Page |
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
3 |
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Item 2. |
18 |
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Item 3. |
31 |
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Item 4. |
31 |
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PART II |
OTHER INFORMATION |
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Item 1. |
32 |
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Item 1A. |
32 |
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Item 2. |
32 |
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Item 6. |
33 |
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34 |
Item 1. |
Financial Statements |
August 2, |
February 2, |
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2020 |
2020 |
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(unaudited) |
(audited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Inventories |
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Prepaid expenses |
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Income taxes receivable |
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Other current assets |
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Total current assets |
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Property and equipment (net of $ |
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Operating lease right of use assets |
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Deferred tax assets |
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Tradenames |
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Goodwill |
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Other assets and deferred charges |
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Total assets |
$ | $ | ||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Current installments of long-term debt |
$ | $ | ||||||
Accounts payable |
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Accrued liabilities |
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Income taxes payable |
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Total current liabilities |
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Deferred income taxes |
— | |||||||
Operating lease liabilities |
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Other liabilities |
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Long-term debt, net |
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Commitments and contingencies |
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Stockholders’ equity: |
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Common stock, par value $ |
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Preferred stock, |
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Paid-in capital |
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Treasury stock, |
( |
) | ( |
) | ||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | $ | ||||||
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Thirteen Weeks |
Thirteen Weeks |
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Ended |
Ended |
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August 2, 2020 |
August 4, 2019 |
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Food and beverage revenues |
$ | $ | ||||||
Amusement and other revenues |
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Total revenues |
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Cost of food and beverage |
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Cost of amusement and other |
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Total cost of products |
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Operating payroll and benefits |
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Other store operating expenses |
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General and administrative expenses |
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Depreciation and amortization expense |
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Pre-opening costs |
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Total operating costs |
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Operating income (loss) |
( |
) | ||||||
Interest expense, net |
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Income (loss) before provision (benefit) for income taxes |
( |
) | ||||||
Provision (benefit) for income taxes |
( |
) | ||||||
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Net income (loss) |
( |
) | ||||||
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Unrealized foreign currency translation gain |
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Unrealized gain (loss) on derivatives, net of tax |
( |
) | ||||||
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Total other comprehensive income ( loss) |
( |
) | ||||||
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Total comprehensive income (loss) |
$ | ( |
) | $ | ||||
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Net income (loss) per share: |
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Basic |
$ | ( |
) | $ | ||||
Diluted |
$ | ( |
) | $ | ||||
Weighted average shares used in per share calculations: |
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Basic |
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Diluted |
Twenty-Six Weeks |
Twenty-Six Weeks |
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Ended |
Ended |
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August 2, 2020 |
August 4, 2019 |
|||||||
Food and beverage revenues |
$ | $ | ||||||
Amusement and other revenues |
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Total revenues |
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Cost of food and beverage |
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Cost of amusement and other |
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Total cost of products |
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Operating payroll and benefits |
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Other store operating expenses |
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General and administrative expenses |
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Depreciation and amortization expense |
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Pre-opening costs |
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Total operating costs |
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Operating income (loss) |
( |
) | ||||||
Interest expense, net |
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Income (loss) before provision (benefit) for income taxes |
( |
) | ||||||
Provision (benefit) for income taxes |
( |
) | ||||||
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|
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Net income (loss) |
( |
) | ||||||
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Unrealized foreign currency translation loss |
( |
) | ( |
) | ||||
Unrealized loss on derivatives, net of tax |
( |
) | ( |
) | ||||
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Total other comprehensive loss |
( |
) | ( |
) | ||||
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Total comprehensive income (loss) |
$ | ( |
) | $ | ||||
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Net income (loss) per share: |
||||||||
Basic |
$ | ( |
) | $ | ||||
Diluted |
$ | ( |
) | $ | ||||
Weighted average shares used in per share calculations: |
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Basic |
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Diluted |
Thirteen Weeks Ended August 2, 2020 |
||||||||||||||||||||||||||||||||
Common Stock |
Paid-In Capital |
Treasury Stock At Cost |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Total |
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Shares |
Amt. |
|
Shares |
Amt. |
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Balance May 3, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Unrealized foreign currency translation gain |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Unrealized gain on derivatives, net of tax |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of common stock |
— | — | — | — | ||||||||||||||||||||||||||||
Repurchase of common stock |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||
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Balance August 2, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
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Thirteen Weeks Ended August 4, 2019 |
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Common Stock |
Paid-In Capital |
Treasury Stock At Cost |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Total |
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Shares |
Amt. |
|
Shares |
Amt. |
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Balance May 5, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
Net income |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Unrealized foreign currency translation gain |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Unrealized loss on derivatives, net of tax |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of common stock |
— | — | — | — | — | |||||||||||||||||||||||||||
Repurchase of common stock |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||
Dividends declared ($ |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
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Balance August 4, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
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Twenty-Six Weeks Ended August 2, 2020 |
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Common Stock |
Paid-In Capital |
Treasury Stock At Cost |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Total |
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Shares |
Amt. |
|
Shares |
Amt. |
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|
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Balance February 2, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Unrealized foreign currency translation loss |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
Unrealized loss on derivatives, net of tax |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of common stock |
— | — | — | — | ||||||||||||||||||||||||||||
Repurchase of common stock |
— | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||
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Balance August 2, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
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Twenty-Six Weeks Ended August 4, 2019 |
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Common Stock |
Paid-In Capital |
Treasury Stock At Cost |
Accumulated Other Comprehensive Loss |
Retained Earnings |
Total |
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Shares |
Amt. |
|
Shares |
Amt. |
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Balance February 3, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
Cumulative effect of a change in accounting principle, net of tax |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Net income |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Unrealized foreign currency translation loss |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
Unrealized loss on derivatives, net of tax |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Issuance of common stock |
— | — | — | — | ||||||||||||||||||||||||||||
Repurchase of common stock |
— | — | ( |
) | — | — | ( |
) | ||||||||||||||||||||||||
Dividends declared ($ |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
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Balance August 4, 2019 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||||||
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Twenty-Six Weeks Ended |
Twenty-Six Weeks Ended |
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August 2, 2020 |
August 4, 2019 |
