☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
January 31, 2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Dallas, or Other Jurisdiction ofIncorporation or Organization) Identification No.) 75220 Zip Code)Registrant’s telephone number)
Registrant’s telephone number, including area code(214) 357-9588
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock $0.01 par value | PLAY | NASDAQ Global Select Market | ||
Preferred Stock Purchase Rights | PLAY | NASDAQ Global Select Market |
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge in definitive proxy or informational statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☒
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||
Emerging Growth Company | ☐ |
As of August 5, 2018, the
$580 million.
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ITEM 1. | Business |
report.
explore new flavors while offering a balanced selection of familiar dishes. Our menu also simplifies execution, and along with recent kitchen enhancements allows us to deliver dishes to customers hotter and faster to drive an improved customer experience. While our menu appeals to a broad spectrum of customers, we continue to evolve it to reflect the changing tastes of our21-39year-old primary target guests, customers, with options for full meals as well as grabbing an appetizer to share with friends. We deliver high-quality offerings, including a wide variety of starters,health-conscious options comparable to those of otherhigher-end casual dining operators.low calorie, vegetarian, and gluten friendly options. We believe our broad menu offers something for everyone and is appropriate for many different occasions. To ensure that we stay with societal shifts, roll outupdate our menus that featureregularly with new food items two times a year.
or limited time offers. Our food revenues, which include68%66% of our food and beverage revenues and approximately 29%24.1% of our total revenues during fiscal 2018.
2020.
2020.
Our Company’s Core Strengths
following:
male and female adults,families, which is moderately skewed to males, primarily between the ages of 21 and 39, as well as families and teenagers. Based on customer survey results, we also believe that the average annual household incomemake up approximately 40% of our customers is approximately $75, which we believe represents an attractive demographic.
mix.
which is reflected byin our fiscal 2018 average annual comparablehistorically higher revenue per store, revenues of $11,100, averagehigher comparable store operating income margins, of 21.7% and higher comparable Store Operating Income Before Depreciation and Amortization Margins (defined in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of of 30.4%.
Experienced management team. We believe
Our Growth Strategies
The operating strategy that underlies the growth
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Offer novel food & drink to bring people together. one-of-a-kind Offer the latest entertainment to enjoy together. eye-catching appearance, virtual reality features, association with recognizable brands or the fact that they cannot be easily replicated at home. We also intend to extend our programming capabilities by offering more curated content and creating a calendar of ongoing andone-time events leveraging our investments in the best and latest audio-visual technology.Align team and integrated experience. in-store experience. We will also refresh our commitment to serving customers through an improved hiring, training and service model, and our team will help create fun and bring our new strategies to life.7 Drive customer engagement. |
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Build great new stores. We will continue to pursue what we believe to be a disciplinedleverage our customer relationship management program and our growing loyalty database by delivering more targeted individualized offers and creative content.
internal studies and third-party research suggests a total store potential in the United States and Canada in excess of 230 stores (including our 121140 stores as of the end of fiscal 2018)2020). We anticipate that approximately 25%opened six stores and closed two stores in fiscal 2020. We will maintain a moderate pace of our future new store openings will utilizein fiscal 2021 as our new 17K design business recovers from the impact of
Our store expansion strategy is driven by aincluding site selection process that allows us to evaluatevisibility, accessibility and select the location, sizetraffic volume, and design of our stores based on consumer research and analysis of operating data from sales in our existing stores. Our site selection process and flexible store design enable us to customize each store with the objective of maximizing return on capital given the characteristics of the market and the location. Our current store large formats are 30,001 to 45,000 square feet in size and our current store small formats span 25,000 to 30,000 square feet. Our small and 17K formats provide us the flexibility to enter new smaller markets and further penetrate existing markets. Our various store formats also provide us with the ability to strategically choose between building new stores and converting existing space, which can be more cost efficient for certain locations. We are targeting average year onecash-on-cash returns of approximately 35% for both our large format and small format stores and approximately 25% for the 17K format. To achieve this return for large format stores, we target average net development costs of approximately $8,300 to $8,800 and first-year store revenues of approximately $10,000 to $12,200. For small format stores, we target average net development costs of approximately $6,800 and average first year store revenues of approximately $8,700. For 17K format stores, we target average net development costs of approximately $5,000 and first-year store revenues of approximately $5,000. Additionally, for both large format and small format stores, we target average year one margins on operating income (excluding allocated national marketing costs) of approximately 18%, and Store Operating Income Before Depreciation and Amortization (excluding allocated national marketing costs) of approximately 29%. For our 17K format store, we target average year one margins on operating income (excluding allocated national marketing costs) of approximately 12% and Store Operating Income Before Depreciation and Amortization (excluding allocated national marketing costs) of approximately 25%.
Expand the Dave & Buster’s brand internationally. We believe that in addition to the growth potential that exists in North America, the Dave & Buster’s brand can also have significant appeal in certain international markets. We are currently assessing these opportunities while maintaining a conservative and disciplined approach towards the execution of our international development strategy. As such, we have retained the services of a third-party consultant to assist in identifying and prioritizing potential markets for expansion as well as potential franchise or joint venture partners. Thus far, we have identified our international market priorities and begun the process of identifying potential international partners.
Site Selection
We believe that the location of stores is critical to our long-term success.trade area demographics The experience and relationships of our current development team has enabled us to focus our attention on the most relevant network of real estate brokers, which has given us access to a larger pool of qualified potential store sites. In addition, we believe the more contemporary look of our stores has been one of the key drivers in attracting new developers and building our new store pipeline. We devote significant time and resources to strategically analyze each prospective market, trade area and site. We continually identify, evaluate and update our database of potential locations for expansion. We base new site selection on an analytical evaluation of a set of drivers we believe increase the probability of successful, high-volume stores.
Our Store Formats
between 30,001 and 45,000 square feet, the target size of our future medium format stores is expected to be between 25,001 and 30,000 square feet while our small format stores span 25,000 to 30,000are below 25,001 square feet. Additionally, our newly-developed 17K design which will span 15,000 to 20,000 square feet, should allowAt January 31, 2021, we operated 110 large format stores, 20 medium format stores and 10 small format stores.
We utilizereduce capital investment risk per store. For the smaller format, stores to penetrate less densely populated markets and backfill existing markets. The smaller format haswe have reduced thesalescustomer facing area dedicated to video and redemption games. We believe that the smaller format maintains the dynamic customer experience that is the foundation of our brand and allows us flexibility in our site selection process. We also believe that
Marketing, Advertising and Promotion
Our corporate marketing department manages all consumer-focused initiatives for the Dave & Buster’s brand. In order to drive sales and expand our customer base, we focus our efforts in three key areas:
Marketing: national advertising, media (linear and digital), promotions,in-store merchandising, pricing
Food and beverage: menu and product development
Customer insights: research, brand health and tracking
We spent approximately $40,767 in marketing efforts in fiscal 2018, $37,876 in fiscal 2017, and $33,795 in fiscal 2016. Our annual marketing expenditures include the cost of national television and radio advertising totaling $30,437, $30,003, and $25,845, in fiscal years 2018, 2017, and 2016, respectively.
We continually seek to improve our marketing effectiveness through a number of initiatives, including:
refining our marketing strategy to better reach both young adults and families;
creating new advertising campaigns;
investing in menu research and development to differentiate our food offerings from our competition and improve key product attributes (quality, consistency, value and overall customer satisfaction) and execution;
developing product/promotional strategies to attract new customers and increase spending/length of stay;
leveraging our loyalty database to create stronger relationships with consumers to engage and motivate them to visit; and
reflecting a consistent brand identity that represents our positioning and commitment to quality.
To drive traffic and increase visit frequency and average check size, the bulk of our marketing budget is allocated to national cable television media. To enhance that effort, we also:
conduct digital initiatives including search engine marketing, mobile campaigns, programmatic marketing and social media;
maintain and optimize the website for search;
runin-store promotions and createpoint-of-purchase materials;
leverage the customer loyalty program, including promotional and trigger emails; and
create local marketing plans to address specific objectives in individual stores or markets.
We work with external advertising, digital, media and design agencies in the development and execution of these programs.
Special Event Marketing
Our corporate and group sales programs are managed by our sales department, which provides direction, training, and support to the special events managers and their teams within each store. They are supported by a special events call center located at our corporate office, targeted printwe are committed to being fun creators. Our team members share a deep commitment to four culture pillars, which describe the relationships our team members have with our customers and online media plans,each other. We are devoted to our “You Got It” service philosophy that calls us to provide exceptional service to our customers and to each other every day. Our “Play Your Heart Out” attitude encourages
Male | Female | Total | ||||||||||
White | 23.9 | % | 22.6 | % | 46.5 | % | ||||||
Black or African American | 14.4 | % | 11.7 | % | 26.1 | % | ||||||
Hispanic | 12.3 | % | 9.6 | % | 21.9 | % | ||||||
Asian/American Indian/Pacific Islander | 2.1 | % | 1.4 | % | 3.5 | % | ||||||
Two or more races | 1.2 | % | 0.8 | % | 2.0 | % | ||||||
Total | 53.9 | % | 46.1 | % | 100.0 | % | ||||||
Operations
Management
brand.
Operational Tools During the recovery, to comply with various federal, state and Programs
local guidelines and in response to changing guest levels, our stores have reduced the hours of operation and in some cases, the number of days operating in a week.
Management Information Systems
financial and marketing data and reduce store and corporate administrative time and expense. We believe our management information systems are sufficient to support our store expansion plans.
Training
We strive to maintain quality and consistency in eachwe share the results of our stores through the careful training and supervision ofannual audit with our team members and the establishment of, and adherence to, high standards relating to personnel performance, food and beverage preparation, game playability and maintenance of our stores. We provide all new team members with complete orientation andone-on-one training for their positions to help ensure they are able to meet our high standards. All of our new team members are trained by partnering with a certified trainer to assure that the training and information they receive is complete and accurate. Team members are certified for their positions by passing a series of tests, including alcohol awareness training.
We require our new store managers to complete an eight-week training program that includesfront-of-house service, kitchen, amusements and management responsibilities. Newly trained managers are then assigned to their home store where they receive additional training with their General Manager. We place a high priority on our continuing management development programs in order to ensure that qualified managers are available for our future openings. We conduct semi-annual evaluations with each manager to discuss prior performance and future performance goals. We hold an annual General Manager conference in which our General Managers share best practices and also receive an update on our business plan.
When we open a new store, we provide varying levels of training to team members in each position to ensure the smooth and efficient operation of the store from the first day it opens to the public. Prior to opening a new store, our dedicated training and opening team travels to the store to prepare for an intensivetwo-week training program for all team members hired for the new store opening. Part of the training team stays on site during the first week of operation. We believe this additional investment in our new stores is important, because it helps us provide our customers with a quality experience from day one.
After a store has been opened and is operating smoothly, the store managers supervise the training of new team members.
Recruiting and Retention
We seek to hire experienced managers and team members and offer competitive wage and benefit programs. Our store managers all participate in a performance-based incentive program that is based on sales and profit goals. In addition, our salaried and hourly employees are also eligible to participate in a 401(k) plan, medical/dental/vision insurance plans and receive vacation/paid time off based on tenure. Additionally, General Managers are eligible for long-term incentive awards depending upon operating performance.
Audit Committee.
$18,848, $20,075 $2.9 million, $18.6 million, and $13,369$18.8 million in fiscal 2018, 20172020, 2019, and 2016,2018, respectively, representing approximately 1.5%0.7%, 1.8%1.4%, and 1.3%1.5%, respectively, of our consolidated revenues. As of February 3, 2019,January 31, 2021, less than 2.0% of our long-lived assets were located outside of the United States.
During fiscal 2020, results also fluctuated due to the timing and frequency of temporary closures and operating restrictions as a result of state and local guidelines imposed due to the
Competition
Theout-of-home entertainment market is highly competitive. We compete for customers’ discretionary entertainment dollars with providers ofout-of-home entertainment, including localized attraction facilities such as movie theaters, sporting events, bowling alleys, sports activity centers, arcades and entertainment centers, night clubs and restaurants as well as theme parks. We also face competition from local, regional and national establishments that offer entertainment experiences similar to ours and restaurants that are highly competitive with respect to price, quality of service, location, ambience and type and quality of food. Some of these establishments may exist in multiple locations, and we may also face competition on a national basis in the future from other concepts that are similar to ours. We also face competition from increasingly sophisticated home-based forms of entertainment, such as internet and video gaming and home movie streaming and delivery.
Employees
As
None of our employeesfood, including regulations regarding product safety, nutritional content and menu labeling. We are covered by collective bargaining agreementsalso subject to federal, state and we have never experienced an organized work stoppage, strike or labor dispute. We believelocal laws that govern health benefits, employment practices and working conditions, including minimum wage rates, wage and compensation packageshour practices, gratuities, overtime, various family leave mandates, discrimination and harassment, immigration, workplace safety and other areas. In California, we are competitive with those offered by competitors and consider our relations with oursubject to the Private Attorneys General Act, which authorizes employees to be good.
file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for labor code violations. We must comply with laws relating to information security, consumer credit protection and fraud, and data privacy laws and standards for the protection of personal and health information.
ITEM 1A. |
An investment in
Our growth strategy depends on our ability to open new stores and operate them profitably.
A key element of our growth strategy is to open additional stores in locations that we believe will provide attractive returns on investment.operations may suffer. Our ability to open newmeet our business strategy plan is dependent upon, among other things, our ability to:
find quality locations;
reach acceptable agreements regarding the lease or purchase of locations;
comply with applicable zoning, licensing, land use and environmental regulations;
raise or have available an adequate amount of cash or currently available financing for construction and opening costs;
timely hire, train and retain the skilled management and other employees necessary to meet staffing needs;
obtain, for acceptable cost, required permits and approvals, including liquor and amusement licenses; and
efficiently manage the amount of time and money used to build and open each new store.
If we succeed in opening new stores on a timely and cost-effective basis, we may nonetheless be unablethese centers to attract enough customers to new stores because potential customersour locations. As demographic and economic patterns change, current locations may be unfamiliar with our stores or concept, or our entertainment and menu options might not appeal to them. Our new stores may not meetcontinue to be attractive or exceedprofitable.
Our expansion into new markets may present increased risks due to our unfamiliarity with the area.
Some of our new stores will be in areas where we have little or no meaningful experience. Those markets
our existing markets. In addition, our national advertising program may not be successful in generating brand awareness in all local markets, and the lack of market awareness of the Dave & Buster’s brand can pose an additional risk in expanding into new markets. Stores opened in new markets may open at lower average weekly revenues than stores opened in existing markets and may have higher store-level operating expense ratios than stores in existing markets. Sales at stores opened in new markets may take longer to reach average store revenues, if at all, thereby adversely affecting our overall profitability.
In addition, we intend to establish stores outside of the United States and Canada. In addition to the risks posed by new markets generally, the operating conditions in overseas markets may vary significantly from those we have experienced in the past, including in relation to consumer preferences, regulatory environment, currency risk, the presence and cooperation of suitable local partners and availability of vendors or commercial and physical infrastructure, among others. There is no guarantee that we will be successful in integrating these new stores into our operations, achieving market acceptance, operating these stores profitably, and maintaining compliance with the rapidly changing business and regulatory requirements of new markets.demand. If we are unablefail to do so, we could suffer a material adverse effect onanticipate changing trends or other consumer preferences, our business, financial condition and results of operations.
operations would be adversely affected.
Our sales growth and ability to achieve profitability are impacted by our comparable store sales, and there are material risks to our ability to increase such sales.
Comparable store sales are a year-over-year comparison of sales at stores open at the end of the period which have been open for at least 18 months as of the beginning of each of the fiscal years. It is a key performance indicator used within the industry and is indicative of acceptance of our initiatives as well as local economic and consumer trends. The level of comparable store sales will affect our sales growth and will continue to be a critical factor affecting our ability to generate profits because the profit margin on comparable store sales is generally higher than the profit margin on new store sales. Our ability to increase comparable store sales depends on many factors, including perceptions of our brand, competition, our ability to increase menu or game prices without adversely impacting traffic counts, executing our marketing strategies effectively, changes in consumer preferences and discretionary spending for multiple reasons including an economic downturn or slower growth, transfer sales from new store openings, weather and changes in government regulations, among others. Many of these factors are beyond our control, and there is no guarantee that management initiatives to increase comparable store sales will be successful.
Our revenues generally fluctuate due to the seasonality of our business and other events.
Our operating results may fluctuate significantly due to seasonal factors. Typically, we have higher revenues associated with the spring andyear-end holidays. Our third quarter, which encompasses theback-to-school fall season, has historically had lower revenues as compared to other quarters. As a result, factors affecting peak seasons could have a disproportionate effect on our results. For example, the number of days between Thanksgiving and New Year’s Day and the days of the week on which Christmas and New Year’s Eve fall affect the volume of business we generate during the December holiday season and can affect our results for the full fiscal year. In addition, unfavorable weather conditions during the winter and spring seasons could have a significant impact on our results.
Our results of operations are subject to fluctuations due to the timing of new store openings.
The timing of new store openings may result in significant fluctuations in our quarterly performance. We typically incur most cashpre-opening costs for a new store within the two months immediately preceding, and the month of, the store’s opening. In addition, the labor and operating costs for a newly opened store during the first three to six months of operation are materially greater than what can be expected after that time, both in aggregate dollars and as a percentage of revenues. Additionally, a portion of a current fiscal year new store capital expenditures is related to stores that are not expected to open until the following fiscal year. Due to these substantialup-front financial requirements to open new stores, the investment risk related to any single store is much larger than that associated with many other restaurants or entertainment venues.
Slow economic growthrecessionfailure to respond effectively to adverse publicity, could have a material adverse impact onharm our landlords or other tenants in shopping centers in which we are located, which in turn could negatively affect our financial results.If we experience an economic downturn in the future, our landlords may be unable to obtain financing or remain in good standing under their existing financing arrangements, resulting in failures to pay required tenant improvement allowances or satisfy other lease covenants to us. In addition, tenants at shopping centers in which we are located or have executed leases, or to which our stores are near, may fail to open or may cease operations. Decreases in total tenant occupancy in shopping centers in which we are located, or to which our stores are near, may affect traffic at our stores. All these factors could have a material adverse impact on our operations.Damage to our brand or reputation could adversely affect our business.
Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could materially adversely impact our business.
publish the content their subscribers and participants’participants post, often without filters or checks on accuracy of the content posted. InformationThe opportunity exists for dissemination of information, including inaccurate information, to spread quickly. Inaccurate or adverse information concerning our Company may be posted on such platforms at any timetime. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also may be used for dissemination of trade secret information, compromising valuable company assets. In summary, the dissemination of information via social media and similar platforms may harm our interests, performance, orbusiness, prospects, financial condition, and results of business,operations, regardless of the information’s accuracy.
