CEC Entertainment Reports Fourth Quarter and Fiscal Year-End Earnings.

IRVING, Texas -- CEC Entertainment, Inc. (NYSE:CEC) today announced earnings for the fourth quarter and fiscal year-ended December 30, 2007.

Revenues for the fourth quarter of 2007 and fourth quarter of 2006 remained constant at $175.1 million, as growth from new store development was offset by a decline in comparable store sales of 2.7%. We reported a net loss of $0.6 million in the fourth quarter of 2007 compared to net income of $12.1 million in the same period of 2006. Diluted earnings per share in the fourth quarter of 2007 decreased to ($0.02) per share from $0.36 per share in the fourth quarter of 2006. Included in 2007 and 2006 fourth quarter results were asset impairment costs totaling $8.4 million and $0.4 million, respectively. Additionally, the fourth quarter of 2007 was negatively impacted by certain tax related adjustments totaling approximately $2.0 million.

Revenues for 2007 increased to $785.3 million from $772.6 million in 2006 primarily due to new store development. Comparable store sales declined 1.4% during 2007. Net income for 2007 decreased to $55.9 million from $68.3 million in 2006. Diluted earnings per share in 2007 were $1.76 per share compared to $2.04 per share in 2006. Included in the 2007 and 2006 fiscal year results were asset impairment costs totaling $9.6 million and $3.9 million, respectively. Excluding asset impairment costs, fiscal year 2007 net income and diluted earnings per share would have been $61.8 million and $1.95, respectively.

During 2007 the Company repurchased $248 million of Company stock representing 7.9 million shares or approximately 25% of diluted shares outstanding at the end of the year. This included $144.6 million used in the fourth quarter of 2007 to repurchase 4.0 million shares of Company stock, which brought the remaining balance on the Company's share repurchase authorization to $232.2 million at the end of 2007. Outstanding borrowings on the Company's $550 million line-of-credit totaled $316.8 million at the end of 2007. At this point in time, the Company continues to believe it will achieve its targeted Debt-to-Adjusted EBITDA ratio of 2:1 and complete the share repurchase authorization within the next three years.

Richard M. Frank, Chairman and Chief Executive Officer, stated that, "We believe sales and operating results in the 2007 fiscal year were negatively impacted by pressures on consumer disposable income. Although disappointed by the sales trend in 2007, we continue to believe our strategies will positively impact sales and earnings, and over the long-term will deliver an excellent experience for our guests and solid performance for our shareholders.

"The 2008 fiscal year is off to a positive start with comparable store sales increasing 2.5% in the first seven weeks of the year. This is particularly encouraging when considering comparable store sales were up 2.7% in the first seven weeks of 2007. We believe we have a strong sales plan for the year and view the early sales performance of 2008 as reinforcing our strategies. However, given the challenging consumer environment, we remain cautious in our outlook for 2008. We're currently estimating comparable store sales growth in fiscal year 2008 to be in a range of flat to up 1%. This may prove to be conservative given our performance to date, but we recognize that seven weeks of performance is a short period of time."

Business Outlook:

Based on current estimates, the Company expects diluted earnings per share to range from $ 2.15 to $2.25 per share for the 2008 fiscal year and $1.10 to $1.15 per share for the first quarter of 2008. Incorporated into this guidance are the following assumptions:

* Comparable store sales growth of flat to positive 1% for the 2008 fiscal year;

* The average price per pound of block cheese for the 2008 fiscal year to be in a range of $1.70 to $1.80;

* An increase in labor expenses for the 2008 fiscal year, primarily driven by higher wage rates, of 0.7% to 0.9% as a percent of revenue;

* 6 to 7 new company units and 4 new franchise units during the year;

* Total capital expenditures for the year of $80 to $85 million;

* Free cash flow will be used to repurchase company shares; and

* An effective tax rate of 38% for the year.

Fourth Quarter Conference Call:

The Company will host a conference call today, February 19, 2008, at 3:30 p.m. Central Time to discuss its fourth quarter and fiscal year-end 2007 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 Performance 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 performance measures such as Earnings Before Interest, Taxes, Depreciation and Amortization ("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 30 years of success as a place Where a Kid can be a Kid[R], CEC Entertainment, Inc. is a leading innovator in the family restaurant/entertainment industry. The Company and its franchisees operate a system of 534 Chuck E. Cheese's restaurants 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.

Chuck E Cheese'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.

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 CEC's operating results, performance or financial condition are its ability to implement its growth strategies; national, regional and local economic conditions affecting the restaurant/entertainment industry; competition within each of the restaurant and entertainment industries; success of its franchise operations; negative publicity; health epidemics or pandemics; acts of God; terrorists acts; litigation; demographic trends; fluctuations in quarterly results of operations, including seasonality; government regulations; weather; school holidays; increased commodity, utility, insurance, advertising and labor costs.

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

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Adjusted EBITDA, a non-GAAP 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 EBITDA divided by revenues expressed as a percentage.

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

The Company believes that the presentation of non-GAAP performance measures provides useful information to 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 performance 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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The following table sets forth a reconciliation of cash provided by operating activities to Free Cash Flow:

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Adjusted EBITDA, a non-GAAP 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 EBITDA divided by revenues expressed as a percentage.

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

The Company believes that the presentation of non-GAAP performance measures provides useful information to 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 performance 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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