FORM 10-K/A
(Amendment No. 1)

|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/A or any amendment to
this Form 10-K/A. 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 38,052,780 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.

EXPLANATORY NOTE

As previously disclosed in a Form 8-K filed on March 2, 2005, following a
review of its lease-related accounting policies, CEC Entertainment, Inc. (the
"Company") determined that it was appropriate to adjust its prior financial
statements (the "Restatement") to correct certain errors contained in those
finanacial statements relating to the computation of depreciation, lease
classification, straight-line rent expense and the related deferred rent
liability.

Historically, when accounting for leases, the Company has depreciated its
leasehold improvements over a period equal to the lesser of the initial
non-cancelable lease term plus periods of expected renewal, or the useful life
of the assets. The periods of expected renewal included option periods provided
for in the lease and any additional periods that the Company considered
reasonably assured of exercising or acquiring. When determining whether each of
its leases was an operating lease or a capital lease and when calculating
straight-line rent expense, the Company used the initial non-cancelable lease
term commencing when the obligation to make current rent payments began. Funds
received from the lessor intended to reimburse the Company for the cost of
leasehold improvements were netted against the amount recorded for the leasehold
improvement.

Following an extensive analysis of its lease-related accounting policies,
the Company has now determined to use a consistent lease period (generally, the
initial non-cancelable lease term plus renewal option periods provided for in
the lease that can be reasonably assured) when calculating depreciation of
leasehold improvements and in determining straight-line rent expense and
classification of its leases as either an operating lease or a capital lease.
The lease term and straight-line rent expense will commence on the date when the
Company takes possession and has the right to control use of the leased
premises. Funds received from the lessor intended to reimburse the Company for
the cost of leasehold improvements will be recorded as a deferred credit
resulting from a lease incentive and amortized over the lease term as a
reduction to rent expense. As a result, the accompanying consolidated financial
statements have been restated from the amounts previously reported to
incorporate the effects of these policies. See Note 2 to the consolidated
financial statements.

This amendment No. 1 on Form 10-K/A to the Company's annual report on Form
10-K for the fiscal year ended December 28, 2003 ("Original Filing"), initially
filed with the Securities and Exchange Commission ("SEC") on March 11, 2004, is
being filed to reflect restatements of the Company's consolidated balance sheets
at December 28, 2003 and December 29, 2002 and the Company's consolidated
statements of earnings, changes in stockholders' equity (including retained
earnings at beginning of fiscal year 2001) and consolidated cash flows for the
fiscal years ended December 28, 2003, December 29, 2002 and December 30, 2001,
and the notes related thereto. For a more detailed description of these
restatements, see Note 2, "Restatement of Financial Statements" to the
accompanying audited consolidated financial statements and the section entitled
"Restatement" in Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in this Form 10-K/A.

For the convenience of the reader, this Form 10-K/A includes the Original
Filing in its entirety. However, this Form 10-K/A only amends and restates Items
6, 7, 8 and 9(a) of Part II of the Original Filing and no other material
information in the Original Filing is amended hereby. The foregoing items have
not been updated to reflect other events occurring after the Original Filing or
to modify or update those disclosures affected by subsequent events. In
addition, pursuant to the rules of the SEC, Item 15 of Part IV of the Original
Filing has been amended to contain the consent of our independent registered
public accounting firm and currently-dated certifications from our Chief
Executive Officer and Chief Financial Officer , as required by Sections 302 and
906 of the Sarbanes-Oxley Act of 2002. The consent of the independent registered
public accounting firm and the certifications of our Chief Executive Officer and
Chief Financial Officer are attached to this Form 10-K/A as Exhibits 23, 31.1,
31.2, and 32.1, respectively.

Except for the foregoing amended information and the retroactive adjustment
of all share and per share information for the effects of a three-for-two stock
split in the form of a special stock dividend effected on March 15, 2004, this
Form 10-K/A continues to describe conditions as of the date of the Original
Filing, and does not update disclosures contained herein to reflect events that
occurred at a later date. Other events occurring after the filing of the
Original Filing or other disclosures necessary to reflect subsequent events have
been or will be addressed in our amended Quarterly Reports on Form 10-Q/A for
the quarterly periods ended March 28, 2004, June 27, 2004 and September 26, 2004
which are being filed subsequent to this filing of this Form 10-K/A and any
reports filed with the SEC subsequent to this filing.

We have not amended and do not intend to amend our previously-filed Annual
Reports on Form 10-K or our Quarterly Reports on Form 10-Q for periods affected
by the Restatement other than the Form 10-K for the fiscal year ended December
28, 2003 and the Forms 10-Q for the fiscal quarters ended March 28, 2004, June
27,2004 and September 26, 2004. For this reason, the consolidated financial
statements, auditors' reports and related financial information for the affected
periods contained in any other prior reports should no longer be relied upon.

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) Corporate Governance Guidelines and (iii) 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 eighteen months 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 are 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 Association is included in the Company's
consolidated financial statements.

