8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): July 29, 2011

CEC ENTERTAINMENT, INC.

(Exact name of registrant as specified in charter)

Kansas	0-13687	48-0905805
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
4441 West Airport Freeway Irving, Texas		75062
(Address of principal executive offices)		(Zip Code)

(972) 258-8507

(Registrant’s telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On August 4, 2011, CEC Entertainment, Inc. (the “Company”) issued a press release announcing its financial results for its second quarter ended July 3, 2011.

The information furnished in this Item 2.02 – “Results of Operations and Financial Condition” of this Current Report on Form 8-K and the press release attached hereto as Exhibit 99.1 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of such section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) Effective as of July 29, 2011, Richard T. Huston retired from his position as Executive Vice President, Marketing and Entertainment at the Company.

Item 8.01. Other Events.

On August 2, 2011, the Company’s Board of Directors declared a cash dividend of $0.20 per share on the common stock of the Company. The cash dividend is payable on October 6, 2011 to stockholders of record as of September 8, 2011.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit Number	Description
99.1	Press Release of CEC Entertainment, Inc. dated August 4, 2011

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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 hereunto duly authorized.

	CEC ENTERTAINMENT, INC.
Date: August 4, 2011	By:	/s/ Tiffany B. Kice
		Tiffany B. Kice
		Executive Vice President, Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press Release of CEC Entertainment, Inc. dated August 4, 2011

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE	CONTACT: Tiffany B. Kice
August 4, 2011	Executive Vice President
3:05 p.m. Central Time	Chief Financial Officer
	(972) 258-4525

CEC ENTERTAINMENT REPORTS

FINANCIAL RESULTS FOR THE SECOND QUARTER OF 2011

IRVING, TEXAS - CEC Entertainment, Inc. (NYSE: CEC) today announced its financial results for its second quarter ended July 3, 2011. Total revenues for the second quarter of 2011 increased $5.2 million, or 2.9%, to $186.2 million from $181.0 million for the second quarter of 2010. The increase was primarily due to a weighted average net increase of approximately nine stores as compared to the second quarter of 2010, and a 0.3% increase in comparable store sales.

Net income for the second quarter ended July 3, 2011 increased to $6.5 million as compared to net income of $4.8 million for the second quarter of 2010. In addition, our diluted earnings per share for the second quarter of 2011 was $0.34 as compared to diluted earnings per share of $0.22 for the second quarter of 2010. An unfavorable tax adjustment was recorded in the prior year of approximately $2.8 million, net of taxes, in connection with an Internal Revenue Service (“IRS”) examination. In addition, diluted earnings per share benefitted from our repurchase of approximately 2.8 million shares of our common stock since the beginning of the second quarter of 2010.

For the first six months of 2011, total revenues increased $15.3 million, or 3.6%, to $442.6 million as compared to $427.3 million for the first six months of 2010. The increase was primarily due to a weighted average net increase of approximately eight stores and a 0.8% increase in comparable store sales.

Net income for the first six months of 2011 increased to $40.6 million as compared to $38.6 million for the first six months of 2010. In addition, our diluted earnings per share for the first six months of 2011 was $2.06 as compared to diluted earnings per share of $1.77 for the first six months of 2010. An unfavorable tax adjustment was recorded in the prior year of approximately $2.8 million, net of taxes, in connection with an IRS examination. In addition, diluted earnings per share benefitted from our repurchase of approximately 3.2 million shares of our common stock since the beginning of fiscal year 2010.

On May 3, 2011, the Company’s Board of Directors declared a cash dividend of $0.20 per share that was paid on July 7, 2011 to stockholders of record as of June 2, 2011. The Company’s Board of Directors declared a cash dividend of $0.20 per share on August 2, 2011 that will be paid on October 6, 2011 to stockholders of record as of September 8, 2011.

Michael Magusiak, President and Chief Executive Officer, stated that, “During the first six months of 2011, we generated $111.6 million of operating cash flow. We utilized this cash by investing $46.8 million primarily in new and existing stores, reducing our outstanding borrowings on our revolving credit facility by $20.5 million, paying out $3.9 million in cash dividends, and using $40.0 million to repurchase 1,049,224 shares of our common stock or approximately 5.3% of diluted shares outstanding at quarter-end.”

