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 March 30, 2003.
|_| 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 |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [_]
At May 12, 2003, an aggregate of 27,062,710 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
CEC ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands, except share data)
ASSETS
March 30, December 29,
2003 2002
----------- ------------
(unaudited)
Current assets:
Cash and cash equivalents................................................... $ 15,823 $ 12,214
Accounts receivable, net.................................................... 7,666 11,270
Inventories................................................................. 9,975 10,716
Prepaid expenses............................................................ 8,443 5,500
Deferred tax asset.......................................................... 1,319 1,319
--------- ---------
Total current assets...................................................... 43,226 41,019
--------- ---------
Property and equipment, net................................................... 501,133 493,533
--------- ---------
Other assets:
Notes receivable from related parties, less current portion ................ 3,825
Other ...................................................................... 2,273 1,326
--------- ---------
2,273 5,151
--------- ---------
$ 546,632 $ 539,703
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................... $ 149 $ 143
Accounts payable and accrued liabilities.................................... 53,938 43,002
--------- ---------
Total current liabilities................................................. 54,087 43,145
--------- ---------
Long-term debt, less current portion.......................................... 31,310 62,349
--------- ---------
Deferred rent................................................................. 4,259 4,086
--------- ---------
Deferred tax liability........................................................ 42,638 38,156
--------- ---------
Other liabilities............................................................. 4,750 4,750
--------- ---------
Commitments and contingencies
Redeemable preferred stock, $60 par value, redeemable for $2,797 in 2005...... 2,573 2,549
--------- ---------
Shareholders' equity:
Common stock, $.10 par value; authorized 100,000,000 shares; 35,694,503
and 35,669,773 shares issued, respectively ............................... 3,569 3,567
Capital in excess of par value.............................................. 202,598 201,936
Retained earnings .......................................................... 335,599 308,277
Accumulated other comprehensive income (loss)............................... 192 (91)
Less treasury shares of 8,635,269 and 8,409,169, respectively, at cost...... (134,943) (129,021)
--------- ---------
407,015 384,668
--------- ---------
$ 546,632 $ 539,703
========= =========
See notes to consolidated financial statements.
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited)
(Thousands, except per share data)
Three Months Ended
------------------------------
March 30, 2003 March 31, 2002
-------------- --------------
Food and beverage revenues................................................... $ 120,844 $ 114,841
Games and merchandise revenues............................................... 62,408 56,950
Franchise fees and royalties................................................. 865 926
Interest income, including related party income of $74 in 2002............... 9 76
--------- ---------
184,126 172,793
--------- ---------
Costs and expenses:
Cost of sales.............................................................. 77,428 73,691
Selling, general and administrative expenses............................... 21,191 19,836
Depreciation and amortization.............................................. 10,905 9,153
Interest expense........................................................... 283 293
Other operating expenses................................................... 29,537 25,966
--------- ---------
139,344 128,939
--------- ---------
Income before income taxes................................................... 44,782 43,854
Income taxes................................................................. 17,375 17,058
--------- ---------
Net income .................................................................. 27,407 26,796
Other comprehensive income, net of tax:
Foreign currency translation............................................... 283 0
--------- ---------
Comprehensive income......................................................... $ 27,690 $ 26,796
========= =========
Earnings per share:
Basic:
Net income .............................................................. $ 1.00 $ .96
========= =========
Weighted average shares outstanding...................................... 27,235 27,862
========= =========
Diluted:
Net income .............................................................. $ 1.00 $ .94
========= =========
Weighted average shares outstanding...................................... 27,438 28,555
========= =========
See notes to consolidated financial statements.