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 15
2006 36 None to 10
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. It is common for the Company to take possession of
leased premises prior to the commencement of rents for the purpose of
constructing leasehold improvements. 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 38,052,780 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 (retroactively adjusted
for a three-for-two stock split effective on March 15, 2004):

High Low
---- ---

2003
- 1st quarter $ 21.11 $ 16.03
- 2nd quarter 24.97 17.40
- 3rd quarter 27.17 22.83
- 4th quarter 34.67 25.99

2002
- 1st quarter $ 33.30 $ 27.88
- 2nd quarter 32.91 26.66
- 3rd quarter 28.28 21.93
- 4th quarter 23.86 15.93

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 (3) 2002 (3) 2001 (3) 2000 (3) 1999 (3)
--------- --------- --------- --------- ---------
(Thousands, except per share and store data)

Operating results (1)

Revenues ................................................. $ 654,598 $ 602,201 $ 562,227 $ 506,111 $ 440,904
Costs and expenses ....................................... 544,500 494,629 462,940 421,355 372,899
--------- --------- --------- --------- ---------
Income before income taxes ............................... 110,098 107,572 99,287 84,756 68,005
Income taxes ............................................. 42,717 41,772 38,721 33,048 26,282
--------- --------- --------- --------- ---------
Net income ............................................... $ 67,381 $ 65,800 $ 60,566 $ 51,708 $ 41,723
========= ========= ========= ========= =========

Per share (2)(4):
Basic:
Net income .......................................... $ 1.70 $ 1.58 $ 1.44 $ 1.27 $ 1.02
Weighted average shares outstanding.................... 39,654 41,511 41,724 40,499 40,506

Diluted:
Net income .......................................... $ 1.66 $ 1.55 $ 1.41 $ 1.23 $ .99
Weighted average shares outstanding.................. 40,389 42,263 42,771 41,759 41,883

Cash flow data:
Cash provided by operations ........................... $ 158,730 $ 136,395 $ 121,889 $ 97,623 $ 81,098
Cash used in investing activities ..................... (94,226) (112,686) (111,058) (89,363) (102,814)
Cash provided by (used in) financing activities ....... (68,651) (15,177) (14,449) (3,691) 21,237

Balance sheet data:
Total assets .......................................... $ 582,983 $ 537,251 $ 457,430 $ 386,724 $ 329,686
Long-term obligations (including current portion
and redeemable preferred stock) ..................... 84,259 77,211 65,445 60,670 66,859
Shareholders' equity .................................. 364,323 359,907 316,201 264,846 207,448

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) Amounts have been adjusted as a result of the Restatement. Amounts for 2003, 2002 and 2001 are discussed in Item 7
"Management's Discussion and Analysis of Financial Condition and Results of Operations", and in Note 2 to the
consolidated financial statements..

(4) All share and per share information have been retroactively adjusted for the effects of a three-for-two stock split
effected in the form of a special stock dividend that was effective on March 15, 2004.

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

Restatement

Following a review of its lease-related accounting policies, the Company
determined that it was appropriate to adjust its prior financial statements to
correct certain errors contained in those financial statements relating to the
computation of depreciation, lease classification, straight-line rent expense
and the related deferred rent liability. As a result, the Company has restated
its consolidated financial statements for the fiscal years 2003, 2002 and 2001
and selected financial information for fiscal years 2000 and 1999.

The Company has now determined to use a consistent lease period (generally,
the initial non-cancelable lease term plus renewal option periods provided for
in the lease that can be reasonably assured) when calculating depreciation of
leasehold improvements and in determining straight-line rent expense and
classification of its leases as either an operating lease or a capital lease.
The lease term and straight-line rent expense will commence on the date when the
Company takes possession and has the right to control use of the leased
premises. Funds received from the lessor intended to reimburse the Company for
the cost of leasehold improvements will be recorded as a deferred credit
resulting from a lease incentive and amortized over the lease term as a
reduction to rent expense. As a result, the accompanying consolidated financial
statements have been restated from the amounts previously reported to
incorporate the effects of these policies. See Note 2 to the consolidated
financial statements.

The cumulative effect of the restatement adjustments through fiscal year
2003 is to increase property and equipment $2.6 million, increase deferred rent
liability $37.7 million, increase obligations under capital leases $11.0
million, decrease deferred tax liability $17.9 million and decrease retained
earnings $28.2 million of which $17.4 million relate to years prior to 2001.
Increases in rent expense, depreciation expense and interest expense, net of the
related tax effects, resulted in decreases in net income of $3.4 million, $3.7
million and $3.6 million, and in diluted earnings per share of $.08, $.09 and
$.08, in fiscal years 2003, 2002 and 2001, respectively.

The following has been updated to give effect to the Restatement.

