GMEB Gamestop Corp

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 fourth quarter and full year ended January 28, 2006. Fourth Quarter Financial Results Earnings were $85.0 million for the fourth quarter of 2005, including merger- related expenses of $2.3 million ($1.4 million, net of tax benefits), as compared to earnings of $34.5 million in the prior year quarter. Diluted earnings per share were $1.10 for the fourth quarter of 2005, including merger-related expenses of $0.02 per diluted share, as compared to $0.64 per diluted share in the prior year quarter, significantly exceeding prior guidance. GameStop sales increased 135.2% to $1,666.9 million in the fourth quarter, in comparison to $708.7 million in the prior year quarter, which was primarily due to the addition of the Electronics Boutique stores acquired in October 2005. On a comparable store basis, sales decreased 0.3% during the fourth quarter. Full Year Financial Results Earnings were $100.8 million for fiscal 2005, including merger-related expenses of $21.1 million ($13.3 million, net of tax benefits), as compared to earnings of $60.9 million in fiscal 2004. Diluted earnings per share were $1.61 for fiscal 2005, including merger related expenses of $0.21 per diluted share, as compared to $1.05 per diluted share in 2004. GameStop sales were $3,091.8 million for fiscal 2005, an increase of 67.8% over fiscal 2004 sales of $1,842.8 million. On a comparable store basis, sales decreased 1.4% during fiscal 2005. "2005 was an exceptional year for GameStop and our shareholders," indicated R. Richard Fontaine, Chairman and Chief Executive Officer. "Our Class A shares began the fiscal year at $18.90 and closed fiscal 2005 at $39.14, a 107% increase, and have continued to rise in 2006. Clearly, our merger with EB Games in October was well received in the market and, I believe, is a reflection of our outstanding position and immense potential in a growing business." "We achieved record sales, increased gross margins, and kept expenses well under control in the midst of explosive growth. Our operating margins increased to 6.2%, and net earnings for the year surpassed $100 million," reported Fontaine. "Tight execution of our integration plans have already begun to yield significant synergies and have resulted in improved cash flow with a year end cash balance of over $400 million." "GameStop's market share has grown every year," noted Fontaine. "And with the merger completed, we now have a 21% share of all new video game sales in the U.S. according to the NPD Group." "We continue to define ourselves as a growth company. That commitment was never more evident than in 2005, when we opened 792 new stores, including 450 in the U.S. and 342 internationally," remarked Fontaine. "In 2006, we plan to open 400 new stores, slowing slightly to give our field organization time to digest all of the changes of the integration, and ramp up to an estimated 600 stores in each of the next two years." "We have an excellent and deep management team, our business plan is sound, and our opportunities are great. We are very excited about the future of GameStop," concluded Fontaine. Business Outlook For fiscal 2006 (the 53-week year ending February 3, 2007), sales are projected to grow between 14.0% and 17.0% on a pro forma basis, with comparable store sales increasing from +6.0% to +9.0%, highlighted by the anticipated launches of Sony's PlayStation 3 and Nintendo's Revolution in November. Diluted earnings per share for the full year are expected to range from $1.83 to $1.93, including projected stock-based compensation expense of $21.2 million ($13.4 million, net of tax benefits), or $0.17 per diluted share. Excluding projected stock-based compensation, full year diluted earnings per share are expected to range from $2.00 to $2.10. For the first quarter of fiscal 2006, the company expects comparable store sales to range from -7.0% to -9.0%, due primarily to the launch of Sony's PSP in the prior year quarter, while diluted earnings per share are expected to range from $0.04 to $0.05, including expected stock-based compensation expense of $5.2 million ($3.2 million, net of tax benefit), or $0.04 per diluted share. This compares to a pro forma loss