FORM 10-K

     |X|  Annual  report  pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934 for the fiscal year ended December 28, 2003.

     |_|  Transition  report  pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act of 1934 for the transition period from _____ to _____.

                         Commission File Number 0-15782

                             CEC ENTERTAINMENT, INC.
             (Exact name of registrant as specified in its charter)

                   Kansas                              48-0905805
          (State or jurisdiction of                 (I.R.S. Employer
        incorporation or organization)             Identification No.)

          4441 West Airport Freeway
                Irving, Texas                             75062

   (Address of principal executive offices)            (Zip Code)

       Registrant's telephone number, including area code: (972) 258-8507

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                        Common Stock, par value $.10 each
                                (Title of Class)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:


                                      None

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or such shorter  period that the registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days. Yes |X| No |_|

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes |X| No |_|

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2) Yes |X| No |_|

     At March 8, 2004,  an aggregate of  25,368,520  shares of the  registrant's
common  stock,  par value of $.10 each  (being  the  registrant's  only class of
common stock), were outstanding.

     At June 30, 2003,  the  aggregate  market value of our common stock held by
non-affiliates of the registrant was $974,078,384.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions  of the  registrant's  definitive  Proxy  Statement,  to be  filed
pursuant to Section 14(a) of the Act in connection  with the  registrant's  2004
annual meeting of shareholders,  have been incorporated by reference in Part III
of this report.









                                   P A R T   I

Item 1. Business

General

     CEC  Entertainment,  Inc. (the "Company") was  incorporated in the state of
Kansas in 1980 and is  engaged  in the  family  restaurant/entertainment  center
business.  The  Company  considers  this to be its sole  industry  segment.  Our
principal  executive  offices are located at 4441 W.  Airport  Freeway,  Irving,
Texas 75062. The Company maintains a website at www.chuckecheese.com.  Documents
available on our website include the Company's (i) Code of Business  Conduct and
Ethics, (ii) Code of Ethics for the Chief Executive Officer and Senior Financial
Officers,  (iii)  Corporate  Governance  Guidelines,  and (iv)  charters for the
Audit,  Compensation,  and  Nominating/Corporate  Governance  Committees.  These
documents are also available in print to any stockholder who requests a copy. In
addition,  we make  available  free of charge  through  our  website  our annual
reports on Form 10-K,  quarterly  reports on Form 10-Q,  current reports on Form
8-K and  amendments  to those reports as soon as  reasonably  practicable  after
electronic  filing  or  furnishing  of such  material  with the  Securities  and
Exchange Commission.

     The Company  operated,  as of December 28, 2003,  418 Chuck E. Cheese's (R)
("Chuck E.  Cheese's")  restaurants.  In  addition,  as of  December  28,  2003,
franchisees of the Company operated 48 Chuck E. Cheese's restaurants.


Chuck E. Cheese's Restaurants

Business Development

     Chuck E.  Cheese's  restaurants  offer a variety  of  pizzas,  a salad bar,
sandwiches,  appetizers and desserts and feature musical and comic entertainment
by  robotic  and  animated   characters,   family  oriented  games,   rides  and
arcade-style activities. The restaurants are intended to appeal to families with
children between the ages of two and 12. The Company opened its first restaurant
in March 1980.

     The  Company and its  franchisees  operate in a total of 48 states and five
countries.  The Company owns and operates  Chuck E. Cheese's  restaurants  in 41
states and Canada. See "Item 2. Properties."

     The  following  table sets forth  certain  information  with respect to the
Chuck  E.  Cheese's  restaurants  owned  by  the  Company  (excludes  franchised
restaurants and one T.J. Hartford's Grille and Bar).

                                           2003           2002           2001
Average annual revenues
     per restaurant (1)                 $1,628,000     $1,641,000     $1,634,000

Number of restaurants open at end
     of period                                 418            384            350

Percent of total restaurant revenues:
     Food and beverage sales                 66.5%          66.7%          68.0%
     Game sales                              31.0%          30.8%          29.5%
     Merchandise sales                        2.5%           2.5%           2.5%

- -------

(1)  In computing these averages,  only  restaurants that were open for a period
     greater  than  one  year at the  beginning  of each  respective  year  were
     included   (331,  300  and  275   restaurants  in  2003,   2002  and  2001,
     respectively). All fiscal years presented consisted of 52 weeks.




     The revenues from Chuck E. Cheese's restaurants are seasonal in nature. The
restaurants  tend to generate  more  revenues  during the first and third fiscal
quarters as compared to the second and fourth fiscal quarters.

     Each Chuck E. Cheese's restaurant  typically employs a general manager, one
or two managers,  an electronic  specialist  who is  responsible  for repair and
maintenance of the robotic  characters and games,  and 45 to 75 food preparation
and service employees, most of whom work part-time.

     To  maintain a unique and  exciting  environment  in the  restaurants,  the
Company  believes it is essential to reinvest  capital  through the evolution of
its games,  rides and entertainment  packages and continuing  enhancement of the
facilities.

     In 2000, the Company  initiated a Phase III upgrade  program that generally
includes a new toddler play area, skill games and rides, kiddie games and rides,
SkyTubes(R)  enhancements,  and prize area  enhancements  with  ticket  counting
machines.  The Company  completed  Phase III  upgrades  in 28,  105,  123 and 50
restaurants  in 2000,  2001,  2002 and 2003,  respectively,  and completed  this
upgrade  program in 2003.  In 2003,  the Company also  initiated a game rotation
plan.  The primary  components  of this plan are to provide new and  transferred
games and rides and enhanced consumer marketing  materials  including a new menu
board. The Company is currently testing revisions to the building exterior along
with interior  enhancements  in conjunction  with a game  rotation.  The Company
completed  33 game  rotations  in  2003  and  plans  to  complete  60 to 80 game
rotations in 2004.

     In 2003, the Company also began a major remodel or reconfiguration  plan in
a  select  number  of  restaurants  that  are  believed  to  have  the  greatest
opportunity to  significantly  increase sales and provide an adequate  return on
investment.  The primary components of a reconfiguration include a relocation of
the dining and  playroom  areas,  expansion  of the space  allocated to the game
room, and an increase in the number of games. The Company  completed three major
remodels or  reconfigurations  in 2003 and has identified ten specific locations
for a major  remodel or  reconfiguration  including  three  franchise  locations
acquired in 2003.

     The Company has expanded the customer areas of 88  restaurants  since 1995,
including  restaurants  with  increased  seating  capacity  due  to an  enhanced
showroom  package.  The Company  plans to continue its strategy of expanding the
customer  areas and seating  capacity of four to five  selected  restaurants  in
2004. The customer area of expanded  restaurants,  other than  restaurants  with
increased  seating capacity due to an enhanced  showroom  package,  is typically
increased by an average of 1,000 to 4,000 square feet per store.

     The  Company  has added 35, 35 and 30  Company-operated  Chuck E.  Cheese's
restaurants in 2003, 2002 and 2001, respectively, including restaurants acquired
from  franchisees.  The Company  anticipates  adding  approximately 36 to 40 new
restaurants  in 2004  through a  combination  of  opening  new  restaurants  and
acquiring existing franchise restaurants.  At the beginning of 2004, the Company
has identified  development  opportunities  for  approximately  300  restaurants
including those restaurants expected to open in 2004.

     The  Company  periodically  reevaluates  the  site  characteristics  of its
restaurants.  The Company will  consider  relocating  the  restaurant  to a more
desirable site in the event certain site  characteristics  considered  essential
for the success of a restaurant deteriorate.

     The Company believes its ownership of trademarks in the names and character
likenesses  featured  in the  operation  of  its  restaurants  are an  important
competitive advantage.


Restaurant Design and Entertainment

     Chuck E. Cheese's  restaurants are typically located in shopping centers or
in  free-standing  buildings near shopping centers and generally occupy 7,000 to
14,000 square feet in area. Chuck E. Cheese's  restaurants are typically divided
into three areas: a kitchen and related area (cashier and prize area, salad bar,
manager's office,  technician's office, restrooms,  etc.) occupies approximately
35% of the space,  a dining area occupies  approximately  25% of the space and a
playroom area occupies approximately 40% of the space.




     The dining area of each Chuck E. Cheese's  restaurant features a variety of
comic and  musical  entertainment  by  computer-controlled  robotic  characters,
together with video monitors and animated  props,  located on various stage type
settings.  The dining area typically provides table and chair seating for 250 to
375 customers.

     Each Chuck E.  Cheese's  restaurant  typically  contains a family  oriented
playroom area offering  approximately  45 coin and  token-operated  attractions,
including  arcade-style  games,  kiddie rides, a toddler play area, video games,
skill  oriented  games and other  similar  entertainment.  Most  games  dispense
tickets  that can be redeemed by guests for prize  merchandise  such as toys and
dolls.  Also included in the playroom area are tubes and tunnels  suspended from
or reaching to the ceiling  ("SkyTubes(R)")  or other free attractions for young
children,  with booth and table seating for the entire family. The playroom area
normally occupies approximately 60% of the restaurant's customer area. A limited
number of free tokens are furnished with food orders.  Additional  tokens may be
purchased. Tokens are used to play the games and rides in the playroom.


Food and Beverage Products

     Each Chuck E. Cheese's  restaurant offers a variety of pizzas, a salad bar,
sandwiches,  appetizers  and  desserts.  Soft  drinks,  coffee  and tea are also
served,  along with beer and wine where  permitted  by local  laws.  The Company
believes  that the  quality  of its food  compares  favorably  with  that of its
competitors.

     The  majority  of  food,   beverages   and  other   supplies  used  in  the
Company-operated  restaurants  is  currently  distributed  under  a  system-wide
agreement  with a  major  food  distributor.  The  Company  believes  that  this
distribution  system creates certain cost and operational  efficiencies  for the
Company.


Marketing

     The  primary  customer  base  for the  Company's  restaurants  consists  of
families  having children  between the ages of two and 12. The Company  conducts
advertising  campaigns  which are targeted at families with young  children that
feature the family  entertainment  experiences  available  at Chuck E.  Cheese's
restaurants  and are  primarily  aimed at  increasing  the frequency of customer
visits. The primary  advertising  medium continues to be television,  due to its
broad access to family  audiences  and its ability to  communicate  the Chuck E.
Cheese's experience.  The television  advertising  campaigns are supplemented by
promotional offers in newspapers, the Company's website and direct e-mail.

Franchising

     The Company began franchising its restaurants in October 1981 and the first
franchised  restaurant  opened in June 1982.  At December 28, 2003,  48 Chuck E.
Cheese's  restaurants were operated by a total of 29 different  franchisees,  as
compared to 50 of such restaurants at December 29, 2002. Currently,  franchisees
have  expansion  rights to open an additional  five franchise  restaurants.  The
Company is not granting additional United States franchises.