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
------------- ------------- -------------
(as restated) (as restated) (as restated)

Revenues .................................. 100.0% 100.0% 100.0%
----- ----- -----
Costs and expenses:
Cost of sales.......................... 44.3% 44.2% 44.5%
Selling, general and administrative.... 12.7% 12.3% 13.0%
Depreciation and amortization.......... 7.6% 7.3% 6.9%
Interest expense....................... .3% .3% .4%
Other operating expenses............... 18.3% 18.0% 17.5%
----- ----- -----
83.2% 82.1% 82.3%
----- ----- -----
Income before income taxes................. 16.8% 17.9% 17.7%
===== ===== =====

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 83.2% in 2003
from 82.1% 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 12.7% in 2003 from 12.3% 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.

Depreciation and amortization expense as a percentage of revenues increased
to 7.6% in 2003 from 7.3% in 2002 primarily due to capital invested in new
restaurants and remodels.

Interest expense as a percentage of revenues was 0.3% in both 2003 and
2002.

Other operating expenses increased as a percentage of revenues to 18.3% in
2003 from 18.0% 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 $67.4 million in 2003 compared to $65.8
million in 2002 due to the changes in revenues and expenses discussed above. The
Company's diluted earnings per share increased 7.8% to $2.50 per share in 2003
compared to $2.32 per share in 2002 due to the 2.4% 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 82.1% in 2002
from 82.3% 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 12.3% in 2002 from 13.0% 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 7.3% in 2002 from 6.9% in 2001 primarily due to increased capital
expenditures and the decrease in comparable store sales.

Interest expense as a percentage of revenues was 0.3% 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 18.0% in
2002 from 17.5% 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 $65.8 million in 2002 compared to $60.6
million in 2001 due to the changes in revenues and expenses discussed above. The
Company's diluted earnings per share increased to $2.32 per share in 2002
compared to $2.11 per share in 2001.

Critical Accounting Policies

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.

Self Insurance

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.

Impairment of Long-Lived Assets

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.

Recent Accounting Pronouncements

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.

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 $158.7 million in 2003 from $136.4
million in 2002. Cash outflows from investing activities for 2003 were $94.2
million, primarily related to capital expenditures. Cash outflows from financing
activities for 2003 were $68.7 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.
Expansion of the retail areas may vary widely based on square footage and can
range in cost from $200,000 to $900,000 but generally have an average capital
cost of approximately $500,000.

During 2003, the Company opened 32 new restaurants, acquired three
restaurants from franchisees and 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
3,428,665 shares of its common stock at an aggregate price of approximately
$82.6 million. Beginning in 1993 through 2003, the Company has repurchased
approximately 15.2 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 (as restated) of the Company
as of December 28, 2003 (thousands):

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

Operating leases (1).......... $ 713,580 $ 51,362 $ 51,504 $ 50,745 $ 49,035 $ 510,934
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..... 18,613 1,374 1,356 1,160 1,160 13,563
--------- -------- --------- -------- -------- ---------
$ 833,538 $ 57,556 $ 122,226 $ 57,021 $ 55,467 $ 541,268
========= ======== ========= ======== ======== =========

(1) Includes the initial non-cancelable term plus renewal option periods provided for in the lease that
can be reasonably assured.

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
----
Report of Independent Registered Public Accounting Firm.................. 19
Consolidated financial statements (as restated):
Consolidated balance sheets........................................... 20
Consolidated statements of earnings and comprehensive income.......... 21
Consolidated statements of shareholders' equity....................... 22
Consolidated statements of cash flows................................. 23
Notes to consolidated financial statements............................ 24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 the standards of the Public Company
Accounting Oversight Board (United States). 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.

As discussed in Note 2, the consolidated financial statements have been
restated. Also, these financial statements give effect to the stock split on
March 15, 2004 as discussed in Note 12.

DELOITTE & TOUCHE LLP

Dallas, Texas
March 8, 2004
(March 18, 2005 as to effects of the Restatement discussed in Note 2)

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

December 28, December 29,
2003 2002
------------- -------------
(as restated) (as restated)
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..................................................... 538,756 491,081
-------- ---------

Other assets:
Notes receivable from related party.......................................... 3,825
Other ....................................................................... 1,471 1,326
--------- ---------
1,471 5,151
--------- ---------
$ 582,983 $ 537,251
========= =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt............................................ $ 554 $ 367
Accounts payable and accrued liabilities..................................... 58,736 43,002
--------- ---------
Total current liabilities................................................. 59,290 43,369
--------- ---------
Long-term debt, less current portion............................................ 75,205 69,545
--------- ---------
Deferred rent................................................................... 42,816 34,675
--------- ---------
Deferred tax liability.......................................................... 32,849 22,456
--------- ---------
Accrued insurance .............................................................. 8,500 4,750
--------- ---------
Commitments and contingencies (Note 8)

