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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) March 27, 2007
-------------------------------
GAMESTOP CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-32637 20-2733559
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
625 Westport Parkway, Grapevine, TX 76051
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 424-2000
-----------------------------
- --------------------------------------------------------------------------------
(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 March 27, 2007, GameStop Corp. issued a press release
announcing its financial results for the fiscal quarter and the full year ended
February 3, 2007. 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 March 27, 2007.
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: March 27, 2007
/s/ David W. Carlson
--------------------
Name: David W. Carlson
Title: Executive Vice President
and Chief Financial
Officer
Table of Contents
- -----------------
GAMESTOP CORP.
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
Exhibit 99.1 Press Release of GameStop Corp., dated March 27, 2007
Exhibit 99.1
GameStop Sales Top $5 Billion
2006 Sales and Net Earnings Grow 72% and 57%
Fourth Quarter EPS Exceeds Guidance
Comparable Store Sales Increase 26.5% for Q4 and 11.9% for Year
Issues Robust 2007 Guidance and Reaffirms Long Range EPS Growth
Targets
GRAPEVINE, Texas--(BUSINESS WIRE)--March 27, 2007--GameStop Corp.
(NYSE:GME), the world's largest video game and entertainment software
retailer, today reported sales and earnings for the fourth quarter and
the full year ended February 3, 2007. Please 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.
Fourth Quarter Financial Results
Net earnings were $129.8 million for the 14-week fourth quarter of
2006, including debt retirement costs related to the bond buy-back
program of $2.5 million ($1.6 million, net of tax benefits), as
compared to net earnings of $85.0 million for the 13-week fourth
quarter of 2005, an increase of 52.7%.
Diluted earnings per share were $0.81, including debt retirement
costs of $0.01 per diluted share, compared to $0.55 per diluted share
in the prior year quarter, considerably beating guidance issued on
January 4, 2007. Brisk sales in January of Vivendi's WORLD OF WARCRAFT
and new video game software titles drove the greater than anticipated
results.
GameStop sales increased 38.2% to $2,304.0 million in the fourth
quarter, in comparison to $1,666.9 million in the prior year quarter.
On a comparable store basis, sales increased 26.5% during the fourth
quarter.
Full Year Financial Results
Net earnings were $158.3 million for the 53-week fiscal year 2006,
including merger-related expenses of $6.8 million ($4.3 million, net
of tax benefits) and debt retirement costs of $6.1 million ($3.8
million, net of tax benefits), as compared to earnings of $100.8
million in fiscal 2005, an increase of 57.0%. Diluted earnings per
share were $1.00 for fiscal 2006, including merger related expenses
and debt retirement costs of $0.05 per diluted share, as compared to
$0.81 per diluted share in fiscal 2005.
GameStop sales were $5,318.9 million for fiscal 2006, an increase
of 72.0% over fiscal 2005 sales of $3,091.8 million. On a comparable
store basis, sales increased 11.9% during fiscal 2006.
"2006 was a remarkable year for GameStop. Total sales increased
72%, operating earnings grew by 73%, net earnings were up 57%, and
comparable store sales increased 12%; by any retail measurement, a
remarkable year," indicated R. Richard Fontaine, GameStop's Chairman
and Chief Executive Officer. "In addition, we finished the year with a
strong balance sheet and a year end cash balance of over $650 million.
"During the year we successfully and fully integrated over 2,000
EB Games stores into the GameStop portfolio and opened 421 new stores
worldwide; 276 in the United States and 145 in the international
divisions. In fact, our internal rate of return for new stores was the
highest ever and, in aggregate, significantly exceeded plan.
"While we are in the very early stages of another strong growth
cycle, it is not a mirror of the past. In fact, our 2007 guidance is
based on our belief that this cycle will be deeper, wider, and longer
than any previous period of new console introductions. From the
technology powerhouses of Xbox 360 and PS3, to the uniquely engaging
ease of play and inventiveness of the Wii, to the portability of the
DS Lite, to the value of the PS2, there is a product and a price range
to stimulate the core and casual gamer, and attract new customers to
the video game experience," continued Fontaine.
"No previous cycle has had the diversity of console attributes
currently in our stores; no previous cycle has merged other
technologies like HDTV, Wi-Fi, and MP3 attributes to make the gaming
experience truly the best ever.
"The video game business has become more complex with more console
choices, more sophisticated software, and a huge variety of
enhancement accessories. The business is increasingly favoring the
game passion and deep expertise of our 22,000 managers and game
advisors whose product knowledge differentiates GameStop from the
competition and will give us an even greater edge in the marketplace
of the future."
