e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE QUARTERLY PERIOD ENDED
NOVEMBER 1, 2008
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OR
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD
FROM TO
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COMMISSION FILE
NO. 1-32637
GameStop Corp.
(Exact name of registrant as
specified in its Charter)
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Delaware
(State or other jurisdiction
of
incorporation or organization)
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20-2733559
(I.R.S. Employer
Identification No.)
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625 Westport Parkway,
Grapevine, Texas
(Address of principal
executive offices)
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76051
(Zip
Code)
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Registrants telephone number, including area code:
(817) 424-2000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large accelerated
filer þ
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Accelerated
filer o
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Non-accelerated
filer o
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Smaller reporting
company o
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(Do not check if a smaller reporting
company)
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Number of shares of $.001 par value Class A Common
Stock outstanding as of November 21, 2008: 163,776,078
PART I
FINANCIAL INFORMATION
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ITEM 1.
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Financial
Statements
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GAMESTOP
CORP.
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November 1,
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November 3,
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February 2,
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2008
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2007
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2008
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(Unaudited)
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(Unaudited)
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(In thousands, except per share data)
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ASSETS:
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Current assets:
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Cash and cash equivalents
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$
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478,056
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$
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277,808
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$
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857,414
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Receivables, net
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50,730
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47,443
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56,019
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Merchandise inventories, net
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1,424,249
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1,164,229
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801,025
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Deferred income taxes current
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29,200
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38,458
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27,481
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Prepaid expenses
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56,759
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52,351
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48,915
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Prepaid taxes
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68,222
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73,257
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Other current assets
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45,690
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7,264
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3,863
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Total current assets
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2,152,906
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1,660,810
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1,794,717
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Property and equipment:
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Land
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10,229
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12,026
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11,870
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Buildings and leasehold improvements
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404,660
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358,445
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378,611
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Fixtures and equipment
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590,565
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516,767
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538,738
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Total property and equipment
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1,005,454
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887,238
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929,219
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Less accumulated depreciation and amortization
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502,348
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386,658
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417,550
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Net property and equipment
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503,106
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500,580
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511,669
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Goodwill, net
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1,443,782
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1,402,845
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1,402,440
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Deferred taxes
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28,681
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9,496
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26,332
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Other noncurrent assets
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35,226
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41,109
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40,733
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Total noncurrent assets
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2,010,795
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1,954,030
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1,981,174
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Total assets
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$
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4,163,701
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$
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3,614,840
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$
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3,775,891
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LIABILITIES AND STOCKHOLDERS EQUITY:
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Current liabilities:
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Accounts payable
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$
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1,102,639
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$
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977,830
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$
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844,376
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Accrued liabilities
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366,147
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313,844
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416,181
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Total current liabilities
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1,468,786
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1,291,674
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1,260,557
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Senior notes payable, long-term portion, net
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545,462
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574,229
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574,473
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Other liabilities
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85,273
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78,692
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78,415
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Total long-term liabilities
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630,735
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652,921
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652,888
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Total liabilities
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2,099,521
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1,944,595
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1,913,445
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Commitments and Contingencies (Note 10)
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Stockholders equity:
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Preferred stock authorized 5,000 shares; no
shares issued or outstanding
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Class A common stock $.001 par value;
authorized 300,000 shares; 163,776, 160,959 and
161,007 shares issued and outstanding, respectively
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164
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161
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161
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Additional
paid-in-capital
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1,299,721
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1,200,586
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1,208,474
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Accumulated other comprehensive income (loss)
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(23,870
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)
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37,091
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31,603
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Retained earnings
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788,165
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432,407
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622,208
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Total stockholders equity
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2,064,180
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1,670,245
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1,862,446
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Total liabilities and stockholders equity
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$
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4,163,701
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$
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3,614,840
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$
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3,775,891
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See accompanying notes to condensed consolidated financial
statements.
2
GAMESTOP
CORP.
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13 Weeks Ended
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39 Weeks Ended
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November 1,
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November 3,
|
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November 1,
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November 3,
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2008
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2007
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2008
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2007
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(In thousands, except per share data)
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(Unaudited)
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Sales
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$
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1,695,746
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$
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1,611,201
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$
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5,313,783
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$
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4,228,377
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Cost of sales
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1,222,317
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1,191,637
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3,882,825
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3,098,745
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Gross profit
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473,429
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419,564
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1,430,958
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1,129,632
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Selling, general and administrative expenses
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|
335,722
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288,954
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1,012,134
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824,504
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Depreciation and amortization
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35,767
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33,705
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|
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106,912
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|
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96,858
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Merger-related expenses
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|
16,605
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16,605
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Operating earnings
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|
85,335
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96,905
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295,307
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208,270
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Interest income
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|
(3,672
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)
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|
(2,627
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)
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|
(10,242
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)
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(9,191
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)
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Interest expense
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|
|
12,479
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|
|
|
14,549
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|
|
36,748
|
|
|
|
48,575
|
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Debt extinguishment expense
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|
|
|
|
|
|
3,840
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|
|
2,331
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|
|
|
12,591
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Earnings before income tax expense
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76,528
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81,143
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266,470
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156,295
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Income tax expense
|
|
|
29,859
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|
|
|
29,186
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|
100,513
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57,805
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Net earnings
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$
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46,669
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$
|
51,957
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$
|
165,957
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|
$
|
98,490
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Net earnings per common share-basic
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|
$
|
0.29
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|
|
$
|
0.32
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|
|
$
|
1.02
|
|
|
$
|
0.63
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Weighted average shares of common stock-basic
|
|
|
163,736
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|
|
|
160,048
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|
|
|
162,983
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|
|
|
157,308
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|
|
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|
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|
|
|
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|
|
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Net earnings per common share-diluted
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|
$
|
0.28
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|
|
$
|
0.31
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|
$
|
0.99
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|
|
$
|
0.60
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|
|
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|
|
|
|
|
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|
|
|
|
|
|
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|
Weighted average shares of common stock-diluted
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|
|
167,995
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|
|
|
166,357
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|
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|
167,813
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|
|
|
164,128
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See accompanying notes to condensed consolidated financial
statements.
3
GAMESTOP
CORP.
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Class A
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Accumulated
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Common Stock
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Additional
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Other
|
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Common
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Paid-in
|
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Comprehensive
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Retained
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|
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Shares
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Stock
|
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|
Capital
|
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Income (Loss)
|
|
|
Earnings
|
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Total
|
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|
(In thousands)
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|
|
|
(Unaudited)
|
|
|
Balance at February 2, 2008
|
|
|
161,007
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|
|
$
|
161
|
|
|
$
|
1,208,474
|
|
|
$
|
31,603
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|
$
|
622,208
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|
|
$
|
1,862,446
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|
Comprehensive income:
|
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|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
Net earnings for the 39 weeks ended November 1, 2008
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
165,957
|
|
|
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|
|
Foreign currency translation
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|
|
|
|
|
|
|
|
|
|
|
|
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|
(55,473
|
)
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|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110,484
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
28,433
|
|
|
|
|
|
|
|
|
|
|
|
28,433
|
|
Exercise of stock options and issuance of shares upon vesting of
restricted stock grants (including tax benefit of $37,235)
|
|
|
2,769
|
|
|
|
3
|
|
|
|
62,814
|
|
|
|
|
|
|
|
|
|
|
|
62,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at November 1, 2008
|
|
|
163,776
|
|
|
$
|
164
|
|
|
$
|
1,299,721
|
|
|
$
|
(23,870
|
)
|
|
$
|
788,165
|
|
|
$
|
2,064,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
4
GAMESTOP
CORP.
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
165,957
|
|
|
$
|
98,490
|
|
Adjustments to reconcile net earnings to net cash flows used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
107,913
|
|
|
|
97,576
|
|
Amortization and retirement of deferred financing fees
|
|
|
1,825
|
|
|
|
5,198
|
|
Amortization and retirement of original issue discount on senior
notes
|
|
|
989
|
|
|
|
918
|
|
Stock-based compensation expense
|
|
|
28,433
|
|
|
|
20,311
|
|
Deferred taxes
|
|
|
(8,285
|
)
|
|
|
(4,754
|
)
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
(33,925
|
)
|
|
|
(92,628
|
)
|
Loss on disposal of property and equipment
|
|
|
3,960
|
|
|
|
4,979
|
|
Increase in other long-term liabilities
|
|
|
11,256
|
|
|
|
9,305
|
|
Increase in liability to landlords for tenant allowances, net
|
|
|
3,394
|
|
|
|
3,810
|
|
Change in the value of foreign exchange contracts
|
|
|
(42,535
|
)
|
|
|
3,423
|
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
2,736
|
|
|
|
(11,336
|
)
|
Merchandise inventories
|
|
|
(688,441
|
)
|
|
|
(447,307
|
)
|
Prepaid expenses and other current assets
|
|
|
(16,538
|
)
|
|
|
(14,007
|
)
|
Prepaid taxes
|
|
|
(39,359
|
)
|
|
|
38,551
|
|
Accounts payable and accrued liabilities
|
|
|
302,854
|
|
|
|
148,036
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(199,766
|
)
|
|
|
(139,435
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(132,758
|
)
|
|
|
(124,757
|
)
|
Acquisitions, net of cash acquired
|
|
|
(50,800
|
)
|
|
|
1,062
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(183,558
|
)
|
|
|
(123,695
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(30,000
|
)
|
|
|
(270,000
|
)
|
Repayment of other debt
|
|
|
|
|
|
|
(12,173
|
)
|
Issuance of shares relating to stock options
|
|
|
28,432
|
|
|
|
64,308
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
33,925
|
|
|
|
92,628
|
|
Net change in other noncurrent assets and deferred financing fees
|
|
|
(2,890
|
)
|
|
|
6,233
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
29,467
|
|
|
|
(119,004
|
)
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
(25,501
|
)
|
|
|
7,539
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(379,358
|
)
|
|
|
(374,595
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
857,414
|
|
|
|
652,403
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
478,056
|
|
|
$
|
277,808
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
5
GameStop Corp. (together with its predecessor companies,
GameStop, we, our, or the
Company), a Delaware corporation, is the
worlds largest retailer of video games and entertainment
software. The unaudited consolidated financial statements
include the accounts of the Company and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. All dollar and share amounts in the
consolidated financial statements and notes to the consolidated
financial statements are stated in thousands of
U.S. dollars unless otherwise indicated.
