GameStop 2008 Annual Report Download - page 57

In October 2004, GameStop issued a promissory note in favor of Barnes & Noble in the principal amount of
$74.0 million in connection with the repurchase of GameStop’s common stock held by Barnes & Noble. The note
was unsecured and bore interest at 5.5% per annum, payable with each principal installment. Scheduled principal
payments of $12.2 million and $12.2 million were made in October 2006 and October 2007, respectively, satisfying
the promissory note in full.
We used cash to expand the Company through acquisitions during fiscal 2008. On April 5, 2008, the Company
purchased all the outstanding stock of FRS for $21.0 million, net of cash acquired. FRS operated 49 record stores in
Norway and also operated office and warehouse facilities in Oslo, Norway. The Company converted these stores
into video game stores with an inventory assortment similar to its other stores in Norway.
In 2003, the Company purchased a 51% controlling interest in GameStop Group Limited which operates stores
in Ireland and the United Kingdom. Under the terms of the purchase agreement, the minority interest owners of the
remaining 49% have the ability to require the Company to purchase their remaining shares in incremental
percentages at a price to be determined based partially on the Company’s price to earnings ratio and GameStop
Group Limited’s earnings. On May 21, 2008, the minority interest owners exercised their right to sell one-third of
their shares, or approximately 16% of GameStop Group Limited, to the Company under the terms of the original
purchase agreement for $27.4 million. The transaction was completed in June 2008 and recorded in accordance with
the provisions of SFAS 141.
On November 17, 2008, GameStop France SAS, a wholly owned subsidiary of GameStop, completed the
acquisition of substantially all of the outstanding capital stock of SFMI Micromania from L Capital, LV Capital,
Europ@web and other shareholders of Micromania for approximately $580.4 million, net of cash acquired.
Micromania is a leading retailer of video and computer games in France with 332 stores as of January 31, 2009. The
Company funded the transaction with cash on hand, a draw on the Revolver totaling $275.0 million, and the Term
Loans.
Based on our current operating plans, we believe that available cash balances, cash generated from our
operating activities and funds available under the Revolver will be sufficient to fund our operations, required
payments on the Senior Notes, store expansion and remodeling activities and corporate capital expenditure
programs for at least the next 12 months.
Contractual Obligations
The following table sets forth our contractual obligations as of January 31, 2009:
Contractual Obligations Total
Less Than
1 Year 1-3 Years 3-5 Years
More Than
5 Years
Payments Due by Period
(In millions)
Long-Term Debt(1)................. $ 726.0 $ 44.0 $ 88.0 $594.0 $ —
Operating Leases .................. 972.8 295.1 387.1 179.5 111.1
Purchase Obligations(2) ............. 734.3 734.3 — — —
Total ........................... $2,433.1 $1,073.4 $475.1 $773.5 $111.1
(1) The long-term debt consists of $550.0 million (principal value), which bears interest at 8.0% per annum.
Amounts include contractual interest payments.
(2) Purchase obligations represent outstanding purchase orders for merchandise from vendors. These purchase
orders are generally cancelable until shipment of the products.
In addition to minimum rentals, the operating leases generally require the Company to pay all insurance, taxes
and other maintenance costs and may provide for percentage rentals. Percentage rentals are based on sales
performance in excess of specified minimums at various stores. Leases with step rent provisions, escalation clauses
or other lease concessions are accounted for on a straight-line basis over the lease term, including renewal options
for those leases in which it is reasonably assured that the Company will exercise the renewal option. The Company
does not have leases with capital improvement funding.
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