GameStop 2006 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... Growing NORTH AMERICA EUROPE AUSTRALIA STORE COUNT United States, 3,752 Canada, 267 Puerto Rico, 45 Guam, 2 STORE COUNT Italy, 157 Denmark, 26 Spain, 101 Norway, 12 Germany, 95 Switzerland, 8 Sweden, 46 Austria, 6 Ireland, 35 United Kingdom, 6 Finland, 1 STORE COUNT Australia, 191 New...

  • Page 3
    ... as GameStop.com and EBgames.com, and Game Informer magazine, a leading multi-platform video game publication. We offer customers the most popular new software, hardware and game accessories for next generation video game systems and the PC. In addition, our used game trade program creates value...

  • Page 4

  • Page 5
    ... business model and represent what was another spectacular demonstration of effort on behalf of our dedicated employees. Our landmark year with over $5.3 billion in sales and solid market share growth, provides a strong platform for GameStop to take full advantage of the exceptional opportunities...

  • Page 6
    ... before it. From the power of emerging technology, where the Xbox 360 and the PS3 systems deliver "teraflop" measured processing power, to the impact of innovation with Nintendo's Wii using gyroscopic controllers, video gaming has entered an amazing new cycle of expansive potential. Furthermore...

  • Page 7
    ... of new games, the GameStop trade video game product than any other retailer, but every store is staffed by "gamers" who have the experience and information needed to help our customers make the right buying decisions. When the choice comes down to Xbox 360 or PS3; a Wii or a PS2; a DS Lite...

  • Page 8
    ... ties to key gaming sites, and apply the same successful "first-to-market" philosophy found in our retail stores to our e-commerce operations, making GameStop.com and EBGames.com the online commerce gaming destinations of choice. e-Commerce Respect the Ratings a nationwide public education and...

  • Page 9

  • Page 10
    ...CY 2003-2006 1 Growth In New Video Game Software Units Sold, CY 2003-2006 1 gamestop corp. growth $26.95 $1.00 4 $19.57 2 3 4 $9.40 Includes special charges of $.05 per diluted share for California litigation settlement costs, professional fees relating to the spin-off by Barnes & Noble, Inc...

  • Page 11
    ... the Company's Class B Common Stock to Barnes & Noble's stockholders) through February 2, 2007 (the last trading date of fiscal 2006) with the cumulative total return on the S&P 500 Index and the Dow Jones Specialty Retailers Index over the same period. Total return values were calculated based on...

  • Page 12

  • Page 13
    FORM 10-K FORM 10-K

  • Page 14

  • Page 15
    ...(Address of principal executive offices) 76051 (Zip Code) Registrant's telephone number, including area code: (817) 424-2000 Securities registered pursuant to Section 12(b) of the Act: (Title of Class) (Name of Exchange on Which Registered) Class A Common Stock, $.001 par value per share New York...

  • Page 16
    ..., Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...Certain Relationships and Related Transactions, and Director Independence ...Principal Accountant Fees and Services ... 22...

  • Page 17
    ... 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 February 3, 2007, we operated 4,778 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop...

  • Page 18
    ...and vendors for sufficient quantities of their products and for new product releases; • economic conditions affecting the electronic game industry; • the competitive environment in the electronic game industry; • our ability to open and operate new stores; • our ability to attract and retain...

  • Page 19
    ...to PC entertainment software. According to International Development Group, a market research firm, retail sales of video game hardware and software and PC entertainment software totaled approximately $10.3 billion in Europe in 2006. The Canadian Press has reported that the video game product market...

  • Page 20
    ... to open new strip center stores in our target markets and new mall stores in selected mall locations; and • Increasing our comparable store sales and operating earnings by capitalizing on industry growth and increasing sales of used video game products and our Game Informer magazine. Targeting...

  • Page 21
    ... the opportunity to pre-order products in our stores or through our web site prior to their release. Investing in our Information Systems and Distribution Capabilities. We employ sophisticated and fullyintegrated inventory management, store-level point of sale and financial systems and state-of...

