☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 35-2382255 | ||
(State of Incorporation) | (I.R.S. Employer ID) | ||
2481 Mañana Drive, Dallas, Texas, 75220 | (214) 357-9588 | ||
(Address of principal executive offices) (Zip Code) | (Registrant’s telephone number) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock $0.01 par value | PLAY | NASDAQ Global Select Market | ||
Preferred Stock Purchase Rights | PLAY | NASDAQ Global Select Market |
Large accelerated filer | ☒ | |||||||||
Accelerated filer | ||||||||||
☐ | ||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||
Emerging Growth Company | ☐ |
Page | ||||||
PART I | ||||||
Item 1. | 3 | |||||
Item 2. | 18 | |||||
Item 3. | ||||||
Item 4. | ||||||
PART II | ||||||
Item 1. | ||||||
Item 1A. | ||||||
Item 2. | ||||||
Item 6. | ||||||
Item 1. | Financial Statements |
August 2, | February 2, | |||||||||||||||
2020 | 2020 | November 1, 2020 | February 2, 2020 | |||||||||||||
(unaudited) | (audited) | (unaudited) | (audited) | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 224,305 | $ | 24,655 | $ | 8,341 | $ | 24,655 | ||||||||
Inventories | 31,189 | 34,477 | 26,732 | 34,477 | ||||||||||||
Prepaid expenses | 12,751 | 14,269 | 12,080 | 14,269 | ||||||||||||
Income taxes receivable | 23,805 | 2,331 | 44,574 | 2,331 | ||||||||||||
Other current assets | 934 | 3,245 | 665 | 3,245 | ||||||||||||
Total current assets | 292,984 | 78,977 | 92,392 | 78,977 | ||||||||||||
Property and equipment (net of $739,805 and $686,824 accumulated depreciation as of August 2, 2020 and February 2, 2020, respectively) | 872,010 | 900,637 | ||||||||||||||
Property and equipment (net of $767,510 and $686,824 accumulated depreciation as of November 1, 2020 and February 2, 2020, respectively) | 846,056 | 900,637 | ||||||||||||||
Operating lease right of use assets | 1,062,266 | 1,011,568 | 1,050,878 | 1,011,568 | ||||||||||||
Deferred tax assets | 21,491 | 7,639 | 20,451 | 7,639 | ||||||||||||
Tradenames | 79,000 | 79,000 | 79,000 | 79,000 | ||||||||||||
Goodwill | 272,650 | 272,636 | 272,643 | 272,636 | ||||||||||||
Other assets and deferred charges | 19,566 | 19,682 | 23,641 | 19,682 | ||||||||||||
Total assets | $ | 2,619,967 | $ | 2,370,139 | $ | 2,385,061 | $ | 2,370,139 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current installments of long-term debt | $ | 15,000 | $ | 15,000 | $ | — | $ | 15,000 | ||||||||
Accounts payable | 59,539 | 65,359 | 42,849 | 65,359 | ||||||||||||
Accrued liabilities | 238,651 | 207,452 | 244,163 | 207,452 | ||||||||||||
Income taxes payable | 624 | 3,054 | 415 | 3,054 | ||||||||||||
Total current liabilities | 313,814 | 290,865 | 287,427 | 290,865 | ||||||||||||
Deferred income taxes | — | 19,102 | 13,355 | 19,102 | ||||||||||||
Operating lease liabilities | 1,285,533 | 1,222,054 | 1,277,794 | 1,222,054 | ||||||||||||
Other liabilities | 38,603 | 35,779 | 37,896 | 35,779 | ||||||||||||
Long-term debt, net | 731,646 | 632,689 | 561,815 | 632,689 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders’ equity: | ||||||||||||||||
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 60,422,212 shares at August 2, 2020 and 43,386,852 shares at February 2, 2020; outstanding: 47,594,912 shares at August 2, 2020 and 30,603,340 shares at February 2, 2020 | 604 | 434 | ||||||||||||||
Preferred stock, 50,000,000 authorized; 0ne issued | — | — | ||||||||||||||
Common stock, par value $0.01; authorized: 400,000,000 shares; issued: 60,483,730 shares at November 1, 2020 and 43,386,852 shares at February 2, 2020; outstanding: 47,642,029 shares at November 1, 2020 and 30,603,340 shares at February 2, 2020 | 605 | 434 | ||||||||||||||
Preferred stock, 50,000,000 authorized; NaN issued | — | — | ||||||||||||||
Paid-in capital | 526,253 | 339,161 | 529,523 | 339,161 | ||||||||||||
Treasury stock, 12,827,300 and 12,783,512 shares as of August 2, 2020 and February 2, 2020, respectively | (595,728 | ) | (595,041 | ) | ||||||||||||
Treasury stock, 12,841,701 and 12,783,512 shares as of November 1, 2020 and February 2, 2020, respectively | (595,957 | ) | (595,041 | ) | ||||||||||||
Accumulated other comprehensive loss | (12,077 | ) | (8,369 | ) | (10,673 | ) | (8,369 | ) | ||||||||
Retained earnings | 331,319 | 433,465 | 283,276 | 433,465 | ||||||||||||
Total stockholders’ equity | 250,371 | 169,650 | 206,774 | 169,650 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 2,619,967 | $ | 2,370,139 | $ | 2,385,061 | $ | 2,370,139 | ||||||||
Thirteen Weeks | Thirteen Weeks | |||||||||||||||
Ended | Ended | |||||||||||||||
August 2, 2020 | August 4, 2019 | Thirteen Weeks Ended November 1, 2020 | Thirteen Weeks Ended November 3, 2019 | |||||||||||||
Food and beverage revenues | $ | 17,002 | $ | 137,921 | $ | 38,346 | $ | 124,637 | ||||||||
Amusement and other revenues | 33,831 | 206,678 | 70,706 | 174,715 | ||||||||||||
Total revenues | 50,833 | 344,599 | 109,052 | 299,352 | ||||||||||||
Cost of food and beverage | 4,659 | 36,934 | 10,664 | 33,384 | ||||||||||||
Cost of amusement and other | 4,025 | 22,689 | 7,244 | 18,796 | ||||||||||||
Total cost of products | 8,684 | 59,623 | 17,908 | 52,180 | ||||||||||||
Operating payroll and benefits | 13,756 | 80,927 | 27,704 | 76,165 | ||||||||||||
Other store operating expenses | 62,682 | 104,376 | 70,783 | 110,713 | ||||||||||||
General and administrative expenses | 9,278 | 15,991 | 11,746 | 16,210 | ||||||||||||
Depreciation and amortization expense | 35,160 | 32,745 | 34,384 | 33,340 | ||||||||||||
Pre-opening costs | 2,388 | 4,723 | 2,570 | 4,245 | ||||||||||||
Total operating costs | 131,948 | 298,385 | 165,095 | 292,853 | ||||||||||||
Operating income (loss) | (81,115 | ) | 46,214 | (56,043 | ) | 6,499 | ||||||||||
Interest expense, net | 8,163 | 4,605 | 8,213 | 6,110 | ||||||||||||
Loss on debt refinance | 904 | — | ||||||||||||||
Income (loss) before provision (benefit) for income taxes | (89,278 | ) | 41,609 | |||||||||||||
Provision (benefit) for income taxes | (30,676 | ) | 9,253 | |||||||||||||
Income (loss) before benefit for income taxes | (65,160 | ) | 389 | |||||||||||||
Benefit for income taxes | (17,117 | ) | (93 | ) | ||||||||||||
Net income (loss) | (58,602 | ) | 32,356 | (48,043 | ) | 482 | ||||||||||
Unrealized foreign currency translation gain | 304 | 134 | 34 | 59 | ||||||||||||
Unrealized gain (loss) on derivatives, net of tax | 1,372 | (3,373 | ) | 1,370 | (1,568 | ) | ||||||||||
Total other comprehensive income ( loss) | 1,676 | (3,239 | ) | |||||||||||||
Total other comprehensive income (loss) | 1,404 | (1,509 | ) | |||||||||||||
Total comprehensive income (loss) | $ | (56,926 | ) | $ | 29,117 | |||||||||||
Total comprehensive loss | $ | (46,639 | ) | $ | (1,027 | ) | ||||||||||
Net income (loss) per share: | ||||||||||||||||
Basic | $ | (1.24 | ) | $ | 0.91 | $ | (1.01 | ) | $ | 0.02 | ||||||
Diluted | $ | (1.24 | ) | $ | 0.90 | $ | (1.01 | ) | $ | 0.02 | ||||||
Weighted average shares used in per share calculations: | ||||||||||||||||
Basic | 47,111,763 | 35,407,965 | 47,613,741 | 30,980,878 | ||||||||||||