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Cash flows from operating activities: |
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Net income (loss) |
$ | ( |
) | $ | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization expense |
||||||||
Non-cash interest expense |
— | |||||||
Impairment of long-lived assets |
— | |||||||
Deferred taxes |
( |
) | ||||||
Loss on disposal of fixed assets |
||||||||
Share-based compensation |
||||||||
Other, net |
||||||||
Changes in assets and liabilities: |
||||||||
Inventories |
( |
) | ||||||
Prepaid expenses |
( |
) | ||||||
Income tax receivable |
( |
) | ||||||
Other current assets |
( |
) | ||||||
Other assets and deferred charges |
( |
) | ||||||
Accounts payable |
( |
) | ||||||
Accrued liabilities |
||||||||
Income taxes payable |
( |
) | ( |
) | ||||
Other liabilities |
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Net cash provided by (us operating activitiese d in) |
( |
) | ||||||
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Cash flows from investing activities: |
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Capital expenditures |
( |
) | ( |
) | ||||
Proceeds from sales of property and equipment |
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Net cash used in investing activities |
( |
) | ( |
) | ||||
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Cash flows from financing activities: |
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Proceeds from debt |
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Payments of debt |
( |
) | ( |
) | ||||
Net proceeds from the issuance of common stock |
— | |||||||
Proceeds from the exercise of stock options |
||||||||
Repurchase of common stock under share repurchase program |
— | ( |
) | |||||
Dividends paid |
( |
) | ( |
) | ||||
Repurchases of common stock to satisfy employee withholding tax obligations |
( |
) | ( |
) | ||||
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Net cash provided by (used in) financing activities |
( |
) | ||||||
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Increase in cash and cash equivalents |
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Beginning cash and cash equivalents |
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Ending cash and cash equivalents |
$ | $ | ||||||
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Supplemental disclosures of cash flow information: |
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Decrease in fixed asset accounts payable |
$ | ( |
) | $ | ( |
) | ||
Cash paid for income taxes, net |
$ | $ | ||||||
Cash paid for interest, net |
$ | $ |
Fair Value |
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Balance Sheet Location |
August 2, 2020 |
February 2, 2020 |
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Interest rate swaps |
Accrued liabilities | $ | ( |
) | $ | ( |
) | |||||
Interest rate swaps |
Other liabilities | ( |
) | ( |
) | |||||||
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Total derivatives (1) |
$ | ( |
) | $ | ( |
) | ||||||
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(1) |
The balance at August 2, 2020 relates to our swap agreements after hedge accounting was discontinued, effective April 14, 2020. |
Thirteen Weeks Ended |
Twenty-six Weeks Ended |
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August 2, 2020 |
August 4, 2019 |
August 2, 2020 |
August 4, 2019 |
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Amount of loss recorded in accumulated other comprehensive income |
$ | — | $ | |||||||||||||
Amount of loss reclassified into income (1) |
$ | ( |
) | ( |
) | $ | ( |
) | ( |
) | ||||||
Income tax expense (benefit) in accumulated other comprehensive income |
$ | ( |
) | $ | ( |
) | ( |
) |
(1) |
Amounts reclassified into income are included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income (Loss). |
August 2, 2020 |
February 2, 2020 |
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Deferred amusement revenue |
$ | $ | ||||||
Current portion of operating lease liabilities, net (1) |
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Rent payable (note 4) |
— | |||||||
Variable rent liabilities (note 4) |
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Deferred gift card revenue |
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Property taxes |
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Compensation and benefits |
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Current portion of derivatives |
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Current portion of long-term insurance |
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Utilities |
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Customer deposits |
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Inventory liabilities |
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Sales and use taxes |
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Dividend payable |
— | |||||||
Other |
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|
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Total accrued liabilities |
$ | $ | ||||||
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|
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(1) | The balance of leasehold incentive receivables of $ |
August 2, 2020 |
February 2, 2020 |
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Credit facility — term |
$ | $ | ||||||
Credit facility — revolver |
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Total debt outstanding |
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Current installments — term |
( |
) | ( |
) | ||||
Debt issuance costs — term |
( |
) | ( |
) | ||||
|
|
|
|
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Long-term debt, net |
$ | $ | ||||||
|
|
|
|
Thirteen Weeks Ended |
Twenty-six Weeks Ended |
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August 2, 2020 |
August 4, 2019 |
August 2, 2020 |
August 4, 2019 |
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Interest expense on credit facilities |
$ | $ | ||||||||||||||
Interest associated with swap agreements |
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Amortization of issuance cost |
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Interest income |
( |
) | ( |
) | ( |
) | ||||||||||
Capitalized interest |
( |
) | ( |
) | ( |
) | ||||||||||
|
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|
|||||||||
Total interest expense, net |
$ | $ | $ | $ |
Thirteen Weeks Ended |
Twenty-six Weeks Ended |
|||||||||||||||
August 2, 2020 |
August 4, 2019 |
August 2, 2020 |
August 4, 2019 |
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Operating lease cost |
$ | |
$ | |
||||||||||||
Variable lease cost |
|
|
||||||||||||||
Short-term lease cost |
|
|
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|
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|
|
|
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Total |
$ | $ | $ | $ | ||||||||||||
|
|
|
|
|
|
|
|
Thirteen Weeks |
Thirteen Weeks |
|||||||
Ended |
Ended |
|||||||
August 2, 2020 |
August 4, 2019 |
|||||||
Numerator: |
||||||||
Net income (loss) |
$ | ( |
) | $ | ||||
Denominator: |
||||||||
Weighted average number of common shares |
||||||||
Weighted average dilutive impact of equity-based |
— | |||||||
Weighted average number of common and common |
||||||||
Net income (loss) per share: |
||||||||
Basic |
$ | ( |
) | $ | ||||
Diluted |
$ | ( |
) | $ |
Twenty-Six Weeks Ended August 2, 2020 |
Twenty-Six Weeks Ended August 4, 2019 |
|||||||
Numerator: |
||||||||
Net income (loss) |
$ | ( |
) | $ | ||||
Denominator: |
||||||||
Weighted average number of common shares outstanding (basic) |
||||||||
Weighted average dilutive impact of equity-based awards (1) |
— | |||||||
Weighted average number of common and common equivalent shares outstanding (diluted) |
||||||||
Net income (loss) per share: |
||||||||
Basic |
$ | ( |
) | $ | ||||
Diluted |
$ | ( |
) | $ |
(1) | Due to the net loss for the thirteen and twenty-six weeks ended August 2, 2020, |
Thirteen Weeks Ended |
Twenty-six Weeks Ended |
|||||||||||||||
August 2, 2020 |
August 4, 2019 |
August 2, 2020 |
August 4, 2019 |
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Stock options |
$ | $ | ||||||||||||||
RSU’s |
||||||||||||||||
Share-based compensation expense |
$ | $ | $ | $ | ||||||||||||
2014 Stock Incentive Plan |
2010 Stock Incentive Plan |
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Number |
Wtd. Avg. |
Number |
Wtd. Avg. |
|||||||||||||
of Options |
Exercise Price |
of Options |
Exercise Price |
|||||||||||||
Outstanding at February 2, 2020 |
$ | $ | ||||||||||||||
Granted |
— | — | — | — | ||||||||||||
Exercised |
— | — | ( |
) | ||||||||||||
Forfeited |
( |
) | — | — | ||||||||||||
Outstanding at August 2, 2020 |
$ | $ | ||||||||||||||
Exercisable at August 2, 2020 |
$ | $ | ||||||||||||||
Wtd. Avg. |
||||||||
|
Shares |
Fair Value |
||||||
Outstanding at February 2, 2020 |
$ | |||||||
Granted |
||||||||
Change in performance units |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Outstanding at August 2, 2020 |
$ | |||||||
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | reduced expenses broadly, including by furloughing all of our hourly store team members and approximately 94% of store management personnel, on or about March 19, 2020, while enacting 12-week salary reductions for remaining managers. In addition, effective March 24, 2020, the Company furloughed all but a small team of essential corporate and administrative staff, enacted 12-week salary reductions ranging from 10% to 50%, and suspended all cash board fees through the remainder of fiscal 2020; |
• | canceled or delayed all non-essential planned capital spending for the remainder of fiscal 2020; |
• | halted or delayed planned store openings after our one store opening in Chattanooga, TN, on March 16, 2020, including delayed construction through the second quarter of fiscal 2020; |
• | stopped work on future planned sites and commenced negotiations to terminate related contracts, as applicable; |
• | suspended our share repurchase program and declaration of dividends; |
• | drew down substantially all the remaining credit available under our $500,000 revolving credit facility; |
• | sold shares of our common stock, which generated gross proceeds of approximately $185,600; and |
• | negotiated with our landlords, vendors, and other business partners to temporarily reduce our lease and contract payments and obtain other concessions. As of August 2, 2020, a total of 92 rent relief agreements related to our operating locations and corporate headquarters were executed, which generally provide for full deferral for three months beginning April 2020, with partial deferral continuing for periods of up to six months, at approximately 50% of those locations. |
Thirteen Weeks Ended August 2, 2020 |
Thirteen Weeks Ended August 4, 2019 |
|||||||||||||||
Food and beverage revenues |
$ | 17,002 | 33.4 | % | $ | 137,921 | 40.0 | % | ||||||||
Amusement and other revenues |
33,831 | 66.6 | 206,678 | 60.0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
50,833 | 100.0 | 344,599 | 100.0 | ||||||||||||
Cost of food and beverage (as a percentage of food and beverage revenues) |
4,659 | 27.4 | 36,934 | 26.8 | ||||||||||||
Cost of amusement and other (as a percentage of amusement and other revenues) |
4,025 | 11.9 | 22,689 | 11.0 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cost of products |
8,684 | 17.1 | 59,623 | 17.3 | ||||||||||||
Operating payroll and benefits |
13,756 | 27.1 | 80,927 | 23.5 | ||||||||||||
Other store operating expenses |
62,682 | 123.2 | 104,376 | 30.3 | ||||||||||||
General and administrative expenses |
9,278 | 18.3 | 15,991 | 4.6 | ||||||||||||
Depreciation and amortization expense |
35,160 | 69.2 | 32,745 | 9.5 | ||||||||||||
Pre-opening costs |
2,388 | 4.7 | 4,723 | 1.4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating costs |