The unaudited consolidated financial statements included herein
reflect all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of the Companys
management, necessary for a fair presentation of the information
for the periods presented. These unaudited condensed
consolidated interim financial statements of the Company have
been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) for
interim financial information and do not include all disclosures
required under GAAP for complete financial statements. These
consolidated financial statements should be read in conjunction
with the Companys annual report on
Form 10-K
for the 52 weeks ended February 2, 2008 (fiscal
2007). The preparation of financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. In
preparing these financial statements, management has made its
best estimates and judgments of certain amounts included in the
financial statements, giving due consideration to materiality.
Changes in the estimates and assumptions used by management
could have significant impact on the Companys financial
results. Actual results could differ from those estimates.
Due to the seasonal nature of the business, the results of
operations for the 39 weeks ended November 1, 2008 are
not indicative of the results to be expected for the
52 weeks ending January 31, 2009 (fiscal
2008).
Certain reclassifications have been made to conform the prior
period data to the current interim period presentation.
|
|
2.
|
Change in
Accounting Principles
|
Effective February 3, 2008, the Company implemented
Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards No. 157,
Fair Value Measurements (SFAS 157),
which defines fair value, establishes a framework for its
measurement and expands disclosures about fair value
measurements. The Company elected to implement this Statement
with the one-year deferral permitted by FASB Staff Position
(FSP)
157-2 for
nonfinancial assets and nonfinancial liabilities measured at
fair value, except those that are recognized or disclosed on a
recurring basis (at least annually). We do not expect any
significant impact to our consolidated financial statements when
we implement SFAS 157 for these assets and liabilities.
Due to our election under
FSP 157-2,
for fiscal 2008, SFAS 157 applies to our foreign exchange
contracts, foreign currency options and cross-currency swaps
(together, the Foreign Currency Contracts),
Company-owned life insurance policies with a cash surrender
value and certain nonqualified deferred compensation liabilities
that are measured at fair value on a recurring basis in periods
subsequent to initial recognition. The implementation of
SFAS 157 did not result in a significant change in the
method of calculating fair value of assets or liabilities. The
primary impact from adoption was additional disclosures.
In October 2008, the FASB issued
FSP 157-3,
Determining the Fair Value of a Financial Asset When The
Market for That Asset Is Not Active
(FSP 157-3),
to clarify how an entity would determine fair value in an
inactive market.
FSP 157-3
is effective immediately and applies to our financial statements
for the period ended November 1, 2008. The application of
the provisions of
FSP 157-3
did not materially impact our consolidated financial
6
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
statements for the period ended November 1, 2008. The
Company does not currently own any securities, including cash
equivalents, for which a dislocated market or other problem
exists.
SFAS 157 requires disclosures that categorize assets and
liabilities measured at fair value into one of three different
levels depending on the observability of the inputs employed in
the measurement. Level 1 inputs are quoted prices in active
markets for identical assets or liabilities. Level 2 inputs
are observable inputs other than quoted prices included within
Level 1 for the asset or liability, either directly or
indirectly through market-corroborated inputs. Level 3
inputs are unobservable inputs for the asset or liability
reflecting our assumptions about pricing by market participants.
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 as Bloomberg and The Wall Street Journal,
and industry-standard models that consider various assumptions,
including quoted forward prices, time value, volatility factors,
and contractual prices for the underlying instruments, as well
as other relevant economic measures. When appropriate,
valuations are adjusted to reflect credit considerations,
generally based on available market evidence.
The following table provides the fair value of our financial
assets and liabilities measured on a recurring basis and
recorded on our condensed consolidated balance sheet as of
November 1, 2008:
|
|
|
|
|
|
|
November 1, 2008
|
|
|
|
Level 2
|
|
|
|
(In thousands)
|
|
|
Assets
|
|
|
|
|
Foreign Currency Contracts
|
|
$
|
42,862
|
|
Company-owned life insurance
|
|
|
2,408
|
|
|
|
|
|
|
Total assets
|
|
$
|
45,270
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Foreign Currency Contracts
|
|
$
|
12,418
|
|
Non-qualified deferred compensation
|
|
|
1,019
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
13,437
|
|
|
|
|
|
|
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities
(SFAS 159). This Statement permits entities
the option to measure many financial instruments and certain
other items at fair value at specific election dates. Unrealized
gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 was
effective for our Company on February 3, 2008. The adoption
of SFAS 159 did not have a material impact on our
consolidated financial statements.
|
|
3.
|
Business
Combinations and Goodwill
|
On April 5, 2008, the Company purchased all the outstanding
stock of Free Record Shop Norway AS, a Norwegian private limited
liability company (FRS), for $21,006, net of cash
acquired. FRS operates 49 record stores in Norway and also
operates office and warehouse facilities in Oslo, Norway. The
Company is converting these stores into video game stores with
an inventory assortment similar to its other stores in Norway.
The acquisition was accounted for using the purchase method of
accounting, with the excess of the purchase price over the net
assets acquired, in the amount of $17,871, recorded as goodwill.
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
7
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
percentages at a price to be determined based partially on the
Companys price to earnings ratio and GameStop Group
Limiteds 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
$27,383. The transaction was completed in June 2008 and recorded
in accordance with the provisions of Statement of Financial
Accounting Standards No. 141, Business Acquisitions.
During July 2008, the Company purchased certain assets and
website operations from The Gamesman Limited, a video game and
entertainment software retailer including eight stores in New
Zealand, for $1,910. The acquisition was accounted for using the
purchase method of accounting, with the excess of the purchase
price over the net assets acquired, in the amount of $605,
recorded as goodwill.
The pro forma effect assuming the above acquisitions were made
at the beginning of fiscal 2007 is not material to the
Companys consolidated financial statements.
|
|
4.
|
Accounting
for Stock-Based Compensation
|
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model. This
valuation model requires the use of subjective assumptions,
including expected option life, expected volatility and the
expected employee forfeiture rate. The Company uses historical
data to estimate the option life and the employee forfeiture
rate, and uses historical volatility when estimating the stock
price volatility. There were no options to purchase common stock
granted during the 13 weeks ended November 1, 2008 and
November 3, 2007. The options to purchase common stock
granted during the 39 weeks ended November 1, 2008 and
November 3, 2007 were 1,362 and 939, respectively, with a
weighted-average fair value estimated at $15.45 and $10.16 per
share, respectively, using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
Volatility
|
|
|
38.2
|
%
|
|
|
40.5
|
%
|
Risk-free interest rate
|
|
|
2.4
|
%
|
|
|
4.8
|
%
|
Expected life (years)
|
|
|
3.5
|
|
|
|
4.0
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
In the 13 weeks ended November 1, 2008 and
November 3, 2007, the Company included compensation expense
relating to stock option grants of $3,916 and $3,866,
respectively, in selling, general and administrative expenses in
the accompanying condensed consolidated statements of
operations. In the 39 weeks ended November 1, 2008 and
November 3, 2007, the Company included compensation expense
relating to stock option grants of $12,733 and $11,937,
respectively, in selling, general and administrative expenses.
As of November 1, 2008, the unrecognized compensation
expense related to the unvested portion of our stock options was
$18,416, which is expected to be recognized over a weighted
average period of 1.9 years. The total intrinsic values of
options exercised during the 13 weeks ended
November 1, 2008 and November 3, 2007 were $3,236 and
$84,100, respectively. The total intrinsic values of options
exercised during the 39 weeks ended November 1, 2008
and November 3, 2007 were $86,981 and $262,002,
respectively.
During the 13 weeks ended November 1, 2008 and
November 3, 2007, the Company granted 67 shares and
10 shares, respectively, of restricted stock which had a
fair market value of $43.24 and $56.76 per share, respectively.
The restricted shares vest in equal annual installments over
three years. During the 39 weeks ended November 1,
2008 and November 3, 2007, the Company granted
602 shares and 974 shares, respectively, of restricted
stock which had a weighted-average fair market value of $49.20
and $27.09 per share, respectively. The restricted shares vest
in equal annual installments over three years. During the
13 weeks ended November 1, 2008 and November 3,
2007, the Company included compensation expense relating to the
restricted share grants in the amount of $4,449 and $2,800,
respectively, in selling, general and administrative expenses in
the accompanying
8
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
condensed consolidated statements of operations. During the
39 weeks ended November 1, 2008 and November 3,
2007, the Company included compensation expense relating to the
restricted share grants in the amount of $15,700 and $8,374,
respectively, in selling, general and administrative expenses.
As of November 1, 2008, there was $28,096 of unrecognized
compensation expense related to nonvested restricted stock
awards that is expected to be recognized over a weighted average
period of 2.0 years.
|
|
5.
|
Computation
of Net Earnings per Common Share
|
On February 7, 2007, all outstanding shares of Class B
common stock were converted into shares of Class A common
stock on a one-for-one basis (the Conversion). In
addition, as of February 9, 2007, the Board of Directors of
the Company authorized a two-for-one stock split, effected by a
one-for-one stock dividend to stockholders of record at the
close of business on February 20, 2007, paid on
March 16, 2007 (the Stock Split). The effect of
the Conversion and the Stock Split has been retroactively
applied to all periods presented in the condensed consolidated
financial statements and notes thereto. The Company now has only
Class A common stock outstanding and computes earnings per
share in accordance with Statement of Financial Accounting
Standards No. 128, Earnings per Share. A
reconciliation of shares used in calculating basic and diluted
net earnings per common share follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands, except per share data)
|
|
|
Net earnings
|
|
$
|
46,669
|
|
|
$
|
51,957
|
|
|
$
|
165,957
|
|
|
$
|
98,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
163,736
|
|
|
|
160,048
|
|
|
|
162,983
|
|
|
|
157,308
|
|
Dilutive effect of options and restricted shares on common stock
|
|
|
4,259
|
|
|
|
6,309
|
|
|
|
4,830
|
|
|
|
6,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares and dilutive potential common shares
|
|
|
167,995
|
|
|
|
166,357
|
|
|
|
167,813
|
|
|
|
164,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.29
|
|
|
$
|
0.32
|
|
|
$
|
1.02
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.28
|
|
|
$
|
0.31
|
|
|
$
|
0.99
|
|
|
$
|
0.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table contains information on restricted shares
and options to purchase shares of Class A common stock
which were excluded from the computation of diluted earnings per
share because they were anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-
|
|
|
Range of
|
|
|
|
|
|
Dilutive
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Shares
|
|
|
Prices
|
|
|
Dates
|
|
|
(In thousands, except per share data)
|
|
13 Weeks Ended November 1, 2008
|
|
|
1,342
|
|
|
|
49.95
|
|
|
2010 - 2018
|
13 Weeks Ended November 3, 2007
|
|
|
2
|
|
|
|
|
|
|
2010
|
In October 2005, in connection with the Companys merger
with Electronics Boutique Holdings Corp. (EB) (the
merger), the Company entered into a five-year,
$400,000 Credit Agreement (the Revolver), including
a $50,000 letter of credit sub-limit, secured by the assets of
the Company and its U.S. subsidiaries. The Revolver places
certain restrictions on the Company and its subsidiaries,
including limitations on asset sales, additional liens and the
incurrence of additional indebtedness. In April 2007, the
Company amended the Revolver to extend the
9
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
maturity date from October 11, 2010 to April 25, 2012,
reduce the LIBO interest rate margin, reduce and fix the rate of
the unused commitment fee and modify or delete certain other
covenants.
