-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K9BMYhXQvq0LsX1O3rMoSdwpsDTVpE/N58xri97FGyfjfpDCK2e0zk0yrG9U03Xo 4kRla+JovOvsYJXYlmUCkQ== 0000813920-00-000004.txt : 20000517 0000813920-00-000004.hdr.sgml : 20000517 ACCESSION NUMBER: 0000813920-00-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000402 FILED AS OF DATE: 20000516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CEC ENTERTAINMENT INC CENTRAL INDEX KEY: 0000813920 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 480905805 STATE OF INCORPORATION: KS FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13687 FILM NUMBER: 637792 BUSINESS ADDRESS: STREET 1: PO BOX 152077 STREET 2: 4441 W AIRPORT FREEWAY CITY: IRVING STATE: TX ZIP: 75015 BUSINESS PHONE: 2142588507 MAIL ADDRESS: STREET 1: PO BOX 152077 CITY: IRVING STATE: TX ZIP: 75015 FORMER COMPANY: FORMER CONFORMED NAME: SHOWBIZ PIZZA TIME INC DATE OF NAME CHANGE: 19920703 10-Q 1 10QDOCUMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended April 2, 2000. - Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ----------- to ------------. Commission File Number 0-15782 CEC ENTERTAINMENT, INC. (Exact name of registrant as specified in its charter) Kansas 48-0905805 (State or other jurisdiction of(I.R.S. Employer incorporation or organization)Identification No.) 4441 West Airport Freeway Irving, Texas 75062 (Address of principal executive offices, including zip code) (972) 258-8507 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No - At April 2, 2000, an aggregate of 26,791,971 shares of the registrant's Common Stock, par value of $.10 each (being the registrant's only class of common stock), were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements CEC ENTERTAINMENT, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Consolidated balance sheets . . . . . . . . . . . . . . . . 2 Consolidated statements of earnings and comprehensive income. . . . . . . . . . . . . . . . . . . 3 Consolidated statement of shareholders' equity . . . . . . . 4 Consolidated statements of cash flows . . . . . . . . . . . . 5 Notes to consolidated financial statements. . . . . . . . . . 6 Page 1 CEC ENTERTAINMENT, INC. CONSOLIDATED BALANCE SHEETS (Thousands, except share data) ASSETS April 2, January 2, 2000 2000 -------- ---------- (unaudited) Current assets: Cash and cash equivalents . . . . . . . . . . $ 9,046 $ 2,731 Accounts receivable . . . . . . . . . . . . . 4,129 6,451 Current portion of notes receivable . . . . . 5 7 Inventories . . . . . . . . . . . . . . . . . 8,846 7,895 Prepaid expenses. . . . . . . . . . . . . . . 5,327 4,727 Current portion of deferred tax asset. . . . 776 776 Assets held for resale . . . . . . . . . . . 12,473 13,070 ------- ------- Total current assets . . . . . . . . . . . . 40,602 35,657 ------- ------- Property and equipment, net. . . . . . . . . . 291,397 280,624 ------- ------- Notes receivable from related parties, less current portion . . . . . . . . . . . 983 491 ------- ------- Other assets . . . . . . . . . . . . . . . . . 7,248 8,396 ------- ------- $340,230 $325,168 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt . . . . . . $ 6,905 $ 7,729 Accounts payable and accrued liabilities. . . 48,360 34,294 ------- ------- Total current liabilities. . . . . . . . . 55,265 42,023 ------- ------- Long-term debt, less current portion . . . . . 38,695 51,567 ------- ------- Deferred rent. . . . . . . . . . . . . . . . . 4,104 4,110 ------- ------- Long-term deferred tax liability . . . . . . . 3,299 2,167 ------- ------- Other liabilities. . . . . . . . . . . . . . . 1,725 1,725 ------- ------- Redeemable preferred stock, $60 par value, redeemable for $2,911 in 2005 . . . . . . . 2,374 2,348 ------- ------- Shareholders' equity: Common stock, $.10 par value; authorized 100,000,000 shares; 33,831,577 and 33,791,217 shares issued, respectively . . . . . . . . . . . . . . . 3,383 3,379 Capital in excess of par value. . . . . . . . 167,295 166,594 Retained earnings . . . . . . . . . . . . . . 138,853 120,194 Deferred compensation . . . . . . . . . . . . (569) (759) Accumulated other comprehensive income . . 8 42 Less treasury shares of 7,039,606 and 6,777,614, respectively, at cost. . . . . . . . . . . (74,202) (68,222) ------- ------- 234,768 221,228 ------- ------- $ 340,230 $ 325,168 ======= =======