  • Page 22
    ... of new and used video game products, PC entertainment software, and related products, such as trading cards and strategy guides. Our in-store inventory generally consists of a constantly changing selection of over 5,000 SKUs. We have buying groups in the U.S., Canada, Australia and Europe that...

  • Page 23
    ... average approximately 1,500 square feet, carry a balanced mix of new and used video game products and PC entertainment software. Our stores are generally located in high-traffic "power strip centers", local neighborhood strip centers and high-traffic shopping malls, primarily in major metropolitan...

  • Page 24
    ... are located in highly visible locations within malls and strip centers. Locations. The table below sets forth the number of our stores located in the U.S., Canada, Europe and Australia as of February 3, 2007: United States Number of Stores Alabama ...Alaska ...Arizona ...Arkansas ...California...

  • Page 25
    ... ...Texas ...Utah ...Vermont ...Virginia ...Washington...West Virginia ...Wisconsin ...Wyoming ...Sub-total for United States ...International 95 75 113 53 33 64 7 21 31 22 144 26 201 118 8 160 46 29 189 45 13 61 4 74 340 29 7 120 74 23 46 5 3,799 267 191 28 219 6 26 1 Canada ...Australia...New...

  • Page 26
    ... We operate electronic commerce web sites at www.gamestop.com and www.ebgames.com that allow our customers to buy video game products and other merchandise on-line. The sites also offer customers information and content about available games, release dates for upcoming games, and access to store...

  • Page 27
    ... to stores and returns to vendors. Inventory is shipped to each store at least twice a week, or daily, if necessary, in order to keep stores in supply of products. We also operate distribution centers in Canada, Australia and in various locations in Europe. Management Information Systems. Our...

  • Page 28
    ...skills. We also sponsor annual store managers' conferences in the U.S., Canada, Europe and Australia, which we invite all video game software publishers to attend, and operate an intense educational training program to provide our employees with information about the video game products that will be...

  • Page 29
    ...SEC. The address of that site is http://www.sec.gov. In addition to copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, the Company's Code of Standards, Ethics and Conduct is available on our website under "Investor...

  • Page 30
    ... business terms, we may not be able to offer products to our customers at competitive prices. If our vendors fail to provide marketing and merchandising support at historical levels, our sales and earnings could be negatively impacted. The manufacturers of video game hardware and software and PC...

  • Page 31
    ...in time on a calculated mix of the tax rates applicable to our company and to estimates of the amount of income to be derived in any given jurisdiction. A change in the mix of our business from year to year and from country to country, changes in rules related to accounting for income taxes, changes...

  • Page 32
    ... generation video game systems, at some point in the future this technology may become more prevalent. A limited selection of PC entertainment software and older generation video games is currently available for download over the Internet. If advances in technology continue to expand our customer...

  • Page 33
    ...site, third-party operated distribution centers with which we work. The third-party distribution centers pick up products from our suppliers, repackage the products for each of our stores and ship those products to our stores by package carriers. We use inventory replenishment systems to track sales...

  • Page 34
    ... us to reduce our prices or increase spending; • our ability to open and operate new stores; • our ability to attract and retain qualified personnel; and • our dependence upon software publishers to develop popular game and entertainment titles for video game systems and PCs. If our financial...

  • Page 35
    ..., including the notes; • sell assets; and • transact with affiliates. We cannot assure you that these covenants will not adversely affect our ability to finance our future operations or capital needs or to pursue available business opportunities. The Senior Credit Facility contains various...

  • Page 36
    ... 480,000 square foot facility in Grapevine, Texas, which houses our corporate headquarters and certain of our distribution operations. In May 2006, we purchased an additional 65,000 square foot building at the Grapevine, Texas location which is currently being used in our refurbishing operations. We...

