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GT Interactive Reports Third Quarter and Nine Months Operating Results.

NEW YORK--(BUSINESS WIRE)--Feb. 11, 1999--

New CEO Sees Fourth Quarter as Period of Assessment and Transition

GT Interactive Software Corp. (Nasdaq:GTIS), a leading entertainment software publisher, today announced operating results for the third quarter and nine months ended December 31, 1998.

Net revenues in the third quarter were $246.8 million, a 16 percent increase compared to the same period last year. Increased sales were driven by strong performances of new releases including Oddworld: Abe's Exoddus(TM) and Duke Nukem: Time to Kill(TM), both for Sony PlayStation, as well as Humongous Entertainment's Blue's Birthday Adventure(TM) and Blue's ABC Time Activities(TM) and WizardWorks' Deer Hunter II(TM) all on CD-ROM. Operating income before goodwill amortization and one time charges increased 59 percent to $40.7 million for the third quarter, compared with $25.6 million in last year's third quarter. Before non-recurring items in both periods, net income for the quarter was $22.9 million, or $.33 per share, vs. $16.4 million, or $.24 per share, in the same period last year. Net income for the quarter was $16.8 million, or $0.24 per share, compared to a loss of $42.5 million, or $0.63 per share, in same period last year.

During the third quarter, GT Interactive incurred a one-time, non-cash charge of $5.0 million, or $.07 per share, for purchased R&D associated with the recent acquisition of Reflections Interactive Ltd., and a $1.7 million, or $.02 per share, charge related to the final charges of the retention bonus program associated with the acquisition of SingleTrac Entertainment last year.

For the nine months ended December 31, 1998, revenues were $479.3 million compared to $437.3 million in the same period last year. Operating income before goodwill amortization and one-time charges was $49.4 million in the nine months, compared with $49.5 million in the corresponding period last year. Before non-recurring items in both periods, net income for the nine months was $26.0 million, or $.38 per share, vs. $29.4 million, or $.43 per share, in the same period last year. Net income for the nine months was $19.9 million, or $0.29 per share, versus a loss of $29.5 million, or $0.43 per share, in the same period last year.

During the third quarter of the prior year, GT Interactive expensed $73.8 million of royalty advances which were previously capitalized, resulting in a $.68 per share charge. In connection with this, the company changed its accounting, as of January 1, 1998, for future royalty advances, treating such costs as research and development expenses, which are expensed as incurred. Additionally, in 1997, GT Interactive incurred a charge of $11.0 million, or $.16 per share, and $2.4 million, or $.02 per share, as a write-off of purchased R&D and a retention bonus, respectively, associated with the SingleTrac acquisition. Furthermore, in 1997, as a result of a canceled acquisition, GT Interactive incurred a charge of $1.1 million, or $.01 per share, for legal and other fees.

Mr. Thomas A. Heymann, GT's newly appointed Chairman and Chief Executive Officer said, "While GT's net income has improved, our operating performance this year has been unsatisfactory. I am committed to taking decisive and significant action to return GT Interactive to acceptable levels of profitability and to build a foundation for consistent and profitable growth. To that end, I will be using the next eight weeks to conduct a thorough assessment of our operations and re-evaluate our new release schedule. GT's fourth fiscal quarter will be a transitional period, as I make the appropriate revisions to our long-term business plan.

"I am very confident about GT Interactive's future because of GT's many strengths and assets, especially our high-quality brands, people and products, as well as our strong retail distribution. We are committed to improving the company's financial performance by defining a clear business model and action plan to deliver these results," Heymann concluded.

As previously announced on February 9, GT Interactive appointed Thomas A. Heymann Chairman and Chief Executive Officer. Immediately prior to joining GT, Mr. Heymann was President of The Disney Store, Inc.- Worldwide.

Third Quarter Highlights

- Front line publishing revenues, at $128 million, accounted for 52

percent of total revenues in the quarter. Domestic front line

revenues increased 29 percent in the quarter, driven by a strong

performance by new titles such as Duke Nukem: Time to Kill(TM)

and Oddworld: Abe's Exoddus for the PlayStation, and the

continued strength of Blues Clues and Deer Hunter franchises.

- International front line publishing revenues increased 26 percent

to $68 million, due to strong sales of GT's Oddworld and Duke

Nukem franchises, including PlayStation titles Oddworld: Abe's

Exoddus, Abe's Oddysey and Duke Nukem: Time to Kill, as well as

Abe's Adventures for the Gameboy.

- Sales of Humongous Entertainment's Blues Clues titles helped

increase GT's children's market share in dollars to 7.9 percent

in the quarter from 4.2 percent in the prior year quarter,

according to PC Data. Humongous' revenues in the quarter

increased more than three times that of revenues in same quarter

last year. Blue's ABC Time Activities and Blue's Birthday

Adventure were the industry's No. 1 and No. 3 selling children's

educational software titles in the quarter, respectively,

according to PC Data. Blue's ABC Time Activities was also the No.

3 selling title of all PC games in the quarter.

- Wizard Works' revenues were up 27 percent, led by sales of Deer

Hunter II, which was the best selling PC game in the US for the

quarter, according to PC Data.

- Third party distribution increased 16 percent compared to the

third quarter of last year, due to very strong retail sales of

consumer software as well as additional new retail accounts.

Other Highlights

- The company brought its stable of quality internal software

developers to eight by acquiring Reflections Interactive Ltd.,

located in the UK, and Legend Entertainment, located in Virginia.

