ELBO Electronics Boutique Hldgs (MM)

Electronics Boutique Reports Record Fiscal 2004 Fourth Quarter and Full Year Results - Record Sales Increase 21.3 Percent for the Full Fiscal Year - WEST CHESTER, Pa., March 11 /PRNewswire-FirstCall/ -- Electronics Boutique Holdings Corp. today announced record financial results for its fiscal fourth quarter and year ended January 31, 2004. The results were highlighted by strong sales growth in new and pre-played video game software and an increase in market share. For the fiscal fourth quarter,total revenues increased 25.9 percent to $671.5 million, compared with $533.5 million for the same period a year ago. This growth was driven by a 31 percent increase in software sales and a 22 percent increase in hardware sales, compared with the same quarter in fiscal 2003. The company exceeded its projections for comparable store sales, posting a 2.0 percent increase in the fourth quarter. Net income for the quarter was $39.4 million, or $1.57 per diluted share, which includes $2.9 million, or $0.12 per diluted share, of management fee revenue recorded in connection with the termination of the services agreement with Game Group Plc. This compares with net income of $31.6 million, or $1.21 per diluted share, for the same quarter in fiscal 2003. For the full fiscal year, total revenues grew 21.6 percent to $1,601.8 million from $1,316.8 million in fiscal 2003. This was fueled by a 33 percent increase in video game software sales and 17 percent growth in hardware sales, compared with the priorfiscal year. Comparable store sales for fiscal 2004 were even to last year. Net income was $45.7 million, or $1.80 per diluted share, which includes $2.9 million, or $0.12 per diluted share, of management fee revenue from the termination of the services agreement. This compares with net income of $37.4 million, or $1.42 per diluted share, reported in fiscal 2003, before the cumulative effect of a change in accounting principle relating to the recognition of vendor allowances, which lowered net income by $4.8 million, or $0.18 per diluted share. "Electronics Boutique had a great year in fiscal 2004, setting new company records in revenue, profits and store growth. We also continued to gain market share in each quarter, demonstrating the abilityof our business model to meet challenges and leverage opportunities within our industry," said Jeffrey W. Griffiths, president and chief executive officer. "Our software sales for the year were particularly strong, increasing 33 percent compared with fiscal 2003, driven by steady growth in the installed hardware base. We expect these growth trends to continue, fueled by an anticipated hardware price drop in fiscal 2005, as well as an exciting lineup of new software titles." On January 30, 2004, the company entered into an agreement to terminate its services agreement with Game Group Plc, a specialty retailer based in the United Kingdom. Under the termination agreement, Electronics Boutique agreed to accept a lump sum payment of $15.0 million inlieu of the remaining two years of management fees required under the services agreement. The termination agreement eliminated certain restrictive covenants that impacted the company's ability to expand in Europe. The remaining covenants now expire over the next two years. As a result, the company recorded $10.3 million as deferred revenue, which will be recognized over the terms of these covenants. The remaining $4.7 million was recorded as management fee revenue in the fourth quarter of fiscal 2004 and represents revenue that would have been recognized in fiscal 2005 had the services agreement not been terminated. During the year, the company opened a net of 383 stores, increasing the size of its store base to 1,528 as of January 31, 2004. As a result of these openings, Electronics Boutique significantly expanded its presence in strip- centers in the United States and Canada, strengthened its leadership position in Australia and continued to build a foundation for future expansion in Europe. Business Outlook "Our outlook for the coming year is very positive. The installed base continues to grow, and we are preparing for several major software launches in the latter half of the year, some of which are expected to set new sales records for our industry," noted Mr. Griffiths. "Electronics Boutique is now the world's largest specialty retailer dedicated to video game software, hardware and accessories. As a result, we are uniquely positioned to benefit from this strong software lineupand the growth of the installed base to capture greater market share." "Electronics Boutique expanded at an unprecedented rate in the past year, growing our store base and our market share," added Mr. Griffiths. "We plan to open approximately 400 newlocations in fiscal 2005. We expect this expansion, which will focus on adding new strip-center locations in North America and on building our position in international markets, will continue our proven growth strategy." For fiscal 2005, the company expects total sales to increase in the range of 17 to 21 percent, with comparable store sales increasing between 2 and 4 percent. Based on this, the company expects fiscal 2005 earnings to be in the range of $1.85 to $1.95 per diluted share based on anaverage diluted share count of 25.2 million. This forecast includes $5.8 million to be reported as management fee revenue resulting from the termination of the services agreement with Game Group Plc, which represents $0.14 per diluted share. For the