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Atari Inc – ‘10-Q’ for 6/30/96

As of:  Wednesday, 8/14/96   ·   For:  6/30/96   ·   Accession #:  940180-96-373   ·   File #:  0-27338

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 8/14/96  Atari Inc                         10-Q        6/30/96    2:33K                                    Donnelley RR & So… 12/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      16     72K 
 2: EX-27       Financial Data Schedule                                2      5K 


10-Q   —   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 1. Financial Statements (Unaudited):
8Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
12Item 4. Submission of Matters to a vote of Security Holders
"Item 6. Exhibits and Reports on Form 8-K
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================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______ FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 Commission File No. 0-27338 ______ GT INTERACTIVE SOFTWARE CORP. (Exact name of registrant as specified in its charter) DELAWARE 13-3689915 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 16 EAST 40TH STREET, NEW YORK, NY 10016 (Address of principal executive offices) (Zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 726-6500 ______ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No_____ ------ As of August 1, 1996, there were 66,181,791 shares of the registrant's Common Stock outstanding. Page__ of ___ Exhibit index begins on page ____
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GT INTERACTIVE SOFTWARE CORP. 1996 QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION [Enlarge/Download Table] Page Item 1. Financial Statements (Unaudited): Consolidated Balance Sheets as of December 31, 1995 (audited) and June 30, 1996 3 Consolidated Statements of Income for the three months and the six months ended June 30, 1995 and 1996 4 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II - OTHER INFORMATION Item 4 Submission of Matters to a vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 15
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PART I. FINANCIAL INFORMATION Item I. Financial Statements (Unaudited) GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS [Enlarge/Download Table] December 31, June 30, 1995 1996 ------------- ----------- (audited) (unaudited) (in thousands) ASSETS Current assets: Cash and cash equivalents $ 82,799 $ 59,976 Short-term investments 9,563 9,767 Receivables, net 83,191 63,226 Inventories, net 48,512 44,514 Royalty advances 29,577 48,757 Deferred income taxes 14,046 15,465 Prepaid expenses and other current assets 1,914 4,246 --------------- -------------- Total current assets 269,602 245,951 Property and equipment, net 5,670 6,954 Goodwill, net 21,286 20,740 Investments -- 2,794 Other assets 1,011 1,422 --------------- -------------- Total assets $ 297,569 $ 277,861 =============== ============== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ 87,366 $ 64,946 Accrued liabilities 44,452 35,599 Royalties payable 23,466 25,507 Deferred income 3,824 5,347 Income taxes payable 4,738 4,390 Current portion of long-term liabilities 1,184 1,536 Due to related party 955 159 --------------- -------------- Total current liabilities 165,985 137,484 Other long-term liabilities 7,788 6,506 --------------- -------------- Total liabilities 173,773 143,990 --------------- -------------- Commitments and contingencies Stockholders' equity: Common stock, $.01 par, 150,000,000 shares authorized, 62,687,416 shares issued and outstanding 627 627 Additional paid-in capital 112,763 112,763 Retained earnings 10,406 20,481 --------------- -------------- Total stockholders' equity 123,796 133,871 --------------- -------------- Total liabilities and stockholders' equity $ 297,569 $ 277,861 =============== ============== The accompanying footnotes are an integral part of these financial statements. Page 3
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) [Enlarge/Download Table] For the Three Months For The Six Months Ended June 30, Ended June 30, -------------------- -------------------- 1995 1996 1995 1996 -------- -------- -------- --------- (in thousands, except per share data) Net sales $ 30,298 $ 72,032 $ 64,420 $ 140,934 Cost of goods sold 17,440 41,144 36,368 81,687 Selling and distribution expenses 5,358 16,191 10,924 29,561 General and administrative expenses 4,028 5,873 7,347 12,885 -------- -------- -------- --------- Operating income 3,472 8,824 9,781 16,801 Merger costs --- (1,573) --- (1,573) Interest and other income, net 125 918 254 2,459 -------- -------- -------- -------- Income before income taxes 3,597 8,169 10,035 17,687 Provision for income taxes 1,457 3,381 318 7,599 -------- -------- -------- -------- Net income $ 2,140 $ 4,788 $ 9,717 $ 10,088 ======== ======== ======== ======== Pro forma adjustment to income tax provision 3,997 -------- Pro forma net income $ 5,720 ======== Net income per share $ 0.08 $ 0.16 Weighed average shares outstanding 62,687 62,687 The accompanying footnotes are an intergal part of these financial statements. Page 4
