CEC Entertainment Reports 5.7% Comparable Store Sales Gain

Second-Quarter Diluted EPS Rises 85% to $0.48
IRVING, Texas--(Business Wire)--
CEC Entertainment, Inc. (NYSE: CEC) today reported net earnings of
$11.3 million for its second quarter, which ended on June 29, 2008, as
compared to $8.5 million for the second quarter of 2007. The Company's
diluted earnings per share increased 85% to $0.48 per diluted share,
as compared to $0.26 per diluted share in the second quarter of 2007.

Total quarterly revenue increased 7.0% to $192.5 million, compared
with revenue of $179.9 million for the second quarter of fiscal 2007,
driven by new store openings and a comparable store sales gain of
5.7%. The Company believes the comparable store sales gain reflects
the success of its current strategies, including the ongoing capital
initiatives at existing stores, the introduction of an enhanced
marketing plan and recent efforts to increase the number of birthday
party reservations and fundraising events.

Operating income for the second quarter of 2008 was $22.5 million,
or 11.7% of total revenue, as compared to $16.6 million, or 9.2% of
total revenue, in the prior year, an increase of 250 basis points as a
percentage of total revenue. The increase in operating income as a
percentage of total revenue is primarily attributable to the gain in
comparable store sales; partially offset by increases in commodity
prices, including cheese and dough; advertising expenses and
administrative costs.

Richard M. Frank, Chairman and Chief Executive Officer, stated
that, "We are pleased with the strong sales performance during the
second quarter and first half of this year. We believe this momentum
speaks directly to the health and vitality of our brand in the
marketplace today and is further evidenced by the fact that each of
our five regions posted positive comparable store sales growth for the
first six months of fiscal 2008. We are further encouraged by our
belief that each of our sales strategies are working and adding to our
sales performance. Although we feel confident in our strategies and
believe we are well positioned to continue growing sales for the
balance of the year, we remain cautious in our outlook given the
current economic environment. We are currently estimating comparable
store sales growth of 2% to 3% for the remainder of the year."

During the second quarter of 2008, the Company achieved its
pre-announced targeted debt-to-Adjusted EBITDA ratio of 2:1, ending
the quarter with $394.5 million borrowed on its revolving credit
facility. Furthermore, during the second quarter, the Company
purchased 2.8 million shares of its common stock, or approximately
11.3% of shares outstanding at the beginning of the quarter, at a cost
of $102.2 million.

Business Outlook:

Based on current estimates, the Company expects diluted earnings
per share to range from $2.57 to $2.65 per share for the 2008 fiscal
year representing 32% to 36% growth from the prior year, after
excluding asset impairment charges from fiscal year 2007. In addition,
the Company expects diluted earnings per share to range from $0.56 to
$0.60 per share and $0.20 to $0.22 per share for the third quarter and
fourth quarter of 2008, respectively. This guidance is based on the
following assumptions:

-- comparable store sales growth of 2.0% to 3.0% for the second
half of 2008;

-- higher cheese and dough costs for the last six months of 2008
compared to the same period in the prior year will be offset
by a reduction in cheese and dough usage resulting from
certain company initiatives implemented during the first half
of the year;

-- labor expenses as a percent of Company store sales is expected
to increase 0.5% to 0.7% for the remainder of the 2008 fiscal
year driven primarily by minimum wage increases and favorable
adjustments to health insurance reserves occurring in the
second half of the prior year;

-- opening of five to six new Company stores and four to five new
franchise stores during the year;

-- total capital expenditures for the year of $80 to $85 million;
and

-- an effective tax rate of 38.0% to 38.5% for the remainder of
the year.

Second Quarter Conference Call:

The Company will host a conference call today, July 22, 2008, at
3:30 p.m. Central Time to discuss its second quarter 2008 financial
results. A live webcast of the call (listen only) can be accessed
through the Company's website, www.chuckecheese.com. Shortly after its
conclusion, a replay of the call will be available for a minimum of
ninety days on the website.

