Edgar Filing: CEC ENTERTAINMENT INC

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________

FORM 10-Q

______________________________________________________________________



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

For the quarterly period ended April 3, 2016



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

For the transition period from to

Commission File Number: 001-13687

____________________________________

CEC ENTERTAINMENT, INC.

(Exact name of registrant as specified in its charter)

____________________________________



Kansas (State or other jurisdiction of incorporation or organization)		48-0905805 (IRS Employer Identification No.)

1707 Market Place Blvd Irving, Texas		75063
(Address of principal executive offices)		(Zip Code)

(972) 258-8507

(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

____________________________________

Indicate by check mark 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 ý No ¨

Indicate by check mark 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 ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	ý	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of May 2, 2016, an aggregate of 200 shares of the registrant’s common stock, par value $0.01 per share were outstanding.

Table of Contents

CEC ENTERTAINMENT, INC.

TABLE OF CONTENTS



	Page
PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements (Unaudited)

Consolidated Balance Sheets at April 3, 2016 and January 3, 2016	3

Consolidated Statements of Earnings for the three months ended April 3, 2016, and March 29, 2015	4

Consolidated Statements of Comprehensive Income (Loss) for the three months ended April 3, 2016 and March 29, 2015	5

Consolidated Statements of Cash Flows for the three months ended April 3, 2016 and March 29, 2015	6

Notes to Consolidated Financial Statements	8

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	37

ITEM 4. Controls and Procedures	37

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings	38

ITEM 1A. Risk Factors	38

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	38

ITEM 6. Exhibits	39

SIGNATURES

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements.

CEC ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share information)



	April 3, 2016			January 3, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	69,998		$	50,654
Restricted cash	4,142			—
Accounts receivable	17,658			25,936
Inventories	26,425			23,275
Prepaid expenses	20,830			18,223
Total current assets	139,053			118,088
Property and equipment, net	613,637			629,047
Goodwill	483,876			483,876
Intangible assets, net	487,068			488,095
Other noncurrent assets	20,276			13,929
Total assets	$	1,743,910		$	1,733,035
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Bank indebtedness and other long-term debt	$	7,656		$	7,650
Capital lease obligations	435			421
Accounts payable	35,580			44,090
Accrued expenses	52,156			38,284
Unearned revenues	10,555			10,233
Accrued interest	3,912			9,757
Other current liabilities	3,780			3,678
Total current liabilities	114,074			114,113
Capital lease obligations, less current portion	14,934			15,044
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion	970,556			971,333
Deferred tax liability	193,584			201,734
Accrued insurance	9,485			9,737
Other noncurrent liabilities	213,890			212,528
Total liabilities	1,516,523			1,524,489
Stockholder’s equity:
Common stock, $0.01 par value; authorized 1,000 shares; 200 shares issued as of April 3, 2016 and January 3, 2016	—			—
Capital in excess of par value	356,632			356,460
Retained earnings (deficit)	(126,683		)	(144,598		)
Accumulated other comprehensive income (loss)	(2,562		)	(3,316		)
Total stockholder’s equity	227,387			208,546
Total liabilities and stockholder’s equity	$	1,743,910		$	1,733,035

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

Table of Contents

CEC ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(in thousands)



	Three Months Ended
	April 3, 2016		March 29, 2015
REVENUES:
Food and beverage sales	$	122,202	$	116,537
Entertainment and merchandise sales	147,557		144,744
Total company store sales	269,759		261,281
Franchise fees and royalties	4,559		4,227
Total revenues	274,318		265,508
OPERATING COSTS AND EXPENSES:
Company store operating costs:
Cost of food and beverage (exclusive of items shown separately below)	30,521		29,225
Cost of entertainment and merchandise (exclusive of items shown separately below)	8,750		8,522
Total cost of food, beverage, entertainment and merchandise	39,271		37,747
Labor expenses	69,043		67,173
Depreciation and amortization	27,629		29,241
Rent expense	24,150		24,458
Other store operating expenses	36,010		33,519
Total company store operating costs	196,103		192,138
Other costs and expenses:
Advertising expense	13,100		11,452
General and administrative expenses	18,018		16,326
Transaction, severance and related litigation costs	749		905
Total operating costs and expenses	227,970		220,821
Operating income (loss)	46,348		44,687
Interest expense	17,061		17,499
Income (loss) before income taxes	29,287		27,188
Income tax expense (benefit)	11,372		12,446
Net income (loss)	$	17,915	$	14,742

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

Table of Contents

CEC ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(in thousands)



	Three Months Ended
	April 3, 2016		March 29, 2015
Net income (loss)	$	17,915	$	14,742
Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	754		(1,642		)
Comprehensive income (loss)	$	18,669	$	13,100

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

Table of Contents

CEC ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)



