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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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) May 18, 2006
--------------------------------
GAMESTOP CORP.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-32637 20-2733559
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(Commission File Number) (IRS Employer Identification No.)
625 Westport Parkway, Grapevine, Texas 76051
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(Address of Principal Executive Offices) (Zip Code)
(817) 424-2000
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(Registrant's Telephone Number, Including Area Code)
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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 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, nor
shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, as amended, except as shall be expressly set forth by specific
reference in such filing.
On May 18, 2006, GameStop Corp. (the "Company") issued a press release
announcing its financial results for the fiscal quarter ended April 29, 2006. A
copy of the press release is attached hereto as Exhibit 99.1.
Item 8.01. Other Events.
On May 18, 2006, the Company announced the commencement of the exchange
offer of its and GameStop, Inc.'s $300,000,000 Senior Floating Rate Notes due
2011 and $650,000,000 8% Senior Notes due 2012, each registered under the
Securities Act of 1933, as amended, for all of its and GameStop, Inc.'s
outstanding $300,000,000 Senior Floating Rate Notes due 2011 and $650,000,000 8%
Senior Notes due 2012 sold on September 28, 2005 pursuant to Rule 144A and
Regulation S under the Securities Act of 1933, as amended. The exchange offer
will expire at 5:00 p.m. New York City time on June 16, 2006, unless extended.
The Company also announced that its Board of Directors has authorized the
buyback of up to an aggregate of $100,000,000 of its Senior Floating Rate Notes
and Senior Notes. The timing and amount of the repurchases will be determined by
the Company's management based on their evaluation of market conditions and
other factors. In addition, the repurchases may be suspended or discontinued at
any time.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits
99.1 Press Release issued by GameStop Corp., dated May 18, 2006.
2
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.
Date: May 18, 2006 By: /s/ David W. Carlson
----------------------------
David W. Carlson
Executive Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
99.1 Press Release of GameStop Corp., dated May 18, 2006.
4
Exhibit 99.1
GameStop Corp. First Quarter EPS of $0.15 Exceeds Guidance;
Operating Earnings Surge 126%;
New Software Sales Stronger Than Expected;
GameStop Increases Fiscal 2006 Outlook
GRAPEVINE, Texas--(BUSINESS WIRE)--May 18, 2006--GameStop Corp.
(NYSE:GME) (NYSE:GME.B), the world's largest video game and
entertainment software retailer, today reported record sales and
earnings for the first quarter ended April 29, 2006.
GameStop net earnings were $11.7 million for the first quarter of
2006, including merger-related expenses of $1.3 million ($0.8 million,
net of tax benefits) and stock-based compensation of $5.2 million
($3.3 million, net of tax benefits). Diluted earnings per share were
$0.15 for the first quarter of 2006, including merger-related expenses
of $0.01 per diluted share and stock-based compensation of $0.04 per
diluted share. This compares to previously released guidance of $0.04
to $0.05 per diluted share. Operating earnings surged 126% to $38.1
million.
Total company sales increased 119% to $1,040.0 million in
comparison to $474.7 million in the prior year quarter. Comparable
store sales decreased 3.3% during the first quarter, beating
previously announced guidance of -7.0% to -9.0% due to strong
sell-thru of Microsoft Xbox 360 titles such as Elder Scrolls IV:
Oblivion from Take 2 Interactive and Ghost Recon: Advanced War Fighter
from Ubisoft, as well as our best-selling title of the quarter, Square
Enix's Kingdom Hearts II for Sony's PlayStation 2.
"Our exceptionally strong results this quarter are due primarily
to the improved flow of Xbox 360 hardware, early acceptance of the
$59.99 price point for next generation software, and the successful
completion of key integration strategies between GameStop and EB
Games," indicated R. Richard Fontaine, Chairman and Chief Executive
Officer. "While there is more work that needs to be done to fully
complete the merger, we have concluded many critical facets of the
integration, including the roll out of GameStop's inventory management
system to EB stores, applying best practices to the company's
operations, the closing of the West Chester general office and the
Coatesville distribution center, and restructuring of field
management. We continue to have great confidence in our new and used
business model as an earnings driver while the industry moves through
the transformation to multiple new hardware platforms."
