GameStop 2012 Annual Report Download

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Ready to
level up
2012 ANNUAL REPORT POWER TO THE PLAYERS

Table of contents

  • Page 1
    2012 ANNUAL REPORT P O W E R T O T H E P L AY E R S level up Ready to

  • Page 2
    ... the video game industry faced many challenges in 2012. GameStop outperformed the market, however, and grew market share by 221 basis points, expanded our margin rate by 170 basis points and enhanced shareholder return with a 67% increase in our quarterly dividend. As we enter 2013, GameStop is well...

  • Page 3
    ... video game industry, so we entered the year with disciplined resolve to control expenses and persist in executing our strategic plan. As a result, we significantly outperformed the market and again expanded our gross margin rates despite a decrease in topline sales. As expected, digital receipts...

  • Page 4
    2012 ANNUAL REPORT P O W E R T O T H E P L AY E R S GlobalImpact GameStop operates 6,602 stores in 15 countries worldwide, making us the largest specialty retailer of video games on the planet. On top of our large global footprint, we also command leading market share in13 of the 15 countries ...

  • Page 5
    ...on managing the basics of our business and executing GameStop's strategic plan in 2012. As a result, international comparable store sales outperformed the U.S., leading to market share gains in most markets. Additionally, gross margin improvements, focus on cost controls and continued rollout of new...

  • Page 6
    ... market share, clearly illustrating the importance of our buy-sell-trade business to the overall health of the video game industry. PRE-OWNED SALES $2,430.5 $2,620.2 $2,469.8 $2,394.1 $2,800 We returned more than $2,600 $2,400 OF TRADES were applied to the purchase of new products in 2012...

  • Page 7
    2012 ANNUAL REPORT P O W E R T O T H E P L AY E R S REFURBISHMENTOPERATIONSCENTER GameStop's 182,000 square foot Refurbishment Operations Center (ROC) in Grapevine, Texas, lies at the core of the buy-sell-trade business. This state-of-the-art facility develops proprietary technology to repair and ...

  • Page 8
    ... Re driving market share growth and delivers valuable insights d that steer real estate, marketing and buying decisions. tha TIMES PUR members shop with GameStop 5 times more often than non-members. 70 6 PERCENT PUR members accounted for 70% of total U.S. purchases in 2012. Global Scale PowerUp...

  • Page 9
    ... family of tablets and offers an exclusive free $25 Amazon.com gift card with purchase. GameStop begins selling NET10 pre-paid wireless plans, giving customers the option to immediately activate their devices. March 2012 June September December January 2013 Recommerce: The business of buying...

  • Page 10
    2012 ANNUAL REPORT P O W E R T O T H E P L AY E R S OutsideTheBox New N technologies are driving consumers to engage with brands s in some exciting and dynamic ways, and GameStop is committed to delivering an exceptional experience, whether our customers choose ch to shop in our stores, on our ...

  • Page 11
    ... launched Web-in-Store, a service that allows customers to purchase and pay for items in our stores and have them shipped free of charge directly to their homes. Web-in-Store gives all stores the ability to sell the broad range of products featured on GameStop.com, including tablets, high-end gaming...

  • Page 12
    .... Under the Giving Power program, we maintain support for Make-A-Wish®, providing gift cards for shopping spree wishes and delivering memorable in-store experiences for wish kids. To offer more associates the opportunity to give back, we also established a group volunteer program supporting Ronald...

  • Page 13
    2012 ANNUAL REPORT P O W E R T O T H E P L AY E R S GameStop is constantly exploring national and local associate volunteer opportunities to support our charities of choice. As we look to 2013, our goal is to increase our employee participation through Make-A-Wish® and Ronald McDonald House ...

  • Page 14
    ... ANNUAL REPORT P O W E R T O T H E P L AY E R S LookingAhead 2012 was a transformative year for GameStop and we will continue this course in 2013. As we prepare to level up, we are in a stronger market share position than ever before, with the right strategies and tactics to drive continued growth...