Business Outlook
For fiscal 2007 (the 52-week year ending February 2, 2008), sales
are projected to grow between 19.0% and 21.0%, with comparable store
sales ranging from +14.0% to +16.0%, backed by a strong release slate
of video game titles across all platforms. Diluted earnings per share
for the full year are expected to range from $1.37 to $1.40. GameStop
expects to open between 500-550 stores worldwide in 2007.
For the first quarter of fiscal 2007, the company expects
comparable store sales to range from +12.0% to +14.0%, driven by the
expected launches of Sony's PlayStation 3 in Europe and Australia,
Sony's GOD OF WAR II for the PlayStation 2 in the U.S., the worldwide
launch of Nintendo's POKEMON DIAMOND and PEARL for the Nintendo DS, as
well as continued strong demand for Microsoft Xbox 360 titles. Diluted
earnings per share are expected to range from $0.15 to $0.16. This
compares to earnings per share of $0.07 in the first quarter of 2006.
Based on expected strong video game industry fundamentals, the
company's expanding worldwide retail portfolio, and sound cash
generation, GameStop currently expects earnings per share to grow at
least 25% annually in fiscals 2008 and 2009.
Note that guidance does not include debt retirement costs.
Fourth quarter and full year 2005 pro forma statements of
operations have been provided in Schedules III and IV 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.
123(R) was implemented at the beginning of fiscal 2005.
Conference Call and Webcast Information
A conference call with GameStop Corp.'s management is scheduled
for March 27, 2007 at 11:00 AM ET to discuss the fourth quarter and
full year 2006 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 April 10, 2007.
About GameStop Corp.
Headquartered in Grapevine, TX, GameStop Corp. is the world's
largest video game and entertainment software retailer. The company
operates 4,778 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
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 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 Sony's
PlayStation 3 and 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 January 28, 2006 filed
with the SEC and available at the SEC's Internet site at
http://www.sec.gov.
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
February 3, January 28,
2007 2006
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents $ 652,403 $ 401,593
Receivables, net 34,268 38,738
Merchandise inventories 675,385 603,178
Prepaid expenses and other current
assets 37,882 16,339
Prepaid taxes 5,545 21,068
Deferred taxes 34,858 41,051
----------- -----------
Total current assets 1,440,341 1,121,967
----------- -----------
Property and
equipment:
Land 10,712 10,257
Buildings & leasehold improvements 305,806 262,908
Fixtures and equipment 425,841 343,897
----------- -----------
742,359 617,062
Less accumulated depreciation and
amortization 285,896 184,937
----------- -----------
Net property and
equipment 456,463 432,125
----------- -----------
Goodwill, net 1,403,907 1,392,352
Assets held for sale -- 19,297
Other noncurrent assets 48,873 50,080
----------- -----------
Total assets $ 3,349,584 $ 3,015,821
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 717,868 $ 543,288
Accrued liabilities 357,013 331,859
Note payable, current portion 12,176 12,527
----------- -----------
Total current
liabilities 1,087,057 887,674
Deferred taxes -- 13,640
Other long-term
liabilities 42,926 36,331
Notes payable, long-term portion 412 21,675
Senior floating and fixed rate notes payable,
net of discount 843,311 941,788
----------- -----------
Total liabilities 1,973,706 1,901,108
=========== ===========
Stockholders' equity:
Preferred stock - authorized 5,000
shares; no shares issued or
outstanding -- --
Class A common stock - $.001 par
value; authorized 300,000 shares;
152,305 and 145,594 shares issued and
outstanding, respectively 152 146
Additional paid-in-capital 1,021,903 921,335
Accumulated other comprehensive income 3,227 886
Retained earnings 350,596 192,346
----------- -----------
Total stockholders'
equity 1,375,878 1,114,713
----------- -----------
Total liabilities and
stockholders' equity $ 3,349,584 $ 3,015,821
=========== ===========
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
14 weeks 13 weeks
ended ended
Feb. 3, Jan. 28,
2007 2006
----------- -----------
Sales $2,303,966 $1,666,914
Cost of sales 1,749,478 1,225,796
----------- -----------
Gross profit 554,488 441,118
Selling, general and administrative expenses 294,025 259,974
Depreciation and amortization 30,321 26,283
Stock-based compensation 5,272 --
Merger-related expenses -- 2,271
----------- -----------
Operating earnings 224,870 152,590
Interest expense, net 14,138 18,635
Debt extinguishment expense 2,497 --
----------- -----------
Earnings before income tax expense 208,235 133,955
Income tax expense 78,432 48,940
----------- -----------
Net earnings $ 129,803 $ 85,015
=========== ===========
Earnings per common share:
Basic $ 0.85 $ 0.59
Diluted $ 0.81 $ 0.55
Weighted average common shares outstanding:
Basic 151,832 144,812
Diluted 159,832 154,774
Percentage of Sales:
- ----------------------------------------------
Sales 100.0% 100.0%
Cost of sales 75.9% 73.5%
----------- -----------
Gross profit 24.1% 26.5%
SG&A expenses 12.8% 15.6%
Depreciation and amortization 1.3% 1.6%
Stock-based compensation 0.2% --
Merger-related expenses 0.0% 0.2%
----------- -----------
Operating earnings 9.8% 9.1%
Interest expense, net 0.7% 1.1%
Debt extinguishment expense 0.1% --
----------- -----------
Earnings before income tax expense 9.0% 8.0%
Income tax expense 3.4% 2.9%
----------- -----------
Net earnings 5.6% 5.1%
=========== ===========
GameStop Corp.