See notes to consolidated financial statements. Page 2 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME (Unaudited) (Thousands, except per share data) Three Months Ended ---------------------------------- April 2, 2000 April 4,1999 ------------- ------------ Food and beverage revenues . . . . . . . . $ 93,779 $ 76,544 Games and merchandise revenues . . . . . . 46,567 40,992 Franchise fees and royalties . . . . . . . 942 812 Interest income, including related party income of $23 and $17, respectively. . . . . . . . . . . . . . 59 49 ------- ------- 141,347 118,397 ------- ------- Costs and expenses: Cost of sales . . . . . . . . . . . . . . 61,550 51,610 Selling, general and administrative expenses . . . . . . . . . . . . . . . 19,996 17,087 Depreciation and amortization . . . . . . 8,096 7,467 Interest expense. . . . . . . . . . . . 761 695 Other operating expenses. . . . . . . . . 20,318 17,885 ------- ------- 110,721 94,744 ------- ------- Income before income taxes . . . . . . . . . 30,626 23,653 Income taxes: Current expense . . . . . . . . . . . . . . 10,750 8,846 Deferred expense. . . . . . . . . . . . . . 1,132 426 ------- ------- 11,882 9,272 ------- ------- Net income . . . . . . . . . . . . . . . . . 18,744 14,381 Other comprehensive income, net of tax: Foreign currency translation. . . . . . . . 34 3 Comprehensive income . . . . . . . . . . . . $ 18,778 $ 14,384 ======= ======= Earnings per share: Basic: Net income . . . . . . . . . . . . . . . . $ .69 $ .53 ======= ======= Weighted average shares outstanding. . . . 26,868 26,979 ======= ======= Diluted: Net income . . . . . . . . . . . . . . . $ .68 $ .52 ======= ======= Weighted average shares outstanding. . . . 27,639 27,623 ======= =======
See notes to consolidated financial statements. Page 3 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited) (Thousands, except per share data) Amounts Shares ------- ------ Common stock and capital in excess of par value Balance, beginning of year. . . . . . . . . . . . $ 169,973 33,791 Stock options exercised . . . . . . . . . . . . . 484 36 Net tax benefit from exercise of options and stock grants . . . . . . . . . . . . . . . 67 Stock issued under 401(k) plan. . . . . . . . . . 154 5 ------- ------- Balance, April 2, 2000. . . . . . . . . . . . . . 170,678 33,832 ------- ======= Retained earnings: Balance, beginning of year. . . . . . . . . . . . 120,194 Net income. . . . . . . . . . . . . . . . . . . . 18,744 Redeemable preferred stock accretion. . . . . . . (26) Redeemable preferred stock dividend, $1.20 per share. . . . . . . . . . . . . . . . (59) ------- Balance, April 2, 2000. . . . . . . . . . . . . . 138,853 ------- Deferred compensation: Balance, beginning of year. . . . . . . . . . . . (759) Amortization of deferred compensation . . . . . . 190 ------- Balance, April 2, 2000. . . . . . . . . . . . . . (569) ------- Accumulated other comprehensive income: Balance, beginning of year. . . . . . . . . . . . 42 Foreign currency translation. . . . . . . . . . . (34) ------- Balance, April 2, 2000. . . . . . . . . . . . . . 8 ------- Treasury shares: Balance, beginning of year. . . . . . . . . . . . (68,222) 6,778 Treasury stock acquired . . . . . . . . . . . . (5,980) 262 ------- ------- Balance, April 2, 2000. . . . . . . . . . . . . . (74,202) 7,040 ------- ======= Total shareholder's equity . . . . . . . . . . . . $ 234,768 =======
See notes to consolidated financial statements. Page 4 CEC ENTERTAINMENT, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Thousands) Three Months Ended ---------------------------------- April 2, 2000 April 4, 1999 ------------- ------------- Operating activities: Net income . . . . . . . . . . . . . . $ 18,744 $ 14,381 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization . . . . . 8,096 7,467 Deferred tax expense. . . . . . . . . . 1,132 426 Compensation expense under stock grant plan. . . . . . . . . . . . . . 190 191 Other . . . . . . . . . . . . . . . . . (6) (22) Net change in receivables, inventory, prepaids, payables and accrued liabilities. . . . . . . . . . 14,837 6,679 ------- ------- Cash provided by operations. . . . . 42,993 29,122 ------- ------- Investing activities: Purchases of property and equipment . . (18,849) (19,249) Additions to notes receivable . . . . . (696) (876) Payments received on notes receivable . 206 753 (Increase) decrease in assets held for resale, investments, deferred charges and other assets . . . . . . . . . . . 1,725 (618) ------- ------- Cash used in investing activities. . . . (17,614) (19,990) ------- ------- Financing activities: Payments on debt and line of credit . . . (13,696) (10,845) Proceeds on long term debt. . . . . . . . 5,521 Exercise of stock options . . . . . . . . 484 774 Redeemable preferred stock dividends. . . (59) (60) Treasury stock acquired . . . . . . . . . (5,980) Other . . . . . . . . . . . . . . . . . . 187 533 -------- -------- Cash used in financing activities. . . . (19,064) (4,077) -------- -------- Increase in cash and cash equivalents . . 6,315 5,055 Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . 2,731 3,210 ------- ------- Cash and cash equivalents, end of period . $ 9,046 $ 8,265 ======= ======== See notes to consolidated financial statements.