  • Page 15
    ...York Stock Exchange as of July 27, 2012. Number of shares of $.001 par value Class A Common Stock outstanding as of March 25, 2013: 117,836,276 DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement of the registrant to be filed pursuant to Regulation 14A under the Securities...

  • Page 16
    ...Disagreements with Accountants on Accounting and Financial Disclosure ...Controls and Procedures ...Other Information ...PART III Directors, Executive Officers and Corporate Governance ...Executive Compensation ...Security Ownership of Certain Beneficial Owners and Management and Related Stockholder...

  • Page 17
    ...also sell various types of digital products, including downloadable content, network points cards, prepaid digital and online timecards and digitally downloadable software. Our mobile business consists primarily of pre-owned mobile devices, tablets and related accessories. Our buy-sell-trade program...

  • Page 18
    ... pre-owned video game products. International Development Group, a market research firm ("IDG"), estimates that retail sales of video game hardware and software and PC entertainment software totaled approximately $9.4 billion in Europe in 2012. For 2012, the NPD Group reported that video game retail...

  • Page 19
    ... easy-to-use, free or very low-priced games played through the internet in Web browsers, on dedicated gaming Web sites or on mobile phones or other mobile devices. Casual games cost less to develop and distribute than a traditional console video game and are often supported by in-game advertising or...

  • Page 20
    ... brand awareness over a broader demographic area in order to promote our unique buying experience in-store for new and pre-owned hardware and software, trade-ins of pre-owned video game and mobile consumer electronics products and to leverage our Web sites at www.gamestop.com, www.ebgames.com...

  • Page 21
    ... Kongregate.com and we acquired a digital PC distribution platform, Impulse, and a streaming technology company, Spawn Labs, during the 52 weeks ended January 28, 2012 ("fiscal 2011"). We continue to make investments in e-commerce, digital delivery systems, mobile applications, online video game...

  • Page 22
    ... in the first few days and weeks following its release. As the world's largest retailer of video game products and PC entertainment software with a proven capability to distribute new releases to our customers quickly and capture market share immediately following new product launches, we believe we...

  • Page 23
    ... software, and related products, such as video game accessories and strategy guides, as well as new and pre-owned mobile devices such as tablets, phones and music players. Our in-store inventory generally consists of a constantly changing selection of over 4,600 SKUs. We have buying groups...

  • Page 24
    ...Points Cards. The proliferation of online game play through Microsoft Xbox Live, the PlayStation Network and PC gaming Web sites has led to consumer demand for subscription, time and points cards ("digital currency") as well as digitally downloadable content for existing console video games. We sell...

  • Page 25
    ... marketing opportunities both for our vendors and for us. Our stores average approximately 1,400 square feet and carry a balanced mix of new and pre-owned video game products and PC entertainment software. Our stores are generally located in high-traffic "power strip centers," local neighborhood...

  • Page 26
    ... ...Texas ...Utah ...Vermont ...Virginia ...Washington ...West Virginia ...Wisconsin ...Wyoming ...Sub-total for United States ... 10 20 43 27 154 26 263 140 9 185 45 37 219 46 15 73 9 104 378 28 5 144 80 33 64 8 4,425 Number of Stores International Canada ...Australia ...New Zealand ...Sub-total...

  • Page 27
    Game Informer We publish Game Informer, the world's largest video game publication and Web site featuring reviews of new title releases, tips and secrets about existing games and news regarding current developments in the electronic game industry. Print and digital versions of the monthly magazine ...

  • Page 28
    ...In fiscal 2010, we launched our PowerUp Rewards loyalty program in the United States which gives our customers the ability to sign up for a free or paid membership that offers points earned on purchases in our stores, on our U.S. Web site and on Kongregate.com, which can be redeemed for discounts or...

  • Page 29
    ... environment via a secure, virtual private network. Regional communication links exist to each of our distribution centers and offices in international locations with connectivity to our U.S. data center as required by our international, distributed applications. Our in-store point-of-sale system...

