UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT ~~UNDER~~PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~October 29, 2017~~

November 3, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM

Commission FileNo.

001-35664

Dave & Buster’s Entertainment, Inc.

(Exact name of registrant as specified in its charter)


Delaware		35-2382255
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2481 Mañana Drive

Dallas, Texas 75220

(Address of principal executive offices)

(Zip Code)

(214)

357-9588

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock $0.01 par value	PLAY	NASDAQ Stock Market LLC

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by checkmark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

~~Non-accelerated filer~~	~~☐ (Do not check if a smaller reporting company)~~
Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by checkmark whether the registrant is a shell company (as defined inRule

12b-2

of the Exchange Act). Yes

☐

☒

As of ~~November 30, 2017, there were 40,694,355~~December

4, 2019, the registrant had

30,570,973

shares of ~~the Issuer’s~~ common stock, $0.01 par value per share, outstanding.

PART I – FINANCIAL INFORMATION

~~ITEM~~

Item 1.

~~FINANCIAL STATEMENTS~~

Financial Statements

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

   October 29, January 29,
   2017 2017
   (unaudited) (audited)
ASSETS
Current assets:

Cash and cash equivalents
   $ 15,258 $ 20,083
Inventories
   26,107 21,860
Prepaid expenses
   18,221 15,828
Income taxes receivable
   1,611 5,901
Other current assets
   17,916 11,932


Total current assets
   79,113 75,604
Property and equipment (net of $449,572 and $387,505 accumulated depreciation as of October 29, 2017 and January 29, 2017, respectively)
   686,858 606,865
Deferred tax assets
   3,926 2,446
Tradenames
   79,000 79,000
Goodwill
   272,600 272,629
Other assets and deferred charges
   15,700 16,189


Total assets
   $ 1,137,197 $ 1,052,733


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Current installments of long-term debt
   $ 15,000 $ 7,500
Accounts payable
   62,444 55,278
Accrued liabilities
   129,287 112,327
Income taxes payable
   396 2,692


Total current liabilities
   207,127 177,797
Deferred income taxes
   12,978 14,497
Deferred occupancy costs
   170,579 147,592
Other liabilities
   21,023 16,767
Long-term debt, net
   299,940 256,628
Commitments and contingencies

Stockholders’ equity:

Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 42,627,975 shares at October 29, 2017 and 42,469,570 shares at January 29, 2017; outstanding: 40,927,386 shares at October 29, 2017 and 42,204,587 shares at January 29, 2017
   426 425
Preferred stock, 50,000,000 authorized; none issued
   —   —
Paid-in capital
   318,379 310,230
Treasury stock, 1,700,589 and 264,983 shares as of October 29, 2017 and January 29, 2017, respectively
   (105,406 ) (14,817 )
Accumulated other comprehensive loss
   (520 ) (723 )
Retained earnings
   212,671 144,337


Total stockholders’ equity
   425,550 439,452


Total liabilities and stockholders’ equity
   $ 1,137,197 $ 1,052,733


	November 3, 2019			February 3, 2019
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	20,880		$	21,585
Inventories		32,620			27,315
Prepaid expenses		12,722			20,713
Income taxes receivable		2,876			1,880
Other current assets		2,511			19,600

Total current assets		71,609			91,093
Property and equipment (net of $657,348 and $578,178 accumulated depreciation as of November 3, 2019 and February 3, 2019, respectively)		878,203			805,337
Operating lease right of use assets		967,697			—
Deferred tax assets		8,934			6,736
Tradenames		79,000			79,000
Goodwill		272,628			272,625
Other assets and deferred charges		20,116			18,396

Total assets	$	2,298,187		$	1,273,187

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	15,000		$	15,000
Accounts payable		65,538			60,427
Accrued liabilities		199,125			157,164
Income taxes payable		1,720			11,799

Total current liabilities		281,383			244,390
Deferred income taxes		19,287			14,634
Deferred occupancy costs		—			223,678
Operating lease liabilities		1,174,772			—
Other liabilities		34,240			24,179
Long-term debt, net		640,384			378,469
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 43,350,485 shares at November 3, 2019 and 43,177,476 shares at February 3, 2019; outstanding: 30,566,973 shares at November 3, 2019 and 37,522,085 shares at February 3, 2019		434			432
Preferred stock, 50,000,000 authorized; NaN issued		—			—
Paid-in capital		337,510			331,255
Treasury stock, 12,783,512 and 5,655,391 shares as of November 3, 2019 and February 3, 2019, respectively		(595,041	)		(297,129	)
Accumulated other comprehensive loss		(8,156	)		(683	)
Retained earnings		413,374			353,962

Total stockholders’ equity		148,121			387,837

Total liabilities and stockholders’ equity	$	2,298,187		$	1,273,187

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

   Thirteen Weeks Thirteen Weeks
   Ended Ended
   October 29, 2017 October 30, 2016
Food and beverage revenues
   $ 107,690 $ 101,343
Amusement and other revenues
   142,289 127,316


Total revenues
   249,979 228,659
Cost of food and beverage
   28,387 26,560
Cost of amusement and other
   16,220 15,581


Total cost of products
   44,607 42,141
Operating payroll and benefits
   57,967 55,034
Other store operating expenses
   82,766 71,888
General and administrative expenses
   13,432 13,506
Depreciation and amortization expense
   25,672 22,864
Pre-opening costs
   5,609 4,553


Total operating costs
   230,053 209,986


Operating income
   19,926 18,673
Interest expense, net
   2,156 1,578
Loss on debt refinancing
   718 —


Income before provision for income taxes
   17,052 17,095
Provision for income taxes
   4,895 6,340


Net income
   12,157 10,755


Unrealized foreign currency translation loss
   (225 ) (106 )


Total comprehensive income
   $ 11,932 $ 10,649


Net income per share:

Basic
   $ 0.30 $ 0.26
Diluted
   $ 0.29 $ 0.25
Weighted average shares used in per share calculations:

Basic
   41,077,206 42,061,235
Diluted
   42,250,611 43,327,812


	Thirteen Weeks Ended November 3, 2019			Thirteen Weeks Ended November 4, 2018
Food and beverage revenues	$	124,637		$	118,807
Amusement and other revenues		174,715			163,332

Total revenues		299,352			282,139
Cost of food and beverage		33,384			31,163
Cost of amusement and other		18,796			17,571

Total cost of products		52,180			48,734
Operating payroll and benefits		76,165			71,309
Other store operating expenses		110,713			96,267
General and administrative expenses		16,210			15,043
Depreciation and amortization expense		33,340			30,574
Pre-opening costs		4,245			4,740

Total operating costs		292,853			266,667

Operating income		6,499			15,472
Interest expense, net		6,110			3,321

Income before provision (benefit) for income taxes		389			12,151
Provision (benefit) for income taxes		(93	)		295

Net income		482			11,856

Unrealized foreign currency translation gain (loss)		59			(76	)
Unreali zed loss of derivatives, net of tax		(1,568	)		—

Total other comprehensive loss		(1,509	)		(76	)

Total comprehensive income (loss)	$	(1,027	)	$	11,780

Net income per share:
Basic	$	0.02		$	0.30
Diluted	$	0.02		$	0.30
Weighted average shares used in per share calculations:
Basic		30,980,878			38,892,288
Diluted		31,515,454			39,855,648

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(in thousands, except share and per share amounts)

   Thirty-Nine Weeks    Thirty-Nine Weeks
   Ended    Ended
   October 29, 2017    October 30, 2016
Food and beverage revenues
   $ 356,190    $ 326,139
Amusement and other revenues
   478,688    408,837




Total revenues
   834,878    734,976
Cost of food and beverage
   91,562    83,772
Cost of amusement and other
   50,481    48,628




Total cost of products
   142,043    132,400
Operating payroll and benefits
   187,610    166,614
Other store operating expenses
   247,663    214,487
General and administrative expenses
   45,172    40,131
Depreciation and amortization expense
   74,447    65,108
Pre-opening costs
   14,626    10,390




Total operating costs
   711,561    629,130




Operating income
   123,317    105,846
Interest expense, net
   6,073    5,573
Loss on debt refinancing
   718    —




Income before provision for income taxes
   116,526    100,273
Provision for income taxes
   31,217    36,845




Net income
   85,309    63,428




Unrealized foreign currency translation gain
   203    180




Total comprehensive income
   $ 85,512    $ 63,608




Net income per share:

Basic
   $ 2.05    $ 1.52
Diluted
   $ 1.99    $ 1.47
Weighted average shares used in per share calculations:

Basic
   41,521,802    41,863,932
Diluted
   42,888,659    43,234,767


	Thirty-nine Weeks Ended November 3, 2019			Thirty-nine Weeks Ended N ovember 4, 2018
Food and beverage revenues	$	410,779		$	388,804
Amusement and other revenues		596,754			544,713

Total revenues		1,007,533			933,517
Cost of food and beverage		109,072			101,181
Cost of amusement and other		64,456			60,248

Total cost of products		173,528			161,429
Operating payroll and benefits		239,965			217,939
Other store operating expenses		321,334			284,432
General and administrative expenses		49,047			45,461
Depreciation and amortization expense		97,226			87,129
Pre-opening costs		15,970			17,121

Total operating costs		897,070			813,511

Operating income		110,463			120,006
Interest expense, net		14,771			9,406

Income before provision for income taxes		95,692			110,600
Provision for income taxes		20,411			22,815

Net income		75,281			87,785

Unrealized foreign currency translation gain ( loss )		2			(438	)
Unrealized loss of derivatives, net of tax		(7,475	)		—

Total other comprehensive loss		(7,473	)		(438	)

Total comprehensive income	$	67,808		$	87,347

Net income per share:
Basic	$	2.19		$	2.23
Diluted	$	2.15		$	2.18
Weighted average shares used in per share calculations:
Basic		34,405,503			39,314,271
Diluted		35,042,311			40,257,231

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share amounts)

         Paid-In
Capital    Accumulated
Other
Comprehensive
Gain (Loss) Retained
Earnings Total

            Treasury Stock
   Common Stock       At Cost
   Shares    Amt.       Shares Amt.
Balance January 29, 2017 (audited)
   42,469,570    $ 425    $ 310,230    264,983 $ (14,817 ) $ (723 ) $ 144,337 $ 439,452
Net income
   —      —      —      —   —   —   85,309 85,309
Unrealized foreign currency translation gain
   —      —      —      —   —   203 —   203
Share-based compensation
   —      —      7,006    —   —   —   —   7,006
Cumulative effect of a change in accounting principle
   —      —      —      —   —   —   782 782
Issuance of common stock
   158,405    1    1,143    —   —   —   —   1,144
Repurchase of common stock
   —      —      —      1,778,484 (109,988 ) —   —   (109,988 )
Issuance of treasury stock
   —      —      —      (342,878 ) 19,399 —   (17,757 ) 1,642








Balance October 29, 2017 (unaudited)
   42,627,975    $ 426    $ 318,379    1,700,589 $ (105,406 ) $ (520 ) $ 212,671 $ 425,550


	Thirteen Weeks Ended November 3, 2019
	Common Stock				Paid-In Capital		Treasury Stock At Cost					Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares		Amt.		Paid-In Capital		Shares		Amt.			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance August 4, 2019		43,337,125	$	433	$	335,599		10,358,291	$	(497,862	)	$	(6,647	)	$	417,779		$	249,302
Net income		—		—		—		—		—			—			482			482
Unrealized foreign currency translation gain		—		—		—		—		—			59			—			59
Unrealized loss of derivatives, net of tax		—		—		—		—		—			(1,568	)		—			(1,568	)
Share-based compensation		—		—		1,747		—		—			—			—			1,747
Issuance of common stock		13,360		1		164		—		—			—			—			165
Repurchase of common stock		—		—				2,425,221		(97,179	)		—			—			(97,179	)
Dividends declared ($0.16 per share)		—		—		—		—		—			—			(4,887	)		(4,887	)

Balance November 3, 2019		43,350,485	$	434	$	337,510		12,783,512	$	(595,041	)	$	(8,156	)	$	413,374		$	148,121


	Thirteen Weeks Ended November 4 , 201 8
	Common Stock				Paid-In Capital		Treasury Stock At Cost					Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares		Amt.		Paid-In Capital		Shares		Amt.			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance August 5, 2018		42,937,988	$	429	$	325,951		3,910,033	$	(209,084	)	$	(611	)	$	324,240		$	440,925
Net income		—		—		—		—		—			—			11,856			11,856
Unrealized foreign currency translation loss		—		—		—		—		—			(76	)		—			(76	)
Share-based compensation		—		—		1,757		—		—			—			—			1,757
Issuance of common stock		199,988		2		1,686		—		—			—			—			1,688
Repurchase of common stock		—		—		—		436,706		(24,997	)		—			—			(24,997	)
Dividends declared ($0.15 per share)		—		—		—		—		—			—			(5,842	)		(5,842	)

Balance November 4, 2018		43,137,976	$	431	$	329,394		4,346,739	$	(234,081	)	$	(687	)	$	330,254		$	425,311

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

CONSOLIDATED ~~STATEMENTS~~STATEMENT OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY (UNAUDITED)

(in ~~thousands)~~

   Thirty-Nine Weeks Thirty-Nine Weeks
   Ended Ended
   October 29,2017 October 30, 2016
Cash flows from operating activities:

Net income
   $ 85,309 $ 63,428
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization expense
   74,447 65,108
Deferred taxes
   (2,217 ) 4,445
Excess income tax benefit related to share-based compensation plans
   —   (9,124 )
Loss on debt refinancing
   718 —
Loss on disposal of fixed assets
   1,205 987
Share-based compensation
   7,006 4,665
Other, net
   1,034 1,261
Changes in assets and liabilities:

Inventories
   (4,247 ) (1,028 )
Prepaid expenses
   (2,393 ) (2,284 )
Income tax receivable
   4,290 (3,284 )
Other current assets
   (6,647 ) 10,056
Other assets and deferred charges
   (119 ) 1,194
Accounts payable
   2,007 2,972
Accrued liabilities
   17,088 10,855
Income taxes payable
   (2,296 ) 9,059
Deferred occupancy costs
   23,249 14,071
Other liabilities
   2,629 2,169


Net cash provided by operating activities
   201,063 174,550


Cash flows from investing activities:

Capital expenditures
   (150,278 ) (131,284 )
Proceeds from sales of property and equipment
   52 31
Collections of notes receivable
   3,200 800


Net cash used in investing activities
   (147,026 ) (130,453 )


Cash flows from financing activities:

Proceeds from debt
   431,000 68,000
Payments of debt
   (379,750 ) (127,625 )
Payment of debt issuance costs
   (2,910 ) —
Proceeds from the exercise of stock options
   1,144 2,920
Proceeds from issuance of treasury stock
   1,642 77
Repurchase of common stock
   (109,988 ) (7,364 )
Excess income tax benefit related to share-based compensation plans
   —   9,124


Net cash used in financing activities
   (58,862 ) (54,868 )


Decrease in cash and cash equivalents
   (4,825 ) (10,771 )
Beginning cash and cash equivalents
   20,083 25,495


Ending cash and cash equivalents
   $ 15,258 $ 14,724


Supplemental disclosures of cash flow information:

Increase in fixed asset accounts payable
   $ 5,159 $ 18,978
Cash paid for income taxes, net
   $ 31,439 $ 26,606
Cash paid for interest, net
   $ 5,319 $ 5,083

thousands, except share amounts)


	Thirty-nine Weeks Ended November 3, 2019
	Common Stock				Paid-In Capital		Treasury Stock At Cost					Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares		Amt.		Paid-In Capital		Shares		Amt.			Accumulated Other Comprehensive Loss			Retained Earnings			Total
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		—		—		—		—		—			—			75,281			75,281
Unrealized foreign currency translation gain		—		—		—		—		—			2			—			2
Unrealized loss of derivatives, net of tax		—		—		—		—		—			(7,475	)		—			(7,475	)
Share-based compensation		—		—		5,479		—		—			—			—			5,479
Issuance of common stock		173,009		2		776		—		—			—			—			778
Repurchase of common stock		—		—				7,128,121		(297,912	)		—			—			(297,912	)
Dividends declared ($0.46 per share)		—		—		—		—		—			—			(15,724	)		(15,724	)

Balance November 3, 2019		43,350,485	$	434	$	337,510		12,783,512	$	(595,041	)	$	(8,156	)	$	413,374		$	148,121

	Thirty-nine Weeks Ended November 4 , 201 8
	Common Stock				Paid-In Capital		Treasury Stock At Cost					Accumulated Other Comprehensive Loss			Retained Earnings			Total
	Shares		Amt.		Paid-In Capital		Shares		Amt.			Accumulated Other Comprehensive Loss			Retained Earnings			Total
Balance February 4, 2018		42,660,806	$	427	$	320,488		2,558,721	$	(147,331	)	$	(249	)	$	248,311		$	421,646
Net income		—		—		—		—		—			—			87,785			87,785
Unrealized foreign currency translation loss		—		—		—		—		—			(438	)		—			(438	)
Share-based compensation		—		—		5,771		—		—			—			—			5,771
Issuance of common stock		477,170		4		3,135		—		—			—			—			3,139
Repurchase of common stock		—		—		—		1,788,018		(86,750	)		—			—			(86,750	)
Dividends declared ($0.15 per share)		—		—		—		—		—			—			(5,842	)		(5,842	)

Balance November 4, 2018		43,137,976	$	431	$	329,394		4,346,739	$	(234,081	)	$	(687	)	$	330,254		$	425,311

See accompanying notes to consolidated financial statements.