As a part of our marketing strategy, we rely on search engine marketing, social media and new digital platforms to attract and retain our customers and maintain brand relevance. Our strategy and initiatives may not be successful, resulting in expenses incurred without improvement in traffic or relevance. In addition, a variety of risks are associated with the use of social media, including improper disclosure of proprietary information, negative comments about us, exposure of personally identifiable information, fraud andout-of-date information. The inappropriate use of social media vehicles by our customers or employees could increase our costs, lead to litigation or result in negative publicity that could damage our reputation.
Our procurementfuture store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligation under the applicable lease, including, among other things, paying the base rent for the remainder of games and amusement offerings is dependent upon a few suppliers.
Our abilitythe lease term. We depend on cash flow from operations to continue to procure new games, amusement offerings, and other entertainment-related equipment is important topay our lease obligations. If our business strategy. The numberdoes not generate adequate cash flow from operating activities and sufficient funds are not otherwise available to us from borrowings under our existing credit facility, we may not be able to service our operating lease obligations, grow our business, respond to competitive challenges or fund other liquidity and capital needs, all of suppliers from which could have a material adverse effect on us.
entities, pay dividends, acquire other businesses or sell assets. In addition, other than during the second amendment suspension period, our credit facility requires us to comply with a total leverage ratio that is no greater than the applicable financial covenant level and a fixed charge ratio that is no greater than 1.25:1.00, which are each tested as of the last day of each fiscal quarter. During the second amendment suspension period, we are required to maintain minimum liquidity of $150.0 million.
Webusiness and results of operations. Competition for qualified employees could require us to pay higher wages, which could result in higher labor costs and could have successfully developed several proprietary amusement offerings that are not available to operations outside the Company. Our ability to develop future offerings is dependent on, among other things, obtaining rights to compelling game content and developing new amusement offerings that are accepted by our customers. There is no guarantee that additional licensing rights will be obtained by us or that our customers will accept the future offerings that we develop. The result could be increased expenses without increased revenues putting downward pressurea material adverse effect on our results of operations.
our data center, as well as our backup data facility, are all located in Dallas, Texas. A natural or
negotiate a new distribution contract. Further, a significant percentage of our WIN! merchandise inventory is directly or indirectly sourced outside the United States and changes in trade policy and tariffs could negatively impact our costs. If we have to pay higher prices for food or other supplies,product costs, our operating costs may increase, and, if we are unable to adjust our purchasing practices or pass suchany cost increases on to our customers, by changing menu or game prices, our operating results could be adversely affected.
We rely on third-party service providers for certain key elements of our operations including credit card processing, telecommunications and utilities. The unplanned loss of services from a major provider could adversely affect our business as we seek out and negotiate for alternate sources of service. We may be unable to replace service providers in a short period of time on acceptable terms, which could limit our operations and increase our costs. If our cost of services increases, we may be unable to pass such cost increases on to our customers, and our operating results could be adversely affected.
Food safety incidents at our stores or in our industry or supply chain may adversely affect customer perception of our brands or industry and result in declines in sales and profits.
We cannot guarantee that our supply chain and food safety controls and training will be fully effective in preventing all food safety issues at our stores, including any occurrences of foodborne illnesses such as salmonella, E. coli, Norovirus, or hepatitis A. In addition, we rely on third-party vendors, making it difficult to monitor food safety compliance and increasing the risk that foodborne illness would affect multiple locations rather than a single store. Some foodborne illness incidents could be caused by third-party vendors and distributors outside of our control. New illnesses resistant to our current precautions may develop in the future, or diseases with long incubation periods could arise, that could give rise to claims or allegations on a retroactive basis. One or more instances of foodborne illness in any of our stores or markets or related to food products we sell could negatively affect our store sales nationwide if highly publicized on national media outlets or through social media. This risk exists even if it were later determined that the illness was wrongly attributed to us or one of our stores. Other restaurant chains have experienced incidents related to foodborne illnesses that have had a material adverse effect on their operations. The occurrence of a similar incident at one or more of our stores, or negative publicity or public speculation about an incident, could reduce customer visits to our stores and negatively impact demand for our menu or game offerings.
We are subject to risksother associated with leasing space subject to long-term,non-cancelable leases.
risks. We typically do not own any real property. Payments under ournon-cancelable, operating leases account for a significant portion of our operating expenses and we expect the new stores we open in the future will also be leased. The leases typically provide for a base rent plus additional rent based on a percentage of the revenue generated by the stores on the leased premises once certain thresholds are met. We generally cannot cancel these leases without substantial economic penalty. If an existing or future store is not profitable, and we decide to close it, we may nonetheless be committed to perform our obligation under the applicable lease, including, among other things, paying the base rent for the remainder of the lease term. We depend on cash flow from operations to pay our lease obligations. If our business does not generate adequate cash flow from operating activities and sufficient funds are not otherwise available to us from borrowings under our existing credit facility, we may not be able to service our operating lease obligations, grow our business, respondanticipate and react to competitive challengeschanging amusement offerings cost by adjusting purchasing practices or fund other liquiditygame prices, and capital needs, which would have a material adverse effect on us.
In addition, as each of our leases expires, we may choose notfailure to renew, or may not be able to renew, such existing leases if the capital investment required to maintain the stores at the leased locations is not justified by the return required on the investment. If we are not able to renew the leases at rents that allow such stores to remain profitable as their terms expire, the number of such stores may decrease, resulting in lower revenue from operations, or we may relocate a store, which could subject us to construction and other costs and risks, and in either case,do so could have a material adverse effect on our business,operating results. In addition, any decrease in availability of new amusement offerings that appeal to customers could lead to decreases in revenues as customers negatively react to lack of new game options.
obtain and obtain/maintain licenses and permits necessary for such operation, in compliance with laws, regulations and other requirements, which could adversely affect our business, results of operations or financial condition.Each store is
Our costs
governments in response to the
We are subject to including the following:
on other expenses. For example, our suppliers may be more severely impacted by higher minimum wage standards, which could result in increased costs to us. In general, we have been able to partially offset cost increases resulting from changes inconditions, including minimum wage rates, by increasing menu or game prices, improving productivity, or throughwage and hour practices, gratuities, overtime, labor practices, various family leave mandates, discrimination and harassment, immigration, workplace safety and other adjustments, but there can be no assuranceareas;
Uncertainty continues to exist with respect to the future of areas;
In May 2018, federal disclosure requirements went into effect under PPACA requiring new menu nutritional labeling requirements,food, including the requirement to publish the total numberfederal regulations of calories of standard menu items on menus, along with a statement that puts this calorie information in the context of a total daily calorie intake. The PPACA also requires us to provide to consumers, upon request, a written summary of detailed nutritional information for each standard menu item, and to provide a statement on menus about the availability of this information. The PPACA also permits the Food and Drug Administration, which oversees the safety of the entire food system, including inspection and mandatory food recalls, menu labeling and nutritional content, and additional requirements in certain states and local jurisdictions;
Immigration reform continues to attract significant attentionenvironmental factors could delay or prevent development of new stores in the public arena and the U.S. Congress. certain locations.
Our sales andbusiness, results of operations may be adversely affected by climate change and the passage of other environmental legislation and regulations. The costs and other effects of new legal requirements cannot be determined with certainty. For example, new legislation or regulations may result in increased costs directly for our compliance or indirectly to the extent that such requirements increase prices charged to us by vendors
because of increased compliance costs. At this point, we are unable to determine the impact that climate change and other environmental legislation and regulations could have on our overall business.
Our success depends upon our ability to recruit and retain qualified store management and operating personnel while also controlling our labor costs.
We must continue to attract, retain and motivate qualified management and operating personnel to maintain consistency in our service, hospitality, quality and atmosphere of our stores, in the United States and Canada. Qualified management and operating personnel are typically in high demand. If we are unable to attract and retain a satisfactory number of qualified management and operating personnel, labor shortages could delay the planned openings of new stores or adversely impact our existing stores. Any such delays, material increases in employee turnover rates in existing stores or widespread employee dissatisfaction could have a material adverse effect on our business and results of operations. Competition for qualified employees could require us to pay higher wages, which could result in higher labor costs and could have a material adverse effect on our results of operations.
Our financial performance and the ability to successfully implement our strategic directioncondition could be adversely affected if we fail to retain, or effectively respond, to a loss of key management.
Our future success significantly depends on the continued service and performanceaffected. Moreover, although none of our key management personnel. Weemployees have employment agreements with all members of senior management. However, we cannot prevent members of senior management from terminating their employment with us. Losing the services of members of senior management could materially harm our business until a suitable replacement is found, and such replacementbeen or are now represented by any unions, labor organizations may not have equal experience and capabilities. In addition, we have not purchased life insurance on any membersseek to represent certain of our senior management.
If weemployees in the future, and if they are unable to successfully designsuccessful, our payroll expenses and execute a business strategy plan, our revenues and profitabilityother labor costs may be increased in the course of collective bargaining, and/or there may be strikes or other work disruptions that may adversely affected.
Our ability to increase revenues and profitability is dependent on designing and executing effective business strategies. If we are delayed or unsuccessful in executingaffect our strategies or if our strategies do not yield the desired results, our business, financial condition and results of operations may suffer. Our ability to meet our business strategy plan is dependent upon, among other things, our ability to:
increase gross sales and operating profits at our existing stores with game, food and beverage options desired by our customers;
evolve our marketing and branding strategies to appeal to our customers;
innovate and implement technology initiatives to provide a unique digital customer experience;
identify adequate sources of capital to fund and finance strategic initiatives, including new store openings, remodeling existing stores and new game development;
grow and expand operations, including identifying available, suitable and economically viable sites for new stores; and
improve the speed and quality of our service.
We face potential liability with our gift cards under the property laws of some states.
time that the cards are inactive. To date we have not remitted any amounts relating to unredeemed gift cards to states based upon our assessment of applicable laws.
Customer complaints
Local conditions, adverse weather conditions, natural disasters and acts of violence or terrorism, could adversely affect our business.
Certain of the regions in which our stores are located have been, and may in the future be, subject to adverse local conditions, events, terrorist attacks, adverse weather conditions, or natural disasters, such as earthquakes, floods and hurricanes. Depending upon its magnitude, a natural disaster could severely damage our stores, which could adversely affect our business, results of operations or financial condition. Our corporate headquarters, company-owned distribution center, game repair facility and our data center, as well as our backup data facility, are all located in Dallas, Texas. A natural orman-made disaster could significantly impact our ability to provide
services and systems to our stores and negatively impact store operations throughout our operations. We currently maintain property and business interruption insurance through the aggregate property policy for each of our stores. However, if there is a major disaster, such coverage may not be adequate. In addition, upon the expiration of our current insurance policies, adequate insurance coverage may not be available at reasonable rates, or at all. Any act of violence at or threatened against our stores or the centers in which they are located, including active shooter situations and terrorist activities, may result in restricted access to our stores and/or store closures in the short-term and, in the long term, may cause our customers and employees to avoid visiting our stores. Any such situation could adversely impact cash flows and make it more difficult to fully staff our stores, which could materially adversely affect our business.
We may not be ableproperty.Ourproperty could harm our business.
Information technology system failures or interruptions may impact our operations.
We rely heavily on various information technology systems, includingpoint-of-sale, kiosk
The unauthorized access to, theft or destruction of, customer or employee personal, financial or other data or of our proprietary or confidential information that is stored in our information systems or by third parties on our behalf could impact our reputation and brand and expose us to potential liability and loss of revenues.
The protection of customer, employee and company data is critical to us. We are subject to laws relating to information security, privacy, cashless payments, consumer credit and fraud. Additionally, an increasing number of government and industry groups have established laws and standards for the protection of personal and health information. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and constantly changing requirements. Compliance with these requirements may result in cost increases due to necessary system changes and the development of new administrative processes, and if we fail to comply with laws and regulations regarding privacy and security, we could be exposed to risks of fines, investigations, litigation and disruption of our operations.
In the ordinary course of our business, we receive and maintain certain personal information from our customers, employees and vendors, and we process customer payments using payment information. Customers and employees have a high expectation that we will adequately protect their personal information. Third parties may have the technology orknow-how to breach the security of this customer information, and our security measures and those of our technology vendors may not effectively prohibit others from obtaining improper access to this information. A number of restaurant operators and retailers have experienced security breaches in which credit and debit card information may have been stolen. Although we employ security technologies and practices and have taken other steps to try to prevent a breach, we may nevertheless not have the resources or technical sophistication to prevent rapidly evolving types of cyberattacks. In fiscal 2007, there was an external breach of our credit card processing systems, which led to fraudulent credit card activity and resulted in the payment of fines and reimbursements for the fraudulent credit card activity. As part of a settlement with the Federal Trade Commission, we have implemented a series of corrective measures in order to ensure that our computer systems are secure and that our customers’ personal information is protected. If in the future, we experience another security breach, we could become subject to claims, lawsuits or other proceedings for purportedly fraudulent transactions arising out of the theft of credit or debit card information, compromised security and information systems, failure of our employees to comply with applicable laws, the unauthorized acquisition or use of such information by third parties, or other similar claims. In addition, such breach could put us in violation of our settlement agreement with the Federal Trade Commission. Any such incidents or proceedings could disrupt the operation of our stores, adversely affect our reputation, consumer confidence, and our results of operations, or result in the imposition of penalties or cause us to incur significant unplanned losses and expenditures, including those necessary to remediate any damage to persons whose personal information may have been compromised. Although we have established a cybersecurity policy, which includes procedures designed to increase transparency and address our customers’ concerns regarding data breaches (whether actual or perceived), the policy may not be effective in addressing those concerns, which may in turn adversely affect our reputation and customer confidence. We maintain a separate insurance policy covering cybersecurity risks and such insurance coverage may, subject to policy terms and conditions, cover certain aspects of cyber risks, but this policy is subject to a retention amount and may not be applicable to a particular incident or otherwise may be insufficient to cover all our losses beyond any retention. Further, in light of recent court rulings, there is uncertainty as to whether traditional commercial general liability policies will be construed to cover the expenses related to cyberattacks and breaches if credit and debit card information is stolen.
We are required to maintain the highest level of Payment Card Industry (“PCI”) Data Security Standard compliance at our corporate office and stores. As part of an overall security program and to meet PCI standards, we undergo regular external vulnerability scans and we are reviewed by a third-party assessor. As PCI standards change, we may be required to implement additional security measures. If we do not maintain the required level of PCI compliance, we could be subject to costly fines or additional fees from the card brands that we accept or lose our ability to accept those payment cards.
Failure of our internal control over financial reporting could harm our business
Our management is responsible for establishingfollowing March 2020, the coronavirus global pandemic and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with generally accepted accounting principlessignificant uncertainties in the United States. Because of its inherent limitations, internal control over financial reporting is not intendedStates economy created due to provide absolute assurance that we would prevent or detectthe health crisis had a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting, including such a failure by third party service providerssignificant impact on whose controls we rely, could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could result in substantial cost to remediate and could cause a loss of investor confidence and decline in the market price of our common stock.
Our long-term business strategy may include growth through the acquisitionfuture. The outcome of other businesses. We may not be able to identify attractive acquisition opportunities or successfully acquire identified targets on terms favorable to us. Competition for acquisition opportunities may be substantial and may cause us to refrain from making acquisitions. In addition, we may not be successful in integrating future acquisitions into our existing operations, whichreforms may result in unforeseen operational difficulties, diminishedincreased interest expense to us. Changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our shares, and a rising interest rate environment could have an adverse impact on the price of our shares, our ability to issue equity or incur debt for acquisitions or other purposes.
Acquisitions that we complete could present several additional risks, including but not limited to:
incorrect assumptions regarding the future results of acquired operations or assets or expected cost reductions or other synergies expected to be realized from acquiring operations or assets;
failure to integrate the operations or management of any acquired operations or assets successfully and timely;
potential loss of key employees and customers of the acquired companies;
potential lack of experience operating in a geographic market or product line of the acquired business;
an increase in our expenses, particularly overhead expenses, and working capital requirements;
the possible inability to achieve the intended objectives of the business combination; and
the diversion of management’s attention from existing operations or other priorities.
ITEM 1B. |
ITEM 2. | Properties |
As of February 3, 2019, we lease the building or site of all our 121 operating stores. The table below shows the locations of our operating stores as of February 3, 2019:
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The contracted lease terms, including renewal options, generally range from 20 to 40 years. Our leases typically provide for a minimum annual rent plus contingent rent to be determined as a percentage of the applicable store’s annual gross revenues. In fiscal 2018 we paid contingent rent in 33 of our stores. Generally,
leases are “net leases” that require us to pay our pro rata share of taxes, insurance and maintenance costs. All our leases include renewal options that give us the opportunity to extend the lease terms through 2023 or later. During fiscal 2018, we also purchased land for a future site in Wichita, Kansas. Additionally, as of February 3, 2019, we have signed 24 lease agreements for future store openings, including ten stores that are under construction, and these future locations are excluded from the table above. During the first quarter of fiscal 2019 we closed a store in Georgia as a result of our decision not to renew the lease.
In addition to our leased stores, we
Location | Total | |||
Alabama | 2 | |||
Alaska | 1 | |||
Arizona | 4 | |||
Arkansas | 2 | |||
California | 16 | |||
Colorado | 2 | |||
Connecticut | 2 | |||
Florida | 8 | |||
Georgia | 4 | |||
Hawaii | 1 | |||
Idaho | 1 | |||
Illinois | 4 | |||
Indiana | 2 | |||
Kansas | 3 | |||
Kentucky | 2 | |||
Louisiana | 1 | |||
Maryland | 5 | |||
Massachusetts | 3 | |||
Michigan | 3 | |||
Minnesota | 2 | |||
Missouri | 1 | |||
Nebraska | 1 | |||
Nevada | 1 | |||
New Hampshire | 1 | |||
New Jersey | 3 | |||
New Mexico | 1 | |||
New York | 11 | |||
North Carolina | 4 | |||
Ohio | 6 | |||
Oklahoma | 2 | |||
Oregon | 1 | |||
Pennsylvania | 7 | |||
Rhode Island | 1 | |||
South Carolina | 3 | |||
Tennessee | 4 | |||
Texas | 13 | |||
Utah | 1 | |||
Virginia | 4 | |||
Washington | 1 | |||
Wisconsin | 3 | |||
Puerto Rico | 1 | |||
Ontario, Canada | 2 | |||
Total | 140 |
ITEM 3. | Legal Proceedings |
ITEM 4. | Mine Safety Disclosures |
ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
stock.
