e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
|
|
|
þ
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
FOR THE QUARTERLY PERIOD ENDED
MAY 3, 2008
|
OR
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
FOR THE TRANSITION PERIOD
FROM TO
|
COMMISSION FILE
NO. 1-32637
GameStop Corp.
(Exact name of registrant as
specified in its Charter)
|
|
|
Delaware
|
|
20-2733559
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
|
|
625 Westport Parkway,
Grapevine, Texas
|
|
76051
(Zip Code)
|
(Address of principal executive
offices)
|
|
|
Registrants telephone number, including area code:
(817) 424-2000
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 þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large accelerated
filer þ
|
|
Accelerated
filer o
|
|
Non-accelerated
filer o
|
|
Smaller reporting
company o
|
|
|
(Do not check if a smaller reporting
company)
|
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Number of shares of $.001 par value Class A Common
Stock outstanding as of June 6, 2008: 163,356,001
PART I
FINANCIAL INFORMATION
|
|
ITEM 1.
|
Financial
Statements
|
GAMESTOP
CORP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
February 2,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(In thousands, except per share data)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
625,986
|
|
|
$
|
307,328
|
|
|
$
|
857,414
|
|
Receivables, net
|
|
|
66,662
|
|
|
|
38,856
|
|
|
|
56,019
|
|
Merchandise inventories, net
|
|
|
988,584
|
|
|
|
793,517
|
|
|
|
801,025
|
|
Prepaid expenses and other current assets
|
|
|
56,603
|
|
|
|
45,721
|
|
|
|
52,778
|
|
Prepaid taxes
|
|
|
|
|
|
|
52,136
|
|
|
|
|
|
Deferred taxes
|
|
|
24,764
|
|
|
|
36,220
|
|
|
|
27,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,762,599
|
|
|
|
1,273,778
|
|
|
|
1,794,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
12,032
|
|
|
|
11,168
|
|
|
|
11,870
|
|
Buildings and leasehold improvements
|
|
|
396,278
|
|
|
|
318,215
|
|
|
|
378,611
|
|
Fixtures and equipment
|
|
|
560,051
|
|
|
|
447,649
|
|
|
|
538,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
968,361
|
|
|
|
777,032
|
|
|
|
929,219
|
|
Less accumulated depreciation and amortization
|
|
|
451,472
|
|
|
|
317,276
|
|
|
|
417,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
516,889
|
|
|
|
459,756
|
|
|
|
511,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill, net
|
|
|
1,415,509
|
|
|
|
1,403,557
|
|
|
|
1,402,440
|
|
Deferred financing fees
|
|
|
8,136
|
|
|
|
12,549
|
|
|
|
8,963
|
|
Deferred taxes
|
|
|
29,059
|
|
|
|
7,260
|
|
|
|
26,332
|
|
Other noncurrent assets
|
|
|
35,593
|
|
|
|
29,878
|
|
|
|
31,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,488,297
|
|
|
|
1,453,244
|
|
|
|
1,469,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,767,785
|
|
|
$
|
3,186,778
|
|
|
$
|
3,775,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
781,927
|
|
|
$
|
597,444
|
|
|
$
|
844,376
|
|
Accrued liabilities
|
|
|
365,926
|
|
|
|
287,394
|
|
|
|
409,878
|
|
Note payable, current portion
|
|
|
|
|
|
|
12,173
|
|
|
|
|
|
Taxes payable
|
|
|
4,674
|
|
|
|
|
|
|
|
6,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,152,527
|
|
|
|
897,011
|
|
|
|
1,260,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
544,992
|
|
|
|
573,760
|
|
|
|
574,473
|
|
Senior floating rate notes payable, long-term portion
|
|
|
|
|
|
|
163,614
|
|
|
|
|
|
Deferred rent and other long-term liabilities
|
|
|
79,857
|
|
|
|
70,951
|
|
|
|
78,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
624,849
|
|
|
|
808,325
|
|
|
|
652,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,777,376
|
|
|
|
1,705,336
|
|
|
|
1,913,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 163,263, 157,414 and
161,007 shares issued and outstanding, respectively
|
|
|
163
|
|
|
|
157
|
|
|
|
161
|
|
Additional
paid-in-capital
|
|
|
1,271,076
|
|
|
|
1,109,130
|
|
|
|
1,208,474
|
|
Accumulated other comprehensive income
|
|
|
34,837
|
|
|
|
13,515
|
|
|
|
31,603
|
|
Retained earnings
|
|
|
684,333
|
|
|
|
358,640
|
|
|
|
622,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,990,409
|
|
|
|
1,481,442
|
|
|
|
1,862,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,767,785
|
|
|
$
|
3,186,778
|
|
|
$
|
3,775,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
2
GAMESTOP
CORP.
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
1,813,617
|
|
|
$
|
1,278,983
|
|
Cost of sales
|
|
|
1,340,211
|
|
|
|
930,214
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
473,406
|
|
|
|
348,769
|
|
Selling, general and administrative expenses
|
|
|
328,667
|
|
|
|
257,116
|
|
Depreciation and amortization
|
|
|
34,836
|
|
|
|
31,035
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
109,903
|
|
|
|
60,618
|
|
Interest income
|
|
|
(4,942
|
)
|
|
|
(3,828
|
)
|
Interest expense
|
|
|
13,430
|
|
|
|
17,944
|
|
Debt extinguishment expense
|
|
|
2,331
|
|
|
|
6,724
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
99,084
|
|
|
|
39,778
|
|
Income tax expense
|
|
|
36,959
|
|
|
|
15,055
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
62,125
|
|
|
$
|
24,723
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share-basic
|
|
$
|
0.38
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock-basic
|
|
|
161,825
|
|
|
|
153,439
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share-diluted
|
|
$
|
0.37
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock-diluted
|
|
|
167,377
|
|
|
|
161,256
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
3
GAMESTOP
CORP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Paid-in
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Capital
|
|
|
Income
|
|
|
Earnings
|
|
|
Total
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Balance at February 2, 2008
|
|
|
161,007
|
|
|
$
|
161
|
|
|
$
|
1,208,474
|
|
|
$
|
31,603
|
|
|
$
|
622,208
|
|
|
$
|
1,862,446
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings for the 13 weeks ended May 3, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,125
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,234
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,359
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
11,766
|
|
|
|
|
|
|
|
|
|
|
|
11,766
|
|
Exercise of stock options and issuance of shares upon vesting of
restricted stock grants (including tax benefit of $32,156)
|
|
|
2,256
|
|
|
|
2
|
|
|
|
50,836
|
|
|
|
|
|
|
|
|
|
|
|
50,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at May 3, 2008
|
|
|
163,263
|
|
|
$
|
163
|
|
|
$
|
1,271,076
|
|
|
$
|
34,837
|
|
|
$
|
684,333
|
|
|
$
|
1,990,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
4
GAMESTOP
CORP.
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
62,125
|
|
|
$
|
24,723
|
|
Adjustments to reconcile net earnings to net cash flows used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
35,148
|
|
|
|
31,187
|
|
Amortization and retirement of deferred financing fees
|
|
|
826
|
|
|
|
2,087
|
|
Amortization and retirement of original issue discount on senior
notes
|
|
|
518
|
|
|
|
449
|
|
Stock-based compensation expense
|
|
|
11,766
|
|
|
|
6,962
|
|
Deferred taxes
|
|
|
2,328
|
|
|
|
(1,393
|
)
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
(30,044
|
)
|
|
|
(48,343
|
)
|
Loss on disposal of property and equipment
|
|
|
666
|
|
|
|
389
|
|
Increase in deferred rent and other long-term liabilities
|
|
|
4,659
|
|
|
|
5,472
|
|
Increase in liability to landlords for tenant allowances, net
|
|
|
1,358
|
|
|
|
628
|
|
Change in the value of foreign exchange contracts
|
|
|
2,011
|
|
|
|
319
|
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
(9,351
|
)
|
|
|
(3,457
|
)
|
Merchandise inventories
|
|
|
(171,929
|
)
|
|
|
(106,393
|
)
|
Prepaid expenses and other current assets
|
|
|
(413
|
)
|
|
|
(4,897
|
)
|
Prepaid taxes
|
|
|
28,760
|
|
|
|
11,329
|
|
Accounts payable and accrued liabilities
|
|
|
(139,135
|
)
|
|
|
(213,545
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(200,707
|
)
|
|
|
(294,483
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(36,405
|
)
|
|
|
(28,027
|
)
|
Acquisitions, net of cash acquired
|
|
|
(16,995
|
)
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(53,400
|
)
|
|
|
(27,677
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(30,000
|
)
|
|
|
(106,386
|
)
|
Issuance of shares relating to stock options
|
|
|
20,426
|
|
|
|
29,971
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
30,044
|
|
|
|
48,343
|
|
Net (increase) decrease in other noncurrent assets and deferred
financing fees
|
|
|
(4,361
|
)
|
|
|
4,337
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
16,109
|
|
|
|
(23,735
|
)
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
6,570
|
|
|
|
820
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(231,428
|
)
|
|
|
(345,075
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
857,414
|
|
|
|
652,403
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
625,986
|
|
|
$
|
307,328
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
5
GameStop Corp. (together with its predecessor companies,
GameStop, we, our, or the
Company), a Delaware corporation, is the
worlds largest retailer of video games and entertainment
software. The unaudited consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. All dollar and share amounts in the
consolidated financial statements and notes to the consolidated
financial statements are stated in thousands of
U.S. dollars unless otherwise indicated.
The unaudited consolidated financial statements included herein
reflect all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of the Companys
management, necessary for a fair presentation of the information
for the periods presented. These consolidated financial
statements are condensed and, therefore, do not include all of
the information and footnotes required by generally accepted
accounting principles. These consolidated financial statements
should be read in conjunction with the Companys annual
report on
Form 10-K
for the 52 weeks ended February 2, 2008 (fiscal
2007). The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. In preparing these
financial statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. Changes in
the estimates and assumptions used by management could have
significant impact on the Companys financial results.
Actual results could differ from those estimates.
Due to the seasonal nature of the business, the results of
operations for the 13 weeks ended May 3, 2008 are not
indicative of the results to be expected for the 52 weeks
ending January 31, 2009 (fiscal 2008).
Certain reclassifications have been made to conform the prior
period data to the current interim period presentation.
|
|
2.
|
Change in
Accounting Principles
|
Effective February 3, 2008, the Company implemented
Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards No. 157
(SFAS 157), Fair Value Measurements,
which defines fair value, establishes a framework for its
measurement and expands disclosures about fair value
measurements. The Company elected to implement this Statement
with the one-year deferral permitted by FASB Staff Position
(FSP)
157-2 for
nonfinancial assets and nonfinancial liabilities measured at
fair value, except those that are recognized or disclosed on a
recurring basis (at least annually). We do not expect any
significant impact to our consolidated financial statements when
we implement SFAS 157 for these assets and liabilities.
Due to our election under
FSP 157-2,
for fiscal 2008, SFAS 157 applies to our foreign exchange
contracts, foreign currency options and cross-currency swaps
(together, the Foreign Currency Contracts),
Company-owned life insurance policies with a cash surrender
value and certain nonqualified deferred compensation liabilities
that are measured at fair value on a recurring basis in periods
subsequent to initial recognition. The implementation of
SFAS 157 did not result in a significant change in the
method of calculating fair value of assets or liabilities. The
primary impact from adoption was additional disclosures.
SFAS 157 requires disclosures that categorize assets and
liabilities measured at fair value into one of three different
levels depending on the observability of the inputs employed in
the measurement. Level 1 inputs are quoted prices in active
markets for identical assets or liabilities. Level 2 inputs
are observable inputs other than quoted prices included within
Level 1 for the asset or liability, either directly or
indirectly through market-corroborated inputs. Level 3
inputs are unobservable inputs for the asset or liability
reflecting our assumptions about pricing by market participants.
6
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We value our Foreign Currency Contracts, Company-owned life
insurance policies with cash surrender values and certain
nonqualified deferred compensation liabilities based on
Level 2 inputs using quotations provided by major market
news services, such as Bloomberg and The Wall Street Journal,
and industry-standard models that consider various assumptions,
including quoted forward prices, time value, volatility factors,
and contractual prices for the underlying instruments, as well
as other relevant economic measures. When appropriate,
valuations are adjusted to reflect credit considerations,
generally based on available market evidence.
The following table provides the fair value of our financial
assets and liabilities measured on a recurring basis and
recorded on our condensed consolidated balance sheet as of
May 3, 2008:
|
|
|
|
|
|
|
May 3, 2008
|
|
|
|
Level 2
|
|
|
|
(In thousands)
|
|
|
Assets
|
|
|
|
|
Foreign currency contracts
|
|
$
|
1,883
|
|
Company owned life insurance
|
|
|
3,441
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,324
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Foreign currency contracts
|
|
$
|
12,610
|
|
Nonqualified deferred compensation
|
|
|
1,449
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
14,059
|
|
|
|
|
|
|
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities
(SFAS 159). This Statement permits entities
the option to measure many financial instruments and certain
other items at fair value at specific election dates. Unrealized
gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 was
effective for our Company on February 3, 2008. The adoption
of SFAS 159 did not have a material impact on our
consolidated financial statements.
|
|
3.
|
Business
Combinations and Goodwill
|
On April 5, 2008, the Company purchased all the outstanding
stock of Free Record Shop Norway AS, a Norwegian private limited
liability company (FRS), for $16,995, net of cash
acquired. FRS operates 49 record stores in Norway and also
operates office and warehouse facilities in Oslo, Norway. The
Company intends to convert these stores into video game stores
with an inventory assortment similar to its other stores in
Norway. The acquisition was accounted for using the purchase
method of accounting, with the excess of the purchase price over
the net assets acquired, in the amount of $13,069, recorded as
goodwill. The pro forma effect assuming the acquisition of FRS
at the beginning of fiscal 2007 is not material to the
Companys consolidated financial statements.
