GameStop 2003 Annual Report Download - page 15

Table of Contents
may not be able to enter into new leases on favorable terms or at all, or we may not be able to locate suitable alternative sites or additional sites for new store expansion
in a timely manner. Our revenues and earnings may decline if we fail to maintain existing store locations, enter into new leases, locate alternative sites or find additional
sites for new store expansion.
The ability to download video games and play video games on the Internet could lower our sales.
While it is currently not possible to download video game software onto existing video game platforms over the Internet, at some point in the future this technology
may become available. A limited selection of PC entertainment software may currently be purchased for download over the Internet, and as technology advances, a
broader selection of PC entertainment software may become available for purchase and download or playing on the Internet. If advances in technology continue to
expand our customers’ ability to access software through these and other sources, our customers may no longer choose to purchase video games or PC entertainment
software in our stores. As a result, our sales and earnings could decline.
If we fail to keep pace with changing industry technology, we will be at a competitive disadvantage.
The interactive entertainment industry is characterized by swiftly changing technology, evolving industry standards, frequent new and enhanced product
introductions and product obsolescence. These characteristics require us to respond quickly to technological changes and to understand their impact on our customers’
preferences. If we fail to keep pace with these changes, our business may suffer.
The terms of our credit facility could restrict our operational flexibility.
We are subject to operational and financial covenants and other restrictions under our revolving credit facility. The covenants place restrictions on our ability to,
among other things, incur more debt or create liens on our assets, merge or consolidate with others, make acquisitions and investments, dispose of assets, pay dividends
and enter into transactions with affiliates. These covenants could limit our operational flexibility and restrict our ability to borrow additional funds, if necessary, to
finance operations. In addition, our credit facility includes a number of covenants relating to financial ratios.
Failure to comply with these operational and financial covenants could result in an event of default under the terms of the credit facility which, if not cured or
waived, could result in the borrowed amounts becoming due and payable. In addition, our obligations under the credit facility are secured by all assets owned by us and
our subsidiaries. An event of default under the credit facility would permit the lenders to proceed directly against those assets.
We depend upon our key personnel and they would be difficult to replace.
Our success depends upon our ability to attract, motivate and retain key management for our stores and skilled merchandising, marketing and administrative
personnel at our headquarters. We depend upon the continued services of our key executive officers, R. Richard Fontaine, our Chairman of the Board and Chief
Executive Officer, Daniel A. DeMatteo, our President and Chief Operating Officer and David W. Carlson, our Executive Vice President and Chief Financial Officer.
We do not have employment contracts with any of our key personnel. The loss of services of any of our key personnel could have a negative impact on our business.
We may engage in acquisitions which could negatively impact our business if we fail to successfully complete and integrate them.
To enhance our efforts to grow and compete, we may engage in acquisitions. Our plans to pursue future acquisitions are subject to our ability to negotiate favorable
terms for these acquisitions. Accordingly, we cannot assure you that future acquisitions will be completed. In addition, to facilitate future acquisitions, we may take
actions that could dilute the equity interests of our stockholders, increase our debt or cause us to assume contingent liabilities, all of which may have a detrimental effect
on the price of our common stock. Finally, if any acquisitions are not successfully integrated with our business, our ongoing operations could be adversely affected.
6