IRVING, Texas (RestaurantNewsRelease.com) CEC Entertainment, Inc. (NYSE: CEC) today reported net earnings of $33.9 million for the first quarter ended April 4, 2010, compared to net earnings of $34.1 million in the first quarter of 2009. Diluted earnings per share increased to $1.53 for the first quarter of 2010, compared to $1.48 in the first quarter of 2009. The increase in diluted earnings per share benefited from a 3.9% decrease in the number of weighted average diluted shares outstanding between the two periods associated with the Company’s common stock repurchases. Total quarterly revenues decreased 0.7% to $246.3 million during the first quarter of 2010 from total quarterly revenues of $248.1 million in the first quarter of 2009. This decrease is primarily due to the effect of one additional operating week in the Company’s 2009 fiscal year which caused the seasonally strong first week of the 2010 calendar year to shift into the fourth fiscal quarter of 2009 instead of in the first fiscal quarter of 2010. First quarter 2010 comparable store sales on a same calendar week basis (comparing weeks 1 through 13 of fiscal year 2010 to weeks 2 through 14 of fiscal year 2009) grew 0.7%.
Michael Magusiak, President and Chief Executive Officer, stated that, “We’re relatively pleased with our comparable store sales performance in the first quarter of 2010. As we move forward in 2010, our outlook for the business is best characterized as one of cautious optimism. The consumer environment remains uncertain, but we believe our strategies are solid. We are pleased with the results realized from our capital initiatives, our continued focus on birthday party sales, school and non-profit fundraisers, and our recent changes to our pricing and coupon strategies. We intend to build upon these proven and successful initiatives to further improve our future comparable store sales performance.”
Based on its current estimates, the Company is projecting fiscal year 2010 diluted earnings per share to be in a range of $2.70 to $2.80, representing a growth rate of 8.0% to 12.0% over fiscal year 2009 diluted earnings per share excluding the benefit of the extra week in fiscal year 2009. A reconciliation of diluted earnings per share excluding the estimated impact of the 53rd operating week in fiscal year 2009 is set forth in a table accompanying this release. This guidance incorporates the following full fiscal year 2010 assumptions:
- comparable store sales, on a calendar week basis, up 1.0% to 2.0%;
- seven additional Company-owned stores, including one relocation;
- average cheddar block prices in a range of $1.55 to $1.65 per pound;
- slight labor pressure due to minimum wage increases and increases in unemployment taxes;
- depreciation and rent expense will grow 4% and 3%, respectively;
- advertising expense as a percentage of total revenue will decrease 0.1 to 0.2 percentage points;
- effective tax rate of approximately 38.0%;
- total capital expenditures will range from $96.0 million to $100.0 million;
- free cash flow used to repurchase Company common stock on an opportunistic basis.
First Quarter 2010 Conference Call:
The Company will host a conference call Thursday, May 6, 2010, at 3:30 p.m. Central Time to discuss its first quarter 2010 financial results and outlook for the 2010 fiscal year. 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, June 25, 2010.
Non-GAAP Financial Measures:
The Company reports and discusses its operating results using financial measures consistent with generally accepted accounting principles (“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 Free Cash Flow and diluted earnings per share excluding the benefit of the extra week in fiscal year 2009. 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.
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, 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. A reconciliation of the most directly comparable GAAP financial measure to Free Cash Flow is set forth in a table accompanying this release. Free Cash Flow as defined herein may differ from similarly titled measures presented by other companies.
The Company believes that presenting fiscal year 2009 diluted earnings per share excluding the estimated benefit of the extra week provides useful information to the Company, investors and other interested parties about the Company’s year-over-year results and projected growth. The Company believes that an understanding of the impact of the 53rd operating week in fiscal 2009 on diluted earnings per share provides a more meaningful understanding of the Company’s performance because the periods being compared consist of a different number of weeks. A reconciliation of reported diluted earnings per share to diluted earnings per share excluding the estimated impact of the 53rd week is set forth in a table accompanying this release.
About CEC Entertainment, Inc.:
Celebrating over 30 years of success as a place Where a Kid can be a Kid®, CEC Entertainment, Inc. is a nationally recognized leader in family dining and entertainment. Chuck E. Cheese’s stores feature musical and comic entertainment by robotic and animated characters, arcade-style and skill oriented games, video games, rides and other activities intended to appeal to families with children between the ages of two and 12 and offers a variety of pizzas, sandwiches, appetizers, a salad bar and desserts. The Company and its franchisees operate a system of 546 Chuck E. Cheese’s stores located in 48 states (excluding Wyoming and Vermont) and six foreign countries or territories. Currently, 498 locations in the United States and Canada are owned and operated by the Company. 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 3, 2010. 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:
- Changes in consumer discretionary spending and general economic conditions;
- Disruptions in the financial markets affecting the availability and cost of credit and our ability to maintain adequate insurance coverage;
- Our ability to successfully implement our business development strategies;
- Costs incurred in connection with our business development strategies;
- Competition in both the restaurant and entertainment industries;
- Loss of certain key personnel;
- Increases in food, labor and other operating costs;
- Changes in consumers’ health, nutrition and dietary preferences;
- Negative publicity concerning food quality, health, safety and other issues;
- Continued existence or occurrence of certain public health issues;
- Disruption of our commodity distribution system;
- Our dependence on a few global providers for the procurement of games and rides;
- Adverse affects of local conditions, events and natural disasters;
- Fluctuations in our quarterly results of operations due to seasonality;
- Conditions in foreign markets;
- Risks in connection with owning and leasing real estate;
- Our ability to adequately protect our trademarks or other proprietary rights;
- Government regulations, litigation, product liability claims and product recalls;
- Disruptions of our information technology systems;
- Application of and changes in generally accepted accounting principles; and
- Failure to establish, maintain and apply adequate internal control over financial reporting.
The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. 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.