IRVING, Texas - (BUSINESS WIRE) - Nov. 1, 2012 - CEC Entertainment, Inc. (NYSE: CEC) today announced its financial results for its third quarter ended September 30, 2012. Total revenues for the third quarter of 2012 decreased 1.7%, or $3.4 million, to $196.6 million from $200.0 million for the third quarter of 2011. The decrease primarily related to a 2.3% decrease in comparable store sales, partially offset by additional revenues from six new stores opened or acquired since the end of the third quarter of 2011.
Net income for the third quarter ended September 30, 2012 decreased 33.3%, or $3.9 million, to $7.8 million compared to $11.7 million for the third quarter of 2011. Diluted earnings per share decreased to $0.45 per share for the third quarter of 2012 from $0.62 per share for the third quarter of 2011. The decrease primarily related to the decrease in net income.
For the first nine months of 2012, total revenues decreased 2.6%, or $16.9 million, to $625.7 million compared to $642.6 million for the first nine months of 2011. The decrease in total revenues was primarily related to a 3.1% decrease in comparable store sales, partially offset by additional revenues from six new stores opened or acquired since the end of the third quarter of 2011.
Net income for the first nine months of 2012 decreased 15.3%, or $8.0 million, to $44.2 million compared to $52.2 million for the first nine months of 2011. Diluted earnings per share decreased to $2.50 per share for the first nine months of 2012 from $2.70 per share for the first nine months of 2011. The decrease primarily related to the decrease in net income. Diluted earnings per share for the first nine months of 2012 benefitted approximately $0.20 from our repurchase of 2.7 million shares of our common stock since the beginning of 2011 fiscal year.
On October 30, 2012, the Company’s Board of Directors declared a cash dividend of $0.24 per share, a 9% increase from our most recent dividend. This cash dividend is scheduled to be paid on December 27, 2012 to stockholders of record as of December 6, 2012.
Michael Magusiak, President and Chief Executive Officer, stated: “We are not pleased with our comparable store sales results for the third quarter and its impact on earnings. During the third quarter, we continued to test certain marketing strategies including a significant reduction in kid’s television advertising weight levels and launched a digital media advertising campaign targeting moms. In retrospect, we believe we reduced media weight levels too deeply, which negatively impacted sales.”
Magusiak continued, “We have continued to revise our strategies to refresh our concept and have developed what we believe is a comprehensive strategic plan that will be fully implemented in 2013. Incorporated in our strategies is a strong marketing plan targeting both kids and adults with significant increases in our media buy, along with the implementation and communication of our value proposition. We remain optimistic about and fully-committed to our strategies, and continue to believe that when fully deployed our strategies will lead to comparable store sales increases, earnings growth and enhanced shareholder value.”
Given the uncertainty that surrounds our fourth quarter sales, including the ultimate impact of Superstorm Sandy in our lowest seasonal quarter, we are suspending guidance for the fourth quarter of 2012.
At this time we are providing guidance for fiscal 2013 of a 2%-3% increase in comparable store sales resulting in diluted earnings per share in a range of $2.80-$3.00, which includes an approximate increase of $5 million in advertising expense as compared to fiscal 2012.
We intend to further update you on our projections for sales and earnings on our year-end call in February of 2013.
The Company will host a conference call Thursday, November 1, 2012, at 3:30 p.m. Central Time to discuss its third quarter 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 through Friday, December 21, 2012.
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.
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 562 Chuck E. Cheese’s stores located in 48 states and eight foreign countries or territories. Currently, 511 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.
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 Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2012, filed on February 23, 2012. 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:
The forward-looking statements made in this press release relate only to events as of the date on which the statements are 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 are made or to reflect the occurrence of unanticipated events
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Percentages are expressed as a percent of total revenues (except as otherwise noted).
(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) Percentage amount expressed as a percentage of Company store sales.
(Note - 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 store sales.)
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CEC ENTERTAINMENT, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Net Income to EBITDA:
The following table set forth a reconciliation of net income to EBITDA and EBITDA expressed as a percentage of total revenues for the periods shown:
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The Company believes that EBITDA provides useful information to the Company, investors and other interested parties about the Company’s operating performance, its capacity to incur and service debt, fund capital expenditures and other corporate uses.
EBITDA, a non-GAAP financial measure, is defined by the Company as net income before income taxes, interest expense, and depreciation and amortization. The non-GAAP financial measure presented in the table above should not be viewed as an alternative or substitute for the Company’s reported GAAP results. EBITDA as defined herein may differ from similarly titled measures presented by other companies.
CEC ENTERTAINMENT, INC.
FREE CASH FLOW AND STORE COUNT INFORMATION
(Unaudited)
Free Cash Flow:
The following table sets forth a reconciliation of cash provided by operating activities to Free Cash Flow for the periods shown:
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Free Cash Flow, a non-GAAP financial measure, is defined by the Company as cash provided by operating activities less capital expenditures, franchise acquisitions and dividend payments.
The Company believes that Free Cash Flow provides useful information to the Company, investors and other interested parties about the amount of cash generated by the business that, after the acquisition of property and equipment, franchise acquisitions and payment of dividends, can be used for other strategic opportunities, including servicing debt, funding additional capital expenditures and making investments in the business. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. The non-GAAP financial measure presented in the table above should not be viewed as an alternative or substitute for the Company’s reported GAAP results. Free Cash Flow, as defined herein, may differ from similarly titled measures presented by other companies.
Store Count Information:
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(1) For the three months ended September 30, 2012, new and closed stores include one relocated store. For the nine months ended September 30, 2012, new and closed stores include three relocated stores. New and closed stores for the nine months ended October 2, 2011, include one relocated store.
Source: CEC Entertainment, Inc.
CEC Entertainment, Inc.
Tiffany B. Kice
972-258-4525
Executive Vice President
Chief Financial Officer
For more than 35 years, CEC Entertainment is a family dining and entertainment franchise.