Movie Gallery Announces Earnings Results for the Second Quarter of 2005

Movie Gallery Announces Earnings Results for the Second Quarter of 2005

Hollywood Integration On-Track

Company Reports First Post-Merger Results In a Challenging Market Environment

DOTHAN, Ala., Aug. 12 /PRNewswire-FirstCall/ -- Movie Gallery, Inc. (NASDAQ:MOVI) today announced financial results for the second quarter of 2005, which ended July 3, 2005. Movie Gallery's second quarter results include the results of operations from Hollywood Entertainment Corporation ("Hollywood"), which Movie Gallery acquired on April 27, 2005. Accordingly, Movie Gallery's second quarter results include approximately 10 weeks of Hollywood's results and 13 weeks of Movie Gallery's results.

In the quarter, total revenues for the combined Company were $504.7 million as compared to Movie Gallery's stand-alone revenues of $189.6 million in the second quarter of 2004. Net loss for the 2005-second quarter was $12.2 million, or $0.39 per diluted share, which included the following: one-time special items on a net of tax basis; (i) a $6.6 million reduction in extended viewing fee revenues related to the purchase accounting effects of conforming Hollywood's revenue recognition method to Movie Gallery's method, (ii) a $5.9 million charge related to a change in accounting estimate for VHS residual value; (iii) one-time cash charges of $2.5 million related to the write-off of merger-related bridge financing fees, (iv) $0.9 million for a merger-related transaction bonuses; (v) other charges of $0.2 million related to stock based compensation; and (vi) equity losses of $0.3 million related to investments in alternative delivery vehicles for movie content. These items total $16.4 million or $0.52 per diluted share. Excluding these items, net income in the 2005-second quarter would have been $4.3 million, or $0.13 per share on an on- going basis. For the 2004-second quarter, the Company's net income was $10.6 million, or $0.32 per diluted share, which included equity losses of $0.04 per diluted share related to investments in alternative delivery vehicles.

Operating income for the 2005-second quarter was $2.0 million and was adversely affected by $23.2 million, which represents the pre-tax effect of the special items described in the preceding paragraph. Excluding these items, operating income in the 2005-second quarter would have been $25.2 million. For the 2004-second quarter, the Company's operating income was $19.8 million.

In addition, net loss for the second quarter includes $10.0 million after- tax, or $0.32 per diluted share, in interest expense related to the new credit agreement to fund the acquisition of Hollywood and other smaller business acquisitions.

Adjusted EBITDA, which is defined as net cash provided by operating activities before changes in operating assets and liabilities, interest, taxes and non-recurring special items, was $58.1 million for the 2005-second quarter, an increase of $32.8 million, or 130%, compared to adjusted EBITDA for the 2004-second quarter.

"During the quarter, we were delighted to complete our acquisitions of both Hollywood Entertainment and VHQ," said Joe Malugen, Chairman, President and Chief Executive Officer of Movie Gallery. "Having said that, we were disappointed to see that our same-store revenues in both the rural and urban markets were adversely impacted by what many experts are now characterizing as the worst box-office slump in more than two decades. Coming into the quarter, we were expecting our same-store revenues to be down slightly. However, with the month of June down considerably more than anticipated, we experienced a 5.5 percent decrease in same-store revenues for the second quarter of 2005.

"In this business our results are driven largely by the quality and quantity of movie titles, which continue to be weaker than we would like. However, we believe that this softness is temporary and expect rental demand to rebound in the fourth quarter. In the fourth quarter of 2005 some of the year's biggest titles and likely best sellers, including Batman Begins, Star Wars Episode 3, War of the Worlds, Mr. and Mrs. Smith, and Fantastic Four, will be released. While we expect challenging conditions to persist in the third quarter, we are optimistic that conditions will improve by the end of the year," Mr. Malugen concluded.

Integration Update

Mr. Malugen stated, "We have already made significant progress in integrating the two companies and we remain committed to moving quickly to realize the benefits of this winning combination. While it is premature to give specific guidance at this time, we continue to believe in our ability to generate sustainable growth while producing consistent profitability now that the acquisition is complete."

