GameStop 2005 Annual Report Download - page 11

PART I
Item 1. Business
General
GameStop Corp. (“GameStop” or the “Company”) is the world’s 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 January 28, 2006, we
operated 4,490 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 gamestop.com and ebgames.com and
publish Game Informer, the largest circulation multi-platform video game magazine in the United States, with
approximately 1.9 million subscribers.
GameStop is a holding company that was created to facilitate the combination of GameStop Holdings Corp.
and Electronics Boutique Holdings Corp., which we refer to as Historical GameStop and EB or Electronics
Boutique, respectively. On April 17, 2005, Historical GameStop and EB entered into a merger agreement pursuant
to which, effective October 8, 2005, separate subsidiaries of GameStop were merged with and into Historical
GameStop and EB, respectively, and Historical GameStop and EB became wholly-owned subsidiaries of GameStop
(the “mergers”) . Our Class A common stock and our Class B common stock are traded on the New York Stock
Exchange under the symbols GME and GME.B, respectively.
Historical GameStop’s subsidiary Babbage’s Etc. LLC (“Babbage’s”) began operations in November 1996. In
October 1999, Babbage’s was acquired by, and became a wholly-owned subsidiary of, Barnes & Noble, Inc.
(“Barnes & Noble”). In June 2000, Barnes & Noble acquired Funco, Inc. (“Funco”) and thereafter, Babbage’s
became a wholly-owned subsidiary of Funco. In December 2000, Funco changed its name to GameStop, Inc. On
February 12, 2002, Historical GameStop completed an initial public offering of its Class A common stock and was a
majority-owned subsidiary of Barnes & Noble until November 12, 2004, when Barnes & Noble distributed its
holdings of outstanding Historical GameStop Class B common stock to its stockholders.
EB was incorporated under the laws of the State of Delaware in March 1998 as a holding company for EB’s
operating activities and completed its initial public offering in July of that same year. EB’s predecessor was
incorporated in the Commonwealth of Pennsylvania in 1977.
In the mergers, Historical GameStop’s stockholders received one share of GameStop’s Class A common stock
for each share of Historical GameStop’s Class A common stock owned and one share of GameStop’s Class B
common stock for each share of Historical GameStop’s Class B common stock owned. EB stockholders received
$38.15 in cash and .78795 of a share of GameStop’s Class A common stock for each EB share owned. In aggregate,
20.2 million shares of GameStop’s Class A common stock were issued to EB stockholders and approximately
$993.3 million in cash was paid in consideration for all outstanding common stock of EB and all outstanding stock
options of EB.
Of our 4,490 stores, 3,624 stores are located in the U.S. and 866 stores are located in Australia, Canada and
Europe. Our stores, which average approximately 1,500 square feet, carry a balanced mix of new and used video
game hardware, video game software and accessories, which we refer to as video game products, and PC
entertainment software. Our used video game products provide a unique value proposition to our customers, and our
purchasing of used video game products provides our customers with an opportunity to trade in their used video
game products for store credits and apply those credits towards other merchandise, which, in turn, increases sales.
Our corporate office and one of our distribution facilities are housed in a 480,000 square foot headquarters and
distribution center in Grapevine, Texas. We purchased this facility in March 2004 and improved and equipped it
prior to relocating headquarters and distribution center operations to this facility in fiscal 2005 (the 52 weeks ending
January 28, 2006). We also have a distribution facility in Louisville, Kentucky. In connection with the mergers, we
have commenced efforts to integrate the operations of Historical GameStop and EB, and are in the process of
discontinuing operations in EB’s distribution facility and corporate office in Pennsylvania and in EB’s call center in
Nevada.
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