Gamestop Corp. (ticker: GME, exchange: New York Stock Exchange (.N)) News Release - 29-Nov-2005
GameStop Corp. Sales Increase 28%; Third Quarter EPS Meets Consensus Estimates; Merger Integration On Track
GRAPEVINE, Texas--(BUSINESS WIRE)--Nov. 29, 2005--GameStop Corp. (NYSE:GME)(NYSE:GME.B), a leading global video game and entertainment software retailer, today reported sales and earnings for the third quarter ended October 29, 2005. GameStop sales were $534.2 million in the third quarter of 2005, compared with $416.7 million in the prior year quarter, an increase of 28.2%. As expected, comparable store sales decreased by 12% due to major software titles released in the third quarter of 2004, particularly Grand Theft Auto: San Andreas from Take-Two Interactive and Fable from Microsoft. Net loss for the third quarter was $2.5 million, including merger costs of $18.8 million, $11.9 million net of taxes, compared with net earnings of $12.0 million in the prior year quarter. Diluted loss per share was $0.04, including merger costs of $0.19 per diluted share and hurricane losses and disaster relief of $0.01 per diluted share, as compared to earnings of $0.21 per diluted share in the prior year quarter. These results were at the high-end of previously announced guidance. "We made significant progress during the third quarter to position ourselves for the fourth quarter and the long term," stated R. Richard Fontaine, Chairman and Chief Executive Officer. "We successfully completed our merger with Electronics Boutique, integration milestones are being met, and a number of best practices have already been cross-applied to the combined company." Fontaine also indicated that, "Third quarter gross margins were positively effected by strong used video games sales as value-driven customers became a larger factor in the face of rising gas prices and general economic uncertainty. During November we experienced weaker than expected new video game software sales mainly due to core customers waiting for the launch of Microsoft's Xbox 360 and to value consumers continuing to gravitate to used video games. We anticipate this trend to continue to a degree throughout the holiday season, with gross sales levels declining, but strong margin contributions supporting forecasted earnings." "On the Xbox 360 front, GameStop sold through every copy we had and did so in record time. There is no question that both the core gamer and gift giver are very enthusiastic about this great product. In fact, our attach ratio of games and accessories to date has never been higher for any release in GameStop's history. Our only concern is that the total hardware released to date in the U.S., and to GameStop, are far less than we had anticipated. While we expect to be supplied throughout the holiday season, the exact quantities to be shipped are not yet clear." Updated Guidance GameStop expects comparable store sales in the fourth quarter to range between flat and +2.0%, following supply limitations of Microsoft's Xbox 360 and slower than anticipated new video game software sales in the first three weeks of November. Used video game sales growth continues to solidly meet our goals, supporting our forecast that diluted earnings per share for the fourth quarter will range from $0.98 to $1.02. GameStop also expects full year 2005 diluted earnings per share will range from $1.65 to $1.70. Please note that guidance does not include merger costs related to the business combination. Conference Call and Webcast Information A conference call with GameStop Corp.'s management is scheduled for November 29, 2005 at 11:00 a.m. ET to discuss the 2005 third quarter results. The conference call will be simulcast on the Internet at (http://www.gamestop.com/investor-relations/). The conference call will be archived on the website until December 14, 2005. About GameStop Corp. Headquartered in Grapevine, TX, GameStop Corp. is one of the world's largest video game and entertainment software retailers. The combined company operates 4,416 retail stores throughout the United States, Austria, Australia, Canada, Denmark, Finland, Germany, Italy, Ireland, New Zealand, Norway, Puerto Rico, Spain, Sweden, Switzerland and the United Kingdom. The company also owns commerce-enabled Web properties, GameStop.com and EBgames.com, and Game Informer(R) magazine, a leading video and computer game publication. GameStop Corp. sells the most popular new software, hardware and game accessories for the PC and next generation video game systems from Sony, Nintendo, and Microsoft. In addition, the company sells computer and video game magazines and strategy guides, action figures, and other related merchandise. General information on GameStop Corp. can be obtained via the Internet by visiting the company's corporate Website: http://www.gamestop.com/investor-relations/. Safe Harbor This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the outlook for the fourth quarter, the ability of the management team to lead the combined operations, future financial and operating results, the new company's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of GameStop's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the risk that the businesses of GameStop and Electronics Boutique will not be integrated successfully or that the cost savings and other synergies from the combination may not be fully realized or may take longer to realize than expected; the inability to obtain sufficient quantities of product to meet consumer demand; and economic and other events that could reduce or impact consumer demand. Additional factors that could cause GameStop's results to differ materially from those described in the forward-looking statements can be found in the Annual Reports on Forms 10-K/A of GameStop and Electronics Boutique for the fiscal year ended January 29, 2005 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov.