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

Shareholders' equity:
Common stock, $.10 par value; authorized 100,000,000 shares;
54,481,913 and 53,504,660 shares issued, respectively ..................... 5,448 5,350
Capital in excess of par value............................................... 219,071 200,153
Retained earnings ........................................................... 350,735 283,516
Accumulated other comprehensive income (loss)................................ 695 (91)
Less treasury shares of 16,042,418 and 12,613,754, respectively, at cost..... (211,626) (129,021)
--------- ---------
364,323 359,907
--------- ---------
$ 582,983 $ 537,251
========= =========

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
------------- ------------- -------------
(as restated) (as restated) (as restated)

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................. 83,024 74,143 73,016
Depreciation and amortization................................ 49,502 43,951 38,972
Interest expense............................................. 2,194 1,680 2,353
Other operating expenses..................................... 119,775 108,498 98,461
--------- --------- ---------
544,500 494,629 462,940
--------- --------- ---------

Income before income taxes...................................... 110,098 107,572 99,287

Income taxes.................................................... 42,717 41,772 38,721
--------- --------- ---------

Net income...................................................... 67,381 65,800 60,566

Other comprehensive income (loss), net of tax:
Foreign currency translation................................. 786 87 (148)
--------- --------- ---------
Comprehensive income............................................ $ 68,167 $ 65,887 $ 60,418
========= ========= =========

Earnings per share:
Basic:
Net income................................................... $ 1.70 $ 1.58 $ 1.44
========= ========= =========
Weighted average shares outstanding.......................... 39,654 41,511 41,724
========= ========= =========
Diluted:
Net income................................................... $ 1.66 $ 1.55 $ 1.41
========= ========= =========
Weighted average shares outstanding.......................... 40,389 42,263 42,771
========= ========= =========

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 53,505 52,988 51,878
Stock options exercised...................... 14,588 6,367 10,547 960 506 1,178
Tax benefit from exercise
of stock options .......................... 4,072 3,265 4,174
Stock issued under 401(k) plan............... 356 297 176 17 11 7
Treasury stock retired and
reserved for 401(k) plan................... (610) (75)
--------- --------- --------- ------- ------- -------
Balance, end of year......................... 224,519 205,503 195,574 54,482 53,505 35,325
--------- --------- --------- ======= ======= =======

Retained earnings (as restated):
Balance beginning of year:
As previously reported....................... 175,217
Prior period adjustment due to Restatement... (17,426)
---------
As restated.................................. 283,516 218,035 157,791
Net income................................... 67,381 65,800 60,566
Redeemable preferred stock accretion......... (49) (95) (91)
Redeemable preferred stock dividend.......... (113) (224) (231)
--------- --------- ---------
Balance, end of year ........................ 350,735 283,516 218,035
--------- --------- ---------

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) 12,614 11,379 10,560
Treasury stock acquired...................... (82,605) (31,791) (23,638) 3,428 1,235 894
Treasury stock retired and
reserved for 401(k) plan................... 610 (75)
--------- --------- --------- ------- ------- -------
Balance, end of year......................... (211,626) (129,021) (97,230) 16,042 12,614 11,379
--------- --------- --------- ======= ======= =======

Total shareholders' equity (as restated)........ $ 364,323 $ 359,907 $ 316,201
========= ========= =========

See notes to consolidated financial statements.

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

Fiscal Year
---------------------------------------------
2003 2002 2001
----- ----- -----
(as restated) (as restated) (as restated)

Operating activities:
Net income................................................................ $ 67,381 $ 65,800 $ 60,566
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization ......................................... 49,502 43,951 38,972
Deferred income tax expense ........................................... 10,225 15,884 9,780
Tax benefit from exercise of stock options ............................ 4,072 3,265 4,174
Other.................................................................. 4,247 2,938 2,319
Net change in receivables, inventories, prepaids, payables and
accrued liabilities..................................................... 17,790 1,731 3,827
Leasehold reimbursements from lessors.................................... 5,513 2,826 2,251
--------- --------- ---------
Cash provided by operations............................................ 158,730 136,395 121,889
--------- --------- ---------

Investing activities:
Purchases of property and equipment....................................... (93,899) (110,952) (113,453)
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...................................... (94,226) (112,686) (111,058)
--------- --------- ---------

Financing activities:
Proceeds from debt and line of credit..................................... 48,700 52,375 37,100
Payments on debt and line of credit....................................... (46,818) (42,171) (38,310)
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...................................... (68,651) (15,177) (14,449)
--------- --------- ---------

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 (as restated):
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 by
the straight-line method over the lesser of the lease term, including renewal
option periods provided for in the lease that can be reasonably assured, or the
estimated useful lives of the related assets. The Company uses a consistent
lease period (generally, the initial non-cancelable lease term plus renewal
option periods provided for in the lease that can be reasonably assured) when
calculating depreciation of leasehold improvements and in determining
straight-line rent expense and classification of its leases as either an
operating lease or a capital lease. 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.