7
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
4.
|
Accounting
for Stock-Based Compensation
|
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model. This
valuation model requires the use of subjective assumptions,
including expected option life, expected volatility and expected
employee forfeiture rate. The Company uses historical data to
estimate the option life and the employee forfeiture rate, and
uses historical volatility when estimating the stock price
volatility. The options to purchase common stock granted during
the 13 weeks ended May 3, 2008 and May 5, 2007
were 1,362 and 939, respectively, with a weighted-average fair
value estimated at $15.45 and $10.16, respectively, using the
following assumptions:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
Volatility
|
|
|
38.2
|
%
|
|
|
40.5
|
%
|
Risk-free interest rate
|
|
|
2.4
|
%
|
|
|
4.8
|
%
|
Expected life (years)
|
|
|
3.5
|
|
|
|
4.0
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
In the 13 weeks ended May 3, 2008 and May 5,
2007, the Company included compensation expense relating to
stock option grants of $4,820 and $4,176, respectively, in
selling, general and administrative expenses in the accompanying
condensed consolidated statements of operations. As of
May 3, 2008, the unrecognized compensation expense related
to the unvested portion of our stock options was $26,330, which
is expected to be recognized over a weighted average period of
2.2 years. The total intrinsic value of options exercised
during the 13 weeks ended May 3, 2008 and May 5,
2007 were $73,161 and $134,969, respectively.
The restricted stock granted during the 13 weeks ended
May 3, 2008 and May 5, 2007 were 534 shares and
956 shares, respectively. The shares had a fair market
value of $49.95 and $26.68 per share, respectively, and vest in
equal annual installments over three years. During the
13 weeks ended May 3, 2008 and May 5, 2007, the
Company included compensation expense relating to the restricted
share grants in the amount of $6,946 and $2,786, respectively,
in selling, general and administrative expenses in the
accompanying condensed consolidated statements of operations. As
of May 3, 2008, there was $33,944 of unrecognized
compensation expense related to nonvested restricted stock
awards that is expected to be recognized over a weighted average
period of 2.3 years.
8
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Computation
of Net Earnings Per Common Share
|
On February 7, 2007, all outstanding shares of Class B
common stock were converted into shares of Class A common
stock on a one-for-one basis (the Conversion). In
addition, as of February 9, 2007, the Board of Directors of
the Company authorized a two-for-one stock split, effected by a
one-for-one stock dividend to stockholders of record at the
close of business on February 20, 2007, paid on
March 16, 2007 (the Stock Split). The effect of
the Conversion and the Stock Split has been retroactively
applied to all periods presented in the condensed consolidated
financial statements and notes thereto. The Company now has only
Class A common stock outstanding and computes earnings per
share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings per Share. A
reconciliation of shares used in calculating basic and diluted
net earnings per common share follows:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Net earnings
|
|
$
|
62,125
|
|
|
$
|
24,723
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
161,825
|
|
|
|
153,439
|
|
Dilutive effect of options and restricted shares on common stock
|
|
|
5,552
|
|
|
|
7,817
|
|
|
|
|
|
|
|
|
|
|
Common shares and dilutive potential common shares
|
|
|
167,377
|
|
|
|
161,256
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.38
|
|
|
$
|
0.16
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.37
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
The following table contains information on restricted shares
and options to purchase shares of Class A common stock
which were excluded from the computation of diluted earnings per
share because they were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-
|
|
|
Range of
|
|
|
|
|
|
|
Dilutive
|
|
|
Exercise
|
|
|
Expiration
|
|
|
|
Shares
|
|
|
Prices
|
|
|
Dates
|
|
|
|
(In thousands, except per share data)
|
|
|
13 Weeks Ended May 3, 2008
|
|
|
1,302
|
|
|
$
|
49.95
|
|
|
|
2018
|
|
13 Weeks Ended May 5, 2007
|
|
|
900
|
|
|
$
|
26.68
|
|
|
|
2017
|
|
In October 2005, in connection with the Companys merger
with Electronics Boutique Holdings Corp. (EB) (the
merger), the Company entered into a five-year,
$400,000 Credit Agreement (the Revolver), including
a $50,000 letter of credit sub-limit, secured by the assets of
the Company and its U.S. subsidiaries. The Revolver places
certain restrictions on the Company and its
U.S. subsidiaries, including limitations on asset sales,
additional liens and the incurrence of additional indebtedness.
In April 2007, the Company amended the Revolver to extend the
maturity date from October 11, 2010 to April 25, 2012,
reduce the LIBO interest rate margin, reduce and fix the rate of
the unused commitment fee and modify or delete certain other
covenants.
The availability under the Revolver is limited to a borrowing
base which allows the Company to borrow up to the lesser of
(x) approximately 70% of eligible inventory and
(y) 90% of the appraisal value of the inventory, in each
case plus 85% of eligible credit card receivables, net of
certain reserves. Letters of credit reduce the amount available
to borrow by their face value. The Companys ability to pay
cash dividends, redeem options and repurchase shares is
generally prohibited, except that if availability under the
Revolver is or will be after any such payment equal to or
greater than 25% of the borrowing base, the Company may
repurchase its capital stock and pay
9
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
cash dividends. In addition, in the event that credit extensions
under the Revolver at any time exceed 80% of the lesser of the
total commitment or the borrowing base, the Company will be
subject to a fixed charge coverage ratio covenant of 1.5:1.0.
The interest rate on the Revolver is variable and, at the
Companys option, is calculated by applying a margin of
(1) 0.0% to 0.25% above the higher of the prime rate of the
administrative agent or the federal funds effective rate plus
0.50% or (2) 1.00% to 1.50% above the LIBO rate. The
applicable margin is determined quarterly as a function of the
Companys consolidated leverage ratio. As of May 3,
2008, the applicable margin was 0.0% for prime rate loans and
1.00% for LIBO rate loans. In addition, the Company is required
to pay a commitment fee of 0.25% for any unused portion of the
total commitment under the Revolver. As of May 3, 2008,
there were no borrowings outstanding under the Revolver and
letters of credit outstanding totaled $7,046.
In September 2007, the Companys Luxembourg subsidiary
entered into a discretionary, $20,000 Uncommitted Line of Credit
(the Line of Credit) with Bank of America. There is
no term associated with the Line of Credit and Bank of America
may withdraw the facility at any time without notice. The Line
of Credit will be made available to the Companys foreign
subsidiaries for use primarily as a bank overdraft facility for
short term liquidity needs and for the issuance of bank
guarantees and letters of credit to support operations. As of
May 3, 2008, there were no borrowings outstanding under the
Line of Credit and bank guarantees outstanding totaled $4,435.
In September 2005, the Company, along with GameStop, Inc. as
co-issuer (together with the Company, the Issuers),
completed the offering of U.S. $300,000 aggregate principal
amount of Senior Floating Rate Notes due 2011 (the Senior
Floating Rate Notes) and U.S. $650,000 aggregate
principal amount of Senior Notes due 2012 (the Senior
Notes and, together with the Senior Floating Rate Notes,
the Notes). The Notes were issued under an Indenture
(the Indenture), dated September 28, 2005, by
and among the Issuers, the subsidiary guarantors party thereto,
and Citibank, N.A., as trustee (the Trustee). The
net proceeds of the offering were used to pay the cash portion
of the merger consideration paid to the stockholders of EB in
connection with the merger.
The Senior Notes bear interest at 8.0% per annum, mature on
October 1, 2012 and were priced at 98.688%, resulting in a
discount at the time of issue of $8,528. The discount is being
amortized using the effective interest method. As of May 3,
2008, the unamortized original issue discount was $5,008. The
rate of interest on the Senior Floating Rate Notes prior to
their redemption on October 1, 2007 was 9.2350% per annum.
The Issuers pay interest on the Senior Notes semi-annually, in
arrears, every April 1 and October 1, to holders of record
on the immediately preceding March 15 and September 15, and
at maturity.
The Indenture contains affirmative and negative covenants
customary for such financings, including, among other things,
limitations on (1) the incurrence of additional debt,
(2) restricted payments, (3) liens, (4) sale and
leaseback transactions and (5) asset sales. Events of
default provided for in the Indenture include, among other
things, failure to pay interest or principal on the Notes, other
breaches of covenants in the Indenture, and certain events of
bankruptcy and insolvency. As of May 3, 2008, the Company
was in compliance with all covenants associated with the
Revolver and the Indenture.
Under certain conditions, the Issuers may on any one or more
occasions prior to maturity redeem up to 100% of the aggregate
principal amount of Senior Notes issued under the Indenture at
redemption prices at or in excess of 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the
redemption date. The circumstances which would limit the
percentage of the Notes which may be redeemed or which would
require the Company to pay a premium in excess of 100% of the
principal amount are defined in the Indenture. Upon a Change of
Control (as defined in the Indenture), the Issuers are required
to offer to purchase all of the Notes then outstanding at 101%
of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase. The Issuers may
acquire Senior Notes by means other than redemption, whether by
tender offer, open market purchases, negotiated transactions or
otherwise, in accordance with applicable securities laws, so
long as such acquisitions do not otherwise violate the terms of
the Indenture.
10
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In May 2006, the Company announced that its Board of Directors
authorized the buyback of up to an aggregate of $100,000 of its
Senior Floating Rate Notes and Senior Notes. As of
February 3, 2007, the Company had repurchased the maximum
authorized amount, having acquired $50,000 of its Senior Notes
and $50,000 of its Senior Floating Rate Notes, and delivered the
Notes to the Trustee for cancellation.
On February 9, 2007, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $150,000 of its Senior Notes and Senior Floating Rate
Notes. As of May 5, 2007, the Company repurchased $106,386
of the Notes, having acquired $20,000 of its Senior Notes and
$86,386 of its Senior Floating Rate Notes, and delivered the
Notes to the Trustee for cancellation. The associated loss on
retirement of this debt was $6,724, which consists of the
premium paid to retire the Notes and the write-off of the
deferred financing fees and the original issue discount on the
Notes. As of February 2, 2008, the Company repurchased an
additional $43,614 of its Senior Floating Rate Notes to complete
the $150,000 buyback in fiscal 2007.
On June 28, 2007, the Company announced that its Board of
Directors authorized the redemption of the remaining $120,000 of
Senior Floating Rate Notes outstanding. The Company redeemed the
Senior Floating Rate Notes on October 1, 2007 at the
redemption price specified by the Senior Floating Rate Notes of
102.0%, plus all accrued and unpaid interest through the
redemption date. The Company incurred a one-time pre-tax charge
of $3,840 associated with the redemption, which represents a
$2,400 redemption premium and $1,440 to recognize unamortized
deferred financing costs.
On February 7, 2008, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $130,000 of its Senior Notes. The timing and amount
of the repurchases will be determined by the Companys
management based on their evaluation of market conditions and
other factors. In addition, the repurchases may be suspended or
discontinued at any time. As of May 3, 2008, the Company
had repurchased $30,000 of its Senior Notes pursuant to this new
authorization and delivered the Senior Notes to the Trustee for
cancellation. The associated loss on retirement of debt is
$2,331, which consists of the premium paid to retire the Senior
Notes and the write-off of the deferred financing fees and the
original issue discount on the Senior Notes.
During October 2007, the Company paid the final principal
payment of $12,173 to Barnes & Noble, Inc.
(Barnes & Noble) on the promissory note
that was issued in connection with the repurchase of
GameStops common stock held by Barnes & Noble,
satisfying the promissory note in full. The note was unsecured
and bore interest at 5.5% per annum.
11
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Comprehensive income is net earnings, plus certain other items
that are recorded directly to stockholders equity, and
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net earnings
|
|
$
|
62,125
|
|
|
$
|
24,723
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
3,234
|
|
|
|
10,288
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
$
|
65,359
|
|
|
$
|
35,011
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries file income tax returns in the
U.S. federal jurisdiction and various states and foreign
jurisdictions. The Company is no longer subject to
U.S. federal income tax examination by tax authorities for
years before and including the fiscal year ended
January 31, 2004 (fiscal 2003). The Internal
Revenue Service (IRS) commenced an examination of
the Companys U.S. income tax returns for the fiscal
years ended January 29, 2005 (fiscal 2004) and
January 28, 2006 (fiscal 2005) in the first
quarter of fiscal 2007 that is anticipated to be completed in
2008. The Company does not anticipate any adjustments that would
result in a material impact on its consolidated financial
statements.
For the quarter ended May 3, 2008, the Company recognized a
$657 decrease in the liability for unrecognized tax benefits and
an increase of $321 for interest and penalties. As of
May 3, 2008, the gross amount of unrecognized tax benefits,
interest and penalties was $23,889. The total amount of
unrecognized tax benefit that, if recognized, would affect the
effective tax rate was $19,892 as of May 3, 2008. The
Company had $3,997 in interest and penalties related to
unrecognized tax benefits as of May 3, 2008.
It is reasonably possible that the amount of the unrecognized
benefit with respect to certain of our unrecognized tax
positions could significantly increase or decrease within the
next 12 months as a result of settling ongoing audits. At
this time, an estimate of the range of the reasonably possible
outcomes cannot be made.
The tax provisions for the 13 weeks ended May 3, 2008
and May 5, 2007 are based upon managements estimate
of the Companys annualized effective tax rate.
|
|
9.
|
Certain
Relationships and Related Transactions
|
The Company operates departments within nine bookstores operated
by Barnes & Noble, a stockholder of the Company until
November 2004 and an affiliate through a common stockholder who
is the chairman of the Board of Directors of Barnes &
Noble and a member of the Companys Board of Directors. The
Company pays a license fee to Barnes & Noble on the
gross sales of such departments. Management deems the license
fee to be reasonable and based upon terms equivalent to those
that would prevail in an arms length transaction. During
the 13 weeks ended May 3, 2008 and May 5, 2007,
these charges amounted to $294 and $232, respectively.
