Ladies and gentlemen thank you for standing by and welcome to the CEC Entertainment teleconference. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, today’s conference is being recorded. I will now like to turn the conference over to our host, Mike Magusiak; please go ahead.

Thank you. Welcome to our conference call. I’m Mike Magusiak, President of the company and I’m joined by Dick Frank, our Chairman and CEO; and Chris Morris, our Executive Vice President and Chief Financial Officer. Before we begin today’s discussion, I would like to make you aware that some of the information presented today may contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those implied in the forward-looking statements. Information regarding the company’s risk factors was included in our press release and is also included in the company’s filings with the SEC. Additionally, in today’s discussion, we may refer to certain non-GAAP financial measures. For a reconciliation of our reported results to such non-GAAP financial measures, please see the earnings release filed earlier today or the Investor Information section of the company’s website. The primary objectives for today’s call are first, to discuss our financial performance during the third quarter of 2008; next, to discussion our strategic plan intended to maximize long-term shareholder value and produce significant free cash flow. Our strategic plan focuses on initiatives to increase comparable store sales and grow our concept with new units intended to produce a high return on investment. Third, Chris will discuss our outlook for the business in the fourth quarter and 2009 and finally, Dick will provide some concluding remarks and then open the lines for the question-and-answer session. Now, I'd like to turn the call over to Chris Morris, who will review our financial performance.

Thank you, Mike. The positive comparable store sales were at momentum we generated in the first half of the year continued into the third quarter despite a difficult macro environment and the number of temporary store closures relating to hurricanes. Third quarter comparable store sales growth was 1.1%. By period, comparable store sales were up 2.4% in period seven, up 1.8% in period eight and down $0.07 or 1% in period nine. Period nine, comp store sales growth was negatively impacted by 39 temporary store closures related to hurricanes Ike and Gustav. As a result of these closures, we lost approximately 265 store operating days during the quarter, which we estimate negatively impacted period nine in Q3 comps by 1.9% and $0.07 or 1% respectively. Accordingly, our best estimate is that Q3 comps would have been positive 1.8% without any impact from hurricanes. We believe five major sales initiatives are positively impacting sales. First, a strong capital plan for existing stores; second, multiple strategies to increase purchase sales; third, a focused effort on suggesting selling in our stores; fourth, strategies to increase school fund raising events; and finally, enhance multi-media marketing plan directed towards kids. In a few moments, Mike will discuss each initiative in further detail. Now let’s quickly review the bottom line performance. We reported third quarter earnings of $0.44 per diluted share. We estimate that Q3 was negatively impacted by three unusual items totaling $4.6 million or $0.13 per diluted share. First, we estimate hurricanes Ike and Gustav impacted third quarter pretax income by approximately $650,000 or $0.02 per diluted share. Second, during the quarter we booked a one-time adjustment with respect to vendor rebates. The total non-cash pretax charge was $950,000 or approximately $0.03 per diluted share, which was recorded in cost of sales and finally…

Thanks, Chris. Our strategies to increase comparable store sales execute cost containment initiatives to maintain industry leading margins and significantly increased earnings per share are evident in our year-to-date financial performance. During the first three quarter of ’08, comparable store sales increased 3.4% and earnings per share grew 31%, despite certain unusual items during the third quarter. I will first review with you our 2008 strategies to maximize long-term shareholder value including our comparable store sales initiatives and our development plan to open high sales volume stores that produce a strong return on investment. I will then discuss our 2009 strategies including a significantly enhanced sales plan as well as the development of company and franchise new stores. We established five major sales initiatives at the beginning of this year to increase comparable store sales. We believe that each of the five initiatives are positively impacting sales. These are: first, a strong capital plan for existing stores; second, multiple strategies to increase birthday sales; third, suggested selling emphasis and programs; four, strategies to increase school fundraising events; and fifth, an enhanced multi-media marketing plan directed to moms and kids. The first initiative to increase comparable store sales is a strong capital plan. This year, we intend to spend approximately $50 million on existing store capital expenditures, which will impact approximately 161 stores or 35% of our comparable store base. The detailed breakdown of our ’08 capital plan includes 16 major remodels, 20 store expansions and 125 game enhancements. Year-to-date, we’ve completed eight store expansions, 11 major remodels and 82 game enhancements. We track each capital improvement by store and evaluate sales before and after the capital expenditure. Each capital initiative category is driving comparable store sales and we believe not only protects our company’s strong cash flow, but it will…