DAVE & BUSTER’S ENTERTAINMENT, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts)

Note 1: Summary of Significant Accounting Policies

Basis of presentation

— Dave & Buster’s Entertainment, Inc. (“D&B Entertainment”) is a Delaware corporation formed in June 2010. References to the “Company”, “we”, “us”, and “our” ~~refer~~refers to D&B Entertainment, any predecessor companies, and its wholly-owned subsidiaries, Dave & Buster’s Holdings, Inc. (“D&B Holdings”), a holding company which owns 100% of the outstanding common stock of Dave & Buster’s, Inc. (“D&B Inc”), the operating company. The Company, headquartered in Dallas, Texas, is a leading operator of high-volume entertainment and dining venues (“stores”) in North America for adults and families under the name “Dave & Buster’s”. The Company operates its business as ~~one~~1 operating and ~~one~~1 reportable segment. During the first three quarters of fiscal 2019, we opened fourteen stores and permanently closed one store in Duluth (Atlanta), Georgia on March 3, 2019. As of ~~October 29, 2017,~~November 3, 2019, we owned and operated ~~101~~134 stores located in 3439 states, Puerto Rico and ~~one~~1 Canadian province.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information as prescribed by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and ~~footnotes~~notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated. The preparation of consolidated financial statements in conformity with GAAP requires us to make certain estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Operating results for the ~~thirteen and~~ thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year ending February ~~4, 2018.~~2, 2020. Our quarterly financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended ~~January 29, 2017,~~February 3, 2019, included in our Annual Report on Form

10-K

as filed with the SEC.

We operate on a 52 or ~~53 week~~

53-week

fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period reported has 13 ~~weeks, except in a 53 week year when the fourth quarter has 14~~ weeks. Fiscal ~~2017~~2019 and ~~2016,~~2018, which end on February ~~4, 2018~~2, 2020 and ~~January 29, 2017,~~February 3, 2019, contain ~~53 and~~ 52 ~~weeks, respectively.~~

weeks.

Cash and cash equivalents

— We consider transaction settlements in process from credit card companies and all ~~highly liquid temporary~~highly-liquid investments with original maturities of three months or less to be cash equivalents. Our cash management system provides for the daily funding of all major bank disbursement accounts ~~on a daily basis~~ as checks are presented for payment. Under this system, outstanding checks ~~are~~ in excess of the cash balances at certain banks ~~which~~ creates book overdrafts. Book overdrafts of ~~$9,761~~$2,246 and ~~$10,065~~$12,782 are presented in “Accounts payable” in the Consolidated Balance Sheets as of ~~October 29, 2017~~November 3, 2019 and ~~January 29, 2017,~~February 3, 2019, respectively. Changes in the book overdraft position are presented within “Net cash provided by operating activities” within the Consolidated Statements of Cash Flows.

~~Other current assets~~~~— The balance includes construction allowance receivables of $8,685 and $7,021 as of October 29, 2017 and January 29, 2017, respectively, related to our new store openings.~~

~~Provision for income taxes~~— The provision for income taxes includes a credit for the tax effect of recognizing excess tax benefits on share-based payments of $11,419 and $0 for the thirty-nine weeks ended October 29, 2017 and October 30, 2016, respectively.

Fair value of financial instruments

— Fair value is defined as the price wethat would ~~receive~~be received to sell an asset or ~~pay~~paid to transfer a liability ~~(exit price)~~ in an orderly transaction between market participants at the measurement ~~date.~~date under current market conditions. In determining fair value, the accounting standards establish a three-level hierarchy for inputs used in measuring fair value as follows: Level One inputs are quoted prices available for identical assets ~~and~~or liabilities in active ~~markets at the measurement date;~~markets; Level Two inputs are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets ~~and~~or liabilities in active ~~markets or other inputs that are observable or can be corroborated by observable market data;~~markets; and Level Three inputs are ~~less observable~~unobservable and reflect ~~our~~management’s own assumptions.

~~Our financial instruments consist~~

The carrying amounts of cash and cash equivalents, accounts and notes receivable, accounts payable, and ~~our credit facility. The carrying amount of cash and cash equivalents, accounts and notes receivable and accounts payable approximates~~other current liabilities approximate fair value because of their ~~short maturities.~~short-term nature. We believe that the carrying amount of our credit facility approximates its fair value because the interest rates are adjusted regularly based on current market conditions. The fair value of the Company’s credit facility was determined to be a Level Two instrument as defined by GAAP.

The fair value of the Company’s interest rate swap is determined based upon Level Two inputs which includes valuation models as reported by our counterparties. These valuation models are based on the present value of expected cash flows using forward rate curves.

Non-financial

assets and liabilities recognized or disclosed at fair value in the consolidated financial statements on a nonrecurring basis include such items as property and equipment, goodwill, tradenames and other assets. These assets are measured at fair value ~~if determined to be impaired.~~when they were evaluated for impairment. During the thirty-nine weeks ended ~~October 29, 2017,~~November 3, 2019, there were no0 impairments recognized.

~~Share repurchase program~~

Table of Contents

Interest rate swaps

— The Company entered into three interest rate swap agreements to manage our exposure to interest rate movements on our variable rate credit facility. The agreements entitle the Company to receive at specified intervals, a variable rate of interest based on

one-month

LIBOR in exchange for the payment of a fixed rate of interest throughout the life of the agreements. The notional amount of the swap agreements total $350,000 and the fixed rate of interest for all agreements is 2.47% plus the applicable spread. The agreements became effective on February 28, 2019 and mature on August 17, 2022, which is the maturity date of our credit facility. The Company has designated its interest rate swap agreements as a cash flow hedge and accounts for the underlying activity in accordance with hedge accounting. To the extent that the swaps are effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivatives are not included in earnings but are included in other comprehensive loss. These changes in fair value are subsequently reclassified into net earnings as a component of interest expense as the hedged interest payments are made on our variable rate debt. Cash flows related to the interest rate swaps are included as component of interest expense and in operating activities. Any portion of the fair value of the swaps determined to be ineffective will be recognized currently in earnings.

The following derivative instruments were outstanding as of the end of the period:


			Fair Value
	Balance Sheet Location		November 3, 2019
Derivatives designated as hedging instruments:
Interest rate swaps		Accrued liabilities	$	(3,202	)
Interest rate swaps		Other liabilities		(7,083	)

Total derivatives			$	(10,285	)

The following table summarizes the activity in accumulated other comprehensive loss related to our interest rate swap derivative instruments:

	��
		Thirteen Weeks Ended November 3, 2019			Thirty-nine Weeks Ended November 3, 2019
Loss recognized in accumulated other comprehensive loss		$	(2,483	)	$	(10,623	)
Loss reclassified from accumulated other comprehensive loss into net earnings (1)		$	326		$	338
Income tax benefit of interest rate swaps in accumulated other comprehensive loss		$	589		$	2,810

(1)	Amounts reclassified into net earnings are included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income.

Revenue recognition

— Amusement revenues are primarily recognized upon utilization of game play credits on power cards purchased and used by customers to activate most of the video and redemption games. We have deferred a portion of revenues for the estimated unfulfilled performance obligations related to unused game play credits which we believe our customers will utilize in the future. During the thirteen weeks and thirty-nine weeks ended November 3, 2019, we recognized revenue of approximately $3,000 and $20,000, respectively, related to the amount in deferred amusement revenue as of the end of fiscal 2018.

In jurisdictions where we do not have a legal obligation to remit unredeemed gift card balances to a legal authority, we recognize revenue on unredeemed gift cards in proportion to the pattern of redemption by the customers. During the thirteen and thirty-nine weeks ended November 3, 2019, we recognized revenue of approximately $2,800 and $4,100, respectively, related to the amount in deferred gift card revenue as of the end of fiscal 2018, of which approximately $260 and $690 was gift card breakage revenue.

Stockholders’ equity

— Our Board of Directors has approved 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 Rule10b5-1~~ ~~of the Securities Exchange Act of 1934, as amended.~~plans. The share repurchase program may be modified, suspended or discontinued at any time. ~~Effective September 7, 2017, an additional $100,000 in common shares authorization was approved by our Board of Directors. As of October 29, 2017,~~On July 12, 2019, the Company ~~has a total~~increased its share repurchase authorization ~~of $300,000 which~~to $800,000. The share repurchase authorization expires at the end of fiscal ~~2018.~~2020. During the thirteen and thirty-nine weeks ended ~~October 29, 2017,~~November 3, 2019, the Company purchased ~~240,342~~2,425,021 and ~~1,778,484~~7,116,585 shares of common stock at an average cost of ~~$48.69~~$40.07 and ~~$61.84~~$41.78 per share, respectively. As of ~~October 29, 2017,~~November 3, 2019, we have approximately ~~$161,188~~$172,820 of share repurchase authorization remaining under the current plan.

In our consolidated financial statements, the Company treats shares withheld for tax purposes on behalf of our employees in connection with the vesting of time-based and performance restricted stock units as common stock repurchases because they reduce the number of shares that would have been issued upon vesting. These withheld shares of common stock are not considered common stock repurchases under our authorized common stock repurchase plan. During the thirty-nine weeks ended November 3, 2019, we withheld 11,536 shares of common stock to satisfy $595 of employees’ tax obligations.

Recently adopted accounting guidance

— On February 4, 2019, we adopted Accounting Standard Update (“ASU”)
2016-02,
Leases (Topic 842). This new guidance requires the recognition of lease liabilities, representing future minimum lease payments on a discounted basis, and corresponding
right-of-use
(“ROU”) assets on the balance sheet for most leases. We adopted this standard using a modified retrospective approach, and we elected the transition method that allows us to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The comparative period information ha
s
not been restated.

Upon adoption of ASU
2016-02,
we applied the package of practical expedients, which eliminated the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs. We also elected a short-term lease exception policy and an accounting policy to not separate
non-lease
components from lease components for our facility leases. The adoption of this guidance resulted in the recognition of ROU assets related to our operating leases of $877,714 and operating lease liabilities of $1,116,252. At the date of adoption, all lease-related balances consisting of $239,416 of deferred occupancy costs (including unfavorable lease liabilities) and $878 of favorable lease assets have been eliminated as an adjustment to ROU assets. We also recorded a cumulative effect reduction to the opening balance of retained earnings of $145, net of tax, from adoption of this guidance. There was no significant impact to our results of operations or cash flows.

Recent accounting pronouncements

—In January 2017, the Financial Accounting Standards Board (“FASB”) issued ~~Accounting Standards Update (“ASU”)~~ASU

2017-04,

Intangibles – Goodwill and Other (Topic 350), which eliminates ~~Step 2 from~~ the requirement to calculate the implied fair value of goodwill ~~impairment test. Under the new standard, annual and interim goodwill impairment tests will compare~~if the fair value of a reporting unit ~~with~~is less than the carrying amount of the reporting unit. Instead, if the carrying amount of a reporting unit exceeds its ~~carrying amount. An~~fair value, an impairment ~~charge~~loss will be recognized ~~for the~~in an amount ~~by which the carrying amount exceeds the reporting unit’s fair value, not~~equal to ~~exceed~~that excess, limited to the total amount of ~~goodwill.~~goodwill allocated to that reporting unit. The ~~pronouncement~~guidance is effective for goodwill impairment tests in fiscal years beginning after December 15, 2019 and should be applied on a prospective basis. The Company does not expect the adoption will have a material impact on our consolidated financial statements when we perform future annual impairment tests.

In August ~~2016,~~2018, the FASB issued ASU~~2016-15,~~ ~~Statement of Cash Flows~~

2018-13,

Fair Value Measurement (Topic ~~230),~~820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which ~~addresses eight specific cash flow issues~~eliminates, modifies and ~~is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.~~adds disclosure requirements for fair value measurements. The ~~guidance~~update is effective for ~~interim and annual periods~~fiscal years beginning after December 15, ~~2017,~~2019 and for interim periods within those fiscal years, with early adoption is permitted. The ~~adoption of this~~Company

does not anticipate the updated guidance ~~is not expected to have a material impact on our consolidated financial statements.~~

~~In March 2016, the FASB issued ASU2016-09,~~ Improvements to Employee Share-Based Payment Accounting (Topic 718), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, as well as classification in the statement of cash flows. The Company adopted the new guidance in the first quarter of fiscal 2017. The ASU’s income tax aspects also impact the calculation of diluted earnings per share by excluding excess tax benefits from the calculation of assumed proceeds available to repurchase shares under the treasury-stock method. The impact of the new guidance was as follows:

As a result of the adoption in the first quarter of 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 stock compensation that had not been previously recognized in additional paid in capital.

During the thirteen and thirty-nine weeks ended October 29, 2017, excess tax benefits of $1,285 and $11,419, respectively, were recognized as a benefit in the “Provision for Income Taxes” in the Consolidated Statement of Comprehensive Income and classified as a source in operating activities in the Consolidated Statement of Cash Flows.

The Company elected to prospectively adopt the effect on the statement of cash flows and accordingly, did not restate the Consolidated Statement of Cash Flows for the thirty-nine weeks ended October 30, 2016.

~~In July 2015, the FASB issued ASU2015-11,~~ Simplifying the Measurement of Inventory (Topic 330), which changes the subsequent measurement of inventory from lower of cost or market to lower of cost and net realizable value. The Company adopted this standard prospectively, beginning January 30, 2017. The adoption did not have a material impact on the Company’s consolidated results of operations and financial condition.

~~In May 2014, the FASB issued guidance in ASU2014-09,~~ Revenue from Contracts with Customers (Topic 606), which supersedes most current revenue recognition guidance and outlines a single comprehensive model for entities to use in accounting for revenue. In August 2015, the FASB issued ASU~~2015-14~~ delaying the effective date for adoption. The update is now effective for interim and annual periods beginning after December 15, 2017. The guidance provides a five step framework to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to be entitled to receive in exchange for those goods or services. We intend to apply the guidance retrospectively with the cumulative effect recognized as of the date of adoption. We do not believe that the new revenue recognition standard will have a material impact on ~~our recognition of revenues.~~

~~In February 2016, the FASB issued ASU2016-02,~~ ~~Leases (Topic 842). The new guidance requires the present value of committed operating lease payments to be recorded asright-of-use~~ lease assets and lease liabilities on the balance sheet. As of October 29, 2017, the Company had an estimated $1,400,000 in undiscounted future minimum lease commitments. Enhanced disclosures will also be required to give financial statement users the ability to assess the amount, timing and uncertainty of cash flows arising from leases. The guidance is effective for interim and annual periods beginning after December 15, 2018, using a modified retrospective adoption method and early adoption is permitted. We are currently evaluating the impact of the updated guidance on ourits consolidated financial statements. ~~We expect the adoption~~

Table of this guidance will result in a material increase in the assets and liabilities on our Consolidated Balance Sheets and will likely have an insignificant impact on our Consolidated Statements of Comprehensive Income.

