GameStop 2005 Annual Report Download - page 86

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In October 2005, the FASB issued Statement of Financial Accounting Standard Staff Position No. 13-1,
Accounting for Rental Costs Incurred During a Construction Period (“SFAS SP 13-1”). This Statement requires
that rental costs associated with ground or building operating leases that are incurred during a construction period
shall be recognized as rental expense. The rental costs shall be included in income from continuing operations.
SFAS SP 13-1 will be effective for the Company beginning in fiscal 2006. However, the Company previously
corrected its calculation of straight-line rent expense to include in the lease term any period during which the
Company is not obligated to pay rent while the store is being constructed. The implementation of SFAS SP 13-1 is
not expected to have an impact on the Company’s financial condition or results of operations.
2. Acquisitions
On June 23, 2003, the Company acquired a controlling interest in Gamesworld Group Limited, an Ireland-
based electronic games retailer, for approximately $3,340. Gamesworld Group Limited was subsequently renamed
GameStop Group Limited. The acquisition was accounted for using the purchase method of accounting and,
accordingly, the results of operations for the period subsequent to the acquisition are included in the consolidated
financial statements. The excess of purchase price over the net assets acquired, in the amount of approximately
$2,931, has been recorded as goodwill.
On October 8, 2005, Historical GameStop and EB 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 merger, Historical GameStop and EB became wholly-owned subsidiaries of the Company. Both management
and the respective Boards of Directors of EB and Historical Gamestop believed that the merger of the companies
would create significant synergies in operations when the companies were integrated and would enable the
Company to increase profitability as a result of combined market share.
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
common stock of Historical GameStop based on the one-for-one ratio. EB stockholders received $38.15 in cash and
.78795 of a share of the Company’s Class A common stock for each EB share owned. In aggregate, 20.2 million
shares of the Company’s Class A common stock were issued to EB stockholders at a value of approximately
$437,144 (based on the closing price of $21.61 of Historical GameStop’s Class A common stock on April 15, 2005,
the last trading day before the date the merger was announced). In addition, approximately $993,254 in cash was
paid in consideration for (i) all outstanding common stock of EB, and (ii) all outstanding stock options of EB.
Including transaction costs of $13,558 incurred by Historical GameStop, the total consideration paid was
approximately $1,443,956.
The consolidated financial statements include the results of EB from the date of acquisition. The purchase
price has been allocated based on estimated fair values as of the acquisition date. The purchase price allocation is
preliminary and a final determination of required purchase accounting adjustments will be made upon the
77
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)