As previously announced, Movie Gallery intends to maintain the Hollywood store format and brand separately from the Movie Gallery business. Integration efforts to date have focused primarily on selecting a leadership team for and consolidating the support functions in all three operating segments. This top-level consolidation is complete for the Human Resources, Real Estate, Legal, Lease Administration, Finance, Information Systems, Loss Prevention and Distribution functions. Almost 60 positions were eliminated by the end of the second quarter. Movie Gallery is also evaluating opportunities to leverage best practices and generate general and administrative cost savings while undertaking initiatives to reap the benefit of the combined company's increased purchasing leverage for non-content merchandise to reduce costs.

Movie Gallery has closed 50 unprofitable Game Crazy stores and is now beginning to re-brand Movie Gallery's 23 Game Zone(R) stores under the Game Crazy brand. Under the leadership of Thomas Johnson, Movie Gallery's Senior Vice President of Corporate Finance and Business Development who is managing the integration, Movie Gallery expects to undertake other strategic initiatives and believes that it will realize significant synergies as a result of the combination.

Mr. Malugen added, "I want to thank the associates and partners of Movie Gallery and Hollywood for their continued hard work and dedication through the ongoing integration process, especially in the current soft business environment. We believe that our combined company is well positioned for long-term success and, with the continued focus of our dedicated employees, we are confident in our ability to create significant value for our shareholders."

Second Quarter and First Half Results

Revenue. For the thirteen weeks and twenty-six weeks ended July 3, 2005, consolidated total revenue increased 166.2 percent and 88.0 percent from the comparable periods in 2004. Same-store total revenue was negative 5.5 percent for the second quarter and negative 0.3 percent for the year-to-date period in 2005. Same-store rental revenue declined 8.4 percent in the second quarter of 2005 and declined 2.7 percent year-to-date in 2005. Same-store product revenue grew 10.6 percent in the second quarter and grew 12.7 percent for the year-to-date period in 2005, driven principally by the sale of new and used game hardware, software and accessories in Hollywood's Game Crazy business.

For the thirteen weeks and twenty-six weeks ended July 3, 2005, the Movie Gallery operating segment total revenues increased 5.0 percent and 10.2 percent from the comparable periods in 2004. The increases were due to an increase of 14.3 percent in the average number of stores operated during both the quarter and year-to-date period of 2005, offset by same-store revenue decreases of 8.1 percent for the second quarter and 3.2 percent for the year- to-date period of 2005. Same-store rental revenue declined 8.7 percent in the second quarter of 2005 and declined 2.9 percent year-to-date in 2005. Same- store product sales declined 1.2 percent in the second quarter and declined 5.6 percent for the year-to-date period in 2005.

The addition of Hollywood operating segment revenue for the thirteen weeks and twenty-six weeks ended July 3, 2005 accounted for 97.0 percent and 88.4 percent, respectively, of the total revenue increases. Hollywood total same- store revenues were negative 4.4 percent for the second quarter and positive 0.9 percent for the year-to-date period. Same-store rental revenue declined 8.2 percent in the second quarter of 2005 and declined 2.7 percent year-to- date in 2005. Same-store product sales increased 12.9 percent in the second quarter and increased 16.6 percent for the year-to-date period in 2005. The growth in Hollywood same-store product sales is primarily driven by the strength of the in-store Game Crazy departments. The same-store revenue percentage changes provided for Hollywood are for the full thirteen weeks and twenty-six weeks ended July 3, 2005.

The following factors contributed to a decrease in our total same-store revenues for the second quarter of 2005 versus 2004:

-- Movie rental revenue, including previously viewed sales, declined and
was adversely impacted by the weak home video release schedule during
the quarter.

-- Game rental revenue declined reflecting the weakness of the new game
titles currently being released and the industry softness that occurs
in anticipation of the introduction of new game platforms currently
scheduled for late 2005 and early 2006 release.

Gross Margins. Gross margin on rental revenue for the second quarter and year-to-date period of 2005 was 66.0 percent and 67.2 percent, respectively, versus 71.5 percent and 71.9 percent for the comparable quarter and year-to- date period of 2004. This included the $10.1 million non-cash charge for a change in accounting estimate on Movie Gallery's VHS inventory. Excluding the VHS write-off in the second quarter, gross margin on rental revenue would have been 68.4 percent and 68.8 percent for the thirteen weeks and thirty-six weeks ending July 3, 2005, respectively.

The remaining decrease versus prior comparable periods is primarily the result of the acquisition of the Hollywood Video stores, as their gross margins are historically lower than those of Movie Gallery stores because Hollywood generally invests proportionally more in rental inventory (as a percentage of revenue) to effectively compete in urban markets. Higher than expected same-store revenue declines for movie rental revenue and higher than normal promotional activity of previously viewed products also contributed to the reduced rental gross margins.