131,948 | 259.6 | 298,385 | 86.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(81,115 | ) | (159.6 | ) | 46,214 | 13.4 | ||||||||||
Interest expense, net |
8,163 | 16.0 | 4,605 | 1.3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before provision (benefit) for income taxes |
(89,278 | ) | (175.6 | ) | 41,609 | 12.1 | ||||||||||
Provision (benefit) for income taxes |
(30,676 | ) | (60.3 | ) | 9,253 | 2.7 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | (58,602 | ) | (115.3 | )% | $ | 32,356 | 9.4 | % | |||||||
|
|
|
|
|
|
|
|
|||||||||
Change in comparable store sales (1) |
(87.0 | )% | (1.8 | )% | ||||||||||||
Company-owned stores at end of period (1) |
137 | 130 | ||||||||||||||
Comparable stores at end of period (1) |
115 | 99 |
(1) |
As of the end of the second quarter of fiscal 2020, 84 of our 137 stores were open. Our comparable store count as of the end of the second quarter of fiscal 2020 excludes a store in Chicago, Illinois which is near the end of its lease term which the Company has decided not to re-open. Our store in Duluth (Atlanta), Georgia permanently closed on March 3, 2019 as we did not exercise the renewal option and has been excluded from fiscal 2019 store counts and comparable store sales. |
Thirteen Weeks Ended August 2, 2020 |
Thirteen Weeks Ended August 4, 2019 |
|||||||||||||||
Net income (loss) |
$ | (58,602 | ) | -115.3 | % | $ | 32,356 | 9.4 | % | |||||||
Interest expense, net |
8,163 | 4,605 | ||||||||||||||
Provision (benefit) for income taxes |
(30,676 | ) | 9,253 | |||||||||||||
Depreciation and amortization expense |
35,160 | 32,745 | ||||||||||||||
|
|
|
|
|||||||||||||
EBITDA |
(45,955 | ) | -90.4 | % | 78,959 | 22.9 | % | |||||||||
Loss on asset disposal |
264 | 406 | ||||||||||||||
Impairment of long-lived assets |
2,178 | — | ||||||||||||||
Share-based compensation |
2,734 | 1,907 | ||||||||||||||
Pre-opening costs |
2,388 | 4,723 | ||||||||||||||
Other costs (1) |
(88 | ) | (13 | ) | ||||||||||||
|
|
|
|
|||||||||||||
Adjusted EBITDA |
$ | (38,479 | ) | -75.7 | % | $ | 85,982 | 25.0 | % | |||||||
|
|
|
|
(1) |
Primarily represents costs related to currency transaction (gains) or losses. |
Thirteen Weeks Ended August 2, 2020 |
Thirteen Weeks Ended August 4, 2019 |
|||||||||||||||
Operating income (loss) |
$ | (81,115 | ) | -159.6 | % | $ | 46,214 | 13.4 | % | |||||||
General and administrative expenses |
9,278 | 15,991 | ||||||||||||||
Depreciation and amortization expense |
35,160 | 32,745 | ||||||||||||||
Pre-opening costs |
2,388 | 4,723 | ||||||||||||||
|
|
|
|
|||||||||||||
Store Operating Income Before Depreciation and Amortization |
$ | (34,289 | ) | -67.5 | % | $ | 99,673 | 28.9 | % | |||||||
|
|
|
|
Thirteen Weeks Ended August 2, 2020 |
Thirteen Weeks Ended August 4, 2019 |
|||||||
New store and operating initiatives |
$ | 1,921 | $ | 40,029 | ||||
Games |
810 | 6,146 | ||||||
Maintenance capital |
838 | 4,190 | ||||||
|
|
|
|
|||||
Total capital additions |
$ | 3,569 | $ | 50,365 | ||||
|
|
|
|
|||||
Payments from landlords |
$ | 4,014 | $ | 7,099 |
• | Temporarily closures of all of our 137 stores, completed by March 20, 2020 (including our one new store opening March 16); |
• | On April 30, 2020, one store re-opened to the public with limited food and beverage offerings. Two additional stores offered limited food and beverage for off-premises dining; and |
• | During the thirteen weeks ended August 2, 2020, an additional 83 stores were re-opened. These stores are operating with limited menus, reduced dining room seating, reduced games in the midway, reduced operating hours and other restrictions referred to as “limited operations”. |
Thirteen weeks ended August 2, 2020 |
Thirteen weeks ended August 4, 2019 |
Change |
||||||||||
Total revenues |
$ | 50,833 | $ | 344,599 | $ | (293,766 | ) | |||||
Total store operating weeks |
628 | 1,674 | (1,046 | ) | ||||||||
Comparable store revenues |
$ | 40,201 | $ | 308,995 | $ | (268,794 | ) | |||||
Comparable store operating weeks |
493 | 1,495 | (1,002 | ) | ||||||||
Noncomparable store revenues |
$ | 10,435 | 36,487 | $ | (26,052 | ) | ||||||
Noncomparable store operating weeks |
135 | 179 | (44 | ) | ||||||||
Other revenues |
$ | 197 | $ | (883 | ) | $ | 1,080 |
Twenty-Six Weeks |
Twenty-Six Weeks |
|||||||||||||||
Ended |
Ended |
|||||||||||||||
August 2, 2020 |
August 4, 2019 |
|||||||||||||||
Food and beverage revenues |
$ | 80,922 | 38.4 | % | $ | 286,142 | 40.4 | % | ||||||||
Amusement and other revenues |
129,717 | 61.6 | 422,039 | 59.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total revenues |
210,639 | 100.0 | 708,181 | 100.0 | ||||||||||||
Cost of food and beverage (as a percentage of food and beverage revenues) |
22,003 | 27.2 | 75,688 | 26.5 | ||||||||||||
Cost of amusement and other (as a percentage of amusement and other revenues) |
14,753 | 11.4 | 45,660 | 10.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total cost of products |
36,756 | 17.4 | 121,348 | 17.1 | ||||||||||||
Operating payroll and benefits |
57,493 | 27.3 | 163,800 | 23.1 | ||||||||||||
Other store operating expenses |
158,354 | 75.3 | 210,621 | 29.8 | ||||||||||||
General and administrative expenses |
23,841 | 11.3 | 32,837 | 4.6 | ||||||||||||
Depreciation and amortization expense |
70,512 | 33.5 | 63,886 | 9.0 | ||||||||||||
Pre-opening costs |
6,211 | 2.9 | 11,725 | 1.7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total operating costs |
353,167 | 167.7 | 604,217 | 85.3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
(142,528 | ) | (67.7 | ) | 103,964 | 14.7 | ||||||||||
Interest expense, net |
14,278 | 6.7 | 8,661 | 1.2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income (loss) before provision (benefit) for income taxes |
(156,806 | ) | (74.4 | ) | 95,303 | 13.5 | ||||||||||
Provision (benefit) for income taxes |
(54,660 | ) | (25.9 | ) | 20,504 | 2.9 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | (102,146 | ) | (48.5 | )% | $ | 74,799 | 10.6 | % | |||||||
|
|
|
|
|
|
|
|
|||||||||
Change in comparable store sales (1) |
(72.2 | )% | (1.0 | )% | ||||||||||||
Company-owned stores at end of period (1) |
137 | 130 | ||||||||||||||
Comparable stores at end of period (1) |
115 | 99 |
(1) |
As of the end of the second quarter of fiscal 2020, 84 of our 137 stores were open. Our comparable store count as of the end of the second quarter of fiscal 2020 excludes a store in Chicago, Illinois which is near the end of its lease term which the Company has decided not to re-open. Our store in Duluth (Atlanta), Georgia permanently closed on March 3, 2019 as we did not exercise the renewal option and has been excluded from fiscal 2019 store counts and comparable store sales. |
Twenty-Six WeeksEnded August 2, 2020 |
Twenty-Six WeeksEnded August 4, 2019 |
|||||||||||||||
Net income (loss) |
$ | (102,146 | ) | -48.5 | % | $ | 74,799 | 10.6 | % | |||||||
Interest expense, net |
14,278 | 8,661 | ||||||||||||||
Provision (benefit) for income taxes |
(54,660 | ) | 20,504 | |||||||||||||
Depreciation and amortization expense |
70,512 | 63,886 | ||||||||||||||
|
|
|
|
|||||||||||||
EBITDA |
(72,016 | ) | -34.2 | % | 167,850 | 23.7 | % | |||||||||
Loss on asset disposal |
417 | 826 | ||||||||||||||
Impairment of long-lived assets |
13,727 | — | ||||||||||||||
Share-based compensation |
2,345 | 3,732 | ||||||||||||||
Pre-opening costs |
6,211 | 11,725 | ||||||||||||||
Other costs (1) |
59 | 33 | ||||||||||||||
|
|
|
|
|||||||||||||
Adjusted EBITDA |
$ | (49,257 | ) | -23.4 | % | $ | 184,166 | 26.0 | % | |||||||
|
|
|
|
(1) |
Primarily represents costs related to currency transaction (gains) or losses. |
Twenty-Six WeeksEnded August 2, 2020 |
Twenty-Six WeeksEnded August 4, 2019 |
|||||||||||||||
Operating income (loss) |
$ | (142,528 | ) | -67.7 | % | $ | 103,964 | 14.7 | % | |||||||
General and administrative expenses |
23,841 | 32,837 | ||||||||||||||
Depreciation and amortization expense |
70,512 | 63,886 | ||||||||||||||
Pre-opening costs |
6,211 | 11,725 | ||||||||||||||
|
|
|
|
|||||||||||||
Store Operating Income Before Depreciation and Amortization |
$ | (41,964 | ) | -19.9 | % | $ | 212,412 | 30.0 | % | |||||||
|
|
|
|
Twenty-Six Weeks Ended August 2, 2020 |
Twenty-Six Weeks Ended August 4, 2019 |
|||||||
New store and operating initiatives |
$ | 40,522 | $ | 91,447 | ||||
Games |
8,718 | 9,842 | ||||||
Maintenance capital |
1,780 | 10,485 | ||||||
|
|
|
|
|||||
Total capital additions |
$ | 51,020 | $ | 111,774 | ||||
|
|
|
|
|||||
Payments from landlords |
$ | 4,014 | $ | 21,341 |
Twenty-six weeks ended August 2, 2020 |
Twenty-six weeks ended August 4, 2019 |
Change |
||||||||||
Total revenues |
$ | 210,639 | $ | 708,181 | $ | (497,542 | ) | |||||
Total store operating weeks |
1,461 | 3,290 | (1,829 | ) | ||||||||
Comparable store revenues |
$ | 179,662 | $ | 645,839 | $ | (466,177 | ) | |||||
Comparable store operating weeks |
1,196 | 2,990 | (1,794 | ) | ||||||||
Noncomparable store revenues |
$ | 33,843 | $ | 65,968 | $ | (32,125 | ) | |||||
Noncomparable store operating weeks |
265 | 300 | (35 | ) | ||||||||
Other revenues |
$ | (2,866 | ) | $ | (3,626 | ) | $ | 760 |
• | reduced expenses broadly; |
• | canceled or delayed all non-essential planned capital spending for the remainder of fiscal 2020 and halted or delayed all planned store openings; |
• | suspended our share repurchase program and our dividend; |
• | drew down substantially all the remaining credit available under our $500,000 revolving credit facility; |
• | negotiated an amendment with our lenders, which included relief from compliance with financial covenants for the first, second and third quarterly periods of fiscal 2020; |
• | sold shares of our common stock, which generated gross proceeds of $75,000; and |
• | initiated negotiations with our landlords, vendors, and other business partners to temporarily reduce our lease and contract payments and obtain other concessions. |
• | sold additional shares of common stock, which generated gross proceeds of $110,600; |
• | submitted a proposal, approved by our shareholders, increasing the number of shares available for incentive awards, which enables management to maintain key talent while preserving the Company’s liquidity by minimizing cash outlays; and |
• | continued discussions with our landlords, vendors and other business partners to reduce our lease and contract payments and obtain concessions. As of August 2, 2020, a total of 92 rent relief agreements relating to our operating locations and corporate headquarters were executed, which generally provide for full deferral for three months beginning April 2020, with partial deferral continuing for periods of up to six months, at approximately 50% of those locations. |
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 4. |
Controls and Procedures |
Item 1. |
Legal Proceedings |
Item 1A. |
Risk Factors |
• | the uncertain and unprecedented impact of the coronavirus and the disease it causes (COVID-19) on our business and operations and the related impact on our liquidity needs; |
• | our ability to continue as a going concern; |
• | our ability to obtain additional waivers or amendments, and thereafter continue to satisfy covenant requirements (even as they may be amended), under our amended credit agreement and derivative contract payables; |
• | our ability to access other funding sources; |
• | the duration of government-mandated and voluntary shutdowns, and the impact of ongoing mitigation restrictions on our operations once our stores can re-open; |
• | the speed with which our stores safely can be re-opened and the level of customer demand following re-opening; |
• | the economic impact of COVID-19 and related disruptions on the communities we serve; and |
• | our overall level of indebtedness. |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
Item 6. |
Exhibits |
Exhibit Number |
Description | |
31.1* | Certification of Brian A. Jenkins, Chief Executive Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a). | |