     The Chuck E. Cheese's standard franchise agreements grant to the franchisee
the  right  to  construct  and  operate  a  restaurant  and use  the  associated
trademarks within the standards and guidelines  established by the Company.  The
franchise  agreement  presently offered by the Company has an initial term of 15
years and includes a 10-year renewal option. The standard agreement provides the
Company  with a right of first  refusal  should a  franchisee  decide  to sell a
restaurant.  The earliest  expiration  dates of  outstanding  Chuck E.  Cheese's
franchises are in 2004.

     The Company and its franchisees  created The  International  Association of
CEC Entertainment, Inc., (the "Association"), to discuss and consider matters of
common interest  relating to the operation of corporate and franchised  Chuck E.
Cheese's restaurants, to serve as an advisory council to the Company and to plan
and approve  contributions to and expenditures from the Advertising Fund [a fund
established  and managed by the  Association  that pays the costs of system-wide
advertising] and the  Entertainment  Fund [a fund established and managed by the
Association to further develop and improve entertainment  attractions].  Routine
business matters of the Association are conducted by a Board of Directors of the
Association,  composed of five members appointed by the Company and five members
elected by the franchisees.




     The franchise  agreements  governing existing  franchised Chuck E. Cheese's
restaurants in the United States  currently  require each franchisee to pay: (i)
to the Company, in addition to an initial franchise fee of $50,000, a continuing
monthly royalty fee equal to 3.8% of gross sales;  (ii) to the Advertising  Fund
of the  Association  an amount  equal to 2.9% of gross  sales;  and (iii) to the
Entertainment  Fund an amount equal to 0.2% of gross  sales.  Under the Chuck E.
Cheese's  franchise  agreements,  the  Company  is  required,  with  respect  to
Company-operated  restaurants,  to spend for local advertising and to contribute
to the  Advertising  Fund  and the  Entertainment  Fund  at the  same  rates  as
franchisees.  The  Company  and  its  franchisees  could  be  required  to  make
additional  contributions  to the Association to fund any cash deficits that may
be incurred by the Association.


Competition

     The restaurant and entertainment industries are highly competitive,  with a
number of major  national and regional  chains  operating in the  restaurant  or
family  entertainment  business.  Although  other  restaurant  chains  presently
utilize  the  combined  family   restaurant  /  entertainment   concept,   these
competitors primarily operate on a regional, market-by-market basis.

     The Company believes that it will continue to encounter  competition in the
future.  Major  national  and  regional  chains,  some of which may have capital
resources as great or greater than the Company,  are competitors of the Company.
The Company believes that the principal  competitive  factors affecting Chuck E.
Cheese's restaurants are established brand recognition,  the relative quality of
food and service, quality and variety of offered entertainment, and location and
attractiveness  of  the  restaurants  as  compared  to  its  competitors  in the
restaurant or entertainment industries.

T.J. Hartford's Grille and Bar

     In 2001, the Company opened a full service casual dining  restaurant with a
game room area named T.J. Hartford's Grille and Bar aimed at a broad demographic
target offering medium priced, high quality food,  including alcoholic beverages
in a relaxed entertaining atmosphere.

Trademarks

     The Company,  through a wholly owned subsidiary,  owns various  trademarks,
including  "Chuck E. Cheese" and "T.J.  Hartford's"  that are used in connection
with the restaurants  and have been  registered with the appropriate  patent and
trademark  offices.  The duration of such  trademarks is  unlimited,  subject to
continued  use.  The Company  believes  that it holds the  necessary  rights for
protection of the marks considered  essential to conduct its present  restaurant
operations.


Government Regulation

     The development and operation of Chuck E. Cheese's  restaurants are subject
to various  federal,  state and local laws and  regulations,  including  but not
limited  to those  that  impose  restrictions,  levy a fee or tax,  or require a
permit or license on the service of  alcoholic  beverages  and the  operation of
games and rides.  The Company is subject to the Fair Labor  Standards  Act,  the
Americans  With  Disabilities  Act, and Family  Medical  Leave Act  mandates.  A
significant  portion of the  Company's  restaurant  personnel  are paid at rates
related to the minimum wage  established by federal and state law.  Increases in
such  minimum  wage result in higher  labor costs to the  Company,  which may be
partially offset by price increases and operational efficiencies.












Working Capital Practices

     The Company  attempts to maintain only sufficient  inventory of supplies in
its restaurants to satisfy current  operational  needs.  The Company's  accounts
receivable consist primarily of credit card receivables, tax receivables, vendor
rebates and construction advances.


Employees

     The Company's  employment  varies  seasonally,  with the greatest number of
people being  employed  during the summer  months.  On December  28,  2003,  the
Company  employed  approximately  16,900  employees,  including  16,600  in  the
operation of Chuck E. Cheese's and T.J.  Hartford's  Grille and Bar  restaurants
and 300 employed by the Company in its executive offices.  None of the Company's
employees are members of any union or collective  bargaining  group. The Company
considers its employee relations to be good.






Item 2. Properties

     The following table sets forth certain  information  regarding the Chuck E.
Cheese's restaurants operated by the Company as of December 28, 2003.

                                                     Chuck E.
              Domestic                               Cheese's
              --------                               --------

              Alabama                                      6
              Arkansas                                     4
              California                                  63
              Colorado                                     8
              Connecticut                                  6
              Delaware                                     2
              Florida                                     22
              Georgia                                     16
              Idaho                                        1
              Illinois                                    21
              Indiana                                     10
              Iowa                                         4
              Kansas                                       4
              Kentucky                                     2
              Louisiana                                    7
              Maryland                                    12
              Maine                                        1
              Massachusetts                               10
              Michigan                                    17
              Minnesota                                    5
              Mississippi                                  2
              Missouri                                     8
              Nevada                                       4
              Nebraska                                     2
              New Hampshire                                2
              New Jersey                                  15
              New Mexico                                   2
              New York                                    18
              North Carolina                               8
              Ohio                                        17
              Oklahoma                                     3
              Pennsylvania                                18
              Rhode Island                                 1
              South Carolina                               5
              South Dakota                                 1
              Tennessee                                   11
              Texas                                       50
              Virginia                                    10
              Washington                                   4
              West Virginia                                1
              Wisconsin                                    9
                                                        ----
                                                         412
                                                        ----
              International

              Canada                                       6
                                                        ----
                                                         418
                                                        ====








     Of the 418  Chuck  E.  Cheese's  restaurants  owned  by the  Company  as of
December 28, 2003, 367 occupy leased premises and 51 occupy owned premises.  The
leases of these  restaurants  will expire at various times from 2004 to 2028, as
described in the table below.


         Year of                    Number of         Range of Renewal
        Expiration                 Restaurants         Options (Years)
        ----------                 -----------        ----------------

           2004                          6               None to  5
           2005                         31               None to 20
           2006                         36               None to 15
           2007                         46               None to 15
           2008 and thereafter         248               None to 20


     The leases of Chuck E.  Cheese's  restaurants  contain terms that vary from
lease to lease,  although  a typical  lease  provides  for a primary  term of 10
years,  with two additional  five-year options to renew, and provides for annual
minimum rent payments of approximately  $4.00 to $31.00 per square foot, subject
to periodic  adjustment.  The  restaurant  leases require the Company to pay the
cost of repairs, insurance and real estate taxes and, in many instances, provide
for additional rent equal to the amount by which a percentage  (typically 6%) of
gross revenues exceeds the minimum rent.


Item 3. Legal Proceedings.

     On June 2, 2000,  a purported  class  action  lawsuit  against the Company,
entitled  Freddy  Gavarrete,  et al. v. CEC  Entertainment,  Inc.,  dba Chuck E.
Cheese's, et. al., Cause No. 00-08132 FMC (RZx), was filed in the Superior Court
of the State of  California  in the County of Los  Angeles  (the " Court").  The
lawsuit  was filed by one former  restaurant  manager  purporting  to  represent
restaurant  managers of the Company in California from 1996 to the present.  The
lawsuit  alleges  violations  of the state wage and hour laws  involving  unpaid
overtime  wages and seeks an  unspecified  amount in damages.  On September  29,
2003, the Company entered into a settlement agreement with the Plaintiffs, which
was subject to approval by the Court,  whereby the Company will pay $4.2 million
plus  up to  $50,000  for  administrative  fees  to  settle  all  claims  of the
Plaintiff.  On January 14, 2004 the Court entered an order granting  preliminary
approval of the settlement agreement.


Item 4. Submission of Matters to a Vote of Security Holders.

     No matters were  submitted to a vote of security  holders during the fourth
quarter of 2003.





                                  P A R T   I I


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

     As of March 8, 2004,  there were an aggregate of  25,368,520  shares of the
Company's  Common Stock  outstanding  and  approximately  2,238  stockholders of
record.

     The Company's  common stock is listed on the New York Stock  Exchange under
the symbol  "CEC." The  following  table sets forth the highest and lowest price
per share of the common stock during each  quarterly  period within the two most
recent years, as reported on the New York Stock Exchange:


                                          High                 Low
                                         ------               ------
        2003
                  - 1st quarter         $ 31.66              $ 24.05
                  - 2nd quarter           37.45                26.10
                  - 3rd quarter           40.76                34.24
                  - 4th quarter           52.01                38.99


        2002
                  - 1st quarter         $ 49.95              $ 41.83
                  - 2nd quarter           49.37                40.00
                  - 3rd quarter           42.43                32.90
                  - 4th quarter           35.80                23.90




     The Company has not paid any cash  dividends on its common stock and has no
present  intention of paying cash dividends  thereon in the future.  The Company
plans to retain  any  earnings  to  finance  anticipated  capital  expenditures,
repurchase the Company's  common stock and reduce its long-term debt. The future
dividend policy with respect to the common stock will be determined by the Board
of Directors of the Company,  taking into  consideration  factors such as future
earnings,  capital requirements,  potential loan agreement  restrictions and the
financial condition of the Company.























Item 6.  Selected Financial Data.




