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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 17, 2006
-------------------------------
GAMESTOP CORP.
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(Exact name of registrant as specified in its charter)
Delaware 1-31228 20-27335597
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
625 Westport Parkway, Grapevine, TX 76051
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 424-2000
---------------------------
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
The following information is furnished pursuant to Item 2.02,
"Results of Operations and Financial Condition," and shall not be deemed "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liabilities of that section.
On August 17, 2006, GameStop Corp. issued a press release
announcing its financial results for the fiscal quarter ended July 29, 2006. A
copy of the press release is attached hereto as Exhibit 99.1.
The information contained in this Current Report, including the
exhibit, shall not be incorporated by reference into any filing of GameStop
Corp., whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release issued by GameStop Corp., dated August 17, 2006.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GAMESTOP CORP.
--------------
(Registrant)
Date: August 17, 2006
/s/ David W. Carlson
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Name: David W. Carlson
Title: Executive Vice President and
Chief Financial Officer
Table of Contents
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GAMESTOP CORP.
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
Exhibit 99.1 Press Release of GameStop Corp., dated August 17, 2006
Exhibit 99.1
GameStop Corp. Second Quarter Sales Surge 132%;
Comparable Store Sales Increase 3.9%; Second Quarter EPS Exceeds Guidance;
Merger Integration Complete
GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 17, 2006--GameStop Corp.
(NYSE:GME)(NYSE:GME.B), the world's largest video game and entertainment
software retailer, today reported sales and earnings for the second quarter
ended July 29, 2006.
Company sales increased 132% to $963.3 million, when compared with $415.9
million in sales from the prior year quarter, with comparable store sales
increasing 3.9%. New video game software increased 8% over the prior year
quarter, with NEW SUPER MARIO BROS. from Nintendo and NCAA FOOTBALL '07 from
Electronic Arts topping the list of best-selling new titles for the quarter.
GameStop's net earnings for the second quarter of 2006 were $3.2 million,
including merger-related expenses of $2.6 million ($1.6 million, net of tax
benefits). Diluted earnings per share were $0.04, including merger-related
expenses of $0.02 per diluted share, exceeding previously released guidance.
"The outstanding execution by our store associates in the second quarter
accelerated the adoption of Nintendo's new DS Lite hand-held system and the sell
through of Microsoft's Xbox 360 console," indicated R. Richard Fontaine,
Chairman and Chief Executive Officer of GameStop Corp. "Our 56% increase in
hardware sales during the quarter is particularly notable as the performance and
momentum clearly positions GameStop as the major launch partner for Sony and
Nintendo with the release later this year of their PlayStation 3 and Wii
consoles."
"A major milestone of the quarter was completing the integration of
GameStop and Electronics Boutique. It is a testimony to the hard work and
partnership of all our team members that, with the recently completed
installation of a singular, unified POS system, we have completed the
integration of two sizable companies, and did so on time and without any
disruptions to our business nor deterioration in customer service," concluded
Chairman Fontaine.
"Without a doubt, we are excited about the new platform launches and the
exceptional franchise titles being released in the upcoming months," indicated
Daniel DeMatteo, Vice Chairman and Chief Operating Officer of GameStop Corp. "In
fact, when you look at the range of new titles, starting with next week's
release of MADDEN NFL '07 from Electronic Arts, and continuing with FINAL
FANTASY XII by Square Enix, LEGEND OF ZELDA: TWILIGHT PRINCESS from Nintendo and
GEARS OF WAR by Microsoft, we are looking at one of the best lineups in years
for all platforms."
Guidance Update
For the third quarter of fiscal 2006, comparable store sales are projected
to range from +4.0% to +6.0%. Diluted earnings per share for the third quarter
are expected to range from $0.20 to $0.22.
Full year fiscal 2006 diluted earnings per share are now expected to range
from $1.94 to $2.04. We continue to believe that full year fiscal 2006
comparable store sales will increase between 7% and 9%, and total sales will
increase between 15% and 17%, on a pro forma basis.
Note that guidance includes projected stock-based compensation expenses of
$0.17 per diluted share for fiscal 2006.
