Ladies and gentlemen, thank you very much for standing by. And welcome to the CEC Entertainment First Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, with instructions provided at that time. (Operator Instructions) As a reminder, today’s conference is being recorded. And now I’d like to turn the conference over to your host, President and CEO, Mr. Mike Magusiak. Please go ahead, sir.

Thank you. Welcome to our conference call. I'm Mike Magusiak, President and CEO of the company, and I'm joined by Dick Frank, our Executive Chairman; and Tiffany Kice, 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. Reconciliation information related to non-GAAP financial measures discussed on this call may be found in the company's first quarter earnings releases and on the company's website under Investor Information. Tiffany will begin today’s call with an overview of our financial performance during the first quarter of 2013. I will then discuss our sales performance to date, our strategic plan and our growth opportunities. Tiffany will then go over our business outlook and finally, Dick will provide concluding remarks before we open the call for Q&A.

Thank you, Mike, and good afternoon, everyone. Comparable store sales for the quarter increased 1.6% with January up 2.1%, February down 6.8% and March up 9.2%. As previously communicated during our year end earnings announcement, February began with the difficult start, with the first two weeks of comparable store sales coming in down approximately 14%. We believe the primary factors that drove this decrease were external in nature and related to the delay in tax return refund, the expiration of the 2% payroll tax break and the increase in gas prices. With the second half of February coming in flat and March coming in at up 9.2%. We believe that we benefited from the late income tax refund, as well as comparison to sales negatively impacted by unseasonably warm weather in March of the prior. Given the continued positive performance into the month of April of 4.8% in comparable store sales, we believe that our strategies are beginning to gain momentum, although we remain in the early stages of this evaluation. Diluted earnings per share increased to $1.90 for the first quarter of 2013, as compared to $1.81 in the prior year. I’ll now walk you through the details of our financial results. Total revenues increased $8.5 million or 3.4% to $255.3 million in the first quarter of 2013, with approximately $3.9 million of the increase being derived from the 1.6% increase in comparable store sales and $4.6 million and additional revenue from new store openings in both fiscal 2012 and 2013. Cost of food, beverage, entertainment and merchandise as a percentage of company store sales decreased 50 basis points. We believe this decrease was primarily attributable to changes in our pricing strategy that was fully implemented in the fourth quarter of 2012. The decrease was partially offset by $0.14…

Thanks Tiffany. We continue to believe that we have developed a very solid sales and profitability plan for 2013, as well as lay the foundation to increase long-term shareholder value. Comparable store sales increased 1.6% during the first quarter, the breakout by period is as follows, period one was positive 2.1%, period two was negative 6.8% and period three was positive 9.2%. We believe the increase in comparable store sales is primarily related to record warm weather in the Midwest and Northeast in March of 2012, which negatively impacted our prior year results. Additionally, while we are still in the early stages of evaluating the impact of the changes to our strategic plan implemented earlier this year. We believe that certain components of our strategy are beginning to gain traction. Comparable store sales during the first four weeks of the second quarter have increased 4.8%, resulting in year to date comparable store sales increasing 2.3%. Year-to-date comparable store sales in the first 17 weeks of the year by region are as follows, the Western region was positive 0.6%, the Northeast was positive 1.8%, the Southeast was positive 2.9% and our Central region was positive 3.9%. We remained committed to our strategic plan which we believe will increase sales in 2013 and establish a strong foundation to build future sales. The main components of our plan are: first, a strong marketing plan targeting both kids and moms with the objective of increasing guest traffic; second, the continued execution of our value proposition supported by advertising; and third, an enhanced strategy of capital reinvestment into our existing locations. As previously communicated, our marketing expenditures are expected to increase approximately $6 million to $41.4 million in 2013 from $35.4 million in 2012. Advertising expenditures increased $2.8 million in the first quarter which represents…