                                                            2003          2002          2001          2000          1999
                                                         ---------     ---------     ---------     ---------     ---------
                                                                   (Thousands, except per share and store data)
Operating results (1):

                                                                                                  
Revenues...............................................  $ 654,598     $ 602,201     $ 562,227     $ 506,111     $ 440,904
Costs and expenses.....................................    538,921       488,541       457,023       415,377       368,578
                                                         ---------     ---------     ---------     ---------     ---------
Income before income taxes.............................    115,677       113,660       105,204        90,734        72,326
Income taxes...........................................     44,882        44,134        41,029        35,379        27,954
                                                         ---------     ---------     ---------     ---------     ---------

Net income.............................................  $  70,795     $  69,526     $  64,175     $  55,355     $  44,372
                                                         =========     =========     =========     =========     =========

Per share (2)(3):
   Basic:
     Net income........................................  $    2.67     $    2.50     $    2.30     $    2.04     $    1.63
   Weighted average shares outstanding.................     26,436        27,674        27,816        26,999        27,004

   Diluted:
     Net income........................................  $    2.62     $    2.46     $    2.24     $    1.98     $    1.58
     Weighted average shares outstanding...............     26,926        28,175        28,514        27,839        27,922

Cash flow data:
   Cash provided by operations.........................  $ 152,842     $ 133,344     $ 119,497     $  94,085     $  78,528
   Cash used in investing activities...................    (88,713)     (109,860)     (108,807)      (85,933)     (100,344)
   Cash provided by (used in) financing activities.....    (68,276)      (14,952)      (14,308)       (3,583)       21,337

Balance sheet data:
   Total assets........................................  $ 580,351     $ 539,703     $ 459,485     $ 389,375     $ 325,168
   Long-term obligations (including current portion
     and redeemable preferred stock)...................     73,249        69,791        59,285        57,288        63,369
   Shareholders' equity................................    392,499       384,668       337,236       282,272       221,228

Number of restaurants at year end:
     Company operated..................................        418           384           350           324           294
     Franchise.........................................         48            50            52            55            55
                                                         ---------     ---------     ---------     ---------     ---------
                                                               466           434           402           379           349
                                                         =========     =========     =========     =========     =========


- ----------------------

(1)  All fiscal years presented were 52 weeks in length.

(2)  No cash dividends on common stock were paid in any of the years presented.

(3)  Share and per share  information  does not reflect the effects of a 3 for 2
     stock  split  effected  in the form of a  special  stock  dividend  that is
     effective and  distributable  on March 15, 2004, to holders of record as of
     February 25, 2004 (Note 11).







Item 7. Management's  Discussion and Analysis of Financial Condition and Results
Of Operations.

     Results of Operations

     A summary of the results of  operations  of the Company as a percentage  of
revenues for the last three fiscal years is shown below.

                                                     2003      2002      2001
                                                    ------    ------    ------
   Revenues ....................................    100.0%    100.0%    100.0%
                                                    ------    ------    ------
   Costs and expenses:
       Cost of sales............................     44.3%     44.2%     44.5%
       Selling, general and administrative......     12.9%     12.7%     13.4%
       Depreciation and amortization............      6.9%      6.5%      6.1%
       Interest expense.........................       .2%       .2%       .4%
       Other operating expenses.................     18.0%     17.5%     16.9%
                                                    ------    ------    ------
                                                     82.3%     81.1%     81.3%
                                                    ------    ------    ------
   Income before income taxes...................     17.7%     18.9%     18.7%
                                                    ======    ======    ======


     2003 Compared to 2002

     Revenues

     Revenues  increased  8.7% to $654.6  million in 2003 from $602.2 million in
2002 primarily due to an increase in the number of Company-operated restaurants.
The  Company  opened  32  new  restaurants,   acquired  three  restaurants  from
franchisees and closed one restaurant in 2003.  Comparable store sales decreased
0.3%.   Average  annual  revenues  per  restaurant   declined  to  approximately
$1,628,000 in 2003 from approximately  $1,641,000 in 2002. Menu prices increased
0.8% between the two years.

     Revenues  from  franchise  fees and  royalties  were $3.3  million  in 2003
compared to $3.2 million in 2002.  During 2003,  two new  franchise  restaurants
opened,  three  franchise  restaurants  were  acquired  by the  Company  and one
franchise restaurant closed.  Franchise comparable store sales increased 1.4% in
2003.

     Costs and Expenses

     Costs and expenses as a percentage  of revenues  increased to 82.3% in 2003
from 81.1% in 2002.

     Cost of sales as a percentage  of revenues  increased to 44.3% in 2003 from
44.2% in 2002. Costs of food, beverage,  and related supplies as a percentage of
revenues  were  12.2% in both  2003 and  2002.  Costs of games  and  merchandise
increased to 4.3% in 2003 from 4.2% in 2002  primarily due to higher prize costs
resulting from a guest value program  implemented in the second quarter of 2003.
Restaurant labor expenses as a percentage of revenues remained constant at 27.8%
in both 2003 and 2002.

     Selling,  general and  administrative  expenses as a percentage of revenues
increased to 12.9% in 2003 from 12.7% in 2002  primarily  due to a $4.25 million
charge in 2003 relating to the settlement, subject to court approval, of a class
action wage and hour lawsuit filed in the State of California.  In January 2004,
the court granted preliminary approval of this settlement.


     Depreciation and amortization expense as a percentage of revenues increased
to 6.9% in 2003 from  6.5% in 2002  primarily  due to  capital  invested  in new
restaurants and remodels.

     Interest  expense as a  percentage  of  revenues  was 0.2% in both 2003 and
2002.









     Other operating  expenses increased as a percentage of revenues to 18.0% in
2003 from  17.5% in 2002  primarily  due to losses on the  disposal  of  assets,
repairs and property taxes.

     The Company's effective income tax rate was 38.8% in both 2003 and 2002.

     Net Income

     The  Company  had net  income of $70.8  million in 2003  compared  to $69.5
million in 2002 due to the changes in revenues and expenses discussed above. The
Company's  diluted  earnings per share increased 6.5% to $2.62 per share in 2003
compared  to $2.46  per  share in 2002 due to the 1.9%  increase  in net  income
discussed above and a 4.6% decrease in the Company's  number of weighted average
shares  outstanding.  Weighted average diluted shares  outstanding  decreased to
26.9 million in 2003 from 28.2 million in 2002  primarily  due to the  Company's
share repurchase program.

     2002 Compared to 2001

     Revenues

     Revenues  increased  7.1% to $602.2  million in 2002 from $562.2 million in
2001 due to new  restaurants.  The Company opened 32 new  restaurants,  acquired
three restaurants from franchisees and closed one restaurant in 2002. Comparable
store sales  decreased  1.0%.  The Company  completed  Phase III upgrades in 105
restaurants  in 2001 and 123  restaurants in 2002.  Average annual  revenues per
restaurant  increased to  approximately  $1,641,000  in 2002 from  approximately
$1,634,000 in 2001. Menu prices increased 0.4% between the two years.

     Revenues from  franchise  fees and royalties were $3.2 million in both 2002
and 2001. One new franchise  restaurant  opened and three franchise  restaurants
were  acquired by the Company  during  2002.  Franchise  comparable  store sales
decreased 0.4% in 2002.

     Costs and Expenses

     Costs and expenses as a percentage  of revenues  decreased to 81.1% in 2002
from 81.3% in 2001.

     Cost of sales as a percentage  of revenues  decreased to 44.2% in 2002 from
44.5% in 2001. Costs of food, beverage,  and related supplies as a percentage of
revenues  decreased to 12.2% in 2002 from 12.8% in 2001  primarily  due to lower
cheese costs. Costs of games and merchandise decreased to 4.2% in 2002 from 4.4%
in 2001 due to buying efficiencies. Restaurant labor expenses as a percentage of
revenues  increased  to 27.8% in 2002 from  27.3% in 2001  primarily  due to the
decrease in comparable store sales and higher average wage rates.

     Selling,  general and  administrative  expenses as a percentage of revenues
declined to 12.7% in 2002 from 13.4% in 2001 primarily due to scale efficiencies
in advertising expense and corporate overhead costs.


     Depreciation and amortization expense as a percentage of revenues increased
to  6.5%  in  2002  from  6.1%  in  2001  primarily  due  to  increased  capital
expenditures and the decrease in comparable store sales.

     Interest  expense as a percentage  of revenues was 0.2% in 2002 compared to
0.4% in 2001 primarily due to a reduction in interest rates.

     Other operating  expenses increased as a percentage of revenues to 17.5% in
2002 from  16.9% in 2001  primarily  due to higher  insurance  costs.  Insurance
expense  increased  approximately  $5.3 million in 2002  compared to 2001 due to
several factors  including  higher  premiums,  claim loss experience and medical
costs.

     The Company's effective income tax rate was 38.8% in 2002 and 39.0% in 2001
due to lower estimated state tax rates.










     Net Income

     The  Company  had net  income of $69.5  million in 2002  compared  to $64.2
million in 2001 due to the changes in revenues and expenses discussed above. The
Company's  diluted  earnings  per  share  increased  to $2.46  per share in 2002
compared to $2.24 per share in 2001.

     Significant Accounting Policies and Estimates

     In preparing the Company's financial statements,  management is required to
make  ongoing  estimates  and  judgments  based  on the  information  available.
Management  believes the following critical accounting policies require the most
significant estimates and judgments.

     The Company  estimates its  liability  for incurred but  unsettled  general
liability  and  workers  compensation  related  claims  under  its  self-insured
retention  programs,  including reported losses in the process of settlement and
losses  incurred but not  reported.  The  estimate is based on loss  development
factors  determined  through  actuarial  methods  using the  actual  claim  loss
experience of the Company subject to adjustment for current trends. Revisions to
the estimated  liability  resulting from ongoing periodic reviews are recognized
in the period in which the differences are identified.  Significant increases in
general liability and workers  compensation claims could have a material adverse
impact on future operating results.

     The  Company   periodically   reviews  the   estimated   useful  lives  and
recoverability of its depreciable  assets based on factors including  historical
experience, the expected beneficial service period of the asset, the quality and
durability of the asset and the Company's  maintenance policy including periodic
upgrades.  Changes  in useful  lives  are made on a  prospective  basis,  unless
factors  indicate the carrying amounts of the assets may not be recoverable from
estimated future cash flows and an impairment write-down is necessary.

     Inflation

     The  Company's  cost of  operations,  including  but not  limited to labor,
supplies,  utilities,  financing and rental costs, are significantly affected by
inflationary  factors.  The Company pays most of its part-time  employees  rates
that are  related to  federal  and state  mandated  minimum  wage  requirements.
Management  anticipates  that any increases in federally  mandated  minimum wage
would result in higher costs to the Company,  which the Company expects would be
partially  offset  by  menu  price  increases  and  increased   efficiencies  in
operations.

     Financial Condition, Liquidity and Capital Resources

     Cash provided by operations increased to $152.8 million in 2003 from $133.3
million in 2002.  Cash outflows from  investing  activities  for 2003 were $88.7
million, primarily related to capital expenditures. Cash outflows from financing
activities for 2003 were $68.3 million,  primarily  related to the repurchase of
the Company's Common Stock. The Company's  primary  requirements for cash relate
to planned capital  expenditures,  the repurchase of the Company's  Common Stock
and debt  service.  The Company  expects that it will satisfy such  requirements
from cash provided by operations  and, if necessary,  funds  available under its
line of credit.

     The Company has  initiated  several  strategies  to increase  revenues  and
earnings over the long-term that require capital expenditures.  These strategies
include: a) new restaurant  development and acquisitions of existing restaurants
from franchisees, b) a game rotation plan, c) major remodels or reconfigurations
and d) expansions of the retail area of existing restaurants.  In addition,  the
Company is  currently  testing  revisions to the  building  exterior  along with
interior enhancements in conjunction with a game rotation.

