Form 8-K

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CeyzvOA32HgDt8f8F88bLQInTMEZ/T5coDomasYBvW3dx3ZahclRkiF1MAZB3ai0 eVxLqPnJWes3aCaJLsf6hQ== 0000891092-04-003662.txt : 20040728 0000891092-04-003662.hdr.sgml : 20040728 20040728161312 ACCESSION NUMBER: 0000891092-04-003662 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040728 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040728 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GSI COMMERCE INC CENTRAL INDEX KEY: 0000828750 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 042958132 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-16611 FILM NUMBER: 04936164 BUSINESS ADDRESS: STREET 1: 1075 FIRST AVE STREET 2: RTE 3 INDUSTRIAL PARK CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 BUSINESS PHONE: 6102653229 MAIL ADDRESS: STREET 1: 1075 FIRST AVE CITY: KING OF PRUSSIA STATE: PA ZIP: 19406 FORMER COMPANY: FORMER CONFORMED NAME: GLOBAL SPORTS INC DATE OF NAME CHANGE: 19971223 8-K 1 e18598_8k.htm FORM 8-K Form 8-K

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: July 28, 2004
(Date of earliest event reported)

GSI COMMERCE, INC.
(Exact name of registrant as specified in its charter)

Delaware	0-16611	04-2958132
(State or other	(Commission File No.)	(IRS Employer
jurisdiction of incorporation)		Identification No.)

1075 First Avenue, King of Prussia, PA 19406
(Address of principal executive offices and zip code)

(610) 265-3229
(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

99.1	Press Release, dated July 28, 2004

Item 12. Results of Operations and Financial Condition.

On July 28, 2004, GSI Commerce, Inc. (the “Registrant”) issued a press release announcing its results for the fiscal quarter ended July 3, 2004 and certain other information. A copy of this press release is furnished as part of this report and incorporated herein by reference.

This press release included as Exhibit 99.1 contains adjusted EBITDA, net merchandise sales and certain ratios that use net merchandise sales which may be considered non-GAAP financial measures. The Registrant uses adjusted EBITDA as a means to evaluate its performance period to period without taking into account certain expenses, particularly stock-based compensation expense, which may fluctuate materially due to fluctuations in the price of the Registrant’s common stock both on a quarterly and annual basis, and does not consistently reflect the Registrant’s results from its core business activities. The Registrant also uses net merchandise sales as a metric for operating its business. Variable costs such as fulfillment and customer service labor expense, order processing costs such as credit card and bank processing fees and business management costs such as marketing department staffing levels are related to the amount of sales made through the Registrant’s platform, whether or not the Registrant records the revenue from such sales. The Registrant believes that investors will have a more thorough understanding of its historical expenses and expense trends if they have visibility to both GAAP net revenue as well as the non-GAAP financial measure net merchandise sales and the percentages that such expenses bear to net revenues and net merchandise sales. These financial measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures included in the press release have been reconciled to the nearest GAAP measures as is required under SEC rules.

As used herein, “GAAP” refers to accounting principles generally accepted in the United States.

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.

		GSI COMMERCE, INC.

		By: /s/ Michael G. Rubin
		Michael G. Rubin
		Chairman, Co-President and Chief
		Executive Officer

