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GameStop Reports Sales And Earnings For Fiscal 2012 And Provides 2013 Outlook

In 2013, GameStop expects to reduce its global square footage by approximately 2%.

Note: Current guidance only includes the effect of the shares purchased thus far in fiscal 2013 from the existing $500 million share repurchase plan.

Conference Call Information

A conference call with GameStop Corp.’s management is scheduled for March 28, 2013 at 10:00 a.m. CDT to discuss the company’s financial results and to provide its 2013 outlook. The phone number for the call is 888-244-2459 and the pass code is 5103499. This call can also be accessed at GameStop Corp.’s investor relations home page at http://investor.GameStop.com/. The conference call will be archived for two months on GameStop’s corporate website.

Non-GAAP Measures

GameStop reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). However, management believes excluding certain items (restructuring, impairment and debt retirement expenses) from the company’s financial results provides management and the investors with a clearer perspective of the current operating performance of the company and an improved comparison to prior period results. We believe it also provides useful information to investors and other users of GameStop's financial statements. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported GAAP financial results.

About GameStop

GameStop Corp. (GME), a Fortune 500 and S&P 500 company headquartered in Grapevine, Texas, is the world's largest multichannel video game retailer. GameStop's retail network and family of brands include 6,602 company-operated stores in 15 countries worldwide and online at www.GameStop.com. The network also includes: www.Kongregate.com, a leading browser-based game site; Game Informer(R) magazine, the leading multi-platform video game publication; Spawn Labs, a streaming technology company; a digital PC game distribution platform available at http://www.GameStop.com/PC; and an online consumer electronics marketplace available at www.BuyMyTronics.com.

General information on GameStop Corp. can be obtained at the company's corporate website. Follow GameStop on Twitter @ www.twitter.com/GameStop and find GameStop on Facebook @ www.facebook.com/GameStop.

Safe Harbor

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, but are not limited to, the outlook for the first quarter and fiscal 2013, 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. GameStop undertakes no obligation to publicly update or revise any 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 console hardware and accessories; the timing of release of video game titles for current generation consoles; the risks associated with expanded international operations and the integration of acquisitions; the impact of increased competition and changing technology in the video game industry, including browser and mobile games and alternative methods of distribution; and economic, regulatory and other events, including litigation, that could reduce or impact consumer demand or affect the company’s business. 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 Jan. 28, 2012 filed with the SEC and available at the SEC's Internet site at http://www.sec.gov or http://investor.GameStop.com.

GameStop Corp.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
   
 
14 weeks 13 weeks
ended ended
Feb. 2, 2013 Jan. 28, 2012
 
Net sales $ 3,561.5 $ 3,578.6
Cost of sales   2,586.6     2,635.4  
 
Gross profit 974.9 943.2
 
Selling, general and administrative
expenses 516.6 513.6
Depreciation and amortization 44.1 45.9
Asset impairments and restructuring charges   1.9     81.2  
 
Operating earnings 412.3 302.5
 
Interest expense, net 1.0 2.1
Debt extinguishment expense   --     0.4  
Earnings before income
tax expense 411.3 300.0
 
Income tax expense   150.2     125.7  
 
Consolidated net income 261.1 174.3
Net loss attributable to noncontrolling interests   --     0.4  
Consolidated net income attributable to GameStop Corp. $ 261.1   $ 174.7  
 
Net income per common share:
Basic 1 $ 2.17 $ 1.28
Diluted 1 $ 2.15 $ 1.27
 
Weighted average common shares
outstanding:
Basic 120.4 137.0
Diluted 121.5 138.1
 
 
 

Percentage of Sales:

 
Net sales 100.0 % 100.0 %
Cost of sales   72.6 %   73.6 %
 
Gross profit 27.4 % 26.4 %
 
SG&A expenses 14.5 % 14.4 %
Depreciation and amortization 1.2 % 1.3 %
Asset impairments and restructuring charges   0.1 %   2.2 %
 
Operating earnings 11.6 % 8.5 %
 
Interest expense, net 0.0 % 0.1 %
Debt extinguishment expense   0.0 %   0.0 %
 
Earnings before income
tax expense 11.6 % 8.4 %
 
Income tax expense   4.3 %   3.5 %
Consolidated net income 7.3 % 4.9 %
 
Net loss attributable to noncontrolling interests   0.0 %   0.0 %
 
Consolidated net income attributable to GameStop Corp.   7.3 %   4.9 %
 

1 Basic net income per common share and diluted net income per common share are calculated based on consolidated net income attributable to GameStop Corp.