Diluted | 47,111,763 | 36,015,710 | 47,613,741 | 31,515,454 |
Thirty-Nine Weeks Ended November 1, 2020 | Thirty-Nine Weeks Ended November 3, 2019 | |||||||
Food and beverage revenues | $ | 119,268 | $ | 410,779 | ||||
Amusement and other revenues | 200,423 | 596,754 | ||||||
Total revenues | 319,691 | 1,007,533 | ||||||
Cost of food and beverage | 32,667 | 109,072 | ||||||
Cost of amusement and other | 21,997 | 64,456 | ||||||
Total cost of products | 54,664 | 173,528 | ||||||
Operating payroll and benefits | 85,197 | 239,965 | ||||||
Other store operating expenses | 229,137 | 321,334 | ||||||
General and administrative expenses | 35,587 | 49,047 | ||||||
Depreciation and amortization expense | 104,896 | 97,226 | ||||||
Pre-opening costs | 8,781 | 15,970 | ||||||
Total operating costs | 518,262 | 897,070 | ||||||
Operating income (loss) | (198,571 | ) | 110,463 | |||||
Interest expense, net | 22,491 | 14,771 | ||||||
Loss on debt refinance | 904 | — | ||||||
Income (loss) before provision (benefit) for income taxes | (221,966 | ) | 95,692 | |||||
Provision (benefit) for income taxes | (71,777 | ) | 20,411 | |||||
Net income (loss) | (150,189 | ) | 75,281 | |||||
Unrealized foreign currency translation gain (loss) | (97 | ) | 2 | |||||
Unrealized loss on derivatives, net of tax | (2,207 | ) | (7,475 | ) | ||||
Total other comprehensive loss | (2,304 | ) | (7,473 | ) | ||||
Total comprehensive income (loss) | $ | (152,493 | ) | $ | 67,808 | |||
Net income (loss) per share: | ||||||||
Basic | $ | (3.56 | ) | $ | 2.19 | |||
Diluted | $ | (3.56 | ) | $ | 2.15 | |||
Weighted average shares used in per share calculations: | ||||||||
Basic | 42,185,163 | 34,405,503 | ||||||
Diluted | 42,185,163 | 35,042,311 |
Twenty-Six Weeks | Twenty-Six Weeks | |||||||
Ended | Ended | |||||||
August 2, 2020 | August 4, 2019 | |||||||
Food and beverage revenues | $ | 80,922 | $ | 286,142 | ||||
Amusement and other revenues | 129,717 | 422,039 | ||||||
Total revenues | 210,639 | 708,181 | ||||||
Cost of food and beverage | 22,003 | 75,688 | ||||||
Cost of amusement and other | 14,753 | 45,660 | ||||||
Total cost of products | 36,756 | 121,348 | ||||||
Operating payroll and benefits | 57,493 | 163,800 | ||||||
Other store operating expenses | 158,354 | 210,621 | ||||||
General and administrative expenses | 23,841 | 32,837 | ||||||
Depreciation and amortization expense | 70,512 | 63,886 | ||||||
Pre-opening costs | 6,211 | 11,725 | ||||||
Total operating costs | 353,167 | 604,217 | ||||||
Operating income (loss) | (142,528 | ) | 103,964 | |||||
Interest expense, net | 14,278 | 8,661 | ||||||
Income (loss) before provision (benefit) for income taxes | (156,806 | ) | 95,303 | |||||
Provision (benefit) for income taxes | (54,660 | ) | 20,504 | |||||
Net income (loss) | (102,146 | ) | 74,799 | |||||
Unrealized foreign currency translation loss | (131 | ) | (57 | ) | ||||
Unrealized loss on derivatives, net of tax | (3,577 | ) | (5,907 | ) | ||||
Total other comprehensive loss | (3,708 | ) | (5,964 | ) | ||||
Total comprehensive income (loss) | $ | (105,854 | ) | $ | 68,835 | |||
Net income (loss) per share: | ||||||||
Basic | $ | (2.59 | ) | $ | 2.07 | |||
Diluted | $ | (2.59 | ) | $ | 2.03 | |||
Weighted average shares used in per share calculations: | ||||||||
Basic | 39,470,874 | 36,117,815 | ||||||
Diluted | 39,470,874 | 36,803,001 |
Thirteen Weeks Ended August 2, 2020 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance May 3, 2020 | 49,578,351 | $ | 496 | $ | 411,048 | 12,786,624 | $ | (595,077 | ) | $ | (13,753 | ) | $ | 389,921 | $ | 192,635 | ||||||||||||||||
Net loss | — | — | — | — | — | — | (58,602 | ) | (58,602 | ) | ||||||||||||||||||||||
Unrealized foreign currency translation gain | — | — | — | — | — | 304 | — | 304 | ||||||||||||||||||||||||
Unrealized gain on derivatives, net of tax | — | — | — | — | — | 1,372 | — | 1,372 | ||||||||||||||||||||||||
Share-based compensation | — | — | 2,734 | — | — | — | — | 2,734 | ||||||||||||||||||||||||
Issuance of common stock | 10,843,861 | 108 | 112,471 | — | — | — | — | 112,579 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 40,676 | (651 | ) | — | — | (651 | ) | ||||||||||||||||||||||
Balance August 2, 2020 | 60,422,212 | $ | 604 | $ | 526,253 | 12,827,300 | $ | (595,728 | ) | $ | (12,077 | ) | $ | 331,319 | $ | 250,371 | ||||||||||||||||
Thirteen Weeks Ended November 1, 2020 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance August 2, 2020 | 60,422,212 | $ | 604 | $ | 526,253 | 12,827,300 | $ | (595,728 | ) | $ | (12,077 | ) | $ | 331,319 | $ | 250,371 | ||||||||||||||||
Net loss | — | — | — | — | — | — | (48,043 | ) | (48,043 | ) | ||||||||||||||||||||||
Unrealized foreign currency translation gain | — | — | — | — | — | 34 | — | 34 | ||||||||||||||||||||||||
Unrealized gain on derivatives, net of tax | — | — | — | — | — | 1,370 | — | 1,370 | ||||||||||||||||||||||||
Share-based compensation | — | — | 2,999 | — | — | — | — | 2,999 | ||||||||||||||||||||||||
Issuance of common stock | 61,518 | 1 | 271 | — | — | — | — | 272 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 14,401 | (229 | ) | — | — | (229 | ) | ||||||||||||||||||||||
Balance November 1, 2020 | 60,483,730 | $ | 605 | $ | 529,523 | 12,841,701 | $ | (595,957 | ) | $ | (10,673 | ) | $ | 283,276 | $ | 206,774 | ||||||||||||||||
Thirteen Weeks Ended November 3, 2019 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
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 on 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 August 4, 2019 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance May 5, 2019 | 43,323,049 | $ | 433 | $ | 333,515 | 6,958,291 | $ | (361,186 | ) | $ | (3,408 | ) | $ | 390,771 | $ | 360,125 | ||||||||||||||||
Net income | — | — | — | — | — | — | 32,356 | 32,356 | ||||||||||||||||||||||||
Unrealized foreign currency translation gain | — | — | — | — | — | 134 | — | 134 | ||||||||||||||||||||||||
Unrealized loss on derivatives, net of tax | — | — | — | — | — | (3,373 | ) | — | (3,373 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 1,907 | — | — | — | — | 1,907 | ||||||||||||||||||||||||
Issuance of common stock | 14,076 | — | 177 | — | — | — | — | 177 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | 3,400,000 | (136,676 | ) | — | — | (136,676 | ) | |||||||||||||||||||||||
Dividends declared ($0.15 per share) | — | — | — | — | — | — | (5,348 | ) | (5,348 | ) | ||||||||||||||||||||||
Balance August 4, 2019 | 43,337,125 | $ | 433 | $ | 335,599 | 10,358,291 | $ | (497,862 | ) | $ | (6,647 | ) | $ | 417,779 | $ | 249,302 | ||||||||||||||||
Twenty-Six Weeks Ended August 2, 2020 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance February 2, 2020 | 43,386,852 | $ | 434 | $ | 339,161 | 12,783,512 | $ | (595,041 | ) | $ | (8,369 | ) | $ | 433,465 | $ | 169,650 | ||||||||||||||||
Net loss | — | — | — | — | — | — | (102,146 | ) | (102,146 | ) | ||||||||||||||||||||||
Unrealized foreign currency translation loss | — | — | — | — | — | (131 | ) | — | (131 | ) | ||||||||||||||||||||||