Page 5 CEC ENTERTAINMENT, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Interim financial statements: In the opinion of management, the accompanying financial statements for the periods ended April 2, 2000 and April 4, 1999 reflect all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial condition, results of operations and cash flows in accordance with generally accepted accounting principles. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted. The unaudited consolidated financial statements referred to above should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K filed with the Securities and Exchange Commission for the year ended January 2, 2000. Results of operations for the periods ended April 2, 2000 and April 4, 1999 are not necessarily indicative of the results for the year. 2. Earnings per common share: Earnings per common share were computed based on the weighted average number of common and potential common shares outstanding during the period. Net income available per common share has been adjusted for the items indicated below, and earnings per common and potential common share were computed as follows (thousands, except per share data): Three Months Ended --------------------------- April 2, April 4, 2000 1999 ------- -------- Net income . . . . . . . . . . . . . . $18,744 $14,381 Accretion of redeemable preferred stock . . . . . . . . . . (26) (25) Redeemable preferred stock dividends . . . . . . . . . . (59) (60) ------- ------- Adjusted income applicable to common and potential common shares. . . . . $18,659 $14,296 ======= ======= Basic: Weighted average common shares outstanding. . . . . . . . . . . 26,868 26,979 ======= ======= Earnings per common share. . . . . $ .69 $ .53 ======= ======= Diluted: Weighted average common shares outstanding . . . . . . . . . . 26,868 26,979 Potential common shares for stock options and stock grants . . . 771 644 ------- ------- Weighted average shares outstanding. 27,639 27,623 ======= ======= Earnings per common and potential common share . . . . . . . . . $ .68 $ .52 ======= =======
Page 6 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations First Quarter 2000 Compared to First Quarter 1999 - ------------------------------------------------- A summary of the results of operations of the Company as a percentage of revenues for the first quarters of 2000 and 1999 is shown below. Three Months Ended ------------------------------- April 2, 2000 April 4, 1999 ------------- ------------- Revenues . . . . . . . . . . . . . 100.0% 100.0% Costs and expenses: Cost of sales. . . . . . . . . . 43.5 43.6 Selling, general and administrative . . . . . . . . 14.1 14.4 Depreciation and amortization 5.7 6.3 Interest expense . . . . . . . . .5 .6 Other operating expenses 14.5 15.1 ----- ----- 78.3 80.0 ----- ----- Income before income taxes 21.7 20.0 Income tax expense . . . . . . 8.4 7.9 ------- ------- Net income . . . . . . . . . . . . 13.3% 12.1% ======= =======
Revenues -------- Revenues increased to $141.3 million in the first quarter of 2000 from $118.4 million in the first quarter of 1999 due to an increase in the number of Company-operated stores and an increase of 7.7% in comparable store sales of the Company's Chuck E. Cheese's stores which were open during all of the first quarters of both 2000 and 1999. During 1999, the Company opened 23 new restaurants and acquired one restaurant from a franchisee. During the first three months of 2000, the Company opened nine new stores. Management believes that sales comparisons during the first quarter were favorably impacted by the timing of the Easter holiday. Menu prices increased 1.5% between the periods. Costs and Expenses ------------------- Costs and expenses as a percentage of revenues decreased to 78.3% in the first quarter of 2000 from 80.0% in the first quarter of 1999. Cost of sales decreased as a percentage of revenues to 43.5% in the first quarter of 2000 from 43.6% in the comparable period of 1999. Cost of food, beverage, prize and merchandise items as a percentage of restaurant sales decreased to 14.9% in the first quarter of 2000 from 15.3% in the first quarter of 1999 primarily due to a decrease in cheese costs. Store labor expenses as a percentage of store sales increased to 25.7% in the first quarter of 2000 from 25.4% in the first quarter of 1999 primarily due to wage increases and new store staffing. Selling, general and administrative expenses as a percentage of revenues decreased to 14.1% in the first quarter of 2000 from 14.4% in the first quarter of 1999 due primarily to a decrease in advertising and corporate overhead costs as a percentage of revenues. Depreciation and amortization expenses as a percentage of revenues decreased to 5.7% in the first quarter of 2000 from 6.3% in the first quarter of 1999 primarily due to the increase in comparable store sales. Interest expense as a percentage of revenues decreased to .5% in the first quarter of 2000 from .6% in the first quarter of 1999 due to increased revenues and lower interest rates. Interest expense on incremental debt incurred to finance assets held for resale has been allocated to the basis of such assets. Other operating expenses decreased as a percentage of revenues to 14.5% in the first quarter of 2000 from 15.1% in the first quarter of 1999 primarily due to the increase in comparable store sales and the fact that a significant portion of operating costs are fixed. Page 7 The Company's effective income tax rate was 38.8% in the first quarter of 2000 compared to 39.2% in the first quarter of 1999 primarily due to lower estimated state tax rates. Net Income ----------- The Company had net income of $18.8 million in the first quarter of 2000 compared to $14.4 million in the first quarter of 1999 due to the changes in revenues and expenses discussed above. The Company's diluted earnings per share increased to $.68 per share in the first quarter of 2000 from $.52 per share in the first quarter of 1999. Financial Condition, Liquidity and Capital Resources Cash provided by operations increased to $43.0 million in the first three months of 2000 from $29.1 million in the comparable period of 1999. Cash outflows from investing activities for the first three months of 2000 were $17.6 million primarily related to capital expenditures. Cash