 
 
GameStop Corp.
Condensed Consolidated Statements of Operations
(in millions, except per share data)
   
 
53 weeks 52 weeks
ended ended
Feb. 2, 2013 Jan. 28, 2012
 
Net sales $ 8,886.7 $ 9,550.5
Cost of sales   6,235.2     6,871.0  
 
Gross profit 2,651.5 2,679.5
 
Selling, general and administrative
expenses 1,835.9 1,842.1
Depreciation and amortization 176.5 186.3
Asset impairments and restructuring charges 53.7 81.2
Goodwill impairments   627.0     --  
Operating earnings (loss) (41.6 ) 569.9
 
Interest expense, net 3.3 19.8
Debt extinguishment expense   0.0     1.0  
 
Earnings (loss) before income
tax expense (44.9 ) 549.1
 
Income tax expense   224.9     210.6  
 
Consolidated net income (loss) (269.8 ) 338.5
Net loss attributable to noncontrolling interests   0.1     1.4  
Consolidated net income (loss) attributable to GameStop Corp. $ (269.7 ) $ 339.9  
 
Net income (loss) per common share:
Basic 1 $ (2.13 ) $ 2.43
Diluted 1 $ (2.13 ) $ 2.41
 
Weighted average common shares
outstanding:
Basic 126.4 139.9
Diluted 126.4 141.0
 
 
 

Percentage of Sales:

 
Net sales 100.0 % 100.0 %
Cost of sales   70.2 %   71.9 %
 
Gross profit 29.8 % 28.1 %
 
SG&A expenses 20.7 % 19.3 %
Depreciation and amortization 2.0 % 2.0 %
Asset impairments and restructuring charges 0.6 % 0.8 %
Goodwill impairments   7.0 %   0.0 %
 
Operating earnings (loss) -0.5 % 6.0 %
 
Interest expense, net 0.0 % 0.2 %
Debt extinguishment expense   0.0 %   0.0 %
 
Earnings (loss) before income
tax expense -0.5 % 5.8 %
 
Income tax expense   2.5 %   2.2 %
Consolidated net income (loss) -3.0 % 3.6 %
 
Net loss attributable to noncontrolling interests   0.0 %   0.0 %
 
Consolidated net income (loss) attributable to GameStop Corp.   -3.0 %   3.6 %
 

1 Basic net income (loss) per common share and diluted net income (loss) per common share are calculated based on consolidated net income attributable to GameStop Corp.

   
 
GameStop Corp.
Condensed Consolidated Balance Sheets
(in millions)
 
 
Feb. 2, Jan. 28,
2013 2012
ASSETS:
Current assets:
Cash and cash equivalents

$

635.8

$

655.0

Receivables, net 73.6 64.4
Merchandise inventories 1,171.3 1,137.5
Prepaid expenses and other current assets 68.5 95.7
Deferred income taxes   61.7   44.7  
Total current assets   2,010.9   1,997.3  
 
Property and equipment:
Land 22.5 22.8
Buildings & leasehold improvements 606.4 602.2
Fixtures and equipment   926.0   876.3  
1,554.9 1,501.3
Less accumulated depreciation and amortization   1,030.1   928.0  
Net property and equipment   524.8   573.3  
 
Goodwill 1,383.1 2,019.0
Other noncurrent assets   214.8   257.8  
Total assets

$

4,133.6

$

4,847.4

 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable

$

870.9

$

804.3

Accrued liabilities   844.4   829.6  
Total current liabilities 1,715.3 1,633.9
 
 
Other long-term liabilities   132.0   173.3  
Total liabilities   1,847.3   1,807.2  
 
Stockholders' equity:
Preferred stock - authorized 5.0 shares; no shares
issued or outstanding -- --
Class A common stock - $.001 par value; authorized 300.0 shares;
118.2 and 136.8 shares outstanding, respectively 0.1 0.1
Additional paid-in-capital 348.3 726.6
Accumulated other comprehensive income 164.4 169.7
Retained earnings   1,773.5   2,145.7  
Equity attributable to GameStop Corp. stockholders   2,286.3   3,042.1  

Equity (deficit) attributable to noncontrolling interest

  0.0   (1.9 )
Total equity   2,286.3   3,040.2  
Total liabilities and stockholders' equity

$

4,133.6

$

4,847.4

 

       
 
GameStop Corp.
 