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................................................. $ 205,503 35,670
Stock options exercised.................................................... 264 13
Net tax benefit from exercise of options and stock grants.................. 44
Stock issued under 401(k) plan............................................. 356 12
--------- -------
Balance, March 30, 2003.................................................... 206,167 35,695
--------- =======
Retained earnings:
Balance, beginning of year................................................. 308,277
Net income................................................................. 27,407
Redeemable preferred stock accretion....................................... (26)
Redeemable preferred stock dividend, $1.20 per share....................... (59)
---------
Balance, March 30, 2003.................................................... 335,599
---------
Accumulated other comprehensive income (loss):
Balance, beginning of year................................................. (91)
Foreign currency translation............................................... 283
---------
Balance, March 30, 2003.................................................... 192
---------
Treasury shares:
Balance, beginning of year................................................. (129,021) 8,409
Treasury stock acquired.................................................... (5,922) 226
--------- -------
Balance, March 30, 2003.................................................... (134,943) 8,635
--------- =======
Total shareholder's equity................................................... $ 407,015
=========
See notes to consolidated financial statements.
CEC ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
Three Months Ended
------------------------------
March 30, 2003 March 31, 2002
-------------- --------------
Operating activities:
Net income ................................................................ $ 27,407 $ 26,796
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization............................................ 10,905 9,153
Deferred income tax expense.............................................. 4,482 4,998
Tax benefit from exercise of stock options............................... 44 2,775
Other.................................................................... 803 204
Net change in receivables, inventory, prepaids, payables and
accrued liabilities..................................................... 16,163 15,568
--------- ---------
Cash provided by operations............................................ 59,804 59,494
--------- ---------
Investing activities:
Purchases of property and equipment........................................ (19,086) (22,416)
Additions to notes receivable.............................................. (1,707)
Payments received on notes receivable...................................... 382
Increase in other assets................................................... (996) (98)
--------- ---------
Cash used in investing activities...................................... (20,082) (23,839)
--------- ---------
Financing activities:
Payments on debt and line of credit ....................................... (31,033) (30,479)
Exercise of stock options ................................................. 264 5,135
Redeemable preferred stock dividends ...................................... (59) (56)
Purchase of treasury stock ................................................ (5,922) (1,471)
Other ..................................................................... 637 (1)
--------- ---------
Cash used in financing activities...................................... (36,113) (26,872)
--------- ---------
Increase in cash and cash equivalents ....................................... 3,609 8,783
Cash and cash equivalents, beginning of period............................... 12,214 3,682
--------- ---------
Cash and cash equivalents, end of period..................................... $ 15,823 $ 12,465
========= =========
See notes to consolidated financial statements.
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 March 30, 2003 and March 31, 2002 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 December 29, 2002. Results
of operations for the periods ended March 30, 2003 and March 31, 2002 are not
necessarily indicative of the results for the year.
2. Earnings per common share:
Basic earnings per common share ("EPS") is computed by dividing earnings
applicable to common shares by the weighted average number of common shares
outstanding. Diluted EPS adjusts for the effect of potential common shares from
dilutive stock options using the treasury stock method. Net income available per
common share has been adjusted for redeemable preferred stock accretion and
dividends. Earnings per common and potential common share were computed as
follows (thousands, except per share data):
Three Months Ended
----------------------
March 30, March 31,
2003 2002
--------- ---------
Net income .......................................... $ 27,407 $ 26,796
Accretion of redeemable preferred stock.............. (26) (22)
Redeemable preferred stock dividends................. (59) (56)
--------- ---------
Adjusted income applicable to commons shares......... 27,322 26,718
========= =========
Basic:
Weighted average common shares outstanding......... 27,235 27,862
========= =========
Earnings per common share.......................... $ 1.00 $ .96
========= =========
Diluted:
Weighted average common shares outstanding......... 27,235 27,862
Potential common shares for stock options
and stock grants................................ 203 693
--------- ---------
Weighted average shares outstanding................ 27,438 28,555
========= =========
Earnings per common and potential
common share.................................... $ 1.00 $ .94
========= =========
CEC ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Stock based compensation:
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock based compensation. All stock options are granted at no less than fair
market value of the common stock at the grant date. Accordingly, no compensation
cost has been recognized for its stock option plans. Had compensation cost for
the Company's stock option plans been determined based on the fair value at the
grant date for awards under those plans consistent with the method prescribed by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's pro-forma net income and earnings per share would
have been as follows:
Three Months Ended
---------------------
March 30, March 31,
2003 2002
-------- --------
Net income, as reported................................................... $ 27,407 $ 26,796
Accretion and dividends of redeemable preferred stock, as reported........ (85) (78)
Fair value based compensation expense, net of taxes....................... (1,624) (1,608)
-------- --------
Pro-forma net income applicable to common shares.......................... $ 25,698 $ 25,110
======== ========
Earnings per Share:
Basic:
As reported............................................................. $ 1.00 $ 0.96
Pro-forma............................................................... $ 0.94 $ 0.90
Diluted:
As reported............................................................. $ 1.00 $ 0.94
Pro-forma............................................................... $ 0.94 $ 0.88
4. Consolidation of Variable Interest Entities:
The Company has adopted the Financial Accounting Standards Board's
Interpretation No. 46, "Consolidation of Variable Interest Entities" (FIN 46).