"Our success in the first quarter comes just one year following
the original public announcement of our merger with EB Games,"
continued Fontaine. "We have followed an extremely efficient and
productive plan of integration, are ahead of schedule and in position
to maximize the upside potential of the business over the remainder of
the year."
Updated Guidance
For the second quarter of fiscal 2006, comparable store sales are
projected to range from -2.0% to +1.0%. Diluted earnings per share for
the second quarter are expected to range from $0.04 to $0.05,
including projected stock-based compensation expense of $0.04 per
diluted share. Excluding projected stock-based compensation, second
quarter diluted earnings per share are expected to range from $0.08 to
$0.09.
Due to the strong results in the first quarter, we are raising our
full year fiscal 2006 diluted earnings per share expectations to range
from $1.93 to $2.03, including projected stock-based compensation
expense of $0.17 per diluted share. Excluding projected stock-based
compensation, full year diluted earnings per share are now expected to
range from $2.10 to $2.20.
Note that guidance does not include merger costs related to the
business combination, which we project could range from $0.03 to $0.05
per diluted share for fiscal 2006.
First 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. 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 May 18, 2006 at 11:00 a.m. EDT to discuss the first 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 June 1, 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 4,565 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 second
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
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; the timing of the release of the next
generation consoles, including Sony's PlayStation 3 and Nintendo's
Wii; 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
April 29, 2006 April 30, 2005
--------------- ---------------
Sales $1,040,027 $474,727
Cost of sales 737,993 348,690
--------------- ---------------
Gross profit 302,034 126,037
Selling, general and administrative
expenses 231,470 98,986
Depreciation and amortization 25,932 10,194
Stock-based compensation 5,190 -
Merger expenses 1,326 -
--------------- ---------------
Operating earnings 38,116 16,857
Interest expense, net 19,329 83
--------------- ---------------
Earnings before income
tax expense 18,787 16,774
Income tax expense 7,086 6,448
--------------- ---------------
Net earnings $11,701 $10,326
=============== ===============
Earnings per common share:
Basic $0.16 $0.20
Diluted $0.15 $0.19
Weighted average common shares
outstanding:
Basic 73,391 51,000
Diluted 78,472 54,490
Percentage of Sales:
- --------------------
Sales 100.0% 100.0%
Cost of sales 71.0% 73.5%
--------------- ---------------
Gross profit 29.0% 26.5%
SG&A expenses 22.2% 20.8%
Depreciation and amortization 2.5% 2.1%
Stock-based compensation 0.5% --
Merger expenses 0.1% --
--------------- ---------------
Operating earnings 3.7% 3.6%
Interest expense, net 1.9% 0.1%
--------------- ---------------
Earnings before income
tax expense 1.8% 3.5%
Income tax expense 0.7% 1.3%
--------------- ---------------
Net earnings 1.1% 2.2%
=============== ===============
GameStop Corp.
Balance Sheets
(in thousands, except per share data)
April 29, April 30,
2006 2005
----------- ---------
ASSETS:
Current assets:
Cash and cash equivalents $ 224,881 $ 149,414
Receivables, net 33,375 10,136
Merchandise inventories 631,874 255,122
Prepaid expenses and other current
assets 35,357 18,195
Prepaid taxes 53,340 -
Deferred taxes 43,843 5,435
----------- ---------
Total current assets 1,022,670 438,302
----------- ---------
Property and equipment:
Land 10,498 2,000
Buildings & leasehold improvements 272,578 114,794
Fixtures and equipment 358,604 197,887
----------- ---------
641,680 314,681
Less accumulated depreciation and
amortization 210,799 133,983
----------- ---------
Net property and equipment 430,881 180,698
----------- ---------
Goodwill, net 1,392,467 320,888
Assets held for sale 19,315 -
Other noncurrent assets 47,977 2,268
----------- ---------
Total assets $ 2,913,310 $ 942,156
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 410,808 $ 211,686
Accrued liabilities 294,532 96,865
Notes payable, current portion 12,491 12,173
----------- ---------
Total current liabilities 717,831 320,724
Deferred taxes 12,307 20,197
Other long-term liabilities 37,479 14,451
Notes payable, long-term portion 21,622 24,347
Senior floating and fixed rate notes payable,
net of discount 942,023 -
----------- ---------
Total liabilities $ 1,731,262 $ 379,719
----------- ---------
Stockholders' equity:
Preferred stock - authorized 5,000
shares; no shares issued or outstanding - -
Class A common stock - $.001 par value;
authorized 300,000 shares; 45,042
and 24,695 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 973,422 509,969
Accumulated other comprehensive income 4,445 466
Retained earnings 204,106 101,947
Treasury stock, at cost, 0 and 3,263
shares, respectively - (50,000)
----------- ---------
Total stockholders' equity 1,182,048 562,437
----------- ---------
Total liabilities and
stockholders' equity $ 2,913,310 $ 942,156
=========== =========
Schedule I
GameStop Corp.