Unrealized loss on derivatives, net of tax | — | — | — | — | — | (3,577 | ) | — | (3,577 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 2,345 | — | — | — | — | 2,345 | ||||||||||||||||||||||||
Issuance of common stock | 17,035,360 | 170 | 184,747 | — | — | — | — | 184,917 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 43,788 | (687 | ) | — | — | (687 | ) | ||||||||||||||||||||||
Balance August 2, 2020 | 60,422,212 | $ | 604 | $ | 526,253 | 12,827,300 | $ | (595,728 | ) | $ | (12,077 | ) | $ | 331,319 | $ | 250,371 | ||||||||||||||||
Thirty-Nine Weeks Ended November 1, 2020 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
Balance February 2, 2020 | 43,386,852 | $ | 434 | $ | 339,161 | 12,783,512 | $ | (595,041 | ) | $ | (8,369 | ) | $ | 433,465 | $ | 169,650 | ||||||||||||||||
Net loss | — | — | — | — | — | — | (150,189 | ) | (150,189 | ) | ||||||||||||||||||||||
Unrealized foreign currency translation loss | — | — | — | — | — | (97 | ) | — | (97 | ) | ||||||||||||||||||||||
Unrealized loss on derivatives, net of tax | — | — | — | — | — | (2,207 | ) | — | (2,207 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 5,344 | — | — | — | — | 5,344 | ||||||||||||||||||||||||
Issuance of common stock | 17,096,878 | 171 | 185,018 | — | — | — | — | 185,189 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | — | 58,189 | (916 | ) | — | — | (916 | ) | ||||||||||||||||||||||
Balance November 1, 2020 | 60,483,730 | $ | 605 | $ | 529,523 | 12,841,701 | $ | (595,957 | ) | $ | (10,673 | ) | $ | 283,276 | $ | 206,774 | ||||||||||||||||
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. | Shares | Amt. | |||||||||||||||||||||||||||||
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 on 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 | ||||||||||||||||
Twenty-Six Weeks Ended August 4, 2019 | ||||||||||||||||||||||||||||||||
Common Stock | Paid-In Capital | Treasury Stock At Cost | Accumulated Other Comprehensive Loss | Retained Earnings | Total | |||||||||||||||||||||||||||
Shares | Amt. | Shares | Amt. | |||||||||||||||||||||||||||||
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 | — | — | — | — | — | — | 74,799 | 74,799 | ||||||||||||||||||||||||
Unrealized foreign currency translation loss | — | — | — | — | — | (57 | ) | — | (57 | ) | ||||||||||||||||||||||
Unrealized loss on derivatives, net of tax | — | — | — | — | — | (5,907 | ) | — | (5,907 | ) | ||||||||||||||||||||||
Share-based compensation | — | — | 3,732 | — | — | — | — | 3,732 | ||||||||||||||||||||||||
Issuance of common stock | 159,649 | 1 | 612 | — | — | — | — | 613 | ||||||||||||||||||||||||
Repurchase of common stock | — | — | 4,702,900 | (200,733 | ) | — | — | (200,733 | ) | |||||||||||||||||||||||
Dividends declared ($0.30 per share) | — | — | — | — | — | — | (10,837 | ) | (10,837 | ) | ||||||||||||||||||||||
Balance August 4, 2019 | 43,337,125 | $ | 433 | $ | 335,599 | 10,358,291 | $ | (497,862 | ) | $ | (6,647 | ) | $ | 417,779 | $ | 249,302 | ||||||||||||||||
Twenty-Six Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||||
August 2, 2020 | August 4, 2019 | November 1, | November 3, | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | (102,146 | ) | $ | 74,799 | $ | (150,189 | ) | $ | 75,281 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization expense | 70,512 | 63,886 | 104,896 | 97,226 | ||||||||||||
Non-cash interest expense | 2,201 | — | 4,088 | 0 | ||||||||||||
Impairment of long-lived assets | 13,727 | — | 13,727 | 0 | ||||||||||||
Deferred taxes | (31,609 | ) | 4,659 | (17,730 | ) | 5,309 | ||||||||||
Loss on disposal of fixed assets | 417 | 826 | 541 | 1,284 | ||||||||||||
Loss on debt refinance | 904 | 0 | ||||||||||||||
Share-based compensation | 2,345 | 3,732 | 5,344 | 5,479 | ||||||||||||
Other, net | 173 | 376 | 1,292 | 928 | ||||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Inventories | 3,288 | (94 | ) | 7,745 | (5,305 | ) | ||||||||||
Prepaid expenses | 2,089 | (4,811 | ) | 2,761 | (615 | ) | ||||||||||
Income tax receivable | (21,474 | ) | 311 | (42,243 | ) | (996 | ) | |||||||||
Other current assets | 2,311 | (444 | ) | 2,580 | 6,050 | |||||||||||
Other assets and deferred charges | 107 | (1,163 | ) | (3 | ) | (1,775 | ) | |||||||||
Accounts payable | 6,646 | (428 | ) | (11,945 | ) | 5,422 | ||||||||||
Accrued liabilities | 37,522 | 22,057 | 44,742 | 37,671 | ||||||||||||
Income taxes payable | (2,430 | ) | (7,362 | ) | (2,639 | ) | (10,079 | ) | ||||||||
Other liabilities | 2,817 | 346 | 4,375 | 1,909 | ||||||||||||
Net cash provided by (us operating activitiese d in) | (13,504 | ) | 156,690 | |||||||||||||
Net cash provided by (used in) operating activities | (31,754 | ) | 217,789 | |||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Capital expenditures | (63,486 | ) | (117,875 | ) | (72,604 | ) | (172,888 | ) | ||||||||
Proceeds from sales of property and equipment | 152 | 375 | 234 | 615 | ||||||||||||
Net cash used in investing activities | (63,334 | ) | (117,500 | ) | (72,370 | ) | (172,273 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from debt | 138,000 | 233,000 | 688,000 | 366,000 | ||||||||||||
Payments of debt | (38,500 | ) | (59,500 | ) | (760,250 | ) | (104,250 | ) | ||||||||
Net proceeds from the issuance of common stock | 182,207 | — | 182,207 | 0 | ||||||||||||
Proceeds from the exercise of stock options | 359 | 613 | 465 | 778 | ||||||||||||
Repurchase of common stock under share repurchase program | — | (200,147 | ) | 0 | (297,317 | ) | ||||||||||
Dividends paid | (4,891 | ) | (10,837 | ) | (4,891 | ) | (10,837 | ) | ||||||||
Debt issuance costs | (16,805 | ) | 0 | |||||||||||||
Repurchases of common stock to satisfy employee withholding tax obligations | (687 | ) | (586 | ) | (916 | ) | (595 | ) | ||||||||
Net cash provided by (used in) financing activities | 276,488 | (37,457 | ) | 87,810 | (46,221 | ) | ||||||||||
Increase in cash and cash equivalents | 199,650 | 1,733 | ||||||||||||||
Decrease in cash and cash equivalents | (16,314 | ) | (705 | ) | ||||||||||||
Beginning cash and cash equivalents | 24,655 | 21,585 | 24,655 | 21,585 | ||||||||||||
Ending cash and cash equivalents | $ | 224,305 | $ | 23,318 | $ | 8,341 | $ | 20,880 | ||||||||
Supplemental disclosures of cash flow information: | ||||||||||||||||
Decrease in fixed asset accounts payable | $ | (12,466 | ) | $ | (6,101 | ) | $ | (12,315 | ) | $ | (311 | ) | ||||
Cash paid for income taxes, net | $ | 752 | $ | 22,850 | ||||||||||||
Cash paid (refund received) for income taxes, net | $ | (9,281 | ) | $ | 26,086 | |||||||||||
Cash paid for interest, net | $ | 11,295 | $ | 8,050 | $ | 17,306 | $ | 13,920 | ||||||||
Dividend declared, not paid | $ | 0 | $ | 4,887 |
Fair Value | ||||||||||||
Balance Sheet Location | August 2, 2020 | February 2, 2020 | ||||||||||
Interest rate swaps | Accrued liabilities | $ | (8,215 | ) | $ | (3,518 | ) | |||||
Interest rate swaps | Other liabilities | (8,724 | ) | (6,967 | ) | |||||||
Total derivatives (1) | $ | (16,939 | ) | $ | (10,485 | ) | ||||||
Fair Value | ||||||||||||
Balance Sheet Location | November 1, 2020 | February 2, 2020 | ||||||||||
