SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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): August 4, 1998
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GT INTERACTIVE SOFTWARE CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 0-27338 13-3689915
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
417 FIFTH AVENUE, NEW YORK, NY 10016
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 726-6500
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ITEM 5. OTHER EVENTS
On August 4, 1998, the Registrant issued the press release
attached hereto as Exhibit 99.1.
ITEM 7. EXHIBITS
99.1 Press Release dated August 4, 1998.
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SIGNATURE
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.
GT INTERACTIVE SOFTWARE CORP.
Date: August 5, 1998 By: /s/ Andy Gregor
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Name: Andy Gregor
Title: Chief Financial Officer
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Exhibit 99.1
NEWS RELEASE
GT INTERACTIVE SOFTWARE CORP.
417 Fifth Avenue
New York, NY 10016
Phone: 212.726.6500
Fax: 212.726.4205
(BW) (GT-INTERACTIVE) (GTIS) GT Interactive Reports First Quarter Results
NEW YORK--Aug. 4, 1998--GT Interactive Software Corp. (NASDAQ: GTIS)
today reported net income of $1.8 million or $0.03 diluted earnings per share
for the three months ended June 30, 1998. Net revenues rose 13 percent to $116
million and operating income before goodwill amortization was $ 5.0 million.
"We continued to grow our publishing business this quarter, driven by
the global best-seller, Unreal, and experienced continued strong sales of
industry chart-toppers Deer Hunter, Rocky Mountain Trophy Hunter and Freddi Fish
3," said Ron Chaimowitz, chairman and chief executive officer of GT Interactive.
"For the quarter, publishing sales were 61 percent of total sales and increased
nine percent as compared to the prior year. Value publishing increased a
significant 22 percent while revenues from international front-line publishing
rose 17 percent. Our mass merchant distribution business remained strong and
increased 20 percent, augmented by sales from our affiliated label companies."
"Looking to the balance of fiscal 1999, we believe we have a strong
lineup, particularly in the last half of the fiscal, highlighted by sequels,
including Oddworld: Abe's Exoddus for PlayStation and PC; Duke Nukem: Time to
Kill for PlayStation; and Blood II and Deer Hunter II, both for PC," Chaimowitz
added. "We are also unveiling Rogue Trip for PlayStation from our SingleTrac
studio while Blues Clues, based on the popular Nickelodeon preschool TV program,
will come from Humongous Entertainment. With the installed base of console
systems reaching mass market levels and sub- $1,000 PC's drawing new casual game
players in, we believe the balance of the fiscal year will be strong for GT
Interactive as well as our entire industry."
For the quarter, general and administrative costs increased $3.1
million due to professional fees for potential mergers and acquisitions;
depreciation expense for new financial and operational systems, and higher rent
related to new facilities in several locations. Selling and distribution
expenses increased $5.3 million, principally due to advertising and co-op fees
for Unreal for the PC and Mike Piazza's Strike Zone for the N64. Research and
development expenses increased $13.5 million, which includes $3 million for
additional development in the company's studios as well as $9.5 million in
advances to third parties.
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As of January 1, 1998, GT Interactive changed its accounting method to
expense royalty advances in a manner comparable with internal software
development costs, which are expensed as incurred. Under its prior accounting
method the company capitalized royalties advanced to third party developers as a
prepayment in current assets and evaluated the realization of these royalty
advances on a quarterly basis. Had this change not occurred, for the quarter
ended June 30, 1998, the company's operating income would have been $11 million
and earnings per share would have been $0.08. Since these royalty advances are
fixed costs, their impact is more significant during softer front-line revenue
quarters. As such, the company expects this higher royalty expense relative to
the prior year, to continue into its second fiscal quarter. It is anticipated
that the change in accounting will have no effect on the Company operating
income for the full fiscal year.
