GameStop 2005 Annual Report Download - page 35

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was not material and the adjustment does not affect historical or future cash flows or the timing of payments
under related leases. See Note 1 of “Notes to Consolidated Financial Statements” of the Company for
additional information concerning lease accounting.
(3) Net earnings (loss) excluding the after-tax effect of goodwill amortization is presented here to provide
additional information about our operations. These items should be considered in addition to, but not as a
substitute for or superior to, operating earnings, net earnings, cash flow and other measures of financial
performance prepared in accordance with GAAP.
(4) Stores are included in our comparable store sales base beginning in the 13th month of operation.
Item 7. Management’s 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, manage-
ment’s plans and objectives, and any statements concerning assumptions related to the foregoing contained in
Management’s 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 elsewhere in this Form 10-K, including the factors disclosed
under “Item 1A. — Risk Factors.”
General
We are 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 web sites under the names gamestop.com and ebgames.com and publish Game Informer, the industry’s
largest circulation multi-platform video game magazine in the United States.
Our fiscal year is composed of 52 or 53 weeks ending on the Saturday closest to January 31. The fiscal years
ended January 28, 2006 (“fiscal 2005”), January 29, 2005 (“fiscal 2004”) and January 31, 2004 (“fiscal 2003”)
consisted of 52 weeks.
On October 8, 2005, GameStop Holdings Corp. (“Historical GameStop”), formerly known as GameStop
Corp., and Electronics Boutique Holdings Corp. (“EB” or “Electronics Boutique”) completed their previously
announced merger pursuant to the Agreement and Plan of Merger, dated as of April 17, 2005 (the “Merger
Agreement”). Upon the consummation of the mergers, Historical GameStop and EB became wholly-owned
subsidiaries of GameStop Corp., formerly known as GSC Holdings Corp., (the “Company”), a Delaware corpo-
ration formed for the purpose of consummating the business combination (the “mergers”). The mergers of
Historical GameStop and EB have been treated as a purchase business combination for accounting purposes, with
Historical GameStop designated as the acquirer. Therefore, the historical financial statements of Historical
GameStop became the historical financial statements of the Company, the registrant. The accompanying consol-
idated financial statements and notes thereto include the results of operations of EB from October 9, 2005 forward.
Therefore, the Company’s operating results for the fiscal year ended January 28, 2006 include 16 weeks of EB’s
results and 52 weeks, respectively, of Historical GameStop’s results. Management expects sales, sales mix, cost of
sales, gross profit, selling general and administrative expenses, depreciation and amortization and interest expense
in fiscal 2006 to be significantly impacted by including the operations of EB for a full year, as opposed to 16 weeks
in fiscal 2005, which included the holiday selling season. Growth in each of these statement of operations line items
will come from each of the Company’s business segments.
Under the terms of the Merger Agreement, Historical GameStop’s stockholders received one share of the
Company’s Class A common stock for each share of Historical GameStop’s Class A common stock owned and one
share of the Company’s Class B common stock for each share of Historical GameStop’s Class B common stock
owned. Approximately 22.2 million shares of the Company’s Class A common stock were issued in exchange for all
outstanding Class A common stock of Historical GameStop based on the one-for-one ratio and approximately
29.9 million shares of the Company’s Class B common stock were issued in exchange for all outstanding Class B
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