  • Page 30
    ... loss prevention managers who assist the stores in implementing security measures to prevent theft of our products. Customer Service Our store personnel provide value-added services to each customer, such as maintaining lists of regular customers and reserving new releases for customers with a down...

  • Page 31
    ... U.S. employees are represented by a labor union or are members of a collective bargaining unit. Available Information We make available on our corporate Web site (www.gamestopcorp.com), under "Investor Relations - SEC Filings," free of charge, our annual reports on Form 10-K, quarterly reports on...

  • Page 32
    ...wide variety of products, including mobile phones, tablets, social networking Web sites and other devices. In order to continue to compete effectively in the electronic game industry, we need to respond quickly to technological changes and to understand their impact on our customers' preferences. It...

  • Page 33
    ... these new forms of gaming into the Company's business model, but we can provide no assurances that these strategies will be successful or profitable. We depend upon the timely delivery of products. We depend on major hardware manufacturers, primarily Microsoft, Sony and Nintendo, to deliver new and...

  • Page 34
    ... Buy; internet-based retailers such as Amazon.com; other U.S. and international video game and PC software specialty stores located in malls and other locations, such as Carrefour and Media Markt; toy retail chains; direct sales by software publishers; and online retailers and game rental companies...

  • Page 35
    ... rate at any given point in time on a calculated mix of the tax rates applicable to our Company and to estimates of the amount of income to be derived in any given jurisdiction. A change in the mix of our business from year to year and from country to country, changes in rules related to accounting...

  • Page 36
    ...of new product releases including new console launches; • the timing of new store openings or closings; • shifts in the timing of certain promotions; • the effect of changes in tax rates in the jurisdictions in which we operate; • acquisition costs and the integration of companies we acquire...

  • Page 37
    ... GameStop locations. We believe that we can ultimately increase profitability by successfully transferring customers and sales to other stores by marketing directly to the PowerUp Rewards members who have shopped in the stores that we plan to close. If we are unsuccessful in marketing to customers...

  • Page 38
    ...our general and administrative costs or income tax expenses to increase. Changes in the accounting rules could materially increase the expenses that we report under U.S. generally accepted accounting principles ("GAAP") and adversely affect our operating results. We may not pay cash dividends on our...

  • Page 39
    ... governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. If we were to borrow against our senior credit facility, a significant increase in interest rates could have an adverse effect on our financial position and results...

  • Page 40
    ...2, 2013, the Company owned or leased office and distribution facilities, with lease expiration dates ranging from 2013 to 2021 and an average remaining lease life of approximately four years, in the following locations: Location Square Footage Owned or Leased Use United States Grapevine, Texas, USA...

  • Page 41
    ... 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Price Range of Common Stock The Company's Class A Common Stock is traded on the New York Stock Exchange ("NYSE") under the symbol...

  • Page 42
    ... by the Company of its equity securities during the fourth quarter of the fiscal year ended February 2, 2013 were as follows: (a) Total Number of Shares Purchased (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (d) Approximate Dollar Value of Shares that May...

  • Page 43
    ... last trading date of fiscal 2012) with the cumulative total return on the Standard & Poor's 500 Stock Index (the "S&P 500") and the Dow Jones Retailers, Other Specialty Industry Group Index (the "Dow Jones Specialty Retailers Index") over the same period. Total return values were calculated based...

  • Page 44
    ...Weeks Ended Ended Ended Ended Ended February 2, January 28, January 29, January 30, January 31, 2013 2012 2011 2010 2009 (In millions, except per share data and statistical data) Statement of Operations Data: Net sales ...Cost of sales ...Gross profit ...Selling, general and administrative expenses...

  • Page 45
    ...: www.kongregate.com, a leading browser-based game site; Game Informer magazine, the leading multiplatform video game publication; Spawn Labs, a streaming technology company; a digital PC distribution platform available at www.gamestop.com/pcgames; iOS and Android mobile applications; and an online...