Information regarding repurchase
Period(1) | Total Number of Shares Repurchased | Average Price Paid per Share | Total Number of Shares Repurchased as Part of Publicly Announced Plan (2) | Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Plan (in thousands) (2) | ||||||||||||
November 5, 2018 — December 2, 2018 | 134,411 | $ | 59.10 | 134,411 | $ | 125,243 | ||||||||||
December 3, 2018 — January 6, 2019 | 780,441 | $ | 46.08 | 780,441 | $ | 89,277 | ||||||||||
January 7, 2019 — February 3, 2019 | 393,800 | $ | 48.60 | 393,800 | $ | 70,137 |
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Period Ended | ||||||||||||||||||||||
10/10/2014 | 2/1/2015 | 1/31/2016 | 1/29/2017 | 2/4/2018 | 2/3/2019 | |||||||||||||||||
PLAY | $100.00 | $ | 179.63 | $ | 226.69 | $ | 342.50 | $ | 298.13 | $ | 320.88 | |||||||||||
S&P 600 Small Cap | $100.00 | $ | 110.16 | $ | 104.99 | $ | 141.75 | $ | 161.70 | $ | 162.27 | |||||||||||
S&P 600 Consumer Discretionary | $100.00 | $ | 116.77 | $ | 103.57 | $ | 121.41 | $ | 144.21 | $ | 146.95 | |||||||||||
NASDAQ Composite | $100.00 | $ | 108.40 | $ | 107.90 | $ | 132.38 | $ | 169.33 | $ | 169.87 |
ITEM 6. | Selected Financial Data |
The Company’s fiscal year consists of 52 or 53 weeks ending on the Sunday after the Saturday closest to January 31. Each quarterly period has 13 weeks, except in a
Fiscal Year Ended | ||||||||||||||||||||
February 3, 2019 | February 4, 2018 | January 29, 2017 | January 31, 2016 | February 1, 2015 | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Total revenues | $ | 1,265,301 | $ | 1,139,791 | $ | 1,005,158 | $ | 866,982 | $ | 746,751 | ||||||||||
Operating income | 161,000 | 165,772 | 150,516 | 110,036 | 73,861 | |||||||||||||||
Net income | 117,221 | 120,949 | 90,795 | 59,619 | 7,636 | |||||||||||||||
Balance sheet data (as of end of period): | ||||||||||||||||||||
Cash and cash equivalents | 21,585 | 18,795 | 20,083 | 25,495 | 70,876 | |||||||||||||||
Working capital (deficit)(1) | (153,297 | ) | (112,918 | ) | (102,193 | ) | (46,567 | ) | 17,140 | |||||||||||
Property and equipment, net | 805,337 | 726,455 | 606,865 | 523,891 | 436,048 | |||||||||||||||
Total assets(2) | 1,273,187 | 1,197,030 | 1,052,733 | 1,003,701 | 944,794 | |||||||||||||||
Total debt, net(2) | 393,469 | 366,249 | 264,128 | 337,416 | 423,496 | |||||||||||||||
Stockholders’ equity | 387,837 | 421,646 | 439,452 | 346,338 | 258,697 | |||||||||||||||
Other data: | ||||||||||||||||||||
Capital expenditures | $ | 216,286 | $ | 219,901 | $ | 180,577 | $ | 162,892 | $ | 129,688 | ||||||||||
Stores open at end of period(3) | 121 | 106 | 92 | 81 | 73 | |||||||||||||||
Stores closed during period | — | — | — | 2 | 1 | |||||||||||||||
Cash dividends declared per share | $ | 0.30 | — | — | — | — | ||||||||||||||
Net income per share of common stock: | ||||||||||||||||||||
Basic | $ | 3.00 | $ | 2.93 | $ | 2.16 | $ | 1.46 | $ | 0.22 | ||||||||||
Diluted | $ | 2.93 | $ | 2.84 | $ | 2.10 | $ | 1.39 | $ | 0.21 | ||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||
Basic | 39,047,106 | 41,276,314 | 41,951,770 | 40,968,455 | 35,314,884 | |||||||||||||||
Diluted | 39,975,122 | 42,583,009 | 43,288,592 | 42,783,905 | 37,126,048 |
Fiscal Year Ended | ||||||||||||||||||||
January 31, 2021 | February 2, 2020 | February 3, 2019 | February 4, 2018 | January 29, 2017 | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Total revenues | $ | 436,512 | $ | 1,354,691 | $ | 1,265,301 | $ | 1,139,791 | $ | 1,005,158 | ||||||||||
Operating income (loss) | (252,612 | ) | 148,079 | 161,000 | 165,772 | 150,516 | ||||||||||||||
Net income (loss) | (206,974 | ) | 100,263 | 117,221 | 120,949 | 90,795 | ||||||||||||||
Balance sheet data (as of end of period): | ||||||||||||||||||||
Cash and cash equivalents | 11,891 | 24,655 | 21,585 | 18,795 | 20,083 | |||||||||||||||
Working capital (deficit) (1) | (152,765 | ) | (211,888 | ) | (153,297 | ) | (112,918 | ) | (102,193 | ) | ||||||||||
Property and equipment, net | 815,027 | 900,637 | 805,337 | 726,455 | 606,865 | |||||||||||||||
Total assets | 2,352,824 | 2,370,139 | 1,273,187 | 1,197,030 | 1,052,733 | |||||||||||||||
Total debt, net | 596,388 | 647,689 | 393,469 | 366,249 | 264,128 | |||||||||||||||
Stockholders’ equity | 153,232 | 169,650 | 387,837 | 421,646 | 439,452 | |||||||||||||||
Other data: | ||||||||||||||||||||
Capital expenditures | $ | 83,016 | $ | 228,091 | $ | 216,286 | $ | 219,901 | $ | 180,577 | ||||||||||
Company-owned stores at end of period | 140 | 136 | 121 | 106 | 92 | |||||||||||||||
Stores closed during period | 2 | 1 | — | — | — | |||||||||||||||
Cash dividends declared per share | $ | — | $ | 0.62 | $ | 0.30 | $ | — | $ | — | ||||||||||
Net income (loss) per share of common stock: | ||||||||||||||||||||
Basic | $ | (4.75 | ) | $ | 3.00 | $ | 3.00 | $ | 2.93 | $ | 2.16 | |||||||||
Diluted | $ | (4.75 | ) | $ | 2.94 | $ | 2.93 | $ | 2.84 | $ | 2.10 | |||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||
Basic | 43,549,887 | 33,450,217 | 39,047,106 | 41,276,314 | 41,951,770 | |||||||||||||||
Diluted | 43,549,887 | 34,099,378 | 39,975,122 | 42,583,009 | 43,288,592 |
(1) | Defined as total current assets minus total current liabilities. |
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ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
By their nature, forward-looking statements involve risks and uncertainties because they relateMarch 28, 2021, fifteen stores continue to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not a guarantee of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this annual reportremain closed to
the initial agreements. As of the end of fiscal 2020, the Company had executed 17 of these additional rent relief agreements.
Our Growth Strategies and Outlook
Our growth is based primarily
Build great new stores;
Driveof our comparable stores sales;after mandated shutdowns related to
Expand the Dave & Buster’s brand internationally.
integrated experience, and driving customer engagement. For further information about our growth strategies and outlook, see Item 1 “Business – Our Growth Strategies”strategy, refer to “Item 1. Strategy”.
Overview
Total revenues increased 11% to $1,265,301 in fiscal 2018 compared to $1,139,791 in fiscal 2017. Our revenue growth was primarily influenced by the number of new store openings partially offset by one less week in fiscal 2018.
Comparable store sales decreased 1.6% in fiscal 2018 compared to the comparable52-week period of fiscal 2017, driven by lower customer volumes.
Operating income decreased to $161,000 in fiscal 2018 compared to Operating income of $165,772 in fiscal 2017. Fiscal 2018 operating margin was 12.7% compared to 14.5% in fiscal 2017. The decrease in operating margin in fiscal 2018 was primarily driven by the increased margin pressure on occupancy costs associated with our recent store openings and higher operating payroll and benefits as a percentage of sales, partially offset by favorable leverage of general and administrative costs.
Earnings per share (“EPS”) for fiscal 2018 increased to $2.93 per diluted share, compared to EPS of $2.84 per diluted share in fiscal 2017.
Cash flows from operations were $337,616 in fiscal 2018 compared to $264,672 in fiscal 2017. The increase was primarily due to increased cash flows from additionalnon-comparable store sales as well as an increase in our net working capital deficit.
Capital expenditures were $216,286 in fiscal 2018 compared to $219,901 in fiscal 2017.
Liquidity and Cash Flows
The primary source of cash flow is from our operating activities and availability under the revolving credit facility.
Store-Level Variability, Quarterly Fluctuations, Seasonality and Inflation
Our new stores typically open with sales volumes that exceedin excess of their expected long-termperformgrow in line with the rest of our comparable store base thereafter. Due toAs a result of the substantial revenues associated with each new store, the number and timing of new store openings will result in significant fluctuations in quarterly results.
In
unseasonably mild weather on customer traffic and sales during that period. Our third quarter, which encompasses the
During fiscal 2020, results also fluctuated due to the timing and frequency of temporary closures and operating restrictions due to state and local guidelines imposed due to the
In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of the
2019
Fiscal Year Ended February 3, 2019 | Fiscal Year Ended February 4, 2018 | |||||||||||||||
Food and beverage revenues | $ | 536,469 | 42.4 | % | $ | 494,816 | 43.4 | % | ||||||||
Amusement and other revenues | 728,832 | 57.6 | 644,975 | 56.6 | ||||||||||||
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Total revenues | 1,265,301 | 100.0 | 1,139,791 | 100.0 | ||||||||||||
Cost of food and beverage (as a percentage of food and beverage revenues) | 139,199 | 25.9 | 127,600 | 25.8 | ||||||||||||
Cost of amusement and other (as a percentage of amusement and other revenues) | 81,064 | 11.1 | 69,072 | 10.7 | ||||||||||||
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Total cost of products | 220,263 | 17.4 | 196,672 | 17.3 | ||||||||||||
Operating payroll and benefits | 296,924 | 23.5 | 256,724 | 22.5 | ||||||||||||
Other store operating expenses | 384,155 | 30.4 | 334,546 | 29.4 | ||||||||||||
General and administrative expenses | 61,521 | 4.9 | 59,565 | 5.2 | ||||||||||||
Depreciation and amortization expense | 118,275 | 9.3 | 102,766 | 9.0 | ||||||||||||
Pre-opening costs | 23,163 | 1.8 | 23,746 | 2.1 | ||||||||||||
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Total operating costs | 1,104,301 | 87.3 | 974,019 | 85.5 | ||||||||||||
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Operating income | 161,000 | 12.7 | 165,772 | 14.5 | ||||||||||||
Interest expense, net | 13,113 | 1.0 | 8,665 | 0.7 | ||||||||||||
Loss on debt retirement | — | — | 718 | 0.1 | ||||||||||||
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Income before provision for income taxes | 147,887 | 11.7 | 156,389 | 13.7 | ||||||||||||
Provision for income taxes | 30,666 | 2.4 | 35,440 | 3.1 | ||||||||||||
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Net income | $ | 117,221 | 9.3 | % | $ | 120,949 | 10.6 | % | ||||||||
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Change in comparable store sales(1) | (1.6 | )% | (0.9 | )% | ||||||||||||
Company-owned stores open at end of period(2) | 121 | 106 | ||||||||||||||
Comparable stores open at end of period | 86 | 76 |
Fiscal Year Ended | Fiscal Year Ended | |||||||||||||||
January 31, 2021 | February 2, 2020 | |||||||||||||||
Food and beverage revenues | $ | 159,501 | 36.5 | % | $ | 563,576 | 41.6 | % | ||||||||
Amusement and other revenues | 277,011 | 63.5 | 791,115 | 58.4 | ||||||||||||
Total revenues | 436,512 | 100.0 | 1,354,691 | 100.0 | ||||||||||||
Cost of food and beverage (as a percent of food and beverage revenues) | 45,207 | 28.3 | 148,196 | 26.3 | ||||||||||||
Cost of amusement and other (as a percent of amusement and other revenues) | 29,698 | 10.7 | 85,115 | 10.8 | ||||||||||||
Total cost of products | 74,905 | 17.2 | 233,311 | 17.2 | ||||||||||||
Operating payroll and benefits | 117,475 | 26.9 | 322,970 | 23.8 | ||||||||||||
Other store operating expenses | 299,464 | 68.6 | 429,431 | 31.8 | ||||||||||||
General and administrative expenses | 47,215 | 10.8 | 69,469 | 5.1 | ||||||||||||
Depreciation and amortization expense | 138,789 | 31.8 | 132,460 | 9.8 | ||||||||||||
Pre-opening costs | 11,276 | 2.6 | 18,971 | 1.4 | ||||||||||||
Total operating costs | 689,124 | 157.9 | 1,206,612 | 89.1 | ||||||||||||
Operating income (loss) | (252,612 | ) | (57.9 | ) | 148,079 | 10.9 | ||||||||||
Interest expense, net | 36,890 | 8.4 | 20,937 | 1.5 | ||||||||||||
Loss on debt refinance | 904 | 0.2 | — | — | ||||||||||||
Income (loss) before provision (benefit) for income taxes | (290,406 | ) | (66.5 | ) | 127,142 | 9.4 | ||||||||||
Provision (benefit) for income taxes | (83,432 | ) | (19.1 | ) | 26,879 | 2.0 | ||||||||||
Net income (loss) | $ | (206,974 | ) | (47.4 | )% | $ | 100,263 | 7.4 | % | |||||||
Change in comparable store sales | (70.2 | )% | (2.6 | )% | ||||||||||||
Company-owned stores at end of period (1) | 140 | 136 | ||||||||||||||
Comparable stores at end of period (1) | 114 | 99 |
(1) |
As of January 31, 2021, 107 of our 140 stores were open and 84 of our 114 comparable stores were open. Our total and comparable store |
re-open.Our store in Duluth (Atlanta), Georgia |
Fiscal Year Ended February 3, 2019 | Fiscal Year Ended February 4, 2018 | |||||||
First Quarter | 6 | 4 | ||||||
Second Quarter | 5 | 4 | ||||||
Third Quarter | 1 | 1 | ||||||
Fourth Quarter | 3 | 5 | ||||||
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Fiscal Year Ended February 3, 2019 | Fiscal Year Ended February 4, 2018 | |||||||||||||||
Net income | $ | 117,221 | 9.3 | % | $ | 120,949 | 10.6 | % | ||||||||
Interest expense, net | 13,113 | 8,665 | ||||||||||||||
Loss on debt retirement | — | 718 | ||||||||||||||
Provision for income tax | 30,666 | 35,440 | ||||||||||||||
Depreciation and amortization expense | 118,275 | 102,766 | ||||||||||||||
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EBITDA | 279,275 | 22.1 | % | 268,538 | 23.6 | % | ||||||||||
Loss on asset disposal | 1,121 | 1,863 | ||||||||||||||
Share-based compensation | 7,422 | 8,916 | ||||||||||||||
Pre-opening costs | 23,163 | 23,746 | ||||||||||||||
Other costs(1) | 136 | (333 | ) | |||||||||||||
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Adjusted EBITDA | $ | 311,117 | 24.6 | % | $ | 302,730 | 26.6 | % | ||||||||
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January 31, 2021 | February 2, 2020 | |||||||||||||||
Net income (loss) | $ | (206,974 | ) | -47.4 | % | $ | 100,263 | 7.4 | % | |||||||
Interest expense, net | 36,890 | 20,937 | ||||||||||||||
Loss on debt refinance | 904 | — | ||||||||||||||
Provision (benefit) for income tax | (83,432 | ) | 26,879 | |||||||||||||
Depreciation and amortization expense | 138,789 | 132,460 | ||||||||||||||
EBITDA | (113,823 | ) | -26.1 | % | 280,539 | 20.7 | % | |||||||||
Loss on asset disposal | 577 | 1,813 | ||||||||||||||
Impairment of long-lived assets and lease termination costs | 13,727 | — | ||||||||||||||
Share-based compensation | 6,985 | 6,857 | ||||||||||||||
Pre-opening costs | 11,276 | 18,971 | ||||||||||||||
Other costs (1) | (15 | ) | 42 | |||||||||||||
Adjusted EBITDA | $ | (81,273 | ) | -18.6 | % | $ | 308,222 | 22.8 | % | |||||||
(1) | Primarily represents costs related to currency transaction (gains) or losses. |
Operating income General and administrative expenses Depreciation and amortization expense Pre-opening costs Store Operating Income Before Depreciation and Amortization New store and operating initiatives Games Maintenance capital Total capital additions Payments from landlords(in dollars and as a percent of total revenues) Operating income (loss) to Store Operating Income Before Depreciation and Amortization for the periods indicated: Fiscal Year Ended
February 3, 2019 Fiscal Year Ended
February 4, 2018 $ 161,000 12.7 % $ 165,772 14.5 % 61,521 59,565 118,275 102,766 23,163 23,746 $ 363,959 28.8 % $ 351,849 30.9 % $ (252,612 ) -57.9 % $ 148,079 10.9 % 47,215 69,469 138,789 132,460 11,276 18,971 $ (55,332 ) -12.7 % $ 368,979 27.2 % represents totalreflects accrual-based additions to property and equipment. Total capital additions. Capital additions do not include any reductions for accrual-based tenant improvement allowances or proceeds from sale-leaseback transactions (collectively, “Payments from landlords”). Fiscal Year
Ended
February 3,
2019 Fiscal Year
Ended
February 4,
2018 $ 162,763 $ 185,449 27,381 18,712 20,821 19,160 $ 210,965 $ 223,321 $ 52,099 $ 40,334
Ended
Ended
2021
2020 $ 51,572 $ 183,897 8,795 19,749 3,266 27,351 $ 63,633 $ 230,997 $ 12,923 $ 33,544
Fiscal year ended January 31, 2021 | Fiscal year ended February 2, 2020 | Change | ||||||||||
Total revenues | $ | 436,512 | $ | 1,354,691 | $ | (918,179 | ) | |||||
Total store operating weeks | 3,922 | 6,769 | (2,847 | ) | ||||||||
Comparable store revenues | $ | 358,395 | $ | 1,200,983 | $ | (842,588 | ) | |||||
Comparable store operating weeks | 3,157 | 5,928 | (2,771 | ) | ||||||||
Noncomparable store revenues | $ | 81,272 | 162,467 | $ | (81,195 | ) | ||||||
Noncomparable store operating weeks | 765 | 841 | (76 | ) | ||||||||
Other revenues | $ | (3,155 | ) | $ | (8,759 | ) | $ | 5,604 |
Fiscal Year Ended | Fiscal Year Ended | |||||||||||||||
February 2, 2020 | February 3, 2019 | |||||||||||||||
Food and beverage revenues | $ | 563,576 | 41.6 | % | $ | 536,469 | 42.4 | % | ||||||||
Amusement and other revenues | 791,115 | 58.4 | 728,832 | 57.6 | ||||||||||||
Total revenues | 1,354,691 | 100.0 | 1,265,301 | 100.0 | ||||||||||||
Cost of food and beverage (as a percentage of food and beverage revenues) | 148,196 | 26.3 | 139,199 | 25.9 | ||||||||||||
Cost of amusement and other (as a percentage of amusement and other revenues) | 85,115 | 10.8 | 81,064 | 11.1 | ||||||||||||
Total cost of products | 233,311 | 17.2 | 220,263 | 17.4 | ||||||||||||
Operating payroll and benefits | 322,970 | 23.8 | 296,924 | 23.5 | ||||||||||||
Other store operating expenses | 429,431 | 31.8 | 384,155 | 30.4 | ||||||||||||
General and administrative expenses | 69,469 | 5.1 | 61,521 | 4.9 | ||||||||||||
Depreciation and amortization expense | 132,460 | 9.8 | 118,275 | 9.3 | ||||||||||||
Pre-opening costs | 18,971 | 1.4 | 23,163 | 1.8 | ||||||||||||
Total operating costs | 1,206,612 | 89.1 | 1,104,301 | 87.3 | ||||||||||||
Operating income | 148,079 | 10.9 | 161,000 | 12.7 | ||||||||||||
Interest expense, net | 20,937 | 1.5 | 13,113 | 1.0 | ||||||||||||
Income before provision for income taxes | 127,142 | 9.4 | 147,887 | 11.7 | ||||||||||||
Provision for income taxes | 26,879 | 2.0 | 30,666 | 2.4 | ||||||||||||
Net income | $ | 100,263 | 7.4 | % | $ | 117,221 | 9.3 | % | ||||||||
Change in comparable store sales | (2.6 | )% | (1.6 | )% | ||||||||||||
Company-owned stores open at end of period (1) | 136 | 121 | ||||||||||||||
Comparable stores open at end of period (1) | 99 | 86 |
(1) | Our store in Duluth (Atlanta), Georgia permanently closed on March 3, 2019, as we did not exercise the renewal option, and has been excluded from fiscal 2019 store counts and comparable store sales. The number of new store openings during the last two fiscal years were as follows: |
Fiscal Year Ended | Fiscal Year Ended | |||||||
February 2, 2020 | February 3, 2019 | |||||||
First Quarter | 7 | 6 | ||||||
Second Quarter | 3 | 5 | ||||||
Third Quarter | 4 | 1 | ||||||
Fourth Quarter | 2 | 3 | ||||||
16 | 15 |
Fiscal Year Ended | Fiscal Year Ended | |||||||||||||||
February 2, 2020 | February 3, 2019 | |||||||||||||||
Net income | $ | 100,263 | 7.4 | % | $ | 117,221 | 9.3 | % | ||||||||
Interest expense, net | 20,937 | 13,113 | ||||||||||||||
Provision for income tax | 26,879 | 30,666 | ||||||||||||||
Depreciation and amortization expense | 132,460 | 118,275 | ||||||||||||||
EBITDA | 280,539 | 20.7 | % | 279,275 | 22.1 | % | ||||||||||
Loss on asset disposal | 1,813 | 1,121 | ||||||||||||||
Share-based compensation | 6,857 | 7,422 | ||||||||||||||
Pre-opening costs | 18,971 | 23,163 | ||||||||||||||
Other costs (1) | 42 | 136 | ||||||||||||||
Adjusted EBITDA | $ | 308,222 | 22.8 | % | $ | 311,117 | 24.6 | % | ||||||||
(1) | Primarily represents costs related to currency transaction (gains) or losses. |
Fiscal Year Ended | Fiscal Year Ended | |||||||||||||||
February 2, 2020 | February 3, 2019 | |||||||||||||||
Operating income | $ | 148,079 | 10.9 | % | $ | 161,000 | 12.7 | % | ||||||||
General and administrative expenses | 69,469 | 61,521 | ||||||||||||||
Depreciation and amortization expense | 132,460 | 118,275 | ||||||||||||||
Pre-opening costs | 18,971 | 23,163 | ||||||||||||||
Store Operating Income Before Depreciation and Amortization | $ | 368,979 | 27.2 | % | $ | 363,959 | 28.8 | % | ||||||||
Fiscal Year Ended | Fiscal Year Ended | |||||||
February 3, 2020 | February 3, 2019 | |||||||
New store and operating initiatives | $ | 183,897 | $ | 162,763 | ||||
Games | 19,749 | 27,381 | ||||||
Maintenance capital | 27,351 | 20,821 | ||||||
Total capital additions | $ | 230,997 | $ | 210,965 | ||||
Payments from landlords | $ | 33,544 | $ | 52,099 |
Comparable stores | $ | (15,250 | ) | |
Comparable stores - impact of one less week | (17,551 | ) | ||
Non-comparable stores | 163,250 | |||
Other | (4,939 | ) | ||
|
| |||
Total | $ | 125,510 | ||
|
|
The following discussion on comparable store sales has been prepared by comparing fiscal 2018 revenues to fiscal 2017 revenues shifted to a52-week basis (beginning February 6, 2017 and ending February 4, 2018). We have estimated the impact of the first week of fiscal 2017 to be $19,457.