Deferred Rent: The Company recognizes rent expense by the straight-line
method over the lease term, including lease renewal option periods that can be
reasonably assured at the inception of the lease. The lease term commences on
the date when the Company takes possession and has the right to control use of
the leased premises. Also, funds received from the lessor intended to reimburse
the Company for the cost of leasehold improvements are recorded as a deferred
credit resulting from a lease incentive and amortized over the lease term as a
reduction of rent expense.

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
------------- ------------- -------------
(as restated) (as restated) (as restated)

Net income, as reported ................................. $ 67,381 $ 65,800 $ 60,566
Fair value based compensation expense, net of taxes...... (6,507) (6,439) (4,613)
-------- -------- --------
Pro forma net income..................................... $ 60,874 $ 59,361 $ 55,953
======== ======== ========

Earnings per Share:
Basic:
As reported.......................................... $ 1.70 $ 1.58 $ 1.44
Pro forma............................................ $ 1.53 $ 1.42 $ 1.33

Diluted:
As reported.......................................... $ 1.66 $ 1.55 $ 1.41
Pro forma............................................ $ 1.50 $ 1.40 $ 1.30

For the pro forma calculations above, the estimated fair value of options
granted was $6.32, $9.79 and $7.94 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.

Earnings per share: Earnings per common share have been retroactively
adjusted for the effects of a three-for-two stock split in the form of a special
stock dividend effected on March 15, 2004.

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.

2. Restatement of Financial Statements:

Subsequent to the issuance of the Company's fiscal year 2003 financial
statements and following a review of its lease-related accounting policies, the
Company's management determined that it was appropriate to adjust its prior
financial statements to correct certain errors contained in those financial
statements relating to the computation of depreciation, lease classification,
straight-line rent expense and the related deferred rent liability.

Following an analysis of its lease-related accounting policies, the Company
has now determined to use a consistent lease period (generally, the initial
non-cancelable lease term plus renewal option periods provided for in the lease
that can be reasonably assured) when calculating depreciation of leasehold
improvements and in determining straight-line rent expense and classification of
its leases as either an operating lease or a capital lease. The lease term and
straight-line rent expense will commence on the date when the Company takes
possession and has the right to control use of the leased premises. Funds
received from the lessor intended to reimburse the Company for the cost of
leasehold improvements will be recorded as a deferred credit resulting from a
lease incentive and amortized over the lease term as a reduction to rent
expense. As a result, the accompanying consolidated financial statements have
been restated from the amounts previously reported to incorporate the effects of
these policies.

The cumulative effect of the restatement adjustments through fiscal year
2003 is to increase property and equipment $2.6 million, increase deferred rent
liability $37.7 million, increase obligations under capital leases $11.0
million, decrease deferred tax liability $17.9 million and decrease retained
earnings $28.2 million of which $17.4 million relate to years prior to 2001.
Increases in rent expense, depreciation expense and interest expense, net of the
related tax effects, resulted in decreases in net income of $3.4 million, $3.7
million and $3.6 million and in diluted earnings per share of $.08, $.09 and
$.08, in fiscal years 2003, 2002 and 2001, respectively.

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

2. Restatement of Financial Statements (continued):

The following is a summary of the significant effects of the Restatement on
the consolidated balance sheets at December 28, 2003 and December 29, 2002,
consolidated statements of earnings for the fiscal years ended December 28,
2003, December 29, 2002 and December 30, 2001, and consolidated statements of
cash flows for the fiscal years ended December 28, 2003, December 29, 2002 and
December 30, 2001.

Fiscal Year 2003
--------------------------------------------
As Previously
Reported Adjustment As restated
------------- ---------- -----------

Consolidated Balance Sheet:
Property and equipment, net.................... $ 536,124 $ 2,632 $ 538,756
Total assets................................... 580,351 2,632 582,983
Current portion of long-term debt.............. 168 386 554
Long-term debt, less current portion........... 64,581 10,624 75,205
Deferred rent.................................. 5,153 37,663 42,816
Deferred tax liability......................... 50,714 (17,865) 32,849
Retained earnings.............................. 378,911 (28,176) 350,735
Total shareholders' equity..................... 392,499 (28,176) 364,323

Consolidated Statement of Earnings:
Depreciation and amortization.................. $ 45,109 $ 4,393 $ 49,502
Interest expense............................... 1,449 745 2,194
Other operating expense........................ 119,334 441 119,775
Total costs and expenses....................... 538,921 5,579 544,500
Income before income taxes..................... 115,677 (5,579) 110,098
Income taxes................................... 44,882 (2,165) 42,717
Net income..................................... 70,795 (3,414) 67,381
Basic earnings per share....................... 1.78 (.08) 1.70
Diluted earnings per share..................... 1.74 (.08) 1.66

Consolidated Statement of Cash Flows:
Cash provided by operations.................... $ 152,842 $ 5,888 $ 158,730
Cash used in investing activities.............. (88,713) (5,513) (94,226)
Cash used in financing activities.............. (68,276) (375) (68,651)

