GameStop 2006 Annual Report Download - page 17

PART I
Item 1. Business
General
GameStop Corp. (“GameStop” or the “Company”) is 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 February 3, 2007, we
operated 4,778 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and
EB Games. We also operate the electronic commerce websites www.gamestop.com and www.ebgames.com and
publish Game Informer, the largest multi-platform video game magazine in the United States based on circulation,
with approximately 2.7 million subscribers.
GameStop is a holding company that was created to facilitate the combination of GameStop Holdings Corp.
and Electronics Boutique Holdings Corp., which we refer to as Historical GameStop and EB or Electronics
Boutique, respectively. On April 17, 2005, Historical GameStop and EB entered into a merger agreement pursuant
to which, effective October 8, 2005, separate subsidiaries of GameStop were merged with and into Historical
GameStop and EB, respectively, and Historical GameStop and EB became wholly-owned subsidiaries of GameStop
(the “mergers”). As of February 3, 2007, our Class A common stock and our Class B common stock traded on the
New York Stock Exchange under the symbols GME and GME.B, respectively. On February 7, 2007, all outstanding
Class B common stock was converted into Class A common stock on a one-for-one basis and the Company no
longer has any Class B common stock. On March 16, 2007, the Company completed a two-for-one stock split of its
Class A common stock.
Historical GameStop’s 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. On
February 12, 2002, Historical GameStop completed an initial public offering of its Class A common stock and was a
majority-owned subsidiary of Barnes & Noble until November 12, 2004, when Barnes & Noble distributed its
holdings of outstanding Historical GameStop Class B common stock to its stockholders.
EB was incorporated under the laws of the State of Delaware in March 1998 as a holding company for EB’s
operating activities and completed its initial public offering in July of that same year. EB’s predecessor was
incorporated in the Commonwealth of Pennsylvania in 1977.
In the mergers, Historical GameStop’s stockholders received one share of GameStop’s common stock for each
share of Historical GameStop’s common stock owned. EB stockholders received $19.08 in cash and .39398 of a
share of GameStop’s common stock for each EB share owned. In aggregate, 40.5 million shares of GameStop’s
common stock were issued to EB stockholders and approximately $993.3 million in cash was paid in consideration
for all outstanding common stock of EB and all outstanding stock options of EB.
In the fiscal year ended February 3, 2007, our sales were $5.3 billion from our four business segments: the
United States, Canada, Europe and Australia. Of our 4,778 stores, 3,799 stores are located in the U.S. and 979 stores
are located in Australia, Canada and Europe. Our stores, which average approximately 1,500 square feet, carry a
balanced mix of new and used video game hardware, video game software and accessories, which we refer to as
video game products, and PC entertainment software. Our used video game products provide a unique value
proposition to our customers, and our purchasing of used video game products provides our customers with an
opportunity to trade in their used video game products for store credits and apply those credits towards other
merchandise, which, in turn, increases sales.
Our corporate office and one of our distribution facilities are housed in a 480,000 square foot facility in
Grapevine, Texas. We purchased this facility in March 2004 and improved and equipped it prior to relocating
headquarters and distribution center operations to this facility in fiscal 2005 (the 52 weeks ending January 28, 2006).
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