  • Page 46
    ... digitally downloadable content, Xbox LIVE, PlayStation and Nintendo network points cards, as well as prepaid digital and online timecards. We expect our sales of digital products to increase in fiscal 2013. We have made significant investments in e-commerce, digital kiosks and instore and Web site...

  • Page 47
    ..., which represents the gross profit effect of sales returns, is estimated based on historical return levels. The sales of pre-owned video game products are recorded at the retail price charged to the customer. Advertising revenues for Game Informer are recorded upon release of magazines for sale to...

  • Page 48
    ... a discounted cash flow method to determine the fair value of reporting units. Management is required to make significant judgments based on the Company's projected annual business plans, long-term business strategies, comparable store sales, store count, gross margins, operating expenses, working...

  • Page 49
    ...than the current market rent at stores acquired as part of the Micromania acquisition or the EB merger. Favorable leasehold interests are amortized on a straight-line basis over their remaining lease term with no expected residual value. For additional information related to the Company's intangible...

  • Page 50
    .... The PowerUp Rewards loyalty program allows enrolled members to earn points on purchases in the Company's stores and on some of the Company's Web sites that can be redeemed for rewards that include discounts or merchandise. The Company estimates the net cost of the rewards that will be issued and...

  • Page 51
    ... of an annual effective tax rate at any given point in time on a calculated mix of the tax rates applicable to our Company and to estimates of the amount of income to be derived in any given jurisdiction. We file our tax returns based on our understanding of the appropriate tax rules and regulations...

  • Page 52
    ... include PC entertainment and other software, digital products and currency, mobile products, including tablets and refurbished mobile devices, accessories and revenues associated with Game Informer magazine and the Company's PowerUp Rewards program. The following table sets forth gross profit (in...

  • Page 53
    ... of PC entertainment software and mobile devices in fiscal 2012 when compared to fiscal 2011 and sales for the 53rd week in fiscal 2012. As a percentage of net sales, new video game hardware sales and new video game software sales decreased and other product sales increased in fiscal 2012 compared...

  • Page 54
    ... to impairment of the Company's Micromania trade name in France and impairment and disposal costs related to the exit of non-core businesses, including a small retail movie chain of stores owned by the Company until fiscal 2011. Restructuring costs include disposal and exit costs related to the exit...

  • Page 55
    ...digital products, some of which are recorded on a commission basis at 100% margin, and growth in sales of PowerUp Rewards Pro memberships and related Game Informer subscriptions that also have higher margins than PC entertainment software and accessories. Selling, general and administrative expenses...

  • Page 56
    ... reporting. Each of the segments consists primarily of retail operations, with all stores engaged in the sale of new and pre-owned video game systems, software and accessories (which we refer to as video game products) and PC entertainment software, new and pre-owned mobile devices and related...

  • Page 57
    ... and restructuring charges reported in operating earnings by operating segment, in U.S. dollars were as follows (in millions): 53 Weeks Ended February 2, 2013 52 Weeks Ended January 28, 2012 52 Weeks Ended January 29, 2011 United States ...Canada ...Australia ...Europe ...Total ... $ 5.7 100.7 107...

  • Page 58
    ... commerce Web site www.gamestop.com, Game Informer magazine, www.kongregate.com, a digital PC game distribution platform available at www.gamestop.com/pcgames, Spawn Labs and an online consumer electronics marketplace available at www.buymytronics.com. As of February 2, 2013, the United States...

  • Page 59
    ... to a decrease in store traffic related to lower sales of new release video game titles and the late stages of the current console cycle. The increase in other product sales was primarily due to an increase in PC entertainment software sales and sales of mobile devices. The segment operating loss...

  • Page 60
    ... 2011. Fiscal 2011 Compared to Fiscal 2010 United States Segment results for the United States include retail operations in 50 states, the District of Columbia, Puerto Rico and Guam, the electronic commerce Web site www.gamestop.com, Game Informer magazine, www.kongregate.com, a digital PC game...