Contents

Note 2: Accrued Liabilities

Accrued liabilities consist of the following as ~~of:~~

   October 29, 2017    January 29, 2017
Deferred amusement revenue
   $ 30,708    $ 28,305
Compensation and benefits
   19,840    20,886
Amusement redemption liability
   17,599    15,431
Rent
   16,233    14,260
Property taxes
   7,650    4,650
Customer deposits
   5,804    3,003
Deferred gift card revenue
   5,173    6,957
Current portion of long-term insurance
   4,070    4,460
Sales and use taxes
   3,376    3,872
Utilities
   3,332    2,969
Inventory liabilities
   4,070    2,659
Other (refer to Note 4)
   11,432    4,875




Total accrued liabilities
   $ 129,287    $ 112,327

of the end of each period:


	November 3, 2019		February 3, 2019
Current portion of operating lease liabilities, net (refer to Note 4)	$	44,666	$	—
Current portion of deferred occupancy costs		—		15,737
Deferred amusement revenue		50,331		44,232
Amusement redemption liability		20,341		19,911
Compensation and benefits		19,928		24,280
Property taxes		10,513		7,278
Customer deposits		8,713		3,731
Deferred gift card revenue		8,127		9,450
Current portion of long-term insurance		5,600		5,900
Dividend payable		4,887		—
Utilities		4,103		4,032
Sales and use taxes		4,037		5,226
Inventory liabilities		3,798		2,876
Current portion of derivatives		3,202		—
Variable rent liabilities		1,931		2,245
Other (refer to Note 5)		8,948		12,266

Total accrued liabilities	$	199,125	$	157,164

Note 3: Debt

Long-term debt consists of the following as of:

   October 29, 2017    January 29, 2017
Credit facility - term
   $ 300,000    $ 138,750
Credit facility - revolver
   16,000    126,000




Total debt outstanding
   316,000    264,750
Less:

Current installments - term
   (15,000 )    (7,500 )
Debt issuance costs - term
   (1,060 )    (622 )




Long-term debt, net
   $ 299,940    $ 256,628


	November 3, 2019			February 3, 2019
Credit facility - term	$	270,000		$	281,250
Credit facility - revolver		386,000			113,000

Total debt outstanding		656,000			394,250
Less:
Current installments - term		(15,000	)		(15,000	)
Debt issuance costs - term		(616	)		(781	)

Long-term debt, net	$	640,384		$	378,469

On August 17, 2017, we entered into a senior secured credit facility that provides a $300,000 term loan facility and a $500,000 revolving credit facility with a maturity date of August 17, 2022. The $500,000 revolving credit facility includes a $35,000 letter of credit

sub-facility

and a $15,000 swing loan

sub-facility.

The revolving credit facility is available to provide financing for general purposes. Principal payments on the term loan facility ofare $3,750 per quarter ~~are required beginning December 31, 2017~~ through maturity, when the remaining balance is due. Our current credit facility is secured by the assets of D&B Inc and is unconditionally guaranteed by D&B Holdings and each of its direct and indirect domestic wholly-owned subsidiaries. As of ~~October 29, 2017,~~November 3, 2019, we had letters of credit outstanding of ~~$4,971~~$8,147 and ~~$479,029~~$105,853 of borrowing available under our

revolving credit facility.

The majority of the proceeds of this senior secured credit facility were used to refinance in full the May 15, 2015 credit facility (of which $291,000 was outstanding) and to pay related interest and expenses. In connection with the new credit facility we incurred debt costs of $2,910, of which $397 was expensed as a loss on debt refinancing. The remaining debt costs incurred of $1,826 and $687 are included in Other assets and deferred charges and Long-term debt, net, respectively, in the Consolidated Balance Sheets. Total loss on debt refinancing, including the write off of a portion of unamortized debt costs, totaled $718 during the thirteen weeks ended October 29, 2017.

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 one-month LIBOR plus a spread ranging from 1.25% to 2.00% for the term loans and the revolving loans. The ~~stated~~interest rate at November 3, 2019 was based on one-month LIBOR plus 1.50%. As of November 3, 2019, the Company’s weighted average interest rate ~~at October 29, 2017~~on outstanding borrowings was ~~2.49%. Theyear-to-date~~ ~~weighted average effective~~4.03%, including the impact of the interest rate ~~was 3.06%.~~swap agreements. The weighted average effective rate includes amortization of debt issuance costs, commitment and other fees.

Our credit facility contains restrictive covenants that, among other things, place certain limitations on our ability 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 covenants. As of ~~October 29, 2017,~~November 3, 2019, we were in compliance with our restrictive ~~covenants.~~

~~Future debt obligations~~~~— The following table sets forth~~and financial ratio covenants of our ~~future debt principal payment obligations as of October 29, 2017 by fiscal year:~~

2017
   $ 3,750
2018
   15,000
2019
   15,000
2020
   15,000
2021
   15,000
2022
   252,250


Total future payments
   $ 316,000

credit facility.

Interest expense, net

— The following tables set forth our recorded interest expense, net for the periods indicated:

   Thirteen Weeks    Thirteen Weeks
   Ended    Ended
   October 29, 2017    October 30, 2016
Interest expense on credit facilities
   $ 2,252    $ 1,582
Amortization of issuance cost
   195    168
Interest income
   (31 )    (58 )
Less: capitalized interest
   (250 )    (112 )
Change in fair value of interest rate cap
   (10 )    (2 )




Total interest expense, net
   $ 2,156    $ 1,578




   Thirty-nine Weeks    Thirty-nine Weeks
   Ended    Ended
   October 29, 2017    October 30, 2016
Interest expense on credit facilities
   $ 5,959    $ 5,216
Amortization of issuance cost
   528    506
Interest income
   (166 )    (184 )
Less: capitalized interest
   (507 )    (322 )
Change in fair value of interest rate cap
   259    357




Total interest expense, net
   $ 6,073    $ 5,573


	Thirteen Weeks Ended November 3, 2019			Thirteen Weeks Ended November 4, 2018
Interest expense on credit facilities	$	6,095		$	3,358
Amortization of issuance cost		198			198
Interest income		(24	)		(27	)
Capitalized interest		(159	)		(192	)
Change in fair value of interest rate cap		—			(16	)

Total interest expense, net	$	6,110		$	3,321


	Thirty-nine Weeks Ended November 3, 2019			Thirty-nine Weeks Ended November 4, 2018
Interest expense on credit facilities	$	15,010		$	9,637
Amortization of issuance cost		594			594
Interest income		(75	)		(83	)
Capitalized interest		(758	)		(720	)
Change in fair value of interest rate cap		—			(22	)

Total interest expense, net	$	14,771		$	9,406

Note 4: Leases

We currently lease the building or site for our stores, corporate office and warehouse space under facility operating leases. These leases typically have initial terms ranging from ten to twenty years and include one or more options to renew. When determining the lease term, we include option periods for which renewal is reasonably certain. Most of the leases require us to pay property taxes, insurance and maintenance of the leased assets. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Operating leases also includes certain equipment leases that have a term in excess of one year. Certain facility leases also have provisions for additional contingent rentals based on revenues. Contingent rent and other variable rent are ~~exposed to interest rate risk arising from changes in interest rates due to the~~included as variable rate indebtedness under our Credit Facility. In October 2015, the Company purchased an interest rate cap agreement for $920 with a notional amount of $200,000 to manage our exposure to interest rate movements on our variable rate credit facility when~~one-month~~ ~~LIBOR exceeds 3.0%. The interest rate cap agreement matures on October 7, 2019. The derivative is not designated as a hedge and does not qualify for hedge accounting. Accordingly, changes~~lease costs in the ~~fair value~~table below.

Lease expense consisted of the ~~interest rate cap are recognized as interest expense. The Company’s investment in the interest rate cap, with a fair value of $38 at October 29, 2017,~~following:


	Thirteen Weeks Ended November 3, 2019		Thirty-nine Weeks Ended November 3, 2019
Operating	$	31,489	$	91,729
Variable		88		2,080
Short-term		108		324

Total	$	31,685	$	94,133

Store lease expense is included in “Other ~~assets~~store operating expenses” or

“Pre-opening

costs,” accordingly, and ~~deferred charges”~~corporate lease expense is included in “General and administrative expenses” in the Consolidated Statements of Comprehensive Income.

Operating leases are included within the “Operating lease right of use assets”, “Accrued liabilities” and “Operating lease liabilities” in the Consolidated Balance ~~Sheets~~Sheets. Operating lease ROU assets and ~~was valued using an analysis~~lease liabilities are recognized at commencement date based on ~~market observable inputs representing Level Two assets~~the present value of lease payments over the lease term and include both facility and equipment leases. The operating lease ROU asset is reduced by leasehold improvement incentives as ~~defined by GAAP. For~~ the ~~thirteen~~incentives are earned. As of November 3, 2019, the balance of leasehold improvement incentive receivables was $5,907 and ~~thirty-nine weeks ending October 29, 2017, interest expense (income)~~is reflected as a reduction of the current portion of operating lease liabilities. The Company uses its incremental borrowing rate at commencement date in determining the present value of lease payments. The Company uses judgment in determining its incremental borrowing rate, which includes ~~$(10) and $259~~selecting a yield curve based on a hypothetical credit rating.

Table of Contents

Other information related to ~~the change~~leases is as follows:


	November 3, 2019
Cash paid for amounts included in the measurement of lease liabi li ties
Operating cash flows from operating leases	$	91,595
ROU assets obtained in exchange for new operating lease liabilities	$	157,873
Weighted-average remaining lease term - operating leases (in years)		15.8
Weighted-average discount rate - operating leases		5.9	%

The maturities of our operating lease liabilities are as follows as of November 3, 2019:


Remainder of 2019	$	22,491
2020		132,635
2021		127,769
2022		119,779
2023		116,224
Thereafter		1,436,809

Total	$	1,955,707
Less: Interest		730,362

Total discounted operating lease liabilities	$	1,225,345

Operating lease payments in the ~~fair value~~table above includes minimum lease payments for

six future sites for which the lease has commenced, and the stores are expected to open in fiscal 2019 and the first half of ~~the interest rate cap.~~

fiscal 2020. Operating lease payments exclude minimum lease payments for seventeen executed facility leases

for which

we have not yet taken possession.

At February 3, 2019, aggregate minimum annual lease payments under facility and equipment operating leases were as follows:


2019	$	122,501
2020		117,908
2021		111,642
2022		104,195
2023		100,779
Thereafter		1,229,803

Total	$	1,786,828

Note 4:5: Commitments and Contingencies

We are subject to certain legal proceedings and claims that arise in the ordinary course of our business, including claims alleging violations of federal and state law regarding workplace and employment matters, discrimination,

slip-and-fall

and other guest-related incidents, and similar matters. In the opinion of management, based upon consultation with legal counsel, the amount of ultimate liability with respect to such legal proceedings and claims will not materially affect the consolidated results of our operations or our financial condition.

On June 30, 2017, we agreed to settle litigation related to alleged violations of the Employee Retirement Income Security Act. ~~Once the~~The settlement agreement ~~is finalized, it will be subject to~~was preliminarily approved by the court ~~approval.~~on December 7, 2018 with final approval on July 19, 2019. To cover the ~~estimated~~ net costs of settlement, including ~~estimated~~ payment to any

opt-in

members and class attorneys, as well as related settlement administration costs, we recorded a net charge of $2,550 (representing $7,500 of gross settlement costs less $4,950 of insurance recoveries) during fiscal 2017. During the ~~thirteen-week period ended July 30, 2017. The charge was recorded in general~~third quarter of fiscal 2019, all funds required to be paid under the final settlement and ~~administrative expenses in our Consolidated Statements of Comprehensive Income. No additional~~release agreement were remitted to a settlement liabilities or recoveries related to this litigation were recorded in the thirteen week period ended October 29, 2017. The actual amount of any settlement payment could vary from our estimate and will be subject to many factors including approvalfund as directed by the ~~court,~~court.

The Company is currently a defendant in several lawsuits filed in courts in California alleging violations of California Business and Professions Code, industry wage orders,

wage-and-hour

laws and rules and regulations pertaining primarily to the ~~claims process~~failure to pay proper regular and overtime wages, failure to pay for missed meals and rest periods, pay stub violations, failure to pay all wages due at the time of termination and other ~~matters typically associated with the settlement of litigation.~~

~~We lease certain property and equipment under variousnon-cancelable~~ ~~operating leases.~~employment related claims (the “California Cases”). Some of the ~~leases include options for renewal~~California Cases purport or ~~extension on various terms. Most~~may be determined to be class actions or Private Attorneys General Act representative actions and seek substantial damages and penalties. With respect to these California Cases, where the Company has determined that a loss is reasonably possible but not probable, the Company is unable to estimate the amount or range of the ~~leases require us~~reasonably possible loss due to ~~pay property taxes, insurance and maintenance~~the inherent difficulties of predicting the ~~leased assets. Certain leases also have provisions for additional contingent rentals~~outcome of uncertainties regarding legal proceedings. The Company’s assessments are based on ~~revenues.~~

~~The following table sets forth our lease commitments as~~estimates and assumptions that have been deemed reasonable by management, but that may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might cause the Company to change those estimates and assumptions. Management’s assessment of ~~October 29, 2017:~~

1 year or less
   $ 100,701
2 years
   99,749
3 years
   93,456
4 years
   88,142
5 years
   79,860
Thereafter
   941,902


Total future payments
   $ 1,403,810

Asthese California Cases could change because of ~~October 29, 2017, we have signed operating lease agreements for ten~~ future ~~sites which are expected to open in~~determinations or the ~~last quarter~~discovery of fiscal 2017 and early fiscal 2018. The landlord has fulfilled the obligations to commit us to the lease terms under these agreements and therefore, the future obligations related to these locations are included in the table above.

As of October 29, 2017, we have signed nineteen additional operating 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 agreementsfacts that are not ~~included in~~presently known. Accordingly, the ~~table above.~~

ultimate costs of resolving these cases may be substantially higher or lower than estimated. The Company is aggressively defending these cases.

Table of Contents

Note 5:6: Earnings per share

Potential dilutive shares consist of the incremental common shares issuable upon the exercise of outstanding stock options (both vested and unvested), unvested time-based restricted stock units (RSU’s) and unvested 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. ~~We excluded 188,229~~The weighted average anti-dilutive options excluded from the calculation of common equivalent shares ~~as of~~were 235,368 and 11,222 in the thirteen weeks ended November 3, 2019 and November 4, 2018, respectively, and 134,450 and 60,154 in the thirty-nine weeks ended ~~October 29, 2017.~~

November 3, 2019 and November 4, 2018, respectively.