outflows from financing activities for the first three months of 2000 were $19.1 million primarily related to repayment of borrowings on the Company's line of credit and the repurchase of the Company's common stock. The Company's primary requirements for cash relate to planned capital expenditures, the repurchase of the Company's common stock and debt service. The Company expects that it will satisfy such requirements from cash provided by operations and, if necessary, funds available under its line of credit. In 2000, the Company plans to add 27 to 32 stores including new stores and acquisitions of existing stores from franchisees. The Company currently anticipates its cost of opening such new stores to average approximately $1.8 million per store which will vary depending upon many factors including the size of the stores and whether the Company acquires land or the store is an in-line or freestanding building. In addition to such new store openings, the Company plans to expand the seating capacity of approximately 17 high sales volume stores in 2000 including 12 stores which will receive an enhanced showroom package. During the first three months of 2000, the Company opened nine new restaurants and expanded one restaurant. The Company currently estimates that capital expenditures in 2000, including expenditures for new store openings, existing store expansions and equipment investments, will be approximately $86 million The Company plans to finance these expenditures through cash flow from operations and borrowings under the Company's line of credit. In 1999, the Company purchased assets previously owned by Discovery Zone, Inc. The preliminary allocation of the purchase price is approximately $7.2 million to property and equipment and $11.8 million to assets held for resale. Subsequent to the purchase, the Company has incurred incremental holding costs of approximately $2.6 million and realized sale proceeds of $4.3 million related to the assets held for resale. While the Company has not yet finalized the purchase price allocation, it is not expected that the final allocation will be materially different from the results reflected herein. In September 1999, the Company announced a plan to purchase shares of the Company's common stock at an aggregate purchase price of up to $25 million. As of May 15, 2000, the Company has purchased shares of its common stock under the $25 million plan at an aggregate purchase price of approximately $8.9 million. In 2000, the Company's line of credit agreement was amended to provide borrowings of up to $55 million with $10 million maturing in 2000 and $45 million maturing in 2001. The Company's total credit facility of $67.8 million consists of $12.8 million in term notes and the $55 million line of credit. Term notes totaling $12 million with annual principal payments of $6 million and annual interest of 10.02% mature in 2001. Term notes totaling $833,000 with one remaining quarterly principal payment and annual interest equal to LIBOR plus 3.5% matures in 2000. Interest under the $55 million line of credit is dependent on earnings and debt levels of the Company and ranges from prime minus 0.5% to plus 0.5% or, at the Company's option, LIBOR plus 1% to 2.5%. Currently, any borrowings under this line of credit would be at prime rate minus 0.5% or LIBOR plus 1%. As of April 2, 2000, $32 million was borrowed under the line of credit. The Company is required to comply with certain financial ratio tests during the terms of the loan agreements. The Company is currently considering increasing the available borrowings under the line of credit agreement and extending the maturity date. Certain statements may constitute "forward-looking statements" which are subject to known and unknown risks and uncertainties including, among other things, certain economic conditions, competition, development factors and operating costs that may cause the actual results to differ materially from results implied by such forward-looking statements. Page 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company is subject to market risk in the form of interest risk and foreign currency risk. Both interest risk and foreign currency risk are immaterial to the Company. PART II - OTHER INFORMATION Item 1. Legal Proceedings. There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. Item 2. Changes in Securities. None to report during quarter for which this report is filed. Item 3. Defaults Upon Senior Securities. None to report during quarter for which this report is filed. Item 4. Submission of Matters to a Vote of Security Holders None to report during quarter for which this report is filed. Item 5. Other Information. None to report during quarter for which this report is filed. Item 6. Exhibits and Reports on Form 8-K. a) Exhibits 10(a)(1) Fifth Modification and Extension Agreement, to the Loan Agreement dated June 27, 1995) in the stated amount of $10,000,000, between Bank One, Texas, N.A. and the Company. 10(a)(2) Supplemental Revolving Credit Note, in the stated amount of $10,000,000, dated August 1, 1996, between Bank One, Texas, N.A. and the Company. 27 Financial Data Schedule b) Reports on Form 8-K None filed during the quarter for which this report is filed. Page 9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CEC ENTERTAINMENT, INC. Dated: May 16, 2000 By: /s/ Richard M. Frank ---------------------- Richard M. Frank Chairman of the Board and Chief Executive Officer Page 10 EXHIBIT INDEX Exhibit Number Description Page No. - ------- ----------- ----- 10(a)(1 Fifth Modification and Extension Agreement, (to the Loan Agreement dated June 27, 1995) in the stated amount of $10,000,000, dated January 10, 2000, between Bank One, Texas, N.A. and the Company. 12 10(a)(2) Supplemental Revolving Credit Note, in the stated amount of $10,000,000, dated January 10, 2000, between Bank One, Texas, N.A. and the Company. 20 Page 11 EX-1.1 2 EXHIBIT 10(b)(1) FIFTH MODIFICATION AGREEMENT Date: Effective January 10, 2000 Bank One: BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association Bank One's Address: 1717 Main Street, 3rd Floor Dallas, Texas 75201 Company: CEC ENTERTAINMENT, INC. (f/k/a ShowBiz Pizza Time, Inc.), a Kansas corporation Company's Address: 4441 W. Airport Freeway Irving, Texas 75062 R E C I T A L S: A. Bank One and Company entered into a Loan evidenced, inter alia, by the following documents: 1. Loan Agreement dated as of June 27, 1995 by and between Company and Bank One for an aggregate Loan in the amount of $5,000,000. 