility
|
|
141,000
|
|
|
140,100
|
|
|
|
Nine Months Ended
|
||||||
|
|
September 30, 2018
|
|
October 1, 2017
|
||||
|
|
(in thousands)
|
||||||
Growth capital spend
(1)
|
|
$
|
21,157
|
|
|
$
|
42,960
|
|
Maintenance capital spend
(2)
|
|
33,048
|
|
|
26,104
|
|
||
IT capital spend
|
|
2,989
|
|
|
5,363
|
|
||
Total Capital Spend
|
|
$
|
57,194
|
|
|
$
|
74,427
|
|
(1)
|
Growth capital spend includes major remodels, venue expansions, our PlayPass initiative and new venue development, including relocations and franchise acquisitions.
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30, 2018
|
|
October 1,
2017 |
|
September 30, 2018
|
|
October 1,
2017 |
||||||||
|
|
(in thousands, except percentages)
|
||||||||||||||
Total revenues
|
|
$
|
220,945
|
|
|
$
|
213,347
|
|
|
$
|
693,208
|
|
|
$
|
690,090
|
|
Net income (loss) as reported
|
|
$
|
(9,487
|
)
|
|
$
|
(11,092
|
)
|
|
$
|
(6,231
|
)
|
|
$
|
200
|
|
Interest expense
|
|
19,069
|
|
|
17,451
|
|
|
56,740
|
|
|
51,574
|
|
||||
Income tax expense
|
|
(2,213
|
)
|
|
(5,221
|
)
|
|
(454
|
)
|
|
1,840
|
|
||||
Depreciation and amortization
|
|
24,739
|
|
|
27,136
|
|
|
76,804
|
|
|
83,064
|
|
||||
Asset Impairments
|
|
5,344
|
|
|
1,843
|
|
|
6,935
|
|
|
1,843
|
|
||||
Loss on asset disposals, net
(1)
|
|
513
|
|
|
1,741
|
|
|
2,551
|
|
|
5,457
|
|
||||
Unrealized loss on foreign exchange
(2)
|
|
(412
|
)
|
|
—
|
|
|
283
|
|
|
—
|
|
||||
Non-cash stock-based compensation
(3)
|
|
(58
|
)
|
|
184
|
|
|
169
|
|
|
520
|
|
||||
Rent expense book to cash
(4)
|
|
945
|
|
|
1,192
|
|
|
5,133
|
|
|
4,028
|
|
||||
Franchise revenue, net cash received
(5)
|
|
(30
|
)
|
|
—
|
|
|
712
|
|
|
(344
|
)
|
||||
Impact of purchase accounting
(6)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
785
|
|
||||
Venue pre-opening costs
(7)
|
|
81
|
|
|
155
|
|
|
105
|
|
|
643
|
|
||||
One-time and unusual items
(8)
|
|
44
|
|
|
1,167
|
|
|
1,511
|
|
|
4,379
|
|
||||
Adjusted EBITDA
(9)
|
|
$
|
38,535
|
|
|
$
|
34,556
|
|
|
$
|
144,258
|
|
|
$
|
153,989
|
|
Adjusted EBITDA Margin
|
|
17.4
|
%
|
|
16.2
|
%
|
|
20.8
|
%
|
|
22.3
|
%
|
(1)
|
Relates primarily to gains or losses upon disposal of property or equipment.
|
(2)
|
Relates to unrealized gains or losses on the revaluation of our indebtedness with our Canadian subsidiary. Effective
January 1, 2018
, we no longer consider undistributed income from our Canadian subsidiary to be permanently invested.
|
(3)
|
Represents non-cash equity-based compensation expense.
|
(4)
|
Represents (i) the removal of the non-cash portion of rent expense relating to the impact of straight-line rent and the amortization of cash incentives and allowances received from landlords, plus (ii) the actual cash received from landlords incentives and allowances in the period in which it was received.
|
(5)
|
Represents the actual cash received for franchise fees received in the period for post-acquisition franchise development agreements, which we do not start recognizing into revenue until the franchise venue is opened.
|
(6)
|
Represents revenue related to unearned gift cards and unearned franchise fees that were removed in purchase accounting, and, therefore, were not recorded as revenue.
|
(7)
|
Relates to start-up and marketing costs incurred prior to the opening of new Company-owned venues and generally consists of payroll, recruiting, training, supplies and rent incurred prior to venue opening.
|
(8)
|
Represents non-recurring income and expenses primarily related to (i) legal fees, claims and settlements related to litigation in respect of the merger in 2014 of CEC Entertainment, Inc. with and into an entity controlled by Apollo Global Management, LLC and its subsidiaries (referred to as the “Merger”); (ii) severance expense and executive termination benefits; (iii) legal claims and settlements related to employee class action lawsuits and settlements; (iv) sales and use tax refunds relating to prior periods; (v) professional fees incurred in connection with one-time strategic corporate and tax initiatives, such as accounting and consulting fees incurred to enhance transfer pricing and to implement PlayPass; (vi) removing current period property losses and insurance recoveries relating to prior period business interruption losses at certain venues, primarily relating to disaster recoveries, such as natural disasters, fires, floods and property damage; and (vii) one-time training and travel-related costs incurred in connection with training venue employees in connection with the implementation of our PlayPass initiative that we began in 2016.
|
(9)
|
With the continued evolution of our games business from tokens to game play credits and now towards time-based play packages following the implementation of All You Can Play (“AYCP”) in the third quarter of 2018, the impact on our financial results of the fluctuation of the deferred revenue liability related to unused credits on Play Pass cards begins to lessen in importance in understanding our Adjusted EBITDA. Customers continue to see the value of time based play and game play credits continue to decline as a percentage of overall game play. As a result, the change in the deferred revenue liability relating to unused Play Pass cards has been removed from Adjusted EBITDA for all periods presented.
|
•
|
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.
|
•
|
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 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 business;
|
•
|
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;
|
•
|
our ability to pay our fixed rental payments;
|
•
|
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
.
|
Exhibit
Number
|
|
Description
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
CEC ENTERTAINMENT, INC.
|
|
|
|
|
|
November 9, 2018
|
|
By:
|
|
/s/ James A. Howell
|
|
|
|
|
James A. Howell
|
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
November 9, 2018
|
|
By:
|
|
/s/ David Rappaport
|
|
|
|
|
David Rappaport
|
|
|
|
|
Vice President, Controller and Chief Accounting Officer
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
Exhibit
Number
|
|
Description
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101.INS
|
|
XBRL Instance Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
By: /s/ Lance Milken
|
_______________________________
Name: Lance Milken Title: Chairman |
1.
|
I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended
September 30, 2018
of CEC Entertainment, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 9, 2018
|
|
/s/ Thomas Leverton
|
|
|
Thomas Leverton
|
|
|
Chief Executive Officer and Director
|
1.
|
I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended
September 30, 2018
of CEC Entertainment, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 9, 2018
|
|
/s/ James A. Howell
|
|
|
James A. Howell
|
|
|
Executive Vice President, Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
November 9, 2018
|
|
/s/ Thomas Leverton
|
|
|
Thomas Leverton
|
|
|
Chief Executive Officer and Director
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
November 9, 2018
|
|
/s/ James A. Howell
|
|
|
James A. Howell
|
|
|
Executive Vice President, Chief Financial Officer
|