Until June 2005, GameStop participated in Barnes &
Nobles workers compensation, property and general
liability insurance programs. The costs incurred by
Barnes & Noble under these programs were allocated to
GameStop based upon total payroll expense, property and
equipment, and insurance claim history of GameStop. Management
deemed the allocation methodology to be reasonable. Although the
Company secured its own insurance coverage, costs will likely
continue to be incurred by Barnes & Noble on insurance
claims which were incurred under its programs prior to June 2005
and any such costs applicable to insurance claims against the
12
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Company will be allocated to the Company. During the
13 weeks ended May 3, 2008 and May 5, 2007, these
allocated charges amounted to $73 and $66, respectively.
In October 2004, the Companys Board of Directors
authorized a repurchase of the common stock held by
Barnes & Noble. The Company repurchased
12,214 shares of its common stock at a price equal to $9.13
per share for aggregate consideration before expenses of
$111,520. The Company paid $37,500 in cash and issued a
promissory note in the principal amount of $74,020, which was
payable in installments and bore interest at 5.5% per annum,
payable when principal installments were due. The Companys
final scheduled principal payment of $12,173 was paid in October
2007. Interest expense on the promissory note for the
13 weeks ended May 5, 2007 totaled $169.
In May 2005, we entered into an arrangement with
Barnes & Noble under which www.gamestop.com
became the exclusive specialty video game retailer listed on
www.bn.com, Barnes & Nobles
e-commerce
site. Under the terms of this agreement, the Company pays a fee
to Barnes & Noble for sales of video game or PC
entertainment products sold through www.bn.com. For the
13 weeks ended May 3, 2008 and May 5, 2007, the
fee to Barnes & Noble totaled $71 and $54,
respectively.
|
|
10.
|
Commitments
and Contingencies
|
On February 14, 2005, and as amended, Steve Strickland, as
personal representative of the Estate of Arnold Strickland,
deceased, Henry Mealer, as personal representative of the Estate
of Ace Mealer, deceased, and Willie Crump, as personal
representative of the Estate of James Crump, deceased, filed a
wrongful death lawsuit against GameStop, Sony, Take-Two
Interactive, Rock Star Games and Wal-Mart (collectively, the
Defendants) and Devin Moore, alleging that
Defendants actions in designing, manufacturing, marketing
and supplying Defendant Moore with violent video games were
negligent and contributed to Defendant Moore killing Arnold
Strickland, Ace Mealer and James Crump. Moore was found guilty
of capital murder in a criminal trial and was sentenced to death
in August 2005.
The courts scheduling order anticipated a Frye hearing in
April 2007, at which plaintiffs causation theory and
experts credentials were to be challenged. However, that
hearing did not take place and plaintiffs Alabama and
Florida counsel withdrew. New Alabama counsel has entered their
appearance for plaintiffs and a new scheduling order for the
Frye expert-causation hearing has been set. It is anticipated
that the issue of the admissibility of plaintiffs expert
testimony will be decided in late fall 2008. There is no current
trial date. The Company does not believe there is sufficient
information to estimate the amount of the possible loss, if any,
resulting from the lawsuit.
In the ordinary course of the Companys business, the
Company is, from time to time, subject to various other legal
proceedings. Management does not believe that any such other
legal proceedings, individually or in the aggregate, will have a
material adverse effect on the Companys financial
condition or results of operations.
In 2003, the Company purchased a 51% controlling interest in
GameStop Group Limited. Under the terms of the purchase
agreement, the minority interest owners of the remaining 49%
have the ability to require the Company to purchase their
remaining shares in incremental percentages at a price to be
determined based partially on the Companys price to
earnings ratio and GameStop Group Limiteds earnings. On
May 21, 2008, the minority interest owners exercised their
right to sell one-third of their shares, or 16% of GameStop
Group Limited, to the Company under the terms of the original
purchase agreement. The transaction was completed in June 2008
for $27,111. The Company already consolidates the results of
GameStop Group Limited; therefore, the additional acquisition
will not have a material effect on the Companys financial
statements.
13
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company is principally engaged in the sale of new and used
video game systems and software, personal computer entertainment
software and related accessories. The following table sets forth
sales (in millions) by significant product category for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
339.0
|
|
|
|
18.7
|
%
|
|
$
|
281.4
|
|
|
|
22.0
|
%
|
New video game software
|
|
|
792.8
|
|
|
|
43.7
|
%
|
|
|
460.6
|
|
|
|
36.0
|
%
|
Used video game products
|
|
|
415.7
|
|
|
|
22.9
|
%
|
|
|
326.4
|
|
|
|
25.5
|
%
|
Other
|
|
|
266.1
|
|
|
|
14.7
|
%
|
|
|
210.6
|
|
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,813.6
|
|
|
|
100.0
|
%
|
|
$
|
1,279.0
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products include PC entertainment and other software and
accessories, magazines and character-related merchandise.
The following table sets forth gross profit (in millions) and
gross profit percentages by significant product category for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
20.4
|
|
|
|
6.0
|
%
|
|
$
|
21.6
|
|
|
|
7.7
|
%
|
New video game software
|
|
|
156.6
|
|
|
|
19.8
|
%
|
|
|
91.8
|
|
|
|
19.9
|
%
|
Used video game products
|
|
|
204.1
|
|
|
|
49.1
|
%
|
|
|
164.3
|
|
|
|
50.3
|
%
|
Other
|
|
|
92.3
|
|
|
|
34.7
|
%
|
|
|
71.1
|
|
|
|
33.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
473.4
|
|
|
|
26.1
|
%
|
|
$
|
348.8
|
|
|
|
27.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company operates its business in the following segments:
United States, Canada, Australia and Europe. Segment results for
the United States include retail operations in 50 states,
the District of Columbia, Puerto Rico and Guam, electronic
commerce websites under the names www.gamestop.com and
www.ebgames.com and Game Informer magazine.
Segment results for Canada include retail operations in Canada
and segment results for Australia include retail operations in
Australia and New Zealand. Segment results for Europe include
retail operations in 12 European countries.
14
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company measures segment profit using operating earnings,
which is defined as income from continuing operations before
intercompany royalty fees, net interest expense and income
taxes. The basis of segmentation and the measurement of segment
profit or loss have not changed since the end of fiscal 2007 and
there have been no material changes in total assets by segment
since February 2, 2008. Transactions between reportable
segments consist primarily of royalties, management fees,
intersegment loans and related interest. Information on segments
appears in the following tables.
Net sales by operating segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
United States
|
|
$
|
1,377,131
|
|
|
$
|
1,004,089
|
|
Canada
|
|
|
128,903
|
|
|
|
80,077
|
|
Australia
|
|
|
103,431
|
|
|
|
72,259
|
|
Europe
|
|
|
204,152
|
|
|
|
122,558
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,813,617
|
|
|
$
|
1,278,983
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings (loss) were as follows:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
United States
|
|
$
|
92,757
|
|
|
$
|
53,607
|
|
Canada
|
|
|
5,802
|
|
|
|
3,652
|
|
Australia
|
|
|
7,814
|
|
|
|
4,470
|
|
Europe
|
|
|
3,530
|
|
|
|
(1,111
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
109,903
|
|
|
$
|
60,618
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Supplemental
Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
24,862
|
|
|
$
|
28,086
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
4,876
|
|
|
$
|
4,805
|
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
Consolidating
Financial Statements
|
In order to finance the merger, as described in Note 6, on
September 28, 2005, the Company, along with GameStop, Inc.
as co-issuer, completed the offering of the Notes. As of
February 2, 2008, the Senior Floating Rate Notes have been
completely redeemed. The direct and indirect
U.S. wholly-owned subsidiaries of the Company, excluding
GameStop, Inc., as co-issuer, have guaranteed the Senior Notes
on a senior unsecured basis with unconditional guarantees.
The following condensed consolidating financial statements
present the financial position as of May 3, 2008,
May 5, 2007 and February 2, 2008 and results of
operations and cash flows for the 13 weeks ended
May 3, 2008 and May 5, 2007 of the Companys
guarantor and non-guarantor subsidiaries.
15
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
May 3,
|
|
|
May 3,
|
|
|
|
|
|
May 3,
|
|
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
538,724
|
|
|
$
|
87,262
|
|
|
$
|
|
|
|
$
|
625,986
|
|
Receivables, net
|
|
|
210,089
|
|
|
|
22,377
|
|
|
|
(165,804
|
)
|
|
|
66,662
|
|
Merchandise inventories, net
|
|
|
626,010
|
|
|
|
362,574
|
|
|
|
|
|
|
|
988,584
|
|
Prepaid expenses and other current assets
|
|
|
37,775
|
|
|
|
18,828
|
|
|
|
|
|
|
|
56,603
|
|
Deferred taxes
|
|
|
21,526
|
|
|
|
3,238
|
|
|
|
|
|
|
|
24,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,434,124
|
|
|
|
494,279
|
|
|
|
(165,804
|
)
|
|
|
1,762,599
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
9,362
|
|
|
|
|
|
|
|
12,032
|
|
Buildings and leasehold improvements
|
|
|
254,574
|
|
|
|
141,704
|
|
|
|
|
|
|
|
396,278
|
|
Fixtures and equipment
|
|
|
442,539
|
|
|
|
117,512
|
|
|
|
|
|
|
|
560,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
699,783
|
|
|
|
268,578
|
|
|
|
|
|
|
|
968,361
|
|
Less accumulated depreciation and amortization
|
|
|
354,850
|
|
|
|
96,622
|
|
|
|
|
|
|
|
451,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
344,933
|
|
|
|
171,956
|
|
|
|
|
|
|
|
516,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
555,065
|
|
|
|
|
|
|
|
(555,065
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,096,622
|
|
|
|
318,887
|
|
|
|
|
|
|
|
1,415,509
|
|
Deferred financing fees
|
|
|
8,116
|
|
|
|
20
|
|
|
|
|
|
|
|
8,136
|
|
Deferred taxes
|
|
|
7,378
|
|
|
|
21,681
|
|
|
|
|
|
|
|
29,059
|
|
Other noncurrent assets
|
|
|
17,240
|
|
|
|
18,353
|
|
|
|
|
|
|
|
35,593
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,684,421
|
|
|
|
358,941
|
|
|
|
(555,065
|
)
|
|
|
1,488,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,463,478
|
|
|
$
|
1,025,176
|
|
|
$
|
(720,869
|
)
|
|
$
|
3,767,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT):
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
595,716
|
|
|
$
|
186,211
|
|
|
$
|
|
|
|
$
|
781,927
|
|
Accrued liabilities
|
|
|
274,775
|
|
|
|
256,955
|
|
|
|
(165,804
|
)
|
|
|
365,926
|
|
Taxes payable
|
|
|
(11,336
|
)
|
|
|
16,010
|
|
|
|
|
|
|
|
4,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
859,155
|
|
|
|
459,176
|
|
|
|
(165,804
|
)
|
|
|
1,152,527
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
544,992
|
|
|
|
|
|
|
|
|
|
|
|
544,992
|
|
Deferred rent and other long-term liabilities
|
|
|
68,922
|
|
|
|
10,935
|
|
|
|
|
|
|
|
79,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
613,914
|
|
|
|
10,935
|
|
|
|
|
|
|
|
624,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,473,069
|
|
|
|
470,111
|
|
|
|
(165,804
|
)
|
|
|
1,777,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 163,263 shares issued and
outstanding
|
|
|
163
|
|
|
|
|
|
|
|
|
|
|
|
163
|
|
Additional
paid-in-capital
|
|
|
1,271,076
|
|
|
|
388,139
|
|
|
|
(388,139
|
)
|
|
|
1,271,076
|
|
Accumulated other comprehensive income (loss)
|
|
|
34,837
|
|
|
|
12,110
|
|
|
|
(12,110
|
)
|
|
|
34,837
|
|
Retained earnings
|
|
|
684,333
|
|
|
|
154,816
|
|
|
|
(154,816
|
)
|
|
|
684,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
1,990,409
|
|
|
|
555,065
|
|
|
|
(555,065
|
)
|
|
|
1,990,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
3,463,478
|
|
|
$
|
1,025,176
|
|
|
$
|
(720,869
|
)
|
|
$
|
3,767,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
May 5,
|
|
|
May 5,
|
|
|
|
|
|
May 5,
|
|
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
252,057
|
|
|
$
|
55,271
|
|
|
$
|
|
|
|
$
|
307,328
|
|
Receivables, net
|
|
|
136,207
|
|
|
|
9,347
|
|
|
|
(106,698
|
)
|
|
|
38,856
|
|
Merchandise inventories, net
|
|
|
553,489
|
|
|
|
240,028
|
|
|
|
|
|
|
|
793,517
|
|
Prepaid expenses and other current assets
|
|
|
31,458
|
|
|
|
14,263
|
|
|
|
|
|
|
|
45,721
|
|
Prepaid taxes
|
|
|
54,950
|
|
|
|
(2,814
|
)
|
|
|
|
|
|
|
52,136
|
|
Deferred taxes
|
|
|
34,394
|
|
|
|
1,826
|
|