Comparable stores | $ | (28,408 | ) | |
Non-comparable stores | 117,592 | |||
Other | 206 | |||
Total | $ | 89,390 | ||
2018.
$163,250$117,592 for fiscal 20182019 compared to fiscal 2017.2018. The increase in815811 additional operating store weeks contributed by our thirty-fivethirty-seven stores. The additional weeks exclude seven operating store weeksfiscal 2017,revenue due to the shift described above.
closure of our store in Duluth (Atlanta), Georgia on March 3, 2019. The year-over-year decline in average weekly
power cards.
sales, partially offset by lower incentive compensation.
sales, the absence of hurricane-related business interruption proceeds recorded in the prior year and incremental legal costs.
prior year $2,550 charge for litigation settlement costs and lower incremental compensationat our corporate headquarters including costs related to our share-based awards.shareholder activism. General and administrative expenses, as a percentage of total revenues, decreased 30increased 20 basis points to 5.1% in fiscal 2019 compared to 4.9% in fiscal 2018, compared to 5.2% in fiscal 2017, for the same reasons above offset by favorable leverage on revenue increases.
Lossrate credit facility. Our swap agreements with our derivative counterparties contain a provision where if the Company defaults on debt refinancing
In connection withany of its indebtedness and repayment of the August 17, 2017, debt refinancing (seeindebtedness has been accelerated, the Company could also be declared in default on its derivative obligations. Refer to Note 51 of Notes tothe Consolidated Financial Statements for further discussion),discussion of our swap agreements, which were
Provision for income taxes
The effective income tax rate decreased to 20.7% in fiscal 2018 compared to 22.7% in fiscal 2017. This decrease in the effective tax rate was favorably impacted by the reduction in the statutory rate from 33.7% to 21.0%, offset by the absencedate of the revaluation of deferrals of 5.1%, as a result of the Tax Act enacted on December 22, 2017. The impact from the Tax Act was offset by an unfavorable 4.0% impact from lower excess tax benefit associated with share-based compensation and an unfavorable 1.5% impact from state taxes. Other differences from the statutory rate are due to the FICA tip credits and the impact of certain income and expense items which are not recognized for income tax purposes. Refer to Note 6 of Notes to Consolidated Financial Statements, for further information on our income tax provision.
Fiscal 2017 Compared to Fiscal 2016
Results of operations.The following table sets forth selected data, in thousands of dollars and as a percentage of total revenues (unless otherwise noted) for the periods indicated. All information is derived from the accompanying consolidated statements of comprehensive income.
Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | |||||||||||||||
Food and beverage revenues | $ | 494,816 | 43.4 | % | $ | 452,140 | 45.0 | % | ||||||||
Amusement and other revenues | 644,975 | 56.6 | 553,018 | 55.0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenues | 1,139,791 | 100.0 | 1,005,158 | 100.0 | ||||||||||||
Cost of food and beverage (as a percentage of food and beverage revenues) | 127,600 | 25.8 | 114,946 | 25.4 | ||||||||||||
Cost of amusement and other (as a percentage of amusement and other revenues) | 69,072 | 10.7 | 65,354 | 11.8 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cost of products | 196,672 | 17.3 | 180,300 | 17.9 | ||||||||||||
Operating payroll and benefits | 256,724 | 22.5 | 228,827 | 22.8 | ||||||||||||
Other store operating expenses | 334,546 | 29.4 | 287,322 | 28.6 | ||||||||||||
General and administrative expenses | 59,565 | 5.2 | 54,474 | 5.4 | ||||||||||||
Depreciation and amortization expense | 102,766 | 9.0 | 88,305 | 8.8 | ||||||||||||
Pre-opening costs | 23,746 | 2.1 | 15,414 | 1.5 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating costs | 974,019 | 85.5 | 854,642 | 85.0 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Operating income | 165,772 | 14.5 | 150,516 | 15.0 | ||||||||||||
Interest expense, net | 8,665 | 0.7 | 6,985 | 0.7 | ||||||||||||
Loss on debt retirement | 718 | 0.1 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Income before provision for income taxes | 156,389 | 13.7 | 143,531 | 14.3 | ||||||||||||
Provision for income taxes | 35,440 | 3.1 | 52,736 | 5.3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net income | $ | 120,949 | 10.6 | % | $ | 90,795 | 9.0 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Change in comparable store sales(1) | (0.9 | )% | 3.3 | % | ||||||||||||
Company-owned stores open at end of period(2) | 106 | 92 | ||||||||||||||
Comparable stores open at end of period | 76 | 66 |
|
|
Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | |||||||
First Quarter | 4 | 3 | ||||||
Second Quarter | 4 | 2 | ||||||
Third Quarter | 1 | 2 | ||||||
Fourth Quarter | 5 | 4 | ||||||
|
|
|
| |||||
14 | 11 |
Reconciliations ofNon-GAAP Financial Measures
Adjusted EBITDA
The following table reconciles (in dollars and as a percent of total revenues) Net income to Adjusted EBITDA for the periods indicated:
Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | |||||||||||||||
Net income | $ | 120,949 | 10.6 | % | $ | 90,795 | 9.0 | % | ||||||||
Interest expense, net | 8,665 | 6,985 | ||||||||||||||
Loss on debt retirement | 718 | — | ||||||||||||||
Provision for income tax | 35,440 | 52,736 | ||||||||||||||
Depreciation and amortization expense | 102,766 | 88,305 | ||||||||||||||
|
|
|
| |||||||||||||
EBITDA | 268,538 | 23.6 | % | 238,821 | 23.8 | % | ||||||||||
Loss on asset disposal | 1,863 | 1,533 | ||||||||||||||
Share-based compensation | 8,916 | 5,828 | ||||||||||||||
Pre-opening costs | 23,746 | 15,414 | ||||||||||||||
Other costs(1) | (333 | ) | (73 | ) | ||||||||||||
|
|
|
| |||||||||||||
Adjusted EBITDA | $ | 302,730 | 26.6 | % | $ | 261,523 | 26.0 | % | ||||||||
|
|
|
|
|
Store Operating Income Before Depreciation and Amortization
The following table reconciles (in dollars and as a percent of total revenues) Operating income to Store Operating Income Before Depreciation and Amortization for the periods indicated:
Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | |||||||||||||||
Operating income | $ | 165,772 | 14.5 | % | $ | 150,516 | 15.0 | % | ||||||||
General and administrative expenses | 59,565 | 54,474 | ||||||||||||||
Depreciation and amortization expense | 102,766 | 88,305 | ||||||||||||||
Pre-opening costs | 23,746 | 15,414 | ||||||||||||||
|
|
|
| |||||||||||||
Store Operating Income Before Depreciation and Amortization | $ | 351,849 | 30.9 | % | $ | 308,709 | 30.7 | % | ||||||||
|
|
|
|
Capital Additions
The following table represents total accrual-based additions to property and equipment. Total capital additions do not include any reductions for payments from landlords.
Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | |||||||
New store | $ | 168,381 | $ | 135,476 | ||||
Operating initiatives, including remodels | 17,068 | 20,919 | ||||||
Games | 18,712 | 19,809 | ||||||
Maintenance Capital | 19,160 | 15,983 | ||||||
|
|
|
| |||||
Total capital additions | $ | 223,321 | $ | 192,187 | ||||
|
|
|
| |||||
Payments from landlords | $ | 40,334 | $ | 46,262 |
Results of Operations
Revenues
Total revenues increased $134,633, or 13.4%, to $1,139,791 in fiscal 2017 compared to total revenues of $1,005,158 in fiscal 2016. We have estimated the impact of the 53rd week of fiscal 2017 to be $19,685. For the year ended February 4, 2018, we derived 29.5% of our total revenue from food sales, 13.9% from beverage sales, 55.8% from amusement sales and 0.8% from other sources. For the year ended January 29, 2017, we derived 30.4% of our total revenue from food sales, 14.6% from beverage sales, 54.2% from amusement sales and 0.8% from other sources.
The increased revenues in fiscal 2017 were from the following sources:
Comparable stores - excluding impact of 53rd week | $ | (7,962 | ) | |
Comparable stores - 53rd week impact | 14,268 | |||
Non-comparable stores | 128,616 | |||
Other | (289 | ) | ||
|
| |||
Total | $ | 134,633 | ||
|
|
The following discussion on comparable store sales has been prepared by comparing fiscal 2017 revenues on a52-week basis to fiscal 2016 revenues.
Comparable store revenue decreased $7,962, or 0.9%, in fiscal 2017 compared to fiscal 2016. Comparable store revenue compared to the prior fiscal year was, in part, negatively impacted by decreases in our food and beverage unit sales throughout the year, increased pressure from competition, cannibalization of sales from our new store openings and weather-related sales interruptions in the third and fourth quarter. Comparablewalk-in revenues, which accounted for 89.2% of comparable store revenue for fiscal 2017, decreased $6,572, or 0.8% compared to fiscal 2016. Comparable store special events revenues, which accounted for 10.8% of consolidated comparable store revenue for fiscal 2017, decreased $1,390, or 1.4% compared to fiscal 2016.
Food sales at comparable stores decreased by $11,632, or 4.3%, to $257,727 for fiscal 2017 from $269,359 in fiscal 2016. Beverage sales at comparable stores decreased by $6,654, or 5.1%, to $122,710 for fiscal 2017 from $129,364 in fiscal 2016. The decrease in food and beverage sales at comparable stores is attributed to lower customer volumes and was partially offset by an overall increase in menu prices. Comparable store amusement and other revenues in fiscal 2017 increased by $10,324, or 2.1%, to $499,638 from $489,314 in fiscal 2016, due to an increase in the revenue per Power Card sold.
Revenue at our 30non-comparable stores increased $128,616 for fiscal 2017 compared to fiscal 2016. The increase innon-comparable store revenue was primarily driven by 718 additional operating store weeks including an additional 30 store weeks duefirst amendment to our53-week year.
Cost of products
The total cost of products was $196,672 for fiscal 2017 and $180,300 for fiscal 2016. The total cost of products as a percentage of total revenues was 17.3% and 17.9% for fiscal 2017 and fiscal 2016, respectively. For the year ended February 4, 2018, the cost of food products was 26.6% of food revenue, the cost of beverage products was 24.1% of beverage revenue, and the amusement and other cost of products was 10.7% of amusement and other revenues. For the year ended January 29, 2017, the cost of food products was 26.1% of food revenue, the cost of beverage products was 23.9% of beverage revenue, and the amusement and other cost of products was 11.8% of amusement and other revenues.
Cost of food and beverage products increased to $127,600 in fiscal 2017 compared to $114,946 for fiscal 2016 due primarily to the increased sales volume at ournon-comparable stores. Cost of food and beverage
products, as a percentage of food and beverage revenues, increased 40 basis points to 25.8% for fiscal 2017 from 25.4% for fiscal 2016. Higher poultry cost and the impact of our largernon-comparable store group were partially offset by savings in seafood and increases in food and beverage menu prices.
Cost of amusement and other increased to $69,072 in fiscal 2017 compared to $65,354 in fiscal 2016 as cost reductions at comparable stores were more than offset by costs related to ournon-comparable stores. The costs of amusement and other, as a percentage of amusement and other revenues, decreased 110 basis points to 10.7% for fiscal 2017 from 11.8% for fiscal 2016. The decrease in cost of amusement and other as a percentage of revenue was due, in part, to a $2,726, or 40 basis point, amusement cost reduction in fiscal 2017 due to the favorable settlement of a multi-year use tax audit by the state of Texas. This cost reduction represents the excess use tax on redemption items during the period from July 2011 through January 2017. Additionally, the decrease in cost of amusement and other as a percentage of revenue was positively impacted by a shift in game play from redemption tonon-redemption games and price increases implemented earlier in the year.
Operating payroll and benefits
Total operating payroll and benefits increased by $27,897, or 12.2%, to $256,724 in fiscal 2017 compared to $228,827 in fiscal 2016. This increase was primarily due to labor associated with 718 additional operating store weeks of our thirtynon-comparable stores as well as the impact of the 53rd week on our comparable stores and was partially offset by an approximate $1,300 decrease in store-level incentive compensation. The total cost of operating payroll and benefits, as a percentage of total revenues, decreased 30 basis points to 22.5% in fiscal 2017 compared to 22.8% for fiscal 2016. This decrease was due to lower store-level incentive compensation and payroll related benefits which decreased approximately 40 basis points, partially offset by an hourly wage rate increase of approximately 4.5% and normal labor inefficiencies associated with ournon-comparable store base.
Other store operating expenses
Other store operating expenses increased by $47,224, or 16.4%, to $334,546 in fiscal 2017 compared to $287,322 in fiscal 2016, primarily due to new store openings and the impact of the 53rd week in fiscal 2017. Other store operating expenses as a percentage of total revenues increased 80 basis points to 29.4% in fiscal 2017 compared to 28.6% in fiscal 2016. This increase was due primarily to increased margin pressure on occupancy costs associated with our recent store openings.
General and administrative expenses
General and administrative expenses increased by $5,091, or 9.3%, to $59,565 in fiscal 2017 compared to $54,474 in fiscal 2016. The increase in general and administrative expenses was primarily driven by a second quarter $2,550 charge for net litigation settlement costs, increased labor costs at our corporate headquarters and incremental compensation costs related to our share-based awards partially offset by lower incentive compensation expenses. General and administrative expenses, as a percentage of total revenues, decreased 20 basis points to 5.2% in fiscal 2017 compared to 5.4% in fiscal 2016, due to favorable leverage on sales.