The following table sets forth the computation of EPS, basic and diluted for the periods indicated:

(in thousands, except share and per share data)    Thirteen Weeks
Ended
October 29, 2017    Thirteen Weeks
Ended
October 30, 2016
Numerator:

Net income
   $ 12,157    $ 10,755
Denominator:

Weighted average number of common shares outstanding (basic)
   41,077,206    42,061,235
Weighted average dilutive impact of equity-based awards
   1,173,405    1,266,577
Weighted average number of common and common equivalent shares outstanding (diluted)
   42,250,611    43,327,812
Net income per share:

Basic
   $ 0.30    $ 0.26
Diluted
   $ 0.29    $ 0.25
(in thousands, except share and per share data)    Thirty-nine
Weeks Ended
October 29, 2017    Thirty-nine
Weeks Ended
October 30, 2016
Numerator:

Net income
   $ 85,309    $ 63,428
Denominator:

Weighted average number of common shares outstanding (basic)
   41,521,802    41,863,932
Weighted average dilutive impact of equity-based awards
   1,366,857    1,370,835
Weighted average number of common and common equivalent shares outstanding (diluted)
   42,888,659    43,234,767
Net income per share:

Basic
   $ 2.05    $ 1.52
Diluted
   $ 1.99    $ 1.47


	Thirteen Weeks Ended November 3, 2019		Thirteen Weeks Ended November 4, 2018
Numerator:
Net income	$	482	$	11,856
Denominator:
Weighted average number of common shares outstanding (basic)		30,980,878		38,892,288
Weighted average dilutive impact of equity-based awards		534,576		963,360
Weighted average number of common and common equivalent shares outstanding (diluted)		31,515,454		39,855,648
Net income per share:
Basic	$	0.02	$	0.30
Diluted	$	0.02	$	0.30

	Thirty-nine Weeks Ended November 3, 2019		Thirty-nine Weeks Ended November 4, 2018
Numerator:
Net income	$	75,281	$	87,785
Denominator:
Weighted average number of common shares outstanding (basic)		34,405,503		39,314,271
Weighted average dilutive impact of equity-based awards		636,808		942,960
Weighted average number of common and common equivalent shares outstanding (diluted)		35,042,311		40,257,231
Net income per share:
Basic	$	2.19	$	2.23
Diluted	$	2.15	$	2.18

Note 6:7: Share-Based Compensation

Compensation ~~expenses~~expense related to stock options, time-based and performance-based RSU’s and restricted stock are included in general and administrative expenses and were as follows:

   Thirteen Weeks Ended    Thirty-nine Weeks Ended
   October 29, 2017    October 30, 2016    October 29, 2017    October 30, 2016
Stock options
   $ 1,584    $ 1,088    $ 4,240    $ 3,138
RSU’s and restricted stock
   973    580    2,766    1,527








Total share-based compensation expense
   $ 2,557    $ 1,668    $ 7,006    $ 4,665


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	November 3, 2019		November 4, 2018		November 3, 2019		November 4, 2018
Stock options	$	731		631	$	2,294	$	2,649
RSU’s and restricted stock		1,016		1,126		3,185		3,122

Total share-based compensation expense	$	1,747	$	1,757	$	5,479	$	5,771

Transactions related to stock option awards during the thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 were as follows:

   2014 Stock Incentive Plan    2010 Stock Incentive Plan
      Weighted       Weighted
      Average       Average
   Number    Exercise    Number    Exercise
   of Options    Price    of Options    Price
Outstanding at January 29, 2017
   833,499    $ 26.93    1,225,053    $ 5.35
Granted
   190,379    57.74    —      —
Exercised
   (16,522 )    34.81    (483,008 )    4.58
Forfeited
   (4,631 )    47.33    —      —








Outstanding at October 29, 2017
   1,002,725    $ 32.56    742,045    $ 5.86








Exercisable at October 29, 2017
   421,687    $ 26.48    688,249    $ 5.66


	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 3, 2019		1,134,218		$	34.22		359,984		$	6.48
Granted		222,266			52.04		—			—
Exercised		(12,220	)		36.30		(58,384	)		5.73
Forfeited		(11,824	)		49.29		—			—

Outstanding at November 3, 2019		1,332,440		$	37.04		301,600		$	6.63

Exercisable at November 3, 2019		927,447		$	31.57		301,600		$	6.63

The total intrinsic value of options exercised during the thirty-nine weeks ended ~~October 29, 2017 and October 30, 2016~~November 3, 2019 was ~~$29,235 and $23,186, respectively.~~$2,736. The unrecognized expense related to our stock option plan totaled approximately ~~$2,375~~$3,056 as of ~~October 29, 2017~~November 3, 2019 and will be expensed over a weighted average period of ~~1.7~~2.2 years.

Transactions related to time-based and performance-based RSU’s and restricted stock during the thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 were as follows:

      Weighted
      Average
   Shares    Fair Value
Outstanding at January 29, 2017
   128,088    $ 37.19
Granted
   70,357    58.78
Vested
   (10,485 )    40.68
Forfeited
   (3,395 )    51.65




Outstanding at October 29, 2017
   184,565    $ 44.96


	Shares			Weighted Average Fair Value
Outstanding at February 3, 2019		220,830		$	47.79
Granted		72,768			52.09
Change in units based on performance		27,372			39.10
Vested		(102,405	)		40.08
Forfeited		(4,244	)		49.58

Outstanding at November 3, 2019		214,321		$	51.79

~~ITEM~~Item 2.

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with the accompanying unaudited consolidated financial statements and the related notes in Item 1 and with the audited consolidated financial statements and the related notes included in our Annual Report on Form

10-K

as filed with the Securities and Exchange Commission (“SEC”) on ~~March 28, 2017.~~April 2, 2019. Unless otherwise specified, the meanings of all defined terms in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are consistent with the meanings of such terms as defined in the Notes to Unaudited Consolidated Financial Statements. This discussion contains statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees 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~~quarterly report as a result of various factors, including those set forth in the section entitled “Risk Factors” in our Annual Report on Form

10-K

filed with the SEC on ~~March 28, 2017.~~April 2, 2019. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Form

10-Q,

those results or developments may not be indicative of results or developments in subsequent periods.

General

We are a leading owner and operator of high-volume venues in North America that combine dining and entertainment for both adults and families under the name “Dave & Buster’s”. Founded in 1982, the core of our concept is to offer our customers the opportunity to “Eat, Drink, Play and Watch” all in one location. Eat and Drink are offered through a full menu of ~~“Fun American New Gourmet”~~ entrées and appetizers and a full selection of

non-alcoholic

and alcoholic beverages. Our Play and Watch offerings provide an extensive assortment of entertainment attractions centered around playing games and watching live sports and other televised events. Our customer mix skews moderately to males, primarily between the ages of 21 and 39, and we believe we also serve as an attractive venue for families with children and teenagers. We believe we appeal to a diverse customer base by providing a highly customizable experience in a dynamic and fun setting.

Our stores average ~~42,000~~41,000 square feet, range in size between 16,000 and 66,000 square feet and are open seven days a week, with hours of operation typically from 11:30 a.m. to midnight on Sunday through Thursday and 11:30 a.m. to 2:00 a.m. on Friday and Saturday.

Our ~~Growth~~ Strategies

Our near-term strategies are as follows:

Revitalize our existing stores

Build deeper guest engagement

Maintain disciplined cost management

Invest in high-return new stores

Return capital to shareholders

Our revitalization of existing stores includes the

re-energizing

of our dining rooms through the installation of “Wow Walls,” LED television displays that create high-energy, contemporary, sports and ~~Outlook~~

~~Our~~entertainment-oriented dining areas. This cutting-edge visual technology, which has been deployed across 37 stores at the end of the third quarter of fiscal 2019, is designed to drive greater traffic and food and beverage penetration. We will continue to invest in food, beverage, amusement and viewing innovations to enhance our offerings and the guest experience.

We are focused on building deeper guest engagement through initiatives such as the nation-wide launch of the Dave & Buster’s mobile app, which we launched in the third quarter of fiscal 2019. The Company’s investments in enhanced data analytics will provide valuable customer insights, actionable intelligence and ultimately drive deeper engagements with existing and new customers, by enabling easier access to our product offerings, limited time offers and targeted promotions.

We utilize disciplined cost management, including G&A savings and operational efficiencies to fuel growth ~~is based primarily on~~investments. The Company has identified future cost savings opportunities that we intend to pursue in the ~~following strategies:~~

near-term. We intend to utilize a significant portion of these cost reductions to fund store technology, data analytics and digital marketing investments to fuel growth in comparable store sales.

~~Pursue disciplined~~

We invest in highest-return new store ~~growth;~~

~~Grow our comparable stores sales; and~~

~~Expand~~locations to strengthen the Dave & Buster’s brand ~~internationally.~~

~~We intend for new store expansion to be a key growth driver. Our long-term plan is to open new stores at an annual rate of at least 10% of our existing stores.~~and portfolio over the long term. During the first thirty-nine weeks of fiscal ~~2017,~~2019, the Company opened ~~nine~~fourteen new stores, compared to ~~seven~~twelve new store openings in the comparable ~~2016~~2018 period. As of October 29, 2017, there were 101 stores in the United States and Canada. To increase comparable store sales we plan to provide our customers with the latest exciting games, leverage the D&B Sports concept by building awareness through national cable advertising and drive customer frequency by enhancing customer experience through providing new product offerings in each of the “Eat, Drink, Play and Watch” components of our business. We currently anticipate opening ~~fourteen~~sixteen new stores in fiscal ~~2017.~~

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 have signed a seven store agreement for licensed development in six countries in the Middle East, and2019. As part of this strategy, we are ~~targeting~~actively evaluating new initiatives related to store format. Our efforts include rightsizing the square footage of new stores to match market sales potential and evaluating the pace of new store openings to enhance focus on both new stores and existing store revitalization.

Adjusted EBITDA is presented because we believe that it provides useful information to investors and analysts regarding our operating performance. By reporting Adjusted EBITDA, we provide a basis for comparison of our business operations between current, past and future periods by excluding items that we do not believe are indicative of our core operating performance.

Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin.

We define “Store Operating Income Before Depreciation and Amortization” as operating income ~~(loss),~~ plus depreciation and amortization expense, general and administrative expenses and

pre-opening

costs. “Store Operating Income Before Depreciation and Amortization Margin” is defined as Store Operating Income Before Depreciation and Amortization divided by total revenues. Store Operating Income Before Depreciation and Amortization Margin allows us to evaluate operating performance of each store across stores of varying size and volume.

We believe that Store Operating Income Before Depreciation and Amortization is another useful measure in evaluating our operating performance because it removes the impact of general and administrative expenses, which are not incurred at the store-level, and the costs of opening new stores, which are

non-recurring

at the store-level, and thereby enables the comparability of the operating performance of our stores for the periods presented. We also believe that Store Operating Income Before Depreciation and Amortization is a useful measure in evaluating our operating performance within the entertainment and dining industry because it permits the evaluation of store-level productivity, efficiency and performance, and we use Store Operating Income Before Depreciation and Amortization as a means of evaluating store financial performance compared with our competitors. However, because this measure excludes significant items such as general and administrative expenses and

pre-opening

costs, as well as our interest expense, net and depreciation and amortization expense, which are important in evaluating our consolidated financial performance from period to period, the value of this measure is limited as a measure of our consolidated financial performance.

Presentation of Operating Results

We operate on a 52 or ~~53 week~~

53-week

fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period has 13 weeks, except in a ~~53 week~~

53-week

year when the fourth quarter has 14 weeks. All references to the third quarter of ~~2017~~2019 relate to the ~~13 week~~

13-week

period ended ~~October 29, 2017.~~November 3, 2019. All references to the third quarter of ~~2016~~2018 relate to the ~~13 week~~

13-week

period ended ~~October 30, 2016.~~November 4, 2018. Fiscal ~~2017~~2019 and fiscal ~~2016~~2018 consist of ~~53 and~~ 52 ~~weeks, respectively.~~weeks. All dollar amounts are presented in thousands, unless otherwise noted, except share and per share amounts.

~~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

We have historically operated stores varying in size and have experienced significant variability among stores in volumes, operating results and net investment costs.

Our new ~~locations~~stores typically open with sales volumes in excess of their expected long term

run-rate

levels, which we refer to as a “honeymoon” effect. We expect our new store sales volumes in year two to be 10% to 20% lower than our year one targets, and to grow in line with the rest of our comparable store base thereafter. As 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 the first year of operation new store operating margins (excluding

pre-opening

expenses) typically benefit from honeymoon sales leverage on occupancy, management labor, and other fixed costs. This benefit is partially offset by normal inefficiencies in hourly labor and other costs associated with establishing a new ~~location.~~store. In year two, operating margins may decline due to the loss of honeymoon sales leverage on fixed costs which is partially offset by improvements in store operating efficiency. Furthermore, rents in our new stores are typically higher than our comparable store base.

~~We also expect seasonality~~

Our operating results fluctuate significantly due to ~~be a factor in the operation or results of the business in the future with~~seasonal factors. Typically, we have higher ~~first and fourth quarter~~ revenues associated with ~~the~~ spring and

year-end ~~holidays. Customer traffic and sales during these quarters may~~

holidays which will continue to be susceptible to the ~~unfavorable~~ impact of severe or unseasonably mild weather ~~or to the generally favorable impact of cold weather.~~on customer traffic and sales during that period. Our third quarter, which encompasses the

back-to-school

fall season, has historically had lower revenues as compared to the other quarters.

We expect that economic and environmental conditions and changes in ~~tax and other~~ regulatory legislation will continue to exert pressure on both supplier pricing and consumer spending related to entertainment and dining alternatives. Although there is no assurance that our cost of products will remain stable or that federal, state or local minimum wage rates will not increase beyond amounts currently legislated, the effects of any supplier price increases or wage rate increases are expected to be partially offset by selected menu price increases where competitively appropriate.

Thirteen Weeks Ended ~~October 29, 2017~~November 3, 2019 Compared to Thirteen Weeks Ended ~~October 30, 2016~~

November 4, 2018

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 unaudited consolidated statements of comprehensive income.

   Thirteen Weeks
Ended Thirteen Weeks
Ended
   October 29, 2017 October 30, 2016
Food and beverage revenues
   $ 107,690    43.1 % $ 101,343    44.3 %
Amusement and other revenues
   142,289    56.9 127,316    55.7






Total revenues
   249,979    100.0 228,659    100.0
Cost of food and beverage (as a percentage of food and beverage revenues)
   28,387    26.4 26,560    26.2
Cost of amusement and other (as a percentage of amusement and other revenues)
   16,220    11.4 15,581    12.2






Total cost of products
   44,607    17.8 42,141    18.4
Operating payroll and benefits
   57,967    23.2 55,034    24.1
Other store operating expenses
   82,766    33.1 71,888    31.4
General and administrative expenses
   13,432    5.4 13,506    5.9
Depreciation and amortization expense
   25,672    10.3 22,864    10.0
Pre-opening costs
   5,609    2.2 4,553    2.0






Total operating costs
   230,053    92.0 209,986    91.8






Operating income
   19,926    8.0 18,673    8.2
Interest expense, net
   2,156    0.9 1,578    0.7
Loss on debt refinancing
   718    0.3 —      —






Income before provision for income taxes
   17,052    6.8 17,095    7.5
Provision for income taxes
   4,895    1.9 6,340    2.8






Net income
   $ 12,157    4.9 % $ 10,755    4.7 %






Change in comparable store sales
      (1.3 )%    5.9 %
Company-owned stores open at end of period
      101    88
Comparable stores open at end of period
      76    66

Thirteen Weeks
Ended

Thirteen Weeks
Ended

November 3, 2019

November 4, 2018

Food and beverage revenues
$
124,637

41.6
% $
118,807

42.1
%
Amusement and other revenues

174,715

58.4

163,332

57.9

Total revenues

299,352

100.0

282,139

100.0

Cost of food and beverage (as a percentage of food and beverage revenues)

33,384

26.8

31,163

26.2

Cost of amusement and other (as a percentage of amusement and other revenues)

18,796

10.8

17,571

10.8

Total cost of products

52,180

17.4

48,734

17.3

Operating payroll and benefits

76,165

25.4

71,309

25.3

Other store operating expenses

110,713

37.1

96,267

34.1

General and administrative expenses

16,210

5.4

15,043

5.3

Depreciation and amortization expense

33,340

11.1

30,574

10.8

Pre-opening
costs

4,245

1.4

4,740

1.7

Total operating costs

292,853

97.8

266,667

94.5

Operating income

6,499

2.2

15,472

5.5

Interest expense, net

6,110

2.1

3,321

1.2

Income before provision (benefit) for income taxes

389

0.1

12,151

4.3

Provision (benefit) for income taxes

(93
)
(0.1
)
295

0.1

Net income
$
482

0.2
% $
11,856

4.2
%

Change in comparable store sales (1)

(4.1
)%
(1.3
)%
Company-owned stores open at end of period (1)

134

118

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.

Reconciliations of
Non-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:

   Thirteen Weeks Thirteen Weeks
   Ended Ended
   October 29, 2017 October 30, 2016
Net income
   $ 12,157 $ 10,755
Interest expense, net
   2,156 1,578
Loss on debt refinancing
   718 —
Provision for income taxes
   4,895 6,340
Depreciation and amortization expense
   25,672 22,864


EBITDA
   45,598 41,537
Loss on asset disposal
   321 514
Share-based compensation
   2,557 1,668
Pre-opening costs
   5,609 4,553
Other costs⁽¹⁾
   46 (5 )


Adjusted EBITDA⁽²⁾
   $ 54,131 $ 48,267


Adjusted EBITDA Margin⁽²⁾
   21.7 % 21.1 %


	Thirteen Weeks					Thirteen Weeks
	Ended					Ended
	November 3, 2019					November 4, 2018
Net income	$	482		0.2	%	$	11,856	4.2	%
Interest expense, net		6,110					3,321
Provision (benefit) for income taxes		(93	)				295
Depreciation and amortization expense		33,340					30,574

EBITDA		39,839		13.3	%		46,046	16.3	%
Loss on asset disposal		458					120
Share-based compensation		1,747					1,757
Pre-opening costs		4,245					4,740
Other costs (1)		1					6

Adjusted EBITDA	$	46,290		15.5	%	$	52,669	18.7	%

⁽¹⁾	Primarily represents costs related to currency transaction (gains) or losses.

⁽²⁾	Beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities. This change has been applied retrospectively to all periods presented.