|
|
|
|
|
|
36,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,062,555
|
|
|
|
317,921
|
|
|
|
(106,698
|
)
|
|
|
1,273,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
8,498
|
|
|
|
|
|
|
|
11,168
|
|
Buildings and leasehold improvements
|
|
|
218,128
|
|
|
|
100,087
|
|
|
|
|
|
|
|
318,215
|
|
Fixtures and equipment
|
|
|
362,061
|
|
|
|
85,588
|
|
|
|
|
|
|
|
447,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
582,859
|
|
|
|
194,173
|
|
|
|
|
|
|
|
777,032
|
|
Less accumulated depreciation and amortization
|
|
|
259,911
|
|
|
|
57,365
|
|
|
|
|
|
|
|
317,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
322,948
|
|
|
|
136,808
|
|
|
|
|
|
|
|
459,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
484,562
|
|
|
|
|
|
|
|
(484,562
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,097,739
|
|
|
|
305,818
|
|
|
|
|
|
|
|
1,403,557
|
|
Deferred financing fees
|
|
|
12,531
|
|
|
|
18
|
|
|
|
|
|
|
|
12,549
|
|
Deferred taxes
|
|
|
(5,787
|
)
|
|
|
13,047
|
|
|
|
|
|
|
|
7,260
|
|
Other noncurrent assets
|
|
|
18,483
|
|
|
|
11,395
|
|
|
|
|
|
|
|
29,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,607,528
|
|
|
|
330,278
|
|
|
|
(484,562
|
)
|
|
|
1,453,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,993,031
|
|
|
$
|
785,007
|
|
|
$
|
(591,260
|
)
|
|
$
|
3,186,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT):
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
463,956
|
|
|
$
|
133,488
|
|
|
$
|
|
|
|
$
|
597,444
|
|
Accrued liabilities
|
|
|
234,041
|
|
|
|
160,051
|
|
|
|
(106,698
|
)
|
|
|
287,394
|
|
Note payable, current portion
|
|
|
12,173
|
|
|
|
|
|
|
|
|
|
|
|
12,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
710,170
|
|
|
|
293,539
|
|
|
|
(106,698
|
)
|
|
|
897,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
573,760
|
|
|
|
|
|
|
|
|
|
|
|
573,760
|
|
Senior floating rate notes payable, long-term portion
|
|
|
163,614
|
|
|
|
|
|
|
|
|
|
|
|
163,614
|
|
Deferred rent and other long-term liabilities
|
|
|
64,045
|
|
|
|
6,906
|
|
|
|
|
|
|
|
70,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
801,419
|
|
|
|
6,906
|
|
|
|
|
|
|
|
808,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,511,589
|
|
|
|
300,445
|
|
|
|
(106,698
|
)
|
|
|
1,705,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 157,414 shares issued and
outstanding
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
157
|
|
Additional
paid-in-capital
|
|
|
1,109,130
|
|
|
|
389,441
|
|
|
|
(389,441
|
)
|
|
|
1,109,130
|
|
Accumulated other comprehensive income (loss)
|
|
|
13,515
|
|
|
|
1,613
|
|
|
|
(1,613
|
)
|
|
|
13,515
|
|
Retained earnings
|
|
|
358,640
|
|
|
|
93,508
|
|
|
|
(93,508
|
)
|
|
|
358,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
1,481,442
|
|
|
|
484,562
|
|
|
|
(484,562
|
)
|
|
|
1,481,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
2,993,031
|
|
|
$
|
785,007
|
|
|
$
|
(591,260
|
)
|
|
$
|
3,186,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
February 2,
|
|
|
February 2,
|
|
|
|
|
|
February 2,
|
|
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
671,333
|
|
|
$
|
186,081
|
|
|
$
|
|
|
|
$
|
857,414
|
|
Receivables, net
|
|
|
198,923
|
|
|
|
22,616
|
|
|
|
(165,520
|
)
|
|
|
56,019
|
|
Merchandise inventories, net
|
|
|
501,861
|
|
|
|
299,164
|
|
|
|
|
|
|
|
801,025
|
|
Prepaid expenses and other current assets
|
|
|
37,119
|
|
|
|
15,659
|
|
|
|
|
|
|
|
52,778
|
|
Deferred taxes
|
|
|
24,153
|
|
|
|
3,328
|
|
|
|
|
|
|
|
27,481
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,433,389
|
|
|
|
526,848
|
|
|
|
(165,520
|
)
|
|
|
1,794,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
9,200
|
|
|
|
|
|
|
|
11,870
|
|
Buildings and leasehold improvements
|
|
|
246,907
|
|
|
|
131,704
|
|
|
|
|
|
|
|
378,611
|
|
Fixtures and equipment
|
|
|
427,623
|
|
|
|
111,115
|
|
|
|
|
|
|
|
538,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
677,200
|
|
|
|
252,019
|
|
|
|
|
|
|
|
929,219
|
|
Less accumulated depreciation and amortization
|
|
|
331,176
|
|
|
|
86,374
|
|
|
|
|
|
|
|
417,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
346,024
|
|
|
|
165,645
|
|
|
|
|
|
|
|
511,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
|
|
|
543,088
|
|
|
|
|
|
|
|
(543,088
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,096,622
|
|
|
|
305,818
|
|
|
|
|
|
|
|
1,402,440
|
|
Deferred financing fees
|
|
|
8,943
|
|
|
|
20
|
|
|
|
|
|
|
|
8,963
|
|
Deferred taxes
|
|
|
7,378
|
|
|
|
18,954
|
|
|
|
|
|
|
|
26,332
|
|
Other noncurrent assets
|
|
|
15,155
|
|
|
|
16,615
|
|
|
|
|
|
|
|
31,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
1,671,186
|
|
|
|
341,407
|
|
|
|
(543,088
|
)
|
|
|
1,469,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,450,599
|
|
|
$
|
1,033,900
|
|
|
$
|
(708,608
|
)
|
|
$
|
3,775,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT):
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
635,722
|
|
|
$
|
208,654
|
|
|
$
|
|
|
|
$
|
844,376
|
|
Accrued liabilities
|
|
|
318,314
|
|
|
|
257,084
|
|
|
|
(165,520
|
)
|
|
|
409,878
|
|
Taxes payable
|
|
|
(8,842
|
)
|
|
|
15,145
|
|
|
|
|
|
|
|
6,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
945,194
|
|
|
|
480,883
|
|
|
|
(165,520
|
)
|
|
|
1,260,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
574,473
|
|
|
|
|
|
|
|
|
|
|
|
574,473
|
|
Deferred rent and other long-term liabilities
|
|
|
68,486
|
|
|
|
9,929
|
|
|
|
|
|
|
|
78,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
642,959
|
|
|
|
9,929
|
|
|
|
|
|
|
|
652,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,588,153
|
|
|
|
490,812
|
|
|
|
(165,520
|
)
|
|
|
1,913,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 161,007 shares issued and
outstanding
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
161
|
|
Additional
paid-in-capital
|
|
|
1,208,474
|
|
|
|
385,751
|
|
|
|
(385,751
|
)
|
|
|
1,208,474
|
|
Accumulated other comprehensive income (loss)
|
|
|
31,603
|
|
|
|
11,262
|
|
|
|
(11,262
|
)
|
|
|
31,603
|
|
Retained earnings
|
|
|
622,208
|
|
|
|
146,075
|
|
|
|
(146,075
|
)
|
|
|
622,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit)
|
|
|
1,862,446
|
|
|
|
543,088
|
|
|
|
(543,088
|
)
|
|
|
1,862,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity (deficit)
|
|
$
|
3,450,599
|
|
|
$
|
1,033,900
|
|
|
$
|
(708,608
|
)
|
|
$
|
3,775,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
May 3,
|
|
|
May 3,
|
|
|
|
|
|
May 3,
|
|
For the 13 Weeks Ended May 3, 2008
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
1,377,131
|
|
|
$
|
436,486
|
|
|
$
|
|
|
|
$
|
1,813,617
|
|
Cost of sales
|
|
|
1,013,201
|
|
|
|
327,010
|
|
|
|
|
|
|
|
1,340,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
363,930
|
|
|
|
109,476
|
|
|
|
|
|
|
|
473,406
|
|
Selling, general and administrative expenses
|
|
|
245,588
|
|
|
|
83,079
|
|
|
|
|
|
|
|
328,667
|
|
Depreciation and amortization
|
|
|
25,585
|
|
|
|
9,251
|
|
|
|
|
|
|
|
34,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
92,757
|
|
|
|
17,146
|
|
|
|
|
|
|
|
109,903
|
|
Interest income
|
|
|
(6,124
|
)
|
|
|
(7,045
|
)
|
|
|
8,227
|
|
|
|
(4,942
|
)
|
Interest expense
|
|
|
12,294
|
|
|
|
9,363
|
|
|
|
(8,227
|
)
|
|
|
13,430
|
|
Debt extinguishment expense
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
84,256
|
|
|
|
14,828
|
|
|
|
|
|
|
|
99,084
|
|
Income tax expense
|
|
|
30,872
|
|
|
|
6,087
|
|
|
|
|
|
|
|
36,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
53,384
|
|
|
$
|
8,741
|
|
|
$
|
|
|
|
$
|
62,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
May 5,
|
|
|
May 5,
|
|
|
|
|
|
May 5,
|
|
For the 13 Weeks Ended May 5, 2007
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
1,004,089
|
|
|
$
|
274,894
|
|
|
$
|
|
|
|
$
|
1,278,983
|
|
Cost of sales
|
|
|
723,528
|
|
|
|
206,686
|
|
|
|
|
|
|
|
930,214
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
280,561
|
|
|
|
68,208
|
|
|
|
|
|
|
|
348,769
|
|
Selling, general and administrative expenses
|
|
|
202,680
|
|
|
|
54,436
|
|
|
|
|
|
|
|
257,116
|
|
Depreciation and amortization
|
|
|
24,274
|
|
|
|
6,761
|
|
|
|
|
|
|
|
31,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
53,607
|
|
|
|
7,011
|
|
|
|
|
|
|
|
60,618
|
|
Interest income
|
|
|
(5,363
|
)
|
|
|
(3,845
|
)
|
|
|
5,380
|
|
|
|
(3,828
|
)
|
Interest expense
|
|
|
17,910
|
|
|
|
5,414
|
|
|
|
(5,380
|
)
|
|
|
17,944
|
|
Debt extinguishment expense
|
|
|
6,724
|
|
|
|
|
|
|
|
|
|
|
|
6,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
34,336
|
|
|
|
5,442
|
|
|
|
|
|
|
|
39,778
|
|
Income tax expense
|
|
|
12,987
|
|
|
|
2,068
|
|
|
|
|
|
|
|
15,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
21,349
|
|
|
$
|
3,374
|
|
|
$
|
|
|
|
$
|
24,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
May 3,
|
|
|
May 3,
|
|
|
|
|
|
May 3,
|
|
For the 13 Weeks Ended May 3, 2008
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
53,384
|
|
|
$
|
8,741
|
|
|
$
|
|
|
|
$
|
62,125
|
|
Adjustments to reconcile net earnings to net cash flows used in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
25,892
|
|
|
|
9,256
|
|
|
|
|
|
|
|
35,148
|
|
Amortization and retirement of deferred financing fees
|
|
|
826
|
|
|
|
|
|
|
|
|
|
|
|
826
|
|
Amortization and retirement of original issue discount on senior
notes
|
|
|
518
|
|
|
|
|
|
|
|
|
|
|
|
518
|
|
Stock-based compensation expense
|
|
|
11,766
|
|
|
|
|
|
|
|
|
|
|
|
11,766
|
|
Deferred taxes
|
|
|
2,627
|
|
|
|
(299
|
)
|
|
|
|
|
|
|
2,328
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
(30,044
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,044
|
)
|
Loss on disposal of property and equipment
|
|
|
566
|
|
|
|
100
|
|
|
|
|
|
|
|
666
|
|
Increase in deferred rent and other long-term liabilities
|
|
|
4,054
|
|
|
|
605
|
|
|
|
|
|
|
|
4,659
|
|
Increase in liability to landlords for tenant allowances, net
|
|
|
1,183
|
|
|
|
175
|
|
|
|
|
|
|
|
1,358
|
|
Change in the value of foreign exchange contracts
|
|
|
2,641
|
|
|
|
(630
|
)
|
|
|
|
|
|
|
2,011
|
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
(10,881
|
)
|
|
|
1,530
|
|
|
|
|
|
|
|
(9,351
|
)
|
Merchandise inventories
|
|
|
(124,149
|
)
|
|
|
(47,780
|
)
|
|
|
|
|
|
|
(171,929
|
)
|
Prepaid expenses and other current assets
|
|
|
(380
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
(413
|
)
|
Prepaid taxes
|
|
|
27,918
|
|
|
|
842
|
|
|
|
|
|
|
|
28,760
|
|
Accounts payable and accrued liabilities
|
|
|
(90,751
|
)
|
|
|
(48,384
|
)
|
|
|
|
|
|
|
(139,135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(124,830
|
)
|
|
|
(75,877
|
)
|
|
|
|
|
|
|
(200,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(25,206
|
)
|
|
|
(11,199
|
)
|
|
|
|
|
|
|
(36,405
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
(16,995
|
)
|
|
|
|
|
|
|
(16,995
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(25,206
|
)
|
|
|
(28,194
|
)
|
|
|
|
|
|
|
(53,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(30,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,000
|
)
|
Issuance of shares relating to stock options
|
|
|
20,426
|
|
|
|
|
|
|
|
|
|
|
|
20,426
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
30,044
|
|
|
|
|
|
|
|
|
|
|
|
30,044
|
|
Net decrease (increase) in other noncurrent assets and deferred
financing fees
|
|
|
(3,043
|
)
|
|
|
(1,318
|
)
|
|
|
|
|
|
|
(4,361
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
17,427
|
|
|
|
(1,318
|
)
|
|
|
|
|
|
|
16,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
|
|
|
|
6,570
|
|
|
|
|
|
|
|
6,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(132,609
|
)
|
|
|
(98,819
|
)
|
|
|
|
|
|
|
(231,428
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
671,333
|
|
|
|
186,081
|
|
|
|
|
|
|
|
857,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
538,724
|
|
|
$
|
87,262
|
|
|
$
|
|
|
|
$
|
625,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
May 5,
|
|
|
May 5,
|
|
|
|
|
|
May 5,
|
|
For the 13 Weeks Ended May 5, 2007
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
21,349
|
|
|
$
|
3,374
|
|
|
$
|
|
|
|
$
|
24,723
|
|
Adjustments to reconcile net earnings to net cash flows used in
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
24,426
|
|
|
|
6,761
|
|
|
|
|
|
|
|
31,187
|
|
Amortization and retirement of deferred financing fees
|
|
|
2,087
|
|
|
|
|
|
|
|
|
|
|
|
2,087
|
|
Amortization and retirement of original issue discount on senior
notes
|
|
|
449
|
|
|
|
|
|
|
|
|
|
|
|
449
|
|
Stock-based compensation expense
|
|
|
6,962
|
|
|
|
|
|
|
|
|
|
|
|
6,962
|
|
Deferred taxes
|
|
|
(1,078
|
)
|
|
|
(315
|
)
|
|
|
|
|
|
|
(1,393
|
)
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
(48,343
|
)
|
|
|
|
|
|
|
|
|
|
|
(48,343
|
)
|
Loss on disposal of property and equipment
|
|
|
525
|
|
|
|
(136
|
)
|
|
|
|
|
|
|
389
|
|
Increase in deferred rent and other long-term liabilities
|
|
|
2,011
|
|
|
|
3,461
|
|
|
|
|
|
|
|
5,472
|
|
Increase in liability to landlords for tenant allowances, net
|
|
|
505
|
|
|
|
123
|
|
|
|
|
|
|
|
628
|
|
Change in the value of foreign exchange contracts
|
|
|
1,541
|
|
|
|
(1,222
|
)
|
|
|
|
|
|