Depreciation and amortization expense
Depreciation and amortization expense increased by $14,461, or 16.4%, to $102,766 in fiscal 2017 compared to $88,305 in fiscal 2016. Increased depreciation due to our 2016 and 2017 capital expenditures for new stores, operating initiatives, including remodels, games and maintenance capital, as well as an estimated $2,000 related to the 53rd week of 2017, partially offset by other assets reaching the end of their depreciable lives.
Pre-opening costs
Pre-opening costs increased by $8,332 to $23,746 in fiscal 2017 compared to $15,414 in fiscal 2016 due to the number and timing of new store openings and stores in development.
Interest expense, net
Interest expense, net increased by $1,680 to $8,665 in fiscal 2017 compared to $6,985 in fiscal 2016 due primarily to higher variable interest rates and an estimated $200 related to the 53rd week of 2017.
Loss on debt retirement
In connection with the August 17, 2017, debt refinancing (see Note 5 of Notes to Consolidated Financial Statements for further discussion), the Company recorded a charge of $718 during the third quarter of fiscal 2017.
Provision for income taxes
The effective income tax rate decreased to 22.7% in fiscal 2017 compared to 36.7% in fiscal 2016. This decrease in the effective tax rate primarily reflects a favorable 7.3% impact from the implementation of new accounting guidance in fiscal 2017 that requires the excess tax benefit from exercised stock options and vested restricted stock to be recorded in the income tax provision instead of additionalpaid-in-capital, and a favorable 6.4% impact from the Tax Cuts and Jobs Act enacted on December 22, 2017. Other differences from the statutory rate are due to the FICA tip credits, state income taxes and the impact of certain income and expense items which are not recognized for income tax purposes. Refer to Note 6 of Notes to Consolidated Financial Statements, for further information on our income tax provision.
Liquidity and Capital Resources
Overview
We finance our activities through cash flow from operations and availability under our existing credit facility. As of February 3, 2019, we
Our Board of Directors approvedpreviously established a share repurchase program, under which the Company may repurchase shares on the open market, through privately negotiated transactions, and through trading plans designed to comply with RuleTheAs a result of the impacts to our business arising from the COVIDmay be modified, suspended or discontinued at any time. As of February 3, 2019, the Company had approximately $70,137 remaining of a total $400,000 share repurchase authorization. The existing share repurchase program expireswas allowed to expire at the end of fiscal 2020. On April 2, 2019, our Board
We currently have and anticipate that in the future we may continue to have negative working capital balances. We are able to operate$11,891.
Short-term liquidity requirements. We generally consider our short-term liquidity requirements to consist of those items that are expected to be incurred within the next twelve months and believe those requirements to consist primarily of funds necessary to pay operating expenses, interest and principal payments on our debt, capital expenditures related to the new store construction and other expenditures associated with acquiring new games, remodeling facilities and recurring replacement of equipment and improvements.
Long-term liquidity requirements. We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next twelve months and believe these requirements
consist primarily of funds necessary for new store development and construction, replacement of games and equipment, renovations and othernon-recurring capital expenditures that need to be made periodically to our stores, principal and interest payments on our outstanding term loan and scheduled lease obligation payments. We intend to satisfy our long-term liquidity requirements through various sources of capital, including our existing cash on hand, cash provided byemployee compensation, operations, and borrowings under the revolving portion of our credit facility.
Based on our current business plan, we believe the cash flowsoccupancy costs. Cash from operations, together with our existing cash balances and availability of borrowings under the revolving portion of our credit facility will be sufficientoperating activities is also subject to meet our anticipated cash needs forchanges in working capital. Working capital capital expenditures, debt service needs, and share repurchasesat any specific point in the foreseeable future. Our ability to make scheduled principal and interest payments, or to refinance our indebtedness, or to fund planned capital expenditures and share repurchases, will depend on future performance, whichtime is subject to general economic conditions, competitive environmentmany variables, including seasonality, the timing of cash receipts and other factors, including those described in the “Risk Factors” section of this Report.
payments, and vendor payment terms.
The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities:
Fiscal Year Ended February 3, 2019 | Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | ||||||||||
Net cash provided by (used in): | ||||||||||||
Operating activities | $ | 337,616 | $ | 264,672 | $ | 231,329 | ||||||
Investing activities | (203,808 | ) | (216,623 | ) | (159,485 | ) | ||||||
Financing activities | (131,018 | ) | (49,337 | ) | (77,256 | ) |
Fiscal 2018 Compared to Fiscal 2017
Net cash provided byflow from operating activities was $337,616 fordecreased $338,170 in fiscal 20182020 compared to $264,672 for fiscal 2017. Increased cash flows from operations were2019 driven primarily by increased cash flows fromthe closure of all of our 137 operating stores as of March 20, 2020. Operations ceased until April 30, 2020, when we
Net cash used inlandlords.
Net cash used in financing activities was $131,018 for fiscal 2018 compared to cash used in financing activities of $49,337 for fiscal 2017. Fiscal 2018 included repurchases of common stock of approximately $149,000 and dividend payments of $11,570, offset by net borrowings of debt of $27,000. Fiscal 2017 cash used in financing activities included repurchases of common stock of approximately $152,000, offset by net borrowings of debt of $102,500.
We plan on financing future growth through existing cash on hand, future operating cash flows, debt facilities and tenant improvement allowances from landlords. We expect to spend between $231,000 to $241,000 ($190,000 to $200,000 net of payments from landlords) on capital additions during fiscal 2019. The
Fiscal 2017 Compared to Fiscal 2016
Net cash provided by operating activities was $264,672 for
Net cash used in investing activities was $216,623 for fiscal 2017 compared to $159,485 for fiscal 2016. Capital expenditures increased $39,324 to $219,901 (excluding the increase in fixed asset accrued liabilities of $3,420) in fiscal 2017 from $180,577 in fiscal 2016. During fiscal 2017,2018, the Company spent $166,675approximately $164,500 ($126,341112,500 net of payments from landlords) for new store construction $19,024and operating improvement initiatives, $29,000 for game refreshment, $17,361and $22,500 for maintenance capital and $16,841 related to a major remodel project on four existing stores, several smaller scale remodel projects and operating improvement initiatives.
Net cash used incapital.
Payment due by period
Total | 1 Year or Less | 2-3 Years | 4-5 Years | After 5 Years | ||||||||||||||||
Credit Facility(1) | $ | 394,250 | $ | 15,000 | $ | 30,000 | $ | 349,250 | $ | — | ||||||||||
Interest requirements(2) | 49,490 | 14,685 | 27,672 | 7,133 | — | |||||||||||||||
Operating leases(3) | 1,786,828 | 122,501 | 229,550 | 204,974 | 1,229,803 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 2,230,568 | $ | 152,186 | $ | 287,222 | $ | 561,357 | $ | 1,229,803 | ||||||||||
|
|
|
|
|
|
|
|
|
|
1 Year | After 5 | |||||||||||||||||||
Total | or Less | 2-3 Years | 4-5 Years | Years | ||||||||||||||||
Debt (1) | $ | 610,000 | $ | — | $ | — | $ | 610,000 | $ | — | ||||||||||
Interest requirements (2) | 216,067 | 47,753 | 93,041 | 75,273 | — | |||||||||||||||
Operating leases (3) | 2,049,535 | 132,037 | 273,801 | 269,403 | 1,374,294 | |||||||||||||||
Total | $ | 2,875,602 | $ | 179,790 | $ | 366,842 | $ | 954,676 | $ | 1,374,294 | ||||||||||
(1) |
Available commitments under the revolving credit |
(2) | The cash obligations for the variable interest requirements on the outstanding balance of the revolving credit facility and the unused commitment are based on |
(3) | Our operating leases generally provide for one or more renewal options. These renewal options allow us to extend the term of the lease for a specified time at an established annual lease payment. Future obligations related to lease renewal options that have been exercised or were reasonably |
disclosures of contingent assets and liabilities. Our significant accounting policies are described in Note 1 of Notes to Consolidated Financial Statements. Critical accounting policies are those that we believe are most important to portraying our financial condition and results of operations and require the greatest amount of judgment by management. Judgment or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgment that is involved in preparing the consolidated financial statements.revenue is derivedrevenues are primarily from customer purchasesrecognized upon utilization of game play credits on Power Cards which allow ourpurchased and used by customers to play theactivate video and redemption games in our Midways. We have recognized a liability for the estimated amount of unused game play credits, which we believe our customers will utilize in the future based on credits remaining on Power Cards, historic utilization patterns and revenue per game play credit sold. For fiscal 2018, a hypothetical 10% increase in estimated future customer utilization would have decreased revenues by approximately $7,000, as a result of additional amounts deferred from sales of game play credits.Certain midwaygames. Redemption games allow customers to earn tickets, which may be redeemed for prizes. The cost of these prizes is included in the cost of amusement products and is generally recorded when tickets are utilized by the customer by redeeming the tickets for a prize in our WIN! Area or storing the ticket value on a Power Card for future redemption.area. We have recordeddeferred a liabilityportion of amusement revenues for the estimated unfulfilled performance obligations based on an estimated rate of future use by customers of unused game play credits and the material right provided to customers to redeem tickets in the future for prizes. We estimate the amount of outstandingdeferred revenue based upon credits and tickets that will be redeemed in subsequent periodsremaining on Power Cards, historic game play credit and ticket utilization patterns and estimates of the standalone selling prices of game play credits and the customer material right. The standalone selling price of the customer material right is estimated using an equivalent chip cost plus margin approach. For purposes of recognizing revenue, the total amount collected from each customer is then allocated between the two performance obligations based on tickets outstanding, historic redemption patternsthe relative standalone selling price of each obligation.
the store over the remaining service life using a risk adjusted discount rate that is commensurate with the inherent risk.
ITEM 7A. | Quantitative and Qualitative Disclosures about Market Risk |
We are exposed to interest rate risk arising from changes in interest rates due to the
Subsequent to the end of fiscal 2018, the Company entered into an1.00%. Our interest rate swap agreementagreements, with a combined notional amount of $350,000, to manage our exposure to interest rate movements on our variable rate credit
facility. The agreement will in effect, convert the floating portion of the interest rate to a fixed interest rate of 2.5% plus a spread from the effective dateapproximately 2.47% through August 17, 2022. As of February 28, 2019 through the term of our existing credit facility.
January 31, 2021,
We have a substantial number
ITEM 8. | Financial Statements and Supplementary Data |
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
ITEM 9A. | Controls and Procedures |
published financial statements in accordance with GAAP, and that our receipts and expenditures are being madeGAAP. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance that unauthorized acquisition, useand may not prevent or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis.
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected. In addition,detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
January 31, 2021.
ITEM 9B. | Other Information |
ITEM 10. | Directors, Executive Officers and Corporate Governance |
ITEM 11. | Executive Compensation |
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence |
ITEM 14. | Principal Accountant Fees and Services |
* | Filed herein |
DAVE & BUSTER’S ENTERTAINMENT, INC., a Delaware Corporation | ||||||
Date: | By: | /s/ | ||||
By: | /s/ Brian A. Jenkins | Chief Executive Officer and Director | ||
Brian A. Jenkins | (Principal Executive Officer) | |||
By: | /s/ | |||
(Principal Financial and Accounting Officer) | ||||
By: | /s/ Stephen M. King | Chairman of the Board | ||
Stephen M. King | ||||
By: | /s/ | Director | ||
By: | /s/ Hamish A. Dodds | Director | ||
Hamish A. Dodds | ||||
By: | /s/ Michael J. Griffith | Director | ||
Michael J. Griffith | ||||
By: | /s/ Jonathan S. Halkyard | Director | ||
Jonathan S. Halkyard | ||||
By: | /s/ John C. Hockin | Director | ||
John C. Hockin |
By: | /s/ Patricia H. Mueller | Director | ||
Patricia H. Mueller | ||||
By: | /s/ Kevin M. Sheehan | Director | ||
Kevin M. Sheehan | ||||
By: | /s/ Jennifer Storms | Director | ||
Jennifer Storms |
April 2, 2019
April 2, 2019
February 3, 2019 | February 4, 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 21,585 | $ | 18,795 | ||||
Inventories | 27,315 | 27,560 | ||||||
Prepaid expenses | 20,713 | 19,052 | ||||||
Income taxes receivable | 1,880 | 4,867 | ||||||
Other current assets | 19,600 | 24,633 | ||||||
|
|
|
| |||||
Total current assets | 91,093 | 94,907 | ||||||
Property and equipment (net of $578,178 and $474,330 accumulated depreciation as of February 3, 2019 and February 4, 2018, respectively) | 805,337 | 726,455 | ||||||
Deferred tax assets | 6,736 | 7,789 | ||||||
Tradenames | 79,000 | 79,000 | ||||||
Goodwill | 272,625 | 272,566 | ||||||
Other assets and deferred charges | 18,396 | 16,313 | ||||||
|
|
|
| |||||
Total assets | $ | 1,273,187 | $ | 1,197,030 | ||||
|
|
|
| |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current installments of long-term debt | $ | 15,000 | $ | 15,000 | ||||
Accounts payable | 60,427 | 54,627 | ||||||
Accrued liabilities | 157,164 | 135,161 | ||||||
Income taxes payable | 11,799 | 3,037 | ||||||
|
|
|
| |||||
Total current liabilities | 244,390 | 207,825 | ||||||
Deferred income taxes | 14,634 | 10,213 | ||||||
Deferred occupancy costs | 223,678 | 184,994 | ||||||
Other liabilities | 24,179 | 21,103 | ||||||
Long-term debt, net | 378,469 | 351,249 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 43,177,476 shares at February 3, 2019 and 42,660,806 shares at February 4, 2018; outstanding: 37,522,085 shares at February 3, 2019 and 40,102,085 shares at February 4, 2018 | 432 | 427 | ||||||
Preferred stock, 50,000,000 authorized; none issued | — | — | ||||||
Paid-in capital | 331,255 | 320,488 | ||||||
Treasury stock, 5,655,391 and 2,558,721 shares as of February 3, 2019 and February 4, 2018, respectively | (297,129 | ) | (147,331 | ) | ||||
Accumulated other comprehensive loss | (683 | ) | (249 | ) | ||||
Retained earnings | 353,962 | 248,311 | ||||||
|
|
|
| |||||
Total stockholders’ equity | 387,837 | 421,646 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 1,273,187 | $ | 1,197,030 | ||||
|
|
|
|
January 31, | February 2, | |||||||
2021 | 2020 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 11,891 | $ | 24,655 | ||||
Inventories | 23,807 | 34,477 | ||||||
Prepaid expenses | 11,878 | 14,269 | ||||||
Income taxes receivable | 70,064 | 2,331 | ||||||
Other current assets | 1,231 | 3,245 | ||||||
Total current assets | 118,871 | 78,977 | ||||||
Property and equipment (net of $798,804 and $686,824 accumulated depreciation as of January 31, 2021 and February 2, 2020, respectively) | 815,027 | 900,637 | ||||||
Operating lease right of use assets, net | 1,037,569 | 1,011,568 | ||||||
Deferred tax assets | 5,874 | 7,639 | ||||||
Tradenames | 79,000 | 79,000 | ||||||
Goodwill | 272,597 | 272,636 | ||||||
Other assets and deferred charges | 23,886 | 19,682 | ||||||
Total assets | $ | 2,352,824 | $ | 2,370,139 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current installments of long-term debt | $ | — | $ | 15,000 | ||||
Accounts payable | 36,400 | 65,359 | ||||||
Accrued liabilities | 234,790 | 207,452 | ||||||
Income taxes payable | 446 | 3,054 | ||||||
Total current liabilities | 271,636 | 290,865 | ||||||
Deferred income taxes | 13,658 | 19,102 | ||||||
Operating lease liabilities | 1,267,791 | 1,222,054 | ||||||
Other liabilities | 50,119 | 35,779 | ||||||
Long-term debt, net | 596,388 | 632,689 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 60,488,833 shares at January 31, 2021 and 43,386,852 shares at February 2, 2020; outstanding: 47,646,606 shares at January 31, 2021 and 30,603,340 shares at February 2, 2020 | 605 | 434 | ||||||
Preferred stock, 50,000,000 authorized; NaN issued | — | — | ||||||
Paid-in capital | 531,191 | 339,161 | ||||||
Treasury stock, 12,842,227 and 12,783,512 shares as of January 31, 2021 and February 2, 2020, respectively | (595,970 | ) | (595,041 | ) | ||||
Accumulated other comprehensive loss | (9,085 | ) | (8,369 | ) | ||||
