News

CEC Entertainment Q4 net drops

February 24, 2011

CEC Entertainment Inc., parent company of Chuck E. Cheese’s, has announced its financial results for the fourth quarter ended Jan. 2.

Total quarterly revenues decreased $4.8 million to $182.8 million during Q410 from total quarterly revenues of $187.6 million in the 14-week Q409. The decrease in total revenues relates to an additional average sales volume operating week in 2009. The company estimates that an additional operating week boosted 2009 revenue by approximately $14 million. 

Net income for Q410 was $2.8 million compared to net income of $5.4 million last year. Diluted earnings per share was $0.14 for the fourth quarter of 2010, and was impacted by approximately $0.05 relating to certain unfavorable tax related adjustments recorded during the fourth quarter of 2010.

Comparable store sales for the full fiscal year 2010 on a same calendar week basis increased 1.5 percent. Total revenues for fiscal year 2010 decreased $1.1 million to $817.2 million compared to total revenues of $818.3 million in fiscal 2009. The decrease in total revenues relates to the additional operating week in FY09.

Net income for the full FY10 was $54.0 million compared to net income of $61.2 million in FY09. Diluted earnings per share was $2.55 for FY10, and was impacted by unfavorable tax related adjustments of approximately $0.17 recorded primarily in the second and fourth quarters.

Additionally, on Feb. 22, 2011, the company’s board of directors approved the initiation of a quarterly cash dividend of $0.20 per share. The dividend announced represents an annual cash dividend rate of $0.80 per share.

With this announcement, dividends paid during the 2011 fiscal year are expected to be $0.60 per share. The company’s first quarterly dividend of $0.20 per share will be paid on April 21 to shareholders of record on March 24.

“Our fourth quarter same calendar week comparable store sales increase of 3.9 percent reflects the strength of our brand and quality implementation of our strategies,” said Michael Magusiak, president and CEO.

The 2010 fiscal year’s generation of $157 million helped add 12 new company stores and enhanced 223 stores with expansions, remodels and game upgrades.

“Additionally, during this same time period we once again confirmed our long-term commitment to our stock repurchase plan buying back 2.2 million shares, which represented approximately 10 percent of diluted shares outstanding at year-end,” said Magusiak. “We anticipate that our cash flow from operations this year will exceed capital expenditures and dividend payments by $50 to $60 million. We intend to continue to return this capital to shareholders with our share repurchase plan on an opportunistic basis.”

2011 predictions

Based on its current estimates, the company is projecting fiscal year 2011 diluted earnings per share to be in a range of $2.95 to $3.05. This guidance incorporates the following assumptions for the 2011 fiscal year:

• Comparable store sales up 1.0 percent to 2.0 percent;
• Six additional company-owned stores, including three relocations;
• Average cheddar block prices in a range of $1.60 to $1.80 per pound;
• Combined depreciation and rent expense will each grow approximately 6 percent from prior year;
• Advertising expense as a percentage of total revenues will decrease approximately 0.1 percentage points;
• Effective tax rate of approximately 38.7 percent;
• Capital expenditures will range from $94.0 million to $95.0 million, impacting approximately 200 stores and the addition of approximately six company-owned stores; and
• Intent to repurchase company common stock on an opportunistic basis.