EX-99.1 2 a5477539ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 GameStop Reports Record Second Quarter 2007 Results EPS Exceeds High-End of Guidance by $0.06 per share Comparable Store Sales Rise 29.1% New Video Game Software Sales Grow 49% EPS, Revenue, and Comparable Store Sales Guidance Raised for Fiscal 2007 GRAPEVINE, Texas--(BUSINESS WIRE)--Aug. 23, 2007--GameStop Corp. (NYSE:GME), the world's largest video game and entertainment software retailer, today announced record financial results for the second quarter ended August 4, 2007. GameStop's net earnings were $21.8 million for the second quarter of 2007, including debt retirement costs of $2.0 million ($1.3 million, net of tax benefits), a 586% increase over the second quarter of 2006. Diluted earnings per share were $0.13 for the second quarter of 2007, including debt retirement costs of $0.01 per diluted share, exceeding the high-end of previously released guidance by $0.06 per share. Total sales increased 38.9% to $1,338.2 million in comparison to $963.3 million in the prior year quarter. Comparable store sales increased 29.1% during the second quarter, also beating previously released guidance of 16.0% to 18.0%. During the second quarter, new video game software sales surged 49% and new hardware sales soared 87%. The top selling video games during the quarter were GUITAR HERO II from Activision, NCAA FOOTBALL '08 by Electronic Arts, MARIO PARTY 8 by Nintendo, Nintendo's POKEMON DIAMOND and PEARL, and FORZA MOTORSPORT 2 from Microsoft. R. Richard Fontaine, GameStop's Chairman and Chief Executive Officer, stated, "GameStop's outstanding second quarter was fueled by continued consumer demand for all the prevalent hardware platforms and the compelling games released during the quarter. It is apparent that the growing base of gaming consumers is well served by GameStop's new and used model, our increasing number of convenient locations and outstanding customer service provided by our store 'gamers'. "Our second quarter performance was very broad-based, with the U.S., Canada, Australia and Europe all exceeding expectations. New store growth, and more importantly, new store performance worldwide, continues to be impressive. During this quarter, we opened 150 new stores and now operate 4,954 stores in 16 countries. GameStop surpassed the 1,000 store count internationally and we are well on our way to achieving our forecast of opening between 500 and 550 new stores during the year," concluded Chairman Fontaine. Daniel DeMatteo, GameStop's Vice Chairman and Chief Operating Officer, stated, "Looking at this year's holiday season, the new video game software line-up is exceptional. MADDEN NFL '08 from Electronic Arts, HALO 3 from Microsoft, ROCK BAND from Electronic Arts, SUPER MARIO GALAXY from Nintendo, GUITAR HERO III by Activision and ASSASSIN'S CREED from Ubisoft, are all part of a diversified group of titles that will appeal to core gamers, casual, young and entry-level players." Updated Guidance For the third quarter of fiscal 2007, GameStop is forecasting comparable store sales to range from +30.0% to +32.0%. Diluted earnings per share are expected to range from $0.19 to $0.21 compared to earnings per share of $0.09 in the third quarter of 2006. Due to the excellent results in the second quarter, we are raising our full year 2007 diluted earnings per share guidance to range from $1.45 to $1.48. Total revenues are now projected to grow between 20.0% and 22.0%, with expected comparable store sales ranging from +15.0% to +17.0%. Note that guidance does not include debt retirement costs. Note that all per share data has been adjusted for the Class B share conversion and the two-for-one stock split that occurred subsequent to February 3, 2007. Conference Call and Webcast Information A conference call with GameStop Corp.'s management is scheduled for August 23, 2007 at 11:00 AM ET 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 September 6, 2007. About GameStop Corp. Headquartered in Grapevine, TX, GameStop Corp. is the world's largest video game and entertainment software retailer. The company operates 4,954 retail stores across the United States and in sixteen countries worldwide. The company also operates two e-commerce sites, GameStop.com and EBgames.com, and publishes 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/corporate. 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 fiscal 2007 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 inability to obtain sufficient quantities of product to meet consumer demand, including Nintendo's Wii; the timing of release of video game titles for next generation consoles; the risks associated with expanded international operations; 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 February 3, 2007 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 Aug 4, 2007 July 29, 2006 ------------- ------------- Sales $ 1,338,193 $ 963,347 Cost of sales 976,894 664,083 ------------- ------------- Gross profit 361,299 299,264 Selling, general and administrative expenses 271,751 239,251 Depreciation and amortization 32,118 26,328 Stock-based compensation 6,683 5,360 Merger-related expenses -- 2,572 ------------- ------------- Operating earnings 50,747 25,753 Interest expense, net 13,346 20,209 Debt extinguishment expense 2,027 191 ------------- ------------- Earnings before income tax expense 35,374 5,353 Income tax expense 13,564 2,176 ------------- ------------- Net