  • Page 37
    ...holders during the 14 weeks ended February 3, 2007. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Price Range of Common Stock The Company's Class A common stock is traded on the New York Stock Exchange ("NYSE") under the...

  • Page 38
    ... $18.65 The high and low sales prices of the Class B shares do not include the effects of the Conversion or the Stock Split. The Class B shares were trading as of February 3, 2007, so this information is provided in accordance with SEC requirements. Approximate Number of Holders of Common Equity As...

  • Page 39
    ... Authorized for Issuance under Equity Compensation Plans Information for our equity compensation plans in effect as of February 3, 2007 is as follows: Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) Number of Securities Remaining Available for Future Issuance Under...

  • Page 40
    ... $1,578,838 $1,352,791 Cost of sales ...3,847,458 2,219,753 1,333,506 1,145,893 1,012,145 Gross profit ...Selling, general and administrative expenses(2) ...Depreciation and amortization(2) ...Stock-based compensation(3) ...Merger-related expenses(4) ...Operating earnings ...Interest expense (income...

  • Page 41
    ...-Based Payment, ("SFAS 123(R)"). This Statement requires companies to expense the estimated fair value of stock options and similar equity instruments issued to employees in its financial statements. The Company adopted the provisions of SFAS 123(R) using the modified prospective application method...

  • Page 42
    ... States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. We also operate electronic commerce websites under the names www.gamestop.com and www.ebgames.com and publish Game Informer, the industry's largest multi-platform video game magazine in the United States based...

  • Page 43
    ... in the video game industry is driven by the introduction of new technology. In fiscal 2005 in the North American markets, Sony introduced the PlayStation Portable (the "PSP") in March and Microsoft introduced the Xbox 360 in November. In November 2006, Nintendo introduced the Wii hardware platform...

  • Page 44
    ... store credit given to the customer. In valuing inventory, management is required to make assumptions regarding the necessity of reserves required to value potentially obsolete or over-valued items at the lower of cost or market. Management considers quantities on hand, recent sales, potential price...

  • Page 45
    ... economic characteristics of its operations. Fair value of this reporting unit was estimated using market capitalization methodologies. Subsequent to the mergers, the Company determined that it has four reporting units, the United States, Australia, Canada and Europe, based upon the similar economic...

  • Page 46
    ... of an annual effective tax rate at any given point in time on a calculated mix of the tax rates applicable to our company and to estimates of the amount of income to be derived in any given jurisdiction. We file our tax returns based on our understanding of the appropriate tax rules and regulations...

  • Page 47
    ..., respectively. The Company includes processing fees associated with purchases made by check and credit cards in cost of sales, rather than selling, general and administrative expenses, in the statement of operations. For the fiscal years ended February 3, 2007, January 28, 2006 and January 29...

  • Page 48
    ... electronic commerce websites www.gamestop.com and www.ebgames.com and Game Informer magazine. Segment results for Canada include retail operations in Canada and segment results for Australia include retail operations in Australia and New Zealand. Segment results for Europe include retail operations...

  • Page 49
    ...of total sales. Used video game product sales also grew due to the mergers, the 53rd week of sales in fiscal 2006 and the increase in store count, with an increase in sales of $508.0 million, or 62.9%, from fiscal 2005. Sales of other product categories, including PC entertainment and other software...

  • Page 50
    ... for new stores and management information systems. Beginning January 29, 2006, the Company adopted the provisions of SFAS 123(R) using the modified prospective application method. Under this method, the Company records stock-based compensation expense based on the estimated grant-date fair value...

  • Page 51
    ...forma basis, comparable store sales decreased 1.4% in fiscal 2005. Stores are included in our comparable store sales base beginning in the thirteenth month of operation. The mergers and the release of the Sony PSP and the Microsoft Xbox 360 led to an increase in new video game hardware sales of $294...

