GMEB Gamestop Corp

GameStop Corp. (NYSE:GME) (NYSE:GME.B), a leading global video game and entertainment software retailer, today announced its updated fiscal 2005 guidance related to the completion of the business combination between GameStop and Electronics Boutique on October 9, 2005. "The merger with Electronics Boutique is coming together extremely well. In a very short period of time, we have made exceptional strides bringing the two companies together," remarked R. Richard Fontaine, GameStop's Chairman and Chief Executive Officer. "Our unifying theme, 'Better Together,' is being proven every day as we combine the operating strengths of each company. As both companies had a history of rapid expansion, together we are well prepared for growth and change. I am confident that GameStop is well on its way to fulfilling all the promises of the merger that we envisioned." "The timing of our combination couldn't be better," continued Fontaine. "With Sony's PSP going into its first holiday gift season, Microsoft's Xbox 360 releasing in the U.S. on November, 22, 2005 and in Europe on December 2, 2005, GameStop is well positioned to end the year with real sales momentum. Adding to the opportunities as we move into 2006, are the expected releases of Sony's PlayStation 3 and Nintendo's Revolution. This is the absolute right time to combine the two companies and we are well on our way to realizing the benefits of the merger." Several items related to the business combination will affect GameStop's financial statements going forward: -- GameStop was required to write-up Electronic Boutique's assets to fair value. As such, in the purchase accounting for the merger, GameStop capitalized various intangible assets and will incur incremental amortization on those assets on an on-going basis. -- GameStop issued an aggregate of $950 million of senior floating rate notes and senior notes to partially finance the combination of the two companies. This outstanding debt will cause GameStop to incur increased interest expense going forward. -- GameStop exchanged 20.2 million shares of GameStop Class A common stock for Electronics Boutique's common stock as part of the combination of the two companies, thus increasing GameStop's weighted average diluted shares outstanding. See the attached table below for further details on each of these items. Third Quarter Guidance For the third quarter of fiscal 2005, the combined company expects comparable store sales to range from -12.0% to -12.5% due to difficult comparisons with the prior year when Grand Theft Auto: San Andreas and Fable were released and sluggish traffic in September 2005 resulting from Hurricanes Katrina and Rita. Diluted earnings per share are expected to range from $0.14 to $0.15, including a $1.0 million charge, or approximately $0.01 per diluted share, related to losses and disaster relief from both hurricanes. GameStop, on a pre-merger stand-alone basis, would have expected diluted earnings per share of $0.18, in line with previous guidance of $0.18 to $.20 per diluted share. This estimate includes the aforementioned $0.01 per diluted share charge related to the impact of the hurricanes. Fourth Quarter Guidance For the fourth quarter of fiscal 2005, the combined company expects comparable store sales to range from +8% to +10%, while diluted earnings per share are expected to range from $0.98 to $1.06. Full Year Guidance For the fiscal year ending January 28, 2006, the combined company expects comparable store sales to range from +4% to +6%. Diluted earnings per share for the full year are expected to range from $1.65 to $1.75. Please note this updated fiscal 2005 guidance does not include merger costs related to the business combination. About GameStop Corp. Headquartered in Grapevine, TX, GameStop Corp. is one of the world's largest video game and entertainment software retailers. The combined company operates over 4,200 retail stores throughout the United States, Australia, Canada, Denmark, Finland, Germany, Italy, Ireland, New Zealand, Norway, Puerto Rico, Spain, Sweden, Switzerland and the United Kingdom. The company also owns commerce-enabled Web properties, 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 computer and video game magazines and strategy guides, action figures, and other related merchandise. General information on GameStop Corp. can be obtained via the Internet by visiting 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, statements about the benefits of the business combination transaction involving GameStop and Electronics Boutique, including future financial and operating results, the new 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 and Electronics Boutique'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 will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; and competition and its effect on pricing, spending, third-party relationships and revenues. Additional factors that could cause GameStop's and Electronics Boutique's results to differ materially from those described in the forward-looking statements can be found in the Annual Reports on Forms 10-K/A of GameStop and Electronics Boutique for the fiscal year ended January 29, 2005 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov. -0- *T Fiscal 2005 Guidance Details ---------------------------- Range ----------------------- Third Quarter 2005 High Low ---------------------------------------------- ----------- ----------- Comparable Store Sales -12.0% -12.5% Incremental Amortization of Intangible Assets 261,000 261,000 Interest Expense (Income), net 6,500,000 6,400,000 Weighted Average Shares-Diluted 61,600,000 61,500,000 EPS $0.15 $0.14 Range ----------------------- Fourth Quarter 2005 High Low ---------------------------------------------- ----------- ----------- Comparable Store Sales 10% 8% Incremental Amortization of Intangible Assets 782,000 782,000 Interest Expense (Income), net 20,700,000 19,800,000 Weighted Average Shares-Diluted 77,600,000 77,000,000 EPS $1.06 $0.98 Range ----------------------- Full Year 2005 High Low ---------------------------------------------- ----------- ----------- Comparable Store Sales 6% 4% Incremental Amortization of Intangible Assets 1,043,000 1,043,000 Interest Expense (Income), net 27,200,000 26,200,000 Weighted Average Shares-Diluted 62,550,000 62,350,000 EPS $1.75 $1.65 *T