Interest rate swaps | Accrued liabilities | $ | (8,191 | ) | $ | (3,518 | ) | |||||
Interest rate swaps | Other liabilities | (6,479 | ) | (6,967 | ) | |||||||
Total derivatives (1) | $ | (14,670 | ) | $ | (10,485 | ) | ||||||
(1) | The balance at |
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
August 2, 2020 | August 4, 2019 | August 2, 2020 | August 4, 2019 | |||||||||||||
Amount of loss recorded in accumulated other comprehensive income | $ | — | 4,668 | $ | 7,602 | 8,140 | ||||||||||
Amount of loss reclassified into income (1) | $ | (1,887 | ) | (27 | ) | $ | (2,680 | ) | (12 | ) | ||||||
Income tax expense (benefit) in accumulated other comprehensive income | $ | 515 | (1,268 | ) | $ | (1,345 | ) | (2,221 | ) |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 1, 2020 | November 3, 2019 | November 1, 2020 | November 3, 2019 | |||||||||||||
Amount of loss recorded in accumulated other comprehensive income | $ | 0 | 2,483 | $ | 7,602 | 10,623 | ||||||||||
Amount of loss reclassified into income (1) | $ | (1,886 | ) | (326 | ) | $ | (4,566 | ) | (338 | ) | ||||||
Income tax expense (benefit) in accumulated other comprehensive income | $ | 516 | (589 | ) | $ | (829 | ) | (2,810 | ) |
(1) | Amounts reclassified into income are included in “Interest expense, net” in the Consolidated Statements of Comprehensive Income (Loss). |
August 2, 2020 | February 2, 2020 | |||||||
Deferred amusement revenue | $ | 78,159 | $ | 75,113 | ||||
Current portion of operating lease liabilities, net (1) | 52,636 | 45,611 | ||||||
Rent payable (note 4) | 31,589 | — | ||||||
Variable rent liabilities (note 4) | 9,037 | 1,331 | ||||||
Deferred gift card revenue | 10,832 | 11,253 | ||||||
Property taxes | 9,936 | 7,226 | ||||||
Compensation and benefits | 8,664 | 23,421 | ||||||
Current portion of derivatives | 8,215 | 3,518 | ||||||
Current portion of long-term insurance | 6,200 | 6,500 | ||||||
Utilities | 4,219 | 4,442 | ||||||
Customer deposits | 1,840 | 4,324 | ||||||
Inventory liabilities | 1,737 | 2,179 | ||||||
Sales and use taxes | 973 | 4,000 | ||||||
Dividend payable | — | 4,891 | ||||||
Other | 14,614 | 13,643 | ||||||
Total accrued liabilities | $ | 238,651 | $ | 207,452 | ||||
November 1, 2020 | February 2, 2020 | |||||||
Deferred amusement revenue | $ | 79,210 | $ | 75,113 | ||||
Current portion of operating lease liabilities, net (1) | 51,850 | 45,611 | ||||||
Rent payable ( Note 4) | 40,542 | — | ||||||
Variable rent liabilities ( Note 4) | 7,559 | 1,331 | ||||||
Deferred gift card revenue | 10,330 | 11,253 | ||||||
Property taxes | 10,285 | 7,226 | ||||||
Compensation and benefits | 9,914 | 23,421 | ||||||
Current portion of derivatives | 8,191 | 3,518 | ||||||
Current portion of long-term insurance | 5,100 | 6,500 | ||||||
Utilities | 4,111 | 4,442 | ||||||
Customer deposits | 1,594 | 4,324 | ||||||
Inventory liabilities | 1,948 | 2,179 | ||||||
Sales and use taxes | 1,160 | 4,000 | ||||||
Dividend payable | — | 4,891 | ||||||
Other | 12,369 | 13,643 | ||||||
Total accrued liabilities | $ | 244,163 | $ | 207,452 | ||||
(1) | The balance of leasehold incentive receivables of |
August 2, 2020 | February 2, 2020 | |||||||
Credit facility — term | $ | 258,750 | $ | 266,250 | ||||
Credit facility — revolver | 489,000 | 382,000 | ||||||
Total debt outstanding | 747,750 | 648,250 | ||||||
Current installments — term | (15,000 | ) | (15,000 | ) | ||||
Debt issuance costs — term | (1,104 | ) | (561 | ) | ||||
Long-term debt, net | $ | 731,646 | $ | 632,689 | ||||
November 1, 2020 | February 2, 2020 | |||||||
Senior Secured Notes | $ | 550,000 | $ | — | ||||
Credit facility - term | — | 266,250 | ||||||
Credit facility - revolver | 26,000 | 382,000 | ||||||
Total debt outstanding | 576,000 | 648,250 | ||||||
Current installments | — | (15,000 | ) | |||||
Debt issuance costs | (14,185 | ) | (561 | ) | ||||
Long-term debt, net | $ | 561,815 | $ | 632,689 | ||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
August 2, 2020 | August 4, 2019 | August 2, 2020 | August 4, 2019 | |||||||||||||
Interest expense on credit facilities | $ | 5,865 | 4,708 | $ | 11,163 | 8,903 | ||||||||||
Interest associated with swap agreements | 1,887 | 27 | 2,680 | 12 | ||||||||||||
Amortization of issuance cost | 411 | 198 | 654 | 396 | ||||||||||||
Interest income | 0 | (25 | ) | (22 | ) | (51 | ) | |||||||||
Capitalized interest | 0 | (303 | ) | (197 | ) | (599 | ) | |||||||||
Total interest expense, net | $ | 8,163 | $ | 4,605 | $ | 14,278 | $ | 8,661 |
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 1, 2020 | November 3, 2019 | November 1, 2020 | November 3, 2019 | |||||||||||||
Interest expense on debt | $ | 6,092 | 5,769 | $ | 17,255 | 14,672 | ||||||||||
Interest associated with swap agreements | 1,886 | 326 | 4,566 | 338 | ||||||||||||
Amortization of issuance cost | 427 | 198 | 1,081 | 594 | ||||||||||||
Interest income | — | (24 | ) | (22 | ) | (75 | ) | |||||||||
Capitalized interest | (192 | ) | (159 | ) | (389 | ) | (758 | ) | ||||||||
Total interest expense, net | $ | 8,213 | $ | 6,110 | $ | 22,491 | $ | 14,771 | ||||||||
Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||
August 2, 2020 | August 4, 2019 | August 2, 2020 | August 4, 2019 | |||||||||||||
Operating lease cost | $ | 33,321 | 30,448 | $ | 66,884 | 60,240 | ||||||||||
Variable lease cost | 5,688 | 6,713 | 13,054 | 14,643 | ||||||||||||
Short-term lease cost | 140 | 116 | 227 | 217 | ||||||||||||
Total | $ | 39,149 | $ | 37,277 | $ | 80,165 | $ | 75,100 | ||||||||
Thirteen Weeks Ended | Thirty-Nine Weeks Ended | |||||||||||||||
November 1, 2020 | November 3, 2019 | November 1, 2020 | November 3, 2019 | |||||||||||||
Operating lease cost | $ | 33,278 | 31,489 | $ | 100,162 | 91,729 | ||||||||||
Variable lease cost | 5,351 | 7,692 | 18,405 | 22,335 | ||||||||||||
Short-term lease cost | 102 | 108 | 329 | 324 | ||||||||||||
Total | $ | 38,731 | $ | 39,289 | $ | 118,896 | $ | 114,388 | ||||||||
Thirteen Weeks Ended November 1, 2020 | Thirteen Weeks Ended November 3, 2019 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | (48,043 | ) | $ | 482 | |||
Denominator: | ||||||||
Weighted average number of common shares outstanding (basic) | 47,613,741 | 30,980,878 | ||||||
Weighted average dilutive impact of equity-based awards (1) | — | 534,576 | ||||||
Weighted average number of common and common equivalent shares outstanding (diluted) | 47,613,741 | 31,515,454 | ||||||
Net income (loss) per share: | ||||||||
Basic | $ | (1.01 | ) | $ | 0.02 | |||
Diluted | $ | (1.01 | ) | $ | 0.02 | |||
Thirty-Nine Weeks Ended November 1, 2020 | Thirty-Nine Weeks Ended November 3, 2019 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | (150,189 | ) | $ | 75,281 | |||
Denominator: | ||||||||
Weighted average number of common shares outstanding (basic) | 42,185,163 | 34,405,503 | ||||||
Weighted average dilutive impact of equity-based awards (1) | — | 636,808 | ||||||
Weighted average number of common and common equivalent shares outstanding (diluted) | 42,185,163 | 35,042,311 | ||||||
Net income (loss) per share: | ||||||||