Accordingly, at the beginning of 2003, the Company has consolidated the
financial statements of the International Association of CEC Entertainment, Inc.
(the "Association"), a related party. The consolidation did not have a material
impact on the Company's consolidated results of operations, financial position,
or cash flows. Notes receivable from related parties, previously reported in
prior periods, are currently eliminated in this consolidation and replaced with
the Association's assets, which are primarily prepaid advertising expenses and
cash.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
You should read this section in combination with the accompanying unaudited
consolidated financial statements. This section may contain forward looking
statements and should be read in conjunction with the factors described below
under "Forward Looking Statements."
Results of Operations
First Quarter 2003 Compared to First Quarter 2002
A summary of the results of operations of the Company as a percentage of
revenues for the first quarters of 2003 and 2002 is shown below.
Three Months Ended
--------------------------------
March 30, 2003 March 31, 2002
-------------- --------------
Revenue................................... 100.0% 100.0%
----- -----
Costs and expenses:
Cost of sales........................... 42.1 42.6
Selling, general and administrative..... 11.5 11.5
Depreciation and amortization........... 5.9 5.3
Interest expense........................ .2 .2
Other operating expenses................ 16.0 15.0
----- -----
75.7 74.6
----- -----
Income before income taxes................. 24.3 25.4
Income tax expense ........................ 9.4 9.9
----- -----
Net income ................................ 14.9% 15.5%
===== =====
Revenues
Revenues increased to $184.1 million in the first quarter of 2003 from
$172.8 million in the first quarter of 2002 due to an increase in the number of
Company-operated restaurants. During 2002, the Company opened 32 new
restaurants, acquired three restaurants from a franchisee and closed one
restaurant. During the first three months of 2003, the Company opened four new
restaurants. Comparable store sales of the Company's Chuck E. Cheese's
restaurants that were open during all of the first quarters of both 2003 and
2002 declined 2.9%. The decline was primarily attributable to a difficult
economic environment and severe weather during the first quarter of 2003. The
decline was partially offset by the favorable impact of the shift of the Easter
holiday to the second quarter in 2003.
Costs and Expenses
Costs and expenses as a percentage of revenues increased to 75.7% in the
first quarter of 2003 from 74.6% in the first quarter of 2002.
Cost of sales decreased as a percentage of revenues to 42.1% in the first
quarter of 2003 from 42.6% in the comparable period of 2002. Cost of food,
beverage, and related supplies as a percentage of revenues decreased to 11.9% in
the first quarter of 2003 from 12.5% in the first quarter of 2002 primarily due
to lower cheese costs. Cost of games and merchandise as a percentage of revenues
increased slightly to 4.2% in the first quarter of 2003 compared to 4.1% in the
first quarter of 2002. Store labor expenses as a percentage of store sales
remained constant at 26.0% in the first quarters of both 2003 and 2002.