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

2. Restatement of Financial Statements (continued):

Fiscal Year 2002
--------------------------------------------
As Previously
Reported Adjustment As Restated
------------- ---------- -----------

Consolidated Balance Sheet:
Property and equipment, net.................... $ 493,533 $ (2,452) $ 491,081
Total assets................................... 539,703 (2,452) 537,251
Current portion of long-term debt.............. 143 224 367
Long-term debt, less current portion........... 62,349 7,196 69,545
Deferred rent.................................. 4,086 30,589 34,675
Deferred tax liability......................... 38,156 (15,700) 22,456
Retained earnings.............................. 308,277 (24,761) 283,516
Total shareholders' equity..................... 384,668 (24,761) 359,907

Consolidated Statement of Earnings:
Depreciation and amortization.................. $ 39,243 $ 4,708 $ 43,951
Interest expense............................... 1,201 479 1,680
Other operating expense........................ 107,597 901 108,498
Total costs and expenses....................... 488,541 6,088 494,629
Income before income taxes..................... 113,660 (6,088) 107,572
Income taxes................................... 44,134 (2,362) 41,772
Net income..................................... 69,526 (3,726) 65,800
Basic earnings per share....................... 1.66 (.08) 1.58
Diluted earnings per share..................... 1.64 (.09) 1.55

Consolidated Statement of Cash Flows:
Cash provided by operations.................... $ 133,344 $ 3,051 $ 136,395
Cash used in investing activities.............. (109,860) (2,826) (112,686)
Cash used in financing activities.............. (14,952) (225) (15,177)

Fiscal Year 2001
--------------------------------------------
As Previously
Reported Adjustment As Restated
------------- ---------- -----------

Consolidated Statement of Earnings:
Depreciation and amortization.................. $ 34,397 $ 4,575 $ 38,972
Interest expense............................... 2,036 317 2,353
Other operating expense........................ 97,436 1,025 98,461
Total costs and expenses....................... 457,023 5,917 462,940
Income before income taxes..................... 105,204 (5,917) 99,287
Income taxes................................... 41,029 (2,308) 38,721
Net income..................................... 64,175 (3,609) 60,566
Basic earnings per share....................... 1.53 (.09) 1.44
Diluted earnings per share..................... 1.49 (.08) 1.41

Consolidated Statement of Cash Flows:
Cash provided by operations.................... $ 119,497 $ 2,392 $ 121,889
Cash used in investing activities.............. (108,807) (2,251) (111,058)
Cash used in financing activities.............. (14,308) (141) (14,449)

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

3. Accounts receivable:

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

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

4. 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
statement of the Association. (Note 1). Accordingly, all significant
intercompany accounts and transactions have been eliminated in 2003.

5. Property and equipment:

2003 2002
------ ------
(as restated) (as restated)
(thousands)

Land......................................................... $ 40,357 $ 36,329
Leasehold improvements....................................... 317,578 274,602
Buildings ................................................... 49,305 44,186
Game, restaurant and other equipment......................... 328,369 299,251
Property leased under capital leases (Note 8)................ 12,563 8,598
--------- ---------
748,172 662,966
Less accumulated depreciation and amortization............... (230,817) (191,414)
--------- ---------
Net property and equipment in service.................... 517,355 471,552
Construction in progress..................................... 7,547 7,305
Game and restaurant equipment held for future service........ 13,854 12,224
--------- ---------
$ 538,756 $ 491,081
========= =========

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

6. Accounts payable and accrued insurance:

2003 2002
------ ------
(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-insurance retention programs for general
liability, workers compensation, health benefits and certain other insured
risks.

7. Long-term debt:

2003 2002
------ ------
(as restated) (as restated)
(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 8)....... 11,359 7,912
-------- --------
75,759 69,912
Less current portion............................ (554) (367)
-------- --------
$ 75,205 $ 69,545
======== ========

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 the revolving bank loan
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.

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

8. 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
- ------- ------------- -------------
(as restated) (as restated)
(thousands)
2004.............................................. $ 1,374 $ 51,362
2005.............................................. 1,356 51,504
2006.............................................. 1,160 50,745
2007.............................................. 1,160 49,034
2008.............................................. 1,160 47,336
2009-2028 (aggregate payments).................... 12,403 463,599
-------- ---------
Minimum future lease payments .................... 18,613 $ 713,580
=========
Less amounts representing interest................ (7,254)
--------
Present value of future minimum lease payments.... 11,359
Less current portion.............................. (554)
--------
Long-term capital lease obligation................ $ 10,805
========

The Company's rent expense, including contingent rent based on a percentage
of sales when applicable, is comprised of the following:

2003 2002 2001
------ ------ ------
(as restated) (as restated) (as restated)
(thousands)
Minimum........................ $ 56,791 $ 52,096 $ 48,909
Contingent..................... 291 330 452
-------- -------- --------
$ 57,082 $ 52,426 $ 49,361
======== ======== ========

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)

9. 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.