Thanks Mike. As we begin the fourth quarter the outlook for consumer economic environment was increasingly negative. The combination of following housing prices, rising unemployment in a growing concern about the future of the U.S economy appears to be causing a significant pull back in consumer spending As a result, it’s difficult to estimate our confidence, the debt and duration of the slowdown in consumer spending. We believe the initiatives that were successful in building sales 3.4% for the first three quarters of the year were worked to ease the negative impact of the slowdown in consumer spending. While we remain confident of our sales strategies, we also recognized the pressure the consumers now they are heading into the holiday season, and realize the comparable store sale could be very volatile in a low seasonal fourth quarter. Leave us to say predicting sales in this type of environment is a challenge. As a result of these unique times, we are not providing specific comparable store sales guidance for the fourth quarter. However we are providing the following information regarding Q4 in fiscal year ’08 financial performance. Comparable store sales for the first three weeks of the fourth quarter are essentially flat or down $0.06 to 1%. The comparable store sales remain flat through out the balance of the quarter, our estimate of dilute EPS for Q4 is a range of $0.15 to $0.17 and for fiscal year ’08 a range of $2.42 to $2.44. Additionally, within the reasonable range of sales volatility, we estimate, the diluted EPS in both the fourth quarter and fiscal year will change approximately $0.2 with every 1% change in Q4 comparable stores sales revenue. Incorporated into these estimates are the following assumptions. We assuming the average price per pound of block cheese will be in…

Thanks, Chris. Due to the first three quarters of 2008 comparable store sales have been positive 3.4% with earnings per share increasing 31%, despite the negative impact of certain unusual items during the third quarter. We believe this performance specifically the comparable store sales performance demonstrates the effectiveness of the five key strategies implemented to drive sales in 2008. These strategies include a strong capital plan, an aggressive approach to birthday party sales an enhanced focused on school fundraising and suggestive sales programs, all reinforced by a solid marketing plan incorporating a strong multi-media effort targeted at moms and kinds. The performance of the first three quarters of 2008 translated into $125 million of operating cash flow reflecting the financial strength of our company. As we begin the fourth quarter, we are faced with both a difficult and largely uncertain economic environment. We are unable to predict with any degree of certainty what this downturn in the consumer environment might mean to our business in the near term, but our focus going forward is clear. Our sales plan in 2008 has been extremely successful as evidenced by the same-store sales performance to-date and we believed our plan for 2009, as outlined previously by Mike is even stronger. We have a great brand and Chuck E. Cheese, the financial strength to continue to evolve an enhanced our product offerings for our guest in the people to execute our plan in a quality and timely manner. This is within our control and we believe as executed properly should result in long-term shareholder value. At this time Mike, Chris and I will be glad to answers, any questions you may have.

(Operator Instructions) Your first question comes from Robert Derrington - Morgan Keegan.

I’ve got a couple different questions; first off, I am not sure who to direct the question to, and I’ll pick on you Mike. There are number things that clearly drove sales during the quarter, one of which were the fundraisers. You had great increase, great growth there, and also in the birthday party program, but obviously with comps being as they were, obviously there were weakness in the base business. Can you kind of give us a little bit of color of where that weakness is? Is that the daily walkup business you might see Mike? Or how would you describe it?

Yes, Bob I’ll take that and Chris may add to it. I think first of all as we look throughout the quarter each of our periods were positive in comparable store sales for both period seven, period eight and period nine, if you back out the hurricanes. So, relatively speaking, we had strong sales performance across the quarter, but then if you break it out a little bit deeper than that, on a yearly basis, every region of the company is positive in sales. With that being said, if you look at the third quarter, our California western region was down almost 2% and so we saw the west coast drop off in sales. If you dig even a little bit deeper than that and you just look across United States, we still had an awful strong quarter in the southwest, it was up about 4% in the east it and was up about 3.4% for the quarter. So, more than anything else what we saw was some regional variability to our comparable store sales in the third quarter. Robert Derrington – Morgan Keegan : Okay and the other thing that kind of was a little bit different color than you’ve typically given us, was the wording about the fact that your free cash flow, you may be using it to reduce borrowings on the outstanding credit facility or to build cash reserves. Can you give us some color; have you had conversations with the banks, which have asked you to be a little bit more conservative with your plan?