31.2* | Certification of Scott J. Bowman, Chief Financial Officer of the Registrant, pursuant to 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a). | |
32.1* | Certification of Brian A. Jenkins, Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2* | Certification of Scott J. Bowman, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 | XBRL Interactive Data files | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* | Filed herein |
DAVE & BUSTER’S ENTERTAINMENT, INC., a Delaware corporation | ||||||
Date: September 10, 2020 | By: | /s/ Brian A. Jenkins | ||||
Brian A. Jenkins | ||||||
Chief Executive Officer | ||||||
Date: September 10, 2020 | By: | /s/ Scott J. Bowman | ||||
Scott J. Bowman | ||||||
Chief Financial Officer |
Exhibit 31.1
CERTIFICATION
I, Brian A. Jenkins, Chief Executive Officer of Dave & Busters Entertainment, Inc., certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Dave & Busters 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 registrants other certifying officer 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: September 10, 2020 | /s/ Brian A. Jenkins | |||||
Brian A. Jenkins | ||||||
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Scott J. Bowman, Chief Financial Officer of Dave & Busters Entertainment, Inc., certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Dave & Busters 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 registrants other certifying officer 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 registrants 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 registrants internal control over financial reporting that occurred during the registrants second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants 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 registrants 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 registrants internal control over financial reporting. |
Date: September 10, 2020 | /s/ Scott J. Bowman | |||||
Scott J. Bowman | ||||||
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION
In connection with the Quarterly Report of Dave & Busters Entertainment, Inc. (the Company) on Form 10-Q for the period ended August 2, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Brian A. Jenkins, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that:
(1) | The Report fully complies with the applicable requirements of Section 13(a) or 15(d), as applicable, 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. |
Date: September 10, 2020
/s/ Brian A. Jenkins |
Brian A. Jenkins |
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION
In connection with the Quarterly Report of Dave & Busters Entertainment, Inc. (the Company) on Form 10-Q for the period ended August 2, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Scott J. Bowman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that:
(1) | The Report fully complies with the applicable requirements of Section 13(a) or 15(d), as applicable, 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. |
Date: September 10, 2020
/s/ Scott J. Bowman |
Scott J. Bowman |
Chief Financial Officer |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Aug. 02, 2020 |
Feb. 02, 2020 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Property and equipment, accumulated depreciation | $ 739,805 | $ 686,824 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 60,422,212 | 43,386,852 |
Common stock, shares outstanding | 47,594,912 | 30,603,340 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Treasury stock, shares | 12,827,300 | 12,783,512 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
Aug. 02, 2020 |
Aug. 04, 2019 |
|
Total revenues | $ 50,833 | $ 344,599 | $ 210,639 | $ 708,181 |
Total cost of products | 8,684 | 59,623 | 36,756 | 121,348 |
Operating payroll and benefits | 13,756 | 80,927 | 57,493 | 163,800 |
Other store operating expenses | 62,682 | 104,376 | 158,354 | 210,621 |
General and administrative expenses | 9,278 | 15,991 | 23,841 | 32,837 |
Depreciation and amortization expense | 35,160 | 32,745 | 70,512 | 63,886 |
Pre-opening costs | 2,388 | 4,723 | 6,211 | 11,725 |
Total operating costs | 131,948 | 298,385 | 353,167 | 604,217 |
Operating income (loss) | (81,115) | 46,214 | (142,528) | 103,964 |
Interest expense, net | 8,163 | 4,605 | 14,278 | 8,661 |
Income (loss) before provision (benefit) for income taxes | (89,278) | 41,609 | (156,806) | 95,303 |
Provision (benefit) for income taxes | (30,676) | 9,253 | (54,660) | 20,504 |
Net income (loss) | (58,602) | 32,356 | (102,146) | 74,799 |
Unrealized foreign currency translation gain | 304 | 134 | (131) | (57) |
Unrealized gain (loss) on derivatives, net of tax | 1,372 | (3,373) | (3,577) | (5,907) |
Total other comprehensive income (loss) | 1,676 | (3,239) | (3,708) | (5,964) |
Total comprehensive income (loss) | $ (56,926) | $ 29,117 | $ (105,854) | $ 68,835 |
Net income (loss) per share: | ||||
Basic | $ (1.24) | $ 0.91 | $ (2.59) | $ 2.07 |
Diluted | $ (1.24) | $ 0.90 | $ (2.59) | $ 2.03 |
Weighted average shares used in per share calculations: | ||||
Basic | 47,111,763 | 35,407,965 | 39,470,874 | 36,117,815 |
Diluted | 47,111,763 | 36,015,710 | 39,470,874 | 36,803,001 |
Amusement and Other Revenues [Member] | ||||
Total revenues | $ 33,831 | $ 206,678 | $ 129,717 | $ 422,039 |
Cost of amusement and other | 4,025 | 22,689 | 14,753 | 45,660 |
Food and Beverage [Member] | ||||
Total revenues | 17,002 | 137,921 | 80,922 | 286,142 |
Cost of food and beverage | $ 4,659 | $ 36,934 | $ 22,003 | $ 75,688 |
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares |
3 Months Ended | 6 Months Ended |
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Statement of Stockholders' Equity [Abstract] | ||
Dividends declared per share | $ 0.15 | $ 0.30 |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 1: Summary of Significant Accounting Policies The accompanying unaudited consolidated financial statements include the accounts of Dave & Buster’s Entertainment, Inc. (referred to herein as the “Company”, “we,” “us” and “our”), any predecessor companies and its wholly-owned subsidiaries, Dave & Buster’s Holdings, Inc. (“D&B Holdings”), which owns 100% of the outstanding common stock of Dave & Busters, Inc. (“D&B Inc”), the operating company. All intercompany balances and transactions have been eliminated in consolidation. The Company, headquartered in Dallas, Texas, is a leading operator of high-volume entertainment and dining venues (“stores”) in North America for adults and families under the name “Dave & Buster’s”. The Company operates its business as one operating and one reportable segment. As of August 2, 2020, we owned and operated 137 stores located in 39 states, Puerto Rico and one Canadian province. The Company operates on a 52 or 53-week fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period reported has 13 weeks. Fiscal 2020 and 2019, which end on January 31, 2021 and February 2, 2020, respectively, contain 52 weeks.The Company’s financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Our quarterly financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended February 2, 2020, included in our Annual Report on Form 10-K as filed with the SEC.Going concern — the period from March 14, 2020 to March 20, 2020, the Company c losed 100% of its 137operating stores in compliance with guidance and orders issued by federal, state and local governments to combat the spread of the COVID-19 pandemic. The extent of impact of these conditions will be based in part on the duration of the store closures or re-opening of stores at full capacity and the timing and extent of customers re-engaging with the brand. During our first quarter, one store re-opened to the public with limited food and beverage offerings and two additional stores offered off-premise dining options. During our second quarter, we have progressively re-opened limited operations in an additional stores in 27states, Puerto Rico and Canada. Subsequent to the end of our second quarter, we re-opened one store and opened a new store located in Manchester, New Hampshire. As of September 4, 2020, 52 stores are closed due to jurisdictional restrictions. The Company is unable to determine whether, when or the manner in which the conditions surrounding the COVID-19 pandemic will change, including when any restrictions or closure requirements will be lifted or potentially re-imposed in certain states or local jurisdictions, whether it will be able to successfully staff stores, and the degree to which it will be able to re-engage customers. These developments have caused a material adverse impact on the Company’s revenues, results of operations and cash flows, including the Company’s ability to meet its obligations when due. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued.The Company has taken several steps to reduce operating costs and to conserve cash. The Company initially furloughed nearly all its workforce, except a small team of essential personnel and temporarily reduced pay and benefits for the remaining employees for a twelve-week period. On March 18, 2020, the Company borrowed substantially all the remaining availability under its revolving credit facility, and the Company continues to actively manage its daily cash flows. During our first and second quarter, the Company obtained additional liquidity through the sale of common stock, which resulted in net proceeds of $182,207. Additionally, the Company initiated ongoing discussions with landlords and other vendors to negotiate relief from cash payments under existing lease and trade payable obligations. As of August 2, 2020, a total of 92 rent relief agreements related to our operating locations and corporate headquarters were executed, which generally provide for full deferral for three months beginning April 2020, with partial deferral continuing for periods of up to six months, at approximately 50% of those locations. We have also been successful in negotiating extended and reduced payment terms with several vendors. Effective April 14, 2020, the Company negotiated an amendment to its existing credit facility, which included relief from compliance with financial covenants for the periods ended May 3, 2020, August 2, 2020 and November 1, 2020. During the financial covenant suspension period, the Company is required to maintain a minimum liquidity amount of $30,000. If the Company is not in compliance with financial covenants after the suspension period or some other event of default arises, the Company’s lenders could instruct the administrative agent under the existing credit facility to exercise remedies including declaring the principal of and accrued interest on all outstanding indebtedness due and payable, terminating all remaining commitments and obligations under the revolving credit facility and requiring the posting of cash collateral in respect of 103% of agreements would become due. Although the lenders under the existing credit facility may waive the default or forebear the exercise of remedies, they are not obligated to do so. Failure to obtain additional waivers would have a material adverse effect on the Company’s liquidity, financial condition and results of operations and may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code to implement a restructuring plan. The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities at the date of the consolidated financial statements and for the period then ended. Actual results could differ from those estimates. Operating results for the twenty-six weeks ended August 2, 2020 are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending January 31, 2021.Cash and cash equivalents (used in) operating activities” within the Consolidated Statements of Cash Flows.Fair value of financial instruments The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, and other current liabilities approximate fair value because of their short-term nature. We believe that the