Dated: July 28, 2004

Exhibit Index

Exhibit No.		Description
99.1		Press Release, dated July 28, 2004

EX-99.1 2 e18598ex99_1.txt PRESS RELEASE Exhibit 99.1 GSI Commerce Reports Fiscal 2004 Second Quarter Operating Results Company Achieves Record Second Quarter Net Revenues and Reduces Net Loss KING OF PRUSSIA, Pa., July 28 /PRNewswire-FirstCall/ -- GSI Commerce Inc. (Nasdaq: GSIC) today announced that for its second fiscal quarter ended July 3, 2004, the company increased its net revenues 28 percent to $64.7 million and reported a net loss of $3.1 million, or $0.08 per share, decreasing the company's net loss by $631,000, or $0.02 per share, compared to last year's second fiscal quarter. For the same comparable periods, adjusted EBITDA, a non-GAAP financial measure, improved by approximately $394,000 to a loss of $535,000, and net merchandise sales, also a non-GAAP financial measure, rose 63 percent to $89.6 million. Definitions of the non-GAAP financial measures, adjusted EBITDA and net merchandise sales, a discussion of why the company uses these measures and a reconciliation of these measures to the nearest GAAP measures appear later in this news release. Net Revenues and Net Merchandise Sales Net revenues were $64.7 million for the second quarter of fiscal 2004, which was a 28 percent increase compared to net revenues of $50.3 million for the second quarter of fiscal 2003. Net revenues from product sales generated by the company's sporting goods category were $33.6 million for the second quarter of fiscal 2004, which was a 24 percent increase compared to $27.0 million for the second quarter of fiscal 2003. Net revenues from product sales generated by the company's other merchandise categories were $19.5 million for the second quarter of fiscal 2004, which was a 4.0 percent increase compared to $18.7 million for the second quarter of fiscal 2003. The company launched the Treo 600 smartphone from palmOne on the GSI Commerce platform approximately one month later than planned which, together with a lengthy product availability backlog for this popular product line, negatively impacted product revenues in the other merchandise sales category in the quarter. Service fee revenues increased 150 percent to $11.6 million in the second quarter of fiscal 2004 compared to $4.6 million in the second quarter of fiscal 2003. Net merchandise sales were $89.6 million for the second quarter of fiscal 2004, a 63 percent increase compared to net merchandise sales of $54.8 million for the second quarter of fiscal 2003. Net merchandise sales represent the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI Commerce platform, whether or not the company is the seller of the merchandise or records the full amount of such sales on its financial statements. Net merchandise sales from the sporting goods category increased 40 percent in the second quarter of fiscal 2004 to $37.9 million compared to $27.0 million in the second quarter of fiscal 2003. Net merchandise sales from the company's other merchandise categories increased 86 percent in the second quarter of fiscal 2004 to $51.7 million from $27.8 million in the second quarter of fiscal 2003. Net Loss, EPS and Adjusted EBITDA The company had a net loss of $3.1 million for the second quarter of fiscal 2004, which was an improvement of approximately $631,000 compared to the net loss of $3.8 million for the second quarter of fiscal 2003. The company showed a $0.02 per share improvement with a net loss per share of $0.08 for the second quarter of fiscal 2004 compared to a net loss per share of $0.10 for the second quarter of fiscal 2003. The company showed a $394,000 improvement in adjusted EBITDA, with an adjusted EBITDA loss of $535,000 in the second quarter of fiscal 2004 compared to an adjusted EBITDA loss of $929,000 in the second quarter of fiscal 2003. The company incurred severance, recruiting and other expenses of approximately $500,000 related to executive management transitions in the second quarter of fiscal 2004, which had not been considered in the company's guidance issued in the fiscal 2004 first quarter operating results news release. Adjusted EBITDA represents earnings (or losses) before interest income/expense, taxes, depreciation, amortization, and stock-based compensation. Gross Profit and Operating Expenses The company's gross profit improved 47 percent to $25.1 million in the second quarter of fiscal 2004 compared to a gross profit of $17.0 million in the second quarter of fiscal 2003. Gross margin improved to 38.8 percent for the second quarter of fiscal 2004 from 33.8 percent in the second quarter of fiscal 2003, an increase of 500 basis points. Total operating expenses were $28.5 million for the second quarter of fiscal 2004, an increase of 35 percent compared to $21.1 million for the second quarter of fiscal 2003. Total operating expenses, as a percentage of net revenues, increased