The gross margin on product sales for the thirteen weeks and twenty-six weeks ended July 3, 2005 was 29.6 percent and 29.4 percent, respectively, compared to 29.4 percent and 31.8 percent for the comparable quarter and year- to-date period of 2004. The decrease in product sales margin for the twenty- six week period was primarily caused by the higher penetration of new movies and new game merchandise sales, which are typically lower margin businesses than used game merchandise and concession products. The acquisition of the Game Crazy operating segment acquired with Hollywood will continue to increase the penetration of new game merchandise versus comparable periods last year.

Operating Costs and Expenses. Store operating expenses include store- level expenses such as lease payments, in-store payroll, utilities, repair and maintenance costs and start-up costs associated with new store openings. Store operating expenses as a percentage of total revenue were 51.9 percent and 50.2 percent for the thirteen weeks and twenty-six weeks ended July 3, 2005, respectively, in comparison to 50.3 percent and 48.3 percent for the comparable periods in 2004. The increases on a percent to sales basis are attributable to higher total spending based on the increase in year-over-year store counts, and the steeper than expected declines in same-store revenues.

General and administrative expenses. General and administrative expenses include the costs to maintain our corporate support centers as well as the overhead costs of our field management team. General and administrative expenses as a percentage of total revenue were 7.3 percent and 7.1 percent for the thirteen weeks and twenty-six weeks ended July 3, 2005, respectively, in comparison to 7.2 percent and 7.0 percent for the comparable periods in 2004. General and administrative expenses increased for the second quarter and year- to-date period primarily as the result of the acquisition of Hollywood.

Conference Call Information

Management will have a conference call today (August 12, 2005) at 10:30 a.m. eastern time to discuss the quarterly financial results. To listen to the conference, please call 1-877-340-MOVI ten minutes prior to the scheduled start time and reference passcode MOVIE GALLERY. The call may also be accessed on the Investor Relations section of the Company's website at: http://www.moviegallery.com/

A replay of the call can be accessed by dialing 1-877-919-4059, replay passcode 12421371 beginning at approximately 2 p.m. (ET) on August 12 and continuing through October 12. The conference call webcast will also be archived on the Investor Relations section of the web site.

About Movie Gallery

Movie Gallery is the second largest North American video rental company with annual revenue in excess of $2.5 billion and approximately 4,700 stores located in all 50 U.S. states, Canada and Mexico. Since the Company's initial public offering in August 1994, Movie Gallery has grown from 97 stores to its present size through acquisitions and new store openings.

For More Information Contact
Financial - Thomas D. Johnson, Jr., Movie Gallery, Inc., (503) 570-1950
Media - Andrew B. Siegel, Joele Frank, Wilkinson Brimmer Katcher,
(212) 335-4449 ext. 127

FORWARD LOOKING STATEMENTS

This release contains forward-looking statements, including statements relating to Movie Gallery's recent acquisition of Hollywood Entertainment, VHQ Entertainment, and the anticipated benefits to Movie Gallery's shareholders, as well as statements relating to overall industry conditions, the Company's growth and long-term values. The forward-looking statements in this release are based upon the Company's current intent, estimates, expectations and projections and involve a number of risks and uncertainties. These risks and uncertainties include, but are not limited to: (i) our ability to integrate appropriate functions of Hollywood; (ii) effects of the long-term indebtedness that was incurred to fund the acquisition of Hollywood, including our ability to comply with the financial covenants contained therein; (iii) the number of new store openings during the year; (iv) declines in same-store revenues; (v) the Company's actual expenses differ from estimates and expectations; (vi) competitive pressures, including technological advances, may be greater than anticipated; (vii) availability of new movie releases priced for sale may negatively impact consumers' desire to rent movies; (viii) movie studios could change their distribution policies; (ix) video game hardware and software manufacturers may fail to introduce new products; (x) Movie Gallery's and Hollywood's information systems may fail to perform as anticipated; (xi) consumer demand for movies and games may be less than expected; (xii) availability of movies and games may be less than expected; (xiii) the Company may expand its investment in existing strategic initiatives for alternative delivery of media content or choose to invest in significant new strategic initiatives; (xiv) risks and costs related to integrating acquisitions; and (xv) other risks described in Movie Gallery's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Cautionary Statements" in Movie Gallery's annual report on Form 10-K for the fiscal year ended January 2, 2005. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Movie Gallery, Inc.
Unaudited Financial Highlights
and Supplemental Information
(amounts in thousands, except per share data)