  • Page 52
    ... mergers; an increase in the growth in accounts payable and accrued liabilities, net of growth in merchandise inventories and the provision for inventory reserves of $47.9 million caused by growth of the Company and efforts to manage working capital; an increase in the cash provided by prepaid taxes...

  • Page 53
    ... our new corporate headquarters and distribution center facility in Grapevine, Texas. The remaining $101.0 million in capital expenditures was used to open new stores, remodel existing stores and invest in information and distribution systems in support of the integration of the operations of EB and...

  • Page 54
    ...priced at 98.688%, resulting in a discount at the time of issue of $8.5 million. The discount is being amortized using the effective interest method. As of February 3, 2007, the unamortized original issue discount was $6.7 million. The Issuers pay interest on the Senior Floating Rate Notes quarterly...

  • Page 55
    .... Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under the Revolver will be sufficient to fund our operations, required interest payments on the Notes and our note payable to Barnes & Noble, store...

  • Page 56
    ... functions in EB's Pennsylvania corporate office and distribution center and Nevada call center, which were closed in the first half of fiscal 2006. In addition to minimum rentals, the operating leases generally require the Company to pay all insurance, taxes and other maintenance costs and may...

  • Page 57
    ... www.gamestop.com is the exclusive specialty video game retailer listed on www.bn.com, Barnes & Noble's e-commerce site. Under the terms of this agreement, the Company pays a fee to Barnes & Noble for sales of video game or PC entertainment products sold through www.bn.com. For the 53 weeks ended...

  • Page 58
    ... authority that is directly imposed on a revenue-producing transaction between a seller and a customer such as sales, use, value added and certain excise taxes, is an accounting policy decision that should be disclosed in a company's financial statements. Additionally, companies that record such...

  • Page 59
    ... to foreign currency risks, EB routinely used forward exchange contracts and cross-currency swaps to manage currency risk and had a number of open positions designated as hedge transactions as of the merger date. The Company discontinued hedge accounting treatment for all derivative instruments...

  • Page 60
    ... is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the...

  • Page 61
    ... an opinion on the effectiveness of the internal control over financial reporting of GameStop Corp. based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit...

  • Page 62
    ... and Chief Executive Officer, Vice Chairman and Chief Operating Officer, President, Chief Financial Officer, Chief Accounting Officer and any Executive Vice President of the Company. This Code of Ethics is attached as Exhibit 14.1 to this Form 10-K. In accordance with SEC rules, the Company intends...

  • Page 63
    ...purchasers listed on Schedule II thereto.(4) Rights Agreement, dated as of June 27, 2005, between GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as Rights Agent.(3) Form of Indenture.(6) Separation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop...

  • Page 64
    ....1 Tax Disaffiliation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8) Insurance Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8) Operating Agreement...

  • Page 65
    Exhibit Number Description 23.1 31.1 31.2 32.1 32.2 Consent of BDO Seidman, LLP. Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of Chief ...

  • Page 66
    ... on its behalf by the undersigned, thereunto duly authorized. GAMESTOP CORP. By: R. RICHARD FONTAINE R. Richard Fontaine Chairman of the Board and Chief Executive Officer /s/ Date: April 4, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed...

  • Page 67
    Name Capacity Date /s/ GERALD R. SZCZEPANSKI Gerald R. Szczepanski /s/ EDWARD A. VOLKWEIN Edward A. Volkwein LAWRENCE S. ZILAVY Lawrence S. Zilavy Director April 4, 2007 Director April 4, 2007 /s/ Director April 4, 2007 52

  • Page 68
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  • Page 69
    ... FINANCIAL STATEMENTS Page GameStop Corp. Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm...Consolidated Financial Statements: Balance Sheets ...Statements of Operations...Statements of Stockholders' Equity ...Statements of Cash Flows ...Notes to...

  • Page 70
    ... No. 123(R) Share-based Payment, on January 29, 2006. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of GameStop Corp.'s internal control over financial reporting as of February 3, 2007, based on criteria...