Selling, general and administrative expenses as a percentage of revenues
remained constant at 11.5% in the first three months of both 2003 and 2002.
Depreciation and amortization expenses as a percentage of revenues
increased to 5.9% in the first quarter of 2003 from 5.3% in the first quarter of
2002 primarily due to the decline in comparable store sales and capital invested
in new stores and remodels.
Interest expense as a percentage of revenues remained constant at 0.2% in
both the first three months of 2003 and 2002.
Other operating expenses increased as a percentage of revenues to 16.0% in
the first quarter of 2003 from 15.0% in the first quarter of 2002 due to higher
rent, repairs, property taxes, gas and insurance costs.
The Company's effective income tax rate was 38.8% in the first quarter of
2003 compared to a rate of 38.9% in the first quarter of 2002.
Net Income
The Company had net income of $27.4 million in the first quarter of 2003
compared to $26.8 million in the first quarter of 2002 due to the changes in
revenues and expenses discussed above. The Company's diluted earnings per share
increased to $1.00 per share in the first quarter of 2003 from $.94 per share in
the first quarter of 2002.
Financial Condition, Liquidity and Capital Resources
Cash provided by operations increased to $59.8 million in the first three
months of 2003 from $59.5 million in the comparable period of 2002. Cash
outflows from investing activities for the first three months of 2003 were $20.1
million primarily related to capital expenditures. Cash outflows from financing
activities for the first three months of 2003 were $36.1 million primarily
related to the 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 2003, the Company plans to add 35 to 38 restaurants including new
restaurants and the acquisitions of existing restaurants from franchisees. The
Company currently anticipates its cost of opening new restaurants in large
markets to average approximately $2.4 million per store which will vary
depending upon many factors including the size of the restaurants and whether
the Company acquires land or the store is an in-line or freestanding building.
The Company has identified approximately 150 additional market areas for
traditional restaurants. In smaller demographic markets, the Company believes
its smaller market strategy increases potential development opportunities by
approximately 200 restaurants resulting in an identified development potential
of 350 restaurants. In 2002, the Company opened three smaller market restaurants
averaging less that 6,900 square feet at an average capital cost of
approximately $700,000 per store. The Company believes approximately 60% of the
new restaurants opened in 2003 will be in large market areas with the remaining
new restaurants opened in small markets.
In addition to new store openings, the Company has initiated several
strategies to increase revenues and earnings over the long term. In 2003, the
Company plans to complete its Phase III upgrade program with the upgrade of an
additional 52 restaurants. The average cost of a Phase III upgrade is
approximately $205,000 to $215,000 per store. A Phase III upgrade generally
includes a new toddler play area, skill games and rides, kiddie games and rides,
sky-tube enhancements, prize area enhancements and kid check enhancements. In
2003, the Company began a game rotation plan which has an average capital cost
of approximately $50,000 per store. The primary components of this initiative
are to provide new and transferred games and rides and enhanced consumer
marketing materials including a new menu board. The Company also plans to
complete a major remodel or reconfiguration in a select number of restaurants
that are believed to have the greatest opportunity to significantly increase
sales and provide a high return on investment. The major components of a
reconfiguration include a reallocation of space between the dining and game room
areas, expansion of the space allocated to the game room, an increase in the
number of games and the new exterior signage. The Company also plans to continue
its strategy of expanding the customer areas and seating capacities of selected
restaurants.
During the first quarter of 2003, the Company opened four new restaurants
all of which were in large markets, completed Phase III upgrades in 20
restaurants, completed the game rotation plan in 20 restaurants and completed
one reconfiguration. The Company currently estimates that capital expenditures
in 2003, including expenditures for new store openings, existing store
expansions and equipment investments, will be approximately $90 million. The
Company plans to finance these expenditures through cash flow from operations
and, if necessary, borrowings under the Company's line of credit.