|
319
|
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
(4,252
|
)
|
|
|
795
|
|
|
|
|
|
|
|
(3,457
|
)
|
Merchandise inventories
|
|
|
(58,352
|
)
|
|
|
(48,041
|
)
|
|
|
|
|
|
|
(106,393
|
)
|
Prepaid expenses and other current assets
|
|
|
(519
|
)
|
|
|
(4,378
|
)
|
|
|
|
|
|
|
(4,897
|
)
|
Prepaid taxes
|
|
|
14,225
|
|
|
|
(2,896
|
)
|
|
|
|
|
|
|
11,329
|
|
Accounts payable and accrued liabilities
|
|
|
(251,331
|
)
|
|
|
37,786
|
|
|
|
|
|
|
|
(213,545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(289,795
|
)
|
|
|
(4,688
|
)
|
|
|
|
|
|
|
(294,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(21,959
|
)
|
|
|
(6,068
|
)
|
|
|
|
|
|
|
(28,027
|
)
|
Acquisitions, net of cash acquired
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(21,609
|
)
|
|
|
(6,068
|
)
|
|
|
|
|
|
|
(27,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(106,386
|
)
|
|
|
|
|
|
|
|
|
|
|
(106,386
|
)
|
Issuance of shares relating to stock options
|
|
|
29,971
|
|
|
|
|
|
|
|
|
|
|
|
29,971
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
48,343
|
|
|
|
|
|
|
|
|
|
|
|
48,343
|
|
Net decrease (increase) in other noncurrent assets and deferred
financing fees
|
|
|
9,019
|
|
|
|
(4,682
|
)
|
|
|
|
|
|
|
4,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(19,053
|
)
|
|
|
(4,682
|
)
|
|
|
|
|
|
|
(23,735
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
|
|
|
|
820
|
|
|
|
|
|
|
|
820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(330,457
|
)
|
|
|
(14,618
|
)
|
|
|
|
|
|
|
(345,075
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
582,514
|
|
|
|
69,889
|
|
|
|
|
|
|
|
652,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
252,057
|
|
|
$
|
55,271
|
|
|
$
|
|
|
|
$
|
307,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
ITEM 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion should be read in conjunction with
the information contained in our consolidated financial
statements, including the notes thereto. Statements regarding
future economic performance, managements plans and
objectives, and any statements concerning assumptions related to
the foregoing contained in Managements Discussion and
Analysis of Financial Condition and Results of Operations
constitute forward-looking statements. Certain factors, which
may cause actual results to vary materially from these
forward-looking statements, accompany such statements or appear
in GameStops Annual Report on
Form 10-K
for the fiscal year ended February 2, 2008 filed with the
Securities and Exchange Commission (the SEC) on
April 2, 2008 (the
Form 10-K),
including the factors disclosed under Item 1A. Risk
Factors.
General
GameStop Corp. (together with its predecessor companies,
GameStop, we, our, or the
Company) is the worlds largest retailer of
video game products and PC entertainment software. We sell new
and used video game hardware, video game software and
accessories, as well as PC entertainment software and related
accessories and other merchandise. As of May 3, 2008, we
operated 5,453 stores in the United States, Australia, Canada
and Europe, primarily under the names GameStop and EB Games. We
also operate electronic commerce websites under the names
www.gamestop.com and www.ebgames.com and publish
Game Informer, the industrys largest multi-platform
video game magazine in the United States based on circulation.
Our fiscal year is composed of 52 or 53 weeks ending on the
Saturday closest to January 31. The fiscal years ending
January 31, 2009 (fiscal 2008) and ended
February 2, 2008 (fiscal 2007) consist of
52 weeks.
Growth in the video game industry is driven by the introduction
of new technology. In 2005 in the North American markets, Sony
introduced the PlayStation Portable (the PSP) in
March and Microsoft introduced the Xbox 360 in November. In
November 2006, Nintendo introduced the Wii hardware platform
worldwide and Sony introduced the PlayStation 3 hardware
platform in the North American markets. Sony introduced the
PlayStation 3 platform in the Australian and European markets in
March 2007. Typically, following the introduction of new video
game platforms, sales of new video game hardware increase as a
percentage of total sales in the first full year following
introduction. As video game platforms mature, the sales mix
attributable to complementary video game software and
accessories, which generate higher gross margins, generally
increases in the subsequent years. The net effect is generally a
decline in gross margins in the first full year following new
platform releases and an increase in gross margins in the years
subsequent to the first full year following the launch period.
Unit sales of maturing video game platforms are typically also
driven by manufacturer-funded retail price decreases, further
driving sales of related software and accessories. We expect
that the installed base of the hardware platforms listed above
and sales of related software and accessories will increase in
the future. The Companys gross margin in the 13 weeks
ended May 3, 2008 and May 5, 2007 were impacted by the
recent launches of these new products.
Critical
Accounting Policies
Our consolidated financial statements have been prepared in
accordance with generally accepted accounting principles.
Preparation of these statements requires management to make
judgments and estimates. Some accounting policies have a
significant impact on amounts reported in these financial
statements. For a summary of significant accounting policies and
the means by which we develop estimates thereon, see
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations in our 2007
Annual Report on
Form 10-K.
22
Consolidated
Results of Operations
The following table sets forth certain statement of operations
items as a percentage of sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
73.9
|
|
|
|
72.7
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
26.1
|
|
|
|
27.3
|
|
Selling, general and administrative expenses
|
|
|
18.1
|
|
|
|
20.2
|
|
Depreciation and amortization
|
|
|
1.9
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
6.1
|
|
|
|
4.7
|
|
Interest expense, net
|
|
|
0.5
|
|
|
|
1.1
|
|
Debt extinguishment expense
|
|
|
0.1
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
5.5
|
|
|
|
3.1
|
|
Income tax expense
|
|
|
2.1
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
3.4
|
%
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
The Company includes purchasing, receiving and distribution
costs in selling, general and administrative expenses, rather
than cost of goods sold, in the statement of operations. For the
13 weeks ended May 3, 2008 and May 5, 2007, these
purchasing, receiving and distribution costs amounted to
$12.1 million and $9.1 million, respectively. The
Company includes processing fees associated with purchases made
by check and credit cards in cost of sales, rather than selling,
general and administrative expenses, in the statement of
operations. For the 13 weeks ended May 3, 2008 and
May 5, 2007, these processing fees amounted to
$12.9 million and $9.0 million, respectively. As a
result of these classifications, our gross margins are not
comparable to those retailers that include purchasing, receiving
and distribution costs in cost of sales and include processing
fees associated with purchases made by check and credit cards in
selling, general and administrative expenses. The
reclassifications had no material net effect on the
13 weeks ended May 3, 2008 and May 5, 2007.
The following table sets forth sales (in millions) by
significant product category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
339.0
|
|
|
|
18.7
|
%
|
|
$
|
281.4
|
|
|
|
22.0
|
%
|
New video game software
|
|
|
792.8
|
|
|
|
43.7
|
%
|
|
|
460.6
|
|
|
|
36.0
|
%
|
Used video game products
|
|
|
415.7
|
|
|
|
22.9
|
%
|
|
|
326.4
|
|
|
|
25.5
|
%
|
Other
|
|
|
266.1
|
|
|
|
14.7
|
%
|
|
|
210.6
|
|
|
|
16.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,813.6
|
|
|
|
100.0
|
%
|
|
$
|
1,279.0
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products include PC entertainment and other software and
accessories, magazines and character-related merchandise.
23
The following table sets forth gross profit (in millions) and
gross profit percentages by significant product category for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
20.4
|
|
|
|
6.0
|
%
|
|
$
|
21.6
|
|
|
|
7.7
|
%
|
New video game software
|
|
|
156.6
|
|
|
|
19.8
|
%
|
|
|
91.8
|
|
|
|
19.9
|
%
|
Used video game products
|
|
|
204.1
|
|
|
|
49.1
|
%
|
|
|
164.3
|
|
|
|
50.3
|
%
|
Other
|
|
|
92.3
|
|
|
|
34.7
|
%
|
|
|
71.1
|
|
|
|
33.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
473.4
|
|
|
|
26.1
|
%
|
|
$
|
348.8
|
|
|
|
27.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks
ended May 3, 2008 compared with the 13 weeks ended
May 5, 2007
Sales increased by $534.6 million, or 41.8%, from
$1,279.0 million in the 13 weeks ended May 5,
2007 to $1,813.6 million in the 13 weeks ended
May 3, 2008. The increase in sales was attributable to the
comparable store sales increase of 27.1% for the first quarter
of fiscal 2008, the addition of non-comparable store sales from
the 796 stores opened since February 4, 2007 of
approximately $144.8 million and increases related to
changes in foreign exchange rates of $41.1 million. Stores
are included in our comparable store sales base beginning in the
thirteenth month of operation and exclude the effect of changes
in foreign exchange rates. The comparable store sales increase
was driven by strong sales of new video game software which is
typical as the installed base of the new hardware platforms
increases in the years following their launch. The new software
sales increase was spread across all platforms and included
several strong video game titles, such as Grand Theft
Auto IV and Super Smash Bros. Brawl.
New video game hardware sales increased $57.6 million, or
20.5%, from $281.4 million in the 13 weeks ended
May 5, 2007 to $339.0 million in the 13 weeks
ended May 3, 2008, primarily due to continued expansion of
the installed base of the new hardware platforms and the
increase in store count since the end of the first quarter of
fiscal 2007. New video game software sales increased
$332.2 million, or 72.1%, from $460.6 million in the
13 weeks ended May 5, 2007 to $792.8 million in
the 13 weeks ended May 3, 2008, primarily due to the
strong sales of new video game titles and the increased sales
related to the new hardware systems discussed above, as well as
the new stores added since last year. Used video game product
sales also grew due to an increase in store count and an
increase in the availability of hardware and software associated
with the new hardware platforms as those platforms age and
expand. Used video game product sales increased
$89.3 million, or 27.4%, from $326.4 million in the
13 weeks ended May 5, 2007 to $415.7 million in
the 13 weeks ended May 3, 2008. Sales of other product
categories grew 26.4%, or $55.5 million, from the
13 weeks ended May 5, 2007 to the 13 weeks ended
May 3, 2008, due to the increase in store count and the
increase in new hardware platform accessories sales.
As a percentage of sales, new video game hardware, used video
game products and the other product category decreased in the
13 weeks ended May 3, 2008 compared to the
13 weeks ended May 5, 2007. This was due to the strong
sales of new video game software driven by the continued
expansion of the installed base of the new video game consoles
mentioned earlier and a strong lineup of video game titles
released in the quarter.
Cost of sales increased by $410.0 million, or 44.1%, from
$930.2 million in the 13 weeks ended May 5, 2007
to $1,340.2 million in the 13 weeks ended May 3,
2008 as a result of an increase in sales and the changes in
gross profit discussed below.
Gross profit increased by $124.6 million, or 35.7%, from
$348.8 million in the 13 weeks ended May 5, 2007
to $473.4 million in the 13 weeks ended May 3,
2008. Gross profit as a percentage of sales decreased from 27.3%
in the 13 weeks ended May 5, 2007 to 26.1% in the
13 weeks ended May 3, 2008. The gross profit
percentage decrease was caused primarily by the increase in
sales of new video game software as a percentage of total sales
in the first quarter of fiscal 2008, which resulted in a
decrease in sales of higher margin used video game products and
other
24
products as a percentage of total sales. Gross profit as a
percentage of sales on new video game hardware decreased from
7.7% in the prior year quarter to 6.0% of sales this quarter due
to a change in the mix of hardware units sold and a reduction in
warranty attachment sales during the first quarter of fiscal
2008. Gross profit as a percentage of sales on used video game
products decreased from 50.3% in the 13 weeks ended
May 5, 2007 to 49.1% in the 13 weeks ended May 3,
2008 due to higher refurbishment costs associated with an
increase in production of refurbished hardware platforms during
the first quarter of fiscal 2008.