carrying amount of our credit facility approximates its fair value because the interest rates reflect current market conditions. The fair value of the Company’s credit facility was determined to be a Level Two instrument as defined by GAAP. The fair value of the Company’s interest rate swap is determined based upon Level Two inputs which includes valuation models as reported by our counterparties. These valuation models are based on the present value of expected cash flows using forward rate curves. Non-financial assets and liabilities recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis include such items as property and equipment, right-of-use The disruption in operations and reduction in revenues have led the Company to consider the impact of the COVID-19 pandemic on the recoverability of its property and equipment and ROU assets for operating leases.During the first quarter of fiscal 2020, each store’s past and present operating performance was reviewed in combination with projected future results primarily through projected undiscounted cash flows that included management’s current expectation of future financial impacts from COVID-19. If the store’s assets were determined to be through comparison of the asset’s carrying value to its undiscounted cash flows, the Company compared the carrying amount of each store’s assets to its fair value as estimated by management to calculate the impairment amount The fair value of the store’s assets is generally determined using a discounted cash flow projection model, which is based on Level Three inputs. Store asset impairment charges represent the excess of the carrying amount over the estimated fair value of the store asset. first qu 2020, primarily driven by the expected impact of the ar ter of fisc alCOVID-19 pandemic on future cash flows of specific stores.During the second quarter of fiscal 2020, the Company did not identify additional triggering events which would require a change in management’s estimate regarding the recoverability of store asset values, and no a dditional impairment related to our operating stores was recognized . twenty-six weeks ended August 2, 2020 that would indicate it is more likely than not that its goodwill or tradename are impaired. The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material.Additionally, the Company is c discussions to terminate or delay possession on several executed lease contracts that have not yet commenced. The Company is also curtailing several potential new store projects that were in the early stage of development. During the thirteen and ontinu ing twenty-six weeks ended August 2, 2020, we recorded an impairment loss and related contract termination costs of $2,178 and $6,981 related to these projects, which is included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income (Loss). Interest rate swaps one-month LIBOR in exchange for the payment of a fixed rate of interest throughout the life of the agreements. The notional amount of the swap agreements total $350,000 and the fixed rate of interest for all agreements is 2.47%. The agreements became effective on February 28, 2019 and mature on August 17, 2022, which is the maturity date of our credit facility.The Company initially designated its interest rate swap agreements as a cash flow hedge and accounted for the underlying activity in accordance with hedge accounting. Effective April 14, 2020, the Company amended its existing credit facility agreement to obtain relief from its financial covenants, and as a result, the variable interest rate terms were modified to create an interest rate floor of 1.00%. Accordingly, and as a result of the current forward interest rate curve, the Company discontinued the hedging relationship as of April 14, 2020 (de-designation date). Given the continued existence of the hedged interest payments, the Company will reclassify its accumulated other comprehensive 17,609loss of $as of the de- d into “Interest expense, net” using a straight-line approach over the remaining life of the originally designated hedging relationship. e signation date The amount of pre-tax losses in accumulated other comprehensive loss that was reclassified into interest expense subsequent to the de-designation date was $ 1,887 and $ 2,201 for the thirt een and twenty -six weeks ended August 2, 2020 , respectively, and the Company expects to reclassify $ 7,547 within the next twelve months. Effective with the de-designation, any gain or loss on the derivatives are recognized in earnings in the period in which the change occurs. For the thirteen and twenty-six weeks ended August 2, 2020, a loss of $ 976 and $ 1,796 was recognized, respectively, which are included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income (Loss).Prior to the de-designation, changes in the fair values of the interest rate swaps were recorded as a component of other comprehensive loss until the interest payments being hedged were recorded as interest expense, at which time the amounts in accumulated other comprehensive loss were reclassified as an adjustment to interest expense. Cash flows related to the interest rate swaps were included as component of interest expense and in operating activities.Credit risk related to the failure of the our counterparties to perform under the terms of the swap agreements is minimized by entering into transactions with carefully selected, credit-worthy parties and the fact that the swap contracts are distributed among several financial institutions to reduce the concentration of credit risk. Our swap agreements with our derivative counterparties contain a provision where if the Company defaults on any of its indebtedness, and repayment of the indebtedness has been accelerated, the Company could also be declared in default on its derivative obligations. The following derivative instruments were outstanding as of the end of the periods indicated:
The following table summarizes the activity in accumulated other comprehensive loss related to our derivative instruments:
Revenue recognition 2,500 and $ 12,100, respectively, related to the amount in deferred amusement revenue as of the end of fiscal 2019. In jurisdictions where we do not have a legal obligation to remit unredeemed gift card balances to a legal authority, we recognize revenue on unredeemed gift cards in proportion to the pattern of redemption by the customers. During the thirteen and twenty-six weeks ended August 2, 2020, we recognized revenue of approximately $140 and $1,440, respectively, related to the amount in deferred gift card revenue as of the end of fiscal 2019, of which approximately $40 and $210 was breakage revenue.Stockholders’ equity twenty-six weeks ended August 2, 2020, the Company indefinitely suspended all share repurchase activity. As of August 2, 2020, we have approximately $172,820 of share repurchase authorization remaining under the current plan.In our consolidated financial statements, the Company treats shares withheld for tax purposes on behalf of our employees in connection with the vesting of time-based and performance restricted stock units as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. During the twenty-six weeks ended August 2, 2020 and August 4, 2019, we withheld 43,788 and 11,336 shares of common stock to satisfy $687 and $586 of employees’ tax obligations, respectively. The share activity in the twenty-six weeks ended August 2, 2020 includes the settlements of $2,351 cash obligations through the issuance of 150,455 shares of common stock.Effective March 18, 2020, the Board of Directors of the Company adopted a 364-day duration Shareholder Rights Plan (the “Rights Plan”) and declared a dividend of one preferred share purchase right for each outstanding share of common stock to shareholders of record on March 30, 2020 to purchase from the Company one-ten thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company for an exercise price of $45.00 once the rights become exercisable, subject to adjustment as provided in the related rights agreement.On April 14, 2020, pursuant to an open market sale agreement, the Company sold 6,149,936 shares of its common stock at a price of $12.20 per share, for proceeds of $75,000, prior to deducting offering expenses related to the offering. On May 4, 2020, the Company entered into an underwriting agreement, pursuant to which it sold 9,578,545 shares of its common stock at a price of $10.44 per share, and on May 18, 2020, the underwriter exercised its over-allotment option for an additional 1,014,871 shares at $10.44 per share, resulting in additional proceeds of $110,600 prior to deducting offering costs. On June 23, 2020, shareholders approved a proposal to amend our 2014 Omnibus Incentive Plan (“Plan”) to increase the number of shares available for awards under the Plan by 3,000,000 shares. Recently adopted accounting guidance 2016-13 , Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, In January 2017, the FASB issued ASU 2017-04 , Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement Recent accounting pronouncements December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which removes certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for taxable goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those years, with early adoption permitted. The Company is currently assessing the impact of this new standard on our consolidated financial statements. In March 2020, the FASB issued ASU
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Reform on Financial Reporting de-designation of the instrument, provided certain criteria are met. As of the end of the first quarter of fiscal 2020, the Company’s exposure to LIBOR rates included its senior credit facility and swap agreements. The Company is currently evaluating the impact of this new standard on our consolidated financial statements. |
Accrued Liabilities |
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Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Liabilities | Note 2: Accrued Liabilities Accrued liabilities consist of the following as of the end of each period:
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Debt | Note 3: Debt Long-term debt consists of the following as of:
On August 17, 2017, we entered into a senior secured credit facility that provides a $300,000 term loan facility and a $500,000 revolving credit facility with a maturity date of August 17, 2022. The $500,000 revolving credit facility includes a $35,000 letter of credit sub-facility and a $15,000 swing loan sub-facility. The revolving credit facility is available to provide financing for general purposes. Principal payments on the term loan facility are $3,750 per quarter through maturity, when the remaining balance is due. Our current credit facility is secured by the assets of D&B Inc and is unconditionally guaranteed by D&B Holdings and each of its direct and indirect domestic wholly-owned subsidiaries. As of August 2, 2020, we had letters of credit outstanding of $9,686 and an unused commitment balance of $1,314 under of revolving credit facility.The interest rates per annum applicable to loans, other than swing loans, under our existing credit facility are currently set based on a defined LIBOR rate plus an applicable margin. Swing loans bear interest at a base rate plus an applicable margin. The loans bear interest subject to a pricing grid based on a total leverage ratio, at one-month LIBOR plus a spread ranging from 1.25% to 2.00% for the term loans and the revolving loans. Our credit facility contains restrictive covenants that, among other things, place certain limitations on our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets. In addition, our credit facility requires us to maintain certain financial ratio covenants. Effective April 14, 2020, we amended our existing credit facility, which included relief from compliance with financial covenants for the quarterly periods ended May 3, 2020, August 2, 2020 and November 1, 2020. During the financial covenant suspension period, a $30,000 liquidity covenant was added as well as certain additional reporting requirements, and the termination of additional borrowings under our revolving credit facility during the suspension period. The interest rate increased to LIBOR plus 2.00% with a LIBOR floor of 1.00%. For the twenty-six weeks ended August 2, 2020,Interest expense, net