  • Page 61
    ... related to the growth of the Company's PowerUp Rewards program. Cash used in investing activities was $152.7 million in fiscal 2012, $201.6 million in fiscal 2011 and $240.1 million in fiscal 2010. During fiscal 2012, the Company used $139.6 million for capital expenditures primarily to open...

  • Page 62
    ...The cash flows used in financing activities in fiscal 2010 were primarily for the repurchase of $381.2 million of treasury shares and $200.0 million in principal of the Company's senior notes. The cash used in financing activities in fiscal 2012, fiscal 2011 and fiscal 2010 was also impacted by cash...

  • Page 63
    ... 52 week period ended January 29, 2011, which consisted of the premium paid to retire the Notes and the write-off of the deferred financing fees and the original issue discount on the Notes. We used cash to expand the Company through acquisitions. During fiscal 2012, fiscal 2011 and fiscal 2010, the...

  • Page 64
    ...2010 and were reported in accrued liabilities at January 29, 2011. In February 2011, the Board of Directors of the Company authorized a $500 million repurchase fund to be used for share repurchases of its common stock and/or to retire the Company's Senior Notes. This plan replaced the September 2010...

  • Page 65
    ...that provide additional detail about those amounts. This accounting standard update is effective prospectively for annual and interim periods beginning after December 15, 2012. The Company is evaluating the effect this accounting standard update will have on its consolidated financial statements. 50

  • Page 66
    ... the disclosure requirements particularly for Level 3 fair value measurements. The adoption of this accounting standard update did not have a significant impact on our consolidated financial statements. In September 2011, an accounting standard update was issued related to testing goodwill for...

  • Page 67
    ... required to be set forth in the Company's periodic reports. (b) Management's Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules...

  • Page 68
    ...information not otherwise provided herein that is required by Items 10, 11, 12, 13 and 14 will be set forth in the definitive proxy statement relating to the 2013 Annual Meeting of Stockholders of the Company, which is to be filed with the SEC pursuant to Regulation 14A under the Securities Exchange...

  • Page 69
    ... of this report on Form 10-K. (2) Financial Statement Schedules required to be filed by Item 8 of this Form 10-K: The following financial statement schedule for the 53 weeks ended February 2, 2013 and the 52 weeks ended January 28, 2012 and January 29, 2011 is filed as part of this report on Form...

  • Page 70
    ... Credit Agreement, dated as of January 4, 2011, among GameStop Corp., as Lead Borrower for: GameStop Corp., GameStop, Inc., Sunrise Publications, Inc., Electronics Boutique Holdings Corp., ELBO Inc., EB International Holdings, Inc., Kongregate Inc., GameStop Texas Ltd., Marketing Control Services...

  • Page 71
    ... Daniel A. DeMatteo.(19) Fourth Amendment, dated as of March 1, 2013, to Amended and Restated Executive Employment Agreement, dated as of December 31, 2008, as amended April 5, 2010, June 2, 2010 and February 9, 2011, between GameStop Corp. and Daniel A. DeMatteo.(20) Amended and Restated Executive...

  • Page 72
    ... 2, 2010, between GameStop Corp. and Michael Mauler. Code of Ethics for Senior Financial and Executive Officers. Code of Standards, Ethics and Conduct. Subsidiaries. Consent of BDO USA, LLP. Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange...

  • Page 73
    ... with the Securities and Exchange Commission on June 27, 2011. Incorporated by reference to Appendix A to the Registrant's Proxy Statement for 2008 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 23, 2008. Incorporated by reference to GameStop Holdings Corp...

  • Page 74
    ... its behalf by the undersigned, thereunto duly authorized. GAMESTOP CORP. By: /s/ J. PAUL RAINES J. Paul Raines Chief Executive Officer Date: April 3, 2013 Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the following persons on behalf of...

  • Page 75
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 76
    ... STATEMENTS Page GameStop Corp. Consolidated Financial Statements: Reports of Independent Registered Public Accounting Firm ...Consolidated Financial Statements: Balance Sheets ...Statements of Operations ...Statements of Comprehensive Income ...Statements of Changes in Equity ...Statements of Cash...