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) [Download Table] For the Six Months Ended June 30, --------------------- 1995 1996 -------- --------- (in thousands) OPERATING ACTIVITIES: Net income $ 9,717 $ 10,088 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 389 1,228 Deferred income taxes (5,756) (1,419) Deferred income 1,065 216 Changes in operating assets and liabilities: Receivables, net 17,620 19,965 Inventories, net (5,300) 3,998 Royalty advances (10,725) (19,180) Due to related party, net (1,697) (796) Prepaid expenses and other current assets (1,338) (2,332) Accounts payable (1,117) (22,420) Accrued liabilities (1,675) (8,853) Royalties payable (723) 2,041 Income taxes payable 1,803 (348) Other (861) (358) --------- --------- Net cash provided by (used in) operating activities 1,402 (18,170) --------- --------- INVESTING ACTIVITIES: Purchases of investments --- (2,794) Purchase of property and equipment (2,862) (2,064) Purchases of short-term investments, net --- (204) Proceeds from disposal of property and equipment --- 32 Purchases of Slash Corporation, net of cash acquired of approximately $516,000 461 --- --------- --------- Net cash used in investing activities (2,401) (5,030) --------- --------- FINANCING ACTIVITIES: Issuance of Series A preferred stock and warrants 15,015 --- Proceeds from issuance of note to a related party 15,225 --- Repayment of notes (10,471) --- Distributions to stockholders (6,000) --- Long-term liabilities (510) 377 --------- --------- Net cash provided by financing activities 13,259 377 --------- --------- Net increase (decrease) in cash and cash equivalents 12,260 (22,823) Cash and cash equivalents - beginning of year 1,217 82,799 --------- --------- Cash and cash equivalents - end of period $ 13,477 $ 59,976 ========= ========= The accompanying footnotes are an integral part of these financial statements. Page 5
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE -1- Significant Accounting Policies Basis of Presentation The accompanying interim consolidated financial statements of GT Interactive Software Corp. and Subsidiaries (the "Company") are unaudited but in the opinion of management reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results for the interim period in accordance with instructions for Form 10-Q. Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. Net Income Per Share For The Three and Six Months Ended June 30, 1996 Net income per share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period. NOTE 2 - Acquisitions On June 24, 1996, the Company acquired all of the outstanding common stock of WizardWorks Group, Inc. ("WizardWorks"), a publisher of consumer software, in exchange for 2.35 million shares of the Company's common stock. On June 28, 1996, the Company acquired all of the outstanding common stock of Candel, Inc., the parent company of FormGen Corp. ("FormGen"), a publisher of multimedia consumer software, in exchange for 1,032,777 shares of the Company's common stock. WizardWorks and FormGen (collectively the "Aquired Companies") have been accounted for as pooling of interests and accordingly are included in the Company's Consolidated Financial Statements as if the acquisitions had occured on January 1, 1994. The following represents the summarized results of operations for the period prior to the consummation of the transaction, which is the three months ended March 31, 1996, on a seperate company basis and combined basis: [Download Table] GT Interactive Acquired Pro Forma Software Corp. Companies Combined ------------------ -------------- ------------ (in thousands) Net revenue $ 62,270 $ 6,632 $ 68,902 Operating income 7,745 232 7,977 Net income 5,100 200 5,300 Page 6
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (Unaudited) NOTE 3-Inventories, net Inventories consists of the following: [Download Table] December 31, June 30, 1995 1996 -------------- ------------- (in thousands) Finished goods $ 51,545 $ 51,205 Raw materials 3,648 2,633 ----------- ----------- 55,193 53,838 Less: reserve for obsolescence 6,681 9,324 ----------- ----------- $ 48,512 $ 44,514 =========== =========== NOTE 4-Supplemental Cash Flow Information [Download Table] For the Six Months Ended June 30, ---------------------- 1995 1996 -------- -------- (in thousands) Issuance of Common Stock in connection with the acquisition of Slash Corporation $ 20,000 $ -- Cash paid for income taxes 3,980 9,336 Cash paid for interest 170 43 NOTE 5-Subsequent Event On July 9, 1996, the Company acquired all of the outstanding common stock of Humongous Entertainment, Inc., a premier developer and publisher of quality children's software, in exchange for 3,458,375 shares of the Company's common stock. This acquisition has been accounted for as a pooling