GameStop 2005 Annual Report Download - page 79

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GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Background and Basis of Presentation
GameStop Corp., formerly known as GSC Holdings Corp., (the “Company” or “GameStop”), is a Delaware
corporation formed for the purpose of consummating the business combination (the “merger”) of GameStop
Holdings Corp., formerly known as GameStop Corp. (“Historical GameStop”), and Electronics Boutique Holdings
Corp. (“EB”), which was completed on October 8, 2005. The Company is the world’s largest retailer of new and
used video game systems and software and personal computer entertainment software and related accessories
primarily through its GameStop and EB Games trade names, web sites (gamestop.com and ebgames.com) and
Game Informer magazine. The Company’s stores, which totaled 4,490 at January 28, 2006, are located in major
regional shopping malls and strip centers in the United States, Australia, Canada and Europe. The Company
operates its business in four segments: United States, Australia, Canada and Europe.
The merger of Historical GameStop and EB has 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 accompanying
condensed consolidated statements of operations and cash flows for the 52 weeks ended January 28, 2006 include
the results of operations of EB from October 9, 2005 forward. Therefore, the Company’s operating results for the
52 weeks ended January 28, 2006 include 16 weeks of EB’s results and 52 weeks of Historical GameStop’s results.
Note 2 provides summary unaudited pro forma information and details on the purchase accounting.
Historical GameStop’s wholly-owned 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. Historical GameStop was incorporated under the laws of the State of Delaware in August 2001 as a holding
company for GameStop, Inc. In February 2002, Historical GameStop completed a public offering of 20,764 shares
of Class A common stock at $18.00 per share (the “Offering”). Upon the effective date of the Offering, Historical
GameStop’s Board of Directors approved the authorization of 5,000 shares of preferred stock, 300,000 shares of
Class A common stock and 100,000 shares of Class B common stock. At the same time, Historical GameStop’s
common stock outstanding was converted to 36,009 shares of Class B common stock.
Until October 2004, all of the 36,009 shares of Historical GameStop Class B common stock outstanding were
held by Barnes & Noble. In October 2004, Historical GameStop’s Board of Directors authorized a repurchase of
6,107 shares of Class B common stock held by Barnes & Noble. Historical GameStop repurchased the shares at a
price equal to $18.26 per share for aggregate consideration of $111,520 before costs of $261. The repurchased
shares were immediately retired. On November 12, 2004, Barnes & Noble distributed to its stockholders its
remaining 29,902 shares of Historical GameStop’s Class B common stock in a tax-free dividend. The Class B shares
retained their super voting power of ten votes per share and were separately listed on the New York Stock Exchange
under the symbol GME.B. All of the outstanding shares of Historical GameStop’s Class A common stock and
Class B common stock were exchanged for the Company’s Class A common stock and Class B common stock,
respectively, in the merger.
Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and
its majority-owned subsidiary, GameStop Group Limited (formerly Gamesworld Group Limited). 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 unless
otherwise indicated.
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