2. Revolving Credit Note dated June 27, 1995 in the original principal amount of $5,000,000 signed by Company and payable to Bank One. B. Bank One and Company modified the Loan to increase its principal balance to $15,000,000, extend the maturity date to June 15, 1998 and make certain other changes in the terms and conditions of the Loan evidenced, inter alia, by the following documents: 1. Modification and Extension Agreement dated August 1, 1996 by and between Company and Bank One for an aggregate Loan in the amount of $15,000,000. 2. Restated Revolving Credit Note dated August 1, 1996 in the original principal amount of $15,000,000 signed by Company and payable to Bank One. C. Bank One and Company modified the Loan to allow for transfer of certain assets and make certain other changes in the terms and conditions of the Loan evidenced, inter alia, by the following documents: 1. Supplemental Agreement dated as of September 29, 1997 by and between Company and Bank One. 2. Guarantee Agreement - ShowBiz Nevada, Inc. dated as of September 29, 1997 made by ShowBiz Nevada, Inc. in favor of Bank One. 3. Guarantee Agreement - ShowBiz Merchandising, Inc. dated as of September 29, 1997 made by ShowBiz Merchandising, Inc. in favor of Bank One. 4. Guarantee Agreement - SPT Properties Company, Inc. dated as of September 29, 1997 made by SPT Properties Company, Inc. in favor of Bank One. 5. Guarantee Agreement - ShowBiz Cayman Islands, Inc. dated as of September 29, 1997 made by ShowBiz Cayman Islands, Inc. in favor of Bank One. D. Bank One and Company modified the Loan to extend the maturity date to June 1, 2000 and make certain other changes in the terms and conditions of the Loan evidenced, inter alia, by the following documents: 1. Second Modification and Extension Agreement dated effective June 14, 1998 by and between Company and Bank One for an aggregate Loan in the amount of $15,000,000.00. 2. Second Restated Revolving Credit Note dated effective June 14, 1998 in the original principal amount of $15,000,000.00 signed by Company and payable to Bank One. E. Bank One and Company modified the Loan to increase its principal balance to $30,000,000.00 and make certain other changes in the terms and conditions of the Loan evidenced, inter alia, by the following documents: 1. Third Modification dated effective December 4, 1998 by and between Company and Bank One for an aggregate Loan in the amount of $30,000,000.00. 2. Third Restated Revolving Credit Note dated effective December 4, 1998 in the original principal amount of $30,000,000.00 signed by Company and payable to Bank One. Bank One and Company modified the Loan to extend the maturity date to June 1, 2001, increase its principal balance to $45,000,000.00 and make certain other changes in the terms and conditions of the Loan evidenced, inter alia, by the following documents: 1. Fourth Modification and Extension Agreement dated effective July 16, 1999 by and between Company and Bank One for an aggregate Loan in the amount of $45,000,000.00. 2. Fourth Restated Revolving Credit Note dated effective July 16, 1999 in the original principal amount of $45,000,000.00 signed by Company and payable to Bank One. G. Bank One is the owner and holder of the Note, Loan Agreement, and other Loan Documents. H. Company has requested that Bank One increase the Revolving Credit Commitment by extending a supplemental revolving credit facility to Company in the original principal amount of $10,000,000.00 to be evidenced by an additional promissory note and to be subject to the terms of the Loan Documents, and Bank One is willing to do so on the terms set out in this Agreement. IT IS AGREED: 1. Definitions. The definition of terms used in the Loan Agreement and Supplemental Agreement shall have the same meanings in this Agreement unless otherwise defined. The term "Loan Documents" in Section 1.1 of the Loan Agreement shall be amended to include all the documents described above and this Agreement. 2. Principal Balance. Bank One and Company acknowledge that as of the date hereof the outstanding principal balance of the Note is FORTY-FIVE MILLION AND NO/100 DOLLARS ($45,000,000.00). 3. Supplemental Credit Facility. Subject to the terms and conditions set forth in the Loan Agreement and the other agreements, instruments and documents evidencing, securing, governing, guaranteeing and/or pertaining to the Loan, and as modified by this Agreement, Bank One hereby agrees to provide to Company a Supplemental Revolving Credit Loan (herein referred to as the "Supplemental Loan"). Subject to the terms and conditions set forth herein, Bank One agrees to lend to Company, on a revolving basis from time to time during the period commencing on the date hereof and continuing through the maturity date of the promissory note evidencing this Supplemental Loan from time to time, such amounts as Company may request hereunder; provided, however, the total principal amount outstanding at any time shall not exceed Ten Million and No/100 Dollars ($10,000,000.00) (herein referred to as the "Supplemental Commitment"). Subject to the terms and conditions hereof, Company may borrow, repay and reborrow hereunder. The sums advanced under the Supplemental Loan shall be used for general working capital needs. All advances, whether one or more, under the Supplemental Loan shall be collectively called the "Supplemental Loan." The original stated principal amount of the Supplemental Note shall be included in the definition of "Revolving Credit Commitment" stated in the Loan Agreement. Except for the different or unique terms specified and applied to the Supplemental Loan, Supplemental Note or both by this Agreement, the Supplemental Loan, Supplemental Note or both shall be subject to the remainder of the terms of the Loan Documents. 