Operating Highlights:
- -- Publishing revenues rose nine percent from $64.7 million in the first
quarter of fiscal 1998 to $70.7 million for the first quarter of fiscal
1999, accounting for 61 percent of revenues in the quarter;
- -- International front-line publishing revenues rose 17 percent while
value-priced revenues increased 22 percent for the quarter. Domestic
front-line publishing declined 3 percent;
- -- GT Interactive shipped 500,000 units of Unreal for PC, a top 10 best-seller
for the quarter according to PC Data;
- -- According to PC Data, GT Interactive achieved the number two market share
in Value-priced software (units, dollars); the number three market share in
Games (units, dollars) and the number three market share in Educational
software (units) for the quarter;
- -- Unreal, Deer Hunter and Rocky Mountain Trophy Hunter were among the top ten
best-selling PC games in the industry for the quarter, while Freddi Fish 3
was among the top 10 Education titles, according to PC Data;
- -- Affiliated label agreements were reached with Palladium Interactive, Beam
and Smartcode whereby GT Interactive will sell and distribute each
company's Software titles throughout North America.
Headquartered in NY, GT Interactive Software Corp. is a leading global
publisher of interactive entertainment and entertainment software under the GT
Interactive, Humongous Entertainment, Cavedog Entertainment, SingleTrac and
MacSoft brands for personal computers as well as game consoles from Sony
Computer Entertainment Inc. and Nintendo. The company operates development
studios in Seattle, Salt Lake City and San Luis Obispo, CA. GT Value Products is
a leader in value-priced software under the WizardWorks, CompuWorks and Slash
brands.
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Located at http://www.gtinteractive.com on the World Wide Web, GT Interactive is
publicly traded under the NASDAQ National Market under the symbol GTIS.
Certain statements contained in this press release may be deemed
forward-looking statements that involve a number of risks and uncertainties. The
company's actual results may differ materially from the expectations expressed
in such forward-looking statements. Among the factors that could cause actual
results to differ materially are worldwide business and industry conditions,
including consumer buying and retailer ordering patterns, product delays,
changes in research and development spending, company customer relations, in
particular, levels of sales to Wal-Mart and other mass merchants, retail
acceptance of the company's published and third-party titles, competitive
conditions and other risks detailed, from time to time, in the company's SEC
filings, including, but not limited to, the company's form 10-K for the period
ended March 31, 1998.
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For The Three Months
Ended June 30,
1997 1998
(in thousands, except per share data)
<S> <C> <C>
Net revenues $102,737 $116,391
Cost of goods sold 60,163 55,898
Selling and distribution expenses 21,119 26,460
General and administrative expenses 9,344 12,453
Research and development 3,068 16,597
Amortization of goodwill 283 871
Operating income 8,760 4,112
Interest and other expense, net (626) (1,176)
Income before income taxes 8,134 2,936
Provision for income taxes 3,667 1,133
Net income $4,467 $1,803
Basic net income per share $0.07 $0.03
Weighted average number of shares
outstanding 66,779 68,056
Diluted net income per share $0.07 $0.03
Weighted average number of shares
outstanding 67,230 68,988
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, June 30,
1998 1998
(audited) (unaudited)
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ASSETS
Current assets:
Cash and cash equivalents $17,224 $8,660
Short-term investments 105 105
Receivables, net 134,815 162,065
Inventories, net 98,469 102,512
Royalty advances 10,009 8,924
Deferred income taxes 16,140 14,980
Income taxes receivable 10,684 12,117
Prepaid expenses and other current
assets 7,954 7,736
Total current assets 295,400 317,099
Property and equipment, net 29,049 32,497
Investments, at cost 10,089 10,089
Goodwill, net 28,043 27,162
Other assets 3,290 3,964
Total assets $365,871 $390,811
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $103,062 $109,639
Accrued liabilities 49,414 48,784
Revolving credit facility 28,000 54,600
Royalties payable 40,395 31,798
Deferred income 156 167
Income taxes payable 3,449 1,853
Current portion of long-term
liabilities 5 5
Due to related party 925 879
Total current liabilities 225,406 247,725
Long-term liabilities 1,576 1,669
Total liabilities 226,982 249,394
Commitments and contingencies
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STOCKHOLDERS' EQUITY
Common stock, $.01 par,
150,000,000 shares authorized,
67,991,926 and 68,074,935 shares
issued and outstanding, respectively 680 681
Additional paid-in capital 131,382 131,730
Retained earnings 7,577 9,380
Cumulative translation adjustment (750) (374)
Total stockholders' equity 138,889 141,417
Total liabilities and stockholders'
equity $365,871 $390,811
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CONTACT: Investors:
Dawn Berrie
212/726-4235
e-mail: [email protected]
Media:
Allyne Mills
212/726-4202
e-mail: [email protected]