	Three Months Ended
	April 3, 2016			March 29, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	17,915		$	14,742
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	28,998			30,398
Deferred income taxes	(8,287		)	(13,268		)
Stock-based compensation expense	135			391
Amortization of lease related liabilities	12			5
Amortization of original issue discount and deferred debt financing costs	1,136			1,137
Loss on asset disposals, net	2,177			1,244
Non-cash rent expense	1,730			2,136
Other adjustments	27			19
Changes in operating assets and liabilities:
Restricted cash	(4,142		)	—
Accounts receivable	5,011			2,392
Inventories	(3,287		)	880
Prepaid expenses	(1,899		)	(752		)
Accounts payable	(7,551		)	(1,230		)
Accrued expenses	165			1,512
Unearned revenues	316			309
Accrued interest	(5,951		)	(5,326		)
Income taxes payable	16,717			25,551
Deferred landlord contributions	550			408
Net cash provided by operating activities	43,772			60,548
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Peter Piper Pizza	—			(663		)
Purchases of property and equipment	(18,823		)	(16,109		)
Acquisition of franchisee	—			—
Development of internal use software	(3,625		)	(185		)
Proceeds from sale of property and equipment	79			97
Net cash used in investing activities	(22,369		)	(16,860		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on senior term loan	(1,900		)	(1,900		)
Repayments on note payable	(7		)	(11		)
Payments on capital lease obligations	(101		)	(100		)
Payments on sale leaseback obligations	(474		)	(386		)
Excess tax benefit realized from stock-based compensation	4			—

Table of Contents

CEC ENTERTAINMENT, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS, CONT'D

(Unaudited)

(in thousands)



Net cash provided by (used in) financing activities	(2,478		)	(2,397		)
Effect of foreign exchange rate changes on cash	419			(661		)
Change in cash and cash equivalents	19,344			40,630
Cash and cash equivalents at beginning of period	50,654			110,994
Cash and cash equivalents at end of period	$	69,998		$	151,624


	Three Months Ended
	April 3, 2016			March 29, 2015
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid	$	21,994		$	21,734
Income taxes paid, net	$	2,949		$	183
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Accrued construction costs	$	783		$	2,870

The accompanying notes are an integral part of these unaudited interim Consolidated Financial Statements.

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Summary of Significant Accounting Policies:

Description of Business

The use of the terms “CEC Entertainment,” the “Company,” “we,” “us” and “our” throughout these unaudited notes to the interim Consolidated Financial Statements refer to CEC Entertainment, Inc. and its subsidiaries.

We currently operate and franchise Chuck E. Cheese’s and Peter Piper Pizza family dining and entertainment centers (also referred to as “stores”) in a total of 47 states and 12 foreign countries and territories. Our stores provide our guests with a variety of family entertainment and dining alternatives. All of our stores utilize a consistent restaurant-entertainment format that features both family dining and entertainment areas with the same general mix of food, beverages, entertainment and merchandise. The economic characteristics, products and services, preparation processes, distribution methods and types of customers are substantially similar for each of our stores. Therefore, we aggregate each store’s operating performance into one reportable segment for financial reporting purposes.

Basis of Presentation

The Company has a controlling financial interest in International Association of CEC Entertainment, Inc. (the “Association”), a VIE. The Association primarily administers the collection and disbursement of funds (the “Association Funds”) used for advertising, entertainment and media programs that benefit both us and our Chuck E. Cheese’s franchisees. We and our franchisees are required to contribute a percentage of gross sales to these funds and could be required to make additional contributions to fund any deficits that may be incurred by the Association. We include the Association in our Consolidated Financial Statements, as we concluded that we are the primary beneficiary of its variable interests because we (a) have the power to direct the majority of its significant operating activities; (b) provide it unsecured lines of credit; and (c) own the majority of the stores that benefit from the Association’s advertising, entertainment and media expenditures. The assets, liabilities and operating results of the Association are not material to our Consolidated Financial Statements.

Because the Association Funds are required to be segregated and used for specified purposes, we do not reflect franchisee contributions to the Association Funds as revenue, but rather record franchisee contributions as an offset to reported advertising expenses. Our contributions to the Association Funds are eliminated in consolidation. Contributions to the advertising, entertainment and media funds from our franchisees were $0.6 million for both the three months ended April 3, 2016 and March 29, 2015. Cash balances held by the Association are restricted for use in our advertising, entertainment and media programs, and are recorded as “Restricted cash” on our Consolidated Balance Sheets at April 3, 2016.

The preparation of these unaudited Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Interim Financial Statements

The accompanying Consolidated Financial Statements as of April 3, 2016 and for the three months ended April 3, 2016 and March 29, 2015 are unaudited and are presented in accordance with the requirements for quarterly reports on Form 10-Q and, consequently, do not include all of the information and footnote disclosures required by GAAP. In the opinion of management, the Consolidated Financial Statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of its consolidated results of operations, financial position and cash flows as of the dates and for the periods presented in accordance with GAAP and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Our Consolidated Financial Statements include all necessary reclassification adjustments to conform prior year results to the current period presentation.

We reclassified $0.9 million of litigation costs related to the Merger (as defined in Note 7. “Commitments and Contingencies”) in our Consolidated Statement of Earnings for the three months ended March 29, 2015 from “General and administrative expenses” to “Transaction, severance and litigation related costs” to conform to the current period’s presentation.

Consolidated results of operations for interim periods are not necessarily indicative of results for the full year. The unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

related notes included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016, filed with the SEC on March 2, 2016.