     The game  rotation  plan began in 2003 and has an average  capital  cost of
approximately  $60,000  per store.  The primary  components  of this plan are to
provide new and transferred games and rides and in certain stores,  enhancements
to the toddler area. The major remodel or reconfiguration  initiative includes a
reallocation  of space between the dining and game room areas,  expansion of the
space  allocated  to the game room and an increase  in the number of games.  The
typical capital cost of this initiative will range from $225,000 to $400,000 per
store. Expansion of the retail areas may vary widely based on square footage and
can range in cost from  $200,000 to  $900,000  per store but  generally  have an
average capital cost of approximately $500,000.




     During  2003,  the  Company  opened  32  new  restaurants,  acquired  three
restaurants   from   franchisees,   completed  the  game  rotation  plan  in  33
restaurants, completed three reconfigurations and three expansions. In 2003, the
Company  also  completed  its Phase III  upgrade  program  with  upgrades  in 50
restaurants.  The average cost of a Phase III upgrade was approximately $205,000
to  $215,000  per store.  A Phase III upgrade  generally  included a new toddler
area, skill games and rides, kiddie games and rides, SkyTube enhancements, prize
area improvements and Kid Check modifications.

     In 2004, the Company plans to add 36 to 40 stores including new restaurants
and acquisitions of existing restaurants from franchisees. The Company currently
anticipates  its cost of opening such new  restaurants  will vary depending upon
many factors  including the size of the restaurants,  the amount of any landlord
contribution and whether the Company acquires land or the store is an in-line or
freestanding  building. The average capital cost of all new restaurants expected
to open in 2004 is approximately  $1.4 million per restaurant.  At the beginning
of 2004, the Company identified development  opportunities for approximately 300
restaurants including those restaurants expected to open in 2004.

     In  2004,  the  Company  plans  to  complete  game  rotations  in  60 to 80
restaurants. The Company plans to complete a major remodel or reconfiguration in
a  select  number  of  restaurants  that  are  believed  to  have  the  greatest
opportunity to  significantly  increase sales and provide an adequate  return on
investment.  The Company has currently  identified 10 to 20 potential  locations
for a major remodel  including the three franchise  locations  acquired in 2003.
The Company  also plans to expand the square  footage of  approximately  four to
five restaurants. In addition, the Company is currently testing revisions to the
building  exterior along with interior  enhancements in conjunction  with a game
rotation.  The Company  expects the aggregate  capital costs of completing  game
rotations,  major remodels and  reconfigurations and expansions in 2004 to total
approximately $16 million and impact 105 to 110 restaurants.

     The Company currently  estimates that capital  expenditures in 2004 will be
$79 million to $85  million.  The Company  plans to finance  these  expenditures
through  cash flow from  operations  and,  if  necessary,  borrowings  under the
Company's line of credit.

     From time to time, the Company repurchases shares of its common stock under
a plan authorized by its Board of Directors.  The plan authorizes repurchases in
the open market or in private  transactions.  In 2003,  the Company  repurchased
2,285,776  shares of its common  stock at an  aggregate  price of  approximately
$82.6  million.  Beginning in 1993  through  2003,  the Company has  repurchased
approximately  10.1 million shares of the Company's common stock at an aggregate
purchase price of approximately  $207 million.  In 2004, the Company completed a
plan  authorized in 2003 and  announced a new plan to  repurchase  shares of the
Company's common stock at an aggregate  purchase price of up to $75 million.  In
2003,  the  Company  reacquired  all  of its  outstanding  preferred  stock  for
approximately $2.8 million.

     In 2002,  the  Company  entered  into a new line of credit  agreement  that
provides  borrowings  of up to $100  million  and  matures  in  2005.  In  2003,
available  borrowings  under the line of credit  agreement  increased  to $132.5
million.  Interest  under the line of credit is  dependent  on earnings and debt
levels of the Company and ranges from prime or, at the Company's  option,  LIBOR
plus 0.75% to 1.50%.  Currently,  any borrowings under this line of credit would
be at the prime rate or LIBOR plus 0.75%.  As of December 28,  2003,  there were
$64.4 million in borrowings under this line of credit. In addition,  the Company
had  outstanding  letters of credit of $3.5 million at December  28,  2003.  The
Company is required  to comply with  certain  financial  ratio tests  during the
terms of the loan agreement.

     The  following  are  contractual  cash  obligations  of the  Company  as of
December 28, 2003 (thousands):




                                                     Cash Obligations Due by Year
                               ------------------------------------------------------------------------
                                 Total        2004         2005        2006        2007      Thereafter
                               ---------    --------    ---------    --------    --------    ----------

                                                                           
Operating leases............   $ 355,507    $ 53,982    $  52,729    $ 49,479    $ 43,524    $ 155,793
Revolving line of credit....      64,400                   64,400
Purchase commitments........      36,945       4,820        4,966       5,116       5,272       16,771
Capital lease obligations...         410         214          196
                               ---------    --------    ---------    --------    --------    ---------
                               $ 457,262    $ 59,016    $ 122,291    $ 54,595    $ 48,796    $ 172,564
                               =========    ========    =========    ========    ========    =========






     In  addition  to  the  above,  the  Company   estimates  that  the  accrued
liabilities for group medical, general liability and workers compensation claims
of approximately  $16.4 million as of December 28, 2003 will be paid as follows:
approximately  $7.9 million to be paid in 2004 and the  remainder  paid over the
six year period from 2005 to 2010.

     Certain statements in this report, 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 the Company'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,   store   sales
cannibalization,  success  of  its  franchise  operations,  negative  publicity,
fluctuations  in  quarterly  results  of  operations,   including   seasonality,
government regulations, weather, school holidays, commodity, insurance and labor
costs.




Item 7A: Quantitative and Qualitative Disclosures About Market Risk

     The Company is subject to market risk in the form of interest rate risk and
foreign  currency  risk.  Both interest rate risk and foreign  currency risk are
immaterial to the Company.






Item 8. Financial Statements and Supplementary Data

                             CEC ENTERTAINMENT, INC.
                YEARS ENDED DECEMBER 28, 2003, DECEMBER 29, 2002
                              AND DECEMBER 30, 2001

                                    CONTENTS






                                                                            Page
                                                                            ----
Independent auditors' report...............................................   17
Consolidated financial statements:
     Consolidated balance sheets...........................................   18
     Consolidated statements of earnings and comprehensive income..........   19
     Consolidated statements of shareholders' equity.......................   20
     Consolidated statements of cash flows.................................   21
     Notes to consolidated financial statements............................   22































INDEPENDENT AUDITORS' REPORT


Board of Directors and Shareholders
CEC Entertainment, Inc.
Irving, Texas


We  have  audited  the   accompanying   consolidated   balance   sheets  of  CEC
Entertainment,  Inc. and  subsidiaries  as of December 28, 2003 and December 29,
2002,  and the related  consolidated  statements  of earnings and  comprehensive
income,  shareholders' equity, and cash flows for each of the three years in the
period  ended   December  28,  2003.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  financial  position  of CEC  Entertainment,  Inc.  and
subsidiaries  as of December 28, 2003 and December 29, 2002,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 28, 2003, in conformity  with  accounting  principles  generally
accepted in the United States of America.




/s/ DELOITTE & TOUCHE LLP

Dallas, Texas
March 8, 2004























                                            CEC ENTERTAINMENT, INC.
                                          CONSOLIDATED BALANCE SHEETS
                                        (Thousands, except share data)

                                                                                    December 28,  December 29,
                                                                                        2003          2002
                                                                                    ------------  ------------
ASSETS

                                                                                             
Current assets:
   Cash and cash equivalents.....................................................    $   8,067     $  12,214
   Accounts receivable, net......................................................       13,103        11,270
   Inventories...................................................................       12,491        10,716
   Prepaid expenses..............................................................        7,608         5,500
   Deferred tax asset............................................................        1,487         1,319
                                                                                     ---------     ---------
      Total current assets.......................................................       42,756        41,019
                                                                                     ---------     ---------
Property and equipment, net......................................................      536,124       493,533
                                                                                     ---------     ---------

Other assets:
   Notes receivable from related party...........................................                      3,825
   Other.........................................................................        1,471         1,326
                                                                                     ---------     ---------
                                                                                         1,471         5,151
                                                                                     ---------     ---------
                                                                                     $ 580,351     $ 539,703
                                                                                     =========     =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term debt.............................................    $     168     $     143
   Accounts payable and accrued liabilities......................................       58,736        43,002
                                                                                     ---------     ---------
      Total current liabilities..................................................       58,904        43,145
                                                                                     ---------     ---------
Long-term debt, less current portion.............................................       64,581        62,349
                                                                                     ---------     ---------
Deferred rent....................................................................        5,153         4,086
                                                                                     ---------     ---------
Deferred tax liability...........................................................       50,714        38,156
                                                                                     ---------     ---------
Accrued insurance ...............................................................        8,500         4,750
                                                                                     ---------     ---------
Commitments and contingencies (Note 7)

Redeemable preferred stock ......................................................                      2,549
                                                                                     ---------     ---------

Shareholders' equity:
   Common stock, $.10 par value; authorized 100,000,000 shares;
     36,321,275 and 35,669,773 shares issued, respectively ......................        3,632         3,567
   Capital in excess of par value................................................      220,887       201,936
   Retained earnings ............................................................      378,911       308,277
   Accumulated other comprehensive income (loss).................................          695           (91)
   Less treasury shares of 10,694,945 and 8,409,169, respectively, at cost.......     (211,626)     (129,021)
                                                                                     ---------     ---------
                                                                                       392,499       384,668
                                                                                     ---------     ---------
                                                                                     $ 580,351     $ 539,703
                                                                                     =========     =========
                                See notes to consolidated financial statements.