Thank you, Mike. As Mike discussed we believe that our sales are starting to gain momentum with year-to-date sales coming in at up 2.3% through April. However, given the substantial volatility we experienced during the first quarter, we remained cautious. At this time, we anticipate an increase in comparable store sales of 1.5% to 2.5% for the fiscal year and diluted earnings per share to be in a range of $2.80 to $2.95. Incorporated into this guidance are the following assumptions for fiscal 2013. 12 to 15 new company-owned stores, including one store relocation; average cheese block prices in the range of the $1.75 to $1.85 per pound; depreciation and amortization to remain relatively flat; rent expense to increase approximately 4% to 5% from the prior year; advertising expense to increase $6 million from the prior year to support our comprehensive and multifaceted advertising plan; capital expenditures to range from approximately $82 million to $84 million and payment of four quarterly dividends totaling approximately $17 million. I will now turn the call over to Dick for some concluding remarks.

Thanks, Tiffany. We’re encouraged by the financial performance of the first quarter with comparable store sales, increasing 1.6% and diluted earnings per share increasing to $1.90. As both Mike and Tiffany pointed out, we experienced a great deal of sales volatility within the quarter with February comparable store sales being negative 6.8% before posting positive comps in March of 9.2%. This type of volatility makes an evaluation of our sales strategies difficult. But given the sales performance through April of 2013, we do believe our strategies are beginning to gain traction. As we look back over the year -- over the last year, 18 months, we believe we have learnt a great deal as we have attempted to revitalize our brand in advertising as we move to the future. In essence, we have been focused on laying a foundation for future growth. Key elements of our plan include first, everyday value messaging, supported by a multimedia campaign. Second, aggressive advertising targeting both kids and moms. Third, revise capital plan that will allow us to impact our stores more frequently at a reduced capital costs. Fourth, the introduction of new major entertainment attractions, which will begin to test as early as this summer. And lastly, growth through both domestic and international new store development. Certainly, our strategies will evolve over time. But we believe that these key elements will guide us in the years ahead. At this time, Mike, Tiffany and I will be glad to answer any questions that any of you may have.

(Operator Instructions) And we’ll now go to our first question from the line of Michael Gallo with C.L. King. Please go ahead.

Hi. Good afternoon and good to see the stabilization.

Thank you.

Mike, I just want to parse in a little bit more on just the weather impact. Obviously, March was unseasonably cold, particularly in the Midwest, but I mean to a large degree I think a lot of April was as well. You gave the break down I think of the Central Region year to date. I was wondering if you have a breakdown of what the Central Region did in March and April and what the other regions did on a relative basis in those months.

Yeah. I mean. First in April -- I'm sorry, starting with March, the central was up 12.2%, but the northeast was up 15.1%. The southeast was up 11.2%. The western was 0.5% down and then in April every one of the regions was positive. The western was up 2.9%. The northeast was up 3.2%. The southeast was up 5.1 and the central was up 8.4.

Okay. Great. I guess when you look at just the characteristics of the comps. It seemed like at least in the quarter that you reported that you saw a bigger increase on the entertainment revenue as a component of the comp and as opposed to the food. Was that at all a reflection of how you bundled the offers? Help us with how we should look at that because it seemed like you saw a greater complaint growth on the entertainment side? Thank you.

Tiffany can take that piece.

Yeah, Mike. I mean, we really look at the total revenues first off and we are pleased with the 3.4% increase there. Your correct food and beverage has remained relatively flat. So, what I think you are seeing is kind of the rebalancing of our menu and a lot of the changes that we have made from a pricing strategy on the menu board. We have lowered the pizza prices, changed the components in the value meals and what we believe happening is more people are buying more tokens through the bill changer and other ways and so that’s increasing your merchant entertainment line.

Okay. Great. Thank you.