Recently Issued Accounting Guidance

Accounting Guidance Not Yet Adopted:

In March 2016, The FASB issued ASU 2016-04, Liabilities - Extinguishments of Liabilities (Subtopic 405-20). This amendment provides a narrow scope exception to Liabilities - Extinguishment of Liabilities (Subtopic 405-20) that requires breakage for those liabilities to be accounted for in accordance with the breakage guidance in Revenue From Contracts With Customers (Topic 606). There is currently no guidance in GAAP, or pending guidance, regarding the derecognition of prepaid stored-value product liabilities within the scope of the amendments in this Update. Under the new guidance, if an entity expects to be entitled to a breakage amount for a liability resulting from the sale of a prepaid stored-value product, the entity shall derecognize the amount related to the expected breakage in proportion to the pattern of rights expected to be exercised by the product holder only to the extent that it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. If an entity does not expect to be entitled to a breakage amount for a prepaid stored-value product, the entity shall derecognize the amount related to the breakage when the likelihood of the product holder exercising its remaining rights becomes remote. This change to an entity’s estimated breakage amount shall be accounted for as a change in accounting estimate. The amendments in this Update are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. We are currently assessing the impact of adopting this new guidance on our Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718). This amendment will require that (i) all excess tax benefits and deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit on the income statement, (ii) the tax effects of exercised or vested awards should now be treated as discrete items in the reporting period in which they occur, and (iii) an entity should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period or not. On the statement of cash flows excess tax benefits should be classified along with other income tax cash flows as an operating activity. This amendment allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The threshold for an award to qualify for equity classification permits withholding up to the maximum statutory tax rate in applicable jurisdictions, and the cash paid by an employer when directly withholding shares for tax-withholding purposes should be classified as a financing activity on the statement of cash flows. Nonpublic entities can make an accounting policy election to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that meet certain conditions. For public entities, the amendments in this Update are effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. We are currently assessing the impact of adopting this new guidance on our Consolidated Financial Statements.

2. Property and Equipment:

Total depreciation and amortization expense was $29.0 million and $30.4 million for the three months ended April 3, 2016 and March 29, 2015, respectively, of which $1.4 million and $1.0 million, respectively, was included in “General and administrative expenses” in our Consolidated Statements of Earnings. Total depreciation and amortization expense for both the three months ended April 3, 2016 and March 29, 2015, includes approximately $0.5 million related to the amortization of franchise agreements (see Note 3. “Intangible Assets, Net”).

Asset Impairments

There were no impairment charges recognized during the three months ended April 3, 2016 and March 29, 2015, respectively.

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

3. Intangible Assets, Net:

The following table presents our indefinite and definite-lived intangible assets at April 3, 2016:



	Weighted Average Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
		(in thousands)
Chuck E. Cheese's tradename	Indefinite	$	400,000	$	—		$	400,000
Peter Piper Pizza tradename	Indefinite	26,700		—			26,700
Favorable lease agreements ⁽¹⁾	10	14,880		(4,200		)	10,680
Franchise agreements	25	53,300		(3,612		)	49,688
		$	494,880	$	(7,812	)	$	487,068

__________________

(1)

In connection with the Merger and the acquisition of Peter Piper Pizza (“PPP”), we also recorded unfavorable lease liabilities of $10.2 million and $3.9 million, respectively, which are included in “Other current liabilities” and “Other noncurrent liabilities” in our Consolidated Balance Sheets. Such amounts are being amortized over a weighted average life of 10 years, and are included in “Rent expense” in our Consolidated Statements of Earnings.

Amortization expense related to favorable lease agreements was $0.5 million for both the three months ended April 3, 2016 and March 29, 2015, and is included in “Rent expense” in our Consolidated Statements of Earnings. Amortization expense related to franchise agreements was $0.5 million for both the three months ended April 3, 2016 and March 29, 2015, and is included in “General and administrative expenses” in our Consolidated Statements of Earnings.

Note 4. Accounts Payable:

Accounts payable consisted of the following as of the dates presented:



	April 3, 2016		January 3, 2016
	(in thousands)
Trade and other amounts payable	$	27,085	$	35,228
Book overdraft	8,495		8,862
Accounts Payable	$	35,580	$	44,090

Trade and other amounts payable represents amounts payable to our vendors, legal fee accruals and settlements payable. The book overdraft balance represents checks issued but not yet presented to banks.

5. Indebtedness and Interest Expense:

Our long-term debt consisted of the following for the periods presented:

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



	April 3, 2016			January 3, 2016
	(in thousands)
Term loan facility	$	744,800		$	746,700
Senior notes	255,000			255,000
Note payable	56			63
Total debt outstanding	999,856			1,001,763
Less:
Unamortized original issue discount	(2,641		)	(2,776		)
Deferred financing costs, net	(19,003		)	(20,004		)
Current portion	(7,656		)	(7,650		)
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion	$	970,556		$	971,333

We were in compliance with the debt covenants in effect as of April 3, 2016 for both the Secured Credit Facilities and the senior notes. For further discussion regarding the debt covenants, see Secured Credit Facilities and Senior Unsecured Debt sections below.

Secured Credit Facilities

As of April 3, 2016, we had $744.8 million (excluding the original issue discount) outstanding under the Term loan facility, no borrowings outstanding under the revolving credit facility and $10.9 million of letters of credit issued but undrawn. The Secured Credit Facilities require scheduled quarterly payments on the term loan equal to 0.25% of the original principal amount of the Term loan from July 2014 to December 2020, with the remaining balance paid at maturity, February 14, 2021. Effective April 8, 2016, the balance of our letters of credit issued but undrawn was reduced to $9.9 million.