                                       CEC ENTERTAINMENT, INC.
                                 CONSOLIDATED STATEMENTS OF EARNINGS
                                      AND COMPREHENSIVE INCOME
                                 (Thousands, except per share data)

                                                                            Fiscal Year
                                                                -----------------------------------
                                                                   2003         2002         2001
                                                                ---------    ---------    ---------

                                                                                 
Food and beverage revenues..................................    $ 433,952    $ 400,119    $ 380,014
Games and merchandise revenues..............................      217,261      198,466      178,766
Franchise fees and royalties................................        3,335        3,188        3,173
Interest income, including related party income
    of  $404 and $181 in 2002 and 2001, respectively .......           50          428          274
                                                                ---------    ---------    ---------
                                                                  654,598      602,201      562,227
                                                                ---------    ---------    ---------
Costs and expenses:
     Cost of sales..........................................      290,005      266,357      250,138
     Selling, general and administrative expenses...........       84,701       76,621       75,275
     Depreciation and amortization..........................       45,109       39,243       34,397
     Interest expense.......................................        1,449        1,201        2,036
     Other operating expenses...............................      117,657      105,119       95,177
                                                                ---------    ---------    ---------
                                                                  538,921      488,541      457,023
                                                                ---------    ---------    ---------

Income before income taxes..................................      115,677      113,660      105,204

Income taxes................................................       44,882       44,134       41,029
                                                                ---------    ---------    ---------

Net income..................................................       70,795       69,526       64,175

Other comprehensive income (loss), net of tax:
     Foreign currency translation...........................          786           87         (148)
                                                                ---------    ---------    ---------
Comprehensive income........................................    $  71,581    $  69,613    $  64,027
                                                                =========    =========    =========

Earnings per share:
Basic:
     Net income  ...........................................    $    2.67    $    2.50    $    2.30
                                                                =========    =========    =========
     Weighted average shares outstanding....................       26,436       27,674       27,816
                                                                =========    =========    =========
Diluted:
     Net income  ...........................................    $    2.62    $    2.46    $    2.24
                                                                =========    =========    =========
     Weighted average shares outstanding....................       26,926       28,175       28,514
                                                                =========    =========    =========



                           See notes to consolidated financial statements.










                                                  CEC ENTERTAINMENT, INC.
                                      CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                             (Thousands, except per share data)


                                                         Fiscal Year - Amounts                   Fiscal Year - Shares
                                                 -------------------------------------       ----------------------------
                                                    2003          2002          2001          2003       2002       2001
                                                 ---------     ---------     ---------       ------     ------     ------
                                                                                                 
Common stock and capital in
  excess of par value:
    Balance, beginning of year...............    $ 205,503     $ 195,574     $ 181,287       35,670     35,325     34,585
    Stock options exercised..................       14,588         6,367        10,547          640        338        785
    Tax benefit from exercise
      of stock options ......................        4,072         3,265         4,174
    Stock issued under 401(k) plan...........          356           297           176           11          7          5
    Treasury stock retired and
      reserved for 401(k) plan...............                                     (610)                               (50)
                                                 ---------     ---------     ---------       ------     ------     ------
    Balance, end of year.....................      224,519       205,503       195,574       36,321     35,670     35,325
                                                 ---------     ---------     ---------       ======     ======     ======

Retained earnings:
    Balance, beginning of year...............      308,277       239,070       175,217
    Net income...............................       70,795        69,526        64,175
    Redeemable preferred stock accretion.....          (49)          (95)          (91)
    Redeemable preferred stock dividend......         (112)         (224)         (231)
                                                 ---------     ---------     ---------
    Balance, end of year.....................      378,911       308,277       239,070
                                                 ---------     ---------     ---------

Accumulated other comprehensive
    income(loss):
    Balance, beginning of year...............          (91)         (178)          (30)
    Foreign currency translation.............          786            87          (148)
                                                 ---------     ---------     ---------
    Balance, end of year.....................          695           (91)         (178)
                                                 ---------     ---------     ---------

Treasury shares:
    Balance, beginning of year...............     (129,021)      (97,230)      (74,202)       8,409      7,586      7,040
    Treasury stock acquired..................      (82,605)      (31,791)      (23,638)       2,286        823        596
    Treasury stock retired and
      reserved for 401(k) plan...............                                      610                                (50)
                                                 ---------     ---------     ---------       ------     ------     ------
    Balance, end of year.....................     (211,626)     (129,021)      (97,230)      10,695      8,409      7,586
                                                 ---------     ---------     ---------       ======     ======     ======

Total shareholders' equity...................    $ 392,499     $ 384,668     $ 337,236
                                                 =========     =========     =========









                                      See notes to consolidated financial statements.









                                                 CEC ENTERTAINMENT, INC.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       (Thousands)

                                                                                               Fiscal Year
                                                                                  -------------------------------------
                                                                                     2003          2002          2001
                                                                                  ---------     ---------     ---------
                                                                                                     
Operating activities:
Net income...................................................................     $  70,795     $  69,526     $  64,175
Adjustments to reconcile net income to cash provided by operations:
   Depreciation and amortization ............................................        45,109        39,243        34,397
   Deferred income tax expense ..............................................        12,390        18,246        12,088
   Tax benefit from exercise of stock options ...............................         4,072         3,265         4,174
   Other.....................................................................         2,686         1,333           836
   Net change in receivables, inventories, prepaids, payables and
     accrued liabilities.....................................................        17,790         1,731         3,827
                                                                                  ---------     ---------     ---------
      Cash provided by operations............................................       152,842       133,344       119,497
                                                                                  ---------     ---------     ---------

Investing activities:
   Purchases of property and equipment.......................................       (88,386)     (108,126)     (111,202)
   Proceeds from dispositions of property and equipment......................                                       297
   Payments received on notes receivable.....................................                       2,201         2,677
   Additions to notes receivable.............................................                      (3,971)       (3,206)
   Change in other assets....................................................          (327)         (426)          647
   Sale of assets held for resale............................................                         462         1,980
                                                                                  ---------     ---------     ---------
      Cash used in investing activities......................................       (88,713)     (109,860)     (108,807)
                                                                                  ---------     ---------     ---------

Financing activities:
   Proceeds from debt and line of credit.....................................        48,700        52,375        37,100
   Payments on debt and line of credit.......................................       (46,443)      (41,946)      (38,169)
   Redeemable preferred stock dividends......................................          (112)         (224)         (231)
   Acquisition of treasury stock.............................................       (82,605)      (31,791)      (23,638)
   Exercise of stock options.................................................        14,588         6,367        10,547
   Redemption of preferred stock.............................................        (2,795)
   Other.....................................................................           391           267            83
                                                                                  ---------     ---------     ---------
      Cash used in financing activities......................................       (68,276)      (14,952)      (14,308)
                                                                                  ---------     ---------     ---------

Increase (decrease) in cash and cash equivalents.............................        (4,147)        8,532        (3,618)
Cash and cash equivalents, beginning of year.................................        12,214         3,682         7,300
                                                                                  ---------     ---------     ---------
Cash and cash equivalents, end of year.......................................     $   8,067     $  12,214     $   3,682
                                                                                  =========     =========     =========



                                     See notes to consolidated financial statements.







                             CEC ENTERTAINMENT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   Summary of significant accounting policies:

     Operations:  CEC  Entertainment,  Inc. and its subsidiaries (the "Company")
operates  and  franchises  family  restaurant/entertainment  centers as Chuck E.
Cheese's restaurants.

     Fiscal year:  The  Company's  fiscal year is 52 or 53 weeks and ends on the
Sunday nearest December 31. References to 2003, 2002 and 2001 are for the fiscal
years ended  December  28,  2003,  December  29,  2002,  and  December 30, 2001,
respectively. Fiscal years 2003, 2002 and 2001 each consisted of 52 weeks.

     Basis of consolidation:  The consolidated  financial statements include the
accounts of the Company and its  subsidiaries.  In 2003, the Company adopted the
Financial Accounting Standards Board's  Interpretation No. 46, "Consolidation of
Variable Interest Entities" (FIN 46). Accordingly, at the beginning of 2003, the
Company consolidated the financial  statements of the International  Association
of  CEC  Entertainment,   Inc.  (the   "Association"),   a  related  party.  The
consolidation  did not have a  material  impact  on the  Company's  consolidated
results of operations,  financial  position or cash flows. Notes receivable from
the Association,  previously reported in prior periods, are currently eliminated
in this  consolidation  and replaced with the  Association's  assets,  which are
primarily  prepaid  advertising  costs and cash.  All  significant  intercompany
accounts and transactions have been eliminated.

     Foreign currency  translation:  The consolidated  financial  statements are
presented in U.S. dollars.  The assets and liabilities of the Company's Canadian
subsidiary  are translated to U.S.  dollars at year-end  exchange  rates,  while
revenues and expenses are translated at average  exchange rates during the year.
Adjustments that result from translating  amounts are reported as a component of
other comprehensive income.

     Cash and cash  equivalents:  Cash and cash  equivalents  of the Company are
composed of demand  deposits with banks and  short-term  cash  investments  with
remaining  maturities  of three  months or less from the date of purchase by the
Company.

     Inventories:  Inventories of food, paper products, merchandise and supplies
are stated at the lower of cost on a first-in, first-out basis or market.

     Property  and  equipment,  depreciation  and  amortization:   Property  and
equipment are stated at cost, net of accumulated  depreciation and amortization.
Depreciation  and  amortization  are provided by charges to operations  over the
estimated  useful  lives of the assets by the  straight-line  method,  generally
ranging from four to 20 years for furniture, fixtures and equipment and 40 years
for buildings.  Leasehold  improvements  are amortized over the shorter of their
estimated useful lives or the related lease life,  generally  ranging from 10 to
20 years. All pre-opening costs are expensed as incurred.

     The Company  evaluates  long-lived assets held and used in the business for
impairment  whenever  events  or  changes  in  circumstances  indicate  that the
carrying  amount of the assets  may not be  recoverable.  Long-lived  assets are
grouped  at the  lowest  level for which  identifiable  cash  flows are  largely
independent.  The carrying amount of long-lived  assets is not recoverable if it
exceeds the sum of associated  undiscounted future cash flows. The amount of any
impairment  is measured  as the excess of the  carrying  amount over  associated
discounted future operating cash flows. Assets held for sale are reported at the
lower of carrying amount or the fair value less costs to sell.









                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


1.   Summary of significant accounting policies (continued):

     Fair Value of  Financial  Instruments:  The Company  has certain  financial
instruments consisting primarily of cash equivalents, notes receivable and notes
payable. The carrying amount of cash equivalents approximates fair value because
of the short maturity of those instruments. The carrying amount of the Company's
notes  receivable  and  long-term  debt  approximates  fair  value  based on the
interest rates charged on instruments with similar terms and risks.

     Stock-Based  Compensation:   The  Company  accounts  for  its  stock  based
compensation  under the intrinsic  value method of Accounting  Principles  Board
Opinion  No.  25,  "Accounting  for Stock  Issued  to  Employees,"  and  related
interpretations  ("APB 25"), and has adopted the  disclosure-only  provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation"  ("SFAS 123").  Under APB 25, no stock-based  compensation cost is
reflected  in net income for grants of stock  options to  employees  because the
Company grants stock options with an exercise price equal to the market value of
the stock on the date of grant.  Had  compensation  cost for the Company's stock
option  plans been  determined  based on the fair value method at the grant date
for awards under those plans  consistent with the method  prescribed by SFAS No.
123, the  Company's  pro forma net income and earnings per share would have been
as follows (thousands, except per share data):




                                                              2003         2002         2001
                                                            --------     --------     --------
                                                                             
Net income, as reported ...............................     $ 70,795     $ 69,526     $ 64,175
Fair value based compensation expense, net of taxes....       (6,507)      (6,439)      (4,613)
                                                            --------     --------     --------
Pro forma net income...................................     $ 64,288     $ 63,087     $ 59,562
                                                            ========     ========     ========

Earnings per Share:
Basic:
    As reported........................................     $   2.67     $   2.50     $   2.30
    Pro forma..........................................     $   2.43     $   2.26     $   2.13

Diluted:
    As reported........................................     $   2.62     $   2.46     $   2.24
    Pro forma..........................................     $   2.38     $   2.22     $   2.08



     For the pro forma  calculations  above, the estimated fair value of options
granted  was  $9.48,  $14.69  and  $11.91  per  share  in 2003,  2002 and  2001,
respectively. The fair value of each stock option grant is estimated on the date
of grant  using  the  Black-Scholes  option  pricing  model  with the  following
weighted average  assumptions used for grants: risk free interest rate of 3.10%,
4.34%  and  4.80% in 2003,  2002 and  2001,  respectively;  no  dividend  yield;
expected lives of five years; and expected volatility of 30%.