Note that guidance does not include merger costs related to the business
combination, which we project could range from $0.03 to $0.04 per diluted share
for fiscal 2006.
Second quarter fiscal 2005 pro forma statements of operations have been
provided in Schedule III as if the acquisition of Electronics Boutique Holding
Corp. took place at the beginning of fiscal 2005. In addition, the pro forma
statements of operations include stock-based compensation expense as if SFAS No.
123R was implemented at the beginning of fiscal 2005.
Conference Call and Webcast Information
A conference call with GameStop Corp.'s management is scheduled for August
17, 2006 at 11:00 AM EDT to discuss the second quarter sales and earnings
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 August 31, 2006.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. (NYSE:GME) (NYSE:GME.B) is
the world's largest video game and entertainment software retailer. The company
operates 4,592 retail stores across the United States and in fourteen countries
worldwide. The company also owns two e-commerce sites, GameStop.com and
EBgames.com, and Game Informer(R) magazine, a leading multi-platform video game
publication. GameStop Corp. sells new and used video game software, hardware and
accessories for next generation video game systems from Sony, Nintendo, and
Microsoft. In addition, the company sells PC entertainment software, related
accessories and other merchandise. General information on GameStop Corp. can be
obtained at 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, the outlook for the third quarter of fiscal
2006 and beyond, future financial and operating results, projected store
openings, the 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 cost savings and other synergies from the
combination with Electronics Boutique 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; the timing of the release of the next
generation consoles, including Sony's PlayStation 3 and Nintendo's Wii, and
related video game titles; 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 GameStop's Annual Report on Form 10-K for the fiscal year ended
January 28, 2006 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
July 29, 2006 July 30, 2005
--------------- -------------
Sales $963,347 $415,930
Cost of sales 664,083 287,775
--------------- -------------
Gross profit 299,264 128,155
Selling, general and administrative
expenses 239,251 104,311
Depreciation and amortization 26,328 10,654
Stock-based compensation 5,360 --
Merger expenses 2,572 --
--------------- -------------
Operating earnings 25,753 13,190
Interest expense, net 20,209 144
Debt extinguishment expense 191 --
--------------- -------------
Earnings before income tax expense 5,353 13,046
Income tax expense 2,176 5,143
--------------- -------------
Net earnings $3,177 $7,903
=============== =============
Earnings per common share:
Basic $0.04 $0.15
Diluted $0.04 $0.14
Weighted average common shares
outstanding:
Basic 75,074 51,646
Diluted 78,829 56,508
Percentage of Sales:
- --------------------
Sales 100.0% 100.0%
Cost of sales 68.9% 69.2%
--------------- -------------
Gross profit 31.1% 30.8%
SG&A expenses 24.8% 25.1%
Depreciation and amortization 2.7% 2.5%
Stock-based compensation 0.6% --
Merger expenses 0.3% --
--------------- -------------
Operating earnings 2.7% 3.2%
Interest expense, net 2.1% 0.1%
Debt extinguishment expense -- --
--------------- -------------
Earnings before income tax expense 0.6% 3.1%
Income tax expense 0.3% 1.2%
--------------- -------------
Net earnings 0.3% 1.9%
=============== =============
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
26 weeks 26 weeks
ended ended
July 29, 2006 July 30, 2005
-------------- --------------
Sales $2,003,374 $890,657
Cost of sales 1,402,076 636,465
-------------- --------------
Gross profit 601,298 254,192
Selling, general and administrative
expenses 470,721 203,297
Depreciation and amortization 52,260 20,848
Stock-based compensation 10,550 --
Merger expenses 3,898 --
-------------- --------------
Operating earnings 63,869 30,047
Interest expense, net 39,538 227
Debt extinguishment expense 191 --
-------------- --------------
Earnings before income tax expense 24,140 29,820
Income tax expense 9,262 11,591
-------------- --------------
Net earnings $14,878 $18,229