The availability under the Revolver is limited to a borrowing
base which allows the Company to borrow up to the lesser of
(x) approximately 70% of eligible inventory and
(y) 90% of the appraisal value of the inventory, in each
case plus 85% of eligible credit card receivables, net of
certain reserves. Letters of credit reduce the amount available
to borrow by their face value. The Companys ability to pay
cash dividends, redeem options and repurchase shares is
generally prohibited, except that if availability under the
Revolver is, or will be after any such payment, equal to or
greater than 25% of the borrowing base, the Company may
repurchase its capital stock and pay cash dividends. In
addition, in the event that credit extensions under the Revolver
at any time exceed 80% of the lesser of the total commitment or
the borrowing base, the Company will be subject to a fixed
charge coverage ratio covenant of 1.5:1.0.
The per annum interest rate on the Revolver is variable and, at
the Companys option, is calculated by applying a margin of
(1) 0.0% to 0.25% above the higher of the prime rate of the
administrative agent or the federal funds effective rate plus
0.50% or (2) 1.00% to 1.50% above the LIBO rate. The
applicable margin is determined quarterly as a function of the
Companys consolidated leverage ratio. As of
November 1, 2008, the applicable margin was 0.0% for prime
rate loans and 1.00% for LIBO rate loans. In addition, the
Company is required to pay a commitment fee of 0.25% for any
unused portion of the total commitment under the Revolver. As of
November 1, 2008, there were no borrowings outstanding
under the Revolver and letters of credit outstanding totaled
$7,496.
In September 2008, in connection with the acquisition of SFMI
Micromania (Micromania), the Company accepted a
Commitment Letter (the Commitment) from Bank of
America, N.A. and Banc of America Securities LLC to provide a
$150,000 junior term loan facility (the Term Loans).
The Commitment provides for term loans up to an aggregate of
$150,000, consisting of a $50,000 secured term loan and a
$100,000 unsecured term loan, subject to the execution and
delivery of definitive loan documents, an amendment to the
existing Revolver permitting the Term Loans, and the completion
of other documents and conditions customary for the Term Loans.
In October 2008, the Company amended the Revolver to permit both
the acquisition of Micromania and the Term Loans. In addition,
during any period for which the Term Loans are outstanding, the
amendment increases the applicable margin under the Revolver
(i) payable on LIBO rate loans to a range of 1.5% to 2.0%
from the current range of 1.0% to 1.5% and (ii) payable on
prime rate loans to a range of 0.5% to 0.75% from the current
range of 0.0% to 0.25%. The margins applicable prior to the
entry into the amendment shall apply once the Term Loans are no
longer outstanding.
In September 2007, the Companys Luxembourg subsidiary
entered into a discretionary, $20,000 Uncommitted Line of Credit
(the Line of Credit) with Bank of America. There is
no term associated with the Line of Credit and Bank of America
may withdraw the facility at any time without notice. The Line
of Credit will be made available to the Companys foreign
subsidiaries for use primarily as a bank overdraft facility for
short-term liquidity needs and for the issuance of bank
guarantees and letters of credit to support operations. As of
November 1, 2008, there were $86 of cash overdrafts
outstanding under the Line of Credit and bank guarantees
outstanding totaled $4,386.
In September 2005, the Company, along with GameStop, Inc. as
co-issuer (together with the Company, the Issuers),
completed the offering of U.S. $300,000 aggregate principal
amount of Senior Floating Rate Notes due 2011 (the Senior
Floating Rate Notes) and U.S. $650,000 aggregate
principal amount of Senior Notes due 2012 (the Senior
Notes and, together with the Senior Floating Rate Notes,
the Notes). The Notes were issued under an
Indenture, dated September 28, 2005 (the
Indenture), by and among the Issuers, the subsidiary
guarantors party thereto, and Citibank, N.A., as trustee (the
Trustee). The net proceeds of the offering were used
to pay the cash portion of the merger consideration paid to the
stockholders of EB in connection with the merger.
The Senior Notes bear interest at 8.0% per annum, mature on
October 1, 2012 and were priced at 98.688%, resulting in a
discount at the time of issue of $8,528. The discount is being
amortized using the effective interest
10
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
method. As of November 1, 2008, the unamortized original
issue discount was $4,538. The rate of interest on the Senior
Floating Rate Notes prior to their redemption on October 1,
2007 was 9.2350% per annum. The Issuers pay interest on the
Senior Notes semi-annually, in arrears, every April 1 and
October 1, to holders of record on the immediately
preceding March 15 and September 15, and at maturity.
The Indenture contains affirmative and negative covenants
customary for such financings, including, among other things,
limitations on (1) the incurrence of additional debt,
(2) restricted payments, (3) liens, (4) sale and
leaseback transactions and (5) asset sales. Events of
default provided for in the Indenture include, among other
things, failure to pay interest or principal on the Notes, other
breaches of covenants in the Indenture, and certain events of
bankruptcy and insolvency. As of November 1, 2008, the
Company was in compliance with all covenants associated with the
Revolver and the Indenture.
Under certain conditions, the Issuers may on any one or more
occasions prior to maturity redeem up to 100% of the aggregate
principal amount of Senior Notes issued under the Indenture at
redemption prices at or in excess of 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the
redemption date. The circumstances which would limit the
percentage of the Notes which may be redeemed or which would
require the Company to pay a premium in excess of 100% of the
principal amount are defined in the Indenture. Upon a Change of
Control (as defined in the Indenture), the Issuers are required
to offer to purchase all of the Notes then outstanding at 101%
of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase. The Issuers may
acquire Senior Notes by means other than redemption, whether by
tender offer, open market purchases, negotiated transactions or
otherwise, in accordance with applicable securities laws, so
long as such acquisitions do not otherwise violate the terms of
the Indenture.
In May 2006, the Company announced that its Board of Directors
authorized the buyback of up to an aggregate of $100,000 of its
Senior Notes and Senior Floating Rate Notes. As of
February 3, 2007, the Company had repurchased the maximum
authorized amount, having acquired $50,000 of its Senior Notes
and $50,000 of its Senior Floating Rate Notes, and delivered the
Notes to the Trustee for cancellation.
On February 9, 2007, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $150,000 of its Senior Notes and Senior Floating Rate
Notes. As of August 4, 2007, the Company had repurchased
the maximum authorized amount, having acquired $20,000 of its
Senior Notes and $130,000 of its Senior Floating Rate Notes, and
delivered the Notes to the Trustee for cancellation. The
associated loss on retirement of this debt was $8,751 for the
39 week period ended November 3, 2007, which consists
of the premium paid to retire the Notes and the recognition of
the deferred financing fees and the original issue discount on
the Notes.
On June 28, 2007, the Company announced that its Board of
Directors authorized the redemption of the remaining $120,000 of
Senior Floating Rate Notes outstanding. The Company redeemed the
Senior Floating Rate Notes on October 1, 2007 at the
redemption price specified by the Senior Floating Rate Notes of
102.0%, plus all accrued and unpaid interest through the
redemption date. The Company incurred a one-time pre-tax charge
of $3,840 associated with the redemption, which represents a
$2,400 redemption premium and $1,440 to recognize unamortized
deferred financing costs.
On February 7, 2008, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $130,000 of its Senior Notes. The timing and amount
of the repurchases will be determined by the Companys
management based on their evaluation of market conditions and
other factors. In addition, the repurchases may be suspended or
discontinued at any time. As of November 1, 2008, the
Company had repurchased $30,000 of its Senior Notes pursuant to
this new authorization and delivered the Senior Notes to the
Trustee for cancellation. The associated loss on retirement of
debt is $2,331, which consists of the premium paid to retire the
Senior Notes and the write-off of the deferred financing fees
and the original issue discount on the Senior Notes.
11
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During October 2007, the Company paid the final principal
payment of $12,173 to Barnes & Noble, Inc.
(Barnes & Noble) on the promissory note
that was issued in connection with the repurchase of
GameStops common stock held by Barnes & Noble,
satisfying the promissory note in full. The note was unsecured
and bore interest at 5.5% per annum.
|
|
7.
|
Comprehensive
income (loss)
|
Comprehensive income (loss) is net earnings, plus certain other
items that are recorded directly to stockholders equity
and consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
Net earnings
|
|
$
|
46,669
|
|
|
$
|
51,957
|
|
|
$
|
165,957
|
|
|
$
|
98,490
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(57,254
|
)
|
|
|
17,732
|
|
|
|
(55,473
|
)
|
|
|
33,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
(10,585
|
)
|
|
$
|
69,689
|
|
|
$
|
110,484
|
|
|
$
|
132,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries file income tax returns in the
U.S. federal jurisdiction and various states and foreign
jurisdictions. The Company is no longer subject to
U.S. federal income tax examination by tax authorities for
years before and including the fiscal year ended
January 31, 2004. The Internal Revenue Service
(IRS) commenced an examination of the Companys
U.S. income tax returns for the fiscal years ended on
January 29, 2005 and January 28, 2006 in the first
quarter of fiscal 2007 that is anticipated to be completed in
2008. The Company does not anticipate any adjustments that would
result in a material impact on its condensed consolidated
financial statements.