Non-GAAP Financial Measures:

The Company reports and discusses its operating results using
financial measures consistent with generally accepted accounting
principles ("GAAP"). From time to time in the course of financial
presentations, earnings conference calls or otherwise, the Company may
disclose certain non-GAAP financial measures such as Adjusted EBITDA
and Free Cash Flow.

Reconciliations of the most directly comparable GAAP financial
measure to Adjusted EBITDA and Free Cash Flow and certain other
supplemental financial data are set forth in tables accompanying this
release.

About CEC Entertainment, Inc.:

Celebrating over 30 years of success as a place Where a Kid can be
a Kid(R), CEC Entertainment, Inc. is a nationally recognized leader in
full-service family entertainment and dining. The Company's stores
feature musical and comic entertainment by robotic and animated
characters, games, rides and arcade-style activities intended to
appeal to families with children between the ages of two and 12. The
Company and its franchisees operate a system of 537 Chuck E. Cheese's
stores located throughout the United States (excluding Wyoming and
Vermont), Canada and abroad. Currently, 490 locations in the United
States and Canada are owned and operated by the Company. For more
information, see the Company's website at www.chuckecheese.com.

Forward-Looking Statements:

Certain statements in this press release, other than historical
information, may be considered forward-looking statements, within the
meaning of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, and are subject to various risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may differ from those anticipated, estimated
or expected. Among the key factors that may have a direct bearing on
the Company's operating results, performance or financial condition
are its ability to implement its growth strategies; national, regional
and local economic conditions affecting the entertainment/dining
industry; consumers' health, nutrition and dietary preferences;
competition within each of the restaurant and entertainment
industries; ability to retain key personnel; success of its franchise
operations; negative publicity; disruption of its commodity
distribution system; ability to protect its trademarks and other
proprietary rights; health epidemics or pandemics; acts of God;
terrorists acts; litigation; product liability claims and product
recalls; demographic trends; fluctuations in quarterly results of
operations, including seasonality; government regulations; weather;
school holidays; and increased commodity, utility, insurance,
advertising and labor costs.

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*T
CEC ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

Quarter Ended Year To Date Ended
------------------ ------------------
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
--------- -------- -------- ---------
(Unaudited) (Unaudited)

REVENUE:
Company store sales $ 191,354 $179,091 $435,573 $ 410,950
Franchise fees and
royalties 1,140 774 2,097 1,774
--------- -------- -------- ---------
Total revenue 192,494 179,865 437,670 412,724
--------- -------- -------- ---------

OPERATING COSTS AND EXPENSES:
Company store operating costs:
Cost of sales 31,102 28,924 69,199 64,921
Labor expenses 54,436 51,736 116,672 110,226
Depreciation and
amortization 18,241 17,293 36,705 34,150
Rent expense 16,357 15,779 32,853 31,704
Other operating expenses 27,811 28,665 58,449 58,297
--------- -------- -------- ---------
Total Company store
operating costs 147,947 142,397 313,878 299,298
Advertising expense 7,902 7,109 18,021 15,549
General and administrative 13,967 12,518 27,255 25,767
Asset impairment costs 137 1,278 137 1,278
--------- -------- -------- ---------
Total operating costs
and expenses 169,953 163,302 359,291 341,892
--------- -------- -------- ---------
Operating income 22,541 16,563 78,379 70,832
Interest expense, net 4,063 2,865 7,896 5,656
--------- -------- -------- ---------
Income before income taxes 18,478 13,698 70,483 65,176
Income taxes 7,170 5,150 26,264 24,608
--------- -------- -------- ---------

Net income $ 11,308 $ 8,548 $ 44,219 $ 40,568
========= ======== ======== =========

Earnings per share:
Basic $ 0.49 $ 0.27 $ 1.81 $ 1.26
Diluted $ 0.48 $ 0.26 $ 1.78 $ 1.22

Weighted average shares
outstanding:
Basic 23,116 32,020 24,439 32,093
Diluted 23,608 33,003 24,860 33,356
*T

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*T
CEC ENTERTAINMENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

June 29, December 30,
2008 2007
------------ ------------
ASSETS (Unaudited)