The term loan was issued net of $3.8 million of original issue discount. We also paid $17.8 million and $3.4 million in debt financing costs related to the term loan facility and revolving credit facility, respectively, which we capitalized in “Bank indebtedness and other long-term debt, net of deferred financing costs” on our Consolidated Balance Sheets. The original issue discount and deferred financing costs are amortized over the lives of the facilities and are included in “Interest expense” on our Consolidated Statements of Earnings.

Borrowings under the Secured Credit Facilities bear interest at a rate equal to, at our option, either (a) a London Interbank Offered Rate (“LIBOR”) determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowings, adjusted for certain additional costs, subject to a 1.00% floor in the case of term loans or (b) a base rate determined by reference to the highest of (i) the federal funds effective rate plus 0.50%; (ii) the prime rate of Deutsche Bank AG New York Branch; and (iii) the one-month adjusted LIBOR plus 1.00%, in each case plus an applicable margin. Effective March 4, 2016, the applicable margin for borrowings under the term loan facility stepped down from 3.25% to 3.00%, the applicable margin for borrowings under the revolving credit facility stepped down from 3.25% to 3.00%, and the applicable unused commitment fee rate stepped down from 0.5% to 0.375% based on our first lien senior secured leverage ratio. During the three months ended April 3, 2016, the federal funds rate ranged from 0.25% to 0.38%, the prime rate was 3.25% and the one-month LIBOR ranged from 0.42% to 0.44%.

The weighted average effective interest rate incurred on our borrowings under our Secured Credit Facilities was 4.7% and 4.6% for the three months ended April 3, 2016 and March 29, 2015, respectively, which includes amortization of debt issuance costs related to our Secured Credit Facilities, amortization of our term loan facility original issue discount and commitment and other fees related to our Secured Credit Facilities.

As of April 3, 2016, the borrowings under the revolving credit facility were less than 30% of the outstanding commitments; therefore, the springing financial maintenance covenant under our revolving credit facility was not in effect.

Senior Unsecured Debt

Our $255.0 million aggregate principal amount borrowings of 8.000% Senior Notes due 2022 (the “senior notes”) bear interest at a rate of 8.000% per year and mature on February 15, 2022.

Our obligations under the senior notes are fully and unconditionally guaranteed, jointly and severally, by our present and future direct and indirect wholly-owned material domestic subsidiaries that guarantee our Secured Credit Facilities.

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The weighted average effective interest rate incurred on borrowings under our senior notes was 8.3% for both the three months ended April 3, 2016 and the three months ended March 29, 2015, which included amortization of debt issuance costs and other fees related to our senior notes.

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Interest Expense

Interest expense consisted of the following for the periods presented:



	Three Months Ended
	April 3, 2016			March 29, 2015
	(in thousands)
Term loan facility ⁽¹⁾	$	8,157		$	7,907
Senior notes	5,157			5,157
Capital lease obligations	440			455
Sale leaseback obligations	2,758			2,783
Amortization of debt issuance costs	1,001			1,001
Other	(452		)	196
Total interest expense	$	17,061		$	17,499

__________________

(1) Includes amortization of original issue discount.

The weighted average effective interest rate incurred on our combined borrowings under our Secured Credit Facilities and senior notes was 5.6% and 5.5% for the three months ended April 3, 2016, and March 29, 2015, respectively.

6. Fair Value of Financial Instruments:

The following table presents information on our financial instruments as of the periods presented:



	April 3, 2016				January 3, 2016
	Carrying Amount ⁽¹⁾		Estimated Fair Value		Carrying Amount ⁽¹⁾		Estimated Fair Value
	(in thousands)
Financial Liabilities:
Bank indebtedness and other long-term debt, less current portion	$	989,559	$	920,101	$	991,337	$	962,600

_________________

(1) Excluding net deferred financing costs

Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, our Secured Credit Facilities and our senior notes. The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximates fair value because of their short maturities. The estimated fair value of our Secured Credit Facilities' term loan and senior notes was determined by using estimated market prices of our outstanding borrowings under our term loan facility and the senior notes, which are classified as Level 2 in the fair value hierarchy.

During the three months ended April 3, 2016 and March 29, 2015, there were no significant transfers among level 1, 2 or 3 fair value determinations.

7. Commitments and Contingencies:

Legal Proceedings

From time to time, we are involved in various inquiries, investigations, claims, lawsuits and other legal proceedings that are incidental to the conduct of our business. These matters typically involve claims from customers, employees or other

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

third parties involved in operational issues common to the retail, restaurant and entertainment industries. Such matters typically represent actions with respect to contracts, intellectual property, taxation, employment, employee benefits, personal injuries and other matters. A number of such claims may exist at any given time, and there are currently a number of claims and legal proceedings pending against us.

In the opinion of our management, after consultation with legal counsel, the amount of liability with respect to claims or proceedings currently pending against us is not expected to have a material effect on our consolidated financial condition, results of operations or cash flows. All necessary loss accruals based on the probability and estimate of loss have been recorded.