For the 13 weeks ended November 1, 2008 and
November 3, 2007, the Company recognized an increase of
$735 and $268 in the liability for unrecognized tax benefits,
respectively, and an increase of $583 and $571 for interest and
penalties, respectively. For the 39 weeks ended
November 1, 2008 and November 3, 2007, the Company
recognized an increase of $78 and decrease of $1,418 in the
liability for unrecognized tax benefits, respectively, and an
increase of $1,340 and $1,688 for interest and penalties,
respectively. As of November 1, 2008, the gross amount of
unrecognized tax benefits, interest and penalties was $25,643.
The total amount of unrecognized tax benefit that, if
recognized, would affect the effective tax rate was $20,630 as
of November 1, 2008. The Company had $5,013 in interest and
penalties related to unrecognized tax benefits accrued as of
November 1, 2008.
It is reasonably possible that the amount of the unrecognized
benefit with respect to certain of our unrecognized tax
positions could significantly increase or decrease within the
next 12 months as a result of settling ongoing audits. At
this time, an estimate of the range of the reasonably possible
outcomes cannot be made.
The tax provisions for the 13 weeks and 39 weeks ended
November 1, 2008 and November 3, 2007 are based upon
managements estimate of the Companys annualized
effective tax rate.
|
|
9.
|
Certain
Relationships and Related Transactions
|
The Company operates departments within eight bookstores
operated by Barnes & Noble, a stockholder of the
Company until November 2004 and an affiliate through a common
stockholder who is the chairman of the Board of Directors of
Barnes & Noble and a member of the Companys
Board of Directors. The Company pays a license fee to
Barnes & Noble on the gross sales of such departments.
Management deems the license fee to be reasonable and based upon
terms equivalent to those that would prevail in an arms
length transaction. During the 13 weeks ended
12
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
November 1, 2008 and November 3, 2007, these charges
amounted to $262 and $289, respectively. During the
39 weeks ended November 1, 2008 and November 3,
2007, these charges amounted to $846 and $776, respectively.
Until June 2005, GameStop participated in Barnes &
Nobles workers compensation, property and general
liability insurance programs. The costs incurred by
Barnes & Noble under these programs were allocated to
GameStop based upon total payroll expense, property and
equipment, and insurance claim history of GameStop. Management
deemed the allocation methodology to be reasonable. Although the
Company secured its own insurance coverage, costs will likely
continue to be incurred by Barnes & Noble on insurance
claims which were incurred under its programs prior to June 2005
and any such costs applicable to insurance claims against the
Company will be allocated to the Company. During the
13 weeks ended November 1, 2008 and November 3,
2007, these charges amounted to $16 and $124, respectively.
During the 39 weeks ended November 1, 2008 and
November 3, 2007, these charges amounted to $120 and $259,
respectively.
In May 2005, the Company entered into an arrangement with
Barnes & Noble under which www.gamestop.com
became the exclusive specialty video game retailer listed on
www.bn.com, Barnes & Nobles
e-commerce
site. Under the terms of this agreement, the Company pays a fee
to Barnes & Noble for sales of video game or PC
entertainment products sold through www.bn.com. The fee
to Barnes & Noble was $70 and $54 for the
13 weeks ended November 1, 2008 and November 3,
2007, respectively, and $213 and $153 for the 39 weeks
ended November 1, 2008 and November 3, 2007,
respectively.
In October 2004, the Companys Board of Directors
authorized a repurchase of the common stock held by
Barnes & Noble. The Company repurchased
12,214 shares of its common stock at a price equal to $9.13
per share for aggregate consideration before expenses of
$111,520. The Company paid $37,500 in cash and issued a
promissory note in the principal amount of $74,020, which was
payable in installments and bore interest at 5.5% per annum,
payable when principal installments were due. The Companys
final scheduled principal payment of $12,173 was paid in October
2007. Interest expense on the promissory note for the
13 weeks and 39 weeks ended November 3, 2007
totaled $106 and $444, respectively.
|
|
10.
|
Commitments
and Contingencies
|
Contingencies
On February 14, 2005, and as amended, Steve Strickland, as
personal representative of the Estate of Arnold Strickland,
deceased, Henry Mealer, as personal representative of the Estate
of Ace Mealer, deceased, and Willie Crump, as personal
representative of the Estate of James Crump, deceased, filed a
wrongful death lawsuit against GameStop, Sony, Take-Two
Interactive, Rock Star Games and Wal-Mart (collectively, the
Defendants) and Devin Moore, alleging that
Defendants actions in designing, manufacturing, marketing
and supplying Defendant Moore with violent video games were
negligent and contributed to Defendant Moore killing Arnold
Strickland, Ace Mealer and James Crump. Moore was found guilty
of capital murder in a criminal trial and was sentenced to death
in August 2005.
Plaintiffs counsel has named a new expert, a psychologist
who testified at the criminal trial on behalf of the criminal
defendant, who will opine (if allowed) that violent video games
were a substantial factor in causing the murders. This same
testimony from this same expert was excluded in the criminal
trial from the same judge hearing this case. The testimony of
plaintiffs psychologist expert was heard by the Court on
October 30, 2008, and the motion to exclude that testimony
has been reset for final argument on December 12, 2008. The
ruling on this motion will have an effect on whether the case is
able to proceed. There is no current trial date. The Company
does not believe there is sufficient information to estimate the
amount of the possible loss, if any, resulting from the lawsuit.
In the ordinary course of the Companys business, the
Company is, from time to time, subject to various other legal
proceedings. Management does not believe that any such other
legal proceedings, individually or in the aggregate, will have a
material adverse effect on the Companys financial
condition or results of operations.
13
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11.
|
Significant
Product Information
|
The Company is principally engaged in the sale of new and used
video game systems and software, PC entertainment software
and related accessories. The following table sets forth sales
(in millions) by significant product category for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
328.4
|
|
|
|
19.3
|
%
|
|
$
|
373.9
|
|
|
|
23.2
|
%
|
|
$
|
1,047.1
|
|
|
|
19.7
|
%
|
|
$
|
949.1
|
|
|
|
22.4
|
%
|
New video game software
|
|
|
703.3
|
|
|
|
41.5
|
%
|
|
|
636.9
|
|
|
|
39.5
|
%
|
|
|
2,201.1
|
|
|
|
41.4
|
%
|
|
|
1,591.7
|
|
|
|
37.7
|
%
|
Used video game products
|
|
|
425.1
|
|
|
|
25.1
|
%
|
|
|
356.3
|
|
|
|
22.1
|
%
|
|
|
1,312.4
|
|
|
|
24.7
|
%
|
|
|
1,040.0
|
|
|
|
24.6
|
%
|
Other
|
|
|
238.9
|
|
|
|
14.1
|
%
|
|
|
244.1
|
|
|
|
15.2
|
%
|
|
|
753.2
|
|
|
|
14.2
|
%
|
|
|
647.6
|
|
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,695.7
|
|
|
|
100.0
|
%
|
|
$
|
1,611.2
|
|
|
|
100.0
|
%
|
|
$
|
5,313.8
|
|
|
|
100.0
|
%
|
|
$
|
4,228.4
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products include PC entertainment and other software and
accessories, magazines and character-related merchandise.
The following table sets forth gross profit (in millions) and
gross profit percentages by significant product category for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
25.4
|
|
|
|
7.7
|
%
|
|
$
|
27.5
|
|
|
|
7.4
|
%
|
|
$
|
68.4
|
|
|
|
6.5
|
%
|
|
$
|
70.6
|
|
|
|
7.4
|
%
|
New video game software
|
|
|
158.5
|
|
|
|
22.5
|
%
|
|
|
132.1
|
|
|
|
20.7
|
%
|
|
|
460.4
|
|
|
|
20.9
|
%
|
|
|
324.1
|
|
|
|
20.4
|
%
|
Used video game products
|
|
|
204.8
|
|
|
|
48.2
|
%
|
|
|
172.6
|
|
|
|
48.5
|
%
|
|
|
643.0
|
|
|
|
49.0
|
%
|
|
|
510.0
|
|
|
|
49.0
|
%
|
Other
|
|
|
84.7
|
|
|
|
35.5
|
%
|
|
|
87.4
|
|
|
|
35.8
|
%
|
|
|
259.2
|
|
|
|
34.4
|
%
|
|
|
224.9
|
|
|
|
34.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
473.4
|
|
|
|
27.9
|
%
|
|
$
|
419.6
|
|
|
|
26.0
|
%
|
|
$
|
1,431.0
|
|
|
|
26.9
|
%
|
|
$
|
1,129.6
|
|
|
|
26.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company operates its business in the following segments:
United States, Canada, Australia and Europe. Segment results for
the United States include retail operations in 50 states,
the District of Columbia, Puerto Rico and Guam, electronic
commerce websites under the names www.gamestop.com and
www.ebgames.com and Game Informer magazine.
Segment results for Canada include retail operations in Canada
and segment results for Australia include retail operations in
Australia and New Zealand. Segment results for Europe include
retail operations in 12 European countries.
14
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company measures segment profit using operating earnings
before merger-related expenses which is defined as income from
continuing operations before intercompany royalty fees, net
interest expense and income taxes. The basis of segmentation and
the measurement of segment profit or loss have not changed since
the end of fiscal 2007 and there has been no material change in
total assets by segment since February 2, 2008.
Transactions between reportable segments consist primarily of
royalties, management fees, intersegment loans and related
interest. Information on segments appears in the following
tables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Sales by operating segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,278,351
|
|
|
$
|
1,241,205
|
|
|
$
|
3,972,394
|
|
|
$
|
3,271,940
|
|
Canada
|
|
|
116,125
|
|
|
|
115,867
|
|
|
|
359,753
|
|
|
|
280,557
|
|
Australia
|
|
|
97,906
|
|
|
|
89,418
|
|
|
|
349,314
|
|
|
|
255,517
|
|
Europe
|
|
|
203,364
|
|
|
|
164,711
|
|
|
|
632,322
|
|
|
|
420,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,695,746
|
|
|
$
|
1,611,201
|
|
|
$
|
5,313,783
|
|
|
$
|
4,228,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings excluding merger-related expenses
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
86,260
|
|
|
$
|
73,856
|
|
|
$
|
261,428
|
|
|
$
|
165,540
|
|
Canada
|
|
|
7,377
|
|
|
|
10,010
|
|
|
|
18,849
|
|
|
|
19,185
|
|
Australia
|
|
|
6,898
|
|
|
|
7,360
|
|
|
|
28,445
|
|
|
|
19,837
|
|
Europe
|
|
|
1,405
|
|
|
|
5,679
|
|
|
|
3,190
|
|
|
|
3,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
101,940
|
|
|
$
|
96,905
|
|
|
$
|
311,912
|
|
|
$
|
208,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.
|
Supplemental
Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
43,892
|
|
|
$
|
57,518
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
143,877
|
|
|
$
|
30,613
|
|
|
|
|
|
|
|
|
|
|
|
|
14.
|
Consolidating
Financial Statements
|
In order to finance the merger, as described in Note 6, on
September 28, 2005, the Company, along with GameStop, Inc.
as co-issuer, completed the offering of the Notes. As of
February 2, 2008, the Senior Floating Rate Notes have been
completely redeemed. The direct and indirect
U.S. wholly-owned subsidiaries of the Company, excluding
GameStop, Inc., as co-issuer, have guaranteed the Senior Notes
on a senior unsecured basis with unconditional guarantees.
