GameStop 2010 Annual Report Download - page 86

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Table of Contents
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3. Vendor Arrangements
The Company and approximately 50 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. The Company's
accounting for cooperative advertising arrangements and other vendor marketing programs results in a portion of the consideration received from the
Company's vendors reducing the product costs in inventory rather than as an offset to the Company's 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 identifiable
advertising and promotional costs to merchandise purchases. The Company then applied this ratio to the value of inventory in determining the
amount of vendor reimbursements to be recorded as a reduction to inventory reflected on the balance sheet.
The cooperative advertising programs and other vendor marketing programs generally cover a period from a few days up to a few weeks and
include items such as product catalog advertising, in-store display promotions, Internet advertising, co-op print advertising, product training and
promotion at the Company's annual store managers conference. The allowance for each event is negotiated with the vendor and requires specific
performance by the Company to be earned.
Specific, incremental and identifiable advertising and promotional costs were $122.1 million, $93.0 million and $92.1 million in the 52 week
periods ended January 29, 2011, January 30, 2010 and January 31, 2009, respectively. Vendor allowances received in excess of advertising expenses
were recorded as a reduction of cost of sales of $83.7 million, $116.9 million and $125.1 million for the 52 week periods ended January 29, 2011,
January 30, 2010 and January 31, 2009, respectively. The amount recognized as income related to the capitalization of excess vendor allowances
was $2.1 million for the 52 weeks ended January 29, 2011. The amounts deferred as a reduction in inventory were $0.7 million and $3.2 million for
the 52 weeks ended January 30, 2010 and January 31, 2009, respectively.
4. Computation of Net Income per Common Share
The Company has Class A common stock outstanding. A reconciliation of shares used in calculating basic and diluted net income per common
share is as follows:
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
January 29, January 30, January 31,
2011 2010 2009
(In millions, except per share data)
Net income attributable to GameStop $ 408.0 $ 377.3 $ 398.3
Weighted average common shares outstanding 151.6 164.5 163.2
Dilutive effect of options and warrants on common stock 2.4 3.4 4.5
Common shares and dilutive potential common shares 154.0 167.9 167.7
Net income per common share:
Basic $ 2.69 $ 2.29 $ 2.44
Diluted $ 2.65 $ 2.25 $ 2.38
F-16