Current assets:
Cash and cash equivalents $ 17,171 $ 18,373
Other current assets 46,903 48,646
------------ ------------
Total current assets 64,074 67,019
Property and equipment, net 662,555 668,390
Other assets 4,196 2,484
------------ ------------

Total assets $ 730,825 $ 737,893
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt $ 783 $ 756
Other current liabilities 89,854 78,149
------------ ------------
Total current liabilities 90,637 78,905
Long-term debt, less current portion 406,384 329,119
Other liabilities 113,166 111,876
------------ ------------
Total liabilities 610,187 519,900

Shareholders' equity 120,638 217,993
------------ ------------

Total liabilities and
shareholders' equity $ 730,825 $ 737,893
============ ============
*T

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CEC ENTERTAINMENT, INC.
RECONCILIATION OF GAAP RESULTS TO NON-GAAP FINANCIAL MEASURES
AND OTHER SUPPLEMENTAL FINANCIAL DATA
(in thousands, except percentages)

The following table sets forth a reconciliation of net income to
Adjusted EBITDA and certain other supplemental financial data for the
periods shown:

Quarter Ended Year to Date Ended
------------------- -------------------
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
--------- --------- --------- ---------
(Unaudited) (Unaudited)

Revenues $192,494 $179,865 $437,670 $412,724
--------- --------- --------- ---------

Net income $ 11,308 $ 8,548 $ 44,219 $ 40,568
Add:
Income taxes 7,170 5,150 26,264 24,608
Interest expense, net 4,063 2,865 7,896 5,656
Depreciation and
amortization 18,390 17,589 36,843 34,675
Asset write-offs 324 2,594 941 3,721
Stock-based
compensation 1,527 1,210 2,602 2,084
--------- --------- --------- ---------
Adjusted EBITDA $ 42,782 $ 37,956 $118,765 $111,312
========= ========= ========= =========

Adjusted EBITDA
Margin 22.2% 21.1% 27.1% 27.0%
*T

The following table sets forth a reconciliation of cash provided
by operating activities to Free Cash Flow for the periods shown:

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*T
Quarter Ended Year to Date Ended
------------------ ------------------
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
-------- --------- --------- --------
(Unaudited) (Unaudited)

Cash provided by operating
activities $ 22,203 $ 4,828 $ 103,682 $ 89,577
Less:
Capital expenditures 21,255 29,607 39,342 58,186
-------- --------- --------- --------
Free Cash Flow $ 948 $(24,779) $ 64,340 $ 31,391
======== ========= ========= ========
*T

Adjusted EBITDA, a non-GAAP financial measure, is defined by the
Company as net income excluding income taxes, net interest expense,
depreciation, amortization, asset write-offs and stock-based
compensation. Adjusted EBITDA Margin represents Adjusted EBITDA
divided by revenues expressed as a percentage.

Free Cash Flow, also a non-GAAP financial measure, is defined by
the Company as cash provided by operating activities less capital
expenditures.

The Company believes that the non-GAAP financial measures above
provide useful information to the Company, investors and other
interested parties regarding the Company's operating performance, its
capacity to incur and service debt, fund capital expenditures and
other corporate uses. The non-GAAP financial measures presented in the
schedules above should not be viewed as alternatives or substitutes
for the Company's reported GAAP results. Adjusted EBITDA and Free Cash
Flow as defined herein may differ from similarly titled measures
presented by other companies.

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*T
CEC ENTERTAINMENT, INC.
STORE INFORMATION

Quarter Ended Year to Date Ended
----------------- ------------------
June 29, July 1, June 29, July 1,
2008 2007 2008 2007
--------- ------- ---------- -------

Number of Company-owned stores:
Beginning of period 490 485 490 484
New 1 4 1 7
Closed (1) (2) (1) (4)
--------- ------- ---------- -------
End of period 490 487 490 487
========= ======= ========== =======

Number of franchise stores:
Beginning of period 44 45 44 45
New 3 - 3 -
Closed - (1) - (1)
--------- ------- ---------- -------
End of period 47 44 47 44
========= ======= ========== =======
*T

CEC Entertainment, Inc.
Christopher D. Morris, 972-258-4525
Executive Vice President
Chief Financial Officer

Copyright Business Wire 2008