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:

Thirteen Weeks
Ended
Thirteen Weeks
Ended
   October 29, 2017 October 30, 2016
Operating income
   $ 19,926 $ 18,673
General and administrative expenses
   13,432 13,506
Depreciation and amortization expense
   25,672 22,864
Pre-opening costs
   5,609 4,553


Store Operating Income Before Depreciation and Amortization
   $ 64,639 $ 59,596


Store Operating Income Before Depreciation and Amortization Margin
   25.9 % 26.1 %

Thirteen Weeks

Thirteen Weeks

Ended

Ended

November 3, 2019

November 4, 2018

Operating income
$
6,499

2.2
% $
15,472

5.5
%
General and administrative expenses

16,210

15,043

Depreciation and amortization expense

33,340

30,574

Pre-opening
costs

4,245

4,740

Store Operating Income Before Depreciation and Amortization
$
60,294

20.1
% $
65,829

23.3
%

Capital Additions

The ~~following~~ table ~~represents total~~below reflects accrual-based ~~additions to property and equipment. Total~~ capital additions. Capital additions do not include any reductions for accrual-based ~~tenant~~leasehold improvement ~~allowances (“Payments~~incentives or proceeds from sale-leaseback transactions (collectively, “Payments form landlords”).

   Thirteen Weeks    Thirteen Weeks
   Ended    Ended
   October 29, 2017    October 30, 2016
New store
   $ 51,232    $ 49,115
Operating initiatives, including remodels
   2,762    3,258
Games
   2,229    348
Maintenance Capital
   4,912    4,667




Total capital additions
   $ 61,135    $ 57,388




Payments from landlords
   $ 2,618    $ 6,118

Thirteen Weeks

Thirteen Weeks

Ended

Ended

November 3, 2019

November 4, 2018

New store and operating initiatives
$
52,147
$
43,431

Games

2,825

6,897

Maintenance capital

5,831

5,149

Total capital additions
$
60,803
$
55,477

Payments from landlords
$
7,240
$
2,552

Results of Operations

Revenues

Total revenues increased ~~$21,320,~~$17,213, or ~~9.3%~~6.1%, to ~~$249,979~~$299,352 in the third quarter of fiscal ~~2017~~2019 compared to total revenues of ~~$228,659~~$282,139 in the third quarter of fiscal ~~2016.~~2018. For the thirteen weeks ended ~~October 29, 2017,~~November 3, 2019, we derived ~~29.1%~~27.9% of our total revenue from food sales, ~~14.0%~~13.7% from beverage sales, ~~56.1%~~57.4% from amusement sales and ~~0.8%~~1.0% from other sources. For the thirteen weeks ended ~~October 30, 2016,~~November 4, 2018, we derived ~~29.8%~~28.3% of our total revenue from food sales, ~~14.5%~~13.8% from beverage sales, ~~54.9%~~57.1% from amusement sales and 0.8% from other sources.

The ~~increased~~net increase in revenues infor the third quarter of fiscal ~~2017~~2019 compared to the third quarter of 2018 were from the following sources:

Comparable stores
   $ (2,496 )
Non-comparable stores
   22,916
Other
   900


Total
   $ 21,320


Comparable stores	$	(9,718	)
Non-comparable stores		26,230
Other		701

Total	$	17,213

Comparable store revenue decreased ~~$2,496,~~$9,718, or ~~1.3%~~4.1%, in the third quarter of fiscal ~~2017~~2019 compared to the third quarter of fiscal ~~2016.~~2018. Comparable store revenue compared to prior year was ~~in part~~ negatively impacted by ~~catastrophic events occurring~~sales transfers to new stores that we opened in ~~the third quarter of fiscal 2017, including Hurricane Harvey~~markets where we operate and ~~Hurricane Irma as well as wildfires in California.~~increased competitive pressure. Comparable

walk-in

revenues, which accounted for ~~90.7%~~90.9% of comparable store revenue for the third quarter of fiscal ~~2017,~~2019, decreased ~~$1,574, or 0.9%~~4.6% compared to the ~~third quarter of~~similar period in fiscal ~~2016.~~2018. Comparable store special events revenues, which accounted for ~~9.3%~~9.1% of comparable store revenue for the third quarter of fiscal ~~2017, decreased $922, or 4.8%~~2019, increased 0.7% compared to the third quarter of fiscal ~~2016.~~

2018.

Food sales at comparable stores decreased by ~~$2,489,~~$3,228, or ~~4.2%~~4.9%, to ~~$56,838~~$63,042 in the third quarter of fiscal ~~2017~~2019 from ~~$59,327~~$66,270 in the third quarter of fiscal ~~2016.~~2018. Beverage sales at comparable stores decreased by ~~$1,194,~~$1,160, or ~~4.1%~~3.6%, to ~~$27,833~~$31,278 in the third quarter of fiscal ~~2017~~2019 from ~~$29,027~~$32,438 in the ~~third quarter of fiscal 2016. The decrease in food and beverage unit sales at comparable stores was partially offset by an overall increase in menu prices.~~2018 comparison period. Comparable store amusement and other revenues in the third quarter of fiscal ~~2017 increased~~2019 decreased by ~~$1,187,~~$5,330, or ~~1.1%~~3.9%, to ~~$111,702~~$130,510 from ~~$110,515~~$135,840 in the ~~third quarter~~comparable thirteen weeks of fiscal ~~2016, due to an increase in the revenue per Power Card sold.~~2018. The ~~growth over fiscal 2016~~decrease in amusement sales was ~~driven~~due in part to lower customer volumes partially offset by ~~national advertising which highlighted~~various pricing initiatives in the current year, including an increase in new card fees with the launch of our ~~entertainment offerings, including a limited time offer which allowed customers to play certain new games for free.~~

RFID power card in the first quarter of fiscal 2019.

Non-comparable

store revenue increased ~~$22,916,~~$26,230 for the third quarter of fiscal ~~2017~~2019 compared to the third quarter of fiscal ~~2016.~~2018. The increase in

non-comparable

store revenue was primarily driven by ~~170~~212 additional operating store weeks contributed by our ~~twenty-five~~thirty-five

non-comparable ~~stores.~~

stores, seventeen of which opened subsequent to the third quarter of fiscal 2018, partially offset by a decrease in revenue due to the closure of our store in Duluth (Atlanta), Georgia on March 3, 2019.

Cost of products

The total cost of products was ~~$44,607~~$52,180 for the third quarter of fiscal ~~2017~~2019 and ~~$42,141~~$48,734 for the third quarter of fiscal ~~2016.~~2018. The total cost of products as a percentage of total revenues was ~~17.8%~~17.4% and ~~18.4%~~17.3% for the third quarter of fiscal ~~2017~~2019 and ~~the third quarter of~~ fiscal ~~2016,~~2018, respectively.

Cost of food and beverage products increased to ~~$28,387~~$33,384 in the third quarter of fiscal ~~2017~~2019 compared to ~~$26,560~~$31,163 for the third quarter of fiscal ~~2016~~2018 due primarily to the increased sales volume related to new store openings. Cost of food and beverage products, as a percentage of food and beverage revenues, increased 2060 basis points to ~~26.4%~~26.8% for the third quarter of fiscal ~~2017~~2019 from 26.2% for the third quarter of fiscal ~~2016. Higher product costs were partially offset by increases~~2018. The unfavorable year-over-year increase in food and beverage ~~prices.~~

costs as a percentage of revenue was primarily driven by increased poultry costs in the current year due to additional weeks featuring our “All You Can Eat” wings and higher costs due to our shift to fresh juices at the bar.

Cost of amusement and other increased to ~~$16,220~~$18,796 in the third quarter of fiscal ~~2017~~2019 compared to ~~$15,581~~$17,571 in the third quarter of fiscal ~~2016 as cost reductions at comparable stores were more than offset by costs related to ournon-comparable~~ ~~stores.~~2018. The costs of amusement and other, as a percentage of amusement and other revenues, ~~decreased 80 basis points to 11.4%~~remained unchanged at 10.8% for both the third quarter of fiscal ~~2017 from 12.2% for~~2019 and the third quarter of fiscal ~~2016. The decrease~~2018. Increases in cost of ~~amusement and other as a percentage of revenue is~~amusements due to recently imposed tariffs were largely offset by price increases ~~implemented earlier~~ in ~~the year and a shift in game play from redemption tonon-redemption~~ ~~games.~~

WIN!.

Table of Contents

Operating payroll and benefits

Total operating payroll and benefits increased by ~~$2,933,~~$4,856, or ~~5.3%~~6.8%, to ~~$57,967~~$76,165 in the third quarter of fiscal ~~2017~~2019 compared to ~~$55,034~~$71,309 in the third quarter of fiscal ~~2016.~~2018. This increase was primarily due to labor associated with the additional operating store weeks of our

non-comparable

stores. The total cost of operating payroll and benefits, as a percentage of total revenues, ~~decreased 90~~increased 10 basis points to ~~23.2%~~25.4% in the third quarter of fiscal ~~2017~~2019 compared to ~~24.1%~~25.3% for the third quarter of fiscal ~~2016.~~2018. This ~~decrease~~increase was ~~primarily~~ due to ~~store-level incentive compensation and payroll related benefits which together~~margin pressure on management labor due to decreased ~~approximately 80 basis points. Additionally, increased focus on~~comparable store sales offset by hourly labor ~~management helped reduce~~improvements compared to the ~~adverse impact of wage rate increases on operating margins.~~

prior year.

Other store operating expenses

Other store operating expenses increased by ~~$10,878,~~$14,446, or ~~15.1%~~15.0%, to ~~$82,766~~$110,713 in the third quarter of fiscal ~~2017~~2019 compared to ~~$71,888~~$96,267 in the third quarter of fiscal ~~2016,~~2018, primarily due to new store openings. Other store operating expenses as a percentage of total revenues increased ~~170~~300 basis points to ~~33.1%~~37.1% in the third quarter of fiscal ~~2017~~2019 compared to ~~31.4%~~34.1% in the third quarter of fiscal ~~2016.~~2018. This increase was due primarily to ~~increased margin pressure on~~higher occupancy costs associated with our ~~recent~~

non-comparable

stores and the deleveraging impact of lower comparable store ~~openings, higher~~sales, the absence of $2,195 of business interruption insurance recoveries recognized during the third quarter of fiscal 2018 and additional legal and marketing costs ~~and incremental sports viewing~~in the current quarter. These cost increases were partially offset by lower maintenance costs.

General and administrative expenses

General and administrative expenses ~~decreased~~increased by ~~$74,~~$1,167, or ~~0.5%~~7.8%, to ~~$13,432~~$16,210 in the third quarter of fiscal ~~2017~~2019 compared to ~~$13,506~~$15,043 in the third quarter of fiscal ~~2016, due to lower incentive compensation~~2018. The increase in general and administrative expenses ~~which were~~was primarily driven by increased professional services costs partially offset by ~~increased~~lower labor costs, mainly incentive compensation, at our corporate ~~headquarters and incremental compensation costs related to our share-based awards.~~headquarters. General and administrative expenses, as a percentage of total revenues ~~decreased 50~~increased 10 basis points to 5.4% in the third quarter of fiscal ~~2017~~2019 compared to ~~5.9%~~5.3% in the third quarter of fiscal ~~2016 due to favorable leverage on sales.~~

2018.

Depreciation and amortization expense

Depreciation and amortization expense increased by ~~$2,808,~~$2,766 or ~~12.3%~~9.0%, to ~~$25,672~~$33,340 in the third quarter of fiscal ~~2017~~2019 compared to ~~$22,864~~$30,574 in the third quarter of fiscal ~~2016.~~2018. Increased depreciation due to our ~~2016~~2018 and ~~2017~~2019 capital expenditures for new stores, operating initiatives, ~~including remodels,~~ games and maintenance capital, was partially offset by other assets reaching the end of their depreciable lives.

Pre-opening

costs

Pre-opening

costs ~~increased~~decreased by ~~$1,056~~$495 to ~~$5,609~~$4,245 in the third quarter of fiscal ~~2017~~2019 compared to ~~$4,553~~$4,740 in the third quarter of fiscal ~~2016 due primarily to the number and timing of new store openings and stores in development.~~

2018

Interest expense, net

Interest expense, net increased by ~~$578~~$2,789 to ~~$2,156~~$6,110 in the third quarter of fiscal ~~2017~~2019 compared to ~~$1,578~~$3,321 in the third quarter of fiscal ~~2016~~2018 due primarily to ~~higher variable interest rates and a slight~~an increase in average outstanding debt.

~~Loss on debt refinancing~~

~~In connection with the August 17, 2017 debt refinancing (see Note 3,~~~~Debt~~,

Provision (benefit) for income taxes

The income tax benefit of ~~Notes to Unaudited Consolidated Financial Statements for further discussion), the Company recorded a charge of $718 during~~$93 in the third quarter of fiscal ~~2017.~~

~~Provision for income taxes~~

2019 was driven primarily by a reduction in our estimated annual effective tax rate. The lower estimated effective ~~income~~ tax rate ~~decreased to 28.7% for~~is driven by the ~~thirteen weeks ended October 29, 2017 compared to 37.1% in~~impact of lower projected state tax expense and the ~~thirteen weeks ended October 30, 2016. The decrease in~~favorable rate impact of tax credits. During the third quarter of fiscal 2018, the effective tax rate ~~primarily reflects a favorable 7.5% impact from the recognition~~ of 2.4% was favorably impacted by excess tax benefits ~~on share-based payments through income tax expense. Refer to Note 1,~~~~Summary of Significant Accounting Policies~~~~, of Notes to Unaudited Consolidated Financial Statements, for information with respect to the tax impacts~~ associated with share-based ~~awards as a result of adoption of new accounting guidance~~compensation, which had little impact in the ~~first~~third quarter of fiscal ~~2017.~~

2019.

Table of Contents

Thirty-nine Weeks Ended ~~October 29, 2017~~November 3, 2019 Compared to Thirty-nine Weeks Ended ~~October 30, 2016~~

November 4, 2018

Results of operations.

   Thirty-nine Weeks Thirty-nine Weeks
   Ended Ended
   October 29, 2017 October 30, 2016
Food and beverage revenues
   $ 356,190    42.7 % $ 326,139    44.4 %
Amusement and other revenues
   478,688    57.3 408,837    55.6






Total revenues
   834,878    100.0 734,976    100.0
Cost of food and beverage (as a percentage of food and beverage revenues)
   91,562    25.7 83,772    25.7
Cost of amusement and other (as a percentage of amusement and other revenues)
   50,481    10.5 48,628    11.9






Total cost of products
   142,043    17.0 132,400    18.0
Operating payroll and benefits
   187,610    22.5 166,614    22.7
Other store operating expenses
   247,663    29.6 214,487    29.1
General and administrative expenses
   45,172    5.4 40,131    5.5
Depreciation and amortization expense
   74,447    8.9 65,108    8.9
Pre-opening costs
   14,626    1.8 10,390    1.4






Total operating costs
   711,561    85.2 629,130    85.6






Operating income
   123,317    14.8 105,846    14.4
Interest expense, net
   6,073    0.7 5,573    0.8
Loss on debt refinancing
   718    0.1 —      —






Income before provision for income taxes
   116,526    14.0 100,273    13.6
Provision for income taxes
   31,217    3.8 36,845    5.0






Net income
   $ 85,309    10.2 % $ 63,428    8.6 %






Change in comparable store sales
      0.8 %    3.4 %
Company owned stores open at end of period
      101    88
Comparable stores open at end of period
      76    66

Thirty-nine Weeks
Ended

Thirty-nine Weeks
Ended

November 3, 2019

November 4, 2018

Food and beverage revenues
$
410,779

40.8
% $
388,804

41.6
%
Amusement and other revenues

596,754

59.2

544,713

58.4

Total revenues

1,007,533

100.0

933,517

100.0

Cost of food and beverage (as a percentage of food and beverage revenues)

109,072

26.6

101,181

26.0

Cost of amusement and other (as a percentage of amusement and other revenues)

64,456

10.8

60,248

11.1

Total cost of products

173,528

17.2

161,429

17.3

Operating payroll and benefits

239,965

23.8

217,939

23.3

Other store operating expenses

321,334

31.9

284,432

30.5

General and administrative expenses

49,047

4.9

45,461

4.9

Depreciation and amortization expense

97,226

9.6

87,129

9.3

Pre-opening
costs

15,970

1.6

17,121

1.8

Total operating costs

897,070

89.0

813,511

87.1

Operating income

110,463

11.0

120,006

12.9

Interest expense, net

14,771

1.5

9,406

1.1

Income before provision for income taxes

95,692

9.5

110,600

11.8

Provision for income taxes

20,411

2.0

22,815

2.4

Net income
$
75,281

7.5
% $
87,785

9.4
%

Change in comparable store sales (1)

(1.9
)%
(3.0
)%
Company-owned stores open at end of period (1)

134

118

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.