of $0.01 per diluted share in the prior year quarter. Synergies related to the merger with Electronics Boutique remain on schedule and the company now forecasts savings ranging from $70 to $80 million in fiscal 2006. These synergies represent the elimination of duplicate general office and warehousing costs, advertising efficiencies, freight savings, benefits from applying GameStop's merchandising algorithms to EB's used video game category, and other fixed cost savings. Including projected pro forma fiscal 2006 EPS growth of 81%, the company currently expects that EPS could grow approximately 25% annually for each of the next three years based upon expected strong video game industry fundamentals, continued merger synergies and excellent cash generation. Note that guidance does not include merger costs related to the business combination. Fiscal 2005 pro forma statements of operations have been provided in Schedule C 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 21, 2006 at 11:00 a.m. ET to discuss the fourth quarter and full year 2005 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 4, 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 4,490 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 computer and video game magazines and strategy guides, action figures, and other related 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 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 Revolution; 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 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 GameStop Corp. Statements of Operations (in thousands, except per share data) 13 weeks 13 weeks ended ended January 28, 2006 January 29, 2005 ---------------- ---------------- Sales $1,666,914 $708,740 Cost of sales 1,225,796 529,327 ---------------- ---------------- Gross profit 441,118 179,413 Selling, general and administrative expenses 259,974 113,149 Depreciation and amortization 26,283 10,284 Merger-related expenses 2,271 - ---------------- ---------------- Operating earnings 152,590 55,980 Interest expense, net 18,635 489 ---------------- ---------------- Earnings before income tax expense 133,955 55,491 Income tax expense 48,940 20,974 ---------------- ---------------- Net earnings $85,015 $34,517 ================ ================ Earnings per common share: Basic $1.17 $0.68 Diluted $1.10 $0.64 Weighted average common shares outstanding: Basic 72,406 50,702 Diluted 77,387 54,155 Percentage of Sales: -------------------- Sales 100.0% 100.0% Cost of sales 73.5% 74.7% ---------------- ---------------- Gross profit 26.5% 25.3% SG&A expenses 15.6% 16.0% Depreciation and amortization 1.6% 1.4% Merger-related expenses 0.2% -- ---------------- ---------------- Operating earnings 9.1% 7.9% Interest expense, net 1.1% 0.1% ---------------- ---------------- Earnings before income tax expense 8.0% 7.8% Income tax expense 2.9% 2.9% ---------------- ---------------- Net earnings 5.1% 4.9% ================ ================ *T -0- *T GameStop Corp. Statements of Operations (in thousands, except per share data) 52 weeks 52 weeks ended ended January 28, 2006 January 29, 2005 ---------------- ----------------- Sales $3,091,783 $1,842,806 Cost of sales 2,219,753 1,333,506 --------------- ----------------- Gross profit 872,030 509,300 Selling, general and administrative expenses 599,343 373,364 Depreciation and amortization 66,355 36,789 Merger-related expenses 13,600 - --------------- ----------------- Operating earnings 192,732 99,147 Interest expense, net 25,292 236 Merger-related interest expense 7,518 - --------------- ----------------- Earnings before income tax expense 159,922 98,911 Income tax expense 59,138 37,985 --------------- ----------------- Net earnings $100,784 $60,926 =============== ================= Earnings per common share: Basic $1.74 $1.11 Diluted $1.61 $1.05 Weighted average common shares outstanding: Basic 57,920 54,662 Diluted 62,486 57,796 Percentage of Sales: -------------------- Sales 100.0% 100.0% Cost of sales 71.8% 72.4% --------------- ----------------- Gross profit 28.2% 27.6% SG&A expenses 19.4% 20.2% Depreciation and amortization 2.2% 2.0% Merger-related expenses 0.4% -- --------------- ----------------- Operating earnings 6.2% 5.4% Interest