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Business Outlook:

Comparable store sales were up 0.8% during the first half of 2011 and were down 7.9% during the first four weeks of the third quarter of 2011. It is difficult to quantify factors that negatively impact sales over a four week period. We believe, however, that our sales were adversely impacted by declines in consumer confidence in July of this year in contrast to the more healthy economic indicators in the prior year. Additionally, we believe that July was negatively impacted by more difficult weather comparisons due to high rainfall totals during the same four weeks of the prior year and increased competition from certain PG-13 movies this year. It is very difficult to project comparable store sales over the short-term, however, considering our year-to-date results and our concerns relating to the current economic environment that we believe is creating uncertainties in consumer spending, we are lowering our projected fiscal year 2011 diluted earnings per share to now be in a range of $2.75 to $2.95. This guidance incorporates the following assumptions for the 2011 fiscal year:

• comparable store sales down 2.0% to flat;

• five additional Company-owned stores, inclusive of three relocations;

• average cheddar block prices in a range of $1.80 to $1.90 per pound;

• combined depreciation and rent expense will increase approximately 6% from the prior year;

• advertising expense as a percentage of total revenue will decrease approximately 0.1 percentage points;

• annual effective income tax rate of approximately 38.7%;

• capital expenditures will range from $92.0 million to $93.0 million;

• our intent to repurchase Company common stock on an opportunistic basis; and

• payment of three quarterly dividends approximating $11.8 million.

Second Quarter 2011 Conference Call:

The Company will host a conference call Thursday, August 4, 2011, at 3:30 p.m. Central Time to discuss its second quarter financial results and outlook for fiscal year 2011. A live webcast of the call (listen only) can be accessed through the Company’s website, www.chuckecheese.com. Shortly after its conclusion, a replay of the call will be available on the website through Friday, September 23, 2011.

Non-GAAP Financial Measures:

The Company reports and discusses its operating results using financial measures consistent with accounting principles generally accepted in the United States (“GAAP”). From time to time in the course of financial presentations, earnings conference calls or otherwise, the Company may disclose certain non-GAAP financial measures such as Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Free Cash Flow. The non-GAAP financial measures presented in this earnings release should not be viewed as alternatives or substitutes for the Company’s reported GAAP results. A reconciliation of the most directly comparable GAAP financial measure to EBITDA and Free Cash Flow is set forth in a table accompanying this release.

About CEC Entertainment, Inc.:

For more than 30 years, CEC Entertainment has served as the nationally recognized leader in family dining and entertainment and the place Where a Kid can be a Kid^®. The Company and its franchisees operate a system of 555 Chuck E. Cheese’s stores located in 48 states and seven foreign countries or territories. Currently, 508 locations in the United States and Canada are owned and operated by the Company. CEC Entertainment, Inc. and its franchises have the common goal of creating lifelong memories for families through fun, food, and play. Each Chuck E. Cheese’s features musical and comic robotic entertainment, games, rides, and play areas, as well as a variety of dining options including pizza, sandwiches, a salad bar, and desserts. Committed to providing a fun, safe environment, Chuck E. Cheese’s helps protect families through industry-leading programs such as Kid Check^®.

Chuck E. Cheese’s aims to promote positive, lifelong memories inside and outside of its stores. In addition to providing a fun entertainment experience for millions of families across the world, Chuck E. Cheese’s has donated more than $6 million to schools and non-profit institutions through its fundraising programs. For more information, see the Company’s website at www.chuckecheese.com.

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Forward-Looking Statements:

Certain statements in this press release, other than historical information, may be considered “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, and are subject to various risks, uncertainties and assumptions. Statements that are not historical in nature, and which may be identified by the use of words such as “may,” “should,” “believe,” “predict,” “potential,” “continue,” “plan,” “intend,” “expect,” “anticipate,” “future,” “project,” “estimate,” and similar expressions (or the negative of such expressions) are forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future events and, therefore, involve a number of assumptions, risks and uncertainties, including the risk factors described in Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2011, filed on February 24, 2011. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ from those anticipated, estimated or expected.

Factors that could cause actual results to differ materially from those contemplated by forward-looking statements include, but are not limited to:

• Changes in consumer discretionary spending and general economic conditions;

• Our ability to successfully implement our business development strategies;

• Costs incurred in connection with our business development strategies;

• Negative publicity concerning food quality, health, safety and other issues;

• Competition in both the restaurant and entertainment industries;

• Disruptions in the financial markets affecting the availability and cost of credit and our ability to maintain adequate insurance coverage;

• Loss of certain key personnel;

• Increases in food, labor and other operating costs;

• Changes in consumers’ health, nutrition and dietary preferences;

• Continued existence or occurrence of certain public health issues;

• Disruption of our commodity distribution system;

• Our dependence on a few global providers for the procurement of games and rides;

• Fluctuations in our quarterly results of operations due to seasonality;

• Adverse effects of local conditions, natural disasters and other events;

• Risks in connection with owning and leasing real estate;

• Our ability to adequately protect our trademarks or other proprietary rights;

• Government regulations, litigation, product liability claims and product recalls;

• Disruptions of our information technology systems; and

• Conditions in foreign markets.

The forward-looking statements made in this press release relate only to events as of the date on which the statements were made. Except as may be required by law, the Company undertakes no obligation to update its forward-looking statements to reflect events and circumstances after the date on which the statements were made or to reflect the occurrence of unanticipated events.