Table of Contents

Reconciliations of
Non-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:

   Thirty-nine Weeks Thirty-nine Weeks
   Ended Ended
   October 29, 2017 October 30, 2016
Net income
   $ 85,309 $ 63,428
Interest expense, net
   6,073 5,573
Loss on debt refinancing
   718 —
Provision for income taxes
   31,217 36,845
Depreciation and amortization expense
   74,447 65,108


EBITDA
   197,764 170,954
Loss on asset disposal
   1,205 987
Share-based compensation
   7,006 4,665
Pre-opening costs
   14,626 10,390
Other costs⁽¹⁾
   (329 ) 68


Adjusted EBITDA⁽²⁾
   $ 220,272 $ 187,064


Adjusted EBITDA Margin⁽²⁾
   26.4 % 25.5 %


	Thirty-nine Weeks				Thirty-nine Weeks
	Ended				Ended
	November 3, 2019				November 4, 2018
Net income	$	75,281	7.5	%	$	87,785	9.4	%
Interest expense, net		14,771				9,406
Provision for income taxes		20,411				22,815
Depreciation and amortization expense		97,226				87,129

EBITDA		207,689	20.6	%		207,135	22.2	%
Loss on asset disposal		1,284				813
Share-based compensation		5,479				5,771
Pre-opening costs		15,970				17,121
Other costs (1)		34				127

Adjusted EBITDA	$	230,456	22.9	%	$	230,967	24.7	%

⁽¹⁾	Primarily represents costs related to currency transaction (gains) or losses.

⁽²⁾	Beginning in the fourth quarter of 2016 we revised our calculation of Adjusted EBITDA to exclude adjustments for changes in deferred amusement revenue and ticket liabilities. This change has been applied retrospectively to all periods presented.

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:

   Thirty-nine Weeks Thirty-nine Weeks
   Ended Ended
   October 29, 2017 October 30, 2016
Operating income
   $ 123,317 $ 105,846
General and administrative expenses
   45,172 40,131
Depreciaton and amortization expense
   74,447 65,108
Pre-opening costs
   14,626 10,390


Store Operating Income Before Depreciation and Amortization
   $ 257,562 $ 221,475


Store Operating Income Before Depreciation and Amortization Margin
   30.9 % 30.1 %

Thirty-nine Weeks

Thirty-nine Weeks

Ended

Ended

November 3, 2019

November 4, 2018

Operating income
$
110,463

11.0
% $
120,006

12.9
%
General and administrative expenses

49,047

45,461

Depreciation and amortization expense

97,226

87,129

Pre-opening
costs

15,970

17,121

Store Operating Income Before Depreciation and Amortization
$
272,706

27.1
% $
269,717

28.9
%

Capital Additions

   Thirty-nine Weeks    Thirty-nine Weeks
   Ended    Ended
   October 29, 2017    October 30, 2016
New store
   $ 119,638    $ 106,134
Operating initiatives, including remodels
   14,830    17,890
Games
   10,521    15,180
Maintenance capital
   10,448    11,058




Total capital additions
   $ 155,437    $ 150,262




Payments from landlords
   $ 24,292    $ 16,779

Thirty-nine
Weeks

Thirty-nine
Weeks

Ended

Ended

November 3, 2019

November 4, 2018

New store and operating initiatives
$
143,594
$
121,895

Games

12,667

25,501

Maintenance capital

16,316

15,875

Total capital additions
$
172,577
$
163,271

Payments from landlords
$
28,581
$
33,097

Table of Contents

Results of Operations

Revenues

Total revenues increased ~~$99,902,~~$74,016, or ~~13.6%~~7.9%, to ~~$834,878~~$1,007,533 in the thirty-nine ~~weeks~~week period ended ~~October 29, 2017~~November 3, 2019 compared to total revenues of ~~$734,976~~$933,517 in the thirty-nine ~~weeks~~week period ended ~~October 30, 2016.~~November 4, 2018. For the thirty-nine weeks ended ~~October 29, 2017,~~November 3, 2019, we derived ~~29.1%~~27.9% of our total revenue from food sales, ~~13.6%~~12.9% from beverage sales, ~~56.6%~~58.4% from amusement sales and ~~0.7%~~0.8% from other sources. For the thirty-nine weeks ended ~~October 30, 2016,~~November 4, 2018, we derived ~~30.2%~~28.5% of our total revenue from food sales, ~~14.2%~~13.1% from beverage sales, ~~54.8%~~57.7% from amusement sales and ~~0.8%~~0.7% from other sources.

The ~~increased~~net increase in revenues for the thirty-nine weeks ended November 3, 2019 compared to the thirty-nine week period ended November 4, 2018, were ~~derived~~ from the following sources:

Comparable stores
   $ 5,453
Non-comparable stores
   93,550
Other
   899


Total
   $ 99,902


Comparable stores	$	(15,520	)
Non-comparable stores		88,451
Other		1,085

Total	$	74,016

Comparable store revenue ~~increased $5,453,~~decreased $15,520, or ~~0.8%~~1.9%, in the thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 compared to the thirty-nine weeks ended ~~October 30, 2016.~~November 4, 2018. Comparable store revenue compared to prior year was negatively impacted by an unfavorable shift in the current year holiday/school break calendar, sales transfers to new stores that we opened in markets where we operate and increased competitive pressure. Comparable

walk-in

revenues, which accounted for ~~90.9%~~91.2% of ~~consolidated~~ comparable store revenue infor the thirty-nine weeks ended ~~October 29, 2017, increased $5,836, or 1.0%~~November 3, 2019, decreased 2.2% compared to the ~~thirty-nine weeks ended October 30, 2016.~~similar period in fiscal 2018. Comparable store special events revenues, which accounted for ~~9.1%~~8.8% of ~~consolidated~~ comparable store revenue infor the thirty-nine weeks ended ~~October 29, 2017, decreased $383, or 0.6%~~November 3, 2019, increased 1.2% compared to the ~~thirty-nine weeks ended October 30, 2016.~~

similar period in fiscal 2018.

Food sales at comparable stores decreased by ~~$6,378,~~$8,504, or ~~3.2%~~3.7%, to ~~$192,070~~$219,396 in the thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 from ~~$198,448~~$227,900 in the thirty-nine weeks ended ~~October 30, 2016.~~November 4, 2018. Beverage sales at comparable stores decreased by ~~$3,680,~~$3,453, or ~~3.9%~~3.3%, to ~~$90,574~~$101,811 in the thirty-nine ~~weeks~~week period ended ~~October 29, 2017~~November 3, 2019 from ~~$94,254~~$105,264 in the ~~thirty-nine weeks ended October 30, 2016. The decrease in food and beverage unit sales at comparable stores was partially offset by price increases.~~2018 comparison period. Comparable store amusement and other revenues in the thirty-nine ~~weeks~~week period ended ~~October 29, 2017 increased~~November 3, 2019 decreased by ~~$15,511,~~$3,563, or ~~4.2%~~0.8%, to ~~$382,578~~$463,199 from ~~$367,067~~$466,762 in the comparable thirty-nine weeks ~~ended October 30, 2016 due to an increase in the revenue per Power Card sold.~~of fiscal 2018. The ~~growth over fiscal 2016~~decrease in amusement sales was ~~driven~~due in part to lower customer volumes partially offset by ~~national advertising, which highlighted~~various pricing initiatives in the current year, including an increase in new card fees with the launch of our new games offerings (including games available only at Dave & Buster’s stores) and included the introduction of several games with highly recognizable and marketable content. Our new amusement offerings included limited time offers which allowed customers to play certain new games for free.

RFID power card.

Non-comparable

store revenue increased ~~$93,550,~~$88,451, for the thirty-nine ~~weeks~~week period ended ~~October 29, 2017~~November 3, 2019 compared to the ~~same~~thirty-nine week period ~~of fiscal 2016.~~ended November 4, 2018. The increase in

non-comparable

store revenue was primarily driven by ~~515~~606 additional operating store weeks contributed by our ~~twenty-five~~thirty-five

non-comparable ~~stores.~~

Cost of products

The total cost of products was ~~$142,043~~$173,528 for the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 and ~~$132,400~~$161,429 for the thirty-nine week period ended ~~October 30, 2016.~~November 4, 2018. The total cost of products as a percentage of total revenues was ~~17.0%~~17.2% and ~~18.0%~~17.3% for the thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 and the thirty-nine week period ended ~~October 30, 2016,~~November 4, 2018, respectively.

Cost of food and beverage products increased to ~~$91,562~~$109,072 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$83,772 in~~$101,181 for the thirty-nine week period ended ~~October 30, 2016~~November 4, 2018, due primarily to the increased sales volume ~~at ournon-comparable~~ ~~stores.~~related to new store openings. Cost of food and beverage products, as a percentage of food and beverage revenues, ~~was 25.7%~~increased 60 basis points to 26.6% for ~~both~~ the thirty-nine week period ended ~~October 29, 2017 and~~November 3, 2019 from 26.0% for the thirty-nine week period ended ~~October 30, 2016, due to savings in~~November 4, 2018. Higher meat costs resulting from our ~~meat and seafood categories offset by~~upgraded steak products, higher poultry costs due to our “All You Can Eat” wings promotion and higher bar consumable costs due to our shift to fresh juices at the bar as well as the impact of our larger

non-comparable

store ~~group.~~

group, were partially offset by declines in seafood costs and increases in food and beverage prices.

Cost of amusement and other increased to ~~$50,481~~$64,456 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$48,628~~$60,248 in the thirty-nine week period ended ~~October 30, 2016.~~November 4, 2018. The costs of amusement and other, as a percentage of amusement and other revenues, decreased ~~140~~30 basis points to ~~10.5%~~10.8% for the thirty-nine ~~weeks~~week period ended ~~October 29, 2017~~November 3, 2019 from ~~11.9%~~11.1% for the thirty-nine ~~weeks~~week period ended October 30, 2016. This decrease was due primarily to a $2,531, or 70 basis point, amusement cost reduction in the first quarter of 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, theNovember 4, 2018. The decrease in cost of amusement and other as a percentage of revenue was ~~positively impacted by~~due, in part, to lower expense associated with our estimated amusement redemption liabilities, an increase in the price of power cards and a shift in game play ~~from redemption~~ to

non-redemption ~~games and price increases implemented earlier in the year.~~

games.

Operating payroll and benefits

Total operating payroll and benefits increased by ~~$20,996,~~$22,026, or ~~12.6%~~10.1%, to ~~$187,610~~$239,965 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$166,614~~$217,939 in the thirty-nine week period ended ~~October 30, 2016,~~November 4, 2018. This increase was primarily due to labor associated with the additional operating store weeks of our

non-comparable

stores. The total cost of operating payroll and benefits, as a ~~percent~~percentage of total revenues, ~~decreased 20~~increased 50 basis points to ~~22.5%~~23.8% in the thirty-nine week period ended November 3, 2019 compared to 23.3% for the thirty-nine ~~weeks~~week period ended ~~October 29, 2017 from 22.7% in the thirty-nine weeks ended October 30, 2016.~~November 4, 2018. This ~~decrease~~increase was due to ~~store-level incentive compensation and payroll related benefits which decreased approximately 30 basis points, partially offset by~~ an hourly wage rate increase of ~~approximately 4.8%~~4.3% and ~~normal labor inefficiencies associated with ournon-comparable~~unfavorable leverage on decreased comparable store ~~base.~~

sales.

Other store operating expenses

Other store operating expenses increased by ~~$33,176,~~$36,902, or ~~15.5%~~13.0%, to ~~$247,663,~~$321,334 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$214,487~~$284,432 in the thirty-nine week period ended ~~October 30, 2016,~~November 4, 2018, primarily due to new store openings. Other store operating expenses ~~during the thirty-nine week period ended October 29, 2017,~~ as a percentage of total revenues increased 50140 basis points to ~~29.6% from 29.1%~~31.9% in the thirty-nine ~~weeks~~week period ended ~~October 30, 2016.~~November 3, 2019 compared to 30.5% in the thirty-nine week period ended November 4, 2018. This increase was due primarily to ~~increased margin pressure on~~higher occupancy costs associated with our ~~recent~~

non-comparable

stores and the deleveraging impact of lower comparable store ~~openings partially offset by favorable leverage~~sales, the absence of ~~marketing expenses on increased revenue.~~

hurricane-related business interruption proceeds recorded in the prior year and incremental legal and sports viewing costs.

General and administrative expenses

General and administrative expenses increased by ~~$5,041,~~$3,586, or ~~12.6%~~7.9%, to ~~$45,172~~$49,047 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$40,131~~$45,461 in the thirty-nine week period ended ~~October 30, 2016.~~November 4, 2018. The increase in general and administrative expenses was primarily driven by ~~a second quarter $2,550 charge for net litigation settlement costs,~~ increased ~~labor~~compensation and professional services costs at our corporate ~~headquarters and incremental compensation costs related to our share-based awards partially offset by lower incentive compensation expenses.~~headquarters. General and administrative expenses, as a percentage of total revenues ~~decreased 10 basis points to 5.4%~~remained unchanged at 4.9% in ~~the~~both thirty-nine ~~weeks~~week periods ended ~~October 29, 2017 compared to 5.5% in the same period of fiscal 2016 due to favorable leverage on sales.~~

November 3, 2019 and November 4, 2018.

Depreciation and amortization expense

Depreciation and amortization expense increased by ~~$9,339,~~$10,097 or ~~14.3%~~11.6%, to ~~$74,447~~$97,226 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$65,108~~$87,129 in the thirty-nine week period ended ~~October 30, 2016.~~November 4, 2018. Increased depreciation due to our ~~2016~~2018 and ~~2017~~2019 capital expenditures for new stores, operating initiatives, ~~including remodels,~~ games and maintenance capital, was partially offset by other assets reaching the end of their depreciable lives.

Pre-opening

costs

Pre-opening

costs ~~increased~~decreased by ~~$4,236~~$1,151 to ~~$14,626~~$15,970 in the thirty-nine week period ended ~~October 29, 2017~~November 3, 2019 compared to ~~$10,390~~$17,121 in the comparable time period of fiscal 2018 due to the timing of new store openings

Interest expense, net

Interest expense, net increased by $5,365 to $14,771 in the thirty-nine week period ended ~~October 30, 2016 due~~November 3, 2019 compared to ~~the number and timing of new store openings and stores in development.~~

~~Interest expense, net~~

~~Interest expense, net increased by $500 to $6,073~~$9,406 in the thirty-nine week period ended ~~October 29, 2017~~November 4, 2018 due primarily to an increase in average outstanding debt and to a lesser extent, higher interest rates.

Provision for income taxes

The effective income tax rate increased to 21.3% in the thirty-nine weeks ended November 3, 2019 compared to ~~$5,573~~20.6% in the thirty-nine week period ended ~~October 30, 2016 due primarily to higher variable interest rates offset by a slight reduction in average outstanding debt.~~

~~Loss on debt refinancing~~

~~In connection with the August 17, 2017 debt refinancing (see Note 3,~~~~Debt~~~~, of Notes to Unaudited Consolidated Financial Statements for further discussion), the Company recorded a charge of $718 during the third quarter of fiscal 2017.~~

~~Provision for income taxes~~

November 4, 2018. The effective income tax rate decreased to 26.8% for the thirty-nine weeks ended October 29, 2017 compared to 36.7% in the thirty-nine weeks ended October 30, 2016. The decrease in the effective tax rateincrease primarily reflects ~~a favorable 9.8% impact from the recognition of~~lower excess tax benefits ~~on share-based payments through income tax expense. Refer to Note 1,~~~~Summary of Significant Accounting Policies~~~~, of Notes to Unaudited Consolidated Financial Statements, for information with respect to the tax impacts~~ associated with share-based ~~awards as~~compensation, partially offset by higher tax credits and a ~~result of adoption of new accounting guidance~~favorable change in the ~~first quarter~~mix of ~~fiscal 2017.~~

jurisdictional earnings.