     Franchise   fees  and  royalties:   Franchise  fees  are  recognized   upon
fulfillment of all significant  obligations to the  franchisee.  At December 28,
2003, 48 Chuck E. Cheese's  restaurants were operated by a total of 29 different
franchisees. The standard franchise agreements grant to the franchisee the right
to  construct  and operate a  restaurant  and use the  associated  trade  names,
trademarks and service marks within the standards and guidelines  established by
the Company.  Royalties from  franchisees are accrued as earned.  Franchise fees
included in revenues were  $281,000,  $240,000,  and $114,000 in 2003,  2002 and
2001, respectively.

     Advertising  costs:  Production  costs for  commercials are expensed in the
year in which the commercials are initially aired. All other  advertising  costs
are expensed as incurred.  The total amounts charged to advertising expense were
approximately  $24.6 million,  $24.4 million and $24.0 million in 2003, 2002 and
2001, respectively.







                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



1.   Summary of significant accounting policies (continued):

     Use of estimates and assumptions:  The preparation of financial  statements
in conformity with generally accepted accounting  principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

     Reclassifications:  Certain reclassifications of 2002 and 2001 amounts have
been made to conform to the 2003 presentation.

     Recent   Accounting   Pronouncements:   In  December  2003,  the  Financial
Accounting  Standards Board issued a revision to Financial  Accounting Standards
Board  Interpretation  No. 46 ("FIN  46R").  FIN 46R requires an  evaluation  of
franchise  arrangements  to  determine  if  franchisees  should be  consolidated
beginning in the first  quarter of fiscal 2004.  The Company is currently in the
process of evaluating FIN 46R but does not believe that its adoption will have a
material effect on the Company's financial statements.


2.   Accounts receivable:                             2003         2002
                                                    --------     --------
                                                         (thousands)

     Trade........................................  $  2,414     $  2,495
     Tax receivables..............................     1,873        3,915
     Vendor rebates...............................     3,638        3,108
     Construction allowances from landlords.......     3,481          779
     Other........................................     1,697          973
                                                    --------     --------
                                                    $ 13,103     $ 11,270
                                                    ========     ========


3.   Notes receivable from related party:

     The  Company  and its  franchisees  contribute  a  percentage  of  revenues
("Assessments")  to the Association,  a related party, to develop  entertainment
attractions and produce and communicate system wide advertising. The Association
has ten directors,  five of whom are also employees of the Company.  At December
29, 2002,  approximately  $3,825,000 was outstanding under notes receivable from
the  Association.  The Company also had accounts  payable to the  Association of
$2,475,000  at December  29, 2002  primarily  for December  assessments.  At the
beginning of 2003, the Company adopted FIN 46 and has consolidated the financial
statements  of  the  Association.   (Note  1).   Accordingly,   all  significant
intercompany accounts and transactions have been eliminated in 2003.

















                                    CEC ENTERTAINMENT, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



4.   Property and equipment:



                                                                        2003          2002
                                                                     ---------     ---------
                                                                           (thousands)

                                                                             
     Land.........................................................   $  40,357     $  36,329
     Leasehold improvements.......................................     301,088       263,625
     Buildings ...................................................      49,305        44,186
     Game, restaurant and other equipment.........................     328,369       299,251
     Property leased under capital leases (Note 7)................         449           449
                                                                     ---------     ---------
                                                                       719,568       643,840
     Less accumulated depreciation and amortization...............    (204,845)     (169,836)
                                                                     ---------     ---------
         Net property and equipment in service....................     514,723       474,004
     Construction in progress.....................................       7,547         7,305
     Game and restaurant equipment held for future service........      13,854        12,224
                                                                     ---------     ---------
                                                                     $ 536,124     $ 493,533
                                                                     =========     =========



5.   Accounts payable and accrued insurance:



                                                                        2003          20002
                                                                     ---------     ---------
                                                                           (thousands)
                                                                             
     Current:
       Accounts payable...........................................   $  30,126     $  19,933
       Salaries and wages.........................................       8,665         7,630
       Insurance..................................................       7,888         6,896
       Taxes, other than income...................................       5,668         5,488
       Income taxes...............................................       2,804
         Other....................................................       3,585         3,055
                                                                     ---------     ---------
                                                                     $  58,736     $  43,002
                                                                     =========     =========
     Long-term:
       Insurance..................................................   $   8,500     $   4,750
                                                                     =========     =========



     Accrued  insurance  liabilities  represent  estimated  claims  incurred but
unpaid  under  the  Company's   self-insured   retention  programs  for  general
liability,  workers  compensation,  health  benefits and certain  other  insured
risks.



6.   Long-term debt:



                                                                        2003          2002
                                                                     ---------     ---------
                                                                           (thousands)
                                                                             
     Revolving bank loan, prime or LIBOR
        plus 0.75% to 1.5%,  due December 2005 ...................   $  64,400     $  62,000
     Obligations under capital leases (Note 7)....................         349           492
                                                                     ---------     ---------
                                                                        64,749        62,492
     Less current portion.........................................        (168)         (143)
                                                                     ---------     ---------
                                                                     $  64,581     $  62,349
                                                                     =========     =========










                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


6.   Long-term debt (continued):

     In 2002, the Company entered into a line of credit agreement which provides
the Company  with a  revolving  credit  facility of $100  million and matures in
2005. In 2003, available borrowings under the line of credit agreement increased
to $132.5  million.  Interest under the line of credit is payable at rates which
are  dependent  on  earnings  and debt  levels of the  Company.  Currently,  any
borrowings  under this line of credit  would be at prime  (4.00% at December 28,
2003) or, at the  Company's  option,  LIBOR  (1.12% at December  28,  2003) plus
0.75%.  A 0.2%  commitment fee is payable on any unused credit line. The Company
is required to comply with certain financial ratio tests during the terms of the
loan agreement.  The weighted  average  interest rate on long-term debt was 2.0%
and 3.1% in 2003 and 2002, respectively.  The Company capitalized interest costs
of $77,000, $176,000 and $306,000 in 2003, 2002 and 2001, respectively.


7.   Commitments and contingencies:

     The Company leases certain  restaurants and related  property and equipment
under  operating  and  capital  leases.  All leases  require  the Company to pay
property  taxes,  insurance and  maintenance  of the leased  assets.  The leases
generally have initial terms of 10 to 20 years with various renewal options.

     Scheduled  annual  maturities of the  obligations for capital and operating
leases as of December 28, 2003, are as follows:

        Years                                              Capital    Operating
       -------                                             -------    ---------
                                                                (thousands)

     2004................................................   $ 214     $  53,982
     2005................................................     196        52,729
     2006................................................                49,479
     2007................................................                43,524
     2008-2028 (aggregate payments)......................               155,793
                                                            -----     ---------
     Minimum future lease payments ......................     410     $ 355,507
                                                                      =========
     Less amounts representing interest..................     (61)
                                                            -----
     Present value of future minimum lease payments......     349
     Less current portion................................    (168)
                                                            -----
     Long-term capital lease obligation..................   $ 181
                                                            =====


     Deferred  rent is  provided to  recognize  the  minimum  rent  expense on a
straight-line basis when rental payments are not made on such basis.  Certain of
the Company's real estate leases require  payment of contingent  rent based on a
percentage of sales. The Company's rent expense is comprised of the following:

                                                2003         2002         2001
                                              --------     --------     --------
                                                         (thousands)
     Minimum...............................   $ 56,350     $ 51,195     $ 47,884
     Contingent............................        291          330          452
                                              --------     --------     --------
                                              $ 56,641     $ 51,525     $ 48,336
                                              ========     ========     ========

     From time to time the Company is involved in  litigation,  most of which is
incidental to its business. In the Company's opinion, no litigation to which the
Company  currently is a party is likely to have a material adverse effect on the
Company's results of operations, financial condition or cash flows.

     In September  2003, the Company  recorded a charge to selling,  general and
administrative  expense of $4.25 million related to the settlement  agreed to on
September 29, 2003,  subject to court approval,  in a class action wage and hour
lawsuit filed in the State of  California.  In January  2004,  the court granted
preliminary approval of this settlement.





                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


8.   Redeemable preferred stock:

     In May 2003, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards  No. 150,  "Accounting  for  Certain  Financial
Instruments with  Characteristics  of Both Liabilities and Equity"("SFAS  150").
SFAS 150 required the Company to classify  redeemable  preferred  stock dividend
preferences  as interest  cost  effective at the  beginning  of the  three-month
period ended September 28, 2003. After that date in 2003,  redeemable  preferred
stock  accretion  and  dividends  of $164,000  is included in interest  expense;
comparable  amounts in prior periods are reported in  shareholders'  equity.  In
October 2003, the Company  reacquired for approximately  $2.8 million all of its
outstanding  redeemable  preferred stock. Also, in 2003 the increase of $163,000
in the carrying value of the redeemable preferred stock to the redemption amount
is included in interest expense.


