GameStop 2006 Annual Report Download - page 47

Results of Operations
The following table sets forth certain income statement items as a percentage of sales for the periods indicated:
53 Weeks Ended
Ended
February 3,
2007
52 Weeks Ended
Ended
January 28,
2006
52 Weeks Ended
Ended
January 29,
2005
Statement of Operations Data:
Sales ................................. 100.0% 100.0% 100.0%
Cost of sales ........................... 72.3 71.8 72.4
Gross profit ............................ 27.7 28.2 27.6
Selling, general and administrative expenses .... 18.8 19.4 20.2
Depreciation and amortization............... 2.1 2.2 2.0
Stock-based compensation . . ............... 0.4 — —
Merger-related expenses ................... 0.1 0.4 —
Operating earnings ....................... 6.3 6.2 5.4
Interest expense, net ...................... 1.4 0.8 —
Merger-related interest expense .............. — 0.2 —
Debt extinguishment expense ............... 0.1 — —
Earnings before income taxes ............... 4.8 5.2 5.4
Income tax expense ...................... 1.8 1.9 2.1
Net earnings............................ 3.0% 3.3% 3.3%
The Company includes purchasing, receiving and distribution costs in selling, general and administrative
expenses, rather than cost of goods sold, in the statement of operations. For the fiscal years ended February 3, 2007,
January 28, 2006 and January 29, 2005, these purchasing, receiving and distribution costs amounted to $22.3 million,
$20.6 million and $9.2 million, 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, 2005 these processing fees
amounted to $40.9 million, $20.9 million and $12.0 million, respectively. As a result of these classifications, our gross
margins are not comparable to those retailers that include purchasing, receiving and distribution costs in cost of sales
and include processing fees associated with purchases made by check and credit cards in selling, general and
administrative expenses. The net effect of the Company’s classifications is that its cost of sales as a percentage of sales
is higher than, and its selling, general and administrative expenses as a percentage of sales are lower than, they would
have been had the Company’s treatment conformed with those retailers that include purchasing, receiving and
distribution costs in cost of sales and include processing fees associated with purchases made by check and credit cards
in selling, general and administrative expenses, by 0.3%, 0.0% and 0.2% for the fiscal years ended February 3, 2007,
January 28, 2006 and January 29, 2005, respectively.
The following table sets forth sales (in millions) by significant product category for the periods indicated:
Sales
Percent
of Total Sales
Percent
of Total Sales
Percent
of Total
53 Weeks
Ended
February 3,
2007
52 Weeks
Ended
January 28,
2006
52 Weeks
Ended
January 29,
2005
Sales:
New video game hardware ...... $1,073.7 20.2% $ 503.2 16.3% $ 209.2 11.4%
New video game software ....... 2,012.5 37.8% 1,244.9 40.3% 776.7 42.1%
Used video game products ....... 1,316.0 24.8% 808.0 26.1% 511.8 27.8%
Other ...................... 916.7 17.2% 535.7 17.3% 345.1 18.7%
Total ..................... $5,318.9 100.0% $3,091.8 100.0% $1,842.8 100.0%
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