5. Promissory Note. The Supplemental Loan shall be evidenced by the promissory note (herein referred to as the "Supplemental Note") duly executed by Company and payable to the order of Bank One, in form and substance as attached hereto as Exhibit "A". Interest on the Note shall accrue at the rate set forth therein. The principal of and interest on the Note shall be due and payable in accordance with the terms and conditions set forth in the Supplemental Note and in the Loan Agreement. The interest rate will not exceed the maximum rate permitted by applicable law. 6. Applicable Margin. The definition of "Applicable Margin" in Section 1.1 of the Loan Agreement shall be supplemented with an additional definition solely for calculating the rate of interest on a Supplemental Loan as follows: "Applicable Margin" shall mean, solely for calculating the rate of interest on a Supplemental Loan, at all times during the applicable periods or portions thereof, (i) unless an Event of Default has occurred and is continuing, the following listed percentage rates per annum with respect to Prime Rate Loans and LIBO Rate Loans for the applicable ratio of (A) Consolidated Indebtedness to (B) the difference equal to EBITDA minus income and profit taxes: Ratio Prime Rate Loans LIBO Rate Loans ----- ------------------ ----------------- Greater than 2.00 0.75% 2.75% 1.50 to 1.99 0.50% 2.25% 1.00 to 1.49 0.25% 1.75% 0.75 to 0.99 0.00% 1.50% Less than 0.74 (0.25%) 1.25% and (ii) during the continuance of an Event of Default and prior to the earlier of Maturity or the expiration of the applicable Interest Period, if any, (A) 2.50% per annum with respect to Prime Rate Loans and (B) 5.00% per annum with respect to LIBO Rate Loans. The ratio of (A) Consolidated Indebtedness to (B) the difference equal to EBITDA minus income and profit taxes, shall be determined at the end of each calendar quarter for the immediately preceding four consecutive calendar quarters. 7. Facility Fee. The Company shall pay a facility fee to Bank One equal to 0.375% per annum of the average daily, unused amount of the Supplemental Commitment for the period from the date of this Agreement to and including the maturity date of the Supplemental Note, payable quarterly in arrears beginning on March 31, 2000 and on the end of each calendar quarter thereafter. The facility fee shall be calculated on the basis of a 360-day year for the actual number of days elapsed. 8. Acknowledgment of Indebtedness. Company acknowledges that as of the date of this Agreement, it is well and truly indebted to Bank One pursuant to the terms of the Note and Supplemental Note. Company hereby promises to pay to Bank One the indebtedness evidenced by the Note and Supplemental Note in accordance with the terms thereof, as modified hereby, and shall observe, comply with, and perform all of the obligations, terms, and conditions under or in connection with the Note, Supplemental Note and all other Loan Documents. 9. Ratification of Loan Documents. Except as provided herein, the terms and provisions of the Note and the other Loan Documents shall remain unchanged and shall remain in full force and effect. Any modification herein of the Note, Loan Agreement and the other Loan Documents shall in no way impair the security of the Loan Documents for the payment of the Note and the Supplemental Note. The promissory notes defined herein and in all other Loan Documents as the "Note" or "Revolving Credit Note(s)" shall hereafter include the Supplemental Note. The Loan Agreement, the Note and the other Loan Documents are hereby ratified and confirmed in all respects. 10. Ratification by Guarantors. Each of ShowBiz Nevada, Inc., a Nevada corporation, ShowBiz Merchandising, Inc., a Nevada corporation, SPT Properties Company, Inc., a Nevada corporation, and ShowBiz Cayman Islands, Inc., a Cayman Islands corporation, ratifies and confirms its respective Guarantee Agreement dated as of September 29, 1997, as being binding and continuing, consents to the terms of this Agreement and acknowledges that the Indebtedness evidenced by the Supplemental Note is and shall be part of the Guaranteed Obligations, as defined in its Guarantee. 11. No Waiver. Company acknowledges that the execution of this Agreement by Bank One is not intended nor shall it be construed as (i) an actual or implied waiver of any default under the Note or any other Loan Document or (ii) an actual or implied waiver of any condition or obligation imposed upon Company pursuant to the Note or any other Loan Document, except to the extent expressly set forth herein. 12. Expenses. Contemporaneously with the execution and delivery thereof, Company shall pay, or cause to be paid, all reasonable costs and expenses incident to the preparation hereof and the consummation of the transactions specified herein, including without limitation fees and expenses of legal counsel to Bank One. 13. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument; but in making proof hereof it shall only be necessary to produce one such counterpart. 14. Benefit. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their heirs, representatives, successors and permitted assigns. 15. Release and Waiver of Usury Claim. Company hereby releases Bank One, its successors and assigns, from all claims, demands, liabilities and causes of action which Company may be entitled to assert (although no such claims are known to exist) against Bank One by reason of Bank One's contracting, charging or receiving for the use, forbearance or detention of money, interest on the Loan evidenced by the Note prior to the execution of this Agreement in excess of that permitted to be charged to Company under applicable law. 16. Release and Waiver of Other Claims. In consideration of the terms, conditions and provisions of this Agreement and the other benefits received by Company hereunder, Company further hereby releases, relinquishes and forever discharges Bank One, as well as its parent and subsidiary corporations, predecessors, successors, assigns, agents, officers, directors, employees, representatives, attorneys and accountants of and from any and all claims, demands, actions, causes of action of any and every kind or character, whether known or unknown, which Company may have against Bank One and its parent and subsidiary corporations, predecessors, successors, assigns, agents, officers, directors, employees, representatives, attorneys or accountants arising out of or with respect to any and all transactions solely relating to the Note or any renewal thereof, and/or the Loan Documents, but