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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cec Entertainment, Inc. | NYSE:CEC | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 53.98 | 0.00 | 01:00:00 |
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Kansas
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48-0905805
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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1707 Market Place Blvd, Suite 200
Irving, Texas
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75063
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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None
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None
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Large accelerated filer
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¨
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Accelerated filer
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¨
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Non-accelerated filer
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x
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Smaller reporting company
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¨
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Emerging growth company
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x
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Page
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PART III
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ITEM 11.
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PART IV
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ITEM 15.
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•
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our strategy, outlook and growth prospects;
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•
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our operational and financial targets and dividend policy;
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•
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our planned expansion of the venue base and the implementation of the new design in our existing venues;
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•
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general economic trends and trends in the industry and markets; and
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•
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the competitive environment in which we operate.
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•
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negative publicity and changes in consumer preference;
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•
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our ability to successfully expand and update our current venue base;
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•
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our ability to successfully implement our marketing strategy;
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•
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our ability to compete effectively in an environment of intense competition;
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•
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our ability to weather economic uncertainty and changes in consumer discretionary spending;
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•
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increases in food, labor and other operating costs;
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•
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the impact of labor scheduling legislation;
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•
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the impact of public health issues, including the novel coronavirus that has disrupted the Company’s operations since February 2020;
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•
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our ability to successfully open international franchises and to operate under the U.S. and foreign anti-corruption laws that govern those international ventures;
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•
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risks related to our substantial indebtedness;
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•
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failure of our information technology systems to support our current and growing businesses;
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•
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disruptions to our commodity distribution system;
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•
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our dependence on third-party vendors to provide us with sufficient quantities of new entertainment-related equipment, prizes and merchandise at acceptable prices;
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•
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risks from product liability claims and product recalls;
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•
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the impact of governmental laws and regulations and the outcomes of legal proceedings;
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•
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potential liability under certain state property laws;
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•
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fluctuations in our financial results due to new venue openings;
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•
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local conditions, natural disasters, terrorist attacks and other events and public health issues, including those outside the United States;
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•
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the seasonality of our business;
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•
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inadequate insurance coverage;
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•
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labor shortages and immigration reform;
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•
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loss of certain personnel;
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•
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our ability to adequately protect our trademarks or other proprietary rights;
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•
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our ability to pay our fixed rental payments;
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•
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impairment charges for goodwill, indefinite-lived intangible assets or other long-lived assets;
|
•
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our ability to successfully integrate the operations of companies we acquire;
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•
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our failure to maintain adequate internal controls over our financial and management systems; and
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•
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other risks, uncertainties and factors set forth in Part I, Item 1A. “Risk Factors” of the Company’s Original Form 10-K filed with the SEC on March 12, 2020 and updated in Item 8.01 “Other Events - Risk Factor Update” of the Company’s Form 8-K filed with the SEC on March 27, 2020.
|
Name and Principal Position
|
Year
|
Salary
|
Stock Awards (3)
|
Option Awards (4)
|
Non-Equity Incentive Plan Compensation (5)
|
All Other Compensation (6)
|
Total
|
||||||
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
($)
|
||||||
Thomas Leverton (1)
|
2019
|
550,000
|
|
667,221
|
|
128,954
|
|
—
|
|
—
|
|
1,346,175
|
|
Former Chief Executive Officer
|
2018
|
550,000
|
|
—
|
|
—
|
|
300,728
|
|
24,000
|
|
874,728
|
|
J. Roger Cardinale
|
2019
|
485,000
|
|
63,363
|
|
85,971
|
|
441,350
|
|
—
|
|
1,075,684
|
|
President
|
2018
|
485,000
|
|
—
|
|
—
|
|
260,337
|
|
18,000
|
|
763,337
|
|
James Howell (2)
|
2019
|
404,652
|
|
515,527
|
|
597,275
|
|
—
|
|
82,440
|
|
1,599,894
|
|
Executive Vice President and Chief Financial Officer
|
2018
|
100,000
|
|
—
|
|
—
|
|
121,532
|
|
—
|
|
221,532
|
|
(1)
|
Mr. Leverton stepped down from his position as Chief Executive Officer of CEC Entertainment on January 21, 2020.