Retained earnings | 226,491 | 433,465 | ||||||
Total stockholders’ equity | 153,232 | 169,650 | ||||||
Total liabilities and stockholders’ equity | $ | 2,352,824 | $ | 2,370,139 | ||||
(LOSS)
Fiscal Year Ended February 3, 2019 | Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | ||||||||||
Food and beverage revenues | $ | 536,469 | $ | 494,816 | $ | 452,140 | ||||||
Amusement and other revenues | 728,832 | 644,975 | 553,018 | |||||||||
|
|
|
|
|
| |||||||
Total revenues | 1,265,301 | 1,139,791 | 1,005,158 | |||||||||
Cost of food and beverage | 139,199 | 127,600 | 114,946 | |||||||||
Cost of amusement and other | 81,064 | 69,072 | 65,354 | |||||||||
|
|
|
|
|
| |||||||
Total cost of products | 220,263 | 196,672 | 180,300 | |||||||||
Operating payroll and benefits | 296,924 | 256,724 | 228,827 | |||||||||
Other store operating expenses | 384,155 | 334,546 | 287,322 | |||||||||
General and administrative expenses | 61,521 | 59,565 | 54,474 | |||||||||
Depreciation and amortization expense | 118,275 | 102,766 | 88,305 | |||||||||
Pre-opening costs | 23,163 | 23,746 | 15,414 | |||||||||
|
|
|
|
|
| |||||||
Total operating costs | 1,104,301 | 974,019 | 854,642 | |||||||||
|
|
|
|
|
| |||||||
Operating income | 161,000 | 165,772 | 150,516 | |||||||||
Interest expense, net | 13,113 | 8,665 | 6,985 | |||||||||
Loss on debt retirement | — | 718 | — | |||||||||
|
|
|
|
|
| |||||||
Income before provision for income taxes | 147,887 | 156,389 | 143,531 | |||||||||
Provision for income taxes | 30,666 | 35,440 | 52,736 | |||||||||
|
|
|
|
|
| |||||||
Net income | 117,221 | 120,949 | 90,795 | |||||||||
|
|
|
|
|
| |||||||
Unrealized foreign currency translation gain (loss) | (434 | ) | 474 | 247 | ||||||||
|
|
|
|
|
| |||||||
Total comprehensive income | $ | 116,787 | $ | 121,423 | $ | 91,042 | ||||||
|
|
|
|
|
| |||||||
Net Income per share: | ||||||||||||
Basic | $ | 3.00 | $ | 2.93 | $ | 2.16 | ||||||
Diluted | $ | 2.93 | $ | 2.84 | $ | 2.10 | ||||||
Weighted average shares used in per share calculations: | ||||||||||||
Basic | 39,047,106 | 41,276,314 | 41,951,770 | |||||||||
Diluted | 39,975,122 | 42,583,009 | 43,288,592 | |||||||||
Cash dividends per share | $ | 0.30 | $ | — | $ | — |
Fiscal Year Ended January 31, 2021 | Fiscal Year Ended February 2, 2020 | Fiscal Year Ended February 3, 2019 | ||||||||||
Food and beverage revenues | $ | 159,501 | $ | 563,576 | $ | 536,469 | ||||||
Amusement and other revenues | 277,011 | 791,115 | 728,832 | |||||||||
Total revenues | 436,512 | 1,354,691 | 1,265,301 | |||||||||
Cost of food and beverage | 45,207 | 148,196 | 139,199 | |||||||||
Cost of amusement and other | 29,698 | 85,115 | 81,064 | |||||||||
Total cost of products | 74,905 | 233,311 | 220,263 | |||||||||
Operating payroll and benefits | 117,475 | 322,970 | 296,924 | |||||||||
Other store operating expenses | 299,464 | 429,431 | 384,155 | |||||||||
General and administrative expenses | 47,215 | 69,469 | 61,521 | |||||||||
Depreciation and amortization expense | 138,789 | 132,460 | 118,275 | |||||||||
Pre-opening costs | 11,276 | 18,971 | 23,163 | |||||||||
Total operating costs | 689,124 | 1,206,612 | 1,104,301 | |||||||||
Operating income (loss) | (252,612 | ) | 148,079 | 161,000 | ||||||||
Interest expense, net | 36,890 | 20,937 | 13,113 | |||||||||
Loss on debt refinance | 904 | — | — | |||||||||
Income (loss) before provision (benefit) for income taxes | (290,406 | ) | 127,142 | 147,887 | ||||||||
Provision (benefit) for income taxes | (83,432 | ) | 26,879 | 30,666 | ||||||||
Net income (loss) | (206,974 | ) | 100,263 | 117,221 | ||||||||
Unrealized foreign currency translation gain (loss) | 119 | (65 | ) | (434 | ) | |||||||
Unrealized loss on derivatives, net of tax | (835 | ) | (7,621 | ) | — | |||||||
Total other comprehensive loss | (716 | ) | (7,686 | ) | (434 | ) | ||||||
Total comprehensive income (loss) | $ | (207,690 | ) | $ | 92,577 | $ | 116,787 | |||||
Net income (loss) per share: | ||||||||||||
Basic | $ | (4.75 | ) | $ | 3.00 | $ | 3.00 | |||||
Diluted | $ | (4.75 | ) | $ | 2.94 | $ | 2.93 | |||||
Weighted average shares used in per share calculations: | ||||||||||||
Basic | 43,549,887 | 33,450,217 | 39,047,106 | |||||||||
Diluted | 43,549,887 | 34,099,378 | 39,975,122 |
(in thousands, except share amounts)
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Income (loss) | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance January 31, 2016 | 41,618,933 | $ | 416 | $ | 280,828 | — | $ | — | $ | (970 | ) | $ | 66,064 | $ | 346,338 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | — | — | — | — | — | — | 90,795 | 90,795 | ||||||||||||||||||||||||
Unrealized foreign currency translation gain | — | — | — | — | — | 247 | — | 247 | ||||||||||||||||||||||||
Share-based compensation | — | — | 5,828 | — | — | — | — | 5,828 | ||||||||||||||||||||||||
Issuance of common stock | 850,637 | 9 | 4,351 | — | — | — | — | 4,360 | ||||||||||||||||||||||||
Excess income tax benefit related to share-based compensation plans | — | — | 19,304 | — | — | — | — | 19,304 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 566,756 | (28,825 | ) | — | — | (28,825 | ) | ||||||||||||||||||||||
Issuance of treasury stock | — | — | (81 | ) | (301,773 | ) | 14,008 | — | (12,522 | ) | 1,405 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance January 29, 2017 | 42,469,570 | 425 | 310,230 | 264,983 | (14,817 | ) | (723 | ) | 144,337 | 439,452 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | — | — | — | — | — | — | 120,949 | 120,949 | ||||||||||||||||||||||||
Unrealized foreign currency translation gain | — | — | — | — | — | 474 | — | 474 | ||||||||||||||||||||||||
Share-based compensation | — | — | 8,916 | — | — | — | — | 8,916 | ||||||||||||||||||||||||
Cumulative effect of a change in accounting principle | — | — | — | — | — | — | 782 | 782 | ||||||||||||||||||||||||
Issuance of common stock | 191,236 | 2 | 1,342 | — | — | — | — | 1,344 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 2,636,616 | (151,913 | ) | — | — | (151,913 | ) | ||||||||||||||||||||||
Issuance of treasury stock | — | — | — | (342,878 | ) | 19,399 | — | (17,757 | ) | 1,642 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance February 4, 2018 | 42,660,806 | 427 | 320,488 | 2,558,721 | (147,331 | ) | (249 | ) | 248,311 | 421,646 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net income | — | — | — | — | — | — | 117,221 | 117,221 | ||||||||||||||||||||||||
Unrealized foreign currency translation loss | — | — | — | — | — | (434 | ) | — | (434 | ) | ||||||||||||||||||||||
Dividends ($0.30 per share) | — | — | — | — | — | — | (11,570 | ) | (11,570 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 7,422 | — | — | — | — | 7,422 | ||||||||||||||||||||||||
Issuance of common stock | 516,670 | 5 | 3,345 | — | — | — | — | 3,350 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 3,096,670 | (149,798 | ) | — | — | (149,798 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Balance February 3, 2019 | 43,177,476 | $ | 432 | $ | 331,255 | 5,655,391 | $ | (297,129 | ) | $ | (683 | ) | $ | 353,962 | $ | 387,837 | ||||||||||||||||
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|
|
|
|
|
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|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
DAVE & BUSTER’S ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended February 3, 2019 | Fiscal Year Ended February 4, 2018 | Fiscal Year Ended January 29, 2017 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 117,221 | $ | 120,949 | $ | 90,795 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization expense | 118,275 | 102,766 | 88,305 | |||||||||
Deferred taxes | 5,474 | (8,845 | ) | 6,961 | ||||||||
Excess income tax benefit related to share-based compensation plans | — | — | (19,304 | ) | ||||||||
Loss on debt refinancing | — | 718 | — | |||||||||
Loss on disposal of fixed assets | 1,121 | 1,863 | 1,533 | |||||||||
Share-based compensation | 7,422 | 8,916 | 5,828 | |||||||||
Other, net | 1,049 | 881 | 1,467 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Inventories | 245 | (5,700 | ) | (2,331 | ) | |||||||
Prepaid expenses | (1,661 | ) | (3,224 | ) | (2,874 | ) | ||||||
Income tax receivable | 2,987 | 1,034 | (1,755 | ) | ||||||||
Other current assets | 4,705 | (13,361 | ) | 6,032 | ||||||||
Other assets and deferred charges | (2,523 | ) | (224 | ) | 487 | |||||||
Accounts payable | 11,122 | (4,071 | ) | 832 | ||||||||
Accrued liabilities | 21,329 | 22,394 | 14,431 | |||||||||
Income taxes payable | 8,762 | 345 | 19,299 | |||||||||
Deferred occupancy costs | 38,958 | 37,702 | 20,156 | |||||||||
Other liabilities | 3,130 | 2,529 | 1,467 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by operating activities | 337,616 | 264,672 | 231,329 | |||||||||
|
|
|
|
|
| |||||||
Cash flows from investing activities: | ||||||||||||
Capital expenditures | (216,286 | ) | (219,901 | ) | (180,577 | ) | ||||||
Proceeds from sale-leaseback transactions | 11,571 | — | 20,262 | |||||||||
Proceeds from insurance | 541 | — | — | |||||||||
Proceeds from sales of property and equipment | 366 | 78 | 30 | |||||||||
Collections on notes receivable | — | 3,200 | 800 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in investing activities | (203,808 | ) | (216,623 | ) | (159,485 | ) | ||||||
|
|
|
|
|
| |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from debt | 265,000 | 509,000 | 97,000 | |||||||||
Payments of debt | (238,000 | ) | (406,500 | ) | (170,500 | ) | ||||||
Debt issuance costs | — | (2,910 | ) | — | ||||||||
Repurchase of common stock | (149,125 | ) | (151,913 | ) | (28,825 | ) | ||||||
Repurchases of common stock to satisfy employee withholding tax obligations | (673 | ) | — | — | ||||||||
Dividends paid | (11,570 | ) | — | — | ||||||||
Proceeds from the exercise of stock options | 3,350 | 1,344 | 4,360 | |||||||||
Proceeds from issuance of treasury stock | — | 1,642 | 1,405 | |||||||||
Excess income tax benefit related to share-based compensation plans | — | — | 19,304 | |||||||||
|
|
|
|
|
| |||||||
Net cash used in financing activities | (131,018 | ) | (49,337 | ) | (77,256 | ) | ||||||
|
|
|
|
|
| |||||||
Increase (decrease) in cash and cash equivalents | 2,790 | (1,288 | ) | (5,412 | ) | |||||||
Beginning cash and cash equivalents | 18,795 | 20,083 | 25,495 | |||||||||
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|
|
| |||||||
Ending cash and cash equivalents | $ | 21,585 | $ | 18,795 | $ | 20,083 | ||||||
|
|
|
|
|
| |||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Increase (decrease) in fixed asset accounts payable | $ | (5,321 | ) | $ | 3,420 | $ | 11,610 | |||||
Cash paid for income taxes, net | $ | 13,464 | $ | 43,072 | $ | 28,213 | ||||||
Cash paid for interest, net | $ | 12,247 | $ | 7,853 | $ | 6,603 |
See accompanying notes to consolidated financial statements.
DAVE & BUSTER’S ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Income (loss) | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance February 4, 2018 | 42,660,806 | $ | 427 | $ | 320,488 | 2,558,721 | (147,331 | ) | (249 | ) | 248,311 | 421,646 | ||||||||||||||||||||
Net income | — | — | — | — | — | — | 117,221 | 117,221 | ||||||||||||||||||||||||
Unrealized foreign currency translation loss | — | — | — | — | — | (434 | ) | — | (434 | ) | ||||||||||||||||||||||
Dividends declared ($0.30 per share) | — | — | — | — | — | — | (11,570 | ) | (11,570 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 7,422 | — | — | — | — | 7,422 | ||||||||||||||||||||||||
Issuance of common stock | 516,670 | 5 | 3,345 | — | — | — | — | 3,350 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 3,096,670 | (149,798 | ) | — | — | (149,798 | ) | ||||||||||||||||||||||
Balance February 3, 2019 | 43,177,476 | 432 | 331,255 | 5,655,391 | (297,129 | ) | (683 | ) | 353,962 | 387,837 | ||||||||||||||||||||||
Cumulative effect of a change in accounting principle, net of tax | — | — | — | — | — | — | (145 | ) | (145 | ) | ||||||||||||||||||||||
Net income | — | — | — | — | — | — | 100,263 | 100,263 | ||||||||||||||||||||||||
Unrealized foreign currency translation loss | — | — | — | — | — | (65 | ) | — | (65 | ) | ||||||||||||||||||||||
Unrealized loss on derivatives, net of tax | — | — | — | — | — | (7,621 | ) | — | (7,621 | ) | ||||||||||||||||||||||
Dividends declared ($0.62 per share) | — | — | — | — | — | — | (20,615 | ) | (20,615 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 6,857 | — | — | — | — | 6,857 | ||||||||||||||||||||||||
Issuance of common stock | 209,376 | 2 | 1,049 | — | — | — | — | 1,051 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 7,128,121 | (297,912 | ) | — | — | (297,912 | ) | ||||||||||||||||||||||
Balance February 2, 2020 | 43,386,852 | 434 | 339,161 | 12,783,512 | (595,041 | ) | (8,369 | ) | 433,465 | 169,650 | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (206,974 | ) | (206,974 | ) | ||||||||||||||||||||||
Unrealized foreign currency translation gain | — | — | — | — | — | 119 | — | 119 | ||||||||||||||||||||||||
Unrealized loss on derivatives, net of tax | — | — | — | — | — | (835 | ) | — | (835 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 6,985 | — | — | — | — | 6,985 | ||||||||||||||||||||||||
Issuance of common stock | 17,101,981 | 171 | 185,045 | — | — | — | — | 185,216 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 58,715 | (929 | ) | — | — | (929 | ) | ||||||||||||||||||||||
Balance January 31, 2021 | 60,488,833 | $ | 605 | $ | 531,191 | 12,842,227 | $ | (595,970 | ) | $ | (9,085 | ) | $ | 226,491 | $ | 153,232 | ||||||||||||||||
Fiscal Year Ended January 31, 2021 | Fiscal Year Ended February 2, 2020 | Fiscal Year Ended February 3, 2019 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income (loss) | $ | (206,974 | ) | $ | 100,263 | $ | 117,221 | |||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization expense | 138,789 | 132,460 | 118,275 | |||||||||
Non-cash interest expense | 5,974 | — | — | |||||||||
Impairment of long-lived assets | 12,248 | — | — | |||||||||
Deferred taxes | (3,365 | ) | 6,473 | 5,474 | ||||||||
Loss on debt refinance | 904 | — | — | |||||||||
Loss on disposal of fixed assets | 577 | 1,813 | 1,121 | |||||||||
Share-based compensation | 6,985 | 6,857 | 7,422 | |||||||||
Other, net | 2,033 | 1,070 | 1,049 | |||||||||
Changes in assets and liabilities: | ||||||||||||
Inventories | 10,670 | (7,162 | ) | 245 | ||||||||
Prepaid expenses | 2,993 | (2,162 | ) | (1,661 | ) | |||||||
Income tax receivable | (67,733 | ) | (451 | ) | 2,987 | |||||||
Other current assets | 2,014 | 5,320 | 4,705 | |||||||||
Other assets and deferred charges | 484 | (1,017 | ) | (2,523 | ) | |||||||
Accounts payable | (9,576 | ) | 2,026 | 11,122 | ||||||||
Accrued liabilities | 56,757 | 47,896 | 21,329 | |||||||||
Income taxes payable | (2,608 | ) | (8,745 | ) | 8,762 | |||||||
Deferred occupancy costs | — | — | 38,958 | |||||||||
Other liabilities | 604 | 4,305 | 3,130 | |||||||||
Net cash provided by (used in) operating activities | (49,224 | ) | 288,946 | 337,616 | ||||||||
Cash flows from investing activities: | ||||||||||||
Capital expenditures | (83,016 | ) | (228,091 | ) | (216,286 | ) | ||||||
Proceeds from sale-leaseback transactions | — | — | 11,571 | |||||||||
Proceeds from insurance | 595 | — | 541 | |||||||||
Proceeds from sales of property and equipment | 461 | 800 | 366 | |||||||||
Net cash used in investing activities | (81,960 | ) | (227,291 | ) | (203,808 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from debt | 732,000 | 406,000 | 265,000 | |||||||||
Payments of debt | (770,250 | ) | (152,000 | ) | (238,000 | ) | ||||||
Debt issuance costs | (20,209 | ) | — | — | ||||||||
Net proceeds from the issuance of common stock | 182,207 | — | — | |||||||||
Repurchase of common stock under share repurchase program | — | (297,317 | ) | (149,125 | ) | |||||||
Repurchases of common stock to satisfy employee withholding tax obligations | (929 | ) | (595 | ) | (673 | ) | ||||||
Dividends paid | (4,891 | ) | (15,724 | ) | (11,570 | ) | ||||||
Proceeds from the exercise of stock options | 492 | 1,051 | 3,350 | |||||||||
Net cash provided by (used in) financing activities | 118,420 | (58,585 | ) | (131,018 | ) | |||||||
Increase (decrease) in cash and cash equivalents | (12,764 | ) | 3,070 | 2,790 | ||||||||
Beginning cash and cash equivalents | 24,655 | 21,585 | 18,795 | |||||||||
Ending cash and cash equivalents | $ | 11,891 | $ | 24,655 | $ | 21,585 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Increase (decrease) for capital expenditures in accounts payable | $ | (19,383 | ) | $ | 2,906 | $ | (5,321 | ) | ||||
Cash paid (received) for income taxes, net | $ | (9,352 | ) | $ | 27,245 | $ | 13,464 | |||||
Cash paid for interest, net | $ | 17,916 | $ | 20,115 | $ | 12,247 | ||||||
Dividends declared, not paid | $ | — | $ | 4,891 | $ | — |
Policies���
We own and operate
Concentration of credit risk—
Other current assets
Consolidated Balance Sheets.
Estimated Depreciable Lives (In Years) | ||
Building and building improvements | 5-40 | |
Leasehold improvements | 5-20 | |
Furniture, fixtures and equipment | 3-10 | |
Games | 3-20 |
We evaluate our property and equipment annuallyIncome (Loss).
— related to transferable liquor licenses and intellectual property licenses associated with some of our proprietary amusement offerings, and assets related to various deposits, the employee deferred compensation plan, and unamortized debt issuance costs on the revolving portion of our credit facility.
Amortization expense in fiscal 2018, 2017 and 2016 includes $188, $588 and $1,399, respectively, of amortization associated with our trademarks, which were fully amortized as of the end of fiscal 2017, and our customer relationships, which had an unamortized balance of $61 as of February 3, 2019. Other intangible assets, net of any applicable accumulated amortization, are included in “Other assets and deferred charges” on the Consolidated Balance Sheets.
Debt issuance costs — Income (Loss).