of interests. Page 7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW The Company is a leading publisher, merchandiser and distributor of consumer software. Since it commenced operations in February 1993, the Company has experienced rapid revenue growth and its product and customer mix have changed substantially. An important element of the Company's financial performance is its product mix which has varied over time as the Company has built its business. The Company's product mix has been composed of three broad product categories: (i) front-line published software; (ii) value-priced software; and (iii) third-party software. Because each of these product categories has different associated costs, the Company's margins have depended and will depend, in part, on the percentage of net sales attributable to each category. In addition, the Company's margins may vary significantly from quarter to quarter depending on the timing of its new published product releases. To the extent that mass merchants require greater proportions of third party software products, some of which may yield lower margins, the Company's operating results may be impacted accordingly. Through February 28, 1995, the Company was an S corporation for Federal and New York state income tax purposes. The income tax provision for the six months ended June 30, 1995 includes a deferred tax benefit of approximately $3.5 million due to the Company's change in tax status. On June 23, 1995, the Company acquired all of the outstanding stock of Slash Corporation ("Slash"), a leading publisher, purchaser, repackager and distributor of value-priced software. Historically, Slash purchased excess inventory from major publishers and sublicensed catalog titles. It sold these products at lower price points or repackaged these and other products into compilation boxes, such as five-packs and ten-packs, for volume sales primarily to mass merchants. Slash's sales of purchased excess inventory have traditionally occurred at lower margins than its sales of sublicensed catalog products. The Company's value-priced software business primarily consists of sublicensed catalog titles which are sold largely to mass merchant customers. Slash's financial results have been included in the Company's Consolidated Financial Statements on a purchase basis for the period since the acquisition. On June 24, 1996, the Company acquired all of the outstanding stock of WizardWorks Group, Inc. ("WizardWorks"), a leading publisher of value-priced interactive entertainment, edutainment and productivity software. WizardWorks publishes and distributes consumer software developed by external developers for Windows, DOS and Macintosh formats. On June 28, 1996, the Company acquired all of the outstanding stock of Candel, Inc., the parent company of FormGen Corp. ("FormGen"), a leading publisher of interactive entertainment PC shareware and software. WizardWorks and FormGen (collectively the "Acquired Companies") have each been accounted for as a pooling of interests, whereby the Company exchanged 3,382,777 newly issued shares of its common stock for all the outstanding shares of the Acquired Companies' common stock. Accordingly, the Company's Financial Statements for the six months ended June 30, 1995 have been restated to include the results of the Acquired Companies. Sales are recorded net of expected future returns which historically have been experienced and reserved for at approximately 30% of gross sales. The consumer software industry is seasonal. Net sales are typically highest during the fourth calender quarter and are typically lower during the second calender quarter. This seasonality is primarily a result of the increased demand for consumer software during the year-end holiday buying season. Page 8
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RESULTS OF OPERATIONS The following table sets forth certain consolidated statement of operations data as a percentage of net sales for the periods indicated: [Download Table] For the Three For the Six Months Months Ended June 30, Ended June 30, ---------------- ---------------- 1995 1996 1995 1996 ------ ------ ------ ------ Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of goods sold 57.6 57.1 56.5 58.0 Selling and distribution expenses 17.7 22.5 17.0 21.0 General and administrative expenses 13.3 8.1 11.4 9.1 ------ ------ ------ ------ Operating income 11.4 12.3 15.1 11.9 Merger costs -- (2.2) -- (1.1) Interest and other income, net .4 1.3 .4 1.8 ------ ------ ------ ------ Income before income taxes 11.8 11.4 15.5 12.6 Provision for income taxes 4.8 4.7 .5 5.4 ------ ------ ------ ------ Net income 7.0 % 6.7 % 15.0 % 7.2 % ====== ====== ====== ====== Net sales for the three months and six months ended June 30, 1996 increased approximately $41.7 million or 138% and $76.5 million or 119%, respectively, as compared to the three and six months ended June 30, 1995. This growth in net sales for the three and