|
(2)
|
Mr. Howell began his employment with CEC Entertainment in September 2018.
|
(3)
|
This column represents the grant date fair value of stock bonus awards approved by the Compensation Committee in each of the fiscal years presented computed in accordance with the Financial Accounting Standards Board’s ASC 718 - Compensation - Stock Compensation (“ASC 718”) . For further discussion on the valuation assumptions used with respect to the stock awards granted in 2019, refer to “-Narrative Disclosure To Summary Compensation Table,” below and Note 17. “Stock-Based Compensation Arrangements” included in Part II, Item 8. “Financial Statements and Supplementary Data” of the Original Form 10-K.
|
(4)
|
This column represents the grant date fair value of stock options approved by the Compensation Committee and awarded to executive officers in each of the fiscal years presented, computed in accordance with ASC 718. For further discussion on the valuation assumptions used with respect to the option awards granted in 2019, refer to Note 17. “Stock-Based Compensation Arrangements” included in Part II, Item 8. “Financial Statements and Supplementary Data” of the Original Form 10-K. Option Award amounts reported in the table above for 2019 consist of the following items:
|
Option Award Component
|
|
Mr. Leverton
|
|
Mr. Cardinale
|
|
Mr. Howell
|
||||||
Stock options - Tranche A:
|
|
|
|
|
|
|
||||||
Fair value on grant date ($)
|
|
$
|
128,954
|
|
|
$
|
85,971
|
|
|
$
|
234,266
|
|
Options granted (#)
|
|
38,725
|
|
|
25,817
|
|
|
70,350
|
|
|||
Stock options - Tranche B:
|
|
|
|
|
|
|
||||||
Fair value on grant date ($)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
213,161
|
|
Options granted (#)
|
|
—
|
|
|
—
|
|
|
70,350
|
|
|||
Stock options - Tranche C:
|
|
|
|
|
|
|
||||||
Fair value on grant date ($)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
149,848
|
|
Options granted (#)
|
|
—
|
|
|
—
|
|
|
70,351
|
|
|||
Stock options - Total:
|
|
|
|
|
|
|
||||||
Fair value on grant date ($)
|
|
$
|
128,954
|
|
|
$
|
85,971
|
|
|
$
|
597,275
|
|
Options granted (#)
|
|
38,725
|
|
|
25,817
|
|
|
211,051
|
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(5)
|
See “-Narrative Disclosure To Summary Compensation Table - Non Equity Incentive Plan Compensation,” below for more information about the terms of these awards.
|
Name
|
|
Year
|
|
Car Allowance/Car Insurance
|
|
Car Insurance Reimbursement
|
|
Moving Expense Reimbursement
|
|
Total
|
||||
|
|
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
||||
Thomas Leverton
|
|
2019
|
|
24,000
|
|
|
—
|
|
|
—
|
|
|
24,000
|
|
|
|
2018
|
|
24,000
|
|
|
—
|
|
|
—
|
|
|
24,000
|
|
J. Roger Cardinale
|
|
2019
|
|
18,000
|
|
|
1,322
|
|
|
—
|
|
|
19,322
|
|
|
|
2018
|
|
18,000
|
|
|
—
|
|
|
—
|
|
|
18,000
|
|
James Howell
|
|
2019
|
|
—
|
|
|
—
|
|
|
82,440
|
|
|
82,440
|
|
|
|
2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Metric
|
|
Total Bonus %
|
Adjusted EBITDA
|
|
40%
|
Free cash flow (1)
|
|
20%
|
Comparable venue sales change
|
|
10%
|
Revenues (2)
|
|
10%
|
Individual Performance
|
|
20%
|
Total
|
|
100%
|
(1)
|
Free cash flow represents Adjusted EBITDA less total capital expenditures as reported in the Company’s Statement of Cash Flows for 2019 included in Part II, Item 8. “Financial Statements and Supplementary Data” of the Original Form 10-K, adjusted for all approved capital projects and new store completions.
|
(2)
|
Revenues represents the Company’s Total revenues of $912.9 million, adjusted for the actual cash received for franchise fees received in the period for post-acquisition franchise development agreements, which we do not start recognizing into revenue until the franchise venue is opened, of $2.0 million, for a grand total of $914.9 million.
