CEC Entertainment Reports Results for Third Quarter 2008

The Company's diluted earnings per share were $0.44 for the third quarter of 2008, as compared to $0.50 in the third quarter of 2007. The third quarter of 2008 includes certain items which the Company estimates negatively impacted diluted earnings per share by $0.13. These items include a $3.0 million, or $0.08 per diluted share, contingent loss with respect to ongoing legal matters and a $0.9 million, or $0.03 per diluted share, charge pertaining to vendor rebates. Additionally, the Company estimates that hurricanes occurring during the third quarter negatively impacted pre-tax results by $0.7 million, or $0.02 per diluted share.

Total quarterly revenue increased 2.2% to $201.9 million, compared with revenue of $197.5 million for the third quarter of fiscal 2007, driven by new store openings, franchise acquisitions and a comparable store sales gain of 1.1%. The Company estimates that short-term store closures resulting from hurricanes occurring during the third quarter negatively impacted comparable store sales by approximately 0.7%. The Company believes the comparable store sales gain reflects the success of its current strategies, including the ongoing capital initiatives at existing stores, the continuation of an enhanced marketing plan implemented at the beginning of the year and recent efforts to increase the number of birthday parties and fundraising events.

Richard M. Frank, Chairman and Chief Executive Officer, stated that, 'We are pleased with the strong financial performance during the first three quarters of this year with comparable store sales growth of 3.4% and diluted earnings per share growth of 31%, despite the negative impact of unusual items during the third quarter. Comparable stores sales growth of 1.1% during the third quarter was negatively impacted by short-term store closures resulting from hurricanes occurring during the quarter, as well as a weakening consumer environment. We remain confident in our sales strategies and believe they are working, yet recognize the growing challenges facing our customers. As a result, we remain cautious in our outlook for the future, yet confident that the company initiatives that were successful in building strong comparable store sales for the first three quarters of the year should work to mitigate any potential negative impact associated with a decline in consumer spending.'

Business Outlook:

The outlook for the consumer economic environment is markedly negative. The Company believes that the weakening of the economy has led to and will continue to lead to a restraint in consumer spending. While the Company remains confident in its sales strategies, it believes that forecasting comparable store sales in this environment is challenging. Accordingly, the Company is not providing specific comparable store sales guidance for the fourth quarter of 2008 or fiscal year 2009. However, the Company is providing the following guidance:

• if comparable store sales remain flat throughout the balance of fiscal year 2008, estimated diluted earnings per share for the fourth quarter and fiscal year-end will range from $0.15 to $0.17 and $2.42 to $2.44, respectively,

• within a reasonable range of sales volatility, the Company estimates that diluted earnings per share in both the fourth quarter and fiscal year-end will change approximately $0.02 with every 1% change in fourth quarter comparable store stores,

• if comparable store sales remain flat throughout the fourth quarter of 2008 and fiscal year 2009, estimated diluted earnings per share for fiscal year 2009 will range from $2.72 to $2.78,

• within a reasonable range of sales volatility, the Company estimates that diluted earnings per share in fiscal year 2009 will change approximately $0.12 with every 1% change in comparable store stores.

Incorporated into the fourth quarter guidance are the following assumptions:

• average price per pound of block cheese will be in a range of $1.80 to $1.85,

• labor expense as a percentage of Company store sales is expected to be higher than in prior year driven by an increase in group medical costs caused by a favorable adjustment taken in the fourth quarter of 2007,

• one new Company store will open in December 2008, bringing the total new unit openings in fiscal year 2008 to five,

• an effective tax rate of approximately 38.5% for the fourth quarter of 2008,

• total capital expenditures for fiscal year 2008 of $85.0 million.

Incorporated into the fiscal year 2009 guidance are the following assumptions:

• fiscal year 2009 is a 53 week year, the Company expects the addition of the extra week will benefit diluted earnings per share by approximately $0.10,

• average price per pound of block cheese will be in a range of $1.80 to $1.85,

• advertising spend will exceed fiscal year 2008 by 3% to 4%,

• six to eight new Company stores, including one relocation, and three to five new franchises will open during fiscal year 2009,

• effective tax rate will approximate 38.5%,

• total capital expenditures will range from $85.0 million to $90.0 million,

• free cash flow will be used to repurchase Company common stock on an opportunistic basis, the economic environment will impact the Company's decision with respect to free cash flow as it may be used to reduce the borrowings outstanding on the credit facility or build cash reserves.

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