Basic | $ | (3.56 | ) | $ | 2.19 | |||
Diluted | $ | (3.56 | ) | $ | 2.15 |
Thirteen Weeks | Thirteen Weeks | |||||||
Ended | Ended | |||||||
August 2, 2020 | August 4, 2019 | |||||||
Numerator: | ||||||||
Net income (loss) | $ | (58,602 | ) | $ | 32,356 | |||
Denominator: | ||||||||
Weighted average number of common shares | 47,111,763 | 35,407,965 | ||||||
Weighted average dilutive impact of equity-based | — | 607,745 | ||||||
Weighted average number of common and common | 47,111,763 | 36,015,710 | ||||||
Net income (loss) per share: | ||||||||
Basic | $ | (1.24 | ) | $ | 0.91 | |||
Diluted | $ | (1.24 | ) | $ | 0.90 |
(1) |
Note 7: Share-Based Compensation Compensation expense related to stock options “ General and administrative expenses ” in the Consolidated Statements of Comprehensive Income (Loss) and is as follows:
16 Transactions related to stock option awards during the thirty-nine weeks ended were as follows:
The total intrinsic value of options exercised during the thirty-nine weeks ended was $869 as of and will be expensed over a weighted average period of 1.2 years. Transactions related to thirty-nine weeks ended
Fair value of our During the Note 8: Income Taxes On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, addressing the carryback of net operating losses for specific periods, temporary modifications to the limitations placed on the tax deductibility of net interest expenses, and technical amendments for qualified improvementproperty. Additionally, the The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annualized effective tax rate for the full fiscal year to “ordinary” income or loss for the reporting period. Due to the uncertainty created by the events surrounding the COVID-19 pandemic, the actual effective tax rate for the year to date period was used to calculate the income tax benefit for theof %, compared to an expense of 21.3% for the approximately %. As of November 1, 2020, the Company has recognized a current benefit of $34,090 related to estimated fiscal year 2019 and 2020 tax net operating losses that will be carried back to recover taxes paid in prior periods. The estimated tax benefit from the net operating losses is included in “Income taxes receivable” in the Consolidated Balance Sheets. 17
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 April 3, 2020. 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 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 April 3, 2020. 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 Form10-Q, those results or developments may not be indicative of results or developments in subsequent periods.Recent Developments On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic and on March 13, 2020, the United States declared a National Public Health Emergency. As a result, several state and local mandates were implemented that encouraged the practice of social distancing, placed restrictions from individuals gathering in groups and, in many areas, placed complete restrictions onnon-essential movement outside of the home. Shortly after the national emergency declaration, state and local officials began placing restrictions on To-Go or curbside service only while others limited capacity in the dining room or midway. By March 20, 2020, all of our 137 operating stores were temporarily re-opened to the public with limited food and beverage offerings and two additional stores offeredoff-premise dining options. During our second re-opened limited operations in an additional re-opened during the second quarter werere-closed during the third quarter (one of whichre-opened on November 14, 2020). As of November 1, 2020, 104 of our 137 stores were open, in limited capacity, in 36 states, Puerto Rico and Canada. 15-item menu, reduced dining capacity and suspended use of some games in our midway for social distancing, reduced operating hours and reduced staffing levels designed to be responsive to restrictions imposed by various jurisdictions related toCOVID-19 re-openings. As of November 1, 2020, 33 of the Company’s stores were closed to in-person guests as a result of localCOVID-19 restrictions (31 of which have been closed since March 20, 2020). Subsequent to the re-opening plans in light of As a result of these developments, the Company is experiencing a significant decrease in traffic which has impacted the Company’s operating results during the thirteen and re-open at full capacity. We cannot predict how long the pandemic will last or when the state and local restrictions will be lifted or potentiallyre-imposed. In addition, we cannot predict how quickly our guests will return to our In response to the ongoing pandemic, the Company and its Board of Directors implemented the following measures to enhance financial flexibility: reduced expenses broadly, including by furloughing all of our hourly store team members and approximately 94% of store management personnel, on or about March 19, 2020, while enacting 12-week salary reductions for remaining18
canceled or delayed all non-essential planned capital spending for the remainder of fiscal 2020;halted or delayed planned store openings after our one store opening in Chattanooga, TN, on March 16, 2020, stopped work on future planned sites and commenced negotiations to terminate related contracts, as applicable; suspended our share repurchase program and declaration of dividends; negotiated amendments to our credit facility resulting in an extension of the maturity date of our revolving credit facility to August 17, 2024; sold shares of our common stock, which generated gross proceeds of approximately $185,600; and negotiated with our landlords, vendors, and other business partners to temporarily reduce our lease and contract payments and obtain other concessions. As of The re-opening process has been a gradual one with the safety of our employees and guests as our top priority. All of ourre-opened stores are operating with streamlined menus, reduced games, new seating and game configurations, reduced operating hours, and reduced staff levels. As dining room and midway restrictions continue to ease and sales begin to improve, some labor inefficiencies and increased cleaning and supply costs are anticipated as stores adjust to improved sales volumes and enhanced health and safety protocols. On an ongoing basis, we will also continue to pursue long-term operating efficiencies and fixed cost restructuring opportunities.Given the level of volatility and uncertainty surrounding the future impact of the pandemic, we have not provided a full year financial outlook for fiscal 2020. 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 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 brand appeals to a relatively balanced mix of male and female adults, as well as families and teenagers, in low to middle-income households.Our stores average Key Measures of Our Performance We monitor and analyze several key performance measures to manage our business and evaluate financial and operating performance. These measures include: Comparable store sales. 