Headquartered in New York, with 1997 calendar year revenues of $531 million, GT Interactive Software Corp. (Nasdaq:GTIS) is a leading global interactive entertainment software company that develops, markets and distributes consumer software. The company has eight internal development studios: Humongous Entertainment, Cavedog Entertainment, SingleTrac, WizardWorks, Oddworld, Bootprint Entertainment, Legend Entertainment and Reflections. The company also has four software labels: GT Interactive, CompuWorks, MacSoft and Slash. GT Interactive's e-commerce system provides secure online transactions through each of the studios' Web sites and www.gtstore.com. GT Interactive also owns the subsidiary OneZero Media that operates a specialized entertainment portal, getwild.com, which acts as the Entertainment Zone on AltaVista; and produces the nationally syndicated television program, "Wild Wild Web." GT Interactive can be found on the Internet at www.gtinteractive.com.

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. Duke Nukem, Duke Nukem: Time to Kill, Oddworld: Abe's Exoddus, Abe's Oddysey, Abe's Adventures Deer Hunter and Deer Hunter II are trademarks of GT Interactive. Blue's Clues, Blue's Birthday Adventure, Blue's ABC Time Activities and all other related titles, logos and characters are trademarks of Viacom International, Inc. Other brand names and products may be trademarks or registered trademarks of their respective companies. -0-

 GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (in thousands, except share data)


 December 31, March 31, December 31,
 1997 1998 1998
 (audited) (audited) (unaudited)

ASSETS
Current assets:
 Cash, cash equivalents
 and short term
 investments $ 39,713 $ 17,329 $ 19,171
 Receivables, net 215,176 134,815 279,889
 Inventories, net 92,874 98,469 160,126
 Income taxes
 receivable 15,171 10,684 1,789
 Other current assets 36,716 34,103 39,229
 ---------- ---------- ----------
 Total current assets 399,650 295,400 500,204
Property and equipment, net 23,245 29,049 37,560
Goodwill, net 23,495 28,043 54,165
Other assets 11,335 13,379 15,273
 ========== ========== ==========
 Total assets $ 457,725 $ 365,871 $ 607,202
 ========== ========== ==========

LIABILITIES AND
 STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable $ 148,625 $ 103,062 $ 187,687
 Accrued liabilities 63,904 49,414 79,629
 Revolving credit
 facility 54,600 28,000 -
 Royalties payable 47,432 40,395 35,997
 Income taxes payable 5,954 3,449 17,751
 Other current
 liabilities 1,170 1,086 1,509
 ---------- ---------- ----------
 Total current
 liabilities 321,685 225,406 322,573
Long term debt - - 95,000
Other non current
 liabilities 1,799 1,576 2,341
 ---------- ---------- ----------
 Total liabilities 323,484 226,982 419,914
 ---------- ---------- ----------

Commitments and contingencies

STOCKHOLDERS' EQUITY
 Common stock 679 680 727
 Additional paid-in
 capital 126,343 131,382 159,041
 Retained earnings 7,219 6,827 27,520
 ---------- ---------- ----------
 Total shareholders'
 equity 134,241 138,889 187,288
 ---------- ---------- ----------

 Total liabilities and
 stockholders' equity $ 457,725 $ 365,871 $ 607,202
 ========== ========== ==========



 GT INTERACTIVE SOFTWARE CORP. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (unaudited)
 (in thousands, except per share data)

 For the Three Months For the Nine Months
 Ended December 31, Ended December 31,
 --------------------------------------------
 1997 1998 1997 1998
 -------- -------- -------- --------

Net revenues 213,569 246,776 437,296 479,318
Cost of goods sold 131,321 119,926 257,251 231,781
Selling and
 distribution expenses 35,232 50,238 82,151 105,806
General and
 administrative expenses 16,849 15,206 36,938 39,070
Research and development 4,616 20,729 11,427 53,291
 -------- -------- -------- --------
 Operating income before
 royalty advance
 write-off, acquisition
 related charges and
 amortization of
 goodwill 25,551 40,677 49,529 49,370


Royalty advance write-off 73,821 0 73,821 0
Purchased research and
 development 11,008 5,000 11,008 5,000
SingleTrac retention
 bonus 2,400 1,680 2,400 1,680
Merger costs 1,050 0 1,050 0
Amortization of goodwill 382 828 948 2,375
 -------- -------- -------- --------
 Operating income (loss) (63,110) 33,169 (39,698) 40,315
Interest and other
 expenses, net 1,084 1,968 2,322 3,933
 -------- -------- -------- --------
 Income (loss) before
 provision for (benefit
 from) income taxes (64,194) 31,201 (42,020) 36,382

Provision for (benefit
 from) income taxes (21,722) 14,429 (12,543) 16,438
 -------- -------- -------- --------
 Net income (loss) (42,472) 16,772 (29,477) 19,944
 ======== ======== ======== ========

Basic net income (loss)
 per share $ (0.63) $ 0.24 $ (0.44) $ 0.29

 Weighed average shares
 outstanding 67,717 69,742 67,174 68,632
 ======== ======== ======== ========

Diluted net income
 (loss) per share $ (0.63) $ 0.24 $ (0.43) $ 0.29

 Weighed average shares
 outstanding 67,717 70,097 67,944 69,292
 ======== ======== ======== ========
COPYRIGHT 1999 Business Wire
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1999, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 
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Geographic Code:1USA
Date:Feb 11, 1999
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