GameStop 2006 Annual Report Download - page 84

The following table summarizes unaudited pro forma financial information assuming the mergers had
occurred on the first day of each period presented. The unaudited pro forma financial information does not
necessarily represent what would have occurred if the transaction had taken place on the date presented and should
not be taken as representative of our future consolidated results of operations. At the time of the mergers,
management expected to realize operating synergies from reduced costs in logistics, marketing, and administration.
The unaudited pro forma information does not reflect these potential synergies or expenses associated with the
mergers or integration activities:
52 Weeks
Ended
January 28,
2006
52 Weeks
Ended
January 29,
2005
(In thousands, except per
share data)
Sales ................................................... $4,393,890 $3,827,685
Cost of sales ............................................. 3,154,928 2,786,554
Gross profit ............................................ 1,238,962 1,041,131
Selling, general and administrative expenses ...................... 930,767 788,413
Depreciation and amortization ................................ 94,288 77,964
Operating earnings ....................................... 213,907 174,754
Interest income ........................................... (6,717) (1,998)
Interest expense ........................................... 85,056 72,217
Earnings before income tax expense .......................... 135,568 104,535
Income tax expense ........................................ 49,482 38,477
Net earnings ........................................... $ 86,086 $ 66,058
Net earnings per common share — basic......................... $ 0.60 $ 0.44
Weighted average shares of common stock — basic ................ 143,850 149,782
Net earnings per common share — diluted ....................... $ 0.56 $ 0.42
Weighted average shares of common stock — diluted ............... 152,982 156,050
In connection with the mergers, the Company incurred merger-related costs and integration activities which
resulted in involuntary employment terminations, lease terminations, disposals of property and equipment and other
costs and expenses. The liability for involuntary termination benefits 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 in October 2005 and was completed in fiscal 2006. The Pennsylvania
corporate office and distribution center were owned facilities that were sold in June 2006. These assets were
classified in the January 28, 2006 balance sheet as “Assets held for sale.”
The liability for lease terminations is associated with stores to be closed. If the Company is unsuccessful in
negotiating lease terminations or sublease agreements, the lease liability will be paid over the remaining lease
terms, the majority of which expire in the next 3 to 5 years, with the last of such leases expiring in 2015. The
Company intends to close these stores in the next 9 to 12 months. The disposals of property and equipment are
related to assets which were either impaired or have been either abandoned or disposed of due to the mergers.
Certain costs associated with the disposition of these assets remained as accrued until the assets were disposed of
and the costs were paid. The disposition of property and equipment was completed in fiscal 2006.
F-16
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)