excluding any other transactions between the parties, occurring prior to the date hereof, including any other loss, expense and/or detriment, of any kind or character, growing out of or in any way connected with or in any way resulting from the acts, actions or omissions of Bank One and its parent and subsidiary corporations, predecessors, successors, assigns, agents, officers, directors, employees, representatives, attorneys, or accountants, and including any loss, cost or damage in connection with any breach of fiduciary duty, breach of any duty of fair dealing, breach of confidence, breach of funding commitment, undue influence, duress, economic coercion, conflict of interest, negligence, bad faith, malpractice, violations of the racketeer influenced and corrupt organizations act, intentional or negligent infliction of mental duress, tortuous interference with contractual relations, tortuous interference with corporate governance or prospective business advantage, breach of contract, deceptive trade practices, libel, slander or conspiracy. 17. Construction. The parties acknowledge that the parties and their counsel have reviewed and had the opportunity to revise this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. 18. Entire Agreement. THIS AGREEMENT, THE NOTE AND THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, this Agreement is executed effective as of the date first above written. BANK ONE, TEXAS, National Association By: --------------------- Name: Paul C. Koch Title: Vice President CEC ENTERTAINMENT, INC. By: --------------------- Name: Larry G. Page Title: Executive Vice President, Chief Financial Officer and Treasurer SHOWBIZ NEVADA, INC. By: --------------------- Name: Don McKechnie Title: Director and President SHOWBIZ MERCHANDISING, INC. By: --------------------- Name: Don McKechnie Title: Director and President SPT PROPERTIES COMPANY, INC. By: ---------------------- Name: Don McKechnie Title: Director and President SHOWBIZ CAYMAN ISLANDS, INC. By: ----------------------- Name: Don McKechnie Title: Director and President STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January ----, 2000, by Paul C. Koch, Vice President of BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking association, on behalf of said national association. -------------------------- Notary Public, State of Texas (SEAL) -------------------------- (Please Print Name of Notary) My Commission expires: - --------------------- STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January 10, 2000, by Larry G. Page, Executive Vice President, Chief Financial Officer and Treasurer of CEC ENTERTAINMENT, INC., a Kansas corporation, on behalf of said corporation. ----------------------------- Notary Public, State of Texas (SEAL) ---------------------------- (Please Print Name of Notary) My Commission expires: - ---------------------- STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January 10, 2000, by Don McKechnie, Director and President of SHOWBIZ NEVADA, INC. a Nevada corporation, on behalf of said corporation. ------------------------------ Notary Public, State of Texas (SEAL) ------------------------------ (Please Print Name of Notary) My Commission expires: ----------------------------- STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January 10, 2000, by Don McKechnie, Director and President of SHOWBIZ MERCHANDISING, INC. a Nevada corporation, on behalf of said corporation. ------------------------------- Notary Public, State of Texas (SEAL) ------------------------------- (Please Print Name of Notary) My Commission expires: ------------------------------- STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January 10, 2000, by Don McKechnie, Director and President of SPT PROPERTIES COMPANY, INC. a Nevada corporation, on behalf of said corporation. ------------------------------ Notary Public, State of Texas (SEAL) ------------------------------ (Please Print Name of Notary) My Commission expires: - ---------------------- STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January 10, 2000, by Don McKechnie, Director and President of SHOWBIZ CAYMAN ISLANDS, INC. a Cayman Islands corporation, on behalf of said corporation. ----------------------------- Notary Public, State of Texas (SEAL) ----------------------------- (Please Print Name of Notary) My Commission expires: ------------------ EX-1.2 3 EXHIBIT 10(b)(2) SUPPLEMENTAL REVOLVING CREDIT NOTE $10,000,000.00 Dallas, Texas January 10, 2000 FOR VALUE RECEIVED, the undersigned, CEC ENTERTAINMENT, INC. (f/k/a SHOWBIZ PIZZA TIME, INC.), a Kansas corporation ("Company"), hereby unconditionally promises to pay to the order of BANK ONE, TEXAS, National Association ("Bank One") at the office of Bank One or any successor, currently located at 1717 Main Street, Third Floor, Dallas, Texas 75201, on September 30, 2000, in lawful money of the United States of America and immediately available funds, an amount equal to the lesser of (a) TEN MILLION AND NO/100 DOLLARS ($10,000,000.00), or (b) the aggregate unpaid principal amount of all Supplemental Loans made by Bank One to the Company pursuant to the Loan Agreement, dated as of June 27, 1995, between Bank One and the Company (as amended, modified or supplemented from time to time in accordance with its terms, the "Loan Agreement"). The Company further promises to pay interest (computed on the basis of a 360-day year for the actual days elapsed) in like money on the unpaid principal balance of this Note from time to time outstanding at the annual rates provided in the Loan Agreement. Interest shall be payable at the times and in the manner provided in the Loan Agreement. All Supplemental Loans made by Bank One pursuant to the Loan Agreement and all payments of the principal thereof shall be endorsed by the holder of this Note on the schedule annexed hereto (including any additional pages such holder may add to such schedule), which endorsement shall constitute prima facie evidence of the accuracy of the information so endorsed; provided, however, that the failure of the holder of this Note to insert any date or amount or other information on such schedule shall not in any manner affect the obligation of the Company to repay the Supplemental Loan in accordance with the terms of the Loan Agreement. On and after