The following condensed consolidating financial statements
present the financial position as of November 1, 2008,
November 3, 2007 and February 2, 2008 and results of
operations for the 13 and 39 weeks ended November 1,
2008 and November 3, 2007 and cash flows for the
39 weeks ended November 1, 2008 and November 3,
2007 of the Companys guarantor and non-guarantor
subsidiaries.
15
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 1,
|
|
|
November 1,
|
|
|
|
|
|
November 1,
|
|
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
233,472
|
|
|
$
|
244,584
|
|
|
$
|
|
|
|
$
|
478,056
|
|
Receivables, net
|
|
|
388,226
|
|
|
|
15,186
|
|
|
|
(352,682
|
)
|
|
|
50,730
|
|
Merchandise inventories, net
|
|
|
981,171
|
|
|
|
443,078
|
|
|
|
|
|
|
|
1,424,249
|
|
Deferred income taxes current
|
|
|
26,478
|
|
|
|
2,722
|
|
|
|
|
|
|
|
29,200
|
|
Prepaid expenses
|
|
|
43,132
|
|
|
|
13,627
|
|
|
|
|
|
|
|
56,759
|
|
Prepaid taxes
|
|
|
72,885
|
|
|
|
(4,663
|
)
|
|
|
|
|
|
|
68,222
|
|
Other current assets
|
|
|
38,364
|
|
|
|
7,326
|
|
|
|
|
|
|
|
45,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,783,728
|
|
|
|
721,860
|
|
|
|
(352,682
|
)
|
|
|
2,152,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
7,559
|
|
|
|
|
|
|
|
10,229
|
|
Buildings and leasehold improvements
|
|
|
273,320
|
|
|
|
131,340
|
|
|
|
|
|
|
|
404,660
|
|
Fixtures and equipment
|
|
|
486,274
|
|
|
|
104,291
|
|
|
|
|
|
|
|
590,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
762,264
|
|
|
|
243,190
|
|
|
|
|
|
|
|
1,005,454
|
|
Less accumulated depreciation and amortization
|
|
|
410,639
|
|
|
|
91,709
|
|
|
|
|
|
|
|
502,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
351,625
|
|
|
|
151,481
|
|
|
|
|
|
|
|
503,106
|
|
Investment
|
|
|
539,949
|
|
|
|
|
|
|
|
(539,949
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,096,621
|
|
|
|
347,161
|
|
|
|
|
|
|
|
1,443,782
|
|
Deferred taxes
|
|
|
7,378
|
|
|
|
21,303
|
|
|
|
|
|
|
|
28,681
|
|
Other noncurrent assets
|
|
|
21,390
|
|
|
|
13,836
|
|
|
|
|
|
|
|
35,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent assets
|
|
|
2,016,963
|
|
|
|
533,781
|
|
|
|
(539,949
|
)
|
|
|
2,010,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,800,691
|
|
|
$
|
1,255,641
|
|
|
$
|
(892,631
|
)
|
|
$
|
4,163,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
822,089
|
|
|
$
|
280,550
|
|
|
$
|
|
|
|
$
|
1,102,639
|
|
Accrued liabilities
|
|
|
295,161
|
|
|
|
423,668
|
|
|
|
(352,682
|
)
|
|
|
366,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,117,250
|
|
|
|
704,218
|
|
|
|
(352,682
|
)
|
|
|
1,468,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
545,462
|
|
|
|
|
|
|
|
|
|
|
|
545,462
|
|
Other liabilities
|
|
|
73,799
|
|
|
|
11,474
|
|
|
|
|
|
|
|
85,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
619,261
|
|
|
|
11,474
|
|
|
|
|
|
|
|
630,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,736,511
|
|
|
|
715,692
|
|
|
|
(352,682
|
)
|
|
|
2,099,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 163,776 shares issued and
outstanding
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
164
|
|
Additional
paid-in-capital
|
|
|
1,299,721
|
|
|
|
402,844
|
|
|
|
(402,844
|
)
|
|
|
1,299,721
|
|
Accumulated other comprehensive income (loss)
|
|
|
(23,870
|
)
|
|
|
(29,494
|
)
|
|
|
29,494
|
|
|
|
(23,870
|
)
|
Retained earnings
|
|
|
788,165
|
|
|
|
166,599
|
|
|
|
(166,599
|
)
|
|
|
788,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,064,180
|
|
|
|
539,949
|
|
|
|
(539,949
|
)
|
|
|
2,064,180
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,800,691
|
|
|
$
|
1,255,641
|
|
|
$
|
(892,631
|
)
|
|
$
|
4,163,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 3,
|
|
|
November 3,
|
|
|
|
|
|
November 3,
|
|
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
|
(Unaudited)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
196,705
|
|
|
$
|
81,103
|
|
|
$
|
|
|
|
$
|
277,808
|
|
Receivables, net
|
|
|
181,422
|
|
|
|
13,888
|
|
|
|
(147,867
|
)
|
|
|
47,443
|
|
Merchandise inventories, net
|
|
|
770,742
|
|
|
|
393,487
|
|
|
|
|
|
|
|
1,164,229
|
|
Deferred income taxes current
|
|
|
36,294
|
|
|
|
2,164
|
|
|
|
|
|
|
|
38,458
|
|
Prepaid expenses
|
|
|
37,701
|
|
|
|
14,650
|
|
|
|
|
|
|
|
52,351
|
|
Prepaid taxes
|
|
|
76,155
|
|
|
|
(2,898
|
)
|
|
|
|
|
|
|
73,257
|
|
Other current assets
|
|
|
309
|
|
|
|
6,955
|
|
|
|
|
|
|
|
7,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,299,328
|
|
|
|
509,349
|
|
|
|
(147,867
|
)
|
|
|
1,660,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
9,356
|
|
|
|
|
|
|
|
12,026
|
|
Buildings and leasehold improvements
|
|
|
236,468
|
|
|
|
121,977
|
|
|
|
|
|
|
|
358,445
|
|
Fixtures and equipment
|
|
|
411,352
|
|
|
|
105,415
|
|
|
|
|
|
|
|
516,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
650,490
|
|
|
|
236,748
|
|
|
|
|
|
|
|
887,238
|
|
Less accumulated depreciation and amortization
|
|
|
307,116
|
|
|
|
79,542
|
|
|
|
|
|
|
|
386,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
343,374
|
|
|
|
157,206
|
|
|
|
|
|
|
|
500,580
|
|
Investment
|
|
|
519,760
|
|
|
|
|
|
|
|
(519,760
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,097,027
|
|
|
|
305,818
|
|
|
|
|
|
|
|
1,402,845
|
|
Deferred taxes
|
|
|
(5,787
|
)
|
|
|
15,283
|
|
|
|
|
|
|
|
9,496
|
|
Other noncurrent assets
|
|
|
25,920
|
|
|
|
15,189
|
|
|
|
|
|
|
|
41,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent assets
|
|
|
1,980,294
|
|
|
|
493,496
|
|
|
|
(519,760
|
)
|
|
|
1,954,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,279,622
|
|
|
$
|
1,002,845
|
|
|
$
|
(667,627
|
)
|
|
$
|
3,614,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
716,778
|
|
|
$
|
261,052
|
|
|
$
|
|
|
|
$
|
977,830
|
|
Accrued liabilities
|
|
|
249,248
|
|
|
|
212,463
|
|
|
|
(147,867
|
)
|
|
|
313,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
966,026
|
|
|
|
473,515
|
|
|
|
(147,867
|
)
|
|
|
1,291,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
574,229
|
|
|
|
|
|
|
|
|
|
|
|
574,229
|
|
Other liabilities
|
|
|
69,122
|
|
|
|
9,570
|
|
|
|
|
|
|
|
78,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
643,351
|
|
|
|
9,570
|
|
|
|
|
|
|
|
652,921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,609,377
|
|
|
|
483,085
|
|
|
|
(147,867
|
)
|
|
|
1,944,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 160,959 shares issued and
outstanding
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
161
|
|
Additional
paid-in-capital
|
|
|
1,200,586
|
|
|
|
397,858
|
|
|
|
(397,858
|
)
|
|
|
1,200,586
|
|
Accumulated other comprehensive income
|
|
|
37,091
|
|
|
|
16,774
|
|
|
|
(16,774
|
)
|
|
|
37,091
|
|
Retained earnings
|
|
|
432,407
|
|
|
|
105,128
|
|
|
|
(105,128
|
)
|
|
|
432,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,670,245
|
|
|
|
519,760
|
|
|
|
(519,760
|
)
|
|
|
1,670,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,279,622
|
|
|
$
|
1,002,845
|
|
|
$
|
(667,627
|
)
|
|
$
|
3,614,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
February 2,
|
|
|
February 2,
|
|
|
|
|
|
February 2,
|
|
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
671,333
|
|
|
$
|
186,081
|
|
|
$
|
|
|
|
$
|
857,414
|
|
Receivables, net
|
|
|
198,923
|
|
|
|
22,616
|
|
|
|
(165,520
|
)
|
|
|
56,019
|
|
Merchandise inventories, net
|
|
|
501,861
|
|
|
|
299,164
|
|
|
|
|
|
|
|
801,025
|
|
Deferred income taxes current
|
|
|
24,153
|
|
|
|
3,328
|
|
|
|
|
|
|
|
27,481
|
|
Prepaid expenses
|
|
|
36,793
|
|
|
|
12,122
|
|
|
|
|
|
|
|
48,915
|
|
Other current assets
|
|
|
326
|
|
|
|
3,537
|
|
|
|
|
|
|
|
3,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,433,389
|
|
|
|
526,848
|
|
|
|
(165,520
|
)
|
|
|
1,794,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
9,200
|
|
|
|
|
|
|
|
11,870
|
|
Buildings and leasehold improvements
|
|
|
246,907
|
|
|
|
131,704
|
|
|
|
|
|
|
|
378,611
|
|
Fixtures and equipment
|
|
|
427,623
|
|
|
|
111,115
|
|
|
|
|
|
|
|
538,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
677,200
|
|
|
|
252,019
|
|
|
|
|
|
|
|
929,219
|
|
Less accumulated depreciation and amortization
|
|
|
331,176
|
|
|
|
86,374
|
|
|
|
|
|
|
|
417,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
346,024
|
|
|
|
165,645
|
|
|
|
|
|
|
|
511,669
|
|
Investment
|
|
|
543,088
|
|
|
|
|
|
|
|
(543,088
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,096,622
|
|
|
|
305,818
|
|
|
|
|
|
|
|
1,402,440
|
|
Deferred taxes
|
|
|
7,378
|
|
|
|
18,954
|
|
|
|
|
|
|
|
26,332
|
|
Other noncurrent assets
|
|
|
24,098
|
|
|
|
16,635
|
|
|
|
|
|
|
|