Selling, general and administrative expenses increased by
$71.6 million, or 27.8%, from $257.1 million in the
13 weeks ended May 5, 2007 to $328.7 million in
the 13 weeks ended May 3, 2008. This increase was
primarily attributable to the increase in the number of stores
in operation and the related increases in store, distribution
and corporate office operating expenses. Selling, general and
administrative expenses as a percentage of sales decreased from
20.2% in the 13 weeks ended May 5, 2007 to 18.1% in
the 13 weeks ended May 3, 2008. The decrease in
selling, general and administrative expenses as a percentage of
sales was primarily due to leveraging as a result of the higher
sales discussed above. Included in selling, general and
administrative expenses is $11.8 million and
$7.0 million in stock-based compensation expense for the
13 weeks ended May 3, 2008 and May 5, 2007,
respectively.
Depreciation and amortization expense increased
$3.8 million from $31.0 million for the 13 weeks
ended May 5, 2007 to $34.8 million in the
13 weeks ended May 3, 2008. This increase was
primarily due to capital expenditures associated with the
opening of 210 new stores during the first quarter of fiscal
2008 and investments in management information systems.
Interest income resulting from the investment of excess cash
balances increased from $3.8 million in the 13 weeks
ended May 5, 2007 to $4.9 million in the 13 weeks
ended May 3, 2008 due primarily to interest income earned
on higher invested cash balances. Interest expense decreased
from $17.9 million in the 13 weeks ended May 5,
2007 to $13.4 million in the 13 weeks ended
May 3, 2008, primarily due to the retirement of
$30.0 million of the Companys senior notes and
$163.6 million of the Companys senior floating rate
notes since May 5, 2007. Debt extinguishment expense of
$6.7 million in the 13 weeks ended May 5, 2007
and $2.3 million in the 13 weeks ended May 3,
2008 was recognized as a result of premiums paid related to debt
retirement and the write-off of deferred financing fees and
unamortized original issue discount.
Income tax expense for the 13 weeks ended May 5, 2007
and the 13 weeks ended May 3, 2008 was based upon
managements estimate of the Companys annualized
effective tax rate. Income tax expense was $15.1 million
for the 13 weeks ended May 5, 2007 compared to
$37.0 million for the 13 weeks ended May 3, 2008.
For the first quarter of fiscal 2007 and fiscal 2008, income tax
expense included a charge of $0.7 million and
$0.1 million, respectively, for unrecognized tax benefit,
interest and penalties associated with our uncertain tax
positions.
The factors described above led to an increase in operating
earnings of $49.3 million, or 81.4%, from
$60.6 million in the 13 weeks ended May 5, 2007
to $109.9 million in the 13 weeks ended May 3,
2008, and an increase in net earnings of $37.4 million, or
151.4%, from $24.7 million in the quarter ended May 5,
2007 to $62.1 million in the quarter ended May 3, 2008.
25
Segment
Performance
The Company operates its business in the following segments:
United States, Australia, Canada and Europe. The following
tables provide a summary of our sales and operating earnings
(loss) by reportable segment:
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
|
May 3,
|
|
|
May 5,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
Sales by operating segment are as follows:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,377.1
|
|
|
$
|
1,004.1
|
|
Canada
|
|
|
128.9
|
|
|
|
80.1
|
|
Australia
|
|
|
103.4
|
|
|
|
72.3
|
|
Europe
|
|
|
204.2
|
|
|
|
122.5
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,813.6
|
|
|
$
|
1,279.0
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss) by operating segment are as follows:
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
92.8
|
|
|
$
|
53.6
|
|
Canada
|
|
|
5.8
|
|
|
|
3.6
|
|
Australia
|
|
|
7.8
|
|
|
|
4.5
|
|
Europe
|
|
|
3.5
|
|
|
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
109.9
|
|
|
$
|
60.6
|
|
|
|
|
|
|
|
|
|
|
United
States
Segment results for the United States include retail operations
in 50 states, the District of Columbia, Puerto Rico and
Guam, the electronic commerce websites www.gamestop.com
and www.ebgames.com and Game Informer magazine. As
of May 3, 2008, the United States segment included 4,128
GameStop stores compared to 3,827 on May 5, 2007. Sales for
the first quarter of fiscal 2008 increased 37.1% compared to the
first quarter of fiscal 2007 as a result of increased sales at
existing stores and the opening of 414 new stores since
February 4, 2007, including 86 stores in the first quarter
of fiscal 2008. Sales at existing stores increased due to strong
sales of new video game software and used video game products
which is typical in the years following the release of new
hardware platforms. As the installed base of the new hardware
platforms expand, more new software titles become available and
trade-ins of used video game products applied toward the
purchase of new video games lead to increased sales of new and
used video game products. The two largest software titles
launched during the first quarter of fiscal 2008 were Grand
Theft Auto IV and Super Smash Bros. Brawl. Segment
operating income increased by 73.1% compared to the first
quarter of fiscal 2007 driven by strong sales of new video game
software and used video game products and their related
accessories, as well as the leveraging of selling, general and
administrative expenses.
Canada
Sales in the Canadian segment in the first quarter of fiscal
2008 increased $48.8 million, or 60.9%, compared to the
first quarter of fiscal 2007. The increase in sales was
primarily attributable to increased sales at existing stores and
the additional sales at the 45 stores opened since
February 4, 2007. As of May 3, 2008, the Canadian
segment had 312 stores compared to 271 stores at May 5,
2007. The increase in sales at existing stores was driven by
strong sales of new video game software related to the new
hardware platforms, including the release of Grand Theft
Auto IV and Super Smash Bros. Brawl during the first
quarter of fiscal 2008. Segment operating income increased by
61.1% compared to the first quarter of fiscal 2007 driven by the
increased sales discussed above and the leveraging of selling,
general and administrative expenses and the favorable impact of
changes in exchange rates since the prior year. For the
13 weeks ended May 3, 2008, changes in exchange rates
when compared to the prior year had the effect of increasing
operating earnings by $0.8 million.
26
Australia
Segment results for Australia include retail operations in
Australia and New Zealand. As of May 3, 2008, the
Australian segment included 291 stores compared to 234 stores at
May 5, 2007. Sales for the first quarter of fiscal 2008
increased 43.0% to $103.4 million compared to first quarter
fiscal 2007 sales of $72.3 million. The increase in sales
was due to an increase in sales at existing stores and the
additional sales at the 73 stores opened since February 4,
2007. The increase in sales at existing stores was driven by a
strong software title lineup available for all hardware
platforms. Sales in the first quarter of fiscal 2007 included
the impact of the Australian market launch of the Sony
PlayStation 3 in March 2007. The new hardware platforms drove an
increase in used product sales in the first quarter of fiscal
2008 as the installed base of the platforms increased and more
software became available. Segment operating income increased by
73.3% to $7.8 million in the first quarter of fiscal 2008
from $4.5 million in the first quarter of fiscal 2007. The
increase was driven by the increased sales discussed above and
the leveraging of the fixed components of selling, general and
administrative expenses. For the 13 weeks ended May 3,
2008, changes in exchange rates when compared to the prior year
had the effect of increasing operating earnings by
$0.9 million.
Europe
Segment results for Europe include retail operations in 12
European countries. As of May 3, 2008, the European segment
operated 722 stores, including the 49 stores acquired from Free
Record Shop Norway AS, a Norwegian private limited liability
company (FRS), in Norway during the first quarter of
fiscal 2008, compared to 484 stores as of May 5, 2007. For
the 13 weeks ended May 3, 2008, European sales
increased $81.7 million, or 66.7%, compared to the
13 weeks ended May 5, 2007. The increase in sales for
the quarter was primarily due to the increase in sales at
existing stores and the additional sales at the 264 stores
opened since February 4, 2007. The increase in sales at
existing stores was driven by a strong software title lineup
available for all hardware platforms. Sales in the first quarter
of fiscal 2007 included the impact of the European market launch
of the Sony PlayStation 3 in March 2007. The new hardware
platforms drove an increase in used product sales in the first
quarter of fiscal 2008 as the installed base of the platforms
increased and more software became available.
The segment operating income in Europe increased to
$3.5 million in the first quarter of fiscal 2008 compared
to the first quarter of fiscal 2007 operating loss of
$1.1 million. The increase in operating income was driven
by the increase in sales and related margin dollars discussed
above, the leveraging of the fixed components of selling,
general and administrative expenses, both of which reflect the
continued maturation of our operations in the European markets,
and the favorable impact of changes in exchange rates since the
prior year. For the 13 weeks ended May 3, 2008,
changes in exchange rates when compared to the prior year had
the effect of increasing operating earnings by $0.7 million.
Seasonality
The Companys business, like that of many retailers, is
seasonal, with the major portion of the sales and operating
profit realized during the quarter which includes the holiday
selling season.
Liquidity
and Capital Resources
Cash
Flows
During the 13 weeks ended May 3, 2008, cash used in
operations was $200.7 million, compared to cash used in
operations of $294.5 million during the 13 weeks ended
May 5, 2007. The decrease in cash used in operations of
$93.8 million from the 13 weeks ended May 5, 2007
to the 13 weeks ended May 3, 2008 was primarily due to
an increase in cash provided by net earnings, including the
non-cash adjustments to net earnings, of $50.6 million as
previously discussed and a decrease in the operating activities
adjustment related to the excess tax benefits realized from the
exercise of stock-based awards of $18.3 million. Also
contributing to the decrease in cash used in operations for the
first quarter of fiscal 2008 compared to the first quarter of
fiscal 2007 was a decrease in working capital of
$24.9 million primarily due to a decrease in prepaid taxes
as a result of the increase in net earnings over the past year.
27
Cash used in investing activities was $53.4 million and
$27.7 million during the 13 weeks ended May 3,
2008 and May 5, 2007, respectively. During the
13 weeks ended May 3, 2008, $36.4 million of cash
was used primarily to open new stores in the U.S. and
internationally and to invest in information systems. In
addition, the Company used $17.0 million, net of cash
acquired, to purchase FRS, a 49-store retail chain located in
Norway. During the 13 weeks ended May 5, 2007,
$28.0 million of cash was used primarily to open new stores
in the U.S. and internationally and to invest in
information systems, offset by $0.4 million of cash
received related to the finalization of the purchase price of
Game Brands Inc., which was acquired during the fourth quarter
of fiscal 2006.
Cash provided by financing activities was $16.1 million for
the thirteen weeks ended May 3, 2008 and cash used in
financing activities for the thirteen weeks ended May 5,
2007 was $23.7 million. The cash flow provided by financing
activities for the quarter ended May 3, 2008 was primarily
due to the issuance of shares relating to stock option exercises
of $20.4 million and $30.0 million for the realization
of tax benefits relating to the stock option exercises and
vested restricted stock. These inflows were offset by the
repurchase of $30.0 million of principal value of the
Companys Senior Notes. The cash flow used in financing
activities for the quarter ended May 5, 2007 was primarily
due to the repurchase of $20.0 million and
$86.4 million of principal value of the Companys
Senior Notes and Senior Floating Rate Notes, respectively. These
cash outflows were offset by $30.0 million received for the
issuance of shares relating to stock option exercises and
$48.3 million for the realization of tax benefits relating
to the stock option exercises and vested restricted stock.
Sources
of Liquidity
We utilize cash generated from operations and have funds
available to us under our revolving credit facility to cover
seasonal fluctuations in cash flows and to support our various
growth initiatives. Our cash and cash equivalents are carried at
cost, which approximates market value, and consist primarily of
time deposits with highly rated commercial banks and money
market investment funds holding direct U.S. Treasury
obligations.
In October 2005, in connection with the merger with EB, the
Company entered into a five-year, $400 million Credit
Agreement (the Revolver), including a
$50 million letter of credit sub-limit, secured by the
assets of the Company and its U.S. subsidiaries. The
Revolver places certain restrictions on the Company and its
U.S. subsidiaries, including limitations on asset sales,
additional liens and the incurrence of additional indebtedness.
In April 2007, the Company amended the Revolver to extend
the maturity date from October 11, 2010 to April 25,
2012, reduce the LIBO interest rate margin, reduce and fix the
rate of the unused commitment fee and modify or delete certain
other covenants.
The availability under the Revolver is limited to a borrowing
base which allows the Company to borrow up to the lesser of
(x) approximately 70% of eligible inventory and
(y) 90% of the appraisal value of the inventory, in each
case plus 85% of eligible credit card receivables, net of
certain reserves. Letters of credit reduce the amount available
to borrow by their face value. The Companys ability to pay
cash dividends, redeem options and repurchase shares is
generally prohibited, except that if availability under the
Revolver is or will be after any such payment equal to or
greater than 25% of the borrowing base, the Company may
repurchase its capital stock and pay cash dividends. In
addition, in the event that credit extensions under the Revolver
at any time exceed 80% of the lesser of the total commitment or
the borrowing base, the Company will be subject to a fixed
charge coverage ratio covenant of 1.5:1.0.
The interest rate on the Revolver is variable and, at the
Companys option, is calculated by applying a margin of
(1) 0.0% to 0.25% above the higher of the prime rate of the
administrative agent or the federal funds effective rate plus
0.50% or (2) 1.00% to 1.50% above the LIBO rate. The
applicable margin is determined quarterly as a function of the
Companys consolidated leverage ratio. As of May 3,
2008, the applicable margin was 0.0% for prime rate loans and
1.00% for LIBO rate loans. In addition, the Company is required
to pay a commitment fee of 0.25% for any unused portion of the
total commitment under the Revolver. As of May 3, 2008,
there were no borrowings outstanding under the Revolver and
letters of credit outstanding totaled $7.0 million.
In September 2007, the Companys Luxembourg subsidiary
entered into a discretionary, $20 million Uncommitted Line
of Credit (the Line of Credit) with Bank of America.
There is no term associated with the Line of Credit and Bank of
America may withdraw the facility at any time without notice.
The Line of Credit will be made available to the Companys
foreign subsidiaries for use primarily as a bank overdraft
facility for short term liquidity
28
needs and for the issuance of bank guarantees and letters of
credit to support operations. As of May 3, 2008, there were
no borrowings outstanding under the Line of Credit and bank
guarantees outstanding totaled $4.4 million.