10. 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
========= ========= =========

11. Income taxes:

The significant components of income tax expense are as follows:

2003 2002 2001
------ ------ ------
(as restated) (as restated) (as restated)
(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.............................................. 9,497 14,068 8,341
State................................................ 728 1,816 1,439
-------- -------- --------
Total deferred expense............................ 10,225 15,884 9,780
-------- -------- --------
$ 42,717 $ 41,772 $ 38,721
======== ======== ========

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

11. 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
------ ------
(as restated) (as restated)
(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........................... $ 16,607 $ 13,449
Unearned franchise fees................... 91 92
Depreciation.............................. (50,120) (35,640)
Foreign................................... (479) (335)
Other..................................... 1,052 (22)
-------- --------
$(32,849) $(22,456)
======== ========

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)

12. 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
------- ------ ------
(as restated) (as restated) (as restated)

Net income ............................................... $ 67,381 $ 65,800 $ 60,566
Accretion of redeemable preferred stock................... (49) (95) (91)
Redeemable preferred stock dividends...................... (113) (224) (231)
-------- -------- --------
Net income applicable to common shares.................... $ 67,219 $ 65,481 $ 60,244
======== ======== ========

Basic:
Weighted average common shares outstanding............. 39,654 41,511 41,724
======== ======== ========
Earnings per common share.............................. $ 1.70 $ 1.58 $ 1.44
======== ======== ========

Diluted:
Weighted average common shares outstanding............. 39,654 41,511 41,724
Potential common shares for stock options.............. 735 752 1,047
-------- -------- --------
Weighted average shares outstanding.................... 40,389 42,263 42,771
======== ======== ========
Earnings per common and potential common shares........ $ 1.66 $ 1.55 $ 1.41
======== ======== ========

Antidilutive stock options to purchase 1,143,144; 1,181,852; and 9,906
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 and per share information included in these
financial statements reflects the effect of such stock split.

13. 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
10,181,250 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 337,500 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 plans. Options which have been
granted under the employee stock option plan cannot be re-priced without
shareholder approval.

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

13. Employee benefit plans (continued):

At December 28, 2003, there were 2,770,352 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 4,538,213 3,975,917 3,732,552 $ 20.42 $ 16.84 $ 11.97
Granted ....................... 2,264,756 1,188,449 1,484,937 19.98 28.97 22.73
Exercised...................... (959,861) (506,484) (1,177,004) 15.20 12.57 8.96
Terminated..................... (244,797) (119,669) (64,568) 21.53 19.61 14.18
---------- ---------- ----------
Options outstanding, end of year 5,598,311 4,538,213 3,975,917 21.09 20.42 16.84
========== ========== ==========

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 Contractual Life Exercise Price as of 12/28/03 Exercise Price
- ---------------- -------------- ---------------- -------------- -------------- --------------

$ 9.11 - $ 13.24 461,958 1.7 $ 11.03 461,120 $ 11.03
$ 14.90 - $ 16.16 505,860 3.3 15.50 297,902 15.50
$ 16.66 - $ 19.99 2,363,456 5.8 19.64 128,064 17.08
$ 20.04 - $ 26.53 1,126,616 4.0 22.67 491,636 22.66
$ 26.86 - $ 36.18 1,140,421 6.1 29.04 23,861 29.41
---------- ----------
$ 9.11 - $ 36.18 5,598,312 4.7 21.09 1,402,583 16.92
========== ==========

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 590,342 additional options to employees at exercise prices of $31.49 to
$31.86 per share and 30,000 options to its non-employee directors at an exercise
price of $31.88 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, 49,950 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)

14. Supplemental cash flow information:

2003 2002 2001
------ ------ ------
(thousands)
Cash paid during the year for:
Interest (as restated)................. $ 2,226 $ 1,695 $ 2,484
Income taxes .......................... 25,773 26,936 25,168

15. Quarterly results of operations (unaudited):

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

As restated:

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......... 43,385 22,726 26,122 17,865
Net income......................... 26,552 13,908 15,987 10,934

Earnings Per Share:
Basic ........................... $ .65 $ .34 $ .41 $ .28
Diluted ......................... .64 .34 .40 .28

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......... 42,332 23,558 25,549 16,133
Net income......................... 25,863 14,392 15,608 9,937

Earnings Per Share:
Basic ........................... $ .62 $ .34 $ .38 $ .24
Diluted ......................... .60 .34 .37 .24

15. Quarterly results of operations (unaudited) (Continued):

As previously reported:

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 ........................... $ .67 $ .36 $ .43 $ .30
Diluted ......................... .66 .36 .42 .30

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 ........................... $ .64 $ .36 $ .40 $ .26
Diluted ......................... .62 .36 .39 .26