40,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent assets
|
|
|
2,017,210
|
|
|
|
507,052
|
|
|
|
(543,088
|
)
|
|
|
1,981,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,450,599
|
|
|
$
|
1,033,900
|
|
|
$
|
(708,608
|
)
|
|
$
|
3,775,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
635,722
|
|
|
$
|
208,654
|
|
|
$
|
|
|
|
$
|
844,376
|
|
Accrued liabilities
|
|
|
309,472
|
|
|
|
272,229
|
|
|
|
(165,520
|
)
|
|
|
416,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
945,194
|
|
|
|
480,883
|
|
|
|
(165,520
|
)
|
|
|
1,260,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
574,473
|
|
|
|
|
|
|
|
|
|
|
|
574,473
|
|
Other liabilities
|
|
|
68,486
|
|
|
|
9,929
|
|
|
|
|
|
|
|
78,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
642,959
|
|
|
|
9,929
|
|
|
|
|
|
|
|
652,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,588,153
|
|
|
|
490,812
|
|
|
|
(165,520
|
)
|
|
|
1,913,445
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
57,407
|
|
|
|
(57,407
|
)
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 161,007 shares issued and
outstanding
|
|
|
161
|
|
|
|
31,484
|
|
|
|
(31,484
|
)
|
|
|
161
|
|
Additional
paid-in-capital
|
|
|
1,208,474
|
|
|
|
296,860
|
|
|
|
(296,860
|
)
|
|
|
1,208,474
|
|
Accumulated other comprehensive income
|
|
|
31,603
|
|
|
|
11,262
|
|
|
|
(11,262
|
)
|
|
|
31,603
|
|
Retained earnings
|
|
|
622,208
|
|
|
|
146,075
|
|
|
|
(146,075
|
)
|
|
|
622,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
1,862,446
|
|
|
|
543,088
|
|
|
|
(543,088
|
)
|
|
|
1,862,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,450,599
|
|
|
$
|
1,033,900
|
|
|
$
|
(708,608
|
)
|
|
$
|
3,775,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 1,
|
|
|
November 1,
|
|
|
|
|
|
November 1,
|
|
For the 13 Weeks Ended November 1, 2008
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
1,278,351
|
|
|
$
|
417,395
|
|
|
$
|
|
|
|
$
|
1,695,746
|
|
Cost of sales
|
|
|
913,079
|
|
|
|
309,238
|
|
|
|
|
|
|
|
1,222,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
365,272
|
|
|
|
108,157
|
|
|
|
|
|
|
|
473,429
|
|
Selling, general and administrative expenses
|
|
|
252,449
|
|
|
|
83,273
|
|
|
|
|
|
|
|
335,722
|
|
Depreciation and amortization
|
|
|
26,563
|
|
|
|
9,204
|
|
|
|
|
|
|
|
35,767
|
|
Merger-related expenses
|
|
|
16,605
|
|
|
|
|
|
|
|
|
|
|
|
16,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
69,655
|
|
|
|
15,680
|
|
|
|
|
|
|
|
85,335
|
|
Interest income
|
|
|
(6,420
|
)
|
|
|
(5,117
|
)
|
|
|
7,865
|
|
|
|
(3,672
|
)
|
Interest expense
|
|
|
12,072
|
|
|
|
8,272
|
|
|
|
(7,865
|
)
|
|
|
12,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
64,003
|
|
|
|
12,525
|
|
|
|
|
|
|
|
76,528
|
|
Income tax expense
|
|
|
24,640
|
|
|
|
5,219
|
|
|
|
|
|
|
|
29,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
39,363
|
|
|
$
|
7,306
|
|
|
$
|
|
|
|
$
|
46,669
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 3,
|
|
|
November 3,
|
|
|
|
|
|
November 3,
|
|
For the 13 Weeks Ended November 3, 2007
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
1,241,205
|
|
|
$
|
369,996
|
|
|
$
|
|
|
|
$
|
1,611,201
|
|
Cost of sales
|
|
|
912,910
|
|
|
|
278,727
|
|
|
|
|
|
|
|
1,191,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
328,295
|
|
|
|
91,269
|
|
|
|
|
|
|
|
419,564
|
|
Selling, general and administrative expenses
|
|
|
228,577
|
|
|
|
60,377
|
|
|
|
|
|
|
|
288,954
|
|
Depreciation and amortization
|
|
|
25,862
|
|
|
|
7,843
|
|
|
|
|
|
|
|
33,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
73,856
|
|
|
|
23,049
|
|
|
|
|
|
|
|
96,905
|
|
Interest income
|
|
|
(4,988
|
)
|
|
|
(4,912
|
)
|
|
|
7,273
|
|
|
|
(2,627
|
)
|
Interest expense
|
|
|
14,489
|
|
|
|
7,333
|
|
|
|
(7,273
|
)
|
|
|
14,549
|
|
Debt extinguishment expense
|
|
|
3,840
|
|
|
|
|
|
|
|
|
|
|
|
3,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
60,515
|
|
|
|
20,628
|
|
|
|
|
|
|
|
81,143
|
|
Income tax expense
|
|
|
22,515
|
|
|
|
6,671
|
|
|
|
|
|
|
|
29,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
38,000
|
|
|
$
|
13,957
|
|
|
$
|
|
|
|
$
|
51,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 1,
|
|
|
November 1,
|
|
|
|
|
|
November 1,
|
|
For the 39 Weeks Ended November 1, 2008
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
3,972,394
|
|
|
$
|
1,341,389
|
|
|
$
|
|
|
|
$
|
5,313,783
|
|
Cost of sales
|
|
|
2,879,882
|
|
|
|
1,002,943
|
|
|
|
|
|
|
|
3,882,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,092,512
|
|
|
|
338,446
|
|
|
|
|
|
|
|
1,430,958
|
|
Selling, general and administrative expenses
|
|
|
752,554
|
|
|
|
259,580
|
|
|
|
|
|
|
|
1,012,134
|
|
Depreciation and amortization
|
|
|
78,530
|
|
|
|
28,382
|
|
|
|
|
|
|
|
106,912
|
|
Merger-related expenses
|
|
|
16,605
|
|
|
|
|
|
|
|
|
|
|
|
16,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
244,823
|
|
|
|
50,484
|
|
|
|
|
|
|
|
295,307
|
|
Interest income
|
|
|
(19,294
|
)
|
|
|
(18,639
|
)
|
|
|
27,691
|
|
|
|
(10,242
|
)
|
Interest expense
|
|
|
36,753
|
|
|
|
27,686
|
|
|
|
(27,691
|
)
|
|
|
36,748
|
|
Debt extinguishment expense
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
2,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
225,033
|
|
|
|
41,437
|
|
|
|
|
|
|
|
266,470
|
|
Income tax expense
|
|
|
83,961
|
|
|
|
16,552
|
|
|
|
|
|
|
|
100,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
141,072
|
|
|
$
|
24,885
|
|
|
$
|
|
|
|
$
|
165,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 3,
|
|
|
November 3,
|
|
|
|
|
|
November 3,
|
|
For the 39 Weeks Ended November 3, 2007
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
3,271,940
|
|
|
$
|
956,437
|
|
|
$
|
|
|
|
$
|
4,228,377
|
|
Cost of sales
|
|
|
2,380,285
|
|
|
|
718,460
|
|
|
|
|
|
|
|
3,098,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
891,655
|
|
|
|
237,977
|
|
|
|
|
|
|
|
1,129,632
|
|
Selling, general and administrative expenses
|
|
|
651,294
|
|
|
|
173,210
|
|
|
|
|
|
|
|
824,504
|
|
Depreciation and amortization
|
|
|
74,821
|
|
|
|
22,037
|
|
|
|
|
|
|
|
96,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
165,540
|
|
|
|
42,730
|
|
|
|
|
|
|
|
208,270
|
|
Interest income
|
|
|
(15,101
|
)
|
|
|
(12,931
|
)
|
|
|
18,841
|
|
|
|
(9,191
|
)
|
Interest expense
|
|
|
48,320
|
|
|
|
19,096
|
|
|
|
(18,841
|
)
|
|
|
48,575
|
|
Debt extinguishment expense
|
|
|
12,591
|
|
|
|
|
|
|
|
|
|
|
|
12,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
119,730
|
|
|
|
36,565
|
|
|
|
|
|
|
|
156,295
|
|
Income tax expense
|
|
|
45,439
|
|
|
|
12,366
|
|
|
|
|
|
|
|
57,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
74,291
|
|
|
$
|
24,199
|
|
|
$
|
|
|
|
$
|
98,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 1,
|
|
|
November 1,
|
|
|
|
|
|
November 1,
|
|
For the 39 Weeks Ended November 1, 2008
|
|
2008
|
|
|
2008
|
|
|
Eliminations
|
|
|
2008
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
141,072
|
|
|
$
|
24,885
|
|
|
$
|
|
|
|
$
|
165,957
|
|
Adjustments to reconcile net earnings to net cash flows provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
79,477
|
|
|
|
28,436
|
|
|
|
|
|
|
|
107,913
|
|
Amortization and retirement of deferred financing fees
|
|
|
1,825
|
|
|
|
|
|
|
|
|
|
|
|
1,825
|
|
Amortization and retirement of original issue discount on senior
notes
|
|
|
989
|
|
|
|
|
|
|
|
|
|
|
|
989
|
|
Stock-based compensation expense
|
|
|
28,433
|
|
|
|
|
|
|
|
|
|
|
|
28,433
|
|
Deferred taxes
|
|
|
(2,324
|
)
|
|
|
(5,961
|
)
|
|
|
|
|
|
|
(8,285
|
)
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
(33,925
|
)
|
|
|
|
|
|
|
|
|
|
|
(33,925
|
)
|
Loss on disposal of property and equipment
|
|
|
1,569
|
|
|
|
2,391
|
|
|
|
|
|
|
|
3,960
|
|
Increase in other long-term liabilities
|
|
|
5,299
|
|
|
|
5,957
|
|
|
|
|
|
|
|
11,256
|
|
Increase in liability to landlords for tenant allowances, net
|
|
|
3,152
|
|
|
|
242
|
|
|
|
|
|
|
|
3,394
|
|
Change in the value of foreign exchange contracts
|
|
|
(40,233
|
)
|
|
|
(2,302
|
)
|
|
|
|
|
|
|
(42,535
|
)
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
(2,141
|
)
|
|
|
4,877
|
|
|
|
|
|
|
|
2,736
|
|
Merchandise inventories
|
|
|
(479,311
|
)
|
|
|
(209,130
|
)
|
|
|
|
|
|
|
(688,441
|
)
|
Prepaid expenses and other current assets
|
|
|
(6,031
|
)
|
|
|
(10,507
|
)
|
|
|
|
|
|
|
(16,538
|
)
|
Prepaid taxes
|
|
|
(29,659
|
)
|
|
|
(9,700
|
)
|
|
|
|
|
|
|
(39,359
|
)
|
Accounts payable and accrued liabilities
|
|
|
(50,359
|
)
|
|
|
353,213
|
|
|
|
|
|
|
|
302,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) operating activities
|
|
|
(382,167