And then just one thing to add on to what Tiffany was saying and Mike, a question that you had about the weather last year. Our comps last year in March were down 8.5%. But I don't believe that was all weather because the prior year in March, the comps were actually positive 5.1%. So it is always difficult on a period-by-period basis with our concept to look comps, at comps over a short period of time. So what we look at is on a broader basis through April that they are up about 2.3%. And I think that’s a function of a number of strategies that we implemented. First, as we said earlier, we increased media weights by about 37% in the first quarter, and that's relatively comparable to the 27% increase for the year. Secondly, we talked about the value proposition. And I really think that as we have lowered our menu price points for value deals, pizza and salad bar and then also offering our guests more flexibility with coupons that that is a much better value for our guests. And then third, we are actually supporting that with a specific commercial that started airing February, the 18th to parents talking about our everyday value. And then we started a promotion in April of this year with augmented reality, and we believe that providing our guests not only with brand message, but also promotional messages for reasons for kids to come in helps our guest visitation. And we're going to continue that through the rest of the year with our next promotion starting at the beginning of June. So that from my perspective are the primary factors that impacted sales.

Thanks very much.

Thank you. We will now go to the line of Will Slabaugh with Stephens Inc. Please go ahead.

Yeah. Thanks. This is J.R. Bizzell on for Will. Congrats on the quarter, guys and ladies. I just wanted to -- I know you said media was up 37% in 1Q. The media spend is up in 1Q. Just wondering if you can give us an idea what the out quarters are going to look like on a percentage increase basis.

Yeah. We would be happy to do that. When I mentioned that 37% that is in trips, media weights on television. But what you are going to see is that by far is the biggest increase for the year versus second quarter it might be up around a million and a half. And then both the third and fourth quarters are both below a million dollar increase, so substantial decreases versus the dollar increase in the first quarter. And that may move a little bit, but that will give you some perspective on the dollar spend.

And some of that is because we had already started doing the digital advertising in the latter half of 2012.

Thanks for the detail. Switching to -- on that marketing plan I know you’ve re-ramped it and it is showing great success so far. And just wondering if you can kind of discuss the mix you are seeing, maybe on the menu front? Are you getting more -- on a demographic basis, is there a change you are experiencing?

We don't see a necessary shift there. We are in our stores all the time and we don't see any evidence of that. What I do think is happening is we have a very good value now on our food, and we also have a very good and excellent value on our tokens. I think that just gives the marketing a much stronger base to advertise fun for all, fun for less.

All right. Great. Congrats on the quarter.

(Operator Instructions) We will now go the line of Robert Derrington with Northcoast Research. Please go ahead.

Yeah. Thank you. Mike, along the line of the mix profile, not your customer mix but essentially what they're buying. Did you see a variation between the bundle deals, more large bundles or medium-sized or any kind of help that you can provide us with there?

Yeah. I would be to happy to do that, Bob. I think first of all, what we saw was a significant increase in value deals and we really see that as positive because that’s what we are trying to do is to promote everyday value in our stores. And one of the things that we did is we dropped the price points on those value deals and we now have across United States, a value deal that starts at $19.99. And that is up significantly, Bob, because of that price point. But what happens is when kids run out of tokens and they will buy more tokens, whether it would be a bill changer or token deals and add on other food items to that lower-priced value deal.

One thing that I noticed, Mike, that $19.99 deal you are talking about used to be a thought, a large pizza with two drinks and 25 tokens. And now it looks like I think it is a medium pizza with two drinks and 20 tokens. So was that part of the plan to kind of help keep prices similar, but also maybe help your cost of sales?

That’s exactly right, Bob. Our discounts on our value meals are very similar to the older discounts, what’s much more attractive is our price points for those value meals, but the discounts are fairly close.

Have the consumers, as they look at these things, do they tend to ask questions to be concerned or any issues around resistance to that or was the mix more than satisfactory?