Statements of Operations
(in thousands, except per share data)
53 weeks 52 weeks
ended ended
Feb. 3, Jan. 28,
2007 2006
----------- -----------
Sales $5,318,900 $3,091,783
Cost of sales 3,847,458 2,219,753
----------- -----------
Gross profit 1,471,442 872,030
Selling, general and administrative expenses 1,000,135 598,996
Depreciation and amortization 109,862 66,355
Stock-based compensation 20,978 347
Merger-related expenses 6,788 13,600
----------- -----------
Operating earnings 333,679 192,732
Interest expense, net 73,324 25,292
Merger-related financing costs -- 7,518
Debt extinguishment expense 6,059 --
----------- -----------
Earnings before income tax expense 254,296 159,922
Income tax expense 96,046 59,138
----------- -----------
Net earnings $ 158,250 $ 100,784
=========== ===========
Earnings per common share:
Basic $ 1.06 $ 0.87
Diluted $ 1.00 $ 0.81
Weighted average common shares outstanding:
Basic 149,924 115,840
Diluted 158,284 124,972
Percentage of Sales:
- ----------------------------------------------
Sales 100.0% 100.0%
Cost of sales 72.3% 71.8%
----------- -----------
Gross profit 27.7% 28.2%
SG&A expenses 18.8% 19.4%
Depreciation and amortization 2.1% 2.2%
Stock-based compensation 0.4% --
Merger-related expenses 0.1% 0.4%
----------- -----------
Operating earnings 6.3% 6.2%
Interest expense, net 1.4% 0.8%
Merger-related financing costs -- 0.2%
Debt extinguishment expense 0.1% --
----------- -----------
Earnings before income tax expense 4.8% 5.2%
Income tax expense 1.8% 1.9%
----------- -----------
Net earnings 3.0% 3.3%
=========== ===========
Schedule I
GameStop Corp.
Sales Mix
14 Weeks Ended 13 Weeks Ended
Feb. 3, 2007 Jan. 28, 2006
------------------- -------------------
Percent Percent
Sales of Sales of
Total Total
--------- ------- --------- -------
Sales (in millions):
New video game hardware $ 604.9 26.3% $ 329.1 19.8%
New video game software 873.7 37.9% 705.5 42.3%
Used video game products 436.5 18.9% 348.6 20.9%
Other 388.9 16.9% 283.7 17.0%
--------- ------- --------- -------
Total $2,304.0 100.0% $1,666.9 100.0%
========= ======= ========= =======
53 Weeks Ended 52 Weeks Ended
Feb. 3, 2007 Jan. 28, 2006
------------------- -------------------
Percent Percent
Sales of Sales of
Total Total
--------- ------- --------- -------
Sales (in millions):
New video game hardware $1,073.7 20.2% $ 503.2 16.3%
New video game software 2,012.5 37.8% 1,244.9 40.3%
Used video game products 1,316.0 24.8% 808.0 26.1%
Other 916.7 17.2% 535.7 17.3%
--------- ------- --------- -------
Total $5,318.9 100.0% $3,091.8 100.0%
========= ======= ========= =======
======================================================================
Schedule II
GameStop Corp.
