GameStop 2006 Annual Report Download - page 85

Merger-related costs include professional fees, financing costs and other costs associated with the mergers and
include certain costs associated with integrating the operations of Historical GameStop and EB, including
relocation costs. The Company completed all integration activities in fiscal 2006. Rebranding of EB stores to
the GameStop name is expected to be completed in the next 12 to 18 months.
The following table represents the activity during the 52 weeks ended January 28, 2006 and the 53 weeks
ended February 3, 2007 associated with the mergers and related liabilities:
Balance at
Beginning of
Period
Charged to
Acquisition
Costs
Charged to
Costs and
Expenses
Write-Offs
and
Non-Cash
Charges
Cash
Payments
Balance at
End of
Period
(In thousands)
Balance at January 29, 2005 ............ $ — $ — $ — $ — $ — $ —
Severance and employee related costs . . . — 17,889 — — 4,984 12,905
Lease terminations ................. — 10,641 — — 584 10,057
Disposal of property and equipment . . . . — 2,494 10,649 10,649 — 2,494
Merger costs, bridge financing and
other .......................... — 34,669 10,469 496 42,009 2,633
Balance at January 28, 2006 ............ — 65,693 21,118 11,145 47,577 28,089
Severance and employee related costs . . . 12,905 (2,913) — (385) 9,735 642
Lease terminations ................. 10,057 1,346 — — 3,867 7,536
Disposal of property and equipment . . . . 2,494 — — 815 1,679 —
Merger costs, bridge financing and
other .......................... 2,633 148 — 976 1,805 —
Balance at February 3, 2007 ............ $28,089 $ (1,419) $ — $ 1,406 $17,086 $ 8,178
Severance and employment related costs totaling $493 were charged to acquisition costs and paid for the
Europe segment and merger 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 retailer operating
under the name Rhino Video Games, for $11,344. 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 the purchase price over the net assets acquired, in the amount of
$8,083 has been recorded as goodwill. In addition, merger-related costs and related liabilities of $612 related to the
Game Brands Inc. purchase have been accrued for and are included in accrued liabilities in the February 3, 2007
consolidated balance sheet. The pro forma effect assuming the acquisition of Game Brands Inc. at the beginning of
fiscal 2006 and fiscal 2005 is not material.
3. Vendor Arrangements
The Company and approximately 75 of its vendors participate in cooperative advertising programs and other
vendor marketing programs in which the vendors provide the Company with cash consideration in exchange for
marketing and advertising the vendors’ products. Our accounting for cooperative advertising arrangements and
other vendor marketing programs, in accordance with FASB Emerging Issues Task Force Issue 02-16 or “EITF
02-16,” results in a portion of the consideration received from our vendors reducing the product costs in inventory
rather than as an offset to our marketing and advertising costs. The consideration serving as a reduction in inventory
is recognized in cost of sales as inventory is sold. The amount of vendor allowances to be recorded as a reduction of
inventory was determined by calculating the ratio of vendor allowances in excess of specific, incremental and
F-17
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)