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
13 weeks 13 weeks
ended ended
Oct 29, 2005 Oct 30, 2004
-------------- --------------
Sales $534,212 $416,737
Cost of sales 357,492 297,778
-------------- --------------
Gross profit 176,720 118,959
Selling, general and administrative
expenses 136,072 89,660
Depreciation and amortization 19,224 9,447
Merger expenses 11,329 --
-------------- --------------
Operating earnings 10,095 19,852
Interest expense, net 6,430 94
Merger-related financing costs 7,518 --
-------------- --------------
Earnings (loss) before income
tax expense (benefit) (3,853) 19,758
Income tax expense (benefit) (1,393) 7,699
-------------- --------------
Net earnings (loss) $(2,460) $12,059
============== ==============
Earnings (loss) per common share:
Basic $(0.04) $0.22
Diluted $(0.04) $0.21
Weighted average common shares
outstanding:
Basic 56,630 54,334
Diluted 56,630 57,367
Percentage of Sales:
--------------------
Sales 100.0% 100.0%
Cost of sales 66.9% 71.5%
-------------- --------------
Gross profit 33.1% 28.5%
SG&A expenses 25.5% 21.5%
Depreciation and amortization 3.6% 2.2%
Merger expenses 2.1% --
-------------- --------------
Operating earnings 1.9% 4.8%
Interest expense, net 1.2% 0.1%
Merger-related financing costs 1.4% --
-------------- --------------
Earnings (loss) before income
tax expense (benefit) (0.7)% 4.7%
Income tax expense (benefit) (0.2)% 1.8%
-------------- --------------
Net earnings (loss) (0.5)% 2.9%
============== ==============
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
39 weeks 39 weeks
ended ended
Oct 29, 2005 Oct 30, 2004
------------- --------------
Sales $1,424,869 $1,134,066
Cost of sales 993,957 804,179
------------- --------------
Gross profit 430,912 329,887
Selling, general and administrative
expenses 339,369 260,215
Depreciation and amortization 40,072 26,505
Merger expenses 11,329 --
------------- --------------
Operating earnings 40,142 43,167
Interest expense (income), net 6,657 (253)
Merger-related financing costs 7,518 --
------------- --------------
Earnings before income tax expense 25,967 43,420
Income tax expense 10,198 17,011
------------- --------------
Net earnings $15,769 $26,409
============= ==============
Earnings per common share:
Basic $0.30 $0.47
Diluted $0.27 $0.45
Weighted average common shares outstanding:
Basic 53,092 55,981
Diluted 57,519 59,010
Percentage of Sales:
--------------------
Sales 100.0% 100.0%
Cost of sales 69.8% 70.9%
------------- --------------
Gross profit 30.2% 29.1%
SG&A expenses 23.8% 23.0%
Depreciation and amortization 2.8% 2.3%
Merger expenses 0.8% --
------------- --------------
Operating earnings 2.8% 3.8%
Interest expense (income), net 0.5% 0.0%
Merger-related financing costs 0.5% --
------------- --------------
Earnings before income
tax expense 1.8% 3.8%
Income tax expense 0.7% 1.5%
------------- --------------
Net earnings 1.1% 2.3%
============= ==============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
October 29, October 30,
2005 2004
----------- ------------
ASSETS:
Current assets:
Cash and cash equivalents $ 81,031 $ 101,563
Receivables, net 34,662 10,490
Merchandise inventories 751,063 274,752
Prepaid expenses and other
current assets 35,953 14,987
Prepaid taxes 62,873 12,047
Deferred taxes 19,967 7,661
----------- ------------
Total current assets 985,549 421,500
----------- ------------
Property and equipment:
Land 10,008 2,000
Buildings & leasehold
improvements 253,373 95,574
Fixtures and equipment 325,387 169,543
----------- ------------
588,768 267,117
Less accumulated depreciation
and amortization 162,141 113,615
----------- ------------
Net property and equipment 426,627 153,502
----------- ------------
Goodwill, net 1,375,265 320,888
Assets to be disposed of 19,190 --
Other noncurrent assets 54,446 1,849
----------- ------------
Total assets $ 2,861,077 $ 897,739
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 519,972 $ 190,657
Accrued liabilities 298,929 104,348
Notes payable, current portion 12,936 49,673
----------- ------------
Total current liabilities 831,837 344,678
Deferred taxes 3,606 17,820
Other long-term liabilities 42,458 7,274
Notes payable, long-term portion 22,171 24,347
Senior floating and fixed rate notes payable,
net of discount 941,557 --
----------- ------------
Total liabilities $ 1,841,629 $ 394,119
----------- ------------
Stockholders' equity:
Preferred stock - authorized
5,000 shares; no shares issued
or outstanding --
Class A common stock - $.001 par
value; authorized 300,000 shares;
42,404 and 23,844 shares issued
and outstanding, respectively 42 24
Class B common stock - $.001 par
value; authorized 100,000 shares;
29,902 shares issued and
outstanding 30 30
Additional paid-in-capital 911,886 496,025
Accumulated other comprehensive
income 100 437
Retained earnings 107,390 57,104
Treasury stock, at cost, 3,263
shares -- (50,000)
----------- ------------
Total stockholders' equity 1,019,448 503,620
----------- ------------
Total liabilities and
stockholders' equity $ 2,861,077 $ 897,739
=========== ============
Schedule I
GameStop Corp.
Retail Sales Mix
13 Weeks Ended 13 Weeks Ended
Oct 29, 2005 Oct 30, 2004
--------------------- ----------------
Percent Percent
Sales of Total Sales of Total
---------- ---------- ------- --------
Sales:
New video game hardware $ 48.4 9.0% $ 35.8 8.6%
New video game software 216.2 40.5% 190.2 45.6%
Used video game products 170.2 31.9% 114.5 27.5%
Other 99.4 18.6% 76.2 18.3%
---------- ---------- ------- --------
Total $ 534.2 100.0% $ 416.7 100.0%
========== ========== ======= ========
Schedule II
GameStop Corp.
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
Oct 29, 2005 Oct 30, 2004
------------------- ----------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
--------- --------- ------- --------
Gross Profit:
New video game hardware $ 5.2 10.7% $ 2.1 5.9%
New video game software 53.8 24.9% 38.7 20.3%
Used video game products 77.2 45.4% 51.1 44.6%
Other 40.5 40.7% 27.1 35.6%
--------- -------
Total $ 176.7 33.1% $ 119.0 28.5%
========= =======
CONTACT: GameStop Corp.
Investor Contact:
David W. Carlson
Executive Vice President & Chief Financial Officer
817-424-2130
or
GameStop Corp.
Media Contact:
Chris Olivera
Director, Public & Media Relations
817-424-2130
SOURCE: GameStop Corp.
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