9.   Cost of sales:

                                                  2003        2002        2001
                                               ---------   ---------   ---------
                                                          (thousands)

Food, beverage and related supplies..........  $  79,982   $  73,690   $  72,006
Games and merchandise........................     28,234      25,490      24,871
Labor........................................    181,789     167,177     153,261
                                               ---------   ---------   ---------
                                               $ 290,005   $ 266,357   $ 250,138
                                               =========   =========   =========


10.  Income taxes:

     The significant components of income tax expense are as follows:

                                                  2003        2002        2001
                                                --------    --------    --------
                                                          (thousands)
Current expense:
   Federal..................................... $ 23,430    $ 18,571    $ 20,957
   State.......................................    4,810       3,854       3,648
   Foreign.....................................      180         198         162
   Tax benefit from exercise of stock options..    4,072       3,265       4,174
                                                --------    --------    --------
      Total current expense....................   32,492      25,888      28,941
Deferred expense:
   Federal.....................................   11,450      16,199      10,412
   State.......................................      940       2,047       1,676
                                                --------    --------    --------
      Total temporary differences .............   12,390      18,246      12,088
                                                --------    --------    --------
                                                $ 44,882    $ 44,134    $ 41,029
                                                ========    ========    ========








                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


10.  Income taxes (continued):

     Deferred  income tax assets and  liabilities  are recognized for the future
tax  consequences  attributable to differences  between the financial  statement
carrying  amounts of assets and liabilities and their  respective tax bases. The
income tax effects of temporary  differences  which give rise to deferred income
tax assets and liabilities are as follows:

                                                      2003         2002
                                                    --------     --------
                                                         (thousands)
Current deferred tax asset:
    Accrued vacation.............................   $    894     $    766
    Unearned gift certificates ..................        498          406
    Other........................................         95          147
                                                    --------     --------
                                                    $  1,487     $  1,319
                                                    ========     ========

Non-current deferred tax asset (liability):
    Deferred rent................................   $  1,994     $  1,580
    Unearned franchise fees......................         91           92
    Depreciation.................................    (53,372)     (39,471)
    Foreign......................................       (479)        (335)
    Other........................................      1,052          (22)
                                                    --------     --------

                                                    $(50,714)    $(38,156)
                                                    ========     ========


     A reconciliation of the statutory rate to taxes provided is as follows:

                                                      2003     2002     2001
                                                     -----    -----    -----

 Federal statutory rate...........................    35.0%    35.0%    35.0%
 State income taxes, net of federal benefit.......     3.3%     3.9%     3.9%
 Other............................................      .5%     (.1)%     .1%
                                                     -----    -----    -----
 Effective tax rate...............................    38.8%    38.8%    39.0%
                                                     =====    =====    =====








                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


11.  Earnings per common share:

     Basic  earnings per common share  ("EPS") is computed by dividing  earnings
applicable  to common  shares by the weighted  average  number of common  shares
outstanding.  Diluted EPS adjusts for the effect of potential common shares from
dilutive stock options using the treasury stock method. Net income applicable to
common shares has been adjusted for  redeemable  preferred  stock  accretion and
dividends for the applicable  periods.  Earnings per common and potential common
shares were computed as follows (thousands, except per share data):




                                                              2003       2002       2001
                                                            --------   --------   --------

                                                                         
Net income...............................................   $ 70,795   $ 69,526   $ 64,175
Accretion of redeemable preferred stock..................        (49)       (95)       (91)
Redeemable preferred stock dividends.....................       (112)      (224)      (231)
                                                            --------   --------   --------
Net income applicable to common shares...................   $ 70,634   $ 69,207   $ 63,853
                                                            ========   ========   ========

Basic:
Weighted average common shares outstanding...............     26,436     27,674     27,816
                                                            ========   ========   ========
Earnings per common share................................   $   2.67   $   2.50   $   2.30
                                                            ========   ========   ========

Diluted:
Weighted average common shares outstanding...............     26,436     27,674     27,816
Potential common shares for stock options................        490        501        698
                                                            --------   --------   --------
Weighted average shares outstanding......................     26,926     28,175     28,514
                                                            ========   ========   ========
Earnings per common and potential common shares..........   $   2.62   $   2.46   $   2.24
                                                            ========   ========   ========



     Antidilutive stock options to purchase 762,096,  787,901,  and 6,604 common
shares  were  not  included  in the EPS  computations  in 2003,  2002 and  2001,
respectively, because the exercise prices of these options were greater than the
average market price of the common shares.

     On February 18, 2004, the Company announced that its Board of Directors had
declared a 3 for 2 stock split  effected in the form of a special stock dividend
that is effective and distributable on March 15, 2004 to holders of record as of
February 25, 2004. The share information  included in these financial statements
and notes does not reflect the effect of such stock split. Pro forma diluted EPS
on a post-split  basis would be $1.75,  $1.64 and $1.49 in 2003,  2002 and 2001,
respectively.


12.  Employee benefit plans:

     The Company has employee  benefit  plans that include:  a) incentive  bonus
compensation  plans based on the  performance of the Company;  b)  non-statutory
stock  option  plans  for its  employees  and  non-employee  directors  and c) a
retirement and savings plan.

     In 1997,  the  Company  adopted an employee  stock  option plan under which
6,787,500  shares,  as amended in 2003,  may be granted before July 31, 2007. In
1995, the Company  adopted a stock option plan for its  non-employee  directors.
The number of shares of the Company's common stock that may be issued under this
plan cannot exceed 225,000 shares.  The exercise price for options granted under
both plans may not be less than the fair market  value of the  Company's  common
stock at date of grant. Options may not be exercised until the employee has been
continuously  employed at least one year after the date of grant.  Options which
expire or terminate  may be re-granted  under the plan.  Options which have been
granted under the plans cannot be re-priced.






                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


12.  Employee benefit plans (continued):


     At December 28, 2003,  there were  1,846,901  shares  available  for future
grants under the employee and non-employee  directors stock option plans.  Stock
option transactions are summarized as follows for all plans:



                                                                                       Weighted Average
                                                    Number of Shares              Exercise  Price Per Share
                                           ---------------------------------     ---------------------------
                                              2003        2002        2001         2003      2002      2001
                                           ---------   ---------   ---------     -------   -------   -------
                                                                                   
Options outstanding, beginning of year     3,025,475   2,650,611   2,488,368     $ 30.63   $ 25.26   $ 17.95
   Granted ...........................     1,509,837     792,299     989,957       29.97     43.45     34.09
   Exercised..........................      (639,907)   (337,656)   (784,669)      22.80     18.86     13.44
   Terminated.........................      (163,198)    (79,779)    (43,045)      32.29     29.42     21.27
                                           ---------   ---------   ---------
Options outstanding, end of year           3,732,207   3,025,475   2,650,611       31.63     30.63     25.26
                                           =========   =========   =========




     Options outstanding at December 28, 2003:




                          Options Outstanding                                      Options Exercisable
- -----------------------------------------------------------------------      --------------------------------
                       Shares          Weighted Avg.        Weighted            Shares            Weighted
    Range of        Outstanding          Remaining           Average          Exercisable          Average
Exercise Prices    as of 12/28/03      Life (years)      Exercise Price      as of 12/28/03    Exercise Price
- ---------------    --------------    ----------------    --------------      --------------    --------------

                                                                                    
$13.67 - $19.94          307,972            1.7             $ 16.55              307,413           $16.55
$22.44 - $24.25          337,240            3.3               23.25              198,601            23.25
$25.00 - $29.99        1,575,637            5.8               29.47               85,376            25.62
$30.06 - $39.80          751,077            4.0               34.01              327,758            34.00
$40.30 - $54.27          760,281            6.1               43.56               15,907            44.12
                      ----------                                                --------
$13.67 - $54.27        3,732,207            4.7               31.63              935,055            25.39
                      ==========                                                ========



     Stock  options  expire seven years from the grant date.  Stock options vest
over  various  periods  ranging  from one to four  years.  In 2004,  the Company
granted 393,561  additional options to employees at exercise prices of $47.24 to
$47.80 per share and 20,000 options to its non-employee directors at an exercise
price of $47.83 per share.

     The  Company has adopted the CEC 401(k)  Retirement  and Savings  Plan,  to
which it may at its discretion make an annual contribution out of its current or
accumulated  earnings.  Contributions  by the Company may be made in the form of
its common  stock or in cash.  At December  28,  2003,  33,300  shares  remained
available  for  grant  under  the  plan.  The  Company  made   contributions  of
approximately  $356,000  and $297,000 in common stock for the 2002 and 2001 plan
years, respectively. The Company accrued $400,000 for contributions for the 2003
plan year which will be paid in common stock in 2004.













                             CEC ENTERTAINMENT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


13.  Supplemental cash flow information:

                                                      2003      2002      2001
                                                    --------  --------  --------
                                                             (thousands)
     Cash paid during the year for:
        Interest..................................  $  1,481  $  1,216  $  2,167
        Income taxes .............................    25,773    26,936    25,168



14.  Quarterly results of operations (unaudited):

     The following  summarizes the unaudited  quarterly results of operations in
2003 and 2002 (thousands, except per share data).




                                                 Fiscal year ended December 28, 2003
                                         ---------------------------------------------------
                                          March 30      June 29       Sept. 28      Dec. 28
                                         ---------     ---------     ---------     ---------

                                                                       
Revenues..............................   $ 184,126     $ 152,885     $ 170,138     $ 147,449
Income before income taxes............      44,782        24,120        27,516        19,259
Net income............................      27,407        14,761        16,840        11,787

Earnings Per Share:
   Basic .............................   $    1.00     $     .54     $     .65     $     .46
   Diluted ...........................        1.00           .54           .64           .45



                                                 Fiscal year ended December 29, 2002
                                         ---------------------------------------------------
                                          March 31      June 30       Sept. 29      Dec. 29
                                         ---------     ---------     ---------     ---------

Revenues..............................   $ 172,793     $ 142,416     $ 148,921     $ 138,071
Income before income taxes............      43,854        25,080        27,071        17,655
Net income............................      26,796        15,323        16,539        10,868

Earnings Per Share:
   Basic .............................   $     .96     $     .55     $     .60     $     .39
   Diluted ...........................         .94           .54           .59           .39









Item  9.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

     None

Item 9A. Controls and Procedures

     An  evaluation   was  performed   under  the   supervision   and  with  the
participation of the Company's management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the  Company's  disclosure  controls and  procedures as of the end of the period
covered by this report.  Based on that  evaluation,  the  Company's  management,
including the Chief  Executive  Officer and Chief Financial  Officer,  concluded
that the Company's  disclosure  controls and procedures were effective as of the
time of  such  evaluation  in  timely  alerting  them  to  material  information
(including information relating to our consolidated subsidiaries) required to be
included in our Exchange Act Filings.  There have been no significant changes in
the  Company's   internal   controls  over   financial   reporting   that  could
significantly affect these controls during the most recent fiscal quarter.


                                 P A R T   I I I

Item 10. Directors and Executive Officers of the Registrant

     The information required by this item regarding the directors and executive
officers of the Company is  incorporated by reference to and will be included in
the Company's  definitive Proxy Statement to be filed pursuant to Regulation 14A
in  connection  with the  Company's  2004 annual  meeting of  stockholders.  The
Company has adopted a Code of Ethics for the Chief Executive  Officer and Senior
Financial  Officers  (the  "Code  of  Ethics")  that  applies  to the  principal
executive officer, principal financial officer and principal accounting officer.
Changes to and waivers granted with respect to the Code of Ethics related to the
above named officers  required to be disclosed  pursuant to applicable rules and
regulations    will   also   be   posted   on   the    Company's    website   at
www.chuckecheese.com.

