CEC Entertainment, Inc. (NYSE: CEC) today announced its financial results for the fourth quarter ended January 2, 2011. Fourth quarter 2010 comparable store sales on a same calendar week basis (comparing weeks 40 through 52 of fiscal year 2010 to weeks 41 through 53 of fiscal year 2009) increased 3.9%. Total quarterly revenues decreased $4.8 million to $182.8 million during the fourth quarter of 2010 from total quarterly revenues of $187.6 million in the 14-week fourth quarter of 2009. The decrease in total revenues relates to an additional average sales volume operating week in the fourth quarter of 2009 compared to the fourth quarter of 2010, as our 2009 fiscal year consisted of 53 weeks compared to 52 weeks in 2010. As compared to the fourth quarter 2010, we estimate that the additional operating week favorably impacted fourth quarter 2009 revenue by approximately $14 million.
Net income for the fourth quarter ended January 2, 2011 was $2.8 million compared to net income of $5.4 million in the 14-week fourth quarter of 2009. Diluted earnings per share was $0.14 for the fourth quarter of 2010, and was impacted by approximately $0.05 relating to certain unfavorable tax related adjustments recorded during the fourth quarter of 2010. Diluted earnings per share was $0.24 in the fourth quarter of 2009, and we estimate that it benefited from the additional average sales volume week in the prior year by approximately $0.12.
Comparable store sales for the full fiscal year 2010 on a same calendar week basis (comparing weeks 1 through 52 of fiscal year 2010 to weeks 2 through 53 of fiscal year 2009) increased 1.5%. Total revenues for fiscal year 2010 decreased $1.1 million to $817.2 million compared to total revenues of $818.3 million in fiscal 2009. The decrease in total revenues relates to an additional high sales volume operating week in fiscal 2009 compared to fiscal 2010. We estimate that the additional operating week in fiscal year 2009, as compared to fiscal year 2010, favorably impacted fiscal year 2009 revenue by approximately $20 million.
Net income for the full fiscal year 2010 was $54.0 million compared to net income of $61.2 million in fiscal 2009. Diluted earnings per share was $2.55 for fiscal 2010, and was impacted by unfavorable tax related adjustments of approximately $0.17 recorded primarily in the second and fourth quarters of 2010. Diluted earning per share was $2.67 for fiscal 2009, and we estimate that the additional high sales volume operating week favorably impacted fiscal year 2009 diluted earnings per share by approximately $0.17. Diluted earnings per share in 2010 was also impacted by the Company’s repurchase of approximately 4.0 million shares of its common stock since the beginning of the first quarter of 2009.
Additionally, on February 22, 2011, the Company’s Board of Directors approved the initiation of a quarterly cash dividend of $0.20 per share. The dividend announced today represents an annual cash dividend rate of $0.80 per share. Due to the timing of the Board’s decision, dividends paid during the 2011 fiscal year are expected to be $0.60 per share. The Company’s first quarterly dividend of $0.20 per share will be paid on April 21, 2011 to shareholders of record on March 24, 2011. While the declaration of future dividends are subject to the final determination and approval of our Board, we currently intend to pay regular quarterly dividends for the foreseeable future.
Michael Magusiak, President and Chief Executive Officer, stated that, “Our fourth quarter same calendar week comparable store sales increase of 3.9% reflects the strength of our brand and quality implementation of our strategies. During fiscal 2010, we generated approximately $157 million of cash flow from operations. We utilized this strong cash flow to add 12 new Company stores and enhance 223 stores in the form of store expansions, major remodels and game enhancements. Additionally, during this same time period we once again confirmed our long-term commitment to our stock repurchase plan buying back 2.2 million shares, which represented approximately 10% of diluted shares outstanding at year-end. Given our confidence in our ability to continue to generate strong cash flow in the future, we believe it is appropriate to not only return capital to our shareholders through share repurchases, but also to return cash to our shareholders through cash dividends. Our Board of Directors recently approved the initiation of a quarterly dividend of $0.20 per share, or $0.80 per share on an annual basis.”
Mr. Magusiak also stated, “We anticipate that our cash flow from operations this year will exceed capital expenditures and dividend payments by $50 to $60 million. We intend to continue to return this capital to shareholders with our share repurchase plan on an opportunistic basis.”
Business Outlook:
Based on its current estimates, the Company is projecting fiscal year 2011 diluted earnings per share to be in a range of $2.95 to $3.05. This guidance incorporates the following assumptions for the 2011 fiscal year:
- comparable store sales up 1.0% to 2.0%;
- six additional Company-owned stores, including three relocations;
- average cheddar block prices in a range of $1.60 to $1.80 per pound;
- combined depreciation and rent expense will each grow approximately 6% from prior year;
- advertising expense as a percentage of total revenues will decrease approximately 0.1 percentage points;
- effective tax rate of approximately 38.7%;
- capital expenditures will range from $94.0 million to $95.0 million, impacting approximately 200 stores and the addition of approximately six Company-owned stores; and
- intent to repurchase Company common stock on an opportunistic basis.
Fourth Quarter 2010 Conference Call:
The Company will host a conference call Thursday, February 24, 2011, at 3:30 p.m. Central Time to discuss its fourth quarter and fiscal year 2010 financial results and outlook for fiscal year 2011. 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, March 25, 2011.
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 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 553 Chuck E. Cheese’s stores located in 48 states and seven foreign countries or territories. Currently, 507 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 pizza, sandwiches, 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 $6 million to schools and non-profit institutions through its fundraising programs. For more information, see the company’s website at www.chuckecheese.com.