Employment-Related Litigation: On January 27, 2014, former CEC employee Franchesca Ford filed a purported class action lawsuit against the Company in San Francisco County Superior Court, California (the “Ford Litigation”). The plaintiff claims to represent other similarly-situated hourly non-exempt employees and former employees of the Company in California who were employed from January 27, 2010 to the present, and she alleges violations of California state wage and hour laws. In March 2014, the Company removed the Ford Litigation to the U.S. District Court for the Northern District of California, San Francisco Division, and subsequently defeated the plaintiff’s motion to remand the case to California state court. In May 2015, the parties reached an agreement to settle the lawsuit on a class-wide basis. The settlement would result in the plaintiffs’ dismissal of all claims asserted in the action, as well as certain related but unasserted claims, and grant of complete releases, in exchange for the Company’s settlement payment. On March 24, 2016, the Court issued an order granting preliminary approval of the class settlement and setting a final approval hearing regarding the settlement for August 2016. The settlement of this action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

On October 10, 2014, former store General Manager Richard Sinohui filed a purported class action lawsuit against the Company in the Superior Court of California, Riverside County (the “Sinohui Litigation”), claiming to represent other similarly-situated current and former General Managers of the Company in California during the period October 10, 2010 to the present. The lawsuit alleges CEC wrongfully classified current and former California General Managers as exempt from overtime protections, that such General Managers worked more than 40 hours a week without overtime premium pay, paid rest periods and paid meal periods, and that the Company failed to provide accurate itemized wage statements or to pay timely wages upon separation from employment, in violation of the California Labor Code, California Business and Professions Code, and the applicable Wage Order issued by the California Industrial Welfare Commission. Additionally, the plaintiff alleged that the Company failed to reimburse General Managers for certain business expenses, including for personal cell phone usage and mileage, in violation of the California Labor Code; he also asserted a claim for civil penalties under the California Private Attorneys General Act (“PAGA”). The plaintiff seeks an unspecified amount in damages. On December 5, 2014, the Company removed the Sinohui Litigation to the U.S. District Court for the Central District of California, Southern Division. On March 16, 2016, the Court issued an order denying in part and granting in part Plaintiff’s Motion for Class Certification. Specifically, the Court denied Plaintiff’s motion to the extent that he sought to certify a class on Plaintiff’s misclassification and wage statement claims, but certified a class with respect to Plaintiff’s claims that the Company had wrongfully failed to reimburse him for cell phone expenses and/or mileage. The Sinohui Litigation is set for trial in August 2016. We believe the Company has meritorious defenses to this lawsuit and we intend to vigorously defend it. While no assurance can be given as to the ultimate outcome of this matter, we currently believe that the final resolution of this action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

Litigation Related to the Merger: Following the January 16, 2014 announcement that the Company had entered into a merger agreement (the “Merger Agreement”), pursuant to which an entity controlled by Apollo Global Management, LLC and its subsidiaries merged with and into CEC Entertainment Inc., with CEC Entertainment Inc. surviving the merger (the “Merger”), four putative shareholder class actions were filed in the District Court of Shawnee County, Kansas, on behalf of purported stockholders of the Company, against the Company, its directors, Apollo, Parent and Merger Sub, in connection with the Merger Agreement and the transactions contemplated thereby. These actions were consolidated into one action in March 2014.

On July 21, 2015, a consolidated class action petition was filed as the operative consolidated complaint, asserting claims against CEC and its former directors, adding The Goldman Sachs Group (“Goldman Sachs”) as a defendant, and removing all Apollo entities as defendants (“Consolidated Class Action Petition”). The Consolidated Class Action Petition alleges that the Company’s directors breached their fiduciary duties to the Company’s stockholders in connection with their consideration and approval of the Merger Agreement by, among other things, conducting a deficient sales process, agreeing to an inadequate tender price, agreeing to certain provisions in the Merger Agreement, and filing materially deficient disclosures regarding the transaction. The Consolidated Class Action Petition also alleges that two members of the Company’s board who also served as the senior managers of the Company had material conflicts of interest and that Goldman Sachs aided and abetted the board’s breaches as a result of various conflicts of interest facing the bank. The Consolidated Class Action Petition seeks,

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

among other things, to recover damages, attorneys’ fees and costs. On March 23, 2016, the Court conducted a hearing on the defendants’ Motion to Dismiss the Consolidated Class Action Petition, and the parties are currently awaiting the Court’s ruling. The Court has not yet set this case for trial. The Company believes the Consolidated Class Action Petition is without merit and intends to defend it vigorously. While no assurance can be given as to the ultimate outcome of the consolidated matter, we currently believe that the final resolution of the action will not have a material adverse effect on our results of operations, financial position, liquidity or capital resources.

8. Income Taxes:

Our income tax expense consists of the following for the periods presented:



	Three Months Ended
	April 3, 2016			March 29, 2015
	(in thousands, except %)
Federal and state income taxes	$	11,263		$	12,174
Foreign income taxes	109			272
Income tax expense ⁽¹⁾	$	11,372		$	12,446
Effective rate	38.8		%	45.8		%

_________________

(1) Including foreign taxes withheld.

Our effective income tax rate of 38.8% for the three months ended April 3, 2016 differs from the statutory rate primarily due to the favorable impact of employment related federal income tax credits partially offset by the impact of non-deductible litigation costs related to the Merger. Our effective income tax rate of 45.8% for the three months ended March 29, 2015 differs from the statutory rate primarily due to the unfavorable impact of non-deductible litigation and settlement costs related to the Merger, partially offset by benefits stemming from employment related income tax credits. Our liability for uncertain tax positions (excluding interest and penalties) was $3.4 million and $3.3 million as of April 3, 2016 and January 3, 2016, respectively, and if recognized would decrease our provision for income taxes by $1.3 million. Within the next twelve months, we could settle or otherwise conclude income tax audits. As such, it is reasonably possible that the liability for uncertain tax positions could decrease by as much as $0.2 million as a result of settlements with certain taxing authorities and expiring statutes of limitations within the next twelve months.