In July 2002, the Company announced a new plan to repurchase shares of the
Company's common stock on the open market at an aggregate purchase price of up
to $25 million. As of March 30, 2003, the Company has purchased shares of its
common stock at an aggregate purchase price of approximately $20.3 million under
the $25 million plan. Beginning in 1993 through May l2, 2003, the Company has
repurchased 8.1 million shares of the Company's common stock at an aggregate
purchase price of approximately $130.2 million.
In 2002, the Company entered into a new line of credit agreement which
provides borrowings of up to $100 million and matures in 2005. Interest under
the line of credit is dependent on earnings and debt levels of the Company and
ranges from prime or, at the Company's option, LIBOR plus 0.75% to 1.50%.
Currently, any borrowings under the line of credit would be at the prime rate or
LIBOR plus 0.75%. As of March 30, 2003, there was $31.0 million in borrowings
under this line of credit. The Company is required to comply with certain
financial ratio tests during the term of the loan agreement.
Forward Looking Statements
Certain statements in this report, 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. 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. Among the key factors that may have a direct bearing on the Company's
operating results, performance or financial condition are its ability to
implement its growth strategies, national, regional and local economic
conditions affecting the restaurant/entertainment industry, competition within
each of the restaurant and entertainment industries, store sales
cannibalization, success of its franchise operations, negative publicity,
fluctuations in quarterly results of operations, including seasonality,
government regulations, weather, school holidays, commodity, insurance and labor
costs.
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.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Within the 90 day period prior to the date of filing this report, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. Based on that evaluation, the Company's
management, including the Chief Executive Officer and Chief Financial Officer,
concluded that the Company's disclosure controls and procedures were effective
as of the time of such evaluation. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the time of such evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
On June 2, 2000, a purported class action lawsuit against the Company,
entitled Freddy Gavarrete, et al. v. CEC Entertainment, Inc., dba Chuck E.
Cheese's , et. al., Cause No. 00-08132 FMC (RZx) ("Gavarrete"), was filed in the
Superior Court of the State of California in the County of Los Angeles (the
"State Court"). On July 27, 2000, the lawsuit was removed to the United States
District Court for the Central District of California (the "Federal Court"). The
lawsuit was filed by one former restaurant manager purporting to represent
restaurant managers of the Company in California from 1996 to the present. The
lawsuit alleges violations of the state wage and hour laws involving unpaid
overtime wages and seeks an unspecified amount in damages. On July 31, 2001, the
Federal Court denied the Plaintiff's motion for class certification. The Federal
Court subsequently granted Plaintiff's motion to amend the complaint by adding a
second party to the lawsuit. On June 5, 2002, the Federal Court granted
Plaintiff's motion for class certification based upon the amended complaint. On
June 25, 2002, the Federal Court granted Plaintiff's motion for reconsideration
of its two orders denying class certification. On August 15, 2002, the Federal
Court denied Plaintiff's motion to reconsider the two prior orders denying class
certification. On September 24, 2002, Plaintiff filed a motion to remand the
case back to the State Court. On October 28, 2002, the Federal Court granted
Plaintiff's motion to remand the case back to State Court. The Company believes
the lawsuit is without merit and intends to vigorously defend against it and
that based on currently available information the lawsuit is not likely to have
a material adverse impact on the Company's financial position.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
99.1 Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002.
b) Reports on Form 8-K
None filed during the quarter for which this report is filed.
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 13, 2003 By: /s/ Rodney Carter
----------------------
Rodney Carter
Executive Vice President, Chief Financial Officer
and Treasurer
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, Richard M. Frank, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CEC
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 quarterly 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 period presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures 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
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
May 13, 2003 /s/Richard M. Frank
-------------------
Richard M. Frank
Chief Executive Officer
CERTIFICATION BY CHIEF FINANCIAL OFFICER
I, Rodney Carter, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CEC
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 quarterly 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 period presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures 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
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
May 13, 2003 /s/ Rodney Carter
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Rodney Carter
Chief Financial Officer