the stated or any accelerated maturity hereof, this Note shall bear interest until paid in full (whether before or after the occurrence of any Event of Default described in Sections 9.1(g) and 9.1(h) of the Loan Agreement) at a rate of 2.5% per annum in excess of the Prime Rate, payable on demand, but in no event in excess of the maximum rate of interest permitted under applicable law. Such interest rate shall change when and as the Prime Rate changes. This Note is the Supplemental Note referred to in the Loan Agreement, is entitled to the benefits thereof and is subject to optional and mandatory prepayment, in whole or in part, as provided therein. Reference is herein made to the Loan Agreement for the rights of the holder to accelerate the unpaid balance hereof prior to maturity. The Company hereby waives diligence, demand, presentment, protest and notice of any kind, release, surrender or substitution of security, or forbearance or other indulgence, without notice. This Note and all of the other Loan Documents are intended to be performed in accordance with, and only to the extent permitted by, all applicable usury laws. If any provision hereof or of any of the other Loan Documents or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, neither the application of such provision to any other person or circumstance nor the remainder of the instrument in which such provision is contained shall be affected thereby and shall be enforced to the greatest extent permitted by law. It is expressly stipulated and agreed to be the intent of Bank One at all times to comply with the usury and other applicable laws now or hereafter governing the interest payable on the Indebtedness evidenced by this Note. If the applicable law is ever revised, repealed or interpreted so as to render usurious any amount called for under this Note or any of the other Loan Documents, or contracted for, charged, taken, reserved or received with respect to the Indebtedness evidenced by this Note, or if Bank One's exercise of the option to accelerate the maturity of this Note, or if any prepayment by the Company results in the Company's having paid any interest in excess of that permitted by law, then it is the express intent of the Company and Bank One that all excess amounts theretofore collected by Bank One be credited on the principal balance of this Note (or, if this Note and all other Indebtedness arising under or pursuant to the other Loan Documents have been paid in full, refunded to the Company), and the provisions of this Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectable hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the then applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder or thereunder. All sums paid, or agreed to be paid, by the Company for the use, forbearance, detention, taking, charging, receiving or reserving of the Indebtedness of the Company to Bank One under this Note or arising under of pursuant to the other Loan Documents shall, to the maximum extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such Indebtedness until payment in full so that the rate or amount of interest on account of such Indebtedness does not exceed the usury ceiling from time to time in effect and applicable to such Indebtedness for so long as such Indebtedness is outstanding. To the extent federal law permits Bank One to contract for, charge, or receive a greater amount of interest, Bank One will rely upon federal law instead of the Texas Finance Code, for the purpose of determining the maximum rate or amount. Additionally, to the maximum extent permitted by applicable law now or hereafter in effect, Bank One may, at its option and from time to time, implement any other method of computing the maximum rate under the Texas Finance Code, or under other applicable law by giving notice, if required, to the Company as provided by applicable law now or hereafter in effect. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Bank One to accelerate the maturity of any interest that has accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to them in the Loan Agreement. This Note may not be changed, modified, or terminated orally, but only by an agreement in writing signed by the party to be charged. IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS NOTE, COMPANY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS (UNLESS SUCH SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE. COMPANY HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF ANY FEDERAL COURT LOCATED IN DALLAS, TEXAS, IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW AND SHALL BE BINDING UPON THE SUCCESSORS AND ASSIGNS OF COMPANY AND INURE TO THE BENEFIT OF BANK ONE AND ITS SUCCESSORS AND ASSIGNS. If any term or provision of this Supplemental Note shall be held invalid, illegal or unenforceable, the validity of all other terms and provisions herein shall in no way be affected thereby. This Note is the Supplemental Note described in that certain Fifth Modification Agreement dated on even date herewith by and between the Company and Bank One and is subject to the terms of that Fifth Modification Agreement which specifies and applies different or unique terms to this Note which are distinct from other Revolving Credit Loans or Revolving Credit Notes defined or described in the Loan Agreement. IN WITNESS WHEREOF, the Company has executed and delivered this Note as of the date first written above. CEC ENTERTAINMENT, INC. By: --------------------------------- Name: Larry G. Page Title: Executive Vice President, Chief Financial Officer and Treasurer STATE OF TEXAS & & COUNTY OF DALLAS & This instrument was acknowledged before me on January 10, 2000, by Larry G. Page, Executive Vice President, Chief Financial Officer and Treasurer of CEC ENTERTAINMENT, INC., a Kansas corporation, on behalf of said corporation. ---------------------------------- Notary Public, State of Texas (SEAL) ---------------------------------- (Please Print Name of Notary) My Commission expires: ------------------------ EX-27 4
5 3-MOS DEC-31-2000 APR-02-2000 9,046 0 4,152 18 8,846 40,602 444,175 152,778 340,230 55,265 38,695 3,383 2,374 0 231,385 340,230 140,346 141,347 61,550 110,721 0 0 761 30,626 11,882 18,744 0 0 0 18,744 .69 .68
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