|
)
|
|
|
182,401
|
|
|
|
|
|
|
|
(199,766
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(85,355
|
)
|
|
|
(47,403
|
)
|
|
|
|
|
|
|
(132,758
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
(50,800
|
)
|
|
|
|
|
|
|
(50,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(85,355
|
)
|
|
|
(98,203
|
)
|
|
|
|
|
|
|
(183,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(30,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(30,000
|
)
|
Issuance of shares relating to stock options
|
|
|
28,432
|
|
|
|
|
|
|
|
|
|
|
|
28,432
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
33,925
|
|
|
|
|
|
|
|
|
|
|
|
33,925
|
|
Net change in other noncurrent assets and deferred financing fees
|
|
|
(2,696
|
)
|
|
|
(194
|
)
|
|
|
|
|
|
|
(2,890
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
29,661
|
|
|
|
(194
|
)
|
|
|
|
|
|
|
29,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
|
|
|
|
(25,501
|
)
|
|
|
|
|
|
|
(25,501
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(437,861
|
)
|
|
|
58,503
|
|
|
|
|
|
|
|
(379,358
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
671,333
|
|
|
|
186,081
|
|
|
|
|
|
|
|
857,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
233,472
|
|
|
$
|
244,584
|
|
|
$
|
|
|
|
$
|
478,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
November 3,
|
|
|
November 3,
|
|
|
|
|
|
November 3,
|
|
For the 39 Weeks Ended November 3, 2007
|
|
2007
|
|
|
2007
|
|
|
Eliminations
|
|
|
2007
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
74,291
|
|
|
$
|
24,199
|
|
|
$
|
|
|
|
$
|
98,490
|
|
Adjustments to reconcile net earnings to net cash flows provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
75,532
|
|
|
|
22,044
|
|
|
|
|
|
|
|
97,576
|
|
Amortization and retirement of deferred financing fees
|
|
|
5,198
|
|
|
|
|
|
|
|
|
|
|
|
5,198
|
|
Amortization and retirement of original issue discount on senior
notes
|
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
918
|
|
Stock-based compensation expense
|
|
|
20,311
|
|
|
|
|
|
|
|
|
|
|
|
20,311
|
|
Deferred taxes
|
|
|
(2,978
|
)
|
|
|
(1,776
|
)
|
|
|
|
|
|
|
(4,754
|
)
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
(92,628
|
)
|
|
|
|
|
|
|
|
|
|
|
(92,628
|
)
|
Loss on disposal of property and equipment
|
|
|
1,013
|
|
|
|
3,966
|
|
|
|
|
|
|
|
4,979
|
|
Increase in other long-term liabilities
|
|
|
4,795
|
|
|
|
4,510
|
|
|
|
|
|
|
|
9,305
|
|
Increase in liability to landlords for tenant allowances, net
|
|
|
3,531
|
|
|
|
279
|
|
|
|
|
|
|
|
3,810
|
|
Change in the value of foreign exchange contracts
|
|
|
7,213
|
|
|
|
(3,790
|
)
|
|
|
|
|
|
|
3,423
|
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
(8,297
|
)
|
|
|
(3,039
|
)
|
|
|
|
|
|
|
(11,336
|
)
|
Merchandise inventories
|
|
|
(275,605
|
)
|
|
|
(171,702
|
)
|
|
|
|
|
|
|
(447,307
|
)
|
Prepaid expenses and other current assets
|
|
|
(7,173
|
)
|
|
|
(6,834
|
)
|
|
|
|
|
|
|
(14,007
|
)
|
Prepaid taxes
|
|
|
36,794
|
|
|
|
1,757
|
|
|
|
|
|
|
|
38,551
|
|
Accounts payable and accrued liabilities
|
|
|
(10,432
|
)
|
|
|
158,468
|
|
|
|
|
|
|
|
148,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) operating activities
|
|
|
(167,517
|
)
|
|
|
28,082
|
|
|
|
|
|
|
|
(139,435
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(94,244
|
)
|
|
|
(30,513
|
)
|
|
|
|
|
|
|
(124,757
|
)
|
Acquisitions, net of cash acquired
|
|
|
1,062
|
|
|
|
|
|
|
|
|
|
|
|
1,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(93,182
|
)
|
|
|
(30,513
|
)
|
|
|
|
|
|
|
(123,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(270,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(270,000
|
)
|
Repayment of other debt
|
|
|
(12,173
|
)
|
|
|
|
|
|
|
|
|
|
|
(12,173
|
)
|
Issuance of shares relating to stock options
|
|
|
64,308
|
|
|
|
|
|
|
|
|
|
|
|
64,308
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
92,628
|
|
|
|
|
|
|
|
|
|
|
|
92,628
|
|
Net change in other noncurrent assets and deferred financing fees
|
|
|
127
|
|
|
|
6,106
|
|
|
|
|
|
|
|
6,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(125,110
|
)
|
|
|
6,106
|
|
|
|
|
|
|
|
(119,004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
|
|
|
|
7,539
|
|
|
|
|
|
|
|
7,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(385,809
|
)
|
|
|
11,214
|
|
|
|
|
|
|
|
(374,595
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
582,514
|
|
|
|
69,889
|
|
|
|
|
|
|
|
652,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
196,705
|
|
|
$
|
81,103
|
|
|
$
|
|
|
|
$
|
277,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On November 12, 2008, the Company entered into a Term Loan
Agreement (the Term Loan Agreement) with Bank of
America, N.A and Banc of America Securities LLC. The Term Loan
Agreement provides for Term Loans in the aggregate of $150,000,
consisting of a $50,000 secured term loan (Term Loan
A) and a $100,000 unsecured term loan (Term Loan
B). The Term Loan Agreement provides that the principal of
Term Loan B will be repaid in four equal installments of $25,000
a week for four consecutive weeks, commencing on
December 3, 2008. Term Loan A matures on March 31,
2009. Amounts borrowed under the Term Loan Agreement may not be
reborrowed once repaid. Borrowings made pursuant to the Term
Loan Agreement will bear interest, payable quarterly or, if
earlier, at the end of any interest period, at a per annum rate
equal to either (a) the prime loan rate, described in the
Term Loan Agreement as the higher of (i) Bank of America
N.A.s prime rate or (ii) the federal funds rate plus
0.50%, in each case plus 1.75%, or (b) the LIBO rate (a
publicly published rate) plus 3.75%.
The Term Loan Agreement contains customary affirmative and
negative covenants, including limitations on GameStop and its
subsidiaries with respect to indebtedness, liens, investments,
distributions, mergers and acquisitions, dispositions of assets,
changes of business and transactions with affiliates. In
addition, the Company will be subject to a fixed charge coverage
ratio covenant of 1.5:1.0. The covenants permit the Company to
use proceeds of the Term Loans for working capital, capital
expenditures, payment of transaction costs and a portion of the
consideration in connection with the acquisition of Micromania
and for all other lawful corporate purposes.
Pursuant to the most recent amendment to the Revolver, the
closing of the Term Loans increased the applicable margin under
the Revolver (i) payable on LIBO rate loans to a range of
1.5% to 2.0% from the current range of 1.0% to 1.5% and
(ii) payable on prime rate loans to a range of 0.5% to
0.75% from the current range of 0.0% to 0.25%. The margins
applicable prior to the entry into the amendment shall apply
once the Term Loans are no longer outstanding.
On November 17, 2008, GameStop France SAS, a wholly-owned
subsidiary of the Company completed the acquisition of
substantially all of the outstanding capital stock of Micromania
for approximately $628,531. Micromania is a leading retailer of
video and computer games in France with 328 locations. The
Company funded the transaction with cash on hand, funds drawn
against its existing Revolver totaling $275,000, and the Term
Loans. The purpose of the acquisition was to expand the
Companys presence in Europe. The Company has hired an
independent valuation firm to provide analysis on the fair value
of the assets acquired in the acquisition. It is impractical for
us to provide the purchase price allocation related to
Micromania at this time.
At the time of filing, the $275,000 draw against the Revolver
and Term Loan B have been repaid. Term Loan A remains
outstanding and bears interest at a rate of 5.75% per annum.
23
|
|
ITEM 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion should be read in conjunction with
the information contained in our consolidated financial
statements, including the notes thereto. Statements regarding
future economic performance, managements plans and
objectives, and any statements concerning assumptions related to
the foregoing contained in Managements Discussion and
Analysis of Financial Condition and Results of Operations
constitute forward-looking statements. Certain factors, which
may cause actual results to vary materially from these
forward-looking statements, accompany such statements or appear
in GameStops Annual Report on
Form 10-K
for the fiscal year ended February 2, 2008 filed with the
Securities and Exchange Commission (the SEC) on
April 2, 2008 (the
Form 10-K),
including the factors disclosed under Item 1A. Risk
Factors.