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

None

Item 9(a). Controls and Procedures

The Company's Audit Committee of the Board of Directors (the "Audit
Committee) held a telephonic meeting with management on January 31, 2005.
Management reached the conclusion, and the Audit Committee concurred, that the
Company's controls over the selection and monitoring of appropriate assumptions
and factors affecting lease accounting were insufficient, and, as a result, the
Company's computation of depreciation, lease classification, straight-line rent
expense and the related deferred rent liability had been incorrect. Accordingly,
management determined, and Audit Committee concurred, that the Company should
report on Form 8-K that its historical financial statements should no longer be
relied upon. The Audit Committee also concurred with management's action plan to
complete an extensive analysis of these matters and quantify the impact of the
correction of the lease accounting errors on the Company's financial statements
for each of the prior periods affected. Historically, the Company had
depreciated its leasehold improvements over a period equal to the lesser of the
initial non-cancelable lease term plus periods of expected renewal, or the
useful life of the assets. The periods of expected renewal included option
periods provided for in the lease and any additional periods that the Company
considered reasonably assured of exercising or acquiring. When determining
whether each of its leases was an operating lease or a capital lease and when
calculating straight-line rent expense, the Company used the initial
non-cancelable lease term commencing when the obligation to make current rent
payments began. Funds received from the lessor intended to reimburse the Company
for the cost of leasehold improvements were netted against the amount recorded
for the leasehold improvement.

On March 1, 2005, the Audit Committee held a telephonic meeting with
management and the Company's independent registered public accounting firm.
Management presented the results of its completed analysis of its lease
accounting practices, including the quantification of the impact of the
correction of the lease accounting errors on the Company's financial statements
for each of the prior periods affected. Management affirmed its prior
determination, and the Audit Committee concurred, to restate the Company's
financial statements for the three year periods ended December 28, 2003 and for
the first three quarters of fiscal 2004 to reflect the correction in its lease
accounting practices.

The Company performed an evaluation, 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, which included the matters
discussed above, the Company's management, including the Chief Executive Officer
and Chief Financial Officer, concluded that the Company's disclosure controls
and procedures were not effective as of December 28, 2003 in ensuring that
material information relating to the Company, including its consolidated
subsidiaries, required to be disclosed by the Company in reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.

In connection with correcting its lease accounting methodology, the Company
has instituted the following procedures:

- - use of a consistent lease period (generally, the initial non-cancelable
lease term plus renewal option periods provided for in the lease that can
be reasonably assured) when calculating depreciation of leasehold
improvements and in determining straight-line rent expense and
classification of its leases as either an operating lease or a capital
lease;
- - commence the lease term and straight-line rent expense on the date when the
Company takes possession and the right to control use of the leased
premises; and
- - record funds received from the lessor intended to reimburse the Company for
the cost of leasehold improvements as a deferred credit resulting from a
lease incentive and amortized over the lease term as a reduction to rent
expense.

The Company has not identified any change in its internal control over financial
reporting that occurred during the fiscal quarter covered by this report that
has materially affected, or is reasonably likely to materially affect, its
internal control over financial reporting.

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 shall 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
Business Conduct and Ethics (the "Code of Conduct") that applies to directors,
officers and employees, including the principal executive officer, principal
financial officer and principal accounting officer. Changes to and waivers
granted with respect to the Code of Conduct related to the above named officers,
other executive officers and directors 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 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 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 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

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:

Report of independent registered public accounting firm.
CEC Entertainment, Inc. consolidated financial statements
(as restated):
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 Registered Public Accounting Firm.

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 adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K:

During the fourth quarter and through the original filing of this report, 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)

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 18, 2005 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 18, 2005
- --------------------------- Chief Executive Officer,
Richard M. Frank and Director (Principal
Executive Officer)

/s/ Christopher D. Morris Senior Vice President, March 18, 2005
- --------------------------- Chief Financial Officer
Christopher D. Morris (Principal Financial Officer)

/s/ James Mabry Vice President - Controller March 18, 2005
- --------------------------- Treasurer
James Mabry (Principal Accounting Officer)

/s/ Michael H. Magusiak President and Director March 18, 2005
- ---------------------------
Michael H. Magusiak

/s/ Richard T. Huston Director March 18, 2005
- ---------------------------
Richard T. Huston

/s/ Larry T. McDowell Director March 18, 2005
- ---------------------------
Larry T. McDowell

/s/ Tim T. Morris Director March 18, 2005
- ---------------------------
Tim T. Morris

/s/ Louis P. Neeb Director March 18, 2005
- ---------------------------
Louis P. Neeb

/s/ Cynthia I. Pharr Lee Director March 18, 2005
- ---------------------------
Cynthia I. Pharr Lee

/s/ Walter Tyree Director March 18, 2005
- ---------------------------
Walter Tyree

/s/ Raymond E. Wooldridge Director March 18, 2005
- ---------------------------
Raymond E. Wooldridge

EXHIBIT INDEX

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

23 Consent of Independent Registered Public Accounting Firm,
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.