In September 2005, the Company, along with GameStop, Inc. as
co-issuer (together with the Company, the Issuers),
completed the offering of U.S. $300 million aggregate
principal amount of Senior Floating Rate Notes due 2011 (the
Senior Floating Rate Notes) and
U.S. $650 million aggregate principal amount of Senior
Notes due 2012 (the Senior Notes and, together with
the Senior Floating Rate Notes, the Notes). The
Notes were issued under an Indenture (the
Indenture), dated September 28, 2005, by and
among the Issuers, the subsidiary guarantors party thereto, and
Citibank, N.A., as trustee (the Trustee). The net
proceeds of the offering were used to pay the cash portion of
the merger consideration paid to the stockholders of EB in
connection with the merger.
The Senior Notes bear interest at 8.0% per annum, mature on
October 1, 2012 and were priced at 98.688%, resulting in a
discount at the time of issue of $8.5 million. The discount
is being amortized using the effective interest method. As of
May 3, 2008, the unamortized original issue discount was
$5.0 million. The rate of interest on the Senior Floating
Rate Notes prior to their redemption on October 1, 2007 was
9.2350% per annum. The Issuers pay interest on the Senior Notes
semi-annually, in arrears, every April 1 and October 1, to
holders of record on the immediately preceding March 15 and
September 15, and at maturity.
The Indenture contains affirmative and negative covenants
customary for such financings, including, among other things,
limitations on (1) the incurrence of additional debt,
(2) restricted payments, (3) liens, (4) sale and
leaseback transactions and (5) asset sales. Events of
default provided for in the Indenture include, among other
things, failure to pay interest or principal on the Notes, other
breaches of covenants in the Indenture, and certain events of
bankruptcy and insolvency. As of May 3, 2008, the Company
was in compliance with all covenants associated with the
Revolver and the Indenture.
Under certain conditions, the Issuers may on any one or more
occasions prior to maturity redeem up to 100% of the aggregate
principal amount of Senior Notes issued under the Indenture at
redemption prices at or in excess of 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the
redemption date. The circumstances which would limit the
percentage of the Notes which may be redeemed or which would
require the Company to pay a premium in excess of 100% of the
principal amount are defined in the Indenture. Upon a Change of
Control (as defined in the Indenture), the Issuers are required
to offer to purchase all of the Notes then outstanding at 101%
of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase. The Issuers may
acquire Senior Notes by means other than redemption, whether by
tender offer, open market purchases, negotiated transactions or
otherwise, in accordance with applicable securities laws, so
long as such acquisitions do not otherwise violate the terms of
the Indenture.
Uses
of Capital
Our future capital requirements will depend on the number of new
stores opened and the timing of those openings within a given
fiscal year. The Company opened 210 stores in the 13 weeks
ended May 3, 2008 and expects to open approximately 550 to
600 stores in fiscal 2008. Capital expenditures for fiscal 2008
are projected to be approximately $170 million to
$180 million, to be used primarily to fund new store
openings and invest in distribution and information systems in
support of operations.
In May 2006, the Company announced that its Board of Directors
authorized the buyback of up to an aggregate of
$100 million of its Senior Floating Rate Notes and Senior
Notes. As of February 3, 2007, the Company had repurchased
the maximum authorized amount, having acquired $50 million
of its Senior Notes and $50 million of its Senior Floating
Rate Notes, and delivered the Notes to the Trustee for
cancellation.
On February 9, 2007, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $150 million of its Senior Notes and Senior
Floating Rate Notes. As of May 5, 2007, the Company
repurchased $106.4 million of the Notes, having acquired
$20 million of its Senior Notes and $86.4 million of
its Senior Floating Rate Notes, and delivered the Notes to the
Trustee for cancellation. The associated loss on retirement of
this debt was $6.7 million, which consists of the premium
paid to retire the Notes and the write-off of the deferred
financing fees and the original issue discount on the Notes. As
of February 2, 2008,
29
the Company repurchased an additional $43.6 million of its
Senior Floating Rate Notes to complete the $150 million
buyback in fiscal 2007.
On June 28, 2007, the Company announced that its Board of
Directors authorized the redemption of the remaining
$120 million of Senior Floating Rate Notes outstanding. The
Company redeemed the Senior Floating Rate Notes on
October 1, 2007 at the redemption price specified by the
Senior Floating Rate Notes of 102.0%, plus all accrued and
unpaid interest through the redemption date. The Company
incurred a one-time pre-tax charge of $3.8 million
associated with the redemption, which represents a
$2.4 million redemption premium and $1.4 million to
recognize unamortized deferred financing costs.
On February 7, 2008, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $130 million of its Senior Notes. The timing and
amount of the repurchases will be determined by the
Companys management based on their evaluation of market
conditions and other factors. In addition, the repurchases may
be suspended or discontinued at any time. As of May 3,
2008, the Company had repurchased $30 million of its Senior
Notes pursuant to this new authorization and delivered the
Senior Notes to the Trustee for cancellation. The associated
loss on retirement of debt is $2.3 million, which consists
of the premium paid to retire the Senior Notes and the write-off
of the deferred financing fees and the original issue discount
on the Senior Notes.
During October 2007, the Company paid the final principal
payment of $12.2 million to Barnes & Noble, Inc.
(Barnes & Noble) on the promissory note
that was issued in connection with the repurchase of
GameStops common stock held by Barnes & Noble,
satisfying the promissory note in full. The note was unsecured
and bore interest at 5.5% per annum.
On April 5, 2008, the Company purchased all the outstanding
stock of FRS for $17.0 million, net of cash acquired. FRS
operates 49 record stores in Norway and also operates office and
warehouse facilities in Oslo, Norway. The Company intends to
convert these stores into video game stores with an inventory
assortment similar to its other stores in Norway.
In 2003, the Company purchased a 51% controlling interest in
GameStop Group Limited. Under the terms of the purchase
agreement, the minority interest owners of the remaining 49%
have the ability to require the Company to purchase their
remaining shares in incremental percentages at a price to be
determined based partially on the Companys price to
earnings ratio and GameStop Group Limiteds earnings. On
May 21, 2008, the minority interest owners exercised their
right to sell one-third of their shares, or 16% of GameStop
Group Limited, to the Company under the terms of the original
purchase agreement. The transaction was completed in June 2008
for $27.1 million.
Based on our current operating plans, we believe that available
cash balances, cash generated from our operating activities and
funds available under the Revolver will be sufficient to fund
our operations, required payments on the Senior Notes, store
expansion and remodeling activities and corporate capital
expenditure programs for at least the next 12 months.
Recent
Accounting Pronouncements
In March 2008, the FASB issued Statement of Financial Accounting
Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities an amendment of
FASB Statement No. 133 (SFAS 161).
SFAS 161 requires enhanced disclosures about how and why an
entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for and their effect on
an entitys financial position, financial performance, and
cash flows. SFAS 161 is effective for the Company on
February 1, 2009. The Company is currently evaluating the
impact that the adoption of SFAS 161 may have on its
consolidated financial statements.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141 (revised 2007), Business
Combinations (SFAS 141(R)).
SFAS 141(R) amends the principles and requirements for how
an acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill
acquired. SFAS 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and
financial effects of the business combination. SFAS 141(R)
is effective for the Company on February 1, 2009, and the
Company will apply SFAS 141(R) prospectively to all
business combinations subsequent to the effective date.
30
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests
in Consolidated Financial Statements an amendment of
Accounting Research Bulletin No. 51
(SFAS 160). SFAS 160 establishes
accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the
controlling and noncontrolling interests and requires the
separate disclosure of income attributable to controlling and
noncontrolling interests. SFAS 160 is effective for fiscal
years beginning after December 15, 2008. The Company is
currently evaluating the impact that the adoption of
SFAS 160 will have on its consolidated financial statements.
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities
(SFAS 159). This statement permits entities
the option to measure many financial instruments and certain
other items at fair value at specific election dates. Unrealized
gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 was
effective for our Company on February 3, 2008. The adoption
of SFAS 159 did not have a material impact on our
consolidated financial statements.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements
(SFAS 157), which defines fair value,
establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS 157 applies
to other accounting pronouncements that require or permit fair
value measurements. The Company adopted SFAS 157 on
February 3, 2008 as required for its financial assets and
liabilities. However, in February 2008, the FASB issued FASB
Staff Position
157-2,
Effective Date of FASB Statement No. 157, which
delays the effective date of SFAS 157 for all non-financial
assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial
statements on a recurring basis. The adoption of SFAS 157
for our financial assets and liabilities did not have a material
impact on the Companys financial condition and results of
operations. We do not believe the adoption of SFAS 157 for
our non-financial assets and liabilities, effective
February 1, 2009, will have a material impact on our
consolidated financial statements.
Disclosure
Regarding Forward-looking Statements
This report on
Form 10-Q
and other oral and written statements made by the Company to the
public contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the
Securities Exchange Act of 1934 (the Exchange Act).
The forward-looking statements involve a number of risks and
uncertainties. A number of factors could cause our actual
results, performance, achievements or industry results to be
materially different from any future results, performance or
achievements expressed or implied by these forward-looking
statements. These factors include, but are not limited to:
|
|
|
|
|
our reliance on suppliers and vendors for sufficient quantities
of their products and for new product releases;
|
|
|
|
general economic conditions in the U.S. and internationally
and specifically, economic conditions affecting the electronic
game industry;
|
|
|
|
the competitive environment in the electronic game industry;
|
|
|
|
our ability to open and operate new stores;
|
|
|
|
our ability to attract and retain qualified personnel;
|
|
|
|
the impact and costs of litigation and regulatory compliance;
|
|
|
|
unanticipated litigation results;
|
|
|
|
the risks involved with our international operations;
|
|
|
|
alternate sources of distribution of video game
software; and
|
|
|
|
other factors described in the
Form 10-K,
including those set forth under the caption Item 1A.
Risk Factors.
|
31
In some cases, forward-looking statements can be identified by
the use of terms such as anticipates,
believes, continues, could,
estimates, expects, intends,
may, plans, potential,
predicts, pro forma, should,
seeks, will or similar expressions.
These statements are only predictions based on current
expectations and assumptions and involve known and unknown
risks, uncertainties and other factors that may cause our or our
industrys actual results, levels of activity, performance
or achievements to be materially different from any future
results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. You
should not place undue reliance on these forward-looking
statements.
Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise after the date of this
Form 10-Q.
In light of these risks and uncertainties, the forward-looking
events and circumstances contained in this
Form 10-Q
may not occur, causing actual results to differ materially from
those anticipated or implied by our forward-looking statements.
|
|
ITEM 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Interest
Rate Exposure
We do not use derivative financial instruments to hedge interest
rate exposure. We limit our interest rate risks by investing our
excess cash balances in short-term, highly-liquid instruments
with a maturity of one year or less. In addition, the Senior
Notes outstanding issued in connection with the merger carry a
fixed interest rate. We do not expect any material losses from
our invested cash balances, and we believe that our interest
rate exposure is modest.
Foreign
Currency Risk
The Company follows the provisions of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities
(SFAS 133), as amended by Statement of
Financial Accounting Standards No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities
and Statement of Financial Accounting Standards
No. 157, Fair Value Measurements
(SFAS 157). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at fair
value while SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. Changes in the fair value of
derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether the derivative
is designated as part of a hedge transaction, and if it is,
depending on the type of hedge transaction.
The Company uses forward exchange contracts, foreign currency
options and cross-currency swaps, (together, the Foreign
Currency Contracts) to manage currency risk primarily
related to intercompany loans denominated in non-functional
currencies and certain foreign currency assets and liabilities.
These Foreign Currency Contracts are not designated as hedges
and, therefore, changes in the fair values of these derivatives
are recognized in earnings, thereby offsetting the current
earnings effect of the re-measurement of related intercompany
loans and foreign currency assets and liabilities. The aggregate
fair value of the Foreign Currency Contracts at May 3, 2008
was a liability of $10.7 million as measured by observable
inputs obtained from market news reporting services, such as
Bloomberg and The Wall Street Journal, and industry-standard
models that consider various assumptions, including quoted
forward prices, time value, volatility factors, and contractual
prices for the underlying instruments, as well as other relevant
economic measures. A hypothetical strengthening or weakening of
10% in the foreign exchange rates underlying the Foreign
Currency Contracts from the market rate as of May 3, 2008
would result in a (loss) or gain in value of the forwards,
options and swaps of ($19.2 million) or $19.2 million,
respectively.
|
|
ITEM 4.
|
Controls
and Procedures
|
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the
Companys management conducted an evaluation, under the
supervision and with the participation of the principal
executive officer and principal financial officer, of the
Companys disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange
32
Act). Based on this evaluation, the principal executive officer
and principal financial officer concluded that, as of the end of
the period covered by this report, the Companys disclosure
controls and procedures are effective. Notwithstanding the
foregoing, a control system, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance
that it will detect or uncover failures within the Company to
disclose material information otherwise required to be set forth
in the Companys periodic reports.
(b) Changes in Internal Control Over Financial Reporting
There was no change in the Companys internal control over
financial reporting (as such term is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the Companys most recently
completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.
PART II
OTHER INFORMATION
|
|
ITEM 1.
|
Legal
Proceedings
|
On February 14, 2005, and as amended, Steve Strickland, as
personal representative of the Estate of Arnold Strickland,
deceased, Henry Mealer, as personal representative of the Estate
of Ace Mealer, deceased, and Willie Crump, as personal
representative of the Estate of James Crump, deceased, filed a
wrongful death lawsuit against GameStop, Sony, Take-Two
Interactive, Rock Star Games and Wal-Mart (collectively, the
Defendants) and Devin Moore, alleging that
Defendants actions in designing, manufacturing, marketing
and supplying Defendant Moore with violent video games were
negligent and contributed to Defendant Moore killing Arnold
Strickland, Ace Mealer and James Crump. Moore was found guilty
of capital murder in a criminal trial and was sentenced to death
in August 2005.