six months ended June 30, 1996 was primarily attributable to the introduction of newly published front-line titles, such as Heretic: Shadow of the Serpent Rider, Gender Wars, Kingdom O'Magic and Duke Nukem 3D, the continuing strong sales of Doom and Doom-related products and the expansion of the Company's value-priced line of software. In addition, an increase in the number of mass merchant stores supplied and serviced by the Company, an increase in the shelf space available to the Company from its existing mass merchant customers and an increase in sales from its existing mass merchant shelf space contributed to the growth in net sales. The purchase of Slash by the Company effective June 23, 1995 and the increase in the distribution of third party software also contributed to the growth in net sales. Additionally, during the six months ended June 30, 1996, the Company released Just Me & My Dad and Vikings: Strategy of the Ultimate Conquest. Cost of goods sold primarily includes costs of purchased products and royalties paid to software developers. Cost of goods sold for the three and six months ended June 30, 1996 increased approximately $23.7 million or 136% and $45.3 million or 125%, respectively, as compared to the three and six months ended June 30, 1995. Costs of goods sold as a percentage of net sales for the three months ended June 30, 1996 decreased to 57.1% from 57.6% for the three months ended June 30, 1995. This decrease was primarily due to a change in product mix toward the Company's higher margin published front-line and value-priced products, which increased to approximately 50% of net sales during the three months ended June 30, 1996 compared to approximately 32% during the three months ended June 30, 1995. During the six months ended June 30, 1996, cost of goods sold as a percentage of net sales increased to 58.0% from 56.5% for the comparable period of the prior year. This increase was primarily due to a change in product mix driven by mass merchants for third party software products which yielded the Company lower margins. The percentage increase was partially offset by a shift in the overall Company mix toward the Company's higher margin published front-line and value-priced products, which increased to approximately 52% of net sales during the six months ended June 30, 1996 compared to approximately 44% during the six months ended June 30, 1995. Page 9
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Selling and distribution expenses primarily include shipping expenses, sales and distribution labor expenses, advertising and promotion expenses and distribution facilities costs. These expenses increased approximately $10.8 million or 202% and $18.6 million or 171% during the three and six months ended June 30, 1996, respectively, compared to the comparable periods of the prior year. The increase was due to the additional advertising costs to support the growth of the Company's published products and an increase in shipping costs attributable to the overall increase in sales volume. In addition, costs associated with the expansion of the Company's sales and distribution staff and distribution center increased to support its growth. Selling and distribution expenses as a percentage of net sales for the three and six months ended June 30, 1996 increased to 22.5% and 21.0%, respectively, compared to 17.7% and 17.0% during the three and six months ended June 30, 1995, respectively. General and administrative expenses primarily include personnel expenses, facilities costs, professional expenses and other overhead charges. These expenses for the three and six months ended June 30, 1996 increased approximately $1.8 million or 46% and $5.5 million or 75%, respectively, as compared to the three and six months ended June 30, 1995. The increase was due primarily to the expansion of the Company's operations. General and administrative expenses as a percentage of net sales for the three and six months ended June 30, 1996 decreased to 8.1% and 9.1%, respectively, from 11.4% and 13.3% for the three and six months ended June 30, 1995, respectively. In the near term, selling and distribution and general and administrative expenses are expected to rise, reflecting additions to the sales, distribution, operational and administrative infrastructure associated with the Company's anticipated growth. These expenses are expected to decline over time as a percentage of the Company's net sales, though there are no assurances to this effect. Merger costs consist of legal, accounting and other professional fees incurred by the Company to complete the acquisition of WizardWorks and FormGen. Interest and other income, net increased approximately $.8 million and $2.2 million for the three and six months ended June 30, 1996, respectively, as compared to the comparable periods of the prior year. This is primarily attributable to greater short-term investments and cash balances. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1996, the Company's principal sources of liquidity included cash and short-term investments of approximately $69.7 million. Cash used in operating activities for the six months ended June 30, 1996 amounted to approximately $18.2 million as compared to cash provided by operating activities of $1.4 million for the six months ended June 30, 1995. This decrease is attributable to the internally generated funds used to support the Company's growth and fluctuations in relative levels of receivables, inventory, royalty advances, accounts payable and income taxes payable. The relative level of inventory to accounts payable as of June 30, 1996 increased compared to June 30, 1995 primarily as a result of the timing of sales and the scheduled payment of the accounts payable. The Company believes that existing cash, cash equivalents and short-term investments together with cash expected to be generated from operations, will be sufficient to fund the Company's anticipated operations for the next twelve months. Page 10
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Except for historical information contained in this Form 10-Q, the information set forth herein may include forward looking statements that are dependent on certain risks and uncertainties. Important factors that could cause actual results to differ materially from the anticipated results include, but are not limited to, world-wide business and industry conditions, adoption of new hardware systems, software development requirements and their impact on product launches, company customer relations and other risks detailed, from time to time, in the Company's SEC filings including, but not limited to, the Annual Report on Form 10-K for the fiscal year ended December 31, 1995. Page 11
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Part II.- OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Company held its Annual Meeting of Stockholders on June 20, 1996. (b) The directors elected at the meeting were: [Download Table] For Withheld Non-Voting --- -------- ---------- Kenneth Cayre 55,677,069 45,700 3,581,870 Jordan A. Levy 55,677,069 45,700 3,581,870 William E. Ford 55,677,569 45,200 3,581,870 Other directors whose terms of office continued after the meeting are as follows: Joseph J. Cayre, Stanley Cayre, Jack J. Cayre, Ron Chaimowitz, Steven A. Denning. (c) Other matters voted upon at the meeting and the results of those votes are as follows: [Download Table] For Against Abstain Non-Voting --- ------- ------- ---------- Ratification of Arthur Andersen LLP as the Company's independent auditors 55,721,469 1,200 100 3,581,870 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits ------------- The following exhibits are filed as part of this report: Exhibit No. Description ----------- ----------- 2.1 Agreement and Plan of Reorganization by and among GT Interactive Software Corp., GT Acquisition Sub, Inc., WizardWorks Group, Inc. and the Stockholders of WizardWorks Group, Inc. dated June 24, 1996 (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Current Report on Form 8-K filed July 9, 1996). 2.2 Escrow Agreement by and among GT Interactive Software Corp., Paul D. Rinde, as the Stockholder Representative of Wizard- Works Group Inc., and Republic National Bank of New York, as Escrow Agent, dated June 24, 1996 (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Current Report on Form 8-K filed July 9, 1996). 3.1 Amended and Restated Certificate of Incorporation (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 3.2 Amended and Restated By-laws (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Registration Statement on Form S-1 filed on October 20, 1995, and all amendments thereto (File No. 33-98448)). 27.1 Financial Data Schedule. ____________ Page 12
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(b) Reports on Form 8-K ----------------------- A report on Form 8-K, dated June 24, 1996 was filed with the Securities and Exchange Commission on July 9, 1996 announcing the acquisition of WizardWorks Group, Inc. and Candel, Inc. in stock-for-stock mergers pursuant to the respective Agreements and Plans of Reorganization. GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES PRO FORMA STATEMENTS OF OPERATIONS The following pro forma statements of operations give effect to the merger of GT Interactive Software Corp. (the "Company") and WizardWorks Group Inc. and Candel, Inc., the parent company of FormGen Corp., (collectively the "Acquired Companies"), which were accounted for as poolings of interests. The pro forma statements of operations combine the results of operations of the Company for the three years ending December 31, 1995 with the results of operations of the Acquired Companies for the three years ended December 31, 1995. These pro forma financial statements should be read in conjunction with the historical financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, Current