|
Metric
|
|
Minimum (1)
|
|
Target
|
|
Maximum (2)
|
|
|
|
||||
Adjusted EBITDA
|
|
$178.0
|
|
$180.0
|
|
$193.3
|
Free cash flow
|
|
$75.3
|
|
$77.3
|
|
$90.6
|
Comparable venue sales change
|
|
2.2%
|
|
2.8%
|
|
5.9%
|
Revenues
|
|
$916.2
|
|
$921.1
|
|
$938.5
|
(1)
|
If the minimum quantitative component of the Incentive Bonus Plan were achieved, the bonus payout, as a percentage of target, would be 50%.
|
(2)
|
The maximum bonus payout on the quantitative component of the Incentive Bonus Plan, as a percentage of target, is 150%.
|
|
|
|
|
2019 Payout
|
||
Metric
|
|
% Weighting
|
|
Bonus as a % of Target
|
|
% of Base
|
Adjusted EBITDA
|
|
40%
|
|
100%
|
|
40%
|
Free cash flow
|
|
20%
|
|
115%
|
|
23%
|
Comparable venue sales change
|
|
10%
|
|
100%
|
|
10%
|
Revenue
|
|
10%
|
|
—%
|
|
—%
|
Individual performance
|
|
20%
|
|
100%
|
|
20%
|
Total
|
|
100%
|
|
|
|
93%
|
Name and Position
|
|
2019 Incentive Bonus Plan Payment
|
Tom Leverton, Former Chief Executive Officer (1)(2)
|
|
$—
|
J. Roger Cardinale, President
|
|
$441,350
|
James Howell, Chief Financial Officer (2)
|
|
$—
|
(1)
|
Mr. Leverton’s employment with the Company terminated as of January 21, 2020; therefore he was eligible for a payment under the 2019 Incentive Bonus Plan.
|
(2)
|
See section entitled “Stock Bonuses”
|
Name and Position
|
|
Number of common shares of Parent (2)
|
|
Payout value of 2019 Stock Bonus
|
Tom Leverton, Former Chief Executive Officer (1)
|
|
7,954
|
|
$70,471
|
J. Roger Cardinale, President
|
|
7,152
|
|
$63,363
|
(1)
|
Mr. Leverton’s employment with the Company terminated as of January 21, 2020.
|
(2)
|
The number of common shares of Parent is presented on a gross basis, before shares withheld for taxes. The total number of shares withheld for taxes for Mr. Leverton and Mr. Cardinale were 2,358 and 2,120, respectively.
|
Name and Position
|
|
Number of common shares of Parent
|
|
Payout value of 2019 Stock Bonus
|
Tom Leverton, Former Chief Executive Officer (1)
|
|
67,353
|
|
$596,750
|
James Howell, Chief Financial Officer
|
|
58,185
|
|
$515,527
|
(1)
|
Mr. Leverton’s employment with the Company terminated as of January 21, 2020, therefore he was eligible for a payment under the 2019 Stock Bonus Agreement.
|
(2)
|
The number of common shares of Parent is presented on a gross basis, before shares withheld for taxes. The total number of shares withheld for taxes for Mr. Leverton and Mr. Howell were 27,440 and 23,596, respectively.