The courts scheduling order anticipated a Frye hearing in
April 2007, at which plaintiffs causation theory and
experts credentials were to be challenged. However, that
hearing did not take place and plaintiffs Alabama and
Florida counsel withdrew. New Alabama counsel has entered their
appearance for plaintiffs and a new scheduling order for the
Frye expert-causation hearing has been set. It is anticipated
that the issue of the admissibility of plaintiffs expert
testimony will be decided in late fall 2008. There is no current
trial date. The Company does not believe there is sufficient
information to estimate the amount of the possible loss, if any,
resulting from the lawsuit.
In the ordinary course of the Companys business, the
Company is, from time to time, subject to various other legal
proceedings. Management does not believe that any such other
legal proceedings, individually or in the aggregate, will have a
material adverse effect on the Companys financial
condition or results of operations.
There have been no other material developments in previously
reported legal proceedings during the fiscal quarter covered by
this
Form 10-Q.
In addition to the other information set forth in this
Form 10-Q,
you should carefully consider the factors discussed in
Item 1A. Risk Factors in our
Form 10-K
for the fiscal year ended February 2, 2008 filed with the
SEC on April 2, 2008. These risks could materially and
adversely affect our business, financial condition and results
of operations. The risks described in our
Form 10-K
have not changed materially, however, they are not the only
risks we face. Our operations could also be affected by
additional factors that are not presently known to us or by
factors that we currently consider immaterial to our business.
33
Exhibits
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of April 17, 2005,
among GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics
Boutique Holdings Corp., GameStop, Inc., GameStop Holdings Corp.
(f/k/a GameStop Corp.), Cowboy Subsidiary LLC and Eagle
Subsidiary LLC.(1)
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation.(2)
|
|
3
|
.2
|
|
Amended and Restated Bylaws.(3)
|
|
4
|
.1
|
|
Indenture, dated September 28, 2005, by and among GameStop
Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary
guarantors party thereto, and Citibank N.A., as trustee.(4)
|
|
4
|
.2
|
|
First Supplemental Indenture, dated October 8, 2005, by and
among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc.,
the subsidiary guarantors party thereto, and Citibank N.A., as
trustee.(5)
|
|
4
|
.3
|
|
Rights Agreement, dated as of June 27, 2005, between
GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New
York, as Rights Agent.(3)
|
|
4
|
.4
|
|
Form of Indenture.(6)
|
|
10
|
.1
|
|
Separation Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(7)
|
|
10
|
.2
|
|
Tax Disaffiliation Agreement, dated as of January 1, 2002,
between Barnes & Noble, Inc. and GameStop Holdings
Corp. (f/k/a GameStop Corp.).(8)
|
|
10
|
.3
|
|
Insurance Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(8)
|
|
10
|
.4
|
|
Operating Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(8)
|
|
10
|
.5
|
|
Second Amended and Restated 2001 Incentive Plan.(9)
|
|
10
|
.6
|
|
Amended and Restated Supplemental Compensation Plan.(10)
|
|
10
|
.7
|
|
Form of Option Agreement.(11)
|
|
10
|
.8
|
|
Form of Restricted Share Agreement.(12)
|
|
10
|
.9
|
|
Stock Purchase Agreement, dated as of October 1, 2004, by
and among GameStop Holdings Corp. (f/k/a GameStop Corp.),
B&N GameStop Holding Corp. and Barnes & Noble,
Inc.(13)
|
|
10
|
.10
|
|
Promissory Note, dated as of October 1, 2004, made by
GameStop Holdings Corp. (f/k/a GameStop Corp.) in favor of
B&N GameStop Holding Corp.(13)
|
|
10
|
.11
|
|
Credit Agreement, dated as of October 11, 2005, by and
among GameStop Corp. (f/k/a GSC Holdings Corp.), certain
subsidiaries of GameStop Corp., Bank of America, N.A. and the
other lending institutions listed in the Agreement, Bank of
America, N.A. and Citicorp North America, Inc., as Issuing
Banks, Bank of America, N.A., as Administrative Agent and
Collateral Agent, Citicorp North America, Inc., as Syndication
Agent, and Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., as Documentation Agent.(14)
|
|
10
|
.12
|
|
Guaranty, dated as of October 11, 2005, by GameStop Corp.
(f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop
Corp. in favor of the agents and lenders.(14)
|
|
10
|
.13
|
|
Security Agreement, dated October 11, 2005, by GameStop
Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of
GameStop Corp. in favor of Bank of America, N.A., as Collateral
Agent for the Secured Parties.(14)
|
|
10
|
.14
|
|
Patent and Trademark Security Agreement, dated as of
October 11, 2005 by GameStop Corp. (f/k/a GSC Holdings
Corp.) and certain subsidiaries of GameStop Corp. in favor of
Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.15
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between GameStop of Texas, L.P. and
Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.16
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between Electronics Boutique of
America, Inc. and Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.17
|
|
Form of Securities Collateral Pledge Agreement, dated as of
October 11, 2005.(14)
|
34
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.18
|
|
First Amendment, dated April 25, 2007, to Credit Agreement,
dated as of October 11, 2005, by and among GameStop Corp.
(f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop
Corp., Bank of America, N.A. and the other lending institutions
listed in the Amendment, Bank of America, N.A. and Citicorp
North America, Inc., as Issuing Banks, Bank of America, N.A., as
Administrative Agent and Collateral Agent, Citicorp North
America, Inc., as Syndication Agent, and Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., as
Documentation Agent.(15)
|
|
10
|
.19
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R.
Richard Fontaine.(16)
|
|
10
|
.20
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and
Daniel A. DeMatteo.(16)
|
|
10
|
.21
|
|
Executive Employment Agreement, dated as of April 3, 2006,
between GameStop Corp. and David W. Carlson.(17)
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
(1) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 18, 2005. |
|
(2) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
February 7, 2007. |
|
(3) |
|
Incorporated by reference to the Registrants Amendment
No. 1 to
Form S-4
filed with the Securities and Exchange Commission on
July 8, 2005. |
|
(4) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 30, 2005. |
|
(5) |
|
Incorporated by reference to the Registrants
Form 10-Q
for the fiscal quarter ended October 29, 2005 filed with
the Securities and Exchange Commission on December 8, 2005. |
|
(6) |
|
Incorporated by reference to the Registrants
Form S-3ASR
filed with the Securities and Exchange Commission on
April 10, 2006. |
|
(7) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 4 to
Form S-1
filed with the Securities and Exchange Commission on
February 5, 2002. |
|
(8) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 3 to
Form S-1
filed with the Securities and Exchange Commission on
January 24, 2002. |
|
(9) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2007 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 29, 2007. |
|
(10) |
|
Incorporated by reference to the Registrants
Form 10-Q
for the fiscal quarter ended July 29, 2006 filed with the
Securities and Exchange Commission on September 5, 2006. |
|
(11) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 10-K
for the fiscal year ended January 29, 2005 filed with the
Securities and Exchange Commission on April 11, 2005. |
|
(12) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 12, 2005. |
|
(13) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
October 5, 2004. |
35
|
|
|
(14) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 12, 2005. |
|
(15) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
April 26, 2007. |
|
(16) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 15, 2005. |
|
(17) |
|
Incorporated by reference to the Registrants
Form 10-K
for the fiscal year ended January 28, 2006 filed with the
Securities and Exchange Commission on April 3, 2006. |
36
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.
GAMESTOP CORP.
David W. Carlson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: June 12, 2008
GAMESTOP CORP.
Robert A. Lloyd
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: June 12, 2008
37
GAMESTOP
CORP.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of April 17, 2005,
among GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics
Boutique Holdings Corp., GameStop, Inc., GameStop Holdings Corp.
(f/k/a GameStop Corp.), Cowboy Subsidiary LLC and Eagle
Subsidiary LLC.(1)
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation.(2)
|
|
3
|
.2
|
|
Amended and Restated Bylaws.(3)
|
|
4
|
.1
|
|
Indenture, dated September 28, 2005, by and among GameStop
Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary
guarantors party thereto, and Citibank N.A., as trustee.(4)
|
|
4
|
.2
|
|
First Supplemental Indenture, dated October 8, 2005, by and
among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc.,
the subsidiary guarantors party thereto, and Citibank N.A., as
trustee.(5)
|
|
4
|
.3
|
|
Rights Agreement, dated as of June 27, 2005, between
GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New
York, as Rights Agent.(3)
|
|
4
|
.4
|
|
Form of Indenture.(6)
|
|
10
|
.1
|
|
Separation Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(7)
|
|
10
|
.2
|
|
Tax Disaffiliation Agreement, dated as of January 1, 2002,
between Barnes & Noble, Inc. and GameStop Holdings
Corp. (f/k/a GameStop Corp.).(8)
|
|
10
|
.3
|
|
Insurance Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(8)
|
|
10
|
.4
|
|
Operating Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(8)
|
|
10
|
.5
|
|
Second Amended and Restated 2001 Incentive Plan.(9)
|
|
10
|
.6
|
|
Amended and Restated Supplemental Compensation Plan.(10)
|
|
10
|
.7
|
|
Form of Option Agreement.(11)
|
|
10
|
.8
|
|
Form of Restricted Share Agreement.(12)
|
|
10
|
.9
|
|
Stock Purchase Agreement, dated as of October 1, 2004, by
and among GameStop Holdings Corp. (f/k/a GameStop Corp.),
B&N GameStop Holding Corp. and Barnes & Noble,
Inc.(13)
|
|
10
|
.10
|
|
Promissory Note, dated as of October 1, 2004, made by
GameStop Holdings Corp. (f/k/a GameStop Corp.) in favor of
B&N GameStop Holding Corp.(13)
|
|
10
|
.11
|
|
Credit Agreement, dated as of October 11, 2005, by and
among GameStop Corp. (f/k/a GSC Holdings Corp.), certain
subsidiaries of GameStop Corp., Bank of America, N.A. and the
other lending institutions listed in the Agreement, Bank of
America, N.A. and Citicorp North America, Inc., as Issuing
Banks, Bank of America, N.A., as Administrative Agent and
Collateral Agent, Citicorp North America, Inc., as Syndication
Agent, and Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., as Documentation Agent.(14)
|
|
10
|
.12
|
|
Guaranty, dated as of October 11, 2005, by GameStop Corp.
(f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop
Corp. in favor of the agents and lenders.(14)
|
|
10
|
.13
|
|
Security Agreement, dated October 11, 2005, by GameStop
Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of
GameStop Corp. in favor of Bank of America, N.A., as Collateral
Agent for the Secured Parties.(14)
|
|
10
|
.14
|
|
Patent and Trademark Security Agreement, dated as of
October 11, 2005 by GameStop Corp. (f/k/a GSC Holdings
Corp.) and certain subsidiaries of GameStop Corp. in favor of
Bank of America, N.A., as Collateral Agent.(14)
|
38
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.15
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between GameStop of Texas, L.P. and
Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.16
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between Electronics Boutique of
America, Inc. and Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.17
|
|
Form of Securities Collateral Pledge Agreement, dated as of
October 11, 2005.(14)
|
|
10
|
.18
|
|
First Amendment, dated April 25, 2007, to Credit Agreement,
dated as of October 11, 2005, by and among GameStop Corp.
(f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop
Corp., Bank of America, N.A. and the other lending institutions
listed in the Amendment, Bank of America, N.A. and Citicorp
North America, Inc., as Issuing Banks, Bank of America, N.A., as
Administrative Agent and Collateral Agent, Citicorp North
America, Inc., as Syndication Agent, and Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., as
Documentation Agent.(15)
|
|
10
|
.19
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R.
Richard Fontaine.(16)
|
|
10
|
.20
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and
Daniel A. DeMatteo.(16)
|
|
10
|
.21
|
|
Executive Employment Agreement, dated as of April 3, 2006,
between GameStop Corp. and David W. Carlson.(17)
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(a)/15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(a)/15d-14(a)
under the Securities Exchange Act of 1934, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to
Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to
Rule 13a-14(b)
under the Securities Exchange Act of 1934 and 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
(1) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 18, 2005. |
|
(2) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
February 7, 2007. |
|
(3) |
|
Incorporated by reference to the Registrants Amendment
No. 1 to
Form S-4
filed with the Securities and Exchange Commission on
July 8, 2005. |
|
(4) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 30, 2005. |
|
(5) |
|
Incorporated by reference to the Registrants
Form 10-Q
for the fiscal quarter ended October 29, 2005 filed with
the Securities and Exchange Commission on December 8, 2005. |
|
(6) |
|
Incorporated by reference to the Registrants
Form S-3ASR
filed with the Securities and Exchange Commission on
April 10, 2006. |
|
(7) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 4 to
Form S-1
filed with the Securities and Exchange Commission on
February 5, 2002. |
|
(8) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 3 to
Form S-1
filed with the Securities and Exchange Commission on
January 24, 2002. |
|
(9) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2007 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 29, 2007. |
|
(10) |
|
Incorporated by reference to the Registrants
Form 10-Q
for the fiscal quarter ended July 29, 2006 filed with the
Securities and Exchange Commission on September 5, 2006. |
39
|
|
|
(11) |
|
Incorporated by reference to the Registrants
Form 10-K
for the fiscal quarter ended January 29, 2005 filed with
the Securities and Exchange Commission on April 11, 2005. |
|
(12) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 12, 2005. |
|
(13) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
October 5, 2004. |
|
(14) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 12, 2005. |
|
(15) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
April 26, 2007. |
|
(16) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 15, 2005. |
|
(17) |
|
Incorporated by reference to the Registrants
Form 10-K
for the fiscal year ended January 28, 2006 filed with the
Securities and Exchange Commission on April 3, 2006. |
40