Joe Malugen Quotations

While much work lies ahead, we are pleased that recovery efforts are under way in the communities affected by Hurricane Katrina and that almost all of our stores have resumed normal operations. I want to acknowledge the extraordinary efforts of the countless number of our associates and partners who are responsible for getting our stores up and running. We look forward to continuing to provide our customers with our outstanding selection of movies and video game rentals.

We look forward to closing the Hollywood transaction promptly. With a broader geographic presence and greatly improved distribution capabilities and scale, our combined company will be a strong competitor.

I purchased the place due to its beauty and history. I am very sad about the loss. It could not be replaced.

Fiscal 2005 was a challenging year for the industry and our company primarily due to a weak box office and, to a lesser extent, the continued growth of various alternative entertainment options and new technologies.

Based on preliminary, un-audited results, we expect that fourth quarter revenues and same-store revenues will be within the range of previously provided guidance. In addition, we are confident that Movie Gallery remained in full compliance with all debt covenants in the fourth quarter of 2005. Looking forward to 2006, with the continued softness in the rental industry, we will soon resume discussions with our lenders regarding further amendments to Movie Gallery's senior credit facility. We continue to believe that our industry is long-term fundamentally sound, and we are looking forward to the introduction of next-generation, high-definition DVDs as a significant catalyst for our business.

Rental revenues have continued to decline over the last several months, and the market weakness we are currently experiencing has been more severe and longer lasting than anticipated,

The loss is tragic since it was reportedly the oldest home on the Mississippi Gulf Coast. It was one of the few homes not damaged by Hurricane Camille in 1969.

We have already made great progress in reducing costs and enhancing efficiency. Today's announcement will further our efforts to create value for shareholders and better position Movie Gallery for long-term success.

That being said, we are not satisfied with our recent performance and have responded by taking decisive actions to improve our results. We are implementing a comprehensive set of initiatives to drive revenues, maximize margin opportunities, further improve our operating efficiencies, cut costs and increase asset utilization. We expect this plan will help offset the continued revenue softness we are seeing and expect to continue to see in the near-term, and will contribute to the long-term success of the Company, which is our goal for stockholders, partners and associates alike.

We want to extend our sympathy to the people and communities affected by Hurricane Katrina. Our thoughts are with our customers, associates, and partners during this difficult time and we hope for a quick recovery from this disaster.