to 44 percent in the second quarter of fiscal 2004 compared to 42 percent in the second quarter of fiscal 2003. Total operating expenses of $28.5 million, as a percentage of net merchandise sales of $89.6 million, were 32 percent in the second quarter of fiscal 2004. This compared to total operating expenses of $21.1 million in the second quarter of fiscal 2003, which, as a percentage of net merchandise sales of $54.8 million, were 38 percent. Balance Sheet The company's cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004's second quarter were $48.2 million compared to $69.5 million at fiscal 2003 year-end, a decrease of $21.3 million, which was primarily attributable to the expected seasonality of working capital and, to a lesser extent, the purchase of a new company headquarters building. Cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004's second quarter decreased $1.2 million compared to the $49.4 million at the end of fiscal 2003's second quarter. During fiscal 2004's second quarter, the company purchased a new headquarters building in King of Prussia, Pa., for $17 million and secured a 10-year, $13-million mortgage loan. The company's inventory at the end of fiscal 2004's second quarter was $22.0 million compared to $22.9 million at fiscal 2003 year-end, a decrease of $879,000. Comparing inventory at the end of fiscal 2004's second quarter to the end of fiscal 2003's second quarter, inventory increased $1.7 million to $22.0 million from $20.3 million. Management's Commentary "GSI Commerce has performed well since our last report," said Michael Rubin, chairman and CEO of GSI Commerce. "We have generated strong growth from sports and other categories, improved our bottom line, continued our strategy of meaningfully investing in our business to support our substantial growth opportunity and added key new partners. We are on track to meet our guidance and are also positioned well for future growth." Highlights since April 28, 2004 -- Polo Ralph Lauren and Timberland successfully launched their e- commerce stores at http://www.polo.com and http://www.timberland.com, respectively, on GSI Commerce's e-commerce platform. -- The company signed new partner agreements with two luxury brand designers and retailers of high-quality apparel, accessories and home products. The company expects to launch these partners' online stores on GSI Commerce's e-commerce platform later this year. -- GSI Commerce secured a multi-year contract extension with palmOne Inc. (Nasdaq: PLMO). In addition to continuing to operate palmOne's online stores in the United States and Canada, GSI Commerce will replace and operate palmOne's Treo(TM) online store, currently operated in-house by palmOne. The new site will include phone activation services and credit authorization interfaces with an expanded list of telecommunication carriers, including AT&T, Sprint, Cingular, T-Mobile and Verizon. -- GSI Commerce signed a multi-year extension of its contract to operate the online retail store for Reebok International Ltd., a leading worldwide designer, marketer and distributor of sports, fitness and casual footwear, apparel and equipment. -- Robert Blyskal was named to the newly created position of co- president and chief operating officer. Blyskal directly oversees the business management, technology and information services, and fulfillment and customer service groups and reports to Michael Rubin. -- The company's e-commerce platform was selected by more of the Top 300 Web retailers in the United States than any other solution provider's platform, according to research published in June by Internet Retailer Magazine in its "2004 Top 300 Guide." -- GSI Commerce completed the purchase of a new 104,000-square-foot headquarters building in King of Prussia, Pa. The company intends to occupy the building in the fourth quarter of fiscal 2004, enabling it to consolidate its headquarters staff into one facility from the three facilities it currently occupies. -- GSI Commerce leased a 400,000-square-foot fulfillment center. This is GSI Commerce's second fulfillment facility. The lease is contingent upon receiving certain tax-related incentives from the state where the facility is located. Provided that the state incentives are approved, GSI Commerce intends to operate the facility, which would nearly double fulfillment capacity to 870,000 square feet from 470,000 square feet, beginning in the fourth quarter of fiscal 2004. Fiscal 2004 Third Quarter, Fourth Quarter and Annual Financial Guidance The following forward-looking statements reflect GSI Commerce's expectations as of July 28, 2004. GSI Commerce provides guidance for its business based only on signed agreements. Given the potential changes in general economic conditions and consumer spending, the emerging nature of e- commerce, and various other risk factors discussed below, actual results may differ materially. The