|
|
|
Option Awards
|
||||||||||||
|
|
Equity Incentive Plan Awards:
|
|
|
|
|
||||||||
Name
|
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable (1)
|
|
Number of Securities Underlying Unexercised Unearned Options (#) (1)
|
|
Options Exercise Price ($) (2)
|
|
Option Expiration Date
|
||||
Thomas Leverton
|
|
193,625
|
|
|
—
|
|
|
387,250
|
|
|
8.03
|
|
|
02/14/2024
|
|
|
—
|
|
|
38,727
|
|
|
—
|
|
|
8.86
|
|
|
02/14/2029
|
J. Roger Cardinale
|
|
129,083
|
|
|
—
|
|
|
258,166
|
|
|
8.03
|
|
|
02/14/2024
|
|
|
—
|
|
|
25,817
|
|
|
—
|
|
|
8.86
|
|
|
02/14/2029
|
James Howell
|
|
—
|
|
|
70,350
|
|
|
140,701
|
|
|
8.86
|
|
|
01/30/2029
|
(1)
|
Under the Queso Holdings Inc. Equity Incentive Plan Stock Option Agreement, as amended (the “Option Agreement”), which each named executive officer signed as a condition of receiving option grants from Parent, each of our named executive officers was awarded three tranches of stock options (with each of Tranche A, Tranche B, and Tranche C equal to 1/3 of the total grant). As to the stock options granted to Messrs. Leverton and Cardinale in 2014, Tranche A stock options vested and became exercisable in equal installments on each of the first five anniversaries of the date the stock options were granted. As to the stock options granted to Messrs. Leverton, Cardinale and Howell in 2014, Tranche A stock options vest and become exercisable in equal installments on each of the first five anniversaries of the date the stock options were granted. Tranche B stock options vest and become exercisable if AP VIII CEC Holdings, L.P. (f/k/a AP VIII Queso Holdings, L.P.), an affiliate of our sponsor, and its affiliates realize a multiple on invested capital (“MOIC”) of at least 2.0x (with such MOIC to be calculated in accordance with the methodology set forth in the Equity Incentive Plan). Tranche C stock options vest and become exercisable if AP VIII CEC Holdings, L.P., an affiliate of our sponsor, and its affiliates realize an MOIC of at least 3.0x. For a description of the treatment of the stock option in the event of an initial public offering or change in control, please see the description below under the heading “Potential Payments Upon Termination or Change in Control - Accelerated Vesting of Stock Options; Option to Repurchase Stock.” As of the same date, none of our named executive officers’ Tranche B and C stock options had vested.
|
Name
|
|
|
Resignation with Good Reason
|
|
Termination Without Cause
|
|
Terminated Without Cause or Resignation with Good Reason Following a Change in Control
|
|
|
|
($)
|
|
($)
|
|
($)
|
Thomas Leverton:
|
|
|
|
|
|
|
|
• Salary
|
|
|
550,000
|
|
550,000
|
|
550,000
|
• Non-Equity Incentive Plan Compensation
|
|
|
426,250
|
|
426,250
|
|
426,250
|
• Accelerated payment of the Converted Award (1)
|
|
|
—
|
|
—
|
|
—
|
Totals
|
|
|
976,250
|
|
976,250
|
|
976,250
|
|
|
|
|
|
|
|
|
J. Roger Cardinale
|
|
|
|
|
|
|
|
• Salary
|
|
|
485,000
|
|
485,000
|
|
485,000
|
• Non-Equity Incentive Plan Compensation
|
|
|
441,350
|
|
441,350
|
|
441,350
|
• Accelerated payment of the Converted Award (1)
|
|
|
—
|
|
—
|
|
—
|
Totals
|
|
|
926,350
|
|
926,350
|
|
926,350
|
|
|
|
|
|
|
|
|
James Howell
|
|
|
|
|
|
|
|
• Salary
|
|
|
406,720
|
|
406,720
|
|
406,720
|
• Non-Equity Incentive Plan Compensation
|
|
|
368,234
|
|
368,234
|
|
368,234
|
• Accelerated payment of the Converted Award (1)
|
|
|
—
|
|
—
|
|
—
|
Totals
|
|
|
774,954
|
|
774,954
|
|
774,954
|
(1)
|
Subject to the continued employment of Messrs. Leverton, Cardinale, and Howell, as applicable, any portion of the Converted Award (i.e., the spread value of Tranche A stock options in a change in control) is payable on the six-month anniversary of such transaction. If, however, the employment of Mr. Leverton, Mr. Cardinale, or Mr. Howell, as applicable, is terminated without cause or due to a resignation with good reason prior to such date, such named executive officer would be eligible to accelerated payment of the Converted Award.