13 Weeks Ended 26 Weeks Ended
-------------------- -------------------
July 4, July 3, July 4, July 3,
2004 2005 2004 2005
--------- --------- --------- ---------
Total revenues $ 189,591 $ 504,729 $ 392,893 $ 738,520
Net income (loss) $ 10,634 $ (12,189) $ 28,886 $ 6,204
Net income (loss) per
diluted share $ 0.32 $ (0.39) $ 0.86 $ 0.19
Weighted average diluted
shares outstanding 33,254 31,574 33,495 31,831

Net cash provided by operating
activities $ 28,116 $ 35,725 $ 49,173 $ 49,035

Adjusted EBITDA $ 25,270 $ 58,139 $ 59,577 $ 97,302

Store count:
Beginning of period 2,240 2,543 2,158 2,482
New store builds 75 92 156 154
Stores acquired 31 2,120 55 2,138
Stores closed (15) (25) (38) (44)
End of period 2,331 4,730 2,331 4,730

Movie Gallery, Inc.
Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)

Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------- ---------------------
July 4, July 3, July 4, July 3,
2004 2005 2004 2005
--------- --------- --------- --------
Revenue:
Rentals $ 175,239 $ 420,332 $ 361,996 $637,073
Product sales 14,352 84,397 30,897 101,447
--------- --------- --------- --------
Total revenue 189,591 504,729 392,893 738,520

Cost of sales:
Cost of rental revenue 49,908 142,751 101,653 209,111
Cost of product sales 10,132 59,439 21,072 71,629
--------- --------- --------- --------
Gross profit 129,551 302,539 270,168 457,780

Operating costs and expenses:
Store operating expenses 95,401 262,194 189,826 370,673
General and administrative 13,686 36,980 27,482 52,431
Amortization of intangibles 675 954 1,289 1,554
Stock compensation (16) 422 40 563
-------- -------- -------- -------
Operating income 19,805 1,989 51,531 32,559

Interest expense, net (66) (16,923) (165) (17,003)
Write-off of bridge financing - (4,234) - (4,234)
Equity in losses of
unconsolidated entities (2,306) (469) (3,936) (806)
-------- -------- -------- -------
Income (loss) before income
taxes 17,433 (19,637) 47,430 10,516
Income taxes (benefit) 6,799 (7,448) 18,544 4,312
-------- -------- -------- -------
Net income (loss) $ 10,634 $(12,189) $ 28,886 $ 6,204
======== ======== ======== ========

Net income (loss) per share:
Basic $ 0.32 $ (0.39) $ 0.88 $ 0.20
Diluted $ 0.32 $ (0.39) $ 0.86 $ 0.19

Weighted average shares outstanding:
Basic 32,794 31,574 32,933 31,386
Diluted 33,254 31,574 33,495 31,831

Cash dividends per common
share $ 0.03 $ 0.03 $ 0.06 $ 0.06

Movie Gallery, Inc.
Consolidated Balance Sheets
(In thousands, except per share amounts)

-------------------------
January 2, July 3,
2005 2005
----------- -----------
(Note 1) (Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 25,518 $ 51,122
Extended viewing fees receivable, net - 8,602
Merchandise inventory, net 27,419 143,798
Prepaid expenses 12,712 41,784
Store supplies and other 9,493 27,827
Deferred income taxes 3,358 16,802
----------- -----------
Total current assets 78,500 289,935

Rental inventory, net 126,541 344,240
Property, furnishings and equipment, net 128,182 370,971
Goodwill, net 143,761 641,412
Other intangibles, net 7,741 191,712
Deferred income taxes, net - 4,768
Deposits and other assets 7,417 37,770
----------- -----------
Total assets $ 492,142 $ 1,880,808
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Current maturities of long-term
obligations $ - $ 27,193
Current maturities of financing
obligations - 8,419
Accounts payable 68,977 194,652
Accrued liabilities 30,570 139,428
Accrued interest - 17,237
Deferred revenue 10,843 34,899
----------- ----------
Total current liabilities 110,390 421,828

Long-term obligations, less
current portion - 1,116,166
Deferred income taxes 50,618 -