Item 11. Executive Compensation

     The information required by this item regarding the directors and executive
officers of the Company is  incorporated by reference to and will be included in
the Company's  definitive Proxy Statement to be filed pursuant to Regulation 14A
in connection with the Company's 2004 annual meeting of stockholders.


Item 12. Security Ownership of Certain Beneficial Owners and Management

     The  information  required by this Item is incorporated by reference to and
will be  included  in the  Company's  definitive  Proxy  Statement  to be  filed
pursuant to Regulation  14A in connection  with Company's 2004 annual meeting of
stockholders.


Item 13. Certain Relationships and Related Transactions

     The information required by this Item regarding the directors and executive
officers of the Company is  incorporated by reference to and will be included in
the Company's  definitive Proxy Statement to be filed pursuant to Regulation 14A
in connection with the Company's 2004 annual meeting of stockholders.


Item 14. Principal Accountant Fees and Services

     The  information  required by this Item is incorporated by reference to and
will be  included  in the  Company's  definitive  Proxy  Statement  to be  filed
pursuant to Regulation 14A in connection  with the Company's 2004 annual meeting
of stockholders.




                                  P A R T   I V

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

     (a) The following documents are filed as a part of this report:

          (1) Financial Statements and Supplementary Data:

          Independent auditors' report.
          CEC  Entertainment,    Inc.    consolidated    financial   statements:
               Consolidated  balance sheets as of December 28, 2003 and December
               29, 2002.  Consolidated  statements of earnings and comprehensive
               income for the years ended  December 28, 2003,  December 29, 2002
               and December 30, 2001.  Consolidated  statements of shareholders'
               equity for the years ended  December 28, 2003,  December 29, 2002
               and December 30, 2001.  Consolidated statements of cash flows for
               the years ended December 28, 2003, December 29, 2002 and December
               30, 2001. Notes to consolidated financial statements.






(2)  Exhibits:

Number         Description
- -------        -----------

3(a)(1)        Amended and  Restated  Articles  of  Incorporation of the Company
               (filed as  Exhibit  3(a)  to  the  Company's  Quarterly Report on
               Form 10-Q for  the  quarter ended July 4, 1999,  and incorporated
               herein by reference).

3(b)(1)        Restated Bylaws of  the Company, dated August 16, 1994  (filed as
               Exhibit 3 to the Company's Quarterly  Report on Form 10-Q for the
               quarter  ended  September 30, 1994,  and  incorporated  herein by
               reference).

3(b)(2)        Amendment to the Bylaws, dated May 5, 1995 (filed as Exhibit 3 to
               the Company's Quarterly Report on Form 10-Q for the quarter ended
               June 30, 1995, and incorporated herein by reference).

4(a)           Specimen form of  certificate representing  $.10 par value Common
               Stock (filed as  Exhibit 4(a)  to the Company's  Annual Report on
               Form 10-K for the year ended December 28, 1990,  and incorporated
               herein by reference).

10(a)          2001 Employment  Agreement dated November 13,  2000,  between the
               Company  and  Richard M. Frank  (filed as  Exhibit  10(a)  to the
               Company's   Annual  Report  on  Form  10-K  for  the  year  ended
               December 30, 2000, and incorporated herein by reference).

10(b)          Employment  Agreement,  dated  May 8,  2001,  between  Michael H.
               Magusiak and the Company (filed as Exhibit 10(a) to the Company's
               Quarterly  Report  on  Form 10-Q  for the  quarter ended April 1,
               2001, and incorporated herein by reference).

10(c)(1)       Credit  Agreement,  in the  stated  amount of $100,000,000, dated
               December 3, 2002,  between Showbiz Merchandising,  L.P., Company,
               Bank of America, Bank One, U.S. Bank National Association,  Fleet
               National Bank,  and the other Lenders  (filed as Exhibit 10(c) to
               the Company's  Annual  Report  on  Form 10-K  for  the year ended
               December 29, 2002, and incorporated herein by reference).

10(c)(2)       First  Amendment  to Credit  Agreement,  in  the stated amount of
               $100,000,000,   dated   February   28,  2003,   between   Showbiz
               Merchandising,   L.P., Company, Bank of  America,  Bank One, U.S.
               Bank  National Association,  Fleet National Bank,  and the  other
               Lenders (filed as Exhibit 10(a) to the Company's Quarterly Report
               on  Form  10-Q  for  the   quarter   ended   June 29,  2003,  and
               incorporated herein by reference).

10(c)(3)       Second  Amendment  to  Credit  Agreement, in the stated amount of
               $100,000,000, dated July 16, 2003, between Showbiz Merchandising,
               L.P., Company,  Bank of  America,  Bank One,  U.S. Bank  National
               Association, Fleet National Bank, and the other Lenders (filed as
               Exhibit 10(_) to the Company's Quarterly  Report on Form 10-Q for
               the quarter  ended  June 29, 2003,  and  incorporated  herein  by
               reference).

10(c)(4)       Third  Amendment  to Credit  Agreement,  in the stated  amount of
               $132,500,000,  dated  August 27, 2003,  between CEC Entertainment
               Concepts,  L.P.  (f/k/a Showbiz  Merchandising,  L.P.),  Company,
               Bank of America, Bank One, U.S. Bank National Association,  Fleet
               National Bank, and the other Lenders.

10(d)(1)       1997 Non-Statutory Stock Option Plan (filed as Exhibit 4.1 to the
               Company's  Form S-8  (No. 333-41039),  and incorporated herein by
               reference).






10(d)(2)       Specimen  form of  Contract under  the 1997  Non-Statutory  Stock
               Option Plan of the Company, as amended to date  (filed as Exhibit
               10(o)(2) to the Company's Annual Report on Form 10-K for the year
               ended January 2, 1998, and incorporated herein by reference).

10(e)(1)       Non-Employee Directors Stock Option Plan  (filed as  Exhibit B to
               the Company's Proxy Statement for  Annual Meeting of Stockholders
               to  be  held   on  June 8,  1995,  and   incorporated  herein  by
               reference).

10(e)(2)       Specimen form of Contract under the Non-Employee Directors  Stock
               Option Plan of the Company, as amended to date  (filed as Exhibit
               10(s)(2) to the Company's Annual Report on Form 10-K for the year
               ended December 27, 1996, and incorporated herein by reference).

10(f)(1)       Specimen form of the Company's current Franchise Agreement (filed
               as   Exhibit   10(a)(1)   to   the   Company's   Form   8-K  (No.
               0000813920-04-000021), and incorporated herein by reference).

10(f)(2)       Specimen  form of the  Company's  current  Development  Agreement
               (filed   as  Exhibit   10(a)(2)   to  the   Company's   Form  8-K
               (No.  0000813920-04-000021),   and    incorporated    herein   by
               reference).

10(g)          Rights Agreement,  dated as on November 19, 1997,  by and between
               the Company and the Rights Agent (filed as Exhibit A to Exhibit 1
               of   the   Company's   Registration   Statement   on   Form   8-A
               (No. 001-13687) and incorporated herein by reference).

23             Consent of Independent Accountants.

31.1           Certification   of  the  Chief  Executive   Officer  pursuant  to
               Rule 13a-14(a)/15d-14(a).

31.2           Certification   of  the   Chief  Financial  Officer  pursuant  to
               Rule 13a-14(a)/15d-14(a).

32.1           Certification of the Chief Executive Officer and Chief  Financial
               Officer pursuant to 18 U.S.C. Section 1350 as adpoted pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002.



(b)  Reports on Form 8-K:

During the fourth  quarter and to present,  we filed or furnished  the following
reports on Form 8-K:

     A current report on Form 8-K,  dated February 18, 2004,  containing a press
     release on February 18, 2004.
     A current  report on Form 8-K,  dated  March 4, 2004,  containing  exhibits
     10(f)(1) and 10(f)(2)

(c)  Exhibits pursuant to Item 601 of Regulation S-K:

     Pursuant to Item 601(b)(4) of Regulation S-K, there have been excluded from
the exhibits  filed  pursuant to this report  instruments  defining the right of
holders  of  long-term  debt  of the  Company  where  the  total  amount  of the
securities  authorized  under  each such  instrument  does not exceed 10% of the
total assets of the Company.  The Company hereby agrees to furnish a copy of any
such instruments to the Commission upon request.

(d) Financial Statements excluded from the annual report to shareholders by Rule
14A - 3(b):

     No  financial  statements  are  excluded  from  the  annual  report  to the
Company's shareholders by Rule 14a - 3(b).





                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


Dated:   March 11, 2004                     CEC Entertainment, Inc.



                                            By: /s/  Richard M. Frank
                                                -------------------------
                                                Richard M. Frank
                                                Chairman of the Board and
                                                Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.


Signature                                 Title                        Date
- ----------                               -------                      ------

/s/ Richard M. Frank          Chairman of the Board,              March 11, 2004
- --------------------------
Richard M. Frank              Chief Executive Officer,
                              and Director (Principal
                              Executive Officer)

/s/ Michael H. Magusiak       President and Director              March 11, 2004
- --------------------------
Michael H. Magusiak

/s/ Christopher D. Morris     Senior Vice President,              March 11, 2004
- --------------------------
Christopher D. Morris         Chief Financial Officer
                              (Principal Financial Officer and
                              Principal Accounting Officer)

/s/  Richard T. Huston        Director                            March 11, 2004
- --------------------------
Richard T. Huston

/s/ Tim T. Morris             Director                            March 11, 2004
- --------------------------
Tim T. Morris

/s/ Louis P. Neeb             Director                            March 11, 2004
- --------------------------
Louis P. Neeb

/s/ Cynthia I. Pharr Lee      Director                            March 11, 2004
- --------------------------
Cynthia I. Pharr Lee

/s/   Walter Tyree            Director                            March 11, 2004
- --------------------------
Walter Tyree

/s/ Raymond E. Wooldridge     Director                            March 11, 2004
- --------------------------
Raymond E. Wooldridge







                                  EXHIBIT INDEX


Exhibit No.     Description
- -----------     -----------

10(c)(4)        Third  Amendment  to Credit  Agreement,  in the stated amount of
                $132,500,000,  dated August 27, 2003,  between CEC Entertainment
                Concepts,  L.P.  (f/k/a Showbiz  Merchandising, L.P.),  Company,
                Bank  of America,  Bank One,  U.S.  Bank  National  Association,
                Fleet National Bank, and the other Lenders.

23              Independent Auditor's Consent of Deloitte & Touche LLP.

31.1            Certification  of  the   Chief  Executive  Officer  pursuant  to
                Rule 13a-14(a)/15d-14(a).

31.2            Certification  of  the  Chief   Financial  Officer  pursuant  to
                Rule 13a-14(a)/15d-14(a)

32.1            Certification  of Chief  Executive  Officer  and Chief Financial
                Officer pursuant  to 18 U.S.C.Section 1350,  as adopted pursuant
                to Section 906 of the Sarbanes-Oxley Act of 2002.