============== ==============
Earnings per common share:
Basic $0.20 $0.36
Diluted $0.19 $0.33
Weighted average common shares
outstanding:
Basic 74,233 51,323
Diluted 78,650 55,499
Percentage of Sales:
- --------------------
Sales 100.0% 100.0%
Cost of sales 70.0% 71.5%
-------------- --------------
Gross profit 30.0% 28.5%
SG&A expenses 23.5% 22.8%
Depreciation and amortization 2.6% 2.3%
Stock-based compensation 0.5% --
Merger expenses 0.2% --
-------------- --------------
Operating earnings 3.2% 3.4%
Interest expense, net 2.0% 0.1%
Debt extinguishment expense -- --
-------------- --------------
Earnings before income tax expense 1.2% 3.3%
Income tax expense 0.5% 1.3%
-------------- --------------
Net earnings 0.7% 2.0%
============== ==============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
July 29, July 30,
2006 2005
----------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $218,726 $98,954
Receivables, net 28,596 9,418
Merchandise inventories 574,067 257,396
Prepaid expenses and other current assets 37,374 24,302
Prepaid taxes 79,395 12,534
Deferred taxes 46,349 5,435
----------- ---------
Total current assets 984,507 408,039
----------- ---------
Property and equipment:
Land 10,073 2,000
Buildings & leasehold improvements 280,723 120,145
Fixtures and equipment 375,736 210,942
----------- ---------
666,532 333,087
Less accumulated depreciation and
amortization 235,299 144,353
----------- ---------
Net property and equipment 431,233 188,734
----------- ---------
Goodwill, net 1,392,926 320,888
Other noncurrent assets 46,570 3,011
----------- ---------
Total assets $2,855,236 $920,672
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $366,221 166,070
Accrued liabilities 281,969 103,706
Note payable, current portion 12,173 12,173
----------- ---------
Total current liabilities 660,363 281,949
Deferred taxes 12,196 19,898
Other long-term liabilities 38,868 15,503
Notes payable, long-term portion 12,685 24,347
Senior floating and fixed rate notes payable,
net of discount 935,431 --
----------- ---------
Total liabilities 1,659,543 341,697
----------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000 shares;
no shares issued or outstanding -- --
Class A common stock - $.001 par value;
authorized 300,000 shares; 45,245 and
25,163 shares issued, respectively 45 25
Class B common stock - $.001 par value;
authorized 100,000 shares; 29,902 shares
issued and outstanding 30 30
Additional paid-in-capital 983,562 519,113
Accumulated other comprehensive income
(loss) 4,773 (43)
Retained earnings 207,283 109,850
Treasury stock, at cost 0 and 3,263
shares, respectively -- (50,000)
----------- ---------
Total stockholders' equity 1,195,693 578,975
----------- ---------
Total liabilities and
stockholders' equity $2,855,236 $920,672
=========== =========
Schedule I
GameStop Corp.
Sales Mix
13 Weeks Ended 13 Weeks Ended
July 29, 2006 July 30, 2005
------------------- -------------------
Percent Percent
Sales of Total Sales of Total
---------- -------- -------- ----------
Sales (in millions):
New video game hardware $157.5 16.4% $51.6 12.4%
New video game software 330.7 34.3% 139.8 33.6%
Used video game products 308.7 32.0% 153.2 36.8%
Other 166.4 17.3% 71.3 17.2%
---------- -------- -------- ----------
Total $963.3 100.0% $415.9 100.0%
========== ======== ======== ==========
Schedule II
GameStop Corp.
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
July 29, 2006 July 30, 2005
------------------- -------------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
---------- -------- -------- ----------
Gross Profit (in millions):
New video game hardware $14.0 8.9% $2.5 4.8%
New video game software 72.7 22.0% 28.9 20.7%
Used video game products 153.9 49.9% 70.8 46.2%
Other 58.7 35.3% 26.0 36.5%
---------- --------
Total $299.3 31.1% $128.2 30.8%
========== ========
Schedule III
GAMESTOP CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
For the Historical Historical
thirteen GameStop Electronics
weeks ended Corp. Boutique GameStop
July 30, July 30, July 30, Pro Forma Corp
2005 2005 (a) 2005 (a) Adjustments Pro Forma
---------- ---------- ----------- ---------
Sales $415,930 $446,511 $-- $862,441
Cost of sales 287,775 311,592 -- 599,367
---------- ---------- ----------- ---------
Gross profit 128,155 134,919 -- 263,074
Selling,
general and
admin.