19 New store openings. Non-GAAP Financial MeasuresIn addition to the results provided in accordance with generally accepted accounting principles (“GAAP”), we provide non-GAAP measures which present operating results on an adjusted basis. These are supplemental measures of performance that are not required by or presented in accordance with GAAP and include Adjusted EBITDA, Adjusted EBITDA Margin, Store Operating Income Before Depreciation and Amortization and Store Operating Income Before Depreciation and Amortization Margin (definedbelow). These non-GAAP measures do not represent and should not be considered as an alternative to net income or cash flows from operations, as determined in accordance with GAAP, and our calculations thereof may not be comparable to similarly entitled measures reported by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Although we use thesenon-GAAP measures to assess the operating performance of our business, they have significant limitations as an analytical tool because they exclude certain material costs. For example, Adjusted EBITDA does not take into account a number of significant items, including our interest expense and depreciation and amortization expense. In addition, Adjusted EBITDA excludespre-opening and other costs which may be important in analyzing our GAAP results. Because Adjusted EBITDA does not account for these expenses, its utility as a measure of our operating performance has material limitations. Our calculations of Adjusted EBITDA adjust for these amounts because they vary from period to period and do not directly relate to the ongoing operations of the currently underlying business of our stores and therefore complicate comparison of underlying business between periods. Nevertheless, because of the limitations described above, management does not view Adjusted EBITDA or Store Operating Income Before Depreciation and Amortization in isolation and also uses other measures, such as revenues, gross margin, operating income and net income, to measure operating performance.Adjusted EBITDA and Adjusted EBITDA Margin pre-opening costs, currency transaction (gains) losses and other costs. “Adjusted EBITDA Margin” is defined as Adjusted EBITDA divided by total revenues.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. 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 andpre-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 fiscal year that ends on the Sunday after the Saturday closest to January 31. Each quarterly period has 13 weeks, except in a53-week year when the fourth quarter has 14 weeks. All references to the 13-week period ended 13-week period ended 20 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 stores historically open with sales volumes in excess of their expected long-term run-rate levels, which we refer to as a “honeymoon” effect. We traditionally 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 may 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 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.Our operating results fluctuate significantly due to seasonal factors. Typically, we have higher revenues associated with spring and year-end holidays which will continue to be susceptible to the impact of severe or unseasonably mild weather on customer traffic and sales during that period. Our third quarter, which encompasses theback-to-school We expect that economic and environmental conditions and changes in 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 might be partially offset by selected menu price increases if competitively appropriate. In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of the COVID-19 pandemic on us or our suppliers, third-party service providers, and/or customers.21 Thirteen Weeks Ended 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 (loss).
Reconciliations of Non-GAAP Financial MeasuresAdjusted EBITDA The following table reconciles (in dollars and as a percent of total revenues) Net income (loss) to Adjusted EBITDA for the periods indicated:
Store Operating Income Before Depreciation and Amortization The following table reconciles (in dollars and as a percent of total revenues) Operating income (loss) to Store Operating Income Before Depreciation and Amortization for the periods indicated:
Capital Additions The table below reflects accrual-based capital additions. Capital additions do not include any reductions for accrual-based leasehold improvement incentives or proceeds from sale-leaseback transactions (collectively, “Payments from landlords”).
Results of Operations Revenues In response to the COVID-19 outbreak, which was declared a global pandemic on March 11, 2020 and a National Public Health Emergency in the United States on March 13, the Company . On April 30, 2020, re-opened the first store to the public, During the third quarter of fiscal year 2020, the Company re-opened an additional 20 stores and one new store in Manchester, New Hampshire and one new store in Lehigh Valley, Pennsylvania. Two stores thatre-opened during the second quarter werere-closed during the third quarter.As of November 1, 2020, 104 of our 137 stores were open. Of these 104 open stores, 84 are comparable stores. These stores are operating with limited menus, reduced dining room seating, reduced games in the midway, reduced operating hours and other restrictions referred to as “limited operations”. Selected revenue and store data for the periods indicated are as follows:
Total revenues decreased COVID-19 pandemic. For the thirteen weeks ended Comparable store revenue decreased re-opened with limited operations. During the re-opening was impacted by changes in local operating restrictions and consumer reactions to changes in localCOVID-19 infection rates.Food sales at comparable stores decreased by COVID-19 pandemic driven reduction in operating hours and product offerings contributed to a shift in our comparable store revenue mix away from food and beverage revenues to amusements and other revenues of approximately Non-comparable store revenue decreased Cost of products The total cost of products was Cost of food and beverage products decreased to Cost of amusement and other decreased to Operating payroll and benefits Total operating payroll and benefits decreased by re-opened and at reduced staffing levels. The total cost of operating payroll and benefits as a percentage of total revenues Other store operating expenses Other store operating expenses decreased by General and administrative expenses General and administrative expenses decreased by Depreciation and amortization expense Depreciation and amortization expense increased by Pre-opening costsPre-opening costs decreased by pre-opening costs being primarily limited topre-opening rent expense after the disruption of our business as a result of theCOVID-19 pandemic.Interest expense, net & Loss on debt refinance Interest expense, net increased by Provision (benefit) for income taxes The effective tax rate for the thirteen weeks ended 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 (loss).
