CEC Entertainment, Inc. (CEC)

I never have liked this company, it encourages kids to beg their parents for quarters and eat unhealthy crap - plus the characters and games are pretty lame. But beyond that..

--CEC is better known for its games than its food, but most companies in the arcade/gaming business are going away because families prefer to play games over and over for free on their home game console or computer. If they had room for something more active like, say, a go-cart track - but they don't.
--The food sucks, CiCi's pizza buffet has better cardboard pizza than these people do and it costs a lot less. They might be better than Little Caesars, but if so not much.
--Food prices are rising all over, every restaurant chain is getting squeezed hard by increasing food costs and this one won't fully escape that either.
--The economy is tight, gas prices are high - luxuries like playing games during dinner with the kids aren't going to be as affordable as they were.

My only counter thought to this is the whole "staycation" argument - people will go to CEC instead of Disney or Six Flags for vacation this year. That's pretty lame, but it might happen. However, those people who normally go to CEC instead of Disney or Six Flags during good times will be staying home during bad times, so that won't really help things very much.

RESTAURANTS / CONSUMER SERVICES /ENTERTAINMENT

30 YEAR OLD COMPANY FRANCHISEES OPERATE 534 RESTUARANTS. OWNER OF CHUCK E CHEESE’S RESTAURANTS. CHUCK E CHEES’S OFFERS FAMILIES WITH KIDS A ONE-OF-A-KIND TOTAL ENTERTAINMENT EXPERIENCE THAT INCLUDES THE COOLEST GAMES AND RIDES, CHANCES TO WIN TICKETS FOR FUN PRIZES, ENTERTAINMENT AND GREAT FOOD FOR THE FAMILY. TODAY, MORE THAN EVER, KIDS NEED A SAFE, WHOLESOME ENVIRONMENT IN WHICH THEY CAN LAUGH, PLAY AND SIMPLY ENJOY BEING A KID.

52 WK RANGE: $19.81-43.83

MARKET CAP: $658M

P/E 10.71

1 YEAR TARGET: $37.75

DIV: NO DIVIDEND

BETA: 1.27

NET PROFIT MARGIN: 7.12%

ROE: 16.34%

% HELD BY INSTITUTIONS: 96.80%

MORNINGSTAR: GROWTH C PROFITABILITY C FINANCIAL HEALTH B-

REVENUE: 4 QTR 2007 AND 4 QTR 2006 REMAINED CONSTANT AT $175.1M, GROWTH: FROM THE NEW STORE DEVELOPMENT WAS OFFSET BY A DECLINE IN COMPARABLE STORE SALES OF 2.7%.

INCOME: A NET LOSS OF $0.6M IN THE 4 QTR 2007 COMPARED TO NET INCOME OF $12.1M IN THE SAME PERIOD OF 2006.

EPS: 1.76 4 QTR 2007 DECREASED TO ($0.02) PER SHARE FROM $0.36 PER SHARE IN THE 4 QTR 2006. INCLUDED IN 2007 AND 2006 4 QTR RESULTS WERE ASSET IMPAIRMENT COSTS TOTALING $8.4M AND $0.4M, RESPECTIVELY. ADDITIONALLY, THE 4 QTR 2007 WAS NEGATIVELY IMPACTED BY CERTAIN TAX RELATED ADJUSTMENTS TOTALING APPROXIMATELY $2.0M.

BUYBACK: REPURCHASED $248M OF COMPANY STOCK 7.9M SHARES. FREE CASH FLOW WILL BE USED TO REPURCHASE SHARES

SALES: SAME-STORE SALE INCREASING 2.5% 08

OUTLOOK: SAME-STORE SALES GROWTH FLAT TO 1% FOR 08 CONSERVATIVE GIVEN CHALLENGING CONSUMER ENVIRONMENT, INCREASE COST OF CHEESE, LABOR EXPENSES