  • Page 77
    ...of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and...

  • Page 78
    ... responsibility is to express an opinion on the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit...

  • Page 79
    GAMESTOP CORP. CONSOLIDATED BALANCE SHEETS February 2, January 28, 2013 2012 (In millions) ASSETS Current assets: Cash and cash equivalents ...Receivables, net ...Merchandise inventories, net ...Deferred income taxes - current ...Prepaid expenses ...Other current assets ...Total current assets ......

  • Page 80
    GAMESTOP CORP. CONSOLIDATED STATEMENTS OF OPERATIONS 53 Weeks 52 Weeks 52 Weeks Ended Ended Ended February 2, January 28, January 29, 2013 2012 2011 (In millions, except per share data) Net sales ...Cost of sales ...Gross profit ...Selling, general and administrative expenses ...Depreciation and ...

  • Page 81
    GAMESTOP CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 53 Weeks Ended February 2, 2013 52 Weeks 52 Weeks Ended Ended January 28, January 29, 2012 2011 (In millions, except per share data) Consolidated net income (loss) ...Other comprehensive income (loss): Foreign currency translation ......

  • Page 82
    ... EQUITY GameStop Corp. Stockholders Class A Common Stock Additional Accumulated Other Common Paid-in Comprehensive Retained Noncontrolling Shares Stock Capital Income Earnings Interest (In millions) Total Balance at January 30, 2010 ...158.7 Comprehensive income: Net income (loss) for the 52 weeks...

  • Page 83
    ...Issuance of shares relating to stock options ...Excess tax benefits realized from exercise of stock-based awards ...Other ...Net cash flows used in financing activities ...Exchange rate effect on cash and cash equivalents ...Net decrease in cash and cash equivalents ...Cash and cash equivalents at...

  • Page 84
    ...as PC entertainment software and other merchandise primarily through its GameStop, EB Games and Micromania stores. The Company's stores, which totaled 6,602 at February 2, 2013, are located in major regional shopping malls and strip centers. We also operate electronic commerce Web sites www.gamestop...

  • Page 85
    ... current cost is added to the existing cost of product on-hand and this amount is re-averaged over the cumulative units. Preowned video game products traded in by customers are recorded as inventory at the amount of the store credit given to the customer. In valuing inventory, management is required...

  • Page 86
    ... ads on the Company's digital Web sites and are amortized on a straight-line basis over 10 years. Favorable leasehold interests represent the value of the contractual monthly rental payments that are less than the current market rent at stores acquired as part of the Micromania acquisition or the EB...

  • Page 87
    ..., which represents the gross profit effect of sales returns, is estimated based on historical return levels. The sales of pre-owned video game products are recorded at the retail price charged to the customer. Advertising revenues for Game Informer are recorded upon release of magazines for sale to...

  • Page 88
    ...with purchases made by check and credit cards in cost of sales, rather than selling, general and administrative expenses, in the consolidated statements of operations. For the 53 weeks ended February 2, 2013 and the 52 weeks ended January 28, 2012 and January 29, 2011, these processing fees amounted...

  • Page 89
    ... an amount estimated to cover the cost of all points previously earned but not yet redeemed by loyalty program members as of the end of the reporting period. Income Taxes Income tax expense includes United States, state, local and international income taxes. Income taxes are accounted for utilizing...

  • Page 90
    ... required service period, companies also have to present tax benefits received in excess of amounts determined based on the compensation expense recognized on the statements of cash flows. Such tax benefits are presented as a use of cash in the operating section and a source of cash in the financing...

  • Page 91
    ...'s fair values of our financial assets and liabilities. Guarantees The Company had bank guarantees relating primarily to international store leases totaling $21.0 million as of February 2, 2013 and $18.2 million as of January 28, 2012. Vendor Concentration The Company's largest vendors worldwide are...