Liquidity and Capital Resources

~~Overview~~

~~We finance our activities through cash flow from operations~~

Cash and ~~availability under our existing credit facility. As of October 29, 2017,~~Cash Equivalents

At November 3, 2019, we had cash and cash equivalents of ~~$15,258,~~$20,880 and a net working capital deficit of ~~$128,014 and outstanding debt obligations of $316,000. We also had $479,029 in borrowing availability under our existing credit facility.~~

~~We currently have, and anticipate that in the future we may continue to have, negative working capital balances.~~$209,774. We are able to operate with a working capital deficit because cash from sales is usually received before related liabilities for product, supplies, labor and services become due. ~~Funds available from sales~~Our operations do not ~~needed immediately to pay for~~require significant inventory or receivables, and we continually invest in our business through the growth of stores and operating ~~expenses have typically been used for capital expenditures~~improvement additions, which are reflected as noncurrent assets and ~~payment~~not a part of ~~long-term debt obligations.~~

~~Short-term liquidity requirements.~~ ~~We generally consider our short-term liquidity requirements to consist~~working capital.

Table 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 paymentsContents

Based on our ~~debt, capital expenditures related to the new store construction~~current business plan, we believe our cash and ~~other expenditures associated~~cash equivalents combined with ~~acquiring new games, remodeling facilities and recurring replacement of equipment and improvements.~~

As of October 29, 2017, we expect our short-term liquidity requirements to include approximately (a) $190,000 to $200,000 of capital additions (net of tenant improvement allowances and other paymentsexpected cash flows from landlords), (b) lease obligation payments of $101,000, (c) estimated cash income tax payments of $61,000, (d) scheduled debt service payments (see “Contractual Obligations and Commercial Commitments”) and (e) the repurchase of our common stock.

~~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, performance-necessary renovations and other~~non-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 by operations, ~~and~~available borrowings under the revolving portion of our credit facility and expected payments from landlords should be sufficient not only for our operating requirements but also to enable us, in the aggregate, to finance our capital allocation strategy, including capital expenditures, share repurchases, cash dividends and any required debt payments through at least the next twelve months and the foreseeable future.

We expect to spend between $249,000 and $254,000 ($215,000 to $220,000 net of payments from landlord) in capital additions during fiscal 2019. The fiscal 2019 additions are expected to include approximately $201,000 to $206,000 ($167,000 to $172,000 net of payments from landlords) for new store construction and operating improvement initiatives, $19,000 for game refreshment and $29,000 in maintenance capital. A portion of the 2019 new store spend is related to stores that will be under construction in 2019 but will not be open until 2020.

Debt and Derivatives

We maintain a $500,000 unsecured revolving credit facility.

Availability under the revolving credit facility is reduced by outstanding letters of credit, which are used to support our self-insurance programs. At November 3, 2019, we had net availability for borrowings of $105,853 based on an outstanding revolver balance of $386,000 and $8,147 in standby letters of credit. We had total outstanding debt obligation of $656,000 under the existing term loan and revolving credit facility, which matures in August 2022. At November 3, 2019, the Company was in compliance with all our covenants contained in our existing credit facility, and none are expected to impact our liquidity or capital resources.

We use interest rate swaps in the management of our exposure to fluctuations in interest rates on our variable rate credit facility. Refer to Note 1 of the Unaudited Consolidated Financial Statements for further discussion.

Dividends and Share Repurchases

Our Board of Directors approved 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 Rule

10b5-1

of the ~~Securities~~ Exchange ~~Act of 1934, as amended.~~Act. The share repurchase program may be modified, suspended or discontinued at any time. ~~Effective September 7, 2017, an additional $100,000 in common shares authorization was approved by our Board~~At November 3, 2019, we had approximately $172,820 remaining of ~~Directors. As of October 29, 2017. the Company has~~ a total $800,000 share repurchase ~~authorization of $300,000 which~~authorization. The existing share repurchase program expires at the end of fiscal ~~2018.~~2020. During the ~~thirteen and~~ thirty-nine weeks ended ~~October 29, 2017, the Company purchased 240,342 and 1,778,484 shares~~November 3, 2019, we declared cash dividends of ~~common stock at an average cost~~$15,724. Our Board of ~~$48.69 and $61.84 per share, respectively. As of October 29, 2017, we have approximately $161,188 of share repurchase authorization remaining~~Directors may authorize capital allocation initiatives, including additional dividends, to return value to shareholders as allowable under ~~the current plan.~~

~~Based on our current business plan, we believe the cash flows from operations, together with~~ our existing cash balances and availability of borrowings under the revolving portion of our credit facility will be sufficient to meet our anticipated cash needs for working capital, capital expenditures, debt service needs, and share repurchases 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, which is subject to general economic conditions, competitive environment and other factors.

~~Borrowing Capacity~~

Our existing credit facility provides a $300,000 term loan facility and a $500,000 revolving credit facility and has a maturity date of August 17, 2022. The $500,000 revolving credit facility includes a $35,000 letter of credit~~sub-facility~~ ~~and a $15,000 swing loansub-facility.~~ The revolving facility was established to provide financing for general purposes. Principal payments on the term loan facility of $3,750 per quarter are required beginning December 31, 2017 through maturity, when the remaining balance is due. Our credit facility is secured by the assets of Dave & Buster’s, Inc. and is unconditionally guaranteed by Dave & Buster’s Holdings, Inc. and each of its direct and indirect domestic wholly-owned subsidiaries.

~~As of October 29, 2017, we had letters of credit outstanding of $4,971 and $479,029 of borrowing available under our~~ credit facility. The interest rates per annum applicable to loans, other than swing loans, under our 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 leveraged 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 on our credit facility at October 29, 2017 was 2.49%. The~~year-to-date~~ weighted average effective interest rate incurred on our borrowings under our credit facility was 3.06%. The weighted average effective rate includes amortization of debt issuance costs, commitment and other fees.

Cash ~~Flows~~

~~The following table presents a summary of our net cash provided by (used in) operating, investing and financing activities:~~

   Thirty-nine Weeks    Thirty-nine Weeks
   Ended October 29, 2017    Ended October 30, 2016
Net cash provided by (used in):

Operating activities
   $ 201,063    $ 174,550
Investing activities
   (147,026 )    (130,453 )
Financing activities
   (58,862 )    (54,868 )

Flow Summary

Operating Activities

— Net cash provided by operating activities ~~was $201,063 for~~decreased $19,211 in the thirty-nine weeks ended ~~October 29, 2017~~November 3, 2019 compared to ~~$174,550 for~~ the thirty-nine weeks ended ~~October 30, 2016. Increased cash flows from operations were~~November 4, 2018 driven primarily by ~~increased~~net cash flows associated with changes in working capital as well as lower operating income.

Cash flow generated from ~~additionalnon-comparable~~ ~~store sales~~operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and ~~slightly increased comparable store sales~~services, employee compensation, operations and ~~improved~~occupancy costs.

Cash provided by or used in operating ~~margins.~~

~~Net~~activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, the timing of cash receipts and payments, and vendor payment terms.

Investing Activities

— Cash used in investing activities was $147,026 for the thirty-nine weeks ended October 29, 2017 compared to $130,453 for the same period of fiscal 2016. Capital expenditures increased $18,994 to $150,278 (excluding the increase in fixed asset accounts payable of $5,159) in the thirty-nine weeks of fiscal 2017 from $131,284 in the thirty-nine weeks of fiscal 2016. During the thirty-nine weeks of fiscal 2017, the Company spent $114,663 ($90,371 net of tenant improvement allowances and other payments from landlords) for new store construction, $14,825 related to major remodel projects on four existing stores, several smaller scale remodel projects and operating improvement initiatives, $11,024 for game refreshment and $9,766 for maintenance capital. primarily reflects capital expenditures.

During the thirty-nine weeks ended ~~October 30, 2016, we~~November 3, 2019, the Company spent ~~$88,039~~approximately $146,000 ($~~71,260~~117,000 net of ~~tenant improvement allowances~~payments from landlords) for new store construction, $17,131 related to major remodel projects on six existing stores, several smaller scale remodel projects and operating improvement initiatives, $15,048 for game refreshment and $11,066 for maintenance capital.

Net cash used in financing activities increased by $3,994 to $58,862 in the thirty-nine weeks ended October 29, 2017 compared to $54,868 in the same period of fiscal 2016. The increase in cash used in financing activities was primarily due to increased repurchases of common stock of $102,624 offset by net borrowings of debt of $51,250 in the thirty-nine weeks ended October 29, 2017 compared to net repayments of $59,625 in the thirty-nine weeks ended October 30, 2016.

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 and $236,000 ($195,000 to $200,000 net of tenant improvement allowances) in capital additions during fiscal 2017. The fiscal 2017 additions are expected to include approximately $195,000 to $200,000 ($159,000 to $164,000 net of tenant improvement allowances) for new store construction and operating improvement initiatives, ~~including four store remodels, $16,000~~$12,000 for game refreshment and ~~$20,000 in~~$15,000 for maintenance capital. ~~A portion~~

Table of Contents

During the ~~2017~~thirty-nine weeks ended November 4, 2018, we spent approximately $122,000 ($89,000 net of payments from landlords) for new store ~~spend is related to stores that will be under~~ construction and operating improvement initiatives, $25,000 for game refreshment and $17,000 for maintenance capital.

Financing Activities

— Cash used in ~~2017 but will not be open until 2018.~~

financing activities primarily reflected approximately $297,000 of share repurchases and approximately $11,000 of cash dividends paid, partially offset by $261,750 of net proceeds from borrowings of debt in the thirty-nine weeks ended November 3, 2019. In the thirty-nine weeks ended November 4, 2018, cash used in financing activities primarily reflected approximately $86,000 of share repurchases and approximately $6,000 of cash dividends paid, partially offset by $17,000 of net proceeds from borrowings.

Contractual Obligations and ~~Commercial~~ Commitments

~~The following table sets forth~~

There have been no material changes outside the ordinary course of business to our ~~expected future annual~~ contractual obligations ~~and commercial commitments~~since February 3, 2019, as ~~of October 29, 2017:~~

   Total    1 Year    2-3 Years    4-5 Years    After 5
Years
Credit Facility₍₁₎
   $ 316,000    $ 15,000    $ 30,000    $ 271,000    $ —
Interest requirements₍₂₎
   33,969    7,920    14,406    11,643    —
Operating leases₍₃₎
   1,403,810    100,701    193,205    168,002    941,902










Total
   $ 1,753,779    $ 123,621    $ 237,611    $ 450,645    $ 941,902

⁽¹⁾	The Credit Facility includes a $300,000 term loan facility and $500,000 revolving credit facility. As of October 29, 2017, we had borrowings of $300,000 under the term loan facility and borrowings of $16,000 under the revolving credit facility.

⁽²⁾ ~~The cash obligations for interest requirements consist of variable rate debt obligations at rates in effect on October 29, 2017 of 2.49%.~~
⁽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 assured to be exercised as of the lease origination date, have been included in the table above.

reported on Form

10-K

filed with SEC on April 2, 2019.

Accounting policies and estimates

The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosures of contingent assets and liabilities. These estimates and assumptions affect amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the consolidated financial statements. Our current estimates are subject to change if different assumptions as to the outcome of future events were made. We evaluate our estimates and judgments on an ongoing basis and we adjust our assumptions and judgments when facts and circumstances dictate. Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates we used in preparing the accompanying consolidated financial statements. A complete description of our critical accounting policies and estimates is included in our annual consolidated financial statements and the related notes in our Annual Report on~~Form10-K~~ Form

10-K

filed with the SEC on ~~March 28, 2017.~~

April 2, 2019.

Recent accounting ~~pronouncements.~~

pronouncements

Refer to Note 1~~Summary of Significant Accounting Policies, of Notes~~ to the Unaudited Consolidated Financial Statements for information regarding new accounting pronouncements.

~~ITEM~~Item 3.

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

We are exposed to market price fluctuation in food and beverage product prices. Given the historical volatility of certain of our food product prices, including proteins, seafood, produce, dairy products, and cooking oil, these fluctuations can materially impact our food costs. While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as disease or inclement weather will not cause the prices of the commodities used in our restaurant operations to fluctuate. ~~In a rapidly-fluctuating commodities market, it~~Additionally, the cost of purchased materials may ~~prove difficult for us to adjust~~be influenced by tariffs and other trade regulations which are outside of our ~~menu prices to respond to any price fluctuations. Therefore, to~~control. To the extent that we do not pass along cost increases to our customers, our results of operations may be adversely affected. At this time, we do not use financial instruments to hedge our commodity risk.

Interest Rate Risk

We are exposed to interest rate risk arising from changes in interest rates due to the variable rate indebtedness under our credit facility. Borrowings pursuant to our credit facility bear interest at a floating rate based on

one-month

LIBOR, plus an applicable margin. ~~Accordingly, fluctuations in market interest rates may increase or decrease our interest expense which will, in turn, increase or decrease our net income and cash flow. In October 2015,~~Effective February 28, 2019, the Company ~~purchased~~entered into an interest rate ~~cap~~swap agreement ~~for $920~~ with a notional amount of ~~$200,000~~$350,000 to manage our exposure to interest rate movements on our variable rate credit ~~facility whenone-month~~ ~~LIBOR exceeds 3.0%.~~facility. The agreement converts the floating interest rate ~~cap agreement matures on October 7, 2019. As~~to a fixed interest rate of ~~October 29, 2017,one-month~~ ~~LIBOR was 1.24%. We estimate that~~approximately 2.5% plus a ~~hypothetical 25 basis point increase inone-month~~ ~~LIBOR would increase~~spread from the effective date through the term of our ~~annualized interest expense in the next year by approximately $800, assuming no change in the balance of the revolving portion of the~~existing credit facility.

Inflation

The primary inflationary factors affecting our operations are food, labor costs, and energy costs. Many of our leases require us to pay taxes, maintenance, repairs, insurance and utilities, all of which are generally subject to inflationary increases. Finally, the cost of constructing our stores is subject to inflationary increases in the costs of labor and material.

We have a substantial number of hourly employees who are paid wage rates at or based on the applicable federal, state or city minimum wage and increases in the minimum wage will increase our labor costs. ~~Key~~Several states and local jurisdictions in which we operate ~~including California and New York,~~ have ~~recently~~ enacted legislation to increase the minimum wage and/or minimum tipped wage rates by varying ~~amounts. Several other states and local jurisdictions in which we operate have also enacted legislation to increase the minimum wage and/or minimum tipped wage~~amounts, with more planned increases ~~planned~~ in the future.

Table of Contents

In general, we have been able to partially offset cost increases resulting from inflation by increasing menu prices, improving productivity, or other operating changes. We may or may not be able to offset cost increases in the future.

~~ITEM~~Item 4.

~~CONTROLS AND PROCEDURES~~Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules

13a-15

and

15d-15

promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

Effective February 4, 2019 we adopted the new guidance for lease accounting (Topic 842). As a result, changes to processes and procedures occurred that affected the Company’s internal control over financial reporting. While we believe the Company’s internal control over financial reporting for affected processes and procedures is effective, we will continue to evaluate and monitor these changes and assess the effectiveness of our internal control over financial reporting as of the end of our fiscal year.

There were no ~~significant~~ changes in our internal control over financial reporting (as defined in the Exchange ActRules

13a-15(f)

and

15d-15(f))

that occurred during our ~~thirteen weeks~~third quarter ended ~~October 29, 2017,~~November 3, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

~~ITEM~~Item 1.

~~LEGAL PROCEEDINGS~~Legal Proceedings

Information regarding legal proceedings is incorporated by reference from Note 45 to our Unaudited Consolidated Financial Statements set forth in Part I of this report.

~~ITEM~~Item 1A.

~~RISK FACTORS~~Risk Factors

There have been no material changes in the risk factors previously disclosed in our Annual Report as filed on Form

10-K

on ~~March 28, 2017.~~

April 2, 2019.

Table of Contents

~~ITEM~~Item 2.

~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Unregistered Sales of Equity Securities and Use of Proceeds

Information regarding repurchase of our common stock, in thousands, except share ~~and per share~~ amounts, during the thirteen weeks ended ~~October 29, 2017:~~

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 (2)
July 31, 2017 – August 27, 2017
   —      $ —      —      $ 72,889
August 28, 2017 - October 1, 2017
   75,000    $ 50.31    75,000    $ 169,116
October 2, 2017 - October 29, 2017
   165,342    $ 47.95    165,342    $ 161,188

November 3, 2019:


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 (3)
August 5, 2019 – September 1, 2019		2,000,000	$	39.65		2,000,000	$	190,683
September 2, 2019 – October 6, 2019		425,021	$	42.03		425,021	$	172,820
October 7, 2019 – November 3, 2019		—	$	—		—	$	172,820

⁽¹⁾	Monthly information is presented by reference to our fiscal periods during the thirteen weeks ended ~~October 29, 2017.~~November 3, 2019.