Retail Sales Mix
13 Weeks Ended 13 Weeks Ended
April 29, 2006 April 30, 2005
-------------------- ---------------------
Percent Percent
Sales of Total Sales of Total
---------- --------- ---------- ----------
Sales (in millions):
New video game hardware $160.6 15.4% $73.9 15.6%
New video game software 406.1 39.1% 183.6 38.7%
Used video game products 275.7 26.5% 135.3 28.5%
Other 197.6 19.0% 81.9 17.2%
---------- --------- ---------- ----------
Total $1,040.0 100.0% $474.7 100.0%
========== ========= ========== ==========
Schedule II
GameStop Corp.
Gross Profit Mix
13 Weeks Ended 13 Weeks Ended
April 29, 2006 April 30, 2005
-------------------- --------------------
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
--------- ---------- --------- ----------
Gross Profit (in millions):
New video game hardware $13.0 8.1% $2.3 3.1%
New video game software 81.7 20.1% 33.6 18.3%
Used video game products 140.9 51.1% 62.7 46.3%
Other 66.4 33.6% 27.4 33.4%
--------- ---------
Total $302.0 29.0% $126.0 26.5%
========= =========
Schedule
III
----------
GAMESTOP CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the
thirteen Historical Historical
weeks ended GameStop Electronics GameStop
April 30, Corp. Boutique Corp
2005 April 30, April 30, Pro Forma Pro
2005 (a) 2005 (a) Adjustments Forma
---------- ----------- ----------- --------
Sales $ 474,727 $ 504,905 $ - $979,632
Cost of sales 348,690 374,845 - 723,535
---------- ----------- ----------- --------
Gross
profit 126,037 130,060 - 256,097
Selling,
general and
admin.
expenses 98,986 114,342 - 213,328
Depr. and
amort. 10,194 10,797 1,204 (c) 22,195
Merger-
related
expenses - 1,500 (1,500)(b) -
Stock-based
compensation - - 2,576 (j) 2,576
---------- ----------- ----------- --------
Operating
earnings 16,857 3,421 (2,280) 17,998
Interest
expense, net 83 (917) 20,374 (d),(e) 19,540
Merger-
related int.
expense - -
---------- ----------- ----------- --------
Earnings
(loss)
before
income
tax exp.
(benefit) 16,774 4,338 (22,654) (1,542)
Income tax
expense
(benefit) 6,448 1,561 (8,587)(f) (578)
---------- ----------- ----------- --------
Net
earnings
(loss) $ 10,326 $ 2,777 $ (14,067) $ (964)
========== =========== =========== ========
Net earnings
(loss) per
Class A &
Class B
common share
--basic $ 0.20 (h) $ 0.11 $ (0.01)(i)
========== =========== ========
Weighted
average
shares of
common
stock--basic 51,000 24,696 (4,467)(g) 71,229
========== =========== =========== ========
Net earnings
(loss) per
Class A &
Class B
common
share--
diluted $ 0.19(h) $ 0.11 $ (0.01)(i)
========== =========== ========
Weighted
average
shares of
common
stock--
diluted 54,490 25,079 (8,340)(g),(k) 71,229
========== =========== =========== ========
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 $1,500
which are directly attributable to the mergers 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
123(R) 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 April 30,
2005.
CONTACT: Media Contact:
Chris Olivera
Director, Public & Media Relations
GameStop Corp.
(817) 424-2130
or
Investor Contact:
David W. Carlson
Executive Vice President & Chief Financial Officer
GameStop Corp.
(817) 424-2130