I’ll take that. Bob, this is Chris. We have had conversations with most of our large banks and our banks continue to be very supportive of our initiatives. They are very pleased with the ability to grow sales at a very difficult time. At this point in time, they have not indicated any concern whatsoever with respect to our ability to continue to comply with all the terms of their credit agreements as well as they haven’t indicated any concerns at all as to the banks continuing to fund our line of credit. So that’s the reason we had those comments in our prepared remarks is just given that the overall economic climate we felt that first, we wanted to give the investment community some details around the key covenants within our credit agreement and to assure you that not only are we complying, but we have a very comfortable cushion. Secondly, as we look out to 2009, at this point in time we do continue to plan on using our free cash flow to repurchase shares in an opportunistic manner, but we also are going into this with eyes wide open and we are going to continue to evaluate our sales on a cash flow trend and we have the flexibility that in the event that the consumer environment continuous to soften, then we may look at our capital structure and our capital allocation differently. So that’s all we were trying to communicate. Robert Derrington – Morgan Keegan: And then one last question if I may? As we come in and look forward into 2009 obviously the first half of this year was a really strong performance for the company, same store sales particularly and as you come up against those tough numbers Mike you had commented about the possibility of seeing birthday party sales increases improve in ’09, which may be able to help you offset those. Is birthday party increase enough to help those comps year-over-year be positive, against the tough numbers?

Yes, I think where we were optimistic about our sales strategies Bob is for a couple of reasons. First of all, we shared with you that our average expansion is increased sales in excess of 20% over the past three years; sales increased in excess of 20%. If you look at the fourth quarter of this year, we are going to complete 12 expansions and next year 25 to 30 expansions for the year. So, if you just take the store expansions in ’08 and ’09, we are going to complete 45 to 50 stores, which represents above 10% of our comparable store sales base; we believe that that will increase comparable store sales. The second point regarding the birthday parties, we gave you two specific numbers as it’s relates to birthday party sales increases and in the first six months of the year or the first five months of the year, we increased birthday sales 6%. Since that time, when we improved our birthday party package and we started advertising it on TV, we’ve increased birthday sales by 15%. So, we can see, what we believe is a good pickup in birthday sales for the first half of next year. Then finally and I would not under estimate this, but as we produce a very strong product in the marketplace along with a strong capital plan, I think Dick Houston and his team have pulled together a very strong plan for next year, we’re increasing the commercials, our points targeting moms and kids by 7% plus we’re in essence going on online media for almost the entire year. So I would say, it would be the combination of those three along with other sales initiatives that we’ve discussed.

Your next question comes from Michael Gallo – CLK. Michael Gallo – CLK : A question that I have is around just mix of business what you’re seeing over the last, I don’t know, three or four weeks. Where do you see the significant shift in people spending less on the games that they come in or are you seeing real changes in customer behavior in a more erratic? Just want to get a sense of whether people are starting to pull back on the game spend, spending less money per occasion, or whether you’ve seen any changes in the average check of the last three or four weeks? Thank you

We have not seen a material shift in our mix over the last several weeks. Michael Gallo – CLK : Okay, that’s helpful. Secondly, Chris did you buy back any stock in the quarter? Shares did you buyback and what was the average price?

We did not repurchase any stock in the third quarter. We achieved our targeted leverage ratio of 2:1 at the end of the second quarter and when we entered the third quarter, we were still at 2.1:1, so we are still within our target leverage ratio. We did not buy any stock in third quarter. Michael Gallo – CLK : It sounds like from your commentary that it’s fair to assume that we should expect buybacks, if there are any fairly approximate free cash flow, -- you don’t want to move that leverage ratio too much higher from where it is now. Although, obviously I understand it would be opportunistic under some circumstances. Is that fair characterizations?

That is a fair characterization, as I just stated we did achieve that target leverage ratio, so we’re comfortable with that. I would not look for us to materially change that at this point in time anyway and so from this point forward its just a be matter of using our free cash flow to repurchase shares on an opportunistic basis.

Your next question comes from Brad Ludington - KeyBanc Capital Markets. Brad Ludington – KeyBanc Capital Markets: I wanted to ask first of on your ’09 guidance, the assuming flat same store sales, the 272 to 278 does that incorporate $0.10 from the additional week in the fourth quarter?