No. Just the opposite from my prospective Bob, to me the way I measure either acceptance or any hesitation toward them is, what they pull out of their valets and value meals are up significantly. So we’ve actual seen that been very, very well receive and then we couple that with coupon that add much more flexibility albeit at lower discount but because of the coupons have packaged deals and offers to buy wings or salad bar or tokens, guest have much more flexibility in selecting coupons that meet their specific family needs

Bob, the other thing on our value packages that I think is important when you talk about acceptance. Past, just wanting to get a 999 price point and rebalance between our food and token value, we had also few our research in just be now the store is new, previous to that we really didn’t have a value package really for the family sizes of Mom’s or Dad’s coming in with their child or three people. And with all of our packages prior to that, starting with a large pizza and four drinks, we felt we didn’t have real a value offering so again the smaller party size, and so I think that as Mike said, the acceptance of that 999 for our guest to spend were really positively receive and we see that in the mix I believe.

No. Along that line, Dick, could you give us a little bit of color on how, one last question, yeah, I'm sorry, how did the birthday party business do relative to some of the just traditional walk up business, I know walk up business at one time had been somewhat soft, how is that mix?

I’ll take that and I will turn it back over to Dick on kind of foundation of where we are growing our concept, because I think what you see in the first quarter, Bob, is really just the first time that we’ve had all of our strategies fully implemented in, from my perspective and I also believe from Dick or Tiffany’s, all we’re doing is laying the foundation to grow future sales and profitability. But if you look on a year-to-date basis through April and I might be off a little bit. birthday sales were down about 6% -- 5% to 6%. And we believe that the primary reason for that is we’ve shifted a significantly more percentage or a higher percentage of our advertising spend on TV to everyday occasions. And birthdays are very, very important to us but as we've been trying to drive more frequency on and everyday occasion. We’re still going to focus on birthdays. We’ve got a new birthday package of rolling up in the second half of this year. And we think that that's a strong package. And then naturally those birthday parties that comparable-store sales that I gave you are down 5% to 6%. That is included naturally in our comps. So Dick, you may talk about maybe a little bit of the foundation of what we’re trying to build with sales going forward.

I think the only add on I would make probably Mike is that even though we reduced our advertising spend on birthdays, it’s still accounts for roughly 15% of our total advertising budget or expenditures and that's in line with sort of the mix of birthday parties to walk in. We typically over the course of the year have about 12% to 15% of our revenues coming from birthday sales. And so we think that to approximate that in terms of our total advertising expenditures strategically make sense over a longer period of time. And again as Mike was talking, it just all comes back, I think too. Our efforts here really to sort of lay the foundation and it got little bit difficult early in the year with a big falloff in the early part of February that comp store sales for us to really have a sense of whether the strategies are working and what was working and so forth. But I think the thing that we feel the best about today is that foundation is in place all the strategies now were in place for the first quarter for really the first time as we sort of revised everything. And I think that foundation for the future is really strong. And I think it has to do with sort of our value pricing like we’ve talked about here just a second ago but also just the excellent shape of our stores from a from capital standpoint, the aggressive marketing against moms and dads as well as the kids. And then going forward, we’re really excited about now bringing in behind that our major new attractions to sort of bring some vitality in the way sort of TicketBlaster did or Skytubes. Bob, you’ve been around the long time and can think back to one we brought the Skytubes in. And so we’ve been working. Our games people been working and entertainment people on major new attractions and we’re really excited now to be to a point where we’ll start to test some of those here this summer and hopefully have those ready by 2014 to start to put in to some major markets. So I think it's really as always the sales is never the result of any one thing, but I think all of our strategies are coming together in way that are really allowing us to move things forward. And so as we look forward, we’re cautiously optimistic that these things are really starting to make a difference for us.

I’m really happy for you guys. Congratulations

Thank you, Bob

Thank you. At this time, we have no further questions in queue.

We appreciate your participation on our call. And as always, if you have any additional questions, please feel free to call Tiffany, Dick or myself. Thank you very much. Bye

And thank you very much; ladies and gentlemen. That does conclude our conference for today. Thank you very much for your participation and for using AT&T executive teleconference service. Have a good day.