  • Page 71
    GAMESTOP CORP. CONSOLIDATED BALANCE SHEETS February 3, January 28, 2007 2006 (In thousands) ASSETS Current assets: Cash and cash equivalents ...Receivables, net ...Merchandise inventories, net ...Prepaid expenses and other current assets . Prepaid taxes ...Deferred taxes ...Total current assets ......

  • Page 72
    GAMESTOP CORP. CONSOLIDATED STATEMENTS OF OPERATIONS 52 Weeks 52 Weeks 53 Weeks Ended Ended Ended January 29, January 28, February 3, 2005 2006 2007 (In thousands, except per share data) Sales ...$5,318,900 Cost of sales ...3,847,458 Gross profit ...Selling, general and administrative expenses ......

  • Page 73
    ... translation ...- Total comprehensive income ...Elimination of treasury stock ...(6,526) Issuance of stock to Electronics Boutique stockholders ...40,458 Stock-based compensation ...- Exercise of employee stock options (including tax benefit of $12,308) ...3,480 Balance at January 28, 2006 ...145...

  • Page 74
    ... of Game Brands Inc.) ...Sale of assets held for sale ...Net cash flows used in investing activities ...Cash flows from financing activities: Issuance of senior notes payable relating to Electronics Boutique merger, net of discount ...Issuance of senior floating rate notes payable relating to...

  • Page 75
    ...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, websites (www.gamestop.com and www.ebgames.com) and Game Informer magazine. The Company's stores, which totaled 4,778...

  • Page 76
    ... accounts. Merchandise Inventories Our merchandise inventories are carried at the lower of cost or market using the average cost method. Used video game products traded in by customers are recorded as inventory at the amount of the store credit given to the customer. In valuing inventory, management...

  • Page 77
    .... The fair value of this reporting unit was estimated using market capitalization methodologies. Subsequent to the mergers, the Company determined that it has four reporting units, the United States, Australia, Canada and Europe, based on a combination of geographic areas, the methods in which we...

  • Page 78
    ... ("GAAP"), as clarified by the Chief Accountant of the SEC in a February 2005 letter to the American Institute of Certified Public Accountants. For all stores opened since the beginning of fiscal 2002, the Company had calculated straight-line rent expense using the initial lease term, but was...

  • Page 79
    ...and similar equity instruments issued to employees in their financial statements. Previously, companies were required to calculate the estimated fair value of these share-based payments and could elect to either include the estimated cost in earnings or disclose the pro forma effect in the footnotes...

  • Page 80
    ... under its plans: 52 Weeks 52 Weeks Ended Ended January 28, January 29, 2006 2005 (In thousands, except per share data) Net earnings, as reported...Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects . . Pro...

  • Page 81
    .... The Company includes processing fees associated with purchases made by check and credit cards in cost of sales, rather than selling, general and administrative expenses, in the statement of operations. For the 53 weeks ended February 3, 2007 and the 52 weeks ended January 28, 2006 and January...

  • Page 82
    ... authority that is directly imposed on a revenue-producing transaction between a seller and a customer such as sales, use, value added and certain excise taxes, is an accounting policy decision that should be disclosed in a company's financial statements. Additionally, companies that record such...

  • Page 83
    ...were issued to EB stockholders at a value of approximately $437,144 (based on the closing price of $10.81 per share 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...

  • Page 84
    ... covered severance amounts, payroll taxes and benefit costs for approximately 680 employees, primarily in general and administrative functions in EB's Pennsylvania corporate office and distribution center and Nevada call center, which were closed in fiscal 2006. Termination of these employees began...

  • Page 85
    ...costs totaling $77, $52 and $3 were charged to acquisition costs and paid for the Europe, Canada and Australia segments, respectively. All other merger costs and related liabilities were incurred for the U.S. segment. On January 13, 2007, the Company purchased Game Brands Inc., a 72 store video game...