Yes. The overall guidance does, but when we said, we assume that our EPS will be within a range assuming flat sales that incorporate $0.10 and then the metrics is just either on top of that or bellow that.

Okay and then going forward, I mean all the way through 2009, it’s probably the best assumption is that, you will not be taken on anymore debt. That correct?

Yes, that’s correct. Incorporated into our, that the financial information we gave you as far as ’09, we’re just assuming that we maintain our leverage and we use free cash flow to repurchase shares.

Okay and then just what was the rebate adjustment this quarter, was that I didn’t understand what you’re talking about, something extraordinary or something that just normally little ahead cause every once in while?

No, it’s a more of unusual charge; the $940,000 reflects a one-time non-cash charge related to the timing of when we recognize the benefit of vendor rebates. Historically, our approach has always been to reflect rebate in our P&L as we purchased product from corresponding vendor. From this point forward rebate will be reflected in our P&L as the product is used, which we believe is a more appropriate recognition policy. The $948,000 was the necessary one-time charge adjusting to the revised recognition policy, but again, from a cash flow perspective there is no impact, we still expect to receive the same rebate amount over the same period of time.

Okay and then final thing. What did you say; your CapEx was in the third quarter? I have buzzed out on that one.

We said that the CapEx for the first three quarters of this year was $63 million.

Your next question comes from Greg Ruedy - Stephens.

I want to ask you about the birthday business and as we move out of summer months into the school session. Can you just kind of, maybe elaborate for us, how that mix shifts, how much business you lose during the week, because you are back in school, and then what opportunity do you have to drive capacity, if it’s more of a weekend based business?

Sure. If you look at the rest of this year to seasonal low quarter, so there would be no capacity issues whatsoever from driving birthday sales for rest of this year.

But in terms of the birthday mix during the week, how much falls off, as you move out of the summer months?

Yes, I mean it’s fairly significant. I mean the overwhelming majority of the birthday parties when kinds are in the school, occur on the weekend so its significant.

But it will be comparable to last year during same seasonal period.

Right okay. Getting back to the expansion plan for the next year 25 to 30, how much of that is due to your retail neighbor is going dark and is there anything, and totally may be you can share with us about conversations with the landlords regarding lease rates renewing or securing new leases?

The increase in expansions is primarily attributable to the sales results that we’ve achieved from expansions over the past three years. As we become more aggressive in expanding our store base, we have really been pleased with the sales and the cash return on investment from expansions. So, if you go back really about 1.5 year ago, we have been very aggressive talking to landlords about expanding next door, and as we’ve done that as well as expand it free standing units that owned or we lease, that effort is just calumniated that we have an awful a lot of momentum in 2008, and 2009 and we believe that will also carry into 2010. As far as lease rate, we continue to be aggressive on lease renegotiations for both new stores, and expansions. One of the benefits that we have of being so financially strong in paying our bills, and being a great tenant to landlords is our financial strength. So, we are able to negotiate from our perspective favorable lease rents in a soft real estate market.

(Operator Instructions) Your final question comes from Margot Murtaugh - Snyder Capital. Margot Murtaugh – Snyder Capital: What are the terms of your credit line, is it LIBOR plus some percentage?

Our credit spread based on a leverage ratio of 2:1, our currently spread is 100 basis over LIBIOR Margot Murtaugh – Snyder Capital: Okay. Any comments on pricing, is there any raising price in your comparable store sales or is it, you don’t have pricing flexibility at this point? I know your raised prices a while back.

We did raise a while back at the beginning of 2008, and as a result of those increases, there is approximately a 1.8% increase in prices during the third quarter and will continue to the fourth quarter and then we lap the adversary of that increase in the first quarter of ’09. Margot Murtaugh – Snyder Capital: And some of you talk about the kids movies schedules; what do you foresee in the coming months, anything favorable to your or not?

We really see a neutral movie schedule in the fourth quarter, that there is certainly nothing that alarms us at this point in time. Margot Murtaugh – Snyder Capital: Okay and could you remind me what percentage of your cost are achieved, do you break that out?

Yes, approximately 20% of our food cost dollars are from cheese. Margot Murtaugh – Snyder Capital: Of food cost dollars, okay.

Dollars, which is in other words approximately 2% of our sales.

There are no additional questions at this time.

We appreciate your participating on our conference call. If you have any additional questions, please feel free to call Dick, Chris or myself. Thank you.

Ladies and gentlemen that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.