- financial tables follow -

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CEC ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended								Six Months Ended
	July 3, 2011				July 4, 2010				July 3, 2011				July 4, 2010
	(in thousands, except per share amounts)
REVENUES
Food and beverage sales	$	88,379	47.7	%	$	89,064	49.4	%	$	212,136	48.2	%	$	210,080	49.4	%
Entertainment and merchandize sales		96,825	52.3	%		91,065	50.6	%		228,284	51.8	%		215,249	50.6	%
Company store sales		185,204	99.5	%		180,129	99.5	%		440,420	99.5	%		425,329	99.5	%
Franchising fees and royalties		1,012	0.5	%		857	0.5	%		2,198	0.5	%		1,984	0.5	%
Total revenues		186,216	100.0	%		180,986	100.0	%		442,618	100.0	%		427,313	100.0	%
OPERATING COSTS AND EXPENSES
Company store operating costs:
Cost of food and beverage (1)		22,087	25.0	%		19,967	22.4	%		50,990	24.0	%		47,586	22.7	%
Cost of entertainment and merchandise (2)		7,351	7.6	%		7,736	8.5	%		17,511	7.7	%		17,786	8.3	%
Total cost of food, beverage, entertainment and merchandise (3)		29,438	15.9	%		27,703	15.4	%		68,501	15.6	%		65,372	15.4	%
Labor expenses (3)		52,242	28.2	%		51,777	28.7	%		115,879	26.3	%		112,372	26.4	%
Depreciation and amortization (3)		20,906	11.3	%		19,836	11.0	%		41,658	9.5	%		39,442	9.3	%
Rent expense (3)		18,334	9.9	%		17,440	9.7	%		36,819	8.4	%		34,926	8.2	%
Other store operating expenses (3)		30,252	16.3	%		29,698	16.5	%		63,246	14.4	%		60,732	14.3	%
Total Company store operating costs (3)		151,172	81.6	%		146,454	81.3	%		326,103	74.0	%		312,844	73.6	%
Other costs and expenses:
Advertising expense		8,849	4.8	%		8,385	4.6	%		17,916	4.0	%		17,422	4.1	%
General and administrative expenses		13,224	7.1	%		11,436	6.3	%		27,279	6.2	%		25,121	5.9	%
Total operating costs and expenses		173,245	93.0	%		166,275	91.9	%		371,298	83.9	%		355,387	83.2	%
Operating income		12,971	7.0	%		14,711	8.1	%		71,320	16.1	%		71,926	16.8	%
Interest expense		2,286	1.2	%		3,442	1.9	%		5,040	1.1	%		6,112	1.4	%
Income before income taxes		10,685	5.7	%		11,269	6.2	%		66,280	15.0	%		65,814	15.4	%
Income taxes		4,183	2.2	%		6,491	3.6	%		25,696	5.8	%		27,174	6.4	%
Net income	$	6,502	3.5	%	$	4,778	2.6	%	$	40,584	9.2	%	$	38,640	9.0	%
Earnings per share:
Basic	$	0.34			$	0.22			$	2.07			$	1.77
Diluted	$	0.34			$	0.22			$	2.06			$	1.77
Weighted average shares outstanding:
Basic		19,323				21,544				19,630				21,810
Diluted		19,359				21,592				19,669				21,849

⁽¹⁾  Percent amount expressed as a percentage of food and beverage sales.

⁽²⁾  Percent amount expressed as a percentage of entertainment and merchandise sales.

⁽³⁾  Percent amount expressed as a percentage of Company store sales.

Due to rounding, percentages presented in the table above may not add. The percentage amounts for the components of cost of food, beverage, entertainment and merchandise do not sum due to the fact that cost of food and beverage and cost of entertainment and merchandise are expressed as a percentage of related food and beverage and entertainment and merchandise sales, as opposed to total Company store sales.

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CEC ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 3,		January 2,
	2011		2011
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	17,376	$	19,269
Other current assets		53,409		68,084
Total current assets		70,785		87,353
Property and equipment, net		680,430		683,192
Other noncurrent assets		8,028		7,484
Total assets	$	759,243	$	778,029
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of capital lease obligations	$	945	$	936
Other current liabilities		83,562		88,138
Total current liabilities		84,507		89,074
Capital lease obligations, less current portion		10,409		10,326
Debt, less current portion		356,500		377,000
Other noncurrent liabilities		152,906		143,567
Total liabilities		604,322		619,967
Total stockholders’ equity		154,921		158,062
Total liabilities and stockholders’ equity	$	759,243	$	778,029