Revenue recognition — During the first quarter of 2018, we adopted ASU2014-09, Revenue from Contracts with Customers (Topic 606), using the cumulative-effect method. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitledinterest based on
Fair Value | ||||||||||||
Balance Sheet Location | January 31, 2021 | February 2, 2020 | ||||||||||
Derivatives designated as hedging instruments: | ||||||||||||
Interest rate swaps | Accrued liabilities | $ | (8,350 | ) | $ | (3,518 | ) | |||||
Interest rate swaps | Other liabilities | (4,416 | ) | (6,967 | ) | |||||||
Total derivatives (1) | $ | (12,766 | ) | $ | (10,485 | ) | ||||||
(1) | The balance at January 31, 2021 relates to our swap agreements after hedge accounting was discontinued. |
derivative instruments for the fiscal years ended:
January 31, 2021 | February 2, 2020 | |||||||
Amount of loss recorded in accumulated other comprehensive income | $ | 7,602 | $ | 11,454 | ||||
Amount of loss reclassified into income (1) | $ | (6,453 | ) | $ | (969 | ) | ||
Income tax expense (benefit) in accumulated other comprehensive income | $ | (314 | ) | $ | (2,864 | ) |
(1) | Amounts reclassified into income are included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income (Loss). |
recognized revenue of approximately $19,300
20
Amusements costs of products — Certain midway games allow customers to earn tickets, which may be redeemed for prizes. The cost of these prizes is included in the cost of amusement products and is generally recorded when tickets are utilized by the customer by redeeming the tickets for a prize in our WIN! area. Customers may also store the ticket value on a Power Card for future redemption. We have recorded a liability for the estimated amount of outstanding tickets that we believe will be redeemed in subsequent periods based on tickets outstanding, historic redemption patterns and the estimated redemption cost of products per ticket.
Income (Loss).
The fair values of acquired lease contracts having contractual rents higher than fair market rents (unfavorable leases) or lower than fair market rents (favorable leases) are amortized on a straight-line basis over the remaining initial lease term. The current andnon-current portions of unfavorable leases are included in “Accrued liabilities” and “Deferred occupancy costs”, respectively, in the Consolidated Balance Sheets. The current andnon-current portions of favorable leases are included in “Other current assets” and “Other assets and deferred charges”, respectively, in the Consolidated Balance Sheets.
Additionally, certain of our lease agreements contain clauses that provide for additionala fixed base rent plus contingent rent based onto be determined as a percentage of sales greater than certain specified target amounts. Contingent rental payments, when considered probable, are recognized as variable lease expenses. The Company accounts for the lease components and
After the adoption of ASU2016-09, Improvements to Employee Share-Based Payment Accounting (Topic 718), the Company began recording excess tax benefits or shortfalls to the provision for income taxes in the Consolidated Statements of Comprehensive Income beginning in fiscal 2017. In prior years, any similar excess tax benefits were recorded as an adjustment to additionalpaid-in capital in the Consolidated Balance Sheets. The Company recorded excess tax benefits of $4,998 and $11,491 in fiscal 2018 and fiscal 2017, respectively, to the provision for income taxes in the Consolidated Statements of Comprehensive Income. In connection with the adoption of the new accounting guidance in fiscal 2017 we recorded an adjustment to retained earnings of $782 to recognize deferred tax assets related to certain state net operating loss carryforwards attributable to excess tax benefits in share-based compensation that had not been previously recognized in additionalpaid-in capital.
RecentIncome (Loss).
January 31, 2021 | February 2, 2020 | February 3, 2019 | ||||||||||
Basic weighted average shares outstanding | 43,549,887 | 33,450,217 | 39,047,106 | |||||||||
Weighted average dilutive impact of awards (1) | — | 649,161 | 928,016 | |||||||||
Diluted weighted average shares outstanding | 43,549,887 | 34,099,378 | 39,975,122 |
(1) | Amounts exclude all potential common and common equivalent shares for periods when there is a net loss. |
The Company will adopt this guidance during our first quarter of fiscal 2019 without restating comparative periods and recognizing a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. We plan to elect to apply the package of practical expedients that permit us to not reassess existing contracts for embedded leases or to reassess lease classification or initial direct costs. We also plan to make policy elections not to apply the balance sheet recognition requirements for qualifying short-term leases and not to separatenon-lease components from lease components, as applicable, to our facility leases.
The adoption of this guidance is expected to have a material impact on our Consolidated Balance Sheets. We expect to recognize additional operating liabilities of approximately $1,050,000 to $1,175,000 for existing operating leases, based on the present value of the remaining minimum rental payments. We expect to recognize the correspondingright-of-use assets of approximately $825,000 to $925,000, which includes the change in presentation of approximately $225,000 to $250,000 of deferred occupancy costs. We estimate the cumulative effect reduction to the opening balance sheet of retained earnings from adjustments resulting from adoption of this guidance to be approximately $150, net of tax.
The Company has not yet finalized quantifying the impact, if any, of leases included in certain other contracts and may identify other impacts. The Company also continues to evaluate the impact the adoption of this new guidance will have on financial statement disclosures, in addition to evaluating business processes and internal controls related to lease accounting to assist in the ongoing application of the new guidance. The new guidance is not expected to impact any covenants related to the Company’s long-term debt because the current credit facility agreements specify that covenant ratios be calculated using GAAP in effect at the time the credit facility agreements were entered.
In January 2017, the FASB issued ASU2017-04,
statements.
February 3, 2019 | February 4, 2018 | |||||||
Operating store—food and beverage | $ | 7,617 | $ | 6,977 | ||||
Operating store—amusement | 9,258 | 8,964 | ||||||
Corporate—amusement, supplies and other | 10,440 | 11,619 | ||||||
|
|
|
| |||||
$ | 27,315 | $ | 27,560 | |||||
|
|
|
|
following:
January 31, 2021 | February 2, 2020 | |||||||
Operating store—food and beverage | $ | 4,175 | $ | 7,950 | ||||
Operating store—amusement | 8,640 | 9,585 | ||||||
Corporate—amusement, supplies and other | 10,992 | 16,942 | ||||||
$ | 23,807 | $ | 34,477 | |||||
February 3, 2019 | February 4, 2018 | |||||||
Land | $ | 2,444 | $ | 3,608 | ||||
Buildings and building improvements | 17,153 | 25,222 | ||||||
Leasehold improvements | 698,328 | 597,649 | ||||||
Furniture, fixtures and equipment | 338,605 | 287,418 | ||||||
Games | 251,819 | 204,593 | ||||||
Construction in progress | 75,166 | 82,295 | ||||||
|
|
|
| |||||
Total cost | 1,383,515 | 1,200,785 | ||||||
Accumulated depreciation | (578,178 | ) | (474,330 | ) | ||||
|
|
|
| |||||
Property and equipment, net | $ | 805,337 | $ | 726,455 | ||||
|
|
|
|
following:
January 31, 2021 | February 2, 2020 | |||||||
Land | $ | 12,302 | $ | 9,021 | ||||
Buildings and building improvements | 37,417 | 23,484 | ||||||
Leasehold improvements | 805,229 | 793,698 | ||||||
Furniture, fixtures and equipment | 430,331 | 412,716 | ||||||
Games | 295,170 | 286,195 | ||||||
Construction in progress | 33,382 | 62,347 | ||||||
Total cost | 1,613,831 | 1,587,461 | ||||||
Accumulated depreciation | (798,804 | ) | (686,824 | ) | ||||
Property and equipment, net | $ | 815,027 | $ | 900,637 | ||||
During fiscal 2018, we purchased landnegatively impacted certain store revenues, which are included in Wichita, Kansas“Other store operating expenses” in the amountConsolidated Statements of $2,444. Additionally, during
February 3, 2019 | February 4, 2018 | |||||||
Deferred amusement revenue | $ | 44,232 | $ | 33,806 | ||||
Compensation and benefits | 24,280 | 19,959 | ||||||
Amusement redemption liability | 19,911 | 18,041 | ||||||
Rent | 17,982 | 16,478 | ||||||
Deferred gift card revenue | 9,450 | 7,583 | ||||||
Property taxes | 7,278 | 6,054 | ||||||
Current portion of long term insurance | 5,900 | 4,600 | ||||||
Sales and use taxes | 5,226 | 5,191 | ||||||
Utilities | 4,032 | 3,554 | ||||||
Customer deposits | 3,731 | 3,250 | ||||||
Inventory liabilities | 2,876 | 4,336 | ||||||
Other (Refer to Note 10) | 12,266 | 12,309 | ||||||
|
|
|
| |||||
Total accrued liabilities | $ | 157,164 | $ | 135,161 | ||||
|
|
|
|
January 31, 2021 | February 2, 2020 | |||||||
Deferred amusement revenue | $ | 78,852 | $ | 75,113 | ||||
Current portion of operating lease liabilities, net (1) | 46,471 | 45,611 | ||||||
Current portion of deferred occupancy costs | 36,121 | 0 | ||||||
Compensation and benefits | 13,846 | 23,421 | ||||||
Accrued interest | 11,321 | 648 | ||||||
Deferred gift card revenue | 10,918 | 11,253 | ||||||
Current portion of derivatives | 8,350 | 3,518 | ||||||
Property taxes | 8,149 | 7,226 | ||||||
Current portion of long-term insurance | 5,100 | 6,500 | ||||||
Utilities | 4,151 | 4,442 | ||||||
Sales and use taxes | 1,385 | 4,000 | ||||||
Customer deposits | 1,373 | 4,324 | ||||||
Dividend payable | 0 | 4,891 | ||||||
Other (Note 10) | 8,753 | 16,505 | ||||||
Total accrued liabilities | $ | 234,790 | $ | 207,452 | ||||
(1) | The balance of leasehold incentive receivables of $8,763 and $6,339 at January 31, 2021 and February 2, 2020, respectively, is reflected as a reduction of the current portion of operating lease liabilities. |
February 3, 2019 | February 4, 2018 | |||||||
Credit Facility—term | $ | 281,250 | $ | 296,250 | ||||
Credit Facility—revolver | 113,000 | 71,000 | ||||||
|
|
|
| |||||
Total debt outstanding | 394,250 | 367,250 | ||||||
Less current installments—term | (15,000 | ) | (15,000 | ) | ||||
Less debt issuance costs—term | (781 | ) | (1,001 | ) | ||||
|
|
|
| |||||
Long-term debt, net | $ | 378,469 | $ | 351,249 | ||||
|
|
|
|
following:
January 31, 2021 | February 2, 2020 | |||||||
Credit Facility—term | $ | 0 | $ | 266,250 | ||||
Credit Facility—revolver | 60,000 | 382,000 | ||||||
Senior secured notes | 550,000 | 0 | ||||||
Total debt outstanding | 610,000 | 648,250 | ||||||
Less current installments | — | (15,000 | ) | |||||
Less debt issuance costs | (13,612 | ) | (561 | ) | ||||
Long-term debt, net | $ | 596,388 | $ | 632,689 | ||||
At the time of the refinancing in fiscal 2017, the majority of proceeds from this senior secured credit facility was used to refinance in full the May 15, 2015 credit facility (of which $291,000 was outstanding) and to pay related interest and expenses. We incurred debt costs of $2,910, of which $397 was expensed as a loss on debt refinancing, and the remaining debt costs are being amortized over the life of the credit facility. The total loss on debt refinancing during fiscal 2017, including a portion of unamortized debt costs written off, was $718.
The interest rates per annum applicable to loans, other than swing loans, under our existing credit facility are currently set based on a defined LIBOR rate plus an applicable margin. Swing loans bear interest at a base rate plus an applicable margin. The loans bear interest subject to a pricing grid based on a total leverage ratio, at
LIBOR plus a spread ranging from 1.25% to 2.00% for the term loans and the revolving loans. The stated weighted average interest rate at February 3, 2019 was 3.75%. The fiscal 2018 weighted average effective interest rate was 3.84%. The weighted average effective rate includes amortization of debt issuance costs, commitment and other fees.
Our credit facility containsand Notes contain restrictive covenants that, among other things, place certain limitations on our ability to:to incur additional indebtedness, make loans or advances to subsidiaries and other entities, pay dividends, acquire other businesses or sell assets. In addition, our credit facility requires us to maintain certain financial ratio
2019 | $ | 15,000 | ||
2020 | 15,000 | |||
2021 | 15,000 | |||
2022 | 349,250 | |||
Thereafter | — | |||
|
| |||
Total future payments | $ | 394,250 | ||
|
|
2024 | $ | 60,000 | ||
2025 | 550,000 | |||
Total future payments | $ | 610,000 | ||
February 3, 2019 | February 4, 2018 | January 29, 2017 | ||||||||||
Interest expense on credit facilities | $ | 13,408 | $ | 8,697 | $ | 6,896 | ||||||
Amortization of issuance cost and discount | 792 | 739 | 674 | |||||||||
Interest income | (136 | ) | (224 | ) | (271 | ) | ||||||
Capitalized interest | (1,009 | ) | (786 | ) | (462 | ) | ||||||
Change in fair value of interest rate cap | 58 | 239 | 148 | |||||||||
|
|
|
|
|
| |||||||
Total interest expense, net | $ | 13,113 | $ | 8,665 | $ | 6,985 | ||||||
|
|
|
|
|
|
net:
January 31, 2021 | February 2, 2020 | February 3, 2019 | ||||||||||
Interest expense on debt | $ | 29,124 | $ | 20,277 | $ | 13,408 | ||||||
Interest associated with swap agreements | 6,453 | 969 | 0 | |||||||||
Amortization of issuance cost | 2,184 | 792 | 792 | |||||||||
Interest income | (22 | ) | (119 | ) | (136 | ) | ||||||
Capitalized interest | (849 | ) | (982 | ) | (1,009 | ) | ||||||
Change in fair value of interest rate cap | 0 | 0 | 58 | |||||||||
Total interest expense, net | $ | 36,890 | $ | 20,937 | $ | 13,113 | ||||||
Our federal statutory rate for fiscal 2018 is 21.0% and fiscal 2017 was 33.7%.
February 3, 2019 | February 4, 2018 | January 29, 2017 | ||||||||||
Current provision: | ||||||||||||
Federal | $ | 13,456 | $ | 35,195 | $ | 35,596 | ||||||
State and local | 10,730 | 9,112 | 10,107 | |||||||||
Foreign | 1,006 | (22 | ) | 72 | ||||||||
|
|
|
|
|
| |||||||
Total current provision | 25,192 | 44,285 | 45,775 | |||||||||
|
|
|
|
|
| |||||||
Deferred provision (benefit): | ||||||||||||
Federal | 5,029 | (5,697 | ) | 7,318 | ||||||||
State and local | (228 | ) | (2,885 | ) | (287 | ) | ||||||
Foreign | 673 | (263 | ) | (70 | ) | |||||||
|
|
|
|
|
| |||||||
Total deferred provision (benefit) | 5,474 | (8,845 | ) | 6,961 | ||||||||
|
|
|
|
|
| |||||||
Provision for income taxes | $ | 30,666 | $ | 35,440 | $ | 52,736 | ||||||
|
|
|
|
|
|
tax provision:
January 31, 2021 | February 2, 2020 | February 3, 2019 | ||||||||||
Current provision: | ||||||||||||
Federal | $ | (78,629 | ) | $ | 11,744 | $ | 13,456 | |||||
State and local | (1,360 | ) | 8,562 | 10,730 | ||||||||
Foreign | (78 | ) | 100 | 1,006 | ||||||||
Total current provision | (80,067 | ) | 20,406 | 25,192 | ||||||||
Deferred provision (benefit): | ||||||||||||
Federal | (5,415 | ) | 7,109 | 5,029 | ||||||||
State and local | 1,951 | (365 | ) | (228 | ) | |||||||
Foreign | 99 | (271 | ) | 673 | ||||||||
Total deferred provision (benefit) | (3,365 | ) | 6,473 | 5,474 | ||||||||
Provision for income taxes | $ | (83,432 | ) | $ | 26,879 | $ | 30,666 | |||||
January 31, 2021 | February 2, 2020 | February 3, 2019 | ||||||||||
Federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
State and local income taxes, net of federal benefit | 2.7 | % | 5.4 | % | 5.3 | % | ||||||
Permanent differences | (0.2 | ) % | 1.5 | % | 1.2 | % | ||||||
Tax credits | 0.7 | % | (6.4 | )% | (5.0 | )% | ||||||
Share-based compensation | (0.2 | ) % | (0.9 | )% | (3.4 | )% | ||||||
Impact of net operating loss carryback | 7.5 | % | — | % | — | % | ||||||
Other | (2.8 | ) % | 0.5 | % | 1.6 | % | ||||||
Effective tax rate | 28.7 | % | 21.1 | % | 20.7 | % | ||||||
February 3, 2019 | February 4, 2018 | |||||||
Deferred tax assets: | ||||||||
Deferred revenue and redemption ticket liability | $ | 18,503 | $ | 14,994 | ||||
Leasing transactions | 16,678 | 12,891 | ||||||
Accrued liabilities | 5,510 | 4,631 | ||||||
Workers compensation and general liability insurance | 4,103 | 3,386 | ||||||
Share-based compensation | 5,991 | 5,289 | ||||||
Net operating loss carryovers | 3,177 | 3,715 | ||||||
Indirect benefit of unrecognized tax benefits | 574 | 398 | ||||||
Other | 2,431 | 2,626 | ||||||
|
|
|
| |||||
Total | 56,967 | 47,930 | ||||||
Valuation allowance | (1,341 | ) | (402 | ) | ||||
|
|
|
| |||||
Total deferred tax assets, net of valuation allowance | 55,626 | 47,528 | ||||||
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|
|
| |||||
Deferred tax liabilities: | ||||||||
Trademark/tradename | (21,498 | ) | (21,413 | ) | ||||
Property and equipment | (40,171 | ) | (25,797 | ) | ||||
Other | (1,855 | ) | (2,742 | ) | ||||
|
|
|
| |||||
Total deferred tax liabilities | (63,524 | ) | (49,952 | ) | ||||
|
|
|
| |||||
Net deferred tax liabilities | $ | (7,898 | ) | $ | (2,424 | ) | ||
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|
|
| |||||
Reported as: | ||||||||
Deferred tax assets, net—noncurrent | 6,736 | 7,789 | ||||||
Deferred tax liablities, net—noncurrent | (14,634 | ) | (10,213 | ) | ||||
|
|
|
| |||||
Net deferred tax liabilities | $ | (7,898 | ) | $ | (2,424 | ) | ||
|
|
|
|
At February 3, 2019,deferred income tax asset (liability) consist of the following:
January 31, 2021 | February 2, 2020 | |||||||
Deferred revenue | $ | 24,136 | $ | 21,961 | ||||
Operating lease liability | 383,378 | 355,566 | ||||||
Accrued liabilities | 1,332 | 3,744 | ||||||
Workers compensation and general liability insurance | 3,923 | 4,397 | ||||||
Share-based compensation | 7,236 | 6,740 | ||||||
Hedging transactions | 3,488 | 2,864 | ||||||
Net operating loss carryovers | 10,303 | 2,817 | ||||||
Tax credit carryovers | 3,054 | 810 | ||||||
Indirect benefit of unrecognized tax benefits | 639 | 525 | ||||||
Other | 5,549 | 2,399 | ||||||
Total deferred tax assets | 443,038 | 401,823 | ||||||
Trademark/tradename | (21,583 | ) | (21,583 | ) | ||||
Property and equipment | (127,969 | ) | (108,685 | ) | ||||
Operating lease right of use asset | (287,030 | ) | (279,812 | ) | ||||
Other | (493 | ) | (586 | ) | ||||
Total deferred tax liabilitie s | (437,075 | ) | (410,666 | ) | ||||
Net deferred tax asset (liability) before valuation allowance | 5,963 | (8,843 | ) | |||||
Valuation allowanc e | (13,747 | ) | (2,620 | ) | ||||
Net deferred tax liability | $ | (7,784 | ) | $ | (11,463 | ) | ||
will not be realized. Based on the level of recent historical taxable income, consistent generation of annual taxable income, and estimations of future taxable income, we have concluded that it is more likely than not that we will realize the federal tax benefits associated with most of our deferred tax assets. The Tax Act repealed the performance-based compensation exception to the executive compensation limitation. A transition rule applies that allows payments to qualify for the exception if the payments are made pursuant to a written binding contract that was in effect on November 2, 2017 and has not since been materially modified. A valuation allowance relates primarily to an establishment of $409 was recordedan allowance for foreign tax credits and to an increase in fiscal 2018 to reduce the portion of deferred tax assetsvaluation allowance related to executive compensation payments made pursuant to contracts in effect after November 2, 2017 to an amount which we believe will ultimately be realized. We assessed the realizabilityas a result of the deferred tax assets associated with state taxes, foreign taxesTax Cuts and uncertain tax positionsJobs Act.