expenses 104,311 120,090 -- 224,401
Depreciation
and
amortization 10,654 11,573 427 (c) 22,654
Merger-
related
expenses -- 1,400 (1,400)(b) --
Stock based
compensation -- -- 2,785 (j) 2,785
---------- ---------- ----------- ---------
Operating
earnings 13,190 1,856 (1,812) 13,234
Interest
expense, net 144 (675) 20,424 (d), (e) 19,893
Merger-
related
interest
expense -- -- -- --
---------- ---------- ----------- ---------
Earnings
(loss)
before
income tax
expense
(benefit) 13,046 2,531 (22,236) (6,659)
Income tax
expense
(benefit) 5,143 911 (8,502)(f) (2,448)
---------- ---------- ----------- ---------
Net earnings
(loss) $7,903 $1,620 $(13,734) $(4,211)
========== ========== =========== =========
Net earnings
(loss) per
common
share--basic $0.15 (h) $0.06 $ $(0.06)(i)
========== ========== =========== =========
Weighted
average
shares of
common
stock--basic 51,646 25,096 (4,867)(g) 71,875
========== ========== =========== =========
Net earnings
(loss) per
common
share--
diluted $0.14 (h) $0.06 $ $(0.06)(i)
========== ========== =========== =========
Weighted
average
shares of
common
stock--
diluted 56,508 25,467 (10,100)(g), (k) 71,875
========== ========== =========== ==========
GAMESTOP CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(In thousands, except per share data)
(a) Certain reclassifications have been made to the historical presentation of
GameStop and EB to conform to the presentation used in the unaudited pro
forma condensed consolidated statement of operations.
(b) To give effect to the exclusion of certain expenses of $1,400 which are
directly attributable to the merger and are believed to be of a one-time or
short-term nature.
(c) To give effect to the intangible asset amortization and depreciation on the
property and equipment adjustment based on the preliminary allocation of
the purchase price over estimated useful lives.
(d) To give effect to the interest expense incurred related to the receipt of
$941,472 resulting from issuance of $650,000 in senior notes, at an
interest rate of 8.0% and $300,000 in senior floating rate notes at an
interest rate of LIBOR plus 3.875%. The senior notes were issued at a
discount of $8,528 and interest expense includes the amortization of this
discount over seven years.
(e) To give effect to the amortization of deferred financing fees relating to
the $400 million revolving credit facility, the senior floating rate notes
and the senior notes over five, six and seven years to match the terms,
respectively.
(f) Represents the aggregate pro forma effective income tax effect of Notes
(b), (c), (d) and (e) above.
(g) The pro forma earnings per share have been adjusted to reflect the issuance
of 20,229 shares of GameStop Class A common stock to EB common stockholders
as if they were issued on January 30, 2005 and to reflect the elimination
of the outstanding shares of Electronics Boutique.
(h) The holders of Historical GameStop Class A and Class B common stock
generally had identical rights, except that the holders of Historical
GameStop Class A common stock were entitled to one vote per share and the
holders of Historical GameStop Class B common stock were entitled to ten
votes per share on all matters to be voted on by stockholders. Earnings per
common share amounts represent per share amounts for both classes of common
stock.
(i) The holders of GameStop Class A and Class B common stock generally have
identical rights, except that the holders of GameStop Class A common stock
are entitled to one vote per share and the holders of GameStop Class B
common stock are entitled to ten votes per share on all matters to be voted
on by stockholders. Earnings per common share amounts represent per share
amounts for both classes of common stock.
(j) To give effect to the stock-based compensation expense as if SFAS 123R had
been adopted as of January 30, 2005.
(k) To remove the effect of securities that are anti-dilutive in nature due to
the pro forma loss in the 13 weeks ended July 30, 2005.
CONTACT: Media Contact:
Chris Olivera
Divisional Vice President, Corporate Communications
GameStop Corp.
(817) 424-2130
or
Investor Contact:
David W. Carlson
Executive Vice President & Chief Financial Officer
GameStop Corp.
(817) 424-2130