company provides the following guidance for the fiscal 2004 third quarter: -- Net revenues are expected to be in the range of $62 million to $67 million. -- Net merchandise sales are expected to be in the range of $92 million to $97 million. -- Net loss is expected to be in the range of $4.9 million to $3.9 million. -- Adjusted EBITDA loss is expected to be in the range of a $1.5 million to $500,000. The company provides the following guidance for the fiscal 2004 fourth quarter: -- Net revenues are expected to be in the range of $117 million to $130 million. -- Net merchandise sales are expected to be in the range of $177.5 million to $190.5 million. -- Net income is expected to be in the range of $12.1 million to $13.1 million. -- Adjusted EBITDA is expected to be in the range of $16.6 million to $17.1 million. The company also updates its previous guidance for fiscal 2004: -- Net revenues are expected to be in the range of $310 million to $328 million. -- Net merchandise sales are expected to be in the range of $445 million to $463 million. -- Net income is expected to be in the range of $0 to $2 million. -- Adjusted EBITDA is expected to be in the range of $13.5 million to $15 million. Non-GAAP Financial Measures This press release contains adjusted EBITDA, net merchandise sales and certain ratios that use net merchandise sales. GSI Commerce uses adjusted EBITDA as a means to evaluate its performance period to period without taking into account certain expenses, particularly stock-based compensation expense, which may fluctuate materially due to fluctuations in the price of GSI Commerce's common stock both on a quarterly and annual basis, and does not consistently reflect GSI Commerce's results from its core business activities. GSI Commerce also uses net merchandise sales as a metric for operating its business. Variable costs such as fulfillment and customer service labor expense, order processing costs such as credit card and bank processing fees and business management costs such as marketing department staffing levels are related to the amount of sales made through GSI Commerce's platform, whether or not GSI Commerce records the revenue from such sales. GSI Commerce believes that investors will have a more thorough understanding of its historical expenses and expense trends if they have visibility to both GAAP net revenue as well as the non-GAAP financial measure net merchandise sales and the percentages that such expenses bear to net revenues and net merchandise sales. These financial measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures included in this press release have been reconciled to the nearest GAAP measures as is required under SEC rules. Second Quarter Conference Call GSI Commerce has scheduled a conference call on July 28 at 4:45 p.m. EDT to discuss the company's fiscal 2004 second quarter results and expectations for future performance. For access to the conference call, please call the toll-free conference number, 1-800-299-7635, by 4:30 p.m. EDT. The conference password is "67635289" and the leader's name is "Michael Rubin." Alternatively, to listen to the call live on the Web, go to the GSI Commerce Web site, http://www.gsicommerce.com, and click on the link provided on the home page. Please do this at least 15 minutes prior to the call (4:30 p.m. EDT) to register, download and install any necessary audio software. For those who cannot listen to the Web broadcast, a telephone replay of the conference call will be available one hour after the completion of the call at 1-888-286-8010 and remain available through August 27. The password for the replay is "48453182." About GSI Commerce GSI Commerce provides an e-commerce solution enabling retailers, branded manufacturers, entertainment companies and professional sports organizations to operate e-commerce businesses. The company's e-commerce solution includes Web site design and development, e-commerce technology, managed hosting, order fulfillment, customer service, merchandising and order management, online merchandising, customer relationship management, content development and online marketing. The company operates either all or a portion of the e-commerce businesses for approximately 45 partners. Forward-Looking Statements All statements made in this release and to be made in GSI Commerce's fiscal 2004 second quarter conference call, including those in the tape recording, live audio and live Webcast of the call, other than statements of historical fact, are or will be forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "should," "guidance," "potential," "continue," "project," "forecast," "confident," "prospects," and similar expressions typically are used to identify forward-looking statements. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business of GSI Commerce and the industries and markets in which GSI Commerce operates. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Factors which may affect GSI Commerce's business, financial condition and operating results include the effects of changes in the economy, consumer spending, the financial markets and the industries in which GSI Commerce and its partners operate, changes affecting the Internet and e- commerce, the ability of GSI Commerce to develop and maintain relationships with strategic partners and suppliers, and the timing of its establishment or extension of its relationships with strategic partners, the ability of GSI Commerce to timely and successfully develop, maintain and protect its technology and product and service offerings and execute operationally, the ability of GSI Commerce to attract and retain qualified personnel, the ability of GSI Commerce to successfully integrate its acquisitions of other businesses, if any, and the performance of acquired businesses. More information about potential factors that could affect GSI Commerce can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed by GSI Commerce with the Securities and Exchange Commission. GSI Commerce expressly disclaims any intent or obligation to update these forward- looking statements, except as otherwise specifically stated by GSI Commerce. palmOne and Treo are among the trademarks or registered trademarks owned by or licensed to palmOne Inc. or its subsidiaries. GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) January 3, July 3, 2004 2004 ASSETS Current assets: Cash and cash equivalents $57,558 $32,975 Marketable securities 11,912 15,268 Accounts receivable, net of allowance of $709 and $718, respectively 4,898 7,283 Inventory 22,910 22,031 Current portion - notes receivable 1,377 900 Prepaid expenses and other current assets 1,848 1,502 Total current assets 100,503 79,959 Property and equipment, net 44,840 63,269 Goodwill, net 13,453 13,453 Notes receivable 2,356 1,293 Other equity investments 2,159 2,847 Other assets, net of accumulated amortization of $2,644 and $3,352, respectively 12,272 11,745 Total assets $175,583 $172,566 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $27,677 $22,215 Accrued expenses and other 22,538 21,344 Deferred revenue 14,998 11,769 Current portion - note payable - 150 Total current liabilities 65,213 55,478 Note payable - 12,850 Mandatorily redeemable preferred stock, Series A, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding as of January 3, 2004 and July 3, 2004, respectively - - Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value, 4,990,000 shares authorized; 0 shares issued and outstanding as of January 3, 2004 and July 3, 2004, respectively - - Common stock, $0.01 par value, 90,000,000 shares authorized; 40,781,036 and 41,011,620 shares issued as of January 3, 2004 and July 3, 2004, respectively; 40,779,826 and 41,010,410 shares outstanding as of January 3, 2004 and July 3, 2004, respectively 408 410 Additional paid in capital 287,571 288,708 Accumulated other comprehensive loss - (97) Accumulated deficit (177,609) (184,783) 110,370 104,238 Less: Treasury stock, at par - - Total stockholders' equity 110,370 104,238 Total liabilities and stockholders' equity $175,583 $172,566 GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 28, July 3, June 28, July 3, 2003 2004 2003 2004 Revenues: Net revenues from product sales $45,722 $53,131 $89,895 $110,009 Service fee revenues 4,626 11,558 9,332 20,948 Net revenues 50,348 64,689 99,227 130,957 Cost of revenues from product sales 33,307 39,564 65,160 81,072 Gross profit 17,041 25,125 34,067 49,885 Operating expenses: Sales and marketing, exclusive of $279, $195, $508 and $689 reported below as stock-based compensation, respectively 11,095 16,787 24,219 34,236 Product development, exclusive of $0, $(47), $0 and $2 reported below as stock-based compensation, respectively 3,418 4,498 7,117 8,981 General and administrative, exclusive of $125, $5, $184 and $89 reported below as stock-based compensation, respectively 3,457 4,375 6,538 8,295 Stock-based compensation 404 153 692 780 Depreciation and amortization 2,734 2,646 5,432 5,245 Total operating expenses 21,108 28,459 43,998 57,537 Other (income) expense: Interest expense - 54 - 54 Interest income (290) (242) (671) (532) Total other (income) expense (290) (188) (671) (478) Net loss $(3,777) $(3,146) $(9,260) $(7,174) Losses per share - basic and diluted: Net loss $(0.10) $(0.08) $(0.24) $(0.18) Weighted average shares outstanding: basic and diluted 38,838 40,991 38,811 40,930 GSI COMMERCE, INC. AND SUBSIDIARIES ADJUSTED EBITDA AND RECONCILIATION TO GAAP RESULTS (In thousands) (Unaudited) Three Months Ended Six Months Ended June 28, July 3, June 28, July 3, 2003 2004 2003 2004 Adjusted EBITDA: Net loss excluding interest income and expense, taxes and charges for stock-based compensation and depreciation and amortization $(929) $(535) $(3,807) $(1,627) Reconciliation of Adjusted EBITDA to GAAP