expense, net 0.8% 0.0% Merger-related interest expense 0.2% -- --------------- ----------------- Earnings before income tax expense 5.2% 5.4% Income tax expense 1.9% 2.1% --------------- ----------------- Net earnings 3.3% 3.3% =============== ================= *T -0- *T GameStop Corp. Balance Sheets (in thousands, except per share data) January 28, January 29, 2006 2005 ------------ ------------ ASSETS: Current assets: Cash and cash equivalents $ 401,593 $ 170,992 Receivables, net 38,738 9,812 Merchandise inventories 603,178 216,296 Prepaid expenses and other current assets 16,339 18,400 Prepaid taxes 19,135 3,703 Deferred taxes 42,282 5,785 ------------ ------------ Total current assets 1,121,265 424,988 ------------ ------------ Property and equipment: Land 10,257 2,000 Buildings & leasehold improvements 262,363 106,428 Fixtures and equipment 340,198 184,536 ------------ ------------ 612,818 292,964 Less accumulated depreciation and amortization 180,693 124,565 ------------ ------------ Net property and equipment 432,125 168,399 ------------ ------------ Goodwill, net 1,392,352 320,888 Assets to be disposed of 19,297 - Other noncurrent assets 50,080 1,708 ------------ ------------ Total assets $ 3,015,119 $ 915,983 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable $ 543,288 206,739 Accrued liabilities 331,859 94,983 Notes payable, current portion 12,527 12,173 ------------ ------------ Total current liabilities 887,674 313,895 Deferred taxes 12,938 21,257 Other long-term liabilities 36,331 13,473 Notes payable, long-term portion 21,675 24,347 Senior floating and fixed rate notes payable, net of discount 941,788 - ------------ ------------ Total liabilities $ 1,900,406 $ 372,972 ------------ ------------ Stockholders' equity: Preferred stock - authorized 5,000 shares; no shares issued or outstanding - - Class A common stock - $.001 par value; authorized 300,000 shares; 42,895 and 24,189 shares issued and outstanding, respectively 43 24 Class B common stock - $.001 par value; authorized 100,000 shares; 29,902 shares issued and outstanding 30 30 Additional paid-in-capital 921,349 500,769 Accumulated other comprehensive income 886 567 Retained earnings 192,405 91,621 Treasury stock, at cost, 3,263 shares - (50,000) ------------ ------------ Total stockholders' equity 1,114,713 543,011 ------------ ------------ Total liabilities and stockholders' equity $ 3,015,119 $ 915,983 ============ ============ *T -0- *T Schedule A GameStop Corp. Retail Sales Mix 13 Weeks Ended 13 Weeks Ended January 28, 2006 January 29, 2005 ----------------------- ----------------- Percent Percent Sales of Total Sales of Total ----------- ---------- ------- -------- Sales (in millions): New video game hardware $ 329.1 19.8% $ 100.3 14.2% New video game software 705.5 42.3% 319.2 45.0% Used video game products 348.6 20.9% 156.5 22.1% Other 283.7 17.0% 132.7 18.7% ----------- ----------- -------- -------- Total $ 1,666.9 100.0% $ 708.7 100.0% =========== =========== ======== ======== 52 Weeks Ended 52 Weeks Ended January 28, 2006 January 29, 2005 ----------------------- ----------------- Percent Percent Sales of Total Sales of Total ----------- ----------- -------- -------- Sales (in millions): New video game hardware $ 503.2 16.3% $ 209.2 11.4% New video game software 1,244.9 40.3% 776.7 42.1% Used video game products 808.0 26.1% 511.8 27.8% Other 535.7 17.3% 345.1 18.7% ----------- ----------- -------- -------- Total $ 3,091.8 100.0% $1,842.8 100.0% =========== =========== ======== ======== *T -0- *T Schedule B GameStop Corp. Gross Profit Mix 13 Weeks Ended 13 Weeks Ended January 28, 2006 January 29, 2005 ------------------ ----------------- Gross Gross Gross Profit Gross Profit Profit Percent Profit Percent --------- -------- --------- ------- Gross Profit (in millions): New video game hardware $ 21.0 6.4% $ 3.1 3.1% New video game software 150.2 21.3% 61.6 19.3% Used video game products 171.7 49.3% 71.1 45.4% Other 98.2 34.6% 43.6 32.9% --------- --------- Total $ 441.1 26.5% $ 179.4 25.3% ========= ========= 52 Weeks Ended 52 Weeks Ended January 28, 2006 January 29, 2005 ------------------ ----------------- Gross Gross Gross Profit Gross Profit Profit Percent Profit Percent --------- -------- --------- ------- Gross Profit (in millions): New video game hardware $ 30.9 6.1% $ 8.5 4.1% New video game software 266.5 21.4% 151.9 19.6% Used video game products 383.0 47.4% 231.6 45.3% Other 191.6 35.8% 117.3 34.0% --------- --------- Total $ 872.0 28.2% $ 509.3 27.6% ========= ========= *T -0- *T Schedule C ---------------------------------------------------------------------- GAMESTOP CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Historical Historical For the GameStop Electronics GameStop thirteen weeks Corp. Boutique Corp ended April April 30, April 30, Pro Forma Pro 30, 2005 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 S, G and A 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 & B common share- basic $ 0.20(h) $ 0.11 $ (0.01)(i) ========== =========== ======== Weighted avg shares of common stock- basic 51,000 24,696 (4,467)(g) 71,229 ========== =========== =========== ======== Net earnings (loss) per Class A & B common share- diluted $ 0.19(h) $ 0.11 $ (0.01)(i) ========== =========== ======== Weighted avg shares of common stock- (g) diluted 54,490 25,079 (8,340)(k) 71,229 ========== =========== =========== ======== GAMESTOP CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Historical Historical For the GameStop Electronics GameStop thirteen weeks Corp. Boutique Corp ended July 30, July 30, July 30, Pro Forma Pro 2005 2005(a) 2005(a) Adjustments Forma ---------- ------------ ----------- -------- Sales $ 415,930 $ 446,511 $ -- $862,441 Cost of sales 287,775 311,592 -- 599,367 ---------- ------------ ----------- -------- Gross profit 128,155 134,919 -- 263,074 S, G and A expenses 104,311 120,090 -- 224,401 Depr. and Amort. 10,654 11,573 427(c) 22,654 Merger-related expenses -- 1,400 (1,400)(b) -- Stock-based compensation -- -- 2,785(j) 2,785 ---------- ------------ ----------- -------- Operating earnings 13,190 1,856 (1,812) 13,234 Interest expense, net 144 (675) 20,424(d)(e) 19,893 Merger-related int. expense -- -- -- -- ---------- ------------ ----------- -------- Earnings (loss) before income tax exp. (benefit) 13,046 2,531 (22,236) (6,659) Income tax expense (benefit) 5,143 911 (8,502)(f) (2,448) ---------- ------------ ----------- -------- Net earnings (loss) $ 7,903 $ 1,620 $ (13,734) $ (4,211) ========== ============ =========== ======== Net earnings (loss) per Class A & B common share- basic $ 0.15(h) $ 0.06 $ (0.06)(i) ========== ============ ======== Weighted avg shares of common stock- basic 51,646 25,096 (4,867)(g) 71,875 ========== ============ =========== ======== Net earnings (loss) per Class A & B common share- diluted $ 0.14(h) $ 0.06 $ (0.06)(i) ========== ============ ======== Weighted avg shares of common stock- (g) diluted 56,508 25,467 (10,100)(k) 71,875 ========== ============ =========== ======== GAMESTOP CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Historical Historical For the GameStop Electronics GameStop thirteen weeks Corp. Boutique Corp ended October October 29, October 8, Pro Forma Pro 29, 2005 2005(a) 2005(a) Adjustments Forma ----------- ----------- ----------- -------- Sales $ 534,212 $ 350,691 $ -- $884,903 Cost of sales 357,492 248,738 -- 606,230 ----------- ----------- ----------- -------- Gross profit 176,720 101,953 -- 278,673 S, G and A expenses 136,072 96,992 -- 233,064 Depr. and Amort. 19,224 8,203 (4,271)(c) 23,156 Merger-related expenses 11,329 -- (11,329)(b) -- Stock-based compensation -- -- 2,798(j) 2,798 ----------- ----------- ----------- -------- Operating earnings 10,095 (3,242) 12,802 19,655 Interest (d) expense, net 6,430 (335) 14,176(e) 20,271 Merger-related int. expense 7,518 -- (7,518)(b) -- ----------- ----------- ----------- -------- Earnings (loss) before income tax exp. (benefit) (3,853) (2,907) 6,144 (616) Income tax expense (benefit) (1,393) (1,057) 2,212(f) (238) ----------- ----------- ----------- -------- Net earnings (loss) $ (2,460) $ (1,850) $ 3,932 $ (378) =========== =========== =========== ======== Net earnings (loss) per Class A & B common share- basic $ (0.04)(h)$ (0.07) $ (0.01)(i) =========== =========== ======== Weighted avg shares of common stock- basic 56,630 25,504 (9,943)(g) 72,191 =========== =========== =========== ======== Net earnings (loss) per Class A & B common share- diluted $ (0.04)(h)$ (0.07) $ (0.01)(i) =========== =========== ======== Weighted avg shares of common stock- (g) diluted 56,630 25,715 (10,154)(k) 72,191 =========== =========== =========== ======== GAMESTOP CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Historical For the GameStop Historical thirteen Corp. Electronics weeks ended January Boutique GameStop January 28, 28, October 8, Pro Forma Corp 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 S, G and A expenses 259,974 -- -- 259,974 Depr. and Amort. 