|
Name (1)
|
|
Fees Earned or Paid in Cash
|
|
Stock Awards
|
|
Option Awards
|
|
All Other Compensation
|
|
Total
|
|||||
|
|
($)(7)
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|||||
Peter C. Brown (2)
|
|
64,875
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
64,875
|
|
Allen R. Weiss (3)
|
|
80,874
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80,874
|
|
Andrew S. Jhawar(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Naveen R. Shahani (5)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Michael Diverio (6)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(1)
|
Mr. Leverton, who stepped down as Chief Executive Officer and director effective January 21, 2020, has been excluded from this table because his compensation is fully reflected in the Summary Compensation Table.
|
(2)
|
Mr. Brown was appointed to the board of directors effective as of March 20, 2019. In addition, the board of directors also appointed Mr. Brown to the audit and compensation committees of the board of directors, and elected him as Chairman of the Audit Committee of the board of directors. Mr. Brown’s compensation reflects a prorated retainer amount based on his partial year of service on the board of directors and committees thereof.
|
(3)
|
Mr. Weiss was compensated $100,000 per year for his services on our board of directors, and committees thereof, through March 7, 2019. For the period from March 8, 2019 through December 29, 2019, Mr. Weiss’ annual retainer fee for his services on our board of directors, and committees thereof, was $76,500.
|
(4)
|
Mr. Jhawar resigned as a member of the Audit Committee of the board of directors and from the position of Chairman of the Audit Committee of the board of directors effective March 20, 2019. Mr. Jhawar was an employee of Apollo during Fiscal 2019 and was not awarded any compensation for his board of directors and committee service.
|
(5)
|
Mr. Shahani was appointed to the board of directors and to the Audit Committee of the board of directors effective as of February 19, 2019. Mr. Shahani was an employee of Apollo during the period from February 19, 2019 through December 29, 2019 and was not awarded any compensation for his board of directors and committee service.
|
(6)
|
During Fiscal 2019, Mr. Diverio, who resigned as a director effective February 19, 2019, was an employee of Apollo and was not awarded any compensation for his board of directors and committee service.
|
(7)
|
This column reports the amount of cash compensation earned in 2019 for board of directors and committee service.
|
|
|
|
1. Consolidated Financial Statements.
|
||
|
|
|
2. Financial Statement Schedules.
|
||
|
|
|
3. Exhibits.
|
||
The exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index, which Exhibit Index is incorporated in this Annual Report on Form 10-K by reference.
|
Exhibit
Number
|
|
Description
|
2.1
|
|
|
|
|
|
3.1
|
|
|
|
|
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3.2
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4.1
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.
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4.2
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4.3
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4.4
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4.5
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4.6
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4.7
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10.1
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10.2
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10.3
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10.4
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10.5
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10.6
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10.7
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10.8
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10.9
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10.10
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10.11
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10.12
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10.13
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10.14
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10.15
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10.16
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10.17
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10.18
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10.19
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21.1
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24.1
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31.1
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31.2
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31.3*
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31.4*
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32.1
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32.2
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101.INS
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XBRL Instance Document (incorporated by reference to Exhibit 101.1INS to the Company’s Annual Report on Form 10-K (File No. 001-13687) as filed with the Commission on March 12, 2019)
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101.SCH
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XBRL Taxonomy Extension Schema Document (incorporated by reference to Exhibit 101.1SCH to the Company’s Annual Report on Form 10-K (File No. 001-13687) as filed with the Commission on March 12, 2019)
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document (incorporated by reference to Exhibit 101.1CAL to the Company’s Annual Report on Form 10-K (File No. 001-13687) as filed with the Commission on March 12, 2019)
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document (incorporated by reference to Exhibit 101.1DEF to the Company’s Annual Report on Form 10-K (File No. 001-13687) as filed with the Commission on March 12, 2019)
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document (incorporated by reference to Exhibit 101.1LAB to the Company’s Annual Report on Form 10-K (File No. 001-13687) as filed with the Commission on March 12, 2019)
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document (incorporated by reference to Exhibit 101.1PRE to the Company’s Annual Report on Form 10-K (File No. 001-13687) as filed with the Commission on March 12, 2019)
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||
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Dated: April 27, 2020
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CEC Entertainment, Inc.
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/s/ David McKillips
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David McKillips
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Chief Executive Officer and Director
|
1 Year Cec Entertainment Chart |
1 Month Cec Entertainment Chart |
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