  • Page 92
    ...of the Company's annual impairment test of its Micromania trade name. The fair value of the Micromania trade name was calculated using a relief-from-royalty approach, which assumes the fair value of the trade name is the discounted cash flows of the amount that would be paid by a hypothetical market...

  • Page 93
    ... of European home office sites and back-office functions. These restructuring charges were a result of management's plan to rationalize the international store base and improve profitability. In addition, the Company recognized impairment charges related to its annual evaluation of store property...

  • Page 94
    ...-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...

  • Page 95
    ... value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value accounting guidance applies to our Foreign Currency Contracts, Company-owned life insurance policies with a cash...

  • Page 96
    ... CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We value our Foreign Currency Contracts, Company-owned life insurance policies with cash surrender values and certain nonqualified deferred compensation liabilities based on Level 2 inputs using quotations provided by major market news services, such...

  • Page 97
    GAMESTOP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) We do not use derivative financial instruments for trading or speculative purposes. We are exposed to counterparty credit risk on all of our derivative financial instruments and cash equivalent investments. The Company manages ...

  • Page 98
    ... amount of goodwill for the Company's reportable segments for the 52 weeks ended January 28, 2012 and the 53 weeks ended February 2, 2013 were as follows: United States Canada Australia (In millions) Europe Total Balance at January 29, 2011 ...Goodwill acquired, net ...Charge from exit of non-core...

  • Page 99
    ... a discounted cash flow method to determine the fair value of reporting units. Management was required to make significant judgments based on the Company's projected annual business plans, long-term business strategies, comparable store sales, store count, gross margins, operating expenses, working...

  • Page 100
    ...result of the fiscal 2012 or fiscal 2010 annual impairment tests. For each impairment test, the fair value of the Micromania trade name was calculated using a relief-from-royalty approach, which assumes the fair value of the trade name is the discounted cash flows of the amount that would be paid by...

  • Page 101
    GAMESTOP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The changes in the carrying amount of deferred financing fees and other intangible assets for the 53 weeks ended February 2, 2013 and the 52 weeks ended January 28, 2012 were as follows: Deferred Other Financing Fees Intangible ...

  • Page 102
    ... as determined on such day plus 1.00%, and (2) for LIBO rate loans of 2.25% to 2.50% above the LIBO rate. The applicable margin is determined quarterly as a function of the Company's average daily excess availability under the facility. In addition, the Company is required to pay a commitment fee of...

  • Page 103
    ...week period ended January 29, 2011, which consisted of the premium paid to retire the Notes and the write-off of the deferred financing fees and original issue discount on the Senior Notes. As of January 28, 2012, the Senior Notes have been fully redeemed. 11. Leases The Company leases retail stores...

  • Page 104
    ... of the following: 53 Weeks Ended February 2, 2013 52 Weeks Ended January 28, 2012 (In millions) 52 Weeks Ended January 29, 2011 Current tax expense: Federal ...State ...Foreign ...Deferred tax expense (benefit): Federal ...State ...Foreign ...Total income tax expense ... $229.6 24.1 29.4 283...

  • Page 105
    GAMESTOP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) The components of earnings (loss) before income tax expense consisted of the following: 53 Weeks Ended February 2, 2013 52 Weeks Ended January 28, 2012 (In millions) 52 Weeks Ended January 29, 2011 United States ......

  • Page 106
    ...2011 was $2.7 million. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Internal Revenue Service ("IRS") is currently examining the Company's U.S. income tax returns for the fiscal years ended January 30, 2010...

  • Page 107
    ...$24.9 - 9.9 (2.0) (7.4) $25.4 $35.2 - 2.1 (6.4) (6.0) $24.9 The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of February 2, 2013, January 28, 2012 and January 29, 2011, the Company had approximately $5.4 million, $3.2 million and...

  • Page 108
    ... issued shares. Options and restricted shares granted on or before June 21, 2011 were issued under the 2001 Incentive Plan. Stock Options A summary of the status of the Company's stock options is presented below: WeightedAverage Exercise Shares Price (Millions of shares) Balance, January 30, 2010...