Reconciliations of Non-GAAP Financial MeasuresAdjusted EBITDA The following table reconciles (in dollars and as a percent of total revenues) Net income (loss) to Adjusted EBITDA for the periods indicated:
Store Operating Income Before Depreciation and Amortization The following table reconciles (in dollars and as a percent of total revenues) Operating income (loss) to Store Operating Income Before Depreciation and Amortization for the periods indicated:
Capital Additions The table below reflects accrual-based capital additions. Capital additions do not include any reductions for Payments from landlords.
Results of Operations Revenues Selected revenue and store data for the periods indicated are as follows:
Total revenues decreased COVID-19 pandemic. For theComparable store revenue decreased re-opened with limited operations. As of March 20, 2020, all the Company’s COVID-19 pandemic. Beginning April 30, 2020, we beganre-opening our stores based on changes in operating restrictions in the various jurisdictions. As of re-opened under limited operating conditions. Our individual comparable stores generally experienced gradual increases in weekly sales performance as operating weeks increased. Individual store performance afterre-opening was impacted by changes in local operating restrictions and consumer reactions to changes in localCOVID-19 infection rates.Comparable walk-in revenues, which accounted for Food sales at comparable stores decreased by Non-comparable store revenue decreased non-comparable stores contributed an additional $9,668 of revenue and 54 additional operating weeks over the same period of fiscal 2019. During the remainder of the non-comparable store revenue decreased Cost of products The total cost of products was Cost of food and beverage products decreased to Cost of amusement and other decreased to Operating payroll and benefits Total operating payroll and benefits decreased by re-opened and at reduced staffing levels. The total cost of operating payroll and benefits, as a percentage of total revenues, increased Other store operating expenses Other store operating expenses decreased by COVID-19 business disruptions were partially offset by a $13,727 charge for impairment of long-lived assets and a net loss on derivatives of General and administrative expenses General and administrative expenses decreased by Depreciation and amortization expense Depreciation and amortization expense increased by Pre-opening costsPre-opening costs decreased by pre-opening costs being primarily limited topre-opening rent expense after the disruption of our business as a result of theCOVID-19 pandemic.29 Interest expense, net and Loss on debt refinance Interest expense, net increased by In connection with the October 27, 2020 debt refinancing, which is explained in Note 3 of the Unaudited Consolidated Financial Statements, the Company recorded a charge of $904 during the third quarter of fiscal 2020. Provision (benefit) for income taxes The effective tax rate for the Liquidity and Capital Resources In response to the business disruption caused by the COVID-19 pandemic, the Company has taken the following actions to enable it to meet its obligations over the next twelve months:During the first reduced expenses broadly; canceled or delayed all non-essential planned capital spending for the remainder of fiscal 2020 and halted or delayed all planned store openings;suspended our share repurchase program and our dividend; drew down substantially all the remaining credit available under our $500,000 revolving credit facility; negotiated an amendment with our lenders, which included relief from compliance with financial covenants for the first, second and third quarterly periods of fiscal 2020; sold shares of our common stock, which generated gross proceeds of initiated negotiations with our landlords, vendors, and other business partners to temporarily reduce our lease and contract payments and obtain other submitted a proposal, approved by our shareholders, increasing the number of shares available for incentive awards, which enables management to maintain key talent while preserving the Company’s liquidity by minimizing cash In addition, during the third quarter of fiscal 2020, we: continued discussions with our landlords, vendors and other business partners to reduce our lease and contract payments and obtain concessions. As of negotiated a second amendment with our lenders, resulting in an extension of the maturity date of our revolving credit facility and extended relief from compliance with financial covenants until the first quarter of fiscal year 2022; and issued $550,000 of senior secured notes, maturing November 1, 2025. re-opening of our remaining stores and lifting of capacity restrictions and other requirements, 30 Debt and Derivatives Effective April 14, 2020, we amended our existing credit facility, which On October 27, 2020, the Company issued $550,000 aggregate principal amount of 7.625% senior secured notes (the “Notes”). Interest on the Notes accrues from October 27, 2020 and is payable in arrears on November 1 and May 1 of each year, commencing on May 1, 2021. The Notes mature on November 1, 2025, unless earlier redeemed, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued by D&B Inc and are unconditionally guaranteed by D&B Holdings and certain of D&B Inc’s existing and future wholly owned material domestic subsidiaries, which is substantially the same as the guarantors of the Company’s existing credit facility. Concurrent and subject to the issuance of the Notes, the Company entered into a second amendment to its existing credit facility, which included relief from testing compliance with certain financial covenants until the last day of the fiscal quarter ending on May 1, 2022. During the financial covenant suspension period the Company is required to maintain a minimum liquidity (primarily availability under the credit facility) of $150,000. The second amendment The Company used the proceeds of the Notes offering, along with cash on hand, to repay the $255,000 principal balance of the term loan facility, $463,000 of borrowings under the revolving credit facility, and related accrued interest. The Company incurred debt issuance costs of $18,200, which are being amortized over the terms of the respective Notes and revolving credit facility. As of November 1, 2020, approximately $3,300 of these debt costs had not been paid. The Company also recorded a loss of $904 related to the unamortized debt costs associated with the term portion of the credit facility. For the Our credit facility and Notes contain restrictive covenants that, among other things, place certain limitations on our During fiscal 2019, we entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates on our variable rate credit facility. Our swap agreements with our derivative counterparties contain a provision where if the Company defaults on any of its indebtedness and repayment of the indebtedness has been accelerated, the Company could also be declared in default on its derivative obligations. Refer to Note 1 of the Unaudited Consolidated Financial Statements for further discussion of our swap agreements, which were de-designated as hedges effective April 14, 2020, the date of the first amendment to our credit facility.Dividends and Share Repurchases The Company had previously established a share repurchase program, under which the Company may repurchase shares on the open market, through privately negotiated transactions, and through trading plans designed to comply with Rule 10b5-1 of the Exchange Act. At -19 pandemic, share purchases and dividend payments have been indefinitely suspended.Cash Flow Summary At Operating Activities 31 Net cash provided by operating activities decreased re-opened our first store, followed by the progressivere-opening of Investing Activities During the During the Financing Activities Contractual Obligations and Commitments 10-K filed with the SEC on April 3, 2020. The following table sets forth the contractual obligations related to the Company’s debt obligations as of November 1, 2020.
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 Form 10-K filed with the SEC on April 3, 2020.Recent accounting pronouncements Refer to Note 1 to the Unaudited Consolidated Financial Statements for information regarding new accounting pronouncements. 32
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. Additionally, the cost of purchased materials may be influenced by tariffs and other trade regulations which are outside of our 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 one-month LIBOR,one-month LIBOR is below 1.00%.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. A large portion of our hourly employees 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. Several states and local jurisdictions in which we operate have enacted legislation to increase the minimum wage and/or minimum tipped wage rates by varying amounts, with more planned increases in the future. 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.
