GameStop 2007 Annual Report Download - page 81

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options granted during the 52 weeks ended February 2, 2008, 53 weeks ended February 3, 2007 and the 52 weeks
ended January 28, 2006 were estimated at $10.16, $8.42 and $4.42, respectively, using the following assumptions:
52 Weeks
Ended
February 2,
2008
53 Weeks
Ended
February 3,
2007
52 Weeks
Ended
January 28,
2006
Volatility ....................................... 40.5% 54.5% 57.3%
Risk-free interest rate .............................. 4.8% 4.6% 4.2%
Expected life (years)............................... 4.0 3.0 6.0
Expected dividend yield ............................ 0% 0% 0%
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. In preparing these financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving due consideration to materiality. Changes in the
estimates and assumptions used by management could have significant impact on the Company’s financial results.
Actual results could differ from those estimates.
Fair Values of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities
reported in the accompanying consolidated balance sheets approximate fair value due to the short-term maturities of
these assets and liabilities. The fair value of the Company’s senior notes payable in the accompanying consolidated
balance sheets is estimated based on recent quotes from brokers. As of February 2, 2008, the senior notes payable
had a carrying value of $574,473 and a fair value of $591,600. As of February 3, 2007, the senior notes payable and
senior floating rate notes payable had a carrying value of $593,311 and $250,000, respectively, and a fair value of
$640,500 and $260,625, respectively.
Guarantees
The Company had bank guarantees relating to international store leases totaling $10,670 as of February 2,
2008.
Vendor Concentration
The Company’s largest vendors worldwide are Nintendo, Sony Computer Entertainment, Microsoft and
Electronic Arts, Inc., which accounted for 21%, 17%, 16% and 11%, respectively, of the Company’s new product
purchases in fiscal 2007 and 11%, 13%, 14% and 10%, respectively, in fiscal 2006. In fiscal 2005, the Company’s
largest vendors, as measured in the U.S. only due to the timing of the mergers, were Sony, Microsoft and Electronic
Arts, Inc. which accounted for 18%, 13% and 11%, respectively, of the Company’s new product purchases.
Reclassifications
Certain reclassifications have been made to conform the prior period data to the current year presentation.
Stock Conversion and Stock Split
On February 7, 2007, following approval by a majority of the Class B common stockholders in a special
meeting of the Company’s Class B common stockholders, all outstanding Class B common shares were converted
F-14
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)