  • Page 86
    ... vendor marketing programs generally cover a period from a few days up to a few weeks and include items such as product catalog advertising, in-store display promotions, internet advertising, co-op print advertising, product training and promotion at the Company's annual store managers conference...

  • Page 87
    ... for the Company's business segments for the 52 weeks ended January 28, 2006 and the 53 weeks ended February 3, 2007 were as follows: United States Canada Australia (In thousands) Europe Total Balance at January 29, 2005 ...Cost relating to the acquisition of Electronics Boutique...Impairment for...

  • Page 88
    ... 28, 2006 and the 53 weeks ended February 3, 2007 were as follows: Deferred Intangible Financing Fees Assets (In thousands) Balance at January 29, 2005 ...Addition for the acquisition of Electronics Boutique, including senior notes payable and senior floating rate notes payable issued and revolving...

  • Page 89
    ...% 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...

  • Page 90
    ...date the Notes were issued, and (3) use their commercially reasonable efforts to consummate the exchange offer with respect to the Notes within 270 days from the date the Notes were issued. In April 2006, the Company filed a registration statement on Form S-4 in order to register new notes (the "New...

  • Page 91
    ... classified as operating leases, generally provide for minimum and, in some cases, percentage rentals and require the Company to pay all insurance, taxes and other maintenance costs. Leases with step rent provisions, escalation clauses or other lease concessions are accounted for on a straightline...

  • Page 92
    ... and assistant store managers in New York to certify a class under New York wage and hour laws. In August 2005, EBOA filed a motion for summary judgment as to certain claims and renewed its request that certification of the claims be denied. On October 17, 2005, the District Court issued an Order...

  • Page 93
    ... should have been paid overtime. The plaintiffs sought to represent all current and former salaried retail managers who were employed by GameStop (as well as a subsidiary of EB) for the three years before April 18, 2006. The Company filed a motion to dismiss, transfer or stay the case based on the...

  • Page 94
    ... tax rate ...State income taxes, net of federal effect ...Foreign income taxes ...Other (including permanent differences) ... 35.0% 2.0 0.7 0.1 37.8% 35.0% 1.1 1.4 (0.5) 37.0% 35.0% 3.3 0.6 (0.5) 38.4% The Company's effective tax rate increased from 37.0% in the 52 weeks ended January 28, 2006...

  • Page 95
    ... 2006 (In thousands) Deferred tax asset: Allowance for doubtful accounts ...Inventory capitalization costs ...Inventory obsolescence reserve ...Organization costs ...Accrued liabilities ...Gift certificate liability ...Deferred rents ...Deferred compensation ...Stock-based compensation ...Merger...

  • Page 96
    ... on the right to receive dividends on such shares. The options to purchase Class A common shares are issued at fair market value of the underlying shares on the date of grant. In general, the options vest and become exercisable ratably over a three-year period, commencing one year after the...

  • Page 97
    ... requirements, primarily age and length of service. The Savings Plan allows employees to invest up to 60%, up to a maximum of $15,000 a year, of their eligible gross cash compensation invested on a pre-tax basis. The Company's optional contributions to the Savings Plan are generally in amounts based...

  • Page 98
    ... www.gamestop.com is the exclusive specialty video game retailer listed on www.bn.com, Barnes & Noble's e-commerce site. Under the terms of this agreement, the Company pays a fee to Barnes & Noble for sales of video game or PC entertainment products sold through www.bn.com. For the 53 weeks ended...

  • Page 99
    ...States, Canada, Australia and Europe. The Company identifies segments based on a combination of geographic areas and management responsibility. Each of the segments includes significant retail operations with all stores engaged in the sale of new and used video game systems and software and personal...

  • Page 100
    GAMESTOP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) United States Fiscal Year Ended January 28, 2006 Canada Australia Europe Other Consolidated Sales ...$2,709.8 $111.4 $ 94.4 $176.2 $ - Depreciation and amortization ...58.6 2.6 1.9 3.3 - Operating earnings...173.7 7.9 11...