⁽²⁾

10b5-1

of the Securities Exchange Act of 1934, as amended. The share repurchase program may be modified, suspended or discontinued at any time. ~~Effective September 7, 2017, an additional $100,000 in common shares authorization was approved by our Board of Directors. As of October 29, 2017, the Company has a~~

(3)	Based on total share repurchase authorization ~~of $300,000 which expires at the end of fiscal 2018.~~in effect on November 3, 2019.


		Page
PART I	FINANCIAL INFORMATION
		~~Page~~
~~PART I~~ Item 1.	~~FINANCIAL INFORMATION~~Financial Statements

~~ITEM 1.~~	~~FINANCIAL STATEMENTS~~		3

~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~		16

~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~		29

~~ITEM 4.~~ Item 2.	~~CONTROLS AND PROCEDURES~~Management’s Discussion and Analysis of Financial Condition and Results of Operations		3019

~~PART II~~	~~OTHER INFORMATION~~

~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~		30

~~ITEM 1A.~~	~~RISK FACTORS~~		30

~~ITEM 2.~~ Item 3.	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~Quantitative and Qualitative Disclosures About Market Risk		31

~~ITEM 6.~~
Item 4.	~~EXHIBITS~~Controls and Procedures		32


PART II	~~SIGNATURES~~OTHER INFORMATION

Item 1.	Legal Proceedings		32

Item 1A.	Risk Factors		32

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33

Item 6.	Exhibits		34

	Signatures		35


	October 29,			January 29,
	2017			2017
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,258		$	20,083
Inventories		26,107			21,860
Prepaid expenses		18,221			15,828
Income taxes receivable		1,611			5,901
Other current assets		17,916			11,932

Total current assets		79,113			75,604
Property and equipment (net of $449,572 and $387,505 accumulated depreciation as of October 29, 2017 and January 29, 2017, respectively)		686,858			606,865
Deferred tax assets		3,926			2,446
Tradenames		79,000			79,000
Goodwill		272,600			272,629
Other assets and deferred charges		15,700			16,189

Total assets	$	1,137,197		$	1,052,733

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	15,000		$	7,500
Accounts payable		62,444			55,278
Accrued liabilities		129,287			112,327
Income taxes payable		396			2,692

Total current liabilities		207,127			177,797
Deferred income taxes		12,978			14,497
Deferred occupancy costs		170,579			147,592
Other liabilities		21,023			16,767
Long-term debt, net		299,940			256,628
Commitments and contingencies
Stockholders’ equity:
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 42,627,975 shares at October 29, 2017 and 42,469,570 shares at January 29, 2017; outstanding: 40,927,386 shares at October 29, 2017 and 42,204,587 shares at January 29, 2017		426			425
Preferred stock, 50,000,000 authorized; none issued		—			—
Paid-in capital		318,379			310,230
Treasury stock, 1,700,589 and 264,983 shares as of October 29, 2017 and January 29, 2017, respectively		(105,406	)		(14,817	)
Accumulated other comprehensive loss		(520	)		(723	)
Retained earnings		212,671			144,337

Total stockholders’ equity		425,550			439,452

Total liabilities and stockholders’ equity	$	1,137,197		$	1,052,733


	Thirty-Nine Weeks		Thirty-Nine Weeks
	Ended		Ended
	October 29, 2017		October 30, 2016
Food and beverage revenues	$	356,190	$	326,139
Amusement and other revenues		478,688		408,837

Total revenues		834,878		734,976
Cost of food and beverage		91,562		83,772
Cost of amusement and other		50,481		48,628

Total cost of products		142,043		132,400
Operating payroll and benefits		187,610		166,614
Other store operating expenses		247,663		214,487
General and administrative expenses		45,172		40,131
Depreciation and amortization expense		74,447		65,108
Pre-opening costs		14,626		10,390

Total operating costs		711,561		629,130

Operating income		123,317		105,846
Interest expense, net		6,073		5,573
Loss on debt refinancing		718		—

Income before provision for income taxes		116,526		100,273
Provision for income taxes		31,217		36,845

Net income		85,309		63,428

Unrealized foreign currency translation gain		203		180

Total comprehensive income	$	85,512	$	63,608

Net income per share:
Basic	$	2.05	$	1.52
Diluted	$	1.99	$	1.47
Weighted average shares used in per share calculations:
Basic		41,521,802		41,863,932
Diluted		42,888,659		43,234,767


					Paid-In Capital								Accumulated Other Comprehensive Gain (Loss)			Retained Earnings			Total

							Treasury Stock
	Common Stock						At Cost
	Shares		Amt.				Shares			Amt.
Balance January 29, 2017 (audited)		42,469,570	$	425	$	310,230		264,983		$	(14,817	)	$	(723	)	$	144,337		$	439,452
Net income		—		—		—		—			—			—			85,309			85,309
Unrealized foreign currency translation gain		—		—		—		—			—			203			—			203
Share-based compensation		—		—		7,006		—			—			—			—			7,006
Cumulative effect of a change in accounting principle		—		—		—		—			—			—			782			782
Issuance of common stock		158,405		1		1,143		—			—			—			—			1,144
Repurchase of common stock		—		—		—		1,778,484			(109,988	)		—			—			(109,988	)
Issuance of treasury stock		—		—		—		(342,878	)		19,399			—			(17,757	)		1,642

Balance October 29, 2017 (unaudited)		42,627,975	$	426	$	318,379		1,700,589		$	(105,406	)	$	(520	)	$	212,671		$	425,550


	Thirty-nine Weeks Ended November 3, 2019			Thirty-nine Weeks Ended November 4, 2018
Cash flows from operating activities:
Net income	$	75,281		$	87,785
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		97,226			87,129
Deferred taxes		5,309			8,067
Loss on disposal of fixed assets		1,284			813
Share-based compensation		5,479			5,771
Other, net		928			847
Changes in assets and liabilities:
Inventories		(5,305	)		(170	)
Prepaid expenses		(615	)		(1,436	)
Income tax receivable		(996	)		1,940
Other current assets		6,050			(6,610	)
Other assets and deferred charges		(1,775	)		(1,020	)
Accounts payable		5,422			5,512
Accrued liabilities		37,671			14,260
Income taxes payable		(10,079	)		1,081
Deferred occupancy costs		—			31,155
Other liabilities		1,909			1,876

Net cash provided by operating activities		217,789			237,000

Cash flows from investing activities:
Capital expenditures		(172,888	)		(163,745	)
Proceeds from sales of property and equipment		615			263
Proceeds from insurance		—			107

Net cash used in investing activities		(172,273	)		(163,375	)

Cash flows from financing activities:
Proceeds from debt		366,000			191,000
Payments of debt		(104,250	)		(174,250	)
Proceeds from the exercise of stock options		778			3,139
Repurchase of common stock under share repurchase program		(297,317	)		(86,077	)
Dividends paid		(10,837	)		(5,842	)
Repurchases of common stock to satisfy employee withholding tax obligations		(595	)		(673	)

Net cash used in financing activities		(46,221	)		(72,703	)

Increase (decrease) in cash and cash equivalents		(705	)		922
Beginning cash and cash equivalents		21,585			18,795

Ending cash and cash equivalents	$	20,880		$	19,717

Supplemental disclosures of cash flow information:
Decrease in fixed asset accounts payable	$	(311	)	$	(474	)
Cash paid for income taxes, net	$	26,086		$	11,661
Cash paid for interest, net	$	13,920		$	8,853
Dividend declared, not paid	$	4,887		$	—


	October 29, 2017		January 29, 2017
Deferred amusement revenue	$	30,708	$	28,305
Compensation and benefits		19,840		20,886
Amusement redemption liability		17,599		15,431
Rent		16,233		14,260
Property taxes		7,650		4,650
Customer deposits		5,804		3,003
Deferred gift card revenue		5,173		6,957
Current portion of long-term insurance		4,070		4,460
Sales and use taxes		3,376		3,872
Utilities		3,332		2,969
Inventory liabilities		4,070		2,659
Other (refer to Note 4)		11,432		4,875

Total accrued liabilities	$	129,287	$	112,327


	October 29, 2017			January 29, 2017
Credit facility - term	$	300,000		$	138,750
Credit facility - revolver		16,000			126,000

Total debt outstanding		316,000			264,750
Less:
Current installments - term		(15,000	)		(7,500	)
Debt issuance costs - term		(1,060	)		(622	)

Long-term debt, net	$	299,940		$	256,628


2017	$	3,750
2018		15,000
2019		15,000
2020		15,000
2021		15,000
2022		252,250

Total future payments	$	316,000


1 year or less	$	100,701
2 years		99,749
3 years		93,456
4 years		88,142
5 years		79,860
Thereafter		941,902

Total future payments	$	1,403,810


(in thousands, except share and per share data)	Thirteen Weeks Ended October 29, 2017		Thirteen Weeks Ended October 30, 2016
Numerator:
Net income	$	12,157	$	10,755
Denominator:
Weighted average number of common shares outstanding (basic)		41,077,206		42,061,235
Weighted average dilutive impact of equity-based awards		1,173,405		1,266,577
Weighted average number of common and common equivalent shares outstanding (diluted)		42,250,611		43,327,812
Net income per share:
Basic	$	0.30	$	0.26
Diluted	$	0.29	$	0.25

(in thousands, except share and per share data)	Thirty-nine Weeks Ended October 29, 2017		Thirty-nine Weeks Ended October 30, 2016
Numerator:
Net income	$	85,309	$	63,428
Denominator:
Weighted average number of common shares outstanding (basic)		41,521,802		41,863,932
Weighted average dilutive impact of equity-based awards		1,366,857		1,370,835
Weighted average number of common and common equivalent shares outstanding (diluted)		42,888,659		43,234,767
Net income per share:
Basic	$	2.05	$	1.52
Diluted	$	1.99	$	1.47


	2014 Stock Incentive Plan					2010 Stock Incentive Plan
				Weighted					Weighted
				Average					Average
	Number			Exercise		Number			Exercise
	of Options			Price		of Options			Price
Outstanding at January 29, 2017		833,499		$	26.93		1,225,053		$	5.35
Granted		190,379			57.74		—			—
Exercised		(16,522	)		34.81		(483,008	)		4.58
Forfeited		(4,631	)		47.33		—			—

Outstanding at October 29, 2017		1,002,725		$	32.56		742,045		$	5.86

Exercisable at October 29, 2017		421,687		$	26.48		688,249		$	5.66


	Thirteen Weeks Ended				Thirteen Weeks Ended
	October 29, 2017				October 30, 2016
Food and beverage revenues	$	107,690	43.1	%	$	101,343	44.3	%
Amusement and other revenues		142,289	56.9			127,316	55.7

Total revenues		249,979	100.0			228,659	100.0
Cost of food and beverage (as a percentage of food and beverage revenues)		28,387	26.4			26,560	26.2
Cost of amusement and other (as a percentage of amusement and other revenues)		16,220	11.4			15,581	12.2

Total cost of products		44,607	17.8			42,141	18.4
Operating payroll and benefits		57,967	23.2			55,034	24.1
Other store operating expenses		82,766	33.1			71,888	31.4
General and administrative expenses		13,432	5.4			13,506	5.9
Depreciation and amortization expense		25,672	10.3			22,864	10.0
Pre-opening costs		5,609	2.2			4,553	2.0

Total operating costs		230,053	92.0			209,986	91.8

Operating income		19,926	8.0			18,673	8.2
Interest expense, net		2,156	0.9			1,578	0.7
Loss on debt refinancing		718	0.3			—	—

Income before provision for income taxes		17,052	6.8			17,095	7.5
Provision for income taxes		4,895	1.9			6,340	2.8

Net income	$	12,157	4.9	%	$	10,755	4.7	%

Change in comparable store sales			(1.3	)%			5.9	%
Company-owned stores open at end of period			101				88
Comparable stores open at end of period			76				66


Comparable stores	$	(2,496	)
Non-comparable stores		22,916
Other		900

Total	$	21,320


	Thirty-nine Weeks Ended				Thirty-nine Weeks Ended
	November 3, 2019				November 4, 2018
Food and beverage revenues	$	410,779	40.8	%	$	388,804	41.6	%
Amusement and other revenues		596,754	59.2			544,713	58.4

Total revenues		1,007,533	100.0			933,517	100.0
Cost of food and beverage (as a percentage of food and beverage revenues)		109,072	26.6			101,181	26.0
Cost of amusement and other (as a percentage of amusement and other revenues)		64,456	10.8			60,248	11.1

Total cost of products		173,528	17.2			161,429	17.3
Operating payroll and benefits		239,965	23.8			217,939	23.3
Other store operating expenses		321,334	31.9			284,432	30.5
General and administrative expenses		49,047	4.9			45,461	4.9
Depreciation and amortization expense		97,226	9.6			87,129	9.3
Pre-opening costs		15,970	1.6			17,121	1.8

Total operating costs		897,070	89.0			813,511	87.1

Operating income		110,463	11.0			120,006	12.9
Interest expense, net		14,771	1.5			9,406	1.1

Income before provision for income taxes		95,692	9.5			110,600	11.8
Provision for income taxes		20,411	2.0			22,815	2.4

Net income	$	75,281	7.5	%	$	87,785	9.4	%

Change in comparable store sales (1)			(1.9	)%			(3.0	)%
Company-owned stores open at end of period (1)			134				118
Comparable stores open at end of period (1)			99				86


	Thirty-nine Weeks		Thirty-nine Weeks
	Ended		Ended
	November 3, 2019		November 4, 2018
New store and operating initiatives	$	143,594	$	121,895
Games		12,667		25,501
Maintenance capital		16,316		15,875

Total capital additions	$	172,577	$	163,271

Payments from landlords	$	28,581	$	33,097


Comparable stores	$	5,453
Non-comparable stores		93,550
Other		899

Total	$	99,902


	Thirty-nine Weeks			Thirty-nine Weeks
	Ended October 29, 2017			Ended October 30, 2016
Net cash provided by (used in):
Operating activities	$	201,063		$	174,550
Investing activities		(147,026	)		(130,453	)
Financing activities		(58,862	)		(54,868	)


	Total		1 Year		2-3 Years		4-5 Years		After 5 Years
Credit Facility₍₁₎	$	316,000	$	15,000	$	30,000	$	271,000	$	—
Interest requirements₍₂₎		33,969		7,920		14,406		11,643		—
Operating leases₍₃₎		1,403,810		100,701		193,205		168,002		941,902

Total	$	1,753,779	$	123,621	$	237,611	$	450,645	$	941,902


~~Exhibit~~ ~~Number~~		~~Description~~
Exhibit Number			Description
31.1*
	31.1*		Certification of ~~Stephen M. King,~~Brian A. Jenkins, Chief Executive Officer of the Registrant, pursuant to17 CFR 240.13a-14(a) or 17CFR 240.15d-14(a).

31.2*
	31.2*		Certification of ~~Brian A. Jenkins, Senior Vice President and~~Scott J. Bowman, Chief Financial Officer of the Registrant, pursuant to 17CFR 240.13a-14(a) or 17 CFR240.15d-14(a).

32.1*
	32.1*		Certification of ~~Stephen M. King,~~Brian A. Jenkins, Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*
	32.2*		Certification of ~~Brian A. Jenkins, Senior Vice President and~~Scott J. Bowman, Chief Financial Officer of the Registrant, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~101~~
	101		Inline XBRL Interactive Data files

	104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).


	DAVE & BUSTER’S ENTERTAINMENT, INC., a Delaware corporation

Date: December ~~5, 2017~~10, 2019	By:	/s/ ~~Stephen M. King~~ Brian A. Jenkins
		~~Stephen M. King~~ Brian A. Jenkins
		Chief Executive Officer

Date: December ~~5, 2017~~10, 2019	By:	/s/ ~~Brian A. Jenkins~~ Scott J. Bowman
		~~Brian A. Jenkins~~ Scott J. Bowman
		~~Senior Vice President and~~ Chief Financial Officer