earnings $ 21,810 $ 3,177 ============= ============= Earnings per common share: Basic $ 0.14 $ 0.02 Diluted $ 0.13 $ 0.02 Weighted average common shares outstanding: Basic 158,438 150,149 Diluted 164,769 157,658 Percentage of Sales: ----------------------------------------- Sales 100.0% 100.0% Cost of sales 73.0% 68.9% ------------- ------------- Gross profit 27.0% 31.1% SG&A expenses 20.3% 24.8% Depreciation and amortization 2.4% 2.7% Stock-based compensation 0.5% 0.6% Merger-related expenses -- 0.3% ------------- ------------- Operating earnings 3.8% 2.7% Interest expense, net 1.0% 2.1% Debt extinguishment expense 0.2% -- ------------- ------------- Earnings before income tax expense 2.6% 0.6% Income tax expense 1.0% 0.3% ------------- ------------- Net earnings 1.6% 0.3% ============= ============= GameStop Corp. Statements of Operations (in thousands, except per share data) 26 weeks 26 weeks ended ended Aug 4, 2007 July 29, 2006 ------------- ------------- Sales $ 2,617,176 $ 2,003,374 Cost of sales 1,907,108 1,402,076 ------------- ------------- Gross profit 710,068 601,298 Selling, general and administrative expenses 521,905 470,721 Depreciation and amortization 63,153 52,260 Stock-based compensation 13,645 10,550 Merger-related expenses -- 3,898 ------------- ------------- Operating earnings 111,365 63,869 Interest expense, net 27,462 39,538 Debt extinguishment expense 8,751 191 ------------- ------------- Earnings before income tax expense 75,152 24,140 Income tax expense 28,619 9,262 ------------- ------------- Net earnings $ 46,533 $ 14,878 ============= ============= Earnings per common share: Basic $ 0.30 $ 0.10 Diluted $ 0.29 $ 0.09 Weighted average common shares outstanding: Basic 155,938 148,466 Diluted 163,013 157,301 Percentage of Sales: ----------------------------------------- Sales 100.0% 100.0% Cost of sales 72.9% 70.0% ------------- ------------- Gross profit 27.1% 30.0% SG&A expenses 19.9% 23.5% Depreciation and amortization 2.4% 2.6% Stock-based compensation 0.5% 0.5% Merger-related expenses -- 0.2% ------------- ------------- Operating earnings 4.3% 3.2% Interest expense, net 1.1% 2.0% Debt extinguishment expense 0.3% -- ------------- ------------- Earnings before income tax expense 2.9% 1.2% Income tax expense 1.1% 0.5% ------------- ------------- Net earnings 1.8% 0.7% ============= ============= GameStop Corp. Balance Sheets (in thousands, except per share data) Aug 4, July 29, 2007 2006 --------- --------- ASSETS: Current assets: Cash and cash equivalents $ 349,277 $ 218,726 Receivables, net 29,798 28,596 Merchandise inventories 713,836 574,067 Prepaid expenses and other current assets 51,951 37,374 Prepaid taxes 74,952 79,395 Deferred taxes 35,979 46,349 --------- --------- Total current assets 1,255,793 984,507 --------- --------- Property and equipment: Land 11,298 10,073 Buildings & leasehold improvements 334,904 280,723 Fixtures and equipment 477,492 375,736 --------- --------- 823,694 666,532 Less accumulated depreciation and amortization 349,927 235,299 --------- --------- Net property and equipment 473,767 431,233 --------- --------- Goodwill, net 1,402,845 1,392,926 Other noncurrent assets 49,100 46,570 --------- --------- Total assets $3,181,505 $2,855,236 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $ 517,233 $ 366,221 Accrued liabilities 339,940 281,969 Note payable, current portion 12,173 12,173 --------- --------- Total current liabilities 869,346 660,363 Deferred taxes -- 12,196 Other long-term liabilities 72,492 39,380 Notes payable, long-term portion -- 12,173 Senior floating and fixed rate notes payable, net of discount 693,993 935,431 --------- --------- Total liabilities 1,635,831 1,659,543 --------- --------- Stockholders' equity: Preferred stock - authorized 5,000 shares; no shares issued or outstanding -- -- Class A common stock - $.001 par value; authorized 300,000 shares; 158,993 and 150,293 shares issued and outstanding, respectively 159 150 Additional paid-in-capital 1,145,706 983,546 Accumulated other comprehensive income 19,359 4,773 Retained earnings 380,450 207,224 --------- --------- Total stockholders' equity 1,545,674 1,195,693 --------- --------- Total liabilities and stockholders' equity $3,181,505 $2,855,236 ========= ========= Schedule I GameStop Corp. Sales Mix 13 Weeks Ended 13 Weeks Ended Aug 4, 2007 July 29, 2006 ------------------- -------------------- Percent Percent Sales of Total Sales of Total --------- --------- --------- ---------- Sales (in millions): New video game hardware $ 293.8 22.0% $ 157.5 16.4% New video game software 494.2 36.9% 330.7 34.3% Used video game products 357.3 26.7% 308.7 32.0% Other 192.9 14.4% 166.4 17.3% --------- --------- --------- ---------- Total $ 1,338.2 100.0% $ 963.3 100.0% ========= ========= ========= ========== ====================================================================== Schedule II GameStop Corp. Gross Profit Mix 13 Weeks Ended 13 Weeks Ended Aug 4, 2007 July 29, 2006 ------------------- -------------------- Gross Gross Gross Profit Gross Profit Profit Percent Profit Percent --------- --------- --------- ---------- Gross Profit (in millions): New video game hardware $ 21.5 7.3% $ 14.0 8.9% New video game software 100.2 20.3% 72.7 22.0% Used video game products 173.2 48.5% 153.9 49.9% Other 66.4 34.4% 58.7 35.3% --------- --------- Total $ 361.3 27.0% $ 299.3 31.1% ========= ========= 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