Earnings Call Excerpt
CEC Entertainment, Inc. (CEC)
Q4 2007 Earnings Call
February 19, 2008 4:30 pm ET
Executives
Michael H. Magusiak – President & Director
Christopher Morris – Executive Vice President, Chief Financial Officer
Richard M. Frank – Chairman of the Board, Chief Executive Officer
Analysts
Robert Derrington – Morgan, Keegan & Company, Inc.
Michael Gallo – C. L. King & Associates, Inc.
Margo Murtaugh – Synder Capital Management
Bill Baldwin – Baldwin Anthony Securities
Mike Christodoulou – Inwood Capital
Presentation
Operator
Welcome to your CEC Entertainment teleconference. At this time all participants are in a listen only mode and later we will conduct a question and answer sessions and we’ll give instructions at that time. (Operators Instructions) And as a reminder the conference is being recorded. So we’d like to turn the conference over to our host Mr. Mike Magusiak. Please go ahead.
Michael H. Magusiak
Welcome to our conference call I’m Mike Magusiak President of the company and I’m joined by Dick Frank our Chairman and CEO and Chris Morris our Executive Vice President and CFO. Before we begin today’s discussion I’d like to make you aware that some of the information presented today may contain forward-looking statements that involves risks and uncertainties that could cause actual results to differ materially from those implied in the forward-looking statements. Information on the company’s risk factors was included in our press release and is also included in the company’s filings with the SEC. Additionally, in today’s discussion we will refer to adjusted EBITDA and free cash flow figures both of which are non-GAAP financial measures. For reconciliation of our reported results as such non-GAAP measures please see the investor’s information section of the company’s website.
The primary objectives for today’s call are first to discuss our financial performance during 2007. Second, to summarize our key strategies to increase long term sales, earnings per share and shareholder value. Third, Chris will discuss our outlook for the business and finally Dick will summarize our presentation and we will then conclude the conference call with a question and answer session. Chris will you please review our financial performance last year.
Christopher D. Morris
Good afternoon everyone. Before I begin a review of the numbers I would like to call your attention to a change in our income statements presentation. We have moved from a single step formant to a multi-step format. We believe this new presentation will provide investors with more information to analyze our business and understand financial trends. We included a table in today’s earnings release showing our financial result for each fiscal quarter in 2007 and 2006 to assist you with a transition to this new format. I would now like to review fourth quarter financial performance. Total revenue was $175.1 million in both Q4 07 and Q4 06. An increase of nine units in our weighted average unit base was offset by 2.7 % decline in comparable store sales. Cost of sales which primarily includes the cost of food, beverage, prizes and merchandise increased 160 basis points from 15.2% to 16.8%. This increase is primarily due to a $0.70 per pound increase in cheese prices in Q4 07 compared to the same period in the prior year, a beverage rebate received in the prior year benefiting Q4 06 by approximately 50 basis points and other miscellaneous increases.
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