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Leases |
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Leases | Note 4: Leases We currently lease the building or site for our stores, corporate office and warehouse space under facility operating leases. These leases typically have initial terms ranging from ten to twenty years and include one or more options to renew. When determining the lease term, we include option periods for which renewal is reasonably certain. Most of the leases require us to pay property taxes, insurance and maintenance of the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating leases also includes certain equipment leases that have a term in excess of one year. Certain facility leases also have provisions for additional contingent rentals based on revenues. Operating lease cost, variable lease cost and short-term lease cost related primarily to our facilities is included in “Other store operating expenses” for our operating stores, “Pre-opening costs” for our stores not yet operating, or “General and administrative expenses” for our corporate office and warehouse, in the Consolidated Statements of Comprehensive Income (Loss).The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and property taxes, are as follows for the fiscal year ended:
During the twenty-six weeks ended August 2, 2020, the Company entered into 92 rent relief agreements with our respective landlords on operating locations and our corporate headquarters. Under these agreements, certain rent payments will be abated, deferred or modified without penalty for various periods, generally providing for full deferral for three months beginning April 2020, with partial deferrals continuing for periods of up to six months at approximately 50% of those locations. The Company has elected to account for lease concessions and deferrals resulting directly from COVID-19 as though the enforceable rights and obligations to the deferrals existed in the respective contracts at lease inception and will not account for the concessions as lease modifications, unless the concession results in a substantial increase in the Company’s obligations. During the twenty-six weeks ended August 2, 2020, 84 of our 92 rent relief agreements qualified for this accounting election, and the remaining eight agreements were treated as lease modifications, primarily due to a significant extension of the lease term. Further, as a result of the COVID-19 pandemic and its impact on our financial condition, the Company has chosen not to pay the majority of its remaining facility operating lease obligations as they become due for properties without rent relief agreements as of the end of the second quarter. As of August 2, 2020, we have bifurcated our current operating lease liabilities into the portion that remains subject to accretion and the portion that is accounted for as a deferral of payments or as short payments. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 5: Commitments and Contingencies We are subject to certain legal proceedings and claims that arise in the ordinary course of our business, including claims alleging violations of federal and state law regarding workplace and employment matters, discrimination, slip-and-fall The Company is currently a defendant in several lawsuits filed in courts in California alleging violations of California Business and Professions Code, industry wage orders, wage-and-hour |
Earnings per share |
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Earnings per share | Note 6: Earnings per share Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and unvested), unvested time-based restricted stock units (RSU’s) and unvested performance RSU’s to the extent performance measures were attained as of the end of the reporting period, calculated using the treasury-stock method. Potential dilutive shares are excluded from the computation of earnings per share (“EPS”) if their effect is anti-dilutive. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and, accordingly, are excluded from the calculation. The weighted average anti-dilutive options excluded from the calculation of common equivalent shares were 160,967 and 97,502 in the thirteen and twenty-six weeks ended August 4, 2019. The following table sets forth the computation of EPS, basic and diluted for the periods indicated:
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Share-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Note 7: Share-Based Compensation Compensation expense related to stock options, time-based and performance-based RSU’s is included in general and administrative expenses and is as follows:
Transactions related to stock option awards during the twenty-six weeks ended August 2, 2020 were as follows:
The total intrinsic value of options exercised during the twenty-six weeks ended August 2, 2020 was $ 792. The unrecognized expense related to our stock option plan totaled approximately $ 1,157 as of August 2, 2020 and will be expensed over a weighted average period of 1.5 years. Transactions related to time-based and performance-based RSU’s during the twenty-six weeks ended August 2, 2020, were as follows:
Fair value of our time-based and performance-based RSU’s is based on our closing stock price on the date of grant. The unrecognized expense related to our time-based and performance-based RSU’s was $12,658 as of August 2, 2020 and will be expensed over a weighted average period of 2.3 years. During the
twenty-six weeks ended August 2, 2020 and August 4, 2019, excess tax expense (benefit) of $477 and ($884), respectively, were recognized as an expense (benefit) in the “Provision (benefit) for income taxes” in the Consolidated Statement of Comprehensive Income (Loss) and classified as a source in operating activities in the Consolidated Statement of Cash Flows. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |
Income Taxes | Note 8: Income Taxes On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, addressing the carryback of net operating losses for specific periods, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvement property. Additionally, the CARES Act, in efforts to enhance business’ liquidity, provides for the deferral of the employer-paid portion of social security taxes. As of August 2, 2020, we have elected to defer employer-paid portion of social security taxes of $1,448, which is included in “Other liabilities” in the Consolidated Balance Sheets.The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annualized effective tax rate for the full fiscal year to “ordinary” income or loss for the reporting period. Due to the uncertainty created by the events surrounding the
COVID-19 pandemic, the actual effective tax rate for the year to date period was used to calculate the income tax benefit for the twenty-six weeks ended August 2, 2020. The effective tax rate for the twenty-six weeks ended August 2, 2020, was a benefit of 34.9%, compared to an effective tax rate of 21.5% for the twenty-six weeks ended August 4, 2019, primarily due to the impact of a decrease in operating earnings before income tax and the impact of the tax provisions within the CARES Act. As a result of the impact of the technical amendments for qualified improvement property within the CARES Act, the Company generated a taxable loss in 2019, which together with the taxable loss in 2020, can now be carried back to prior years when the statutory federal tax rate was at 35.0%. |
Summary of Significant Accounting Policies (Policies) |
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Description of the business | The accompanying unaudited consolidated financial statements include the accounts of Dave & Buster’s Entertainment, Inc. (referred to herein as the “Company”, “we,” “us” and “our”), any predecessor companies and its wholly-owned subsidiaries, Dave & Buster’s Holdings, Inc. (“D&B Holdings”), which owns 100% of the outstanding common stock of Dave & Busters, Inc. (“D&B Inc”), the operating company. All intercompany balances and transactions have been eliminated in consolidation. The Company, headquartered in Dallas, Texas, is a leading operator of high-volume entertainment and dining venues (“stores”) in North America for adults and families under the name “Dave & Buster’s”. The Company operates its business as one operating and one reportable segment. As of August 2, 2020, we owned and operated 137 stores located in 39 states, Puerto Rico and one Canadian province. The Company operates on a 52 or 53-week fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period reported has 13 weeks. Fiscal 2020 and 2019, which end on January 31, 2021 and February 2, 2020, respectively, contain 52 weeks.The Company’s financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. Our quarterly financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended February 2, 2020, included in our Annual Report on Form
10-K as filed with the SEC. |
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Going Concern | Going concern — the period from March 14, 2020 to March 20, 2020, the Company c losed 100% of its 137operating stores in compliance with guidance and orders issued by federal, state and local governments to combat the spread of the COVID-19 pandemic. The extent of impact of these conditions will be based in part on the duration of the store closures or re-opening of stores at full capacity and the timing and extent of customers re-engaging with the brand. During our first quarter, one store re-opened to the public with limited food and beverage offerings and two additional stores offered off-premise dining options. During our second quarter, we have progressively re-opened limited operations in an additional stores in 27states, Puerto Rico and Canada. Subsequent to the end of our second quarter, we re-opened one store and opened a new store located in Manchester, New Hampshire. As of September 4, 2020, 52 stores are closed due to jurisdictional restrictions. The Company is unable to determine whether, when or the manner in which the conditions surrounding the COVID-19 pandemic will change, including when any restrictions or closure requirements will be lifted or potentially re-imposed in certain states or local jurisdictions, whether it will be able to successfully staff stores, and the degree to which it will be able to re-engage customers. These developments have caused a material adverse impact on the Company’s revenues, results of operations and cash flows, including the Company’s ability to meet its obligations when due. