Chuck E. Cheese Update

At Chuck E. Cheese, Selling Is Reheated
Parent Firm's CEO
Unloads More Stock
As Shares Move Up
By DAVID J. REYNOLDS
August 6, 2008; Page C16
Wall Street Journal
http://online.wsj.com/article/SB121797890915115009.html?mod=djkeyword

The chief executive of CEC Entertainment Inc., the parent company of the Chuck E. Cheese franchise, sold shares as they spiked three months ago. Now, he's at it again, selling as shares rise back to their former level.

Richard Frank, chairman and chief executive of CEC, last week reported the sale of 125,902 shares for $4.5 million, or $35.93 a share, after the company's second-quarter earnings release propelled the stock 17% higher.

Three months ago, after the entertainment company released its first-quarter earnings, Mr. Frank sold $13.2 million of stock for an average of $36.37 a share, regulatory filings show. Between the two earnings announcements, CEC's share price dipped as low as $26.30. CEC shares closed Tuesday at $36.75, up 4.8%, in 4 p.m. New York Stock Exchange composite trading.


Mr. Frank's sales followed the end of the company's blackout period on insider stock transactions. CEC's blackout runs from the final week of a fiscal quarter to the earnings announcement for that quarter, according to a policy statement supplied by the company.

The sales were Mr. Frank's most recent since April and May of 2007, when he sold 155,000 shares at an average price of $38.59 a share. After those sales, the stock price dipped and did not fully recover until this spring, when Mr. Frank again sold shares.

In addition to Mr. Frank's transactions about three months ago, two other officers, Chief Financial Officer Chris Morris and President Michael Magusiak, sold a combined 218,750 shares after option exercises for an average price of $37.84 a share.

"There are a variety of personal reasons why executives sell stock, including the expiration of stock options, portfolio diversification, estate planning, etc.," Mr. Morris said in an email release. "The stock I sold in May related to options that were expiring December 31, 2008. Even after recent stock sales, insiders continue to hold a substantial ownership interest in the Company."

Messrs. Magusiak and Frank could not be reached for comment.

According to a company filing, Mr. Frank has agreed to exercise options on 112,500 additional shares before the end of the year at $36.66 a share.

Lynne Collier, an analyst with KeyBanc Capital Markets, said that even as the casual-dining sector has been dragged down by diminished consumer spending, CEC's performance "has been outstanding."

With a three-pronged strategy of providing games, rides and pizza, the Irving, Texas company is proving surprisingly resistant to the economic downturn, Ms. Collier said. For two straight quarters, the company has beaten Wall Street earnings expectations.

Collier, who has a "hold" rating on the stock, said the company's increased focus on birthday parties and school fund raising helped it outperform other chain restaurants.

Comparable store sales at Chuck E. Cheese restaurants increased 3.6% and 5.7% in the first two quarters of the year, while Collier said restaurants in its peer group saw same-store sales decrease in both quarters.

Write to David J. Reynolds at david.reynolds@dowjones.com