As of February 3, 2019, we have $61,402 of state net operating loss carryforwards, which expire beginning 2019 through 2038.
The following table sets forth the change in unrecognized tax benefits excluding interest, penalties and related incomefollows:
January 31, 2021 | February 2, 2020 | February 3, 2019 | ||||||||||
Balance at beginning of year | $ | 2,080 | $ | 2,333 | $ | 1,568 | ||||||
Additions for tax positions of prior years | 28 | 463 | 435 | |||||||||
Reductions for tax positions of prior years | — | (44 | ) | (30 | ) | |||||||
Additions for tax positions of current year | 660 | 450 | 437 | |||||||||
Settlements with taxing authorities | — | (390 | ) | — | ||||||||
Lapse of statute of limitations | (204 | ) | (732 | ) | (77 | ) | ||||||
Balance at end of year | $ | 2,564 | $ | 2,080 | $ | 2,333 | ||||||
February 3, 2019 | February 4, 2018 | January 29, 2017 | ||||||||||
Balance at beginning of year | $ | 1,568 | $ | 1,348 | $ | 1,263 | ||||||
Additions for tax positions of current year | 437 | 290 | 240 | |||||||||
Additions for tax positions of prior years | 435 | — | — | |||||||||
Reductions for tax positions of prior years | (30 | ) | (31 | ) | (76 | ) | ||||||
Lapse of statute of limitations | (77 | ) | (39 | ) | (79 | ) | ||||||
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| |||||||
Balance at end of year | $ | 2,333 | $ | 1,568 | $ | 1,348 | ||||||
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|
|
Theincludes $2,337, that if recognized, would affect our effective tax rate. As of January 31, 2021, and February 2, 2020, we had accrued interest and penalties on the unrecognized tax benefits, excluding any related income tax benefits, were $394 of
We currently anticipateIncome
The following table sets forth the reconciliation
We
January 31, 2021 | February 2, 2020 | |||||||
Operating lease cost | $ | 132,658 | $ | 124,065 | ||||
Variable lease cost | 25,360 | 30,009 | ||||||
Short-term lease cost (1) | 457 | 435 | ||||||
Total lease cost | $ | 158,475 | $ | 154,509 | ||||
(1) | We have elected the short-term lease recognition exemption for all applicable classes of underlying assets. Leases with an initial term of 12 months or less, that do not include a purchase option that we are reasonably certain to exercise, are not recorded on the Consolidated Balance Sheet. |
January 31, 2021 | February 2, 2020 | |||||||
Cash paid for operating lease liabilities | $ | 77,292 | $ | 123,748 | ||||
ROU assets obtained in exchange for new operating lease liabilities (1) | $ | 98,218 | $ | 220,648 | ||||
Weighted-average remaining lease term - operating leases (in years) | 14.8 | 15.7 | ||||||
Weighted-average discount rate - operating leases | 5.94 | % | 5.90 | % |
(1) | Excludes the transition adjustment at adoption of Topic 842 in fiscal 2019. |
2022 | $ | 132,037 | ||
2023 | 138,413 | |||
2024 | 135,388 | |||
2025 | 134,488 | |||
2026 | 134,915 | |||
Thereafter | 1,374,294 | |||
Total future operating lease liability | $ | 2,049,535 | ||
Less: interest | (726,510 | ) | ||
Present value of operating lease liabilities | $ | 1,323,025 | ||
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||
$121,550 | $117,033 | $111,045 | $104,049 | $100,712 | $1,229,784 | $1,784,173 |
At February 3, 2019, we also had lease commitments on equipment as follows:
2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||
$951 | $875 | $597 | $146 | $67 | $19 | $2,655 |
As of February 3, 2019, we have signed operating lease agreements for tenthree future sites for which are expected to open in fiscal 2019. The landlordsthe leases have fulfilled the obligations to commit us to thecommenced. Operating lease terms under these agreements and therefore, the future obligations related to these locations are included in the table above.
Aspayments exclude approximately $173,000 of February 3, 2019, weminimum lease payments for seven executed facility leases which have signed fourteen additional lease agreements for future sites. Our commitments under these agreements are contingent, upon among other things, the landlord’s delivery of access to the premises for construction. Future obligations related to these agreements are not included in the table above.
Share repurchase program
Our
The Company considers several factors in determining when to execute share repurchases, including among other things, currentauthorized and declared quarterly cash needs, capacity for leverage, cost of borrowings, its results of operationsdividends totaling $0.62 and the market price of its common stock. The following table provides, on a settlement date basis, the number of shares repurchased, average price paid$0.30 per share of common stock during fiscal 2019 and total amount paid for share repurchases for fiscal 2018, 2017 and 2016:
Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | ||||||||||
Total number of shares repurchased | 3,080,419 | 2,636,616 | 566,756 | |||||||||
Average price paid per share | $ | 48.41 | $ | 57.62 | $ | 50.86 | ||||||
Toal cash paid for share repurchases | $ | 149,125 | $ | 151,913 | $ | 28,825 |
respectively. The fiscal 2019 fourth quarter dividend was paid in the first quarter of fiscal 2020.
Dividends
Our Board of Directors declared the following dividendsobligations, respectively. The share activity in fiscal 2018:
Declaration Date | Dividend per share | Record Date | Amount | Payment Date | ||||||||
September 11, 2018 | $ | 0.15 | September 25, 2018 | $ | 5,842 | October 10, 2018 | ||||||
December 13, 2018 | $ | 0.15 | December 26, 2018 | $ | 5,728 | January 10, 2019 |
On March 11, 2019, our Board2020 includes the settlements of Directors declared a quarterly$2,517 cash dividendobligations through the issuance of $0.15 per share on each160,540 shares of its outstanding common shares, such dividend to be paid on April 10, 2019, to shareholders of record on March 26, 2019.
stock.
3,100,000 shares. Time-based options granted to employees generally become exercisable ratably over a three-year period from the grant date. Certain time-based options granted to executives at the IPO date vest 50% after a period of three years and 50% after a period of four years. Performance-based RSU’srestricted stock units awarded to employees fully vest after three years, subject to the achievement of specified performance conditions. Market stock units (“MSU’s”) awarded to employees vest ratably over a
Compensation expense associated On June
No options were granted during fiscal 2020.
The significant assumptions used in determining the underlying fair value of the weighted-average options granted in fiscal2014 Stock Incentive Plan | ||||||||||||
Fiscal 2018 | Fiscal 2017 | Fiscal 2016 | ||||||||||
Volatility | 32.7 | % | 32.9 | % | 34.0 | % | ||||||
Risk free interest rate | 2.73 | % | 2.00 | % | 1.29 | % | ||||||
Expected dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||||||
Expected term – in years | 6.0 | 6.0 | 5.9 | |||||||||
Weighted average calculated value | $ | 15.36 | $ | 20.54 | $ | 13.62 |
Fiscal 2019 | Fiscal 2018 | |||||||
Volatility | 34.2 | % | 32.7 | % | ||||
Risk free interest rate | 2.34 | % | 2.73 | % | ||||
Expected dividend yield | 1.15 | % | 0.00 | % | ||||
Expected term – in years | 6.0 | 6.0 | ||||||
Weighted average grant-date fair value | $ | 16.93 | $ | 15.36 |
probability that performance conditions at target or above will be met, and time-based RSU’s and restricted sharesmet. Restricted stock units are
restricted stock units is included in “General and administrative expenses” in the Consolidated Statements of Comprehensive Income (Loss). Forfeitures are estimated at the time of grant and adjusted, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The forfeiture rate is based on historical experience.
2014 Stock Incentive Plan | 2010 Stock Incentive Plan | |||||||||||||||
Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | |||||||||||||
Outstanding at February 4, 2018 | 1,001,403 | $ | 32.55 | 709,979 | $ | 5.88 | ||||||||||
Granted | 205,646 | 41.65 | — | — | ||||||||||||
Exercised | (55,611 | ) | 27.94 | (345,497 | ) | 5.20 | ||||||||||
Forfeited | (17,220 | ) | 46.12 | (4,498 | ) | 9.34 | ||||||||||
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Outstanding at February 3, 2019 | 1,134,218 | 34.22 | 359,984 | 6.48 | ||||||||||||
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Exercisable at February 3, 2019 | 745,267 | $ | 27.97 | 359,984 | $ | 6.48 | ||||||||||
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2014 Stock Incentive Plan | 2010 Stock Incentive Plan | |||||||||||||||
Number of Options | Weighted Average Exercise Price | Number of Options | Weighted Average Exercise Price | |||||||||||||
Outstanding at February 2, 2020 | 1,323,495 | $ | 36.97 | 266,900 | $ | 6.72 | ||||||||||
Granted | — | — | — | — | ||||||||||||
Exercised | — | — | (93,337 | ) | 5.27 | |||||||||||
Forfeited | (91,894 | ) | 39.56 | — | — | |||||||||||
Outstanding at January 31, 2021 | 1,231,601 | 36.77 | 173,563 | 7.51 | ||||||||||||
Exercisable at January 31, 2021 | 1,043,759 | $ | 34.60 | 173,563 | $ | 7.51 | ||||||||||
$11,000.
Shares | Weighted Avg Grant Date Fair Value | |||||||
Outstanding at February 4, 2018 | 184,541 | $ | 44.96 | |||||
Granted | 112,574 | 46.50 | ||||||
Change in units based on performance | 50,452 | 31.72 | ||||||
Vested | (115,562 | ) | 35.26 | |||||
Forfeited | (11,175 | ) | 45.01 | |||||
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Outstanding at February 3, 2019 | 220,830 | $ | 47.79 | |||||
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Fair value
Shares | Weighted Avg Grant Date Fair Value | |||||||
Outstanding at February 2, 2020 | 216,815 | $ | 51.58 | |||||
Granted | 1,064,336 | 12.75 | ||||||
Change in units based on performance | 4,352 | 59.67 | ||||||
Vested | (104,752 | ) | 38.50 | |||||
Forfeited | (64,410 | ) | 25.58 | |||||
Outstanding at January 31, 202 1 | 1,116,341 | $ | 17.32 | |||||
Stock option exercise activity and share unit conversion in fiscal 2018 were satisfied through the issuance of new shares.
provide for a guaranteed matching of 25% of employee contributions, up to a maximum of 6% of eligible employee compensation, as defined by the 401(k) Plan. We also have a discretionary contribution dependent upon attaining a specified performance target. Should we achieve the performance target, it would contribute an additional 25% of qualified employee contributions. Employees may elect to contribute up to 50% of their eligible compensation on a pretax basis. Benefits underUnder the
We offer
On June 30, 2017, we agreed to settle litigation Legal costs related to allegedsuch claims are expensed as incurred.
Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options, unvested time-based RSU’s and performance RSU’s to the extent performance measures were attained as of the end of the reporting period, calculated using the treasury-stock method. Potential dilutive shares are excluded from the computation of earnings per share (“EPS”) if their effect is anti-dilutive. Stock options for which the exercise price exceeds the average market price over the period are anti-dilutive and, accordingly, are excluded from the calculation. For fiscal 2018 and fiscal 2017, we excluded approximately 52,000 and 31,000 anti-dilutive options from the calculation of common equivalent shares.
The following table sets forth the computation of EPS, basic and diluted for the fiscal years ended:
(in thousands, except share and per share data) | February 3, 2019 | February 4, 2018 | January 29, 2017 | |||||||||
Numerator: | ||||||||||||
Net income | $ | 117,221 | $ | 120,949 | $ | 90,795 | ||||||
Denominator: | ||||||||||||
Weighted average number of common shares outstanding (basic) | 39,047,106 | 41,276,314 | 41,951,770 | |||||||||
Weighted average dilutive impact of equity-based awards | 928,016 | 1,306,695 | 1,336,822 | |||||||||
Weighted average number of common and common equivalent shares outstanding (dilutive) | 39,975,122 | 42,583,009 | 43,288,592 | |||||||||
Net income per share: | ||||||||||||
Basic | $ | 3.00 | $ | 2.93 | $ | 2.16 | ||||||
Diluted | $ | 2.93 | $ | 2.84 | $ | 2.10 |
Note 12: Selected Quarterly Financial Information (unaudited)
Fiscal 2018 Quarters Ended | ||||||||||||||||
5/6/2018 | 8/5/2018 | 11/4/2018 | 2/3/2019 | |||||||||||||
Total revenues | $ | 332,190 | $ | 319,188 | $ | 282,139 | $ | 331,784 | ||||||||
Total cost of products | 57,139 | 55,556 | 48,734 | 58,834 | ||||||||||||
Operating income | 58,604 | 45,930 | 15,472 | 40,994 | ||||||||||||
Net income | 42,150 | 33,779 | 11,856 | 29,436 | ||||||||||||
Net income per share of common stock: | ||||||||||||||||
Basic | $ | 1.06 | $ | 0.86 | $ | 0.30 | $ | 0.77 | ||||||||
Diluted | $ | 1.04 | $ | 0.84 | $ | 0.30 | $ | 0.75 | ||||||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 39,695,421 | 39,355,105 | 38,892,288 | 38,245,612 | ||||||||||||
Diluted | 40,612,388 | 40,280,301 | 39,855,648 | 39,065,459 | ||||||||||||
Stores open at end of period | 112 | 117 | 118 | 121 |
Fiscal 2017 Quarters Ended | ||||||||||||||||
4/30/2017 | 7/30/2017 | 10/29/2017 | 2/4/2018 | |||||||||||||
Total revenues | $ | 304,148 | $ | 280,751 | $ | 249,979 | $ | 304,913 | ||||||||
Total cost of products | 48,985 | 48,451 | 44,607 | 54,629 | ||||||||||||
Operating income | 64,228 | 39,163 | 19,926 | 42,455 | ||||||||||||
Net income | 42,796 | 30,356 | 12,157 | 35,640 | ||||||||||||
Net income per share of common stock: | ||||||||||||||||
Basic | $ | 1.02 | $ | 0.73 | $ | 0.30 | $ | 0.88 | ||||||||
Diluted | $ | 0.98 | $ | 0.71 | $ | 0.29 | $ | 0.85 | ||||||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 42,027,551 | 41,460,651 | 41,077,206 | 40,568,751 | ||||||||||||
Diluted | 43,522,403 | 42,830,873 | 42,250,611 | 41,699,060 | ||||||||||||
Stores open at end of period | 96 | 100 | 101 | 106 |
The fourth quarter
Fiscal 2020 Quarters Ended | ||||||||||||||||
5/3/2020 | 8/2/2020 | 11/1/2020 | 1/31/2021 | |||||||||||||
Total revenues | $ | 159,806 | $ | 50,833 | $ | 109,052 | $ | 116,821 | ||||||||
Total cost of products | 28,072 | 8,684 | 17,908 | 20,241 | ||||||||||||
Operating loss | (61,413 | ) | (81,115 | ) | (56,043 | ) | (54,041 | ) | ||||||||
Net loss | (43,544 | ) | (58,602 | ) | (48,043 | ) | (56,785 | ) | ||||||||
Net loss per share of common stock: | ||||||||||||||||
Basic | $ | (1.37 | ) | $ | (1.24 | ) | $ | (1.01 | ) | $ | (1.19 | ) | ||||
Diluted | $ | (1.37 | ) | $ | (1.24 | ) | $ | (1.01 | ) | $ | (1.19 | ) | ||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 31,829,985 | 47,111,763 | 47,613,741 | 47,644,062 | ||||||||||||
Diluted | 31,829,985 | 47,111,763 | 47,613,741 | 47,644,062 | ||||||||||||
Company-owned stores at end of period | 137 | 137 | 137 | 140 |
Fiscal 2019 Quarters Ended | ||||||||||||||||
5/5/2019 | 8/4/2019 | 11/3/2019 | 2/2/2020 | |||||||||||||
Total revenues | $ | 363,582 | $ | 344,599 | $ | 299,352 | $ | 347,158 | ||||||||
Total cost of products | 61,725 | 59,623 | 52,180 | 59,783 | ||||||||||||
Operating income | 57,750 | 46,214 | 6,499 | 37,616 | ||||||||||||
Net income | 42,443 | 32,356 | 482 | 24,982 | ||||||||||||
Net income per share of common stock: | ||||||||||||||||
Basic | $ | 1.15 | $ | 0.91 | $ | 0.02 | $ | 0.82 | ||||||||
Diluted | $ | 1.13 | $ | 0.90 | $ | 0.02 | $ | 0.80 | ||||||||
Weighted average number of shares outstanding: | ||||||||||||||||
Basic | 36,827,665 | 35,407,965 | 30,980,878 | 30,584,360 | ||||||||||||
Diluted | 37,591,944 | 36,015,710 | 31,515,454 | 31,158,919 | ||||||||||||
Company-owned stores at end of period | 127 | 130 | 134 | 136 |
Our revenues and operations are influenced by seasonal shifts in consumer spending. Revenues associated with spring andyear-end holidays have historically been higher. Our third quarter, which encompasses theback-to-school fall season, has historically had lower revenues as compared to the other quarters.
Net income for the fourth quarter of fiscal 2017 includes a benefit to our income tax provision related to the favorablematerial impact of the Tax Act (refer to Note 6 for further discussion of income taxes).
F-24