GameStop 2005 Annual Report Download - page 45

store count and investments in information systems and a net change in prepaid taxes of $21.8 million due to timing
of tax payments made in fiscal 2003 for fiscal 2004.
Cash used in investing activities was $996.8 million and $98.4 million during fiscal 2005 and fiscal 2004,
respectively. During fiscal 2005, $886.1 million of cash was used to acquire EB. Our capital expenditures in fiscal
2005 included approximately $9.7 million to complete the build-out of our new corporate headquarters and
distribution center facility in Grapevine, Texas. The remaining $101.0 million in capital expenditures was used to
open 377 new stores, remodel existing stores and invest in information and distribution systems in support of the
integration of the operations of EB and Historical GameStop. During fiscal 2004, our capital expenditures included
approximately $27.7 million to acquire and begin the build-out of our new corporate headquarters and distribution
center facility. The remaining $70.6 million in capital expenditures was used to open 338 new stores, remodel
existing stores and invest in information systems.
Our future capital requirements will depend on the number of new stores we open and the timing of those
openings within a given fiscal year. We opened 377 stores in fiscal 2005 and expect to open approximately 400
stores in fiscal 2006. Within the next 12 to 24 months, we intend to rebrand all of the EB stores to the GameStop
brand. Projected capital expenditures for fiscal 2006 are approximately $110.0 million, to be used primarily to fund
new store openings, rebrand EB stores and invest in distribution and information systems in support of the
integration of the operations of EB and Historical GameStop.
In October 2005, in connection with the mergers, the Company entered into a five year, $400.0 million Credit
Agreement (the “Senior Credit Facility”), including a $50.0 million letter of credit sub-limit, secured by the assets
of the Company. The Senior Credit Facility places certain restrictions on the Company and the borrower
subsidiaries, including limitations on asset sales, additional liens, and the incurrence of additional indebtedness.
The availability under the Senior Credit Facility 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 Company’s ability to pay cash dividends, redeem options,
and repurchase shares is generally prohibited, except that if availability under the Senior Credit Facility 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 Senior Credit Facility 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 Senior Credit Facility is variable and, at the Company’s 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) 1.25% to 1.75% above the LIBO rate. The applicable margin is determined
quarterly as a function of the Company’s consolidated leverage ratio. As of January 28, 2006 the applicable margin
was 0.0% for prime rate loans and 1.50% for LIBOR loans. In addition, the Company is required to pay a
commitment fee, currently 0.375%, for any unused portion of the total commitment under the Senior Credit Facility.
As of January 28, 2006, there were no borrowings outstanding under the Senior Credit Facility and letters of
credit outstanding totaled $2.3 million.
On May 31, 2005, a subsidiary of EB completed the acquisition of Jump Ordenadores S.L.U. (“Jump”), a
privately-held retailer based in Valencia, Spain. As of January 28, 2006, Jump had other third-party debt of
approximately $0.6 million.
As of January 28, 2006, the Company was in compliance with all covenants associated with its credit facilities.
On September 28, 2005, the Company, along with GameStop, Inc. (which was then a direct wholly-owned
subsidiary of Historical GameStop and is now, as a result of the mergers, an indirect wholly-owned subsidiary of the
Company) as co-issuer (together with the Company, the “Issuers”), completed the offering of $300 million
aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and
$650 million aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the
Senior Floating Rate Notes, the “Notes”). At such time, the gross proceeds of the offering of the Notes were placed
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