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 and15d-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 There were no changes in our internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and15d-15(f)) that occurred during our PART II – OTHER INFORMATION
Information regarding legal proceedings is incorporated by reference from Note 5 to our Unaudited Consolidated Financial Statements set forth in Part I of this report.
The Company is supplementing the Risk Factors previously disclosed in Item 1A of the Annual Report on Form 10-K for the fiscal year ended February 2, 2020, (the “Annual Report”). The following risk factor should be read in conjunction with the Risk Factors disclosed in the Annual Report.33 The COVID-19 pandemic has disrupted and is expected to continue to disrupt our business, which could have a material adverse impact on our business, results of operations, liquidity and financial condition for an extended period of time.The recent outbreak of COVID-19, and any other outbreaks of contagious diseases or other adverse public health developments in the United States or worldwide, could have a material adverse effect on our business, results of operations, liquidity and financial condition. In 2020, theCOVID-19 pandemic has significantly impacted the economy in general, and our business specifically, and it will continue to negatively affect our business in a number of ways. These effects could include, but are not limited to:the uncertain and unprecedented impact of the coronavirus and the disease it causes (COVID-19) on our business and operations and the related impact on our liquidity needs;our ability to continue as a going concern; our ability to obtain additional waivers or amendments, and thereafter continue to satisfy covenant requirements (even as they may be amended), under our amended credit agreement and derivative contract payables; our ability to access other funding sources; the duration of government-mandated and voluntary shutdowns, and the impact of ongoing mitigation restrictions on our operations once our stores can re-open; the speed with which our stores safely can be re-opened and the level of customer demand followingre-opening; the economic impact of COVID-19 and related disruptions on the communities we serve; andour overall level of indebtedness. The extent to which the COVID-19 pandemic, or other outbreaks of disease or similar public health threats, materially and adversely impacts our business, results of operations, liquidity and financial condition is highly uncertain and will depend on future developments. Such developments may include the geographic spread and duration of the virus, the severity of the disease and the actions that may be taken by various governmental authorities and other third parties in response to the outbreak. In addition, how quickly, and to what extent, normal economic and operating conditions can resume cannot be predicted, and the resumption of normal business operations may be delayed or constrained by lingering effects of theCOVID-19 pandemic on us or our suppliers, third-party service providers, and/or customers.We face risks related to our substantial indebtedness and limitations on future sources of liquidity. As of November 1, 2020, we had total borrowings of $576,000, which consisted of $550,000 of secured indebtedness represented by our Notes and $26,000 of senior secured borrowings under our revolving credit facility. Our substantial indebtedness could have important consequences to us, including: making it more difficult for us to satisfy our obligations with respect to our debt, and any failure to comply with the obligations under our debt instruments, including restrictive covenants, could result in an event of default under the agreements governing our indebtedness increasing our vulnerability to general economic and industry conditions, including as a result of disruption caused by the global COVID-19 pandemic;requiring a substantial portion of our cash flow from operations to be dedicated to the payment of obligations with respect to our debt, thereby reducing our ability to use our cash flow to fund our operations, lease payments, capital expenditures, selling and marketing efforts, product development, future business opportunities and other purposes; exposing us to the risk of increased interest rates as a substantial portion of our borrowings are at variable rates; restricting us from making strategic acquisitions; limiting our ability to obtain additional financing for working capital, capital expenditures, product development, debt service requirements, acquisitions, and general corporate or other purposes; and limiting our ability to plan for, or adjust to, changing market conditions and placing us at a competitive disadvantage compared to our competitors who may be less highly leveraged. Any of these risks could materially impact our ability to fund our operations or limit our ability to expand our business, which could have a material adverse effect on our business, financial condition and results of operations. Covenants in our debt agreements restrict our business and could limit our ability to implement our business plan. The credit facility and the indenture governing the Notes contain covenants that may restrict our ability to implement our business plan, finance future operations, respond to changing business and economic conditions, secure additional financing, and engage in opportunistic transactions, such as strategic acquisitions. In addition, if we fail to satisfy the covenants contained in the credit facility, our ability to borrow under the revolving credit loans portion of the credit facility may be restricted. The credit facility and the indenture governing the Notes include covenants restricting, among other things, our ability to do the following under certain circumstances: incur or guarantee additional indebtedness or issue certain disqualified or preferred stock; 34 pay dividends or make other distributions on, or redeem or purchase, any equity interests or make other restricted payments; make certain acquisitions or investments; create or incur liens; transfer or sell assets; incur restrictions on the payments of dividends or other distributions from our restricted subsidiaries; alter the business that we conduct; enter into transactions with affiliates; and consummate a merger or consolidation or sell, assign, transfer, lease or otherwise dispose of all or substantially all of our assets. The covenants in the credit facility are generally more restrictive than the covenants in the indenture governing the Notes and 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, other than during the second amendment suspension period, our credit facility requires us to comply with a total leverage ratio that is no greater than the applicable financial covenant level and a fixed charge ratio that is no greater than 1.25:1.00, respectively, which are each tested as of the last day of each fiscal quarter. During the second amendment suspension period, our credit facility requires us to maintain minimum liquidity of $150,000 at all times. Events beyond our control, including the impact of COVID-19, may affect our ability to comply with our covenants, even after the cessation of the second amendment suspension period.If we default under the credit facility or the indenture governing the Notes, because of a covenant breach or otherwise, all outstanding amounts thereunder could become immediately due and payable. We cannot assure you that we will be able to comply with our covenants under the credit facility, or the indenture governing the Notes or that any covenant violations will be waived in the future. Any violation that is not waived could result in an event of default, permitting our lenders to declare outstanding indebtedness and interest thereon due and payable, and permitting the lenders under the revolving credit loans provided under the credit facility to suspend commitments to make any advance, or require any outstanding letters of credit to be collateralized by an interest bearing cash account, any or all of which could have a material adverse effect on our business, financial condition and results of operations. In addition, if we fail to comply with our financial or other covenants under the credit facility or the indenture governing the Notes, we may need additional financing in order to service or extinguish our indebtedness. We may not be able to obtain financing or refinancing on commercially reasonable terms, or at all. We cannot assure you that we would have sufficient funds to repay outstanding amounts under the credit facility or the indenture governing the Notes and any acceleration of amounts due would have a material adverse effect on our liquidity and financial condition. Changes in interest rates could adversely impact the price of our shares, our ability to issue equity or incur debt for acquisitions or other purposes. Interest rates on future borrowings, credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly. In addition, LIBOR and other “benchmark” rates are subject to ongoing national and international regulatory scrutiny and reform. On July 27, 2017, the U.K. Financial Conduct Authority announced that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR rates after 2021 (the “FCA Announcement”). The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has proposed an alternative rate to replace U.S. Dollar LIBOR: the Secured Overnight Financing Rate, or “SOFR.” We are unable to predict the effect of the FCA Announcement or other reforms, whether currently enacted or enacted in the future. The outcome of reforms may result in increased interest expense to us. Changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our shares, and a rising interest rate environment could have an adverse impact on the price of our shares, our ability to issue equity or incur debt for acquisitions or other purposes. 35
There has been no material change in the use of proceeds disclosed in our prospectus supplement to our registration statement on Form S-3, filed with the SEC on April 14, 2020.There were no repurchases of our common stock under our share repurchase plan during the thirteen weeks ended
Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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