Stockholders' equity:
Preferred stock, $.10 par value; 2,000
shares authorized, no shares issued
or outstanding - -
Common stock, $.001 par value; 65,000
shares authorized, 31,076 and 31,615
shares issued and outstanding,
respectively 31 32
Additional paid-in capital 188,098 201,485
Unearned compensation - (4,666)
Retained earnings 136,750 141,061
Accumulated other comprehensive income 6,255 4,902
----------- ----------
Total stockholders' equity 331,134 342,814
----------- ----------
Total liabilities and stockholders'
equity $ 492,142 $ 1,880,808
=========== ===========

Note 1: Derived from the fiscal 2004 audited consolidated financial statements.

Movie Gallery, Inc.
Consolidated Statements of Cash Flows
(Unaudited, in thousands)

Twenty-Six Weeks Ended
----------------------
July 4, July 3,
2004 2005
--------- ---------
Operating activities:
Net income $ 28,886 $ 6,204
Adjustments to reconcile net income to net cash
provided by operating activities:
Rental inventory amortization 69,837 130,815
Purchases of rental inventory (72,303) (108,179)
Depreciation and intangibles amortization 14,408 31,146
Amortization of debt issuance cost - 865
Stock based compensation 40 563
Tax benefit of stock options exercised 4,079 2,946
Deferred income taxes 8,865 (2,336)
Changes in operating assets and liabilities, net of
business acquisitions:
Extended viewing fees receivable, net - 12,767
Merchandise inventory 1,571 7,748
Other current assets 561 (1,419)
Deposits and other assets 2,985 (8,734)
Accounts payable (8,040) (60,561)
Accrued interest - 17,198
Accrued liabilities and deferred revenue (1,716) 20,012
--------- ---------
Net cash provided by operating activities 49,173 49,035

Investing activities:
Business acquisitions, net of cash acquired (7,747) (1,094,060)
Purchases of rental inventory-base stock (7,822) (9,685)
Purchase of property, furnishings and equipment (25,167) (32,450)
Acquisition of construction phase assets, net - 1,762
--------- ---------
Net cash used in investing activities (40,736) (1,134,433)

Financing activities:
Repayment of capital lease obligations - (105)
Decrease in financing obligations - (1,965)
Net borrowings on credit facilities - 25,066
Long term debt financing fees - (29,119)
Proceeds from issuance of long-term debt - 1,116,120
Principal payments on long-term debt - (1,093)
Proceeds from exercise of stock options 4,575 5,177
Proceeds from employee stock purchase plan 168 169
Purchases and retirement of common stock (25,000) -
Payment of dividends (1,989) (1,894)
--------- ---------
Net cash (used in) provided by
financing activities (22,246) 1,112,356

Effect of exchange rate changes on cash
and cash equivalents (1,084) (1,354)
--------- ---------
Increase (decrease) in cash and
cash equivalents (14,893) 25,604
Cash and cash equivalents at
beginning of period 38,006 25,518
--------- ---------
Cash and cash equivalents
at end of period $ 23,113 $ 51,122
========= =========

Disclosures Regarding Non-GAAP Financial Information

Adjusted EBITDA is defined as net cash provided by operating activities before changes in operating assets and liabilities, interest, taxes and non- recurring special items. Adjusted EBITDA is presented primarily as an alternative measure of liquidity, although we also use it as an internal measure of performance for making business decisions and compensating our executives. It is also a widely accepted financial indicator in the home video specialty retail industry of a company's ability to incur and service debt, finance its operations and meet its growth plans. However, our computation of Adjusted EBITDA is not necessarily identical to similarly captioned measures presented by other companies in our industry. We encourage you to compare the components of our reconciliation of Adjusted EBITDA to cash flows from operations in relation to similar reconciliations provided by other companies in our industry. Our presentation of net cash provided by operating activities and Adjusted EBITDA treats rental inventory as being expensed upon purchase instead of being capitalized and amortized. We believe this presentation is meaningful and appropriate because our annual cash investment in rental inventory is substantial and in many respects is similar to recurring merchandise inventory purchases considering our operating cycle and the relatively short useful lives of our rental inventory. Our calculation of Adjusted EBITDA excludes the impact of changes in operating assets and liabilities. This adjustment eliminates temporary effects attributable to timing differences between accrual accounting and actual cash receipts and disbursements, and other normal, recurring and seasonal fluctuations in working capital that have no long-term or continuing affect on our liquidity. Investors should consider our presentation of Adjusted EBITDA in light of its relationship to cash flows from operations, cash flows from investing activities and cash flows from financing activities as shown in our statements of cash flows. Adjusted EBITDA is not necessarily a measure of "free cash flow" because it does not reflect periodic changes in the level of our working capital or our investments in new store openings, business acquisitions, or other long-term investments we may make. However, it is an important measure used internally by executive management of our Company in making decisions about where to allocate resources to grow our business. Our calculation of Adjusted EBITDA is reconciled to net cash provided by operating activities as follows (in thousands):

