CEC Entertainment Reports Financial Results for the Third Quarter

CEC Entertainment, Inc. (NYSE: CEC) today announced its financial results for the third quarter ended October 3, 2010. Total quarterly revenues increased 4.7% to $207.1 million during the third quarter of 2010 from total quarterly revenues of $197.8 million in the third quarter of 2009. Third quarter 2010 comparable store sales on a same calendar week basis (comparing weeks 27 through 39 of fiscal year 2010 to weeks 28 through 40 of fiscal year 2009) increased 3.8%.

“I appreciate the hard work of our operators and support center employees and look forward to the growth of our concept both domestically and internationally.”

Despite the increase in total quarterly revenues and comparable store sales, net income for the third quarter of 2010 decreased slightly to $12.6 million compared to net income of $12.7 million in the third quarter of 2009. The decline in net income reflects unfavorable items recorded during the third quarter of 2010 totaling approximately $1.1 million net of tax, or a $0.05 impact on diluted earnings per share, including asset impairment charges for three store locations and soft drink supplier transition costs. Diluted earnings per share increased to $0.60 for the third quarter of 2010, compared to $0.55 in the third quarter of 2009. Diluted earnings per share for the third quarter of 2010 benefited by the Company’s repurchase of approximately 3.0 million shares of its common stock since the beginning of the third quarter of 2009.

For the first nine months of 2010, total revenues increased 0.6% to $634.5 million compared to total revenues of $630.7 million in the first nine months of 2009. Comparable store sales for the first nine months of 2010 on a same calendar week basis (comparing weeks 1 through 39 of fiscal year 2010 to weeks 2 through 40 of fiscal year 2009) increased 0.8%. Total reported revenues for the first nine months of 2010 were unfavorably impacted by one additional operating week in the Company’s 2009 fiscal year which caused the seasonally strong first week of the 2010 calendar year to shift into the fourth fiscal quarter of 2009 instead of in the first fiscal quarter of 2010.

Net income for the first nine months of 2010 was $51.2 million compared to net income of $55.8 million in the first nine months of 2009. Diluted earnings per share decreased to $2.38 for the first nine months of 2010, compared to $2.42 in the first nine months of 2009, and was unfavorably impacted by a $0.13 per share tax adjustment recorded during the second quarter of 2010 and the unfavorable adjustments recorded during the third quarter of 2010. Additionally, diluted earnings per share was impacted by the Company’s repurchase of approximately 3.7 million shares of its common stock since the beginning of the first quarter of 2009.

Michael Magusiak, President and Chief Executive Officer, stated that, “Our third quarter financial performance including comparable store sales, operating margins and cash flow from operations reflects the strength of our industry-leading brand and the quality implementation of our strategies. During the first three quarters of this year we generated approximately $138 million of operating cash flow. We utilized $71 million for capital expenditures to add four additional stores and enhance 157 existing stores in the form of store expansions, major remodels and game enhancements. Additionally, during this same time period, we repurchased 1.9 million shares of our common stock, representing approximately 9% of diluted shares outstanding, for $67 million.

The strength and resiliency of our brand is also very evident over a longer time horizon. Despite economic headwinds as indicated by high unemployment over the past two years and three quarters, our cash flow has enabled us to materially enhance our restaurant/entertainment product and return a significant amount of capital to shareholders in the form of share repurchases. During 2008, 2009 and the first three quarters of 2010 we have added 14 new company stores and enhanced over 450 stores in the form of store expansions, major remodels and game enhancements. Additionally, over this same time period, we repurchased approximately 8.6 million shares of our stock representing approximately 37% of the average diluted shares outstanding over the repurchase period. We believe that our aggressive capital plan with our other sales strategies and significant share repurchases will enhance long-term shareholder value.”

Mr. Magusiak also stated, “I appreciate the hard work of our operators and support center employees and look forward to the growth of our concept both domestically and internationally.”

Business Outlook:

Based on its current estimates, the Company is projecting fourth quarter 2010 diluted earnings per share to be in a range of $0.17 to $0.19. This guidance incorporates the following assumptions for the fourth quarter of 2010:

• comparable store sales on a calendar week basis, up 2.0% to 3.0%;
• six to eight additional Company-owned stores, including one or two franchise acquisitions, and one relocation;
• average cheddar block prices in a range of $1.65 to $1.70 per pound;
• depreciation and rent expense will each grow approximately 4% from prior year quarter;
• advertising expense as a percentage of total revenues will decrease approximately 0.3 percentage points;
• effective tax rate of approximately 38.2%;
• capital expenditures will range from $32.0 million to $34.0 million;
• intent to repurchase Company common stock on an opportunistic basis.

In addition, the Company is projecting fiscal year 2011 diluted earnings per share to be in a range of $2.93 to $3.03. This guidance considers total capital expenditures ranging from $93.0 million to $97.0 million, impacting approximately 200 stores and the addition of approximately six to eight Company-owned stores.

About CEC Entertainment, Inc.:

Celebrating over 30 years of success as a place Where a Kid can be a Kid®, CEC Entertainment, Inc. is a nationally recognized leader in family dining and entertainment. Chuck E. Cheese's stores feature musical and comic entertainment by robotic and animated characters, arcade-style and skill oriented games, video games, rides and other activities intended to appeal to families with children between the ages of two and 12 and offers a variety of pizzas, sandwiches, appetizers, a salad bar and desserts. The Company and its franchisees operate a system of 546 Chuck E. Cheese's stores located in 48 states (excluding Wyoming and Vermont) and six foreign countries or territories. Currently, 500 locations in the United States and Canada are owned and operated by the Company. For more information, see the Company’s website at .

Logos, product and company names mentioned are the property of their respective owners.

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