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the date the financial statements are issued.The Company has taken several steps to reduce operating costs and to conserve cash. The Company initially furloughed nearly all its workforce, except a small team of essential personnel and temporarily reduced pay and benefits for the remaining employees for a twelve-week period. On March 18, 2020, the Company borrowed substantially all the remaining availability under its revolving credit facility, and the Company continues to actively manage its daily cash flows. During our first and second quarter, the Company obtained additional liquidity through the sale of common stock, which resulted in net proceeds of $182,207. Additionally, the Company initiated ongoing discussions with landlords and other vendors to negotiate relief from cash payments under existing lease and trade payable obligations. As of August 2, 2020, a total of 92 rent relief agreements related to our operating locations and corporate headquarters were executed, which generally provide for full deferral for three months beginning April 2020, with partial deferral continuing for periods of up to six months, at approximately 50% of those locations. We have also been successful in negotiating extended and reduced payment terms with several vendors. Effective April 14, 2020, the Company negotiated an amendment to its existing credit facility, which included relief from compliance with financial covenants for the periods ended May 3, 2020, August 2, 2020 and November 1, 2020. During the financial covenant suspension period, the Company is required to maintain a minimum liquidity amount of $30,000. If the Company is not in compliance with financial covenants after the suspension period or some other event of default arises, the Company’s lenders could instruct the administrative agent under the existing credit facility to exercise remedies including declaring the principal of and accrued interest on all outstanding indebtedness due and payable, terminating all remaining commitments and obligations under the revolving credit facility and requiring the posting of cash collateral in respect of 103% of agreements would become due. Although the lenders under the existing credit facility may waive the default or forebear the exercise of remedies, they are not obligated to do so. Failure to obtain additional waivers would have a material adverse effect on the Company’s liquidity, financial condition and results of operations and may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code to implement a restructuring plan. The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities at the date of the consolidated financial statements and for the period then ended. Actual results could differ from those estimates. Operating results for the
twenty-six weeks ended August 2, 2020 are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending January 31, 2021. |
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Cash and cash equivalents | Cash and cash equivalents (used in) operating activities” within the Consolidated Statements of Cash Flows. |
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Fair value of financial instruments | Fair value of financial instruments The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, and other current liabilities approximate fair value because of their short-term nature. We believe that the carrying amount of our credit facility approximates its fair value because the interest rates reflect current market conditions. The fair value of the Company’s credit facility was determined to be a Level Two instrument as defined by GAAP. The fair value of the Company’s interest rate swap is determined based upon Level Two inputs which includes valuation models as reported by our counterparties. These valuation models are based on the present value of expected cash flows using forward rate curves. Non-financial assets and liabilities recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis include such items as property and equipment, right-of-use The disruption in operations and reduction in revenues have led the Company to consider the impact of the COVID-19 pandemic on the recoverability of its property and equipment and ROU assets for operating leases.During the first quarter of fiscal 2020, each store’s past and present operating performance was reviewed in combination with projected future results primarily through projected undiscounted cash flows that included management’s current expectation of future financial impacts from COVID-19. If the store’s assets were determined to be through comparison of the asset’s carrying value to its undiscounted cash flows, the Company compared the carrying amount of each store’s assets to its fair value as estimated by management to calculate the impairment amount The fair value of the store’s assets is generally determined using a discounted cash flow projection model, which is based on Level Three inputs. Store asset impairment charges represent the excess of the carrying amount over the estimated fair value of the store asset. first qu 2020, primarily driven by the expected impact of the ar ter of fisc alCOVID-19 pandemic on future cash flows of specific stores.During the second quarter of fiscal 2020, the Company did not identify additional triggering events which would require a change in management’s estimate regarding the recoverability of store asset values, and no a dditional impairment related to our operating stores was recognized . twenty-six weeks ended August 2, 2020 that would indicate it is more likely than not that its goodwill or tradename are impaired. The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material.Additionally, the Company
is c discussions to terminate or delay possession on several executed lease contracts that have not yet commenced. The Company is also curtailing several potential new store projects that were in the early stage of development. During the thirteen and ontinu ing twenty-six weeks ended August 2, 2020, we recorded an impairment loss and related contract termination costs of $2,178 and $6,981 related to these projects, which is included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income (Loss). |
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Interest rate swap | Interest rate swaps one-month LIBOR in exchange for the payment of a fixed rate of interest throughout the life of the agreements. The notional amount of the swap agreements total $350,000 and the fixed rate of interest for all agreements is 2.47%. The agreements became effective on February 28, 2019 and mature on August 17, 2022, which is the maturity date of our credit facility.The Company initially designated its interest rate swap agreements as a cash flow hedge and accounted for the underlying activity in accordance with hedge accounting. Effective April 14, 2020, the Company amended its existing credit facility agreement to obtain relief from its financial covenants, and as a result, the variable interest rate terms were modified to create an interest rate floor of 1.00%. Accordingly, and as a result of the current forward interest rate curve, the Company discontinued the hedging relationship as of April 14, 2020 (de-designation date). Given the continued existence of the hedged interest payments, the Company will reclassify its accumulated other comprehensive 17,609loss of $as of the de- d into “Interest expense, net” using a straight-line approach over the remaining life of the originally designated hedging relationship. e signation date The amount of pre-tax losses in accumulated other comprehensive loss that was reclassified into interest expense subsequent to the de-designation date was $ 1,887 and $ 2,201 for the thirt een and twenty -six weeks ended August 2, 2020 , respectively, and the Company expects to reclassify $ 7,547 within the next twelve months. Effective with the de-designation, any gain or loss on the derivatives are recognized in earnings in the period in which the change occurs. For the thirteen and twenty-six weeks ended August 2, 2020, a loss of $ 976 and $ 1,796 was recognized, respectively, which are included in “Other store operating expenses” in the Consolidated Statements of Comprehensive Income (Loss).Prior to the de-designation, changes in the fair values of the interest rate swaps were recorded as a component of other comprehensive loss until the interest payments being hedged were recorded as interest expense, at which time the amounts in accumulated other comprehensive loss were reclassified as an adjustment to interest expense. Cash flows related to the interest rate swaps were included as component of interest expense and in operating activities.Credit risk related to the failure of the our counterparties to perform under the terms of the swap agreements is minimized by entering into transactions with carefully selected, credit-worthy parties and the fact that the swap contracts are distributed among several financial institutions to reduce the concentration of credit risk. Our swap agreements with our derivative counterparties contain a provision where if the Company defaults on any of its indebtedness, and repayment of the indebtedness has been accelerated, the Company could also be declared in default on its derivative obligations. The following derivative instruments were outstanding as of the end of the periods indicated:
The following table summarizes the activity in accumulated other comprehensive loss related to our derivative instruments:
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Revenue recognition | Revenue recognition 2,500 and $ 12,100, respectively, related to the amount in deferred amusement revenue as of the end of fiscal 2019. In jurisdictions where we do not have a legal obligation to remit unredeemed gift card balances to a legal authority, we recognize revenue on unredeemed gift cards in proportion to the pattern of redemption by the customers. During the thirteen and
twenty-six weeks ended August 2, 2020, we recognized revenue of approximately $140 and $1,440, respectively, related to the amount in deferred gift card revenue as of the end of fiscal 2019, of which approximately $40 and $210 was breakage revenue. |
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Stockholders' equity | Stockholders’ equity twenty-six weeks ended August 2, 2020, the Company indefinitely suspended all share repurchase activity. As of August 2, 2020, we have approximately $172,820 of share repurchase authorization remaining under the current plan.In our consolidated financial statements, the Company treats shares withheld for tax purposes on behalf of our employees in connection with the vesting of time-based and performance restricted stock units as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. During the twenty-six weeks ended August 2, 2020 and August 4, 2019, we withheld 43,788 and 11,336 shares of common stock to satisfy $687 and $586 of employees’ tax obligations, respectively. The share activity in the twenty-six weeks ended August 2, 2020 includes the settlements of $2,351 cash obligations through the issuance of 150,455 shares of common stock.Effective March 18, 2020, the Board of Directors of the Company adopted a 364-day duration Shareholder Rights Plan (the “Rights Plan”) and declared a dividend of one preferred share purchase right for each outstanding share of common stock to shareholders of record on March 30, 2020 to purchase from the Company one-ten thousandth of a share of Series A Junior Participating Preferred Stock, par value $0.01 per share, of the Company for an exercise price of $45.00 once the rights become exercisable, subject to adjustment as provided in the related rights agreement.On April 14, 2020, pursuant to an open market sale agreement, the Company sold 6,149,936 shares of its common stock at a price of $12.20 per share, for proceeds of $75,000, prior to deducting offering expenses related to the offering. On May 4, 2020, the Company entered into an underwriting agreement, pursuant to which it sold 9,578,545 shares of its common stock at a price of $10.44 per share, and on May 18, 2020, the underwriter exercised its over-allotment option for an additional 1,014,871 shares at $10.44 per share, resulting in additional proceeds of $110,600 prior to deducting offering costs. On June 23, 2020, shareholders approved a proposal to amend our 2014 Omnibus Incentive Plan (“Plan”) to increase the number of shares available for awards under the Plan by 3,000,000 shares. |
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Recently adopted accounting guidance | Recently adopted accounting guidance 2016-13 , Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, In January 2017, the FASB issued ASU 2017-04 , Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, In August 2018, the FASB issued ASU