Gross Profit Mix
14 Weeks Ended 13 Weeks Ended
Feb. 3, 2007 Jan. 28, 2006
------------------- -------------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
--------- ------- --------- -------
Gross Profit (in millions):
New video game hardware $ 33.5 5.5% $ 21.0 6.4%
New video game software 178.7 20.5% 150.2 21.3%
Used video game products 213.0 48.8% 171.6 49.2%
Other 129.3 33.2% 98.3 34.6%
--------- ---------
Total $ 554.5 24.1% $ 441.1 26.5%
========= =========
53 Weeks Ended 52 Weeks Ended
Feb. 3, 2007 Jan. 28, 2006
------------------- -------------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
--------- ------- --------- -------
Gross Profit (in millions):
New video game hardware $ 77.0 7.2% $ 30.9 6.1%
New video game software 427.3 21.2% 266.5 21.4%
Used video game products 651.9 49.5% 383.0 47.4%
Other 315.2 34.4% 191.6 35.8%
--------- ---------
Total $1,471.4 27.7% $ 872.0 28.2%
========= =========
Schedule III
GAMESTOP CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Historical Historical
GameStop Electronics
For the thirteen Corp. Boutique GameStop
weeks ended January January 28, October 8, Pro Forma Corp.
28, 2006 2006 (a) 2005 (a) Adjustments Pro Forma
----------- ----------- ----------- -----------
Sales $1,666,914 $ - $ - $1,666,914
Cost of sales 1,225,796 - - 1,225,796
----------- ----------- ----------- -----------
Gross profit 441,118 - - 441,118
Selling, general and
administrative
expenses 259,974 - - 259,974
Depreciation and
amortization 26,283 - - 26,283
Merger-related
expenses 2,271 - (2,271)(b) -
Stock-based
compensation - - 2,422 (d) 2,422
----------- ----------- ----------- -----------
Operating
earnings
(loss) 152,590 - (151) 152,439
Interest expense,
net 18,635 - - 18,635
Merger-related
interest expense - - - -
----------- ----------- ----------- -----------
Earnings (loss)
before income
tax expense
(benefit) 133,955 - (151) 133,804
Income tax expense
(benefit) 48,940 - (56)(g) 48,884
----------- ----------- ----------- -----------
Net earnings
(loss) $ 85,015 $ - $ (95) $ 84,920
=========== =========== =========== ===========
Net earnings per
common share--basic $ 0.59 $ - $ 0.59
=========== =========== ===========
Weighted average
shares of common
stock--basic 144,812 - - 144,812
=========== =========== =========== ===========
Net earnings per
common share--
diluted $ 0.55 $ - $ 0.55
=========== =========== ===========
Weighted average
shares of common
stock--diluted 154,774 - - 154,774
=========== =========== =========== ===========
Schedule IV
GAMESTOP CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
Historical Historical
For the fifty- GameStop Electronics
two weeks ended Corp. Boutique GameStop
January 28, January 28, October 8, Pro Forma Corp.
2006 2006 (a) 2005 (a) Adjustments Pro Forma
----------- ----------- ----------- -----------
Sales $3,091,783 $1,302,107 $ - $4,393,890
Cost of sales 2,219,753 935,175 - 3,154,928
----------- ----------- ----------- -----------
Gross
profit 872,030 366,932 - 1,238,962
Selling, general
and
administrative
expenses 599,343 331,424 - 930,767
Depreciation and
amortization 66,355 30,573 (2,640)(c) 94,288
Merger-related
expenses 13,600 2,900 (16,500)(b) -
Stock-based
compensation - - 10,581 (d) 10,581
----------- ----------- ----------- -----------
Operating
earnings 192,732 2,035 8,559 203,326
Interest
expense, net 25,292 (1,927) 54,974 (e),(f) 78,339
Merger-related
interest
expense 7,518 - (7,518) -
----------- ----------- ----------- -----------
Earnings
(loss)
before
income tax
expense
(benefit) 159,922 3,962 (38,897) 124,987
Income tax
expense
(benefit) 59,138 1,415 (14,933)(g) 45,620
----------- ----------- ----------- -----------
Net
earnings
(loss) $ 100,784 $ 2,547 $ (23,964) $ 79,367
=========== =========== =========== ===========
Net earnings per
common share--
basic $ 0.87 $ 0.05 $ 0.55
=========== =========== ===========
Weighted average
shares of
common stock--
basic 115,840 50,130 (22,120)(h) 143,850
=========== =========== =========== ===========
Net earnings per
common share--
diluted $ 0.81 $ 0.05 $ 0.52
=========== =========== ===========
Weighted average
shares of
common stock--
diluted 124,972 50,792 (22,782)(h) 152,982
=========== =========== =========== ===========
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 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 stock-based compensation expense as if
SFAS 123(R) had been adopted as of January 30, 2005.
(e) 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.
(f) 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.
(g) Represents the aggregate pro forma effective income tax effect
of Notes (b), (c), (d), (e) and (f) above.
(h) The pro forma earnings per share have been adjusted to reflect
the issuance of 40,458 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.
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