GameStop 2013 Annual Report Download - page 53

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allowances as a part of deferred rent. We do 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. We account 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 operations 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. Our liability for uncertain tax positions was
$20.6 million as of February 1, 2014.
Additionally, a valuation allowance is recorded against a deferred tax asset if it is not more likely than not that the
asset will be realized. Several factors are considered in evaluating the realizability of our deferred tax assets, including the remaining
years available for carry forward, the tax laws for the applicable jurisdictions, the future profitability of the specific business units,
and tax planning strategies. Our valuation allowance was $13.3 million as of February 1, 2014. See Note 13 to our consolidated
financial statements for further information regarding income taxes.
Consolidated Results of Operations
The following table sets forth certain statement of operations items as a percentage of net sales for the periods indicated:
52 Weeks Ended
February 1, 2014
53 Weeks Ended
February 2, 2013
52 Weeks Ended
January 28, 2012
Statement of Operations Data:
Net sales....................................................................................... 100.0% 100.0 % 100.0%
Cost of sales................................................................................. 70.6 70.2 71.9
Gross profit.................................................................................. 29.4 29.8 28.1
Selling, general and administrative expenses.............................. 21.0 20.7 19.3
Depreciation and amortization .................................................... 1.8 2.0 2.0
Goodwill impairments ................................................................. 0.1 7.0 —
Asset impairments and restructuring charges.............................. 0.2 0.6 0.8
Operating earnings (loss)............................................................. 6.3 (0.5) 6.0
Interest expense, net .................................................................... — — 0.2
Earnings (loss) before income tax expense ................................. 6.3 (0.5) 5.8
Income tax expense ..................................................................... 2.4 2.5 2.2
Net income (loss)......................................................................... 3.9 (3.0) 3.6
Net loss attributable to noncontrolling interests.......................... — — —
Net income (loss) attributable to GameStop Corp. .....................
3.9% (3.0)% 3.6%
We include purchasing, receiving and distribution costs in selling, general and administrative expenses, rather than in cost
of sales, in the statement of operations. We include processing fees associated with purchases made by check and credit cards in
cost of sales, rather than selling, general and administrative expenses, in the statement of operations. As a result of these
classifications, our gross margins are not comparable to those retailers that include purchasing, receiving and distribution costs in
cost of sales and include processing fees associated with purchases made by check and credit cards in selling, general and
administrative expenses. The net effect of these classifications as a percentage of sales has not historically been material.
Beginning with this Form 10-K, we are expanding the categories included in our disclosures on sales and gross profit by
category in order to reflect recent changes in our business, the expansion of categories previously included in "Other", and
management emphasis as we operate in the future. Our previous categories of New Video Game Hardware and New Video Game
Software remain unchanged.