  • Page 109
    ...is recognized as compensation expense on a straight-line basis between the grant date and the date the options become fully vested. During the 53 weeks ended February 2, 2013 and the 52 weeks ended January 28, 2012 and January 29, 2011, the Company included compensation expense relating to the grant...

  • Page 110
    ...53 weeks ended February 2, 2013, the 52 weeks ended January 28, 2012 and the 52 weeks ended January 29, 2011, the Company included compensation expense relating to the grant of these restricted shares in the amounts of $17.5 million, $12.4 million and $17.4 million, respectively, in selling, general...

  • Page 111
    ...2, 2013 Gross Gross Profit Profit Percent 52 Weeks Ended January 28, 2012 Gross Gross Profit Profit Percent 52 Weeks Ended January 29, 2011 Gross Gross Profit Profit Percent Gross Profit: New video game hardware ...New video game software ...Pre-owned video game products ...Other ...Total ... $ 101...

  • Page 112
    ...software and related accessories. Segment results for the United States include retail operations in 50 states, the District of Columbia, Guam and Puerto Rico, the electronic commerce Web site www.gamestop.com, Game Informer magazine, the online video gaming Web site www.kongregate.com, a digital PC...

  • Page 113
    ... 912.7 5,063.8 18. Supplemental Cash Flow Information 53 Weeks Ended February 2, 2013 52 Weeks Ended January 28, 2012 (In millions) 52 Weeks Ended January 29, 2011 Cash paid during the period for: Interest ...Income taxes ...Subsidiaries acquired: Goodwill ...Noncontrolling interests ...Net assets...

  • Page 114
    ... such person or any member of such group) to purchase, at the Right's then current exercise price, a number of shares of common stock having a market value of twice the exercise price of the Right. In addition, if the Company is acquired in a merger or other business combination transaction or 50...

  • Page 115
    GAMESTOP CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) replacing the remaining $180.1 million authorization. For fiscal 2011, the number of shares repurchased was 11.2 million for an average price per share of $21.38. In March 2012, the Board of Directors authorized the Company to ...

  • Page 116
    ... expense of $0.4 million. 21. Subsequent Event On February 18, 2013, the Board of Directors of the Company approved a quarterly cash dividend to its stockholders of $0.275 per share of Class A Common Stock payable on March 19, 2013 to stockholders of record at the close of business on March 5, 2013...

  • Page 117
    ... Credit Agreement, dated as of January 4, 2011, among GameStop Corp., as Lead Borrower for: GameStop Corp., GameStop, Inc., Sunrise Publications, Inc., Electronics Boutique Holdings Corp., ELBO Inc., EB International Holdings, Inc., Kongregate Inc., GameStop Texas Ltd., Marketing Control Services...

  • Page 118
    ... Corp. and Daniel A. DeMatteo.(19) Fourth Amendment, dated as of March 1, 2013, to Amended and Restated Executive Employment Agreement, dated as of December 31, 2008, as amended April 5, 2010, June 2, 2010 and February 9, 2011, between GameStop Corp. and Daniel A. DeMatteo.(20) 10.13 10.14 10.15...

  • Page 119
    ... 2, 2010, between GameStop Corp. and Michael Mauler. Code of Ethics for Senior Financial and Executive Officers. Code of Standards, Ethics and Conduct. Subsidiaries. Consent of BDO USA, LLP. Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange...

  • Page 120
    ... filed with the Securities and Exchange Commission on June 27, 2011. (11) Incorporated by reference to Appendix A to the Registrant's Proxy Statement for 2008 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 23, 2008. (12) Incorporated by reference to GameStop...

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  • Page 122
    ...Counsel Listed on the New York Stock Exchange Symbol: GME Bryan Cave LLP New York, NY GameStop, EB Games, Electronics Boutique, Game Informer magazine, Micromania, Kongregate.com, Spawn Labs, PowerUp Rewards and Respect the Ratings are trademarks of GameStop, Inc. Products and characters named in...

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