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CEC ENTERTAINMENT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	July 3,			July 4,
	2011			2010
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	40,584		$	38,640
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		41,978			39,868
Deferred income taxes		11,897			(7,793	)
Stock-based compensation costs		3,779			3,653
Other adjustments		123			429
Changes in operating assets and liabilities:
Operating assets		936			5,715
Operating liabilities		12,260			20,406
Net cash provided by operating activities		111,557			100,918
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(46,787	)		(43,074	)
Other investing activities		(502	)		(4,040	)
Net cash used in investing activities		(47,289	)		(47,114	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments on revolving credit facility		(20,500	)		(22,900	)
Proceeds from exercise of stock options		632			4,629
Dividend payments		(3,922	)		—
Payment of taxes for returned restricted shares		(2,728	)		(2,742	)
Treasury stock acquired		(40,019	)		(35,555	)
Other financing activities		275			134
Net cash used in financing activities		(66,262	)		(56,434	)
Effect of foreign exchange rate changes on cash		101			(82	)
Change in cash and cash equivalents		(1,893	)		(2,712	)
Cash and cash equivalents at beginning of period		19,269			17,361
Cash and cash equivalents at end of period	$	17,376		$	14,649

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CEC ENTERTAINMENT, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

Net Income to EBITDA:

The following tables set forth a reconciliation of net income to EBITDA and EBITDA expressed as a percentage of total revenues for the periods shown:

	2010			2009			2008			2007			2006
	(in thousands)
Revenues	$	817,248		$	818,346		$	814,509		$	785,322		$	772,553
Net income	$	54,034		$	61,194		$	56,494		$	55,921		$	68,257
Add:
Income taxes		38,726			37,754			34,137			35,453			43,120
Interest expense		12,142			12,017			17,389			13,170			9,508
Depreciation and amortization		80,679			78,071			75,445			71,919			65,392
EBITDA	$	185,581		$	189,036		$	183,465		$	176,463		$	186,277
EBITDA as a percent of revenues		22.7	%		23.1	%		22.5	%		22.5	%		24.1	%

	Three Months Ended						Six Months Ended
	July 3,			July 4,			July 3,			July 4,
	2011			2010			2011			2010
	(in thousands)
Revenues	$	186,216		$	180,986		$	442,618		$	427,313
Net Income	$	6,502		$	4,778		$	40,584		$	38,640
Add:
Income Taxes		4,183			6,491			25,696			27,174
Interest expense		2,286			3,442			5,040			6,112
Depreciation and amortization		21,064			20,071			41,978			39,868
EBITDA	$	34,035		$	34,782		$	113,298		$	111,794
EBITDA as a percent of revenues		18.3	%		19.2	%		25.6	%		26.2	%

The Company believes that EBITDA provides useful information to the Company, investors and other interested parties about the Company’s operating performance, its capacity to incur and service debt, fund capital expenditures, and other corporate uses.

EBITDA, a non-GAAP financial measure, is defined by the Company as net income before income taxes, interest expense, and depreciation and amortization. The non-GAAP financial measure presented in the table above should not be viewed as an alternative or substitute for the Company’s reported GAAP results. EBITDA as defined herein may differ from similarly titled measures presented by other companies.

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Free Cash Flow:

The following table sets forth a reconciliation of cash provided by operating activities to Free Cash Flow for the periods shown:

	Six Months Ended
	July 3,		July 4,
	2011		2010
	(in thousands)
Cash provided by operating activities	$	111,557	$	100,918
Less:
Capital expenditures		46,787		43,074
Dividend payments		3,922		—
Free Cash Flow	$	60,848	$	57,844

Free Cash Flow, a non-GAAP financial measure, is defined by the Company as cash provided by operating activities less capital expenditures and payment of dividends.

The Company believes that Free Cash Flow provides useful information to the Company, investors and other interested parties about the amount of cash generated by the business that, after the acquisition of property and equipment, can be used for other strategic opportunities, including servicing debt, funding additional capital expenditures and making investments in the business. It should not be inferred that the entire Free Cash Flow amount is available for discretionary expenditures. The non-GAAP financial measure presented in the table above should not be viewed as an alternative or substitute for the Company’s reported GAAP results. Free Cash Flow as defined herein may differ from similarly titled measures presented by other companies.

Store Count Information:

	Three Months Ended					Six Months Ended
	July 3,			July 4,		July 3,			July 4,
	2011			2010		2011			2010
Number of Company-owned stores:
Beginning of period		507			498		507			497
New(1)		1			—		2			—
Acquired from franchisees		—			—		—			1
Closed(1)		(1	)		—		(2	)		—
End of period		507			498		507			498
Number of franchised stores:
Beginning of period		47			48		47			48
New		1			—		2			1
Acquired by the Company		—			—		—			(1	)
Closed		—			—		(1	)		—
End of period		48			48		48			48

(1) For the six months ended July 3, 2011, included the closing and opening of one relocated store.

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