Thirteen Weeks Ended Twenty-six Weeks Ended
------------------ ------------------
July 4, July 3, July 4, July 3,
2004 2005 2004 2005
-------- -------- -------- --------
Net cash provided by
operating activities $ 28,116 $ 35,725 $ 49,173 $ 49,035
Changes in operating
assets and liabilities (5,012) (6,783) 4,639 12,989
Tax benefit of stock
options exercised (1,090) (771) (4,079) (2,946)
Deferred income taxes (3,609) 5,920 (8,865) 2,336
Amortization of debt
issuance cost - (865) - (865)
Interest expense 66 21,157 165 21,237
Income taxes 6,799 (7,448) 18,544 4,312
Extended viewing fee
adjustment - 11,204 - 11,204
-------- -------- -------- --------
Adjusted EBITDA $ 25,270 $ 58,139 $ 59,577 $ 97,302

The Company disclosed a non-GAAP financial measure of Adjusted Operating Income for the thirteen and twenty-six weeks ended July 4, 2004 and July 3, 2005. Adjusted Operating Income represents the Company's operating income less adjustments for non-recurring special items and stock based compensation. The adjustments to Operating Income include adjustments for: conforming Hollywood's method of accounting for extended viewing fees to Movie Gallery's method; reducing the VHS residual value from $2.00 to $1.00; transaction bonuses paid related to the merger and stock based compensation. Management believes the presentation of Adjusted Operating Income is meaningful and appropriate because it presents a useful measure to understand the Company's performance without the distortions of non-recurring special items and stock based compensation. Investors should consider our presentation of Adjusted Operating Income in light of its relationship to Operating Income shown on the Consolidated Statements of Operations.

Thirteen weeks ended Twenty-six weeks ended
---------------------- ------------------------
July 4, July 3, July 4, July 3,
2004 2005 2004 2005
--------- --------- ---------- ----------
Operating income $ 19,805 $ 1,989 $ 51,531 $ 32,559
VHS residual value
adjustment - 10,054 - 10,054
Extended viewing fee
adjustment - 11,204 - 11,204
Transaction bonuses - 1,500 - 1,500
Stock compensation (16) 422 40 563
--------- --------- ---------- ----------
Adjusted operating
income $ 19,789 $ 25,169 $ 51,571 $ 55,880
========== ========= ========== ==========

Home Video Release Quarterly Comparison

Title Slate First Quarter Second Quarter
Q104 Q105 % Change Q204 Q205 % Change
Titles > $100M
Titles 3 5 67% 6 7 17%
Box Office 336 774 130% 989 1080 9%

All Titles $25M-$99.9M
Titles 24 20 -17% 18 16 -11%
Box Office 1184 1067 -10% 1113 813 -27%

All Titles $10M-$99.9M
Titles 34 31 -9% 30 27 -10%
Box Office 1350 1257 -7% 1310 1015 -23%

Title Slate Third Quarter Fourth Quarter
Q304 Q305E % Change Q404 Q405E % Change
Titles > $100M
Titles 1 3 200% 10 9 -10%
Box Office 370 386 4% 2065 1762 -15%

All Titles $25M-$99.9M
Titles 20 18 -10% 18 23 28%
Box Office 1007 927 -8% 1086 1199 10%

All Titles $10M-$99.9M
Titles 32 23 -28% 29 37 28%
Box Office 1202 1028 -14% 1261 1407 12%

Source: Movie Gallery, Inc.

CONTACT: Thomas D. Johnson, Jr. of Movie Gallery, Inc., +1-503-570-1950;
or Andrew B. Siegel of Joele Frank, Wilkinson Brimmer Katcher, +1-212-335-4449
ext. 127, for Movie Gallery, Inc.

Web site: http://www.moviegallery.com/

-------
Profile: intent