Total accrued interest and penalties related to unrecognized tax benefits as of April 3, 2016 and January 3, 2016, was $0.8 million and $1.7 million, respectively. On the Consolidated Balance Sheets, we include current interest related to unrecognized tax benefits in “Accrued interest,” current penalties in “Accrued expenses” and noncurrent accrued interest and penalties in “Other noncurrent liabilities.”

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

9. Stock-Based Compensation Arrangements:

A summary of the option activity under the equity incentive plan as of April 3, 2016 and the activity for the three months ended April 3, 2016 is presented below:



	Stock Options		Weighted Average Exercise Price ⁽¹⁾	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
			($ per share)		($ in thousands)
Outstanding stock options, January 3, 2016	2,393,084		$8.59
Options Granted	101,110		$12.51
Options Exercised	(13,399	)	$8.86
Options Forfeited	(11,185	)	$10.91
Outstanding stock options, April 3, 2016	2,469,610		$8.78	8.14	10,141
Stock options expected to vest, April 3, 2016	2,222,650		$8.78	8.14	9,127
Exercisable stock options, April 3, 2016	327,726		$8.32	7.92	2,861

__________________

(1) The weighted average exercise price reflects the original grant date fair value per option as adjusted for the dividend payment made in August 2015.

As of April 3, 2016, we had $2.9 million of total unrecognized share-based compensation expense related to unvested options, net of expected forfeitures, which is expected to be amortized over the remaining weighted-average period of 3.2 years.

The following table summarizes stock-based compensation expense and the associated tax benefit recognized in the Consolidated Financial Statements for the periods presented:



	Three Months Ended
	April 3, 2016			March 29, 2015
	(in thousands)
Stock-based compensation costs	$	168		$	395
Portion capitalized as property and equipment ⁽¹⁾	(33		)	(4		)
Stock-based compensation expense recognized	$	135		$	391
Excess tax benefit recognized from exercise of stock-based compensation awards	$	4		$	—

__________________

(1)

We capitalize the portion of stock-based compensation costs related to our design, construction, facilities and legal departments that are directly attributable to our store development projects, such as the design and construction of a new store and the remodeling and expansion of our existing stores. Capitalized stock-based compensation cost attributable to our store development projects is included in “Property and equipment, net” in the Consolidated Balance Sheets.

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

10. Stockholder’s Equity:

The following table summarizes the changes in stockholder’s equity during the three months ended April 3, 2016:



	Common Stock			Capital In Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income
	Shares	Amount		Capital In Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income			Total
	(in thousands, except share information)
Balance at January 3, 2016	200	$	—	$	356,460	$	(144,598	)	$	(3,316	)	$	208,546
Net income (loss)	—	—		—		17,915			—			17,915
Other comprehensive income (loss)	—	—		—		—			754			754
Stock-based compensation costs	—	—		168		—			—			168
Excess tax benefit realized from exercise of stock options	—	—		4		—			—			4
Balance at April 3, 2016	200	$	—	$	356,632	$	(126,683	)	$	(2,562	)	$	227,387

11. Consolidating Guarantor Financial Information:

The senior notes issued by CEC Entertainment, Inc. (the “Issuer”) in conjunction with the Merger are our unsecured obligations and are fully and unconditionally, jointly and severally guaranteed by all of our 100% wholly-owned U.S. subsidiaries (the “Guarantors”). Our wholly-owned foreign subsidiaries and our less-than-wholly-owned U.S. subsidiaries are not a party to the guarantees (the “Non-Guarantors”). The following schedules present the condensed consolidating financial statements of the Issuer, Guarantors and Non-Guarantors, as well as consolidated results, for the periods presented:

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



CEC Entertainment, Inc.
Condensed Consolidating Balance Sheet
As of April 3, 2016
(in thousands)

	Issuer			Guarantors			Non-Guarantors			Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	61,106		$	2,217		$	6,675		$	—		$	69,998
Restricted cash	—			—			4,142			—			4,142
Accounts receivable	14,416			2,811			8,944			(8,513		)	17,658
Inventories	23,031			3,087			307			—			26,425
Other current assets	14,608			4,219			2,003			—			20,830
Total current assets	113,161			12,334			22,071			(8,513		)	139,053
Property and equipment, net	570,343			34,587			8,707			—			613,637
Goodwill	432,462			51,414			—			—			483,876
Intangible assets, net	21,156			465,912			—			—			487,068
Intercompany	129,033			27,913			—			(156,946		)	—
Investment in subsidiaries	422,049			—			—			(422,049		)	—
Other noncurrent assets	7,692			11,965			619			—			20,276
Total assets	$	1,695,896		$	604,125		$	31,397		$	(587,508	)	$	1,743,910
Current liabilities:
Bank indebtedness and other long-term debt, current portion	$	7,600		$	56		$	—		$	—		$	7,656
Capital lease obligations, current portion	430			—			5			—			435
Accounts payable and accrued expenses	80,532			13,381			8,290			—			102,203
Other current liabilities	3,452			328			—			—			3,780
Total current liabilities	92,014			13,765			8,295			—			114,074
Capital lease obligations, less current portion	14,867			—			67			—			14,934
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion	970,556			—			—			—			970,556
Deferred tax liability	178,014			16,991			(1,421		)	—			193,584
Intercompany	1,479			138,099			25,881			(165,459		)	—
Other noncurrent liabilities	211,579			11,538			258			—			223,375
Total liabilities	1,468,509			180,393			33,080			(165,459		)	1,516,523
Stockholder's equity:
Common stock	—			—			—			—			—
Capital in excess of par value	356,632			466,114			3,241			(469,355		)	356,632
Retained earnings (deficit)	(126,683		)	(42,382		)	(2,362		)	44,744			(126,683		)
Accumulated other comprehensive income (loss)	(2,562		)	—			(2,562		)	2,562			(2,562		)
Total stockholder's equity	227,387			423,732			(1,683		)	(422,049		)	227,387
Total liabilities and stockholder's equity	$	1,695,896		$	604,125		$	31,397		$	(587,508	)	$	1,743,910