26,283 -- -- 26,283 Merger-related expenses 2,271 -- (2,271) -- Stock-based compensation -- 2,422(j) 2,422 ---------- ----------- ----------- ---------- Operating earnings 152,590 -- (151) 152,439 Interest expense, net 18,635 -- -- 18,635 Merger-related int. expense -- -- -- -- ---------- ----------- ----------- ---------- Earnings (loss) before income tax exp. (benefit) 133,955 -- (151) 133,804 Income tax expense (benefit) 48,940 -- (56)(f) 48,884 ---------- ----------- ----------- ---------- Net earnings (loss) $ 85,015 $ -- $ (95) $ 84,920 ========== =========== =========== ========== Net earnings (loss) per Class A & B common share-basic $ 1.17(h) $ -- $ 1.17(i) ========== =========== ========== Weighted avg shares of common stock-basic 72,406 -- -- 72,406 ========== =========== =========== ========== Net earnings (loss) per Class A & B common share- diluted $ 1.10(h) $ -- $ 1.10(i) ========== =========== ========== Weighted avg shares of common stock- diluted 77,387 -- -- 77,387 ========== =========== =========== ========== GAMESTOP CORP. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Historical For the GameStop Historical fifty-two Corp. Electronics weeks ended January Boutique GameStop January 28, 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 S, G and A expenses 599,343 331,424 -- 930,767 Depr. and Amort. 66,355 30,573 (2,640)(c) 94,288 Merger-related expenses 13,600 2,900 (16,500) -- Stock-based compensation -- -- 10,581(j) 10,581 ---------- ----------- ----------- ---------- Operating earnings 192,732 2,035 8,559 203,326 Interest expense, net 25,292 (1,927) 54,974(d)(e) 78,339 Merger-related int. expense 7,518 -- (7,518) -- ---------- ----------- ----------- ---------- Earnings (loss) before income tax exp. (benefit) 159,922 3,962 (38,897) 124,987 Income tax expense (benefit) 59,138 1,415 (14,933)(f) 45,620 ---------- ----------- ----------- ---------- Net earnings (loss) $ 100,784 $ 2,547 $ (23,964)(g)$ 79,367 ========== =========== =========== ========== Net earnings (loss) per Class A & B common share-basic $ 1.74(h) $ 0.10 $ 1.10(i) ========== =========== ========== Weighted avg shares of common stock-basic 57,920 25,065 (11,060)(g) 71,925 ========== =========== =========== ========== Net earnings (loss) per Class A & B common share- diluted $ 1.61(h) $ 0.10 $ 1.04(i) ========== =========== ========== Weighted avg shares of common stock- diluted 62,486 25,396 (11,391)(g) 76,491 ========== =========== =========== ========== GAMESTOP CORP. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS 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 consolidated statements of operations. (b) The Unaudited Pro Forma Condensed Consolidated Statements of Operations exclude certain expenses of $1,500, $1,400 and $11,329 during the 13 weeks ended April 30, 2005, July 30, 2005 and October 29, 2005, respectively, and financing costs of $7,518 during the 13 weeks ended October 29, 2005, 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 allocation of the purchase price over the 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 over six and seven years to match the terms of the senior floating rate notes and the senior notes, respectively. (f) Represents the aggregate pro forma effective income tax effect of Notes (c), (d), and (e) above. (g) The pro forma earnings per share has been adjusted to reflect the issuance of 20,229 shares of GameStop Class A 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 as of October 8, 2005. (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 dilutive securities that are anti-dilutive in nature due to the pro forma loss in the 13 weeks ended April 30, 2005, July 20, 2005 and October 29, 2005. *T