  • Page 101
    ... price, a number of the acquiring company's common shares having a market value at that time of twice the exercise price of the Right. Furthermore, at any time after a person or group acquires 15% or more of the voting power of the outstanding common stock of the Company but prior to the acquisition...

  • Page 102
    ... to redeem the Rights at any time prior to the acquisition by a person or group of 15% or more of the voting power of the outstanding common stock of the Company, at a price of $.01 per Right. The Rights will expire on October 28, 2014. The Company has 5,000 shares of $.001 par value preferred stock...

  • Page 103
    ... February 3, 2007 and January 28, 2006 and results of operations and cash flows for the fiscal years ended February 3, 2007, January 28, 2006 and January 29, 2005 of the Company's guarantor and non-guarantor subsidiaries. GAMESTOP CORP. CONSOLIDATING BALANCE SHEET Issuers and Non-Guarantor Guarantor...

  • Page 104
    ... $3,015,821 ... Less accumulated depreciation and amortization . Net property and equipment ...Investment ...Goodwill, net ...Assets held for sale ...Deferred financing fees ...Other noncurrent assets ...Total other assets ...Total assets ... 463,619) - - - - (463,619) $(524,148) LIABILITIES AND...

  • Page 105
    ... January 28, 2006 For the 52 Weeks Ended January 28, 2006 Sales ...$2,709,786 Cost of sales ...1,927,765 Gross profit ...Selling, general and administrative expenses ...Depreciation and amortization ...Stock-based compensation ...Merger-related expenses ...Operating earnings ...Interest...

  • Page 106
    ... the 52 Weeks Ended January 29, 2005 Sales ...$1,818,158 Cost of sales ...1,314,937 Gross profit ...Selling, general and administrative expenses ...Depreciation and amortization ...Operating earnings (loss) ...Interest income ...Interest expense ...Earnings (loss) before income tax expense (benefit...

  • Page 107
    ...sales) ...Provision for inventory reserves ...Amortization and retirement of deferred financing fees ...Amortization and retirement of original issue discount on senior notes ...Stock-based compensation expense ...Deferred taxes ...Loss on disposal and impairment of property and equipment...Increase...

  • Page 108
    ... from financing activities: Issuance of senior notes payable relating to Electronics Boutique merger, net of discount ...641,472 Issuance of senior floating rate notes payable relating to Electronics Boutique merger ...300,000 Repayment of debt relating to the repurchase of common stock from Barnes...

  • Page 109
    ...stock from Barnes & Noble ...Proceeds from exercise of stock options ...Net increase in other noncurrent assets ...Net cash flows used in financing activities ...Exchange rate effect on cash and cash equivalents ...Net increase (decrease) in cash and cash equivalents . . Cash and cash equivalents at...

  • Page 110
    ...and stock-based compensation expense of $5,272. (5) The results for the third quarter of the fiscal year ended January 28, 2006 include the results of EB from October 9, 2005, the merger date, through October 29, 2005 and include merger-related expenses of $11,329 and merger-related interest expense...

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    ... of New York, as Rights Agent.(3) Form of Indenture.(6) Separation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(7) Tax Disaffiliation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings...

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    ...17) Computation of Ratio of Earnings to Fixed Charges. Code of Ethics for Senior Financial Officers.(18) Subsidiaries. Consent of BDO Seidman, LLP. Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section...

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    ... 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006. (18) Incorporated by reference to GameStop Holdings Corp.'s Form 10-K for the fiscal year ended January 31, 2004 filed with the Securities and Exchange Commission on April 14, 2004...

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    ... with the Securities and Exchange Commission. GameStop also filed its 2006 Domestic Company Section 303A Written Affirmation. GameStop, EB Games, Electronics Boutique, Game Informer Magazine and Respect the Ratings are trademarks of GameStop, Inc. Products named in these pages are trade names, or...

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