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



CEC Entertainment, Inc.
Condensed Consolidating Balance Sheet
As of January 3, 2016
(in thousands)

	Issuer			Guarantors			Non-Guarantors			Eliminations			Consolidated
Current assets:
Cash and cash equivalents	$	42,235		$	1,797		$	6,622		$	—		$	50,654
Accounts receivable	21,595			3,944			9,468			(9,071		)	25,936
Inventories	19,959			3,021			295			—			23,275
Other current assets	13,562			3,561			1,100			—			18,223
Total current assets	97,351			12,323			17,485			(9,071		)	118,088
Property and equipment, net	585,915			34,539			8,593			—			629,047
Goodwill	432,462			51,414			—			—			483,876
Intangible assets, net	21,855			466,240			—			—			488,095
Intercompany	129,151			30,716			—			(159,867		)	—
Investment in subsidiaries	422,407			—			—			(422,407		)	—
Other noncurrent assets	4,318			8,940			671			—			13,929
Total assets	$	1,693,459		$	604,172		$	26,749		$	(591,345	)	$	1,733,035
Current liabilities:
Bank indebtedness and other long-term debt, current portion	$	7,600		$	50		$	—		$	—		$	7,650
Capital lease obligations, current portion	418			—			3			—			421
Accounts payable and accrued expenses	71,320			27,774			3,270			—			102,364
Other current liabilities	3,350			328			—			—			3,678
Total current liabilities	82,688			28,152			3,273			—			114,113
Capital lease obligations, less current portion	14,980			—			64			—			15,044
Bank indebtedness and other long-term debt, net of deferred financing costs, less current portion	971,320			13			—			—			971,333
Deferred tax liability	184,083			17,867			(216		)	—			201,734
Intercompany	20,580			121,850			26,508			(168,938		)	—
Other noncurrent liabilities	211,262			10,784			219			—			222,265
Total liabilities	1,484,913			178,666			29,848			(168,938		)	1,524,489
Stockholder's equity:
Common stock	—			—			—			—			—
Capital in excess of par value	356,460			466,114			3,241			(469,355		)	356,460
Retained earnings (deficit)	(144,598		)	(40,608		)	(3,024		)	43,632			(144,598		)
Accumulated other comprehensive income (loss)	(3,316		)	—			(3,316		)	3,316			(3,316		)
Total stockholder's equity	208,546			425,506			(3,099		)	(422,407		)	208,546
Total liabilities and stockholder's equity	$	1,693,459		$	604,172		$	26,749		$	(591,345	)	$	1,733,035

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



CEC Entertainment, Inc.
Consolidating Statement of Comprehensive Income (Loss)
For the Three Months Ended April 3, 2016
(in thousands)

	Issuer			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues:
Food and beverage sales	$	107,822		$	12,788		$	1,592		$	—		$	122,202
Entertainment and merchandise sales	139,208			5,598			2,751			—			147,557
Total company store sales	247,030			18,386			4,343			—			269,759
Franchise fees and royalties	598			3,961			—			—			4,559
International Association assessments and other fees	255			615			11,958			(12,828		)	—
Total revenues	247,883			22,962			16,301			(12,828		)	274,318
Operating Costs and Expenses:
Company store operating costs:
Cost of food and beverage	26,644			3,297			580			—			30,521
Cost of entertainment and merchandise	8,119			445			186			—			8,750
Total cost of food, beverage, entertainment and merchandise	34,763			3,742			766			—			39,271
Labor expenses	63,734			3,999			1,310			—			69,043
Depreciation and amortization	26,563			607			459			—			27,629
Rent expense	22,257			1,333			560			—			24,150
Other store operating expenses	33,763			2,166			951			(870		)	36,010
Total company store operating costs	181,080			11,847			4,046			(870		)	196,103
Advertising expense	12,420			1,673			10,965			(11,958		)	13,100
General and administrative expenses	7,183			10,659			176			—			18,018
Transaction, severance and related litigation costs	701			48			—			—			749
Total operating costs and expenses	201,384			24,227			15,187			(12,828		)	227,970
Operating income (loss)	46,499			(1,265		)	1,114			—			46,348
Equity in earnings (loss) in affiliates	(1,112		)	—			—			1,112			—
Interest expense (income)	16,602			351			108			—			17,061
Income (loss) before income taxes	28,785			(1,616		)	1,006			1,112			29,287
Income tax expense (benefit)	10,870			165			337			—			11,372
Net income (loss)	$	17,915		$	(1,781	)	$	669		$	1,112		$	17,915

Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	754			—			(754		)	754			754
Comprehensive income (loss)	$	18,669		$	(1,781	)	$	(85	)	$	1,866		$	18,669

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



CEC Entertainment, Inc.
Consolidating Statement of Comprehensive Income (Loss)
For the Three Months Ended March 29, 2015
(in thousands)

	Issuer			Guarantors			Non-Guarantors			Eliminations			Consolidated
Revenues:
Food and beverage sales	$	102,387		$	12,316		$	1,834		$	—		$	116,537
Entertainment and merchandise sales	137,510			4,110			3,124			—			144,744
Total company store sales	239,897			16,426			4,958			—			261,281
Franchise fees and royalties	805			3,422			—			—			4,227
International Association assessments and other fees	286			662			8,653			(9,601		)	—
Total revenues	240,988			20,510			13,611			(9,601		)	265,508
Operating Costs and Expenses:
Company store operating costs:
Cost of food and beverage	25,390			3,244			591			—			29,225
Cost of entertainment and merchandise	7,620			753			149			—			8,522
Total cost of food, beverage, entertainment and merchandise	33,010			3,997			740			—			37,747
Labor expenses	61,732			3,930			1,511			—			67,173
Depreciation and amortization	27,619			1,114			508			—			29,241
Rent expense	22,303			1,494			661			—			24,458
Other store operating expenses	31,509			1,830			1,128			(948		)	33,519
Total company store operating costs	176,173			12,365			4,548			(948		)	192,138
Advertising expense	9,141			1,060			9,904			(8,653		)	11,452
General and administrative expenses	4,893			11,316			117			—			16,326
Transaction, severance and related litigation costs	—			905			—			—			905
Total operating costs and expenses	190,207			25,646			14,569			(9,601		)	220,821
Operating income (loss)	50,781			(5,136		)	(958		)	—			44,687
Equity in earnings (loss) in affiliates	(7,769		)	—			—			7,769			—
Interest expense (income)	16,737			633			129			—			17,499
Income (loss) before income taxes	26,275			(5,769		)	(1,087		)	7,769			27,188
Income tax expense (benefit)	11,533			1,328			(415		)	—			12,446
Net income (loss)	$	14,742		$	(7,097	)	$	(672	)	$	7,769		$	14,742

Components of other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	(1,642		)	—			(1,642		)	1,642			(1,642		)
Comprehensive income (loss)	$	13,100		$	(7,097	)	$	(2,314	)	$	9,411		$	13,100

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



CEC Entertainment, Inc.
Consolidating Statement of Cash Flows
For the Three Months Ended April 3, 2016
(in thousands)

	Issuer			Guarantors			Non-Guarantors			Eliminations		Consolidated
Cash flows provided by (used in) operating activities:	$	40,445		$	3,662		$	(335	)	$	—	$	43,772

Cash flows from investing activities:
Purchases of property and equipment	(18,342		)	(451		)	(30		)	—		(18,823		)
Development of internal use software	(841		)	(2,784		)	—			—		(3,625		)
Proceeds from sale of property and equipment	79			—			—			—		79
Cash flows provided by (used in) investing activities	(19,104		)	(3,235		)	(30		)	—		(22,369		)

Cash flows from financing activities:
Repayments on senior term loan	(1,900		)	—			—			—		(1,900		)
Repayments on note payable	—			(7		)	—			—		(7		)
Payments on capital lease obligations	(100		)	—			(1		)	—		(101		)
Payments on sale leaseback transactions	(474		)	—			—			—		(474		)
Excess tax benefit realized from stock-based compensation	4			—			—			—		4
Cash flows provided by (used in) financing activities	(2,470		)	(7		)	(1		)	—		(2,478		)
Effect of foreign exchange rate changes on cash	—			—			419			—		419

Change in cash and cash equivalents	18,871			420			53			—		19,344
Cash and cash equivalents at beginning of period	42,235			1,797			6,622			—		50,654
Cash and cash equivalents at end of period	$	61,106		$	2,217		$	6,675		$	—	$	69,998

Table of Contents

CEC ENTERTAINMENT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)



CEC Entertainment, Inc.
Consolidating Statement of Cash Flows
For the Three Months Ended March 29, 2015
(in thousands)

	Issuer			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows provided by (used in) operating activities:	$	53,409		$	2,476		$	4,663		$	—		$	60,548

Cash flows from investing activities:
Acquisition of Peter Piper Pizza	(663		)	—			—			—			(663		)
Intercompany note	(96		)	2,500			—			(2,404		)	—
Purchases of property and equipment	(14,451		)	(1,023		)	(635		)	—			(16,109		)
Development of internal use software	—			(185		)	—			—			(185		)
Proceeds from sale of property and equipment	97			—			—			—			97
Cash flows provided by (used in) investing activities	(15,113		)	1,292			(635		)	(2,404		)	(16,860		)

Cash flows from financing activities:
Repayments on senior term loan	(1,900		)	—			—			—			(1,900		)
Repayments on Note Payable	—			(11		)							(11		)
Intercompany note	—			96			(2,500		)	2,404			—
Payments on capital lease obligations	(100		)	—			—			—			(100		)
Payments on sale leaseback transactions	(386		)