first quarter of fiscal 2005, the company anticipates earnings to be in the range of $0.08 to $0.10 per diluted share. This estimate is based on comparable store sales being in the range of a 2 percent decline to flat for the 13-week period ending May 1, 2004. The company will host an investor conference call at 5:00 p.m. (EST) today to review its financial results and operations. The call will be open to all interested investors through a simultaneous Internet broadcast at http://www.ebholdings.com/, and it will be archived for two weeks on the website. A recording of the call will also be available March 11, 2004 at 8:00 p.m. (EST) through March 18, 2004 at midnight (EST). Listeners should call (800) 642-1687 (domestic) or (706) 645-9291 (international), and use access code 5731368. About Electronics Boutique Holdings Corp. Electronics Boutique, a Fortune 1000 company, is the world's largest specialty retailer dedicated exclusively to video game hardware, software and PC entertainment software and accessories. The company currently operates 1,528 stores in the United States, Australia, Canada, Denmark, Germany, Italy, New Zealand, Norway, Puerto Rico, Sweden and South Korea -- primarily under the names EB Games and Electronics Boutique. The company operates an e-commerce website at http://www.ebgames.com/. Additional company information is available at http://www.ebholdings.com/ This release contains forward-looking statements, including statements by Jeffrey Griffiths and in our Business Outlook, related to the financial performance of Electronics Boutique for the first quarter and full year for the fiscal year ending January 29, 2005, to the growth prospects and opportunities for Electronics Boutique, and to the growth prospects and projected sales for hardware, software and for the video game industry in general. Forward-looking statements refer to expectations, projections and other characterizations of future events or circumstances and are often identified by the use ofwords such as "may," "will," "expect," "believe," "anticipate," "intend," "could," "estimated," "continue" or comparable terminology. In addition to factors specified in Electronics Boutique's recent filings with the Securities and Exchange Commission, there are other factors that could cause actual results to materially differ from those expressed or implied in these forward-looking statements, such as the schedule for new software releases, consumer demand for video game hardware and software, thetiming of the introduction of new generation hardware systems, pricing changes by key vendors for hardware and software and the timing of any such changes, the adequacy of supplies of new and pre-played product, unexpected litigation results, increasedcompetition and promotional activity from other retailers, and the availability of suitable locations for new stores. In light of the risks and uncertainties inherent in the forward- looking statements, these statements should not be regarded as a representation by Electronics Boutique or any other person that the projected results, objectives or plans will be achieved. Electronics Boutique undertakes no obligation to revise or update the forward-looking statements to reflect events or circumstances after the date hereof. -Financial Tables Follow- Electronics Boutique Holdings Corp. Consolidated Statements of Income (Amounts in thousands, except per-share amounts) 13 Weeks Ended 52 Weeks Ended January 31, February 1, January 31, February 1, 2004 2003 2004 2003 Net sales $662,865 $530,189 $1,588,406 $1,309,226 Management fees 8,653 3,355 13,375 7,553 Total revenues 671,518 533,544 1,601,781 1,316,779 Cost of goods sold 496,009 392,316 1,174,429 971,204 Gross profit 175,509 141,228 427,352 345,575 Costs and expenses: Selling, general and administrative expense 105,694 85,057 328,577 267,566 Restructuring andasset impairment reversal - - - (2,611) Depreciation and amortization 7,927 6,224 27,894 22,524 Operating income 61,888 49,947 70,881 58,096 Interest income, net 636 429 1,751 1,677 Income before income tax expense & cumulative effect of change in accounting principle 62,524 50,376 72,632 59,773 Income tax expense 23,120 18,783 26,903 22,373 Income before cumulative effect of change in accounting principle 39,404 31,593 45,729 37,400 Cumulative effect of change in accounting principle, net of tax - - - (4,773) Net income $39,404 $31,593 $45,729 $32,627 Income per share before cumulative effect of change in accounting principle: Basic $1.59 $1.22 $1.82 $1.44 Diluted $1.57 $1.21 $1.80 $1.42 Per share cumulative effect of change in accounting principle: Basic $(0.18) Diluted $(0.18) Net income per share: Basic $1.59 $1.22 $1.82 $1.26 Diluted $1.57 $1.21 $1.80 $1.24 Weighted average shares outstanding: Basic 24,849 25,869 25,114 25,833 Diluted 25,161 26,130 25,417 26,247 Electronics BoutiqueHoldings Corp. Selected Consolidated Balance Sheet Data (Amounts in thousands) January 31, February 1, 2004 2003 Cash and cash equivalents $157,968 $121,873 Merchandise inventories 253,577 226,866 Total current assets 477,687 382,480 Total assets 636,375 521,614 Accounts payable 220,481 176,146 Current liabilities 311,679 237,983 Total liabilities 332,395 247,114 Stockholders' equity 303,980 274,500 DATASOURCE: Electronics Boutique Holdings Corp. CONTACT: James A. Smith, Chief Financial Officer, Electronics Boutique Holdings Corp., +1-610-430-8100 Web site: http://www.ebholdings.com/ http://www.ebgames.com/

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