2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement |
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Recent accounting pronouncements | Recent accounting pronouncements December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which removes certain exceptions related to the approach for intraperiod tax allocations, the calculation of income taxes in interim periods, and the recognition of deferred taxes for taxable goodwill. The guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those years, with early adoption permitted. The Company is currently assessing the impact of this new standard on our consolidated financial statements. In March 2020, the FASB issued ASU
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Reform on Financial Reporting de-designation of the instrument, provided certain criteria are met. As of the end of the first quarter of fiscal 2020, the Company’s exposure to LIBOR rates included its senior credit facility and swap agreements. The Company is currently evaluating the impact of this new standard on our consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block] | The following derivative instruments were outstanding as of the end of the periods indicated:
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Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss) [Table Text Block] | The following table summarizes the activity in accumulated other comprehensive loss related to our derivative instruments:
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Accrued Liabilities | Accrued liabilities consist of the following as of the end of each period:
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Debt (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt | Long-term debt consists of the following as of:
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Recorded Interest Expense, Net | Interest expense, net
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Leases (Tables) |
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Lessee, Operating Lease, Disclosure | The components of lease expense, including variable lease costs primarily consisting of common area maintenance charges and property taxes, are as follows for the fiscal year ended:
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Earnings per share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Calculation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of EPS, basic and diluted for the periods indicated:
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Share-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block] | Compensation expense related to stock options, time-based and performance-based RSU’s is included in general and administrative expenses and is as follows:
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Share-based Compensation, Stock Options, Activity [Table Text Block] | Transactions related to stock option awards during the twenty-six weeks ended August 2, 2020 were as follows:
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Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block] | Transactions related to time-based and performance-based RSU’s during the twenty-six weeks ended August 2, 2020, were as follows:
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Summary of Significant Accounting Policies - Derivative Instruments Outstanding (Details) - USD ($) $ in Thousands |
Aug. 02, 2020 |
Feb. 02, 2020 |
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---|---|---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Current portion of derivatives | $ (8,215) | $ (3,518) | ||
Non-current portion of derivatiives | (8,724) | (6,967) | ||
Total derivatives | [1] | $ (16,939) | $ (10,485) | |
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Summary of Significant Accounting Policies - Accumulated Other Comprehensive Loss (Details) - Interest Rate Swap [Member] - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
Aug. 02, 2020 |
Aug. 04, 2019 |
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Amount of loss recorded in accumulated other comprehensive income | $ 4,668 | $ 7,602 | $ 8,140 | |||
Income tax expense (benefit) in accumulated other comprehensive income | $ 515 | (1,268) | (1,345) | (2,221) | ||
Interest Expense [Member] | ||||||
Amount of loss reclassified into income | [1] | $ (1,887) | $ (27) | $ (2,680) | $ (12) | |
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Accrued Liabilities - Accrued Liabilities (Detail) - USD ($) $ in Thousands |
Aug. 02, 2020 |
Feb. 02, 2020 |
---|---|---|
Accrued Liabilities, Current [Abstract] | ||
Deferred amusement revenue | $ 78,159 | $ 75,113 |
Current portion of operating lease liabilities, net (1) | 52,636 | 45,611 |
Rent payable (note 4) | 31,589 | |
Variable rent liabilities (note 4) | 9,037 | 1,331 |
Deferred gift card revenue | 10,832 | 11,253 |
Property taxes | 9,936 | 7,226 |
Compensation and benefits | 8,664 | 23,421 |
Current portion of derivatives | 8,215 | 3,518 |
Current portion of long-term insurance | 6,200 | 6,500 |
Utilities | 4,219 | 4,442 |
Customer deposits | 1,840 | 4,324 |
Inventory liabilities | 1,737 | 2,179 |
Sales and use taxes | 973 | 4,000 |
Dividend payable | 4,891 | |
Other | 14,614 | 13,643 |
Total accrued liabilities | $ 238,651 | $ 207,452 |
Accrued Liabilities - Accrued Liabilities (Parenthetical) (Detail) - USD ($) $ in Thousands |
Aug. 02, 2020 |
Feb. 02, 2020 |
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Accrued Liabilities, Current [Abstract] | ||
Receivables for tenant improvement allowances | $ 2,231 | $ 6,339 |
Debt - Additional Information (Detail) - USD ($) |
6 Months Ended | |||
---|---|---|---|---|
Aug. 17, 2017 |
Aug. 02, 2020 |
Apr. 14, 2020 |
Aug. 04, 2019 |
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Debt Instrument [Line Items] | ||||
Required liquidity amount | $ 30,000,000 | |||
Minimum [Member] | ||||
Debt Instrument [Line Items] | ||||
Debt instrument interest rate | 1.25% | |||
Derivative, Variable Interest Rate | 1.00% | |||
Maximum [Member] | ||||
Debt Instrument [Line Items] | ||||
Debt instrument interest rate | 2.00% | |||
Credit Facility [Member] | ||||
Debt Instrument [Line Items] | ||||
Senior secured credit facility | $ 300,000,000 | |||
Revolving credit facility, maximum borrowing capacity | $ 500,000,000 | |||
Maturity date | Aug. 17, 2022 | |||
Revolving credit facility, letter of credit sub-facility maximum borrowing capacity | $ 35,000,000 | |||
Revolving credit facility, swing loan sub-facility maximum borrowing capacity | 15,000,000 | |||
Term loan repayment of principal | $ 3,750,000 | |||
Frequency of periodic payment | quarter | |||
Letter of credit facility outstanding | $ 9,686,000 | |||
Borrowing available | $ 1,314,000 | |||
Debt instrument interest rate | 2.00% | |||
Weighted average effective interest | 3.98% | 4.11% | ||
Debt instrument, description of variable rate basis | The loans bear interest subject to a pricing grid based on a total leverage ratio, at one-month LIBOR plus a spread ranging from 1.25% to 2.00% for the term loans and the revolving loans. | |||
Debt Instrument, covenant compliance | Our credit facility contains restrictive covenants that, among other things, place certain limitations on our ability to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets. In addition, our credit facility requires us to maintain certain financial ratio covenants. | |||
Required liquidity amount | $ 30,000,000 | |||
Debt issuance costs | $ 2,000,000 |
Debt - Long-Term Debt (Detail) - USD ($) $ in Thousands |
Aug. 02, 2020 |
Feb. 02, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
Total debt outstanding | $ 747,750 | $ 648,250 |
Less current installments—term | (15,000) | (15,000) |
Long-term debt, net | 731,646 | 632,689 |
Credit Facility—term [Member] | ||
Debt Instrument [Line Items] | ||
Total debt outstanding | 258,750 | 266,250 |
Less current installments—term | (15,000) | (15,000) |
Less debt issuance costs—term | (1,104) | (561) |
Credit Facility—revolver [Member] | ||
Debt Instrument [Line Items] | ||
Total debt outstanding | $ 489,000 | $ 382,000 |
Debt - Recorded Interest Expense, Net (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
Aug. 02, 2020 |
Aug. 04, 2019 |
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Debt Disclosure [Abstract] | ||||
Interest expense on credit facilities | $ 5,865 | $ 4,708 | $ 11,163 | $ 8,903 |
Interest associated with swap agreements | 1,887 | 27 | 2,680 | 12 |
Amortization of issuance cost and discount | 411 | 198 | 654 | 396 |
Interest income | 0 | (25) | (22) | (51) |
Capitalized interest | 0 | (303) | (197) | (599) |
Total interest expense, net | $ 8,163 | $ 4,605 | $ 14,278 | $ 8,661 |
Leases - Lease Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
Aug. 02, 2020 |
Aug. 04, 2019 |
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Leases | ||||
Operating lease cost | $ 33,321 | $ 30,448 | $ 66,884 | $ 60,240 |
Variable lease cost | 5,688 | 6,713 | 13,054 | 14,643 |
Short-term lease cost | 140 | 116 | 227 | 217 |
Total | $ 39,149 | $ 37,277 | $ 80,165 | $ 75,100 |
Earnings Per Share - Additional Information (Detail) - shares |
3 Months Ended | 6 Months Ended |
---|---|---|
Aug. 04, 2019 |
Aug. 04, 2019 |
|
Earnings Per Share [Abstract] | ||
Weighted average anti-dilutive options excluded from calculation of common equivalent shares | 160,967 | 97,502 |
Earnings Per Share - Summary of Calculation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
Aug. 02, 2020 |
Aug. 04, 2019 |
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Numerator: | ||||||
Net income (loss) | $ (58,602) | $ 32,356 | $ (102,146) | $ 74,799 | ||
Denominator: | ||||||
Weighted average number of common shares outstanding (basic) | 47,111,763 | 35,407,965 | 39,470,874 | 36,117,815 | ||
Weighted average dilutive impact of equity-based awards | [1] | 607,745 | 685,186 | |||
Weighted average number of common and common equivalent shares outstanding (diluted) | 47,111,763 | 36,015,710 | 39,470,874 | 36,803,001 | ||
Net income (loss) per share: | ||||||
Basic | $ (1.24) | $ 0.91 | $ (2.59) | $ 2.07 | ||
Diluted | $ (1.24) | $ 0.90 | $ (2.59) | $ 2.03 | ||
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Earnings Per Share - Summary of Calculation of Basic and Diluted Earnings Per Share (Parenthetical) (Detail) - shares |
3 Months Ended | 6 Months Ended |
---|---|---|
Aug. 02, 2020 |
Aug. 02, 2020 |
|
Earnings Per Share [Abstract] | ||
Weighted average dilutive impact of equity-based awards | 0 | 0 |
Share-Based Compensation - Additional Information (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Excess income tax benefit related to stock-based compensation plans | $ 477 | $ 884 |
Stock Options [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Total intrinsic value of stock options exercised | 792 | |
Unrecognized expense related to stock option plan | $ 1,157 | |
Unrecognized compensation expense, weighted average years | 1 year 6 months | |
Restricted Stock Units (RSU's) [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Unrecognized compensation expense, weighted average years | 2 years 3 months 18 days | |
Unrecognized expense related to unvested restricted stock and RSUs | $ 12,658 |
Share-Based Compensation - Summary of Compensation Expenses (Detail) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
Aug. 02, 2020 |
Aug. 04, 2019 |
|
Share-based Payment Arrangement, Noncash Expense [Abstract] | ||||
Stock options | $ 290 | $ 804 | $ 830 | $ 1,563 |
RSU's | 2,444 | 1,103 | 1,515 | 2,169 |
Share-based compensation expense | $ 2,734 | $ 1,907 | $ 2,345 | $ 3,732 |
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Aug. 02, 2020 |
Aug. 04, 2019 |
|
Income Taxes [Line Items] | ||
Corporate tax rate | 34.90% | 21.50% |
Net operating loss carryback, Percentage | 35.00% | |
CARES Act [Member] | ||
Income Taxes [Line Items] | ||
Deferred social security tax | $ 1,448 |
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