results: Adjusted EBITDA $(929) $(535) $(3,807) $(1,627) Interest expense - 54 - 54 Interest income (290) (242) (671) (532) Taxes - - - - Stock-based compensation 404 153 692 780 Depreciation and amortization 2,734 2,646 5,432 5,245 Net loss $(3,777) $(3,146) $(9,260) $(7,174) GSI COMMERCE, INC. AND SUBSIDIARIES NET MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS (Dollars in thousands) (Unaudited) Three Months Ended June 28, July 3, Variance 2003 2004 Amount % Net merchandise sales (1) - (a non-GAAP financial measure): Category: Sporting goods $27,011 $37,912 $10,901 40% Other (2) 27,824 51,669 23,845 86% Total net merchandise sales (1) - (a non-GAAP financial measure) $54,835 $89,581 $34,746 63% Net revenues - (GAAP basis): Net revenues from product sales: Category: Sporting goods $27,011 $33,586 $6,575 24% Other (2) 18,711 19,545 834 4% Total net revenues from product sales 45,722 53,131 7,409 16% Service fee revenues 4,626 11,558 6,932 150% Total net revenues - (GAAP basis) $50,348 $64,689 $14,341 28% Reconciliation of net merchandise sales (1) to net revenues: Net merchandise sales (1) - (a non-GAAP financial measure): Category: Sporting goods $27,011 $37,912 $10,901 40% Other (2) 27,824 51,669 23,845 86% Total net merchandise sales (1) - (a non-GAAP financial measure) 54,835 89,581 34,746 63% Less: Sales by partners (3): Category: Sporting goods - (4,326) (4,326) - Other (9,113) (32,124) (23,011) 253% Total sales by partners (3) (9,113) (36,450) (27,337) 300% Add: Service fee revenues 4,626 11,558 6,932 150% Net revenues - (GAAP basis) $50,348 $64,689 $14,341 28% (1) Net merchandise sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI Commerce platform, whether or not GSI Commerce is the seller of the merchandise or records the full amount of such sales on its financial statements. (2) The "Other" categories of both net merchandise sales and net revenues from product sales include $167,000 and $1,000 for the three-month periods ended June 28, 2003 and July 3, 2004, respectively, related to Ashford.com. (3) Represents the retail value of all product sales through the GSI Commerce platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI Commerce records service fee revenues on these sales. GSI COMMERCE, INC. AND SUBSIDIARIES NET MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS (Dollars in thousands) (Unaudited) Six Months Ended June 28, July 3, Variance 2003 2004 Amount % Net merchandise sales (1) - (a non-GAAP financial measure): Category: Sporting goods $51,418 $72,998 $21,580 42% Other (2) 57,593 102,470 44,877 78% Total net merchandise sales (1) - (a non-GAAP financial measure) $109,011 $175,468 $66,457 61% Net revenues - (GAAP basis): Net revenues from product sales: Category: Sporting goods $51,418 $67,124 $15,706 31% Other (2) 38,477 42,885 4,408 11% Total net revenues from product sales 89,895 110,009 20,114 22% Service fee revenues 9,332 20,948 11,616 124% Total net revenues - (GAAP basis) $99,227 $130,957 $31,730 32% Reconciliation of net merchandise sales (1) to net revenues: Net merchandise sales (1) - (a non-GAAP financial measure): Category: Sporting goods $51,418 $72,998 $21,580 42% Other (2) 57,593 102,470 44,877 78% Total net merchandise sales (1) - (a non-GAAP financial measure) 109,011 175,468 66,457 61% Less: Sales by partners (3): Category: Sporting goods - (5,874) (5,874) - Other (19,116) (59,585) (40,469) 212% Total sales by partners (3) (19,116) (65,459) (46,343) 242% Add: Service fee revenues 9,332 20,948 11,616 124% Net revenues - (GAAP basis) $99,227 $130,957 $31,730 32% (1) Net merchandise sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI Commerce platform, whether or not GSI Commerce is the seller of the merchandise or records the full amount of such sales on its financial statements. (2) The "Other" categories of both net merchandise sales and net revenues from product sales include $902,000 and $9,000 for the six-month periods ended June 28, 2003 and July 3, 2004, respectively, related to Ashford.com. (3) Represents the retail value of all product sales through the GSI Commerce platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI Commerce records service fee revenues on these sales. Contacts: Michael Conn Greg Ryan Senior Vice President Director, Corporate Communications tel: 610-491-7002 tel: 610-491-7294 fax: 610-491-7302 fax: 610-265-2866 e-mail: connm@gsicommerce.com e-mail: ryang@gsicommerce.com SOURCE GSI Commerce, Inc. -0- 07/28/2004 /CONTACT: Michael Conn, Senior Vice President, +1-610-491-7002, or fax, +1-610-491-7302, connm@gsicommerce.com, or Greg Ryan, Director, Corporate Communications, +1-610-491-7294, or fax, +1-610-265-2866, ryang@gsicommerce.com, both of GSI Commerce/ /Web site: http://www.gsicommerce.com / (GSIC PLMO) CO: GSI Commerce, Inc. ST: Pennsylvania IN: ECM CPR MLM REA SPT SU: ERN CCA MAV PER CON AWD ERP RLE -----END PRIVACY-ENHANCED MESSAGE-----