GameStop 2012 Annual Report Download - page 51

operating leases, generally provide for minimum and, in some cases, percentage rentals and require the
Company to pay all insurance, taxes and other maintenance costs. Leases with step rent provisions,
escalation clauses or other lease concessions are accounted for on a straight-line basis over the lease term,
which includes renewal option periods when the Company is reasonably assured of exercising the renewal
options and includes “rent holidays” (periods in which the Company is not obligated to pay rent). Cash or
lease incentives received upon entering into certain store leases (“tenant improvement allowances”) are
recognized on a straight-line basis as a reduction to rent expense over the lease term, which includes
renewal option periods when the Company is reasonably assured of exercising the renewal options. We
record the unamortized portion of tenant improvement allowances as a part of deferred rent. The Company
does not have leases with capital improvement funding. Percentage rentals are based on sales performance
in excess of specified minimums at various stores and are accounted for in the period in which the amount
of percentage rentals can be accurately estimated.
Income Taxes. The Company accounts for income taxes utilizing an asset and liability approach, and
deferred taxes are determined based on the estimated future tax effect of differences between the financial
reporting and tax bases of assets and liabilities using enacted tax rates. As a result of our operations in many
foreign countries, our global tax rate is derived from a combination of applicable tax rates in the various
jurisdictions in which we operate. We base our estimate 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. However, complexities in the tax rules and our operations, as well as
positions taken publicly by the taxing authorities, may lead us to conclude that accruals for uncertain tax
positions are required. In accordance with GAAP, we maintain accruals for uncertain tax positions until
examination of the tax year is completed by the taxing authority, available review periods expire or
additional facts and circumstances cause us to change our assessment of the appropriate accrual amount.
Consolidated Results of Operations
The following table sets forth certain statement of operations items as a percentage of net sales for the
periods indicated:
53 Weeks Ended
February 2,
2013
52 Weeks Ended
January 28,
2012
52 Weeks Ended
January 29,
2011
Statement of Operations Data:
Net sales ................................ 100.0% 100.0% 100.0%
Cost of sales ............................. 70.2 71.9 73.2
Gross profit .............................. 29.8 28.1 26.8
Selling, general and administrative expenses .... 20.7 19.3 18.0
Depreciation and amortization ............... 2.0 2.0 1.8
Goodwill impairments ..................... 7.0 — —
Asset impairments and restructuring charges .... 0.6 0.8 —
Operating earnings (loss) ................... (0.5) 6.0 7.0
Interest expense, net ....................... — 0.2 0.4
Debt extinguishment expense ................ — — —
Earnings (loss) before income tax expense ...... (0.5) 5.8 6.6
Income tax expense ........................ 2.5 2.2 2.3
Consolidated net income (loss) ............... (3.0) 3.6 4.3
Net loss attributable to noncontrolling
interests ............................... — — —
Consolidated net income (loss) attributable to
GameStop Corp. ........................ (3.0)% 3.6% 4.3%
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