GameStop 2008 Annual Report Download - page 54

These investing activities were offset by $19.3 million of cash provided by the sale of the Pennsylvania corporate
office and distribution center which were acquired in the EB merger.
Cash provided by financing activities was $22.7 million in fiscal 2008 and cash used in financing activities was
$117.1 million in fiscal 2007 and $43.3 million in fiscal 2006. The cash flows provided by financing activities in
fiscal 2008 were due to cash received related to the issuance of shares associated with stock option exercises of
$29.0 million and for the excess tax benefits realized from the exercise of stock-based awards of $34.2 million.
These cash inflows were offset by the repurchase of $30.0 million of principal value of the Company’s senior notes
and increases in other non-current assets. In addition, the Company borrowed $425.0 million related to the
acquisition of Micromania and subsequently repaid the balance before the end of fiscal 2008. The cash used in
financing activities for fiscal 2007 was primarily due to the repurchase of $20.0 million and $250.0 million of
principal value of the Company’s senior notes and senior floating rate notes, respectively, and the $12.2 million
principal payment made in October 2007 on the Barnes & Noble promissory note. These cash outflows were offset
by $64.9 million received for the issuance of shares relating to stock option exercises and $93.3 million for the
realization of tax benefits relating to the exercise of stock-based awards. The cash used in financing activities in
fiscal 2006 was primarily due to the repurchase of $50.0 million each of the senior notes and the senior floating rate
notes, the payment of the $12.2 million principal due on the Barnes & Noble promissory note and the repayment of
the $9.1 million mortgage on EB’s Pennsylvania distribution center. The fiscal 2006 outflows were offset by
$33.9 million received for the issuance of shares relating to stock option exercises and $43.8 million for the
realization of tax benefits relating to the exercise of stock-based awards.
Sources of Liquidity
We utilize cash generated from operations and have funds available to us under our revolving credit facility to
cover seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash
equivalents are carried at cost, which approximates market value, and consist primarily of time deposits with highly
rated commercial banks and money market investment funds holding direct U.S. Treasury obligations.
In October 2005, in connection with the EB merger, the Company entered into a five-year, $400 million Credit
Agreement (the “Revolver”), including a $50 million letter of credit sub-limit, secured by the assets of the Company
and its U.S. subsidiaries. The Revolver places certain restrictions on the Company and its subsidiaries, including
limitations on asset sales, additional liens and the incurrence of additional indebtedness. In April 2007, the
Company amended the Revolver to extend the maturity date from October 11, 2010 to April 25, 2012, reduce the
LIBO interest rate margin, reduce and fix the rate of the unused commitment fee and modify or delete certain other
covenants.
The availability under the Revolver is limited to a borrowing base which allows the Company to borrow up to
the lesser of (x) approximately 70% of eligible inventory and (y) 90% of the appraisal value of the inventory, in each
case plus 85% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount
available to borrow by their face value. The Company’s ability to pay cash dividends, redeem options, and
repurchase shares is generally prohibited, except that if availability under the Revolver is or will be after any such
payment equal to or greater than 25% of the borrowing base, the Company may repurchase its capital stock and pay
cash dividends. In addition, in the event that credit extensions under the Revolver at any time exceed 80% of the
lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio
covenant of 1.5:1.0.
The per annum interest rate on the Revolver is variable and, at the Company’s option, is calculated by applying
a margin of (1) 0.0% to 0.25% above the higher of the prime rate of the administrative agent or the federal funds
effective rate plus 0.50% or (2) 1.00% to 1.50% above the LIBO rate. The applicable margin is determined quarterly
as a function of the Company’s consolidated leverage ratio. As of January 31, 2009, the applicable margin was 0.0%
for prime rate loans and 1.00% for LIBO rate loans. In addition, the Company is required to pay a commitment fee
of 0.25% for any unused portion of the total commitment under the Revolver. As of January 31, 2009, there were no
borrowings outstanding under the Revolver and letters of credit outstanding totaled $7.7 million.
In October 2008, the Company amended the Revolver to permit both the acquisition of Micromania and a
committed $150.0 million junior term loan facility (the “Term Loans”). In addition, during any period for which the
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