Report on Form 8-K filed on July 9, 1996 and the Annual Report on Form 10-K for the fiscal year ended December 31, 1995. [Enlarge/Download Table] FOR THE YEAR ENDED DECEMBER 31, 1995 ------------------------------------ GT Interactive Acquired Pro Forma Software Corp. Companies Adjustments Combined -------------- -------------- -------------- -------------- (in thousands) Net sales $ 204,135 $ 24,861 $ (3,223) $ 225,773 Cost of goods sold 129,552 9,821 (3,048) 136,325 Selling, general and administrative expenses 43,290 13,293 --- 56,583 -------------- -------------- -------------- -------------- Operating income 31,293 1,747 (175) 32,865 Interest and other income, net 609 163 --- 772 -------------- -------------- -------------- -------------- Income before income taxes 31,902 1,910 (175) 33,637 Provision for income taxes 9,262 1,330 (75) 10,517 -------------- -------------- -------------- -------------- Net income $ 22,640 $ 580 $ (100) $ 23,120 ============== ============== ============== ============== FOR THE YEAR ENDED DECEMBER 31, 1994 ------------------------------------ GT Interactive Acquired Pro Forma Software Corp. Companies Adjustments Combined -------------- -------------- -------------- -------------- (in thousands) Net sales $ 85,176 $ 14,853 $ --- $ 100,029 Cost of goods sold 47,470 6,128 --- 53,598 Selling, general and administrative expenses 17,366 6,905 --- 24,271 -------------- -------------- -------------- -------------- Operating income 20,340 1,820 --- 22,160 Interest and other income, net 30 (10) --- 20 -------------- -------------- -------------- -------------- Income before income taxes 20,370 1,810 --- 22,180 Provision for income taxes 1,661 770 --- 2,431 -------------- -------------- -------------- -------------- Net income $ 18,709 $ 1,040 $ --- $ 19,749 ============== ============== ============== ============== Page 13
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GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES PRO FORMA FINANCIAL STATEMENTS (CONTINUED) [Enlarge/Download Table] FOR THE YEAR ENDED DECEMBER 31, 1993 ------------------------------------ GT Interactive Acquired Pro Forma Software Corp. Companies Adjustments Combined ----------------- ----------------- ----------------- ----------------- (in thousands) Net sales $ 10,306 $ 7,769 $ -- $ 18,075 Cost of goods sold 4,050 3,271 -- 7,321 Selling, general and administrative expenses 5,325 4,052 -- 9,377 ----------------- ----------------- ----------------- ----------------- Operating income 931 446 -- 1,377 Interest and other income, net 1 22 -- 23 ----------------- ----------------- ----------------- ----------------- Income before income taxes 932 468 -- 1,400 Provision for income taxes 89 197 -- 286 ----------------- ----------------- ----------------- ----------------- Net income $ 843 $ 271 $ -- $ 1,114 ================= ================= ================= ================= Note: The adjustments made to the above pro forma statements of operations reflect the elimination of sales and purchases between the Company and the Acquired Companies, the elimination of the gross profit remaining in ending inventory relating to these sales and the income tax effect of these eliminations. Page 14
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SIGNATURES ---------- 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 thereunto duly authorized. GT INTERACTIVE SOFTWARE CORP. By: /s/ RONALD CHAIMOWITZ ------------------------ Ronald Chaimowitz Chief Executive Officer and Director Date: August 14, 1996 By: /s/ ANDREW GREGOR ----------------------- Andrew Gregor Chief Financial Officer and Senior Vice President, Finance and Administration Date: August 14, 1996 Page 15
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Exhibits -------- [Download Table] Exhibit No. Description Page ---------- ----------- ---- 2.1 Agreement and Plan of Reorganization by and among GT Interactive Software Corp., GT Acquisition Sub, Inc., Wizard- Works Group, Inc. and the Stockholders of WizardWorks Group, Inc. dated June 24, 1996 (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Current Report on Form 8-K filed July 9, 1996). 2.2 Escrow Agreement by and among GT Interactive Software Corp., Paul D. Rinde, as the Stockholder Representative of WizardWorks Group, Inc.,and Republic National Bank of New York, as Escrow Agent, dated June 24, 1996 (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Current Report on form 8-K filed July 9, 1996). 3.1 Amended and Restated Certificate of Incorporation (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995). 3.2 Amended and Restated By-laws (incorporated herein by reference to the exhibit with the corresponding number filed as part of the Company's Registration Statement on Form S-1 filed on October 20, 1995, and all amendments thereto (File No. 33-98448)). 27.1 Financial Data Schedule. _______________ Page 16

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