Schedule I
Sales Mix
 
 
14 Weeks Ended 13 Weeks Ended
Feb. 2, 2013 Jan. 28, 2012
Net Percent Net Percent
Sales of Total Sales of Total
Net Sales (in millions):
 
New video game hardware $ 616.7 17.3 % $ 626.0 17.5 %
New video game software 1,607.7 45.1 % 1,654.6 46.2 %

Pre-owned video game products

752.8

21.1 % 817.6 22.9 %
Other 584.3 16.5 % 480.4 13.4 %
       
Total $ 3,561.5 100.0 % $ 3,578.6 100.0 %
 
 
 
53 Weeks Ended 52 Weeks Ended
Feb. 2, 2013 Jan. 28, 2012
Net Percent Net Percent
Sales of Total Sales of Total
Net Sales (in millions):
 
New video game hardware $ 1,333.4 15.0 % $ 1,611.6 16.9 %
New video game software 3,582.4 40.3 % 4,048.2 42.4 %

Pre-owned video game products

2,430.5

27.4 % 2,620.2 27.4 %
Other 1,540.4 17.3 % 1,270.5 13.3 %
       
Total $ 8,886.7 100.0 % $ 9,550.5 100.0 %
 
 
 
GameStop Corp.
 
Schedule II
Gross Profit Mix
 
 
14 Weeks Ended 13 Weeks Ended
Feb. 2, 2013 Jan. 28, 2012
Gross Gross
Gross Profit Gross Profit

 

Profit Percent Profit Percent
 
Gross Profit (in millions):
 
New video game hardware $ 43.6 7.1 % $ 39.7 6.3 %
New video game software 353.7 22.0 % 338.1 20.4 %

Pre-owned video game products

356.4

47.3 % 378.5 46.3 %
Other 221.2 37.9 % 186.9 38.9 %
   
Total $ 974.9 27.4 % $ 943.2 26.4 %
 
 
53 Weeks Ended 52 Weeks Ended
Feb. 2, 2013 Jan. 28, 2012
Gross Gross
Gross Profit Gross Profit
Profit Percent Profit Percent
 
Gross Profit (in millions):
 
New video game hardware $ 101.7 7.6 % $ 113.6 7.0 %
New video game software 786.3 21.9 % 839.0 20.7 %

Pre-owned video game products

1,170.1

48.1 % 1,221.2 46.6 %
Other 593.4 38.5 % 505.7 39.8 %
   
Total $ 2,651.5 29.8 % $ 2,679.5 28.1 %

       
 
GameStop Corp.
 
Schedule III

Non-GAAP results

 

The following table reconciles the company's net income (loss) and earnings (loss) per share as presented in its Consolidated Statements of Operations and prepared in accordance with Generally Accepted Accounting Principles ("GAAP") to its net income and earnings per share, excluding asset impairments, restructuring costs, and debt retirement expenses.

 
 
14 Weeks Ended 13 Weeks Ended 53 Weeks Ended 52 Weeks Ended
Feb. 2, 2013 Jan. 28, 2012 Feb. 2, 2013 Jan. 28, 2012
Net Income (Loss) $ 261.1 $ 174.7 $ (269.7 ) $ 339.9
 
Goodwill impairments - - 627.0 -
Debt retirement costs - 0.2 - 0.6
Intangible asset impairments - 24.8 29.4 24.8
Impairment of investments in non-core businesses - 22.5 - 22.5
Property, equipment & other asset impairments 1.2 17.3 16.3 17.3

 

     
Non-GAAP Net Income $ 262.3 $ 239.5 $ 403.0   $ 405.1
 
Non-GAAP earnings per share
Basic $ 2.18 $ 1.75 $ 3.19 $ 2.89
Diluted $ 2.16 $ 1.73 $ 3.17 $ 2.87
 
Number of common shares used in non-GAAP calculation
Basic 120.4 137.0 126.4 139.9
Diluted 121.5 138.1 127.1 141.0
 
 

During the third quarter of fiscal 2012, GameStop recorded goodwill and other asset impairment charges of $678.8 million ($671.5 million, net of tax benefits) primarily as a result of finalizing a previously disclosed interim impairment test of the company's goodwill and other intangible assets. This impairment test was required under ASC 350 of GAAP due to a temporary decline in the company's stock price during the second quarter. The charges primarily relate to GameStop's international reporting segments and are non-cash charges, which do not affect future operations, cash flow or liquidity position.

 

 
During the fourth quarter of fiscal 2012, GameStop recorded asset impairment charges of $1.9 million ($1.2 million, net of tax benefits) primarily as a result of impairment tests of property, equipment and other assets.




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