General
GameStop Corp. (together with its predecessor companies,
GameStop, we, our, or the
Company) is the worlds largest retailer of
video game products and PC entertainment software. We sell new
and used video game hardware, video game software and
accessories, as well as PC entertainment software and related
accessories and other merchandise. As of November 1, 2008,
we operated 5,734 stores in the United States, Australia, Canada
and Europe, primarily under the names GameStop and EB Games. We
also operate electronic commerce websites under the names
www.gamestop.com and www.ebgames.com and publish
Game Informer, the industrys largest multi-platform
video game magazine in the United States based on circulation.
Our fiscal year is composed of 52 or 53 weeks ending on the
Saturday closest to January 31. The fiscal years ending
January 31, 2009 (fiscal 2008) and ended
February 2, 2008 (fiscal 2007) consist of
52 weeks.
Growth in the video game industry is driven by the introduction
of new technology. In 2005 in the North American markets, Sony
introduced the PlayStation Portable (the PSP) in
March and Microsoft introduced the Xbox 360 in November. In
November 2006, Nintendo introduced the Wii hardware platform
worldwide and Sony introduced the PlayStation 3 hardware
platform in the North American markets. Sony introduced the
PlayStation 3 platform in the Australian and European markets in
March 2007. Typically, following the introduction of new video
game platforms, sales of new video game hardware increase as a
percentage of total sales in the first full year following
introduction. As video game platforms mature, the sales mix
attributable to complementary video game software and
accessories, which generate higher gross margins, generally
increases in the subsequent years. The net effect is generally a
decline in gross margins in the first full year following new
platform releases and an increase in gross margins in the years
subsequent to the first full year following the launch period.
Unit sales of maturing video game platforms are typically also
driven by manufacturer-funded retail price reductions, further
driving sales of related software and accessories. We expect
that the installed base of the hardware platforms listed above
and sales of related software and accessories will increase in
the future.
Critical
Accounting Policies
Our consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP) for interim
financial information and do not include all disclosures
required under GAAP for complete financial statements.
Preparation of these statements requires management to make
judgments and estimates. Some accounting policies have a
significant impact on amounts reported in these financial
statements. For a summary of significant accounting policies and
the means by which we develop estimates thereon, see
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations in our
Form 10-K.
24
Consolidated
Results of Operations
The following table sets forth certain statement of operations
items as a percentage of sales for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
72.1
|
|
|
|
74.0
|
|
|
|
73.1
|
|
|
|
73.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
27.9
|
|
|
|
26.0
|
|
|
|
26.9
|
|
|
|
26.7
|
|
Selling, general and administrative expenses
|
|
|
19.8
|
|
|
|
17.9
|
|
|
|
19.0
|
|
|
|
19.5
|
|
Depreciation and amortization
|
|
|
2.1
|
|
|
|
2.1
|
|
|
|
2.0
|
|
|
|
2.3
|
|
Merger-related expenses
|
|
|
1.0
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
5.0
|
|
|
|
6.0
|
|
|
|
5.6
|
|
|
|
4.9
|
|
Interest expense, net
|
|
|
0.5
|
|
|
|
0.8
|
|
|
|
0.5
|
|
|
|
0.9
|
|
Debt extinguishment expense
|
|
|
|
|
|
|
0.2
|
|
|
|
0.1
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
4.5
|
|
|
|
5.0
|
|
|
|
5.0
|
|
|
|
3.7
|
|
Income tax expense
|
|
|
1.7
|
|
|
|
1.8
|
|
|
|
1.9
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
2.8
|
%
|
|
|
3.2
|
%
|
|
|
3.1
|
%
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company includes purchasing, receiving and distribution
costs in selling, general and administrative expenses, rather
than cost of goods sold, in the statement of operations. For the
13 weeks ended November 1, 2008 and November 3,
2007, these purchasing, receiving and distribution costs
amounted to $12.6 million and $10.4 million,
respectively. For the 39 weeks ended November 1, 2008
and November 3, 2007, these purchasing, receiving and
distribution costs amounted to $38.5 million and
$29.9 million, respectively. The Company includes
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. For the
13 weeks ended November 1, 2008 and November 3,
2007, these processing fees amounted to $12.5 million and
$12.1 million, respectively. For the 39 weeks ended
November 1, 2008 and November 3, 2007, these
processing fees amounted to $39.1 million and
$31.3 million, respectively. 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 reclassifications had a
net effect of 0.1% of sales or less for all periods presented
herein.
The following table sets forth sales (in millions) by
significant product category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
|
(Unaudited)
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
328.4
|
|
|
|
19.3
|
%
|
|
$
|
373.9
|
|
|
|
23.2
|
%
|
|
$
|
1,047.1
|
|
|
|
19.7
|
%
|
|
$
|
949.1
|
|
|
|
22.4
|
%
|
New video game software
|
|
|
703.3
|
|
|
|
41.5
|
%
|
|
|
636.9
|
|
|
|
39.5
|
%
|
|
|
2,201.1
|
|
|
|
41.4
|
%
|
|
|
1,591.7
|
|
|
|
37.7
|
%
|
Used video game products
|
|
|
425.1
|
|
|
|
25.1
|
%
|
|
|
356.3
|
|
|
|
22.1
|
%
|
|
|
1,312.4
|
|
|
|
24.7
|
%
|
|
|
1,040.0
|
|
|
|
24.6
|
%
|
Other
|
|
|
238.9
|
|
|
|
14.1
|
%
|
|
|
244.1
|
|
|
|
15.2
|
%
|
|
|
753.2
|
|
|
|
14.2
|
%
|
|
|
647.6
|
|
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,695.7
|
|
|
|
100.0
|
%
|
|
$
|
1,611.2
|
|
|
|
100.0
|
%
|
|
$
|
5,313.8
|
|
|
|
100.0
|
%
|
|
$
|
4,228.4
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products include PC entertainment and other software and
accessories, magazines and character-related merchandise.
25
The following table sets forth gross profit (in millions) and
gross profit percentages by significant product category for the
periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
|
|
Gross
|
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
Gross
|
|
|
Profit
|
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
Profit
|
|
|
Percent
|
|
|
|
(Unaudited)
|
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
25.4
|
|
|
|
7.7
|
%
|
|
$
|
27.5
|
|
|
|
7.4
|
%
|
|
$
|
68.4
|
|
|
|
6.5
|
%
|
|
$
|
70.6
|
|
|
|
7.4
|
%
|
New video game software
|
|
|
158.5
|
|
|
|
22.5
|
%
|
|
|
132.1
|
|
|
|
20.7
|
%
|
|
|
460.4
|
|
|
|
20.9
|
%
|
|
|
324.1
|
|
|
|
20.4
|
%
|
Used video game products
|
|
|
204.8
|
|
|
|
48.2
|
%
|
|
|
172.6
|
|
|
|
48.5
|
%
|
|
|
643.0
|
|
|
|
49.0
|
%
|
|
|
510.0
|
|
|
|
49.0
|
%
|
Other
|
|
|
84.7
|
|
|
|
35.5
|
%
|
|
|
87.4
|
|
|
|
35.8
|
%
|
|
|
259.2
|
|
|
|
34.4
|
%
|
|
|
224.9
|
|
|
|
34.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
473.4
|
|
|
|
27.9
|
%
|
|
$
|
419.6
|
|
|
|
26.0
|
%
|
|
$
|
1,431.0
|
|
|
|
26.9
|
%
|
|
$
|
1,129.6
|
|
|
|
26.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks
ended November 1, 2008 compared with the 13 weeks
ended November 3, 2007
Sales increased by $84.5 million, or 5.2%, from
$1,611.2 million in the 13 weeks ended
November 3, 2007 to $1,695.7 million in the
13 weeks ended November 1, 2008. The increase in sales
was attributable to the addition of non-comparable store sales
from the 876 stores opened since August 4, 2007 of
approximately $128.0 million offset by decreases related to
changes in foreign exchange rates of $16.1 million and the
comparable store sales decrease of 1.8% for the third quarter of
fiscal 2008. Stores are included in our comparable store sales
base beginning in the thirteenth month of operation and exclude
the effect of changes in foreign exchange rates. The decline in
comparable store sales was due to the difficult comparison to
the 13 weeks ended November 3, 2007 that included the
launch of Halo 3. Halo 3, which was the largest launch in
GameStops history, was released in September 2007 and had
the effect of increasing both hardware and software sales and
helped drive a 46.3% increase in comparable store sales in the
prior year quarter.
New video game hardware sales decreased $45.5 million, or
12.2%, from $373.9 million in the 13 weeks ended
November 3, 2007 to $328.4 million in the
13 weeks ended November 1, 2008, primarily due to the
decline in sales of hardware related to the launch of Halo 3
in the 13 weeks ended November 3, 2007, offset by
an increase in sales of newer hardware systems and the increase
in store count since October 2007. New video game software sales
increased $66.4 million, or 10.4%, from $636.9 million
in the 13 weeks ended November 3, 2007 to
$703.3 million in the 13 weeks ended November 1,
2008 despite the launch of Halo 3 in the prior year
quarter. The increase in new video game software sales was
primarily due to the strong sales of new video game titles
released in fiscal 2008, the increased sales related to the
expanding new hardware platform base and our increase in store
count, offset by the impact of the Halo 3 launch in the
13 weeks ended November 3, 2007. Used video game
product sales increased $68.8 million, or 19.3%, from
$356.3 million in the 13 weeks ended November 3,
2007 to $425.1 million in the 13 weeks ended
November 1, 2008. Used video game product sales grew due to
an increase in store count and an increase in the availability
of hardware and software associated with the new hardware
platforms as those platforms age and expand. Sales of other
product categories declined slightly by 2.1%, or
$5.2 million, from the 13 weeks ended November 3,
2007 to the 13 weeks ended November 1, 2008.
As a percentage of sales, new video game hardware and the other
product category decreased and new video game software and used
video game products increased in the 13 weeks ended
November 1, 2008 compared to the 13 weeks ended
November 3, 2007. This was due to the strong sales of new
video game software and used video game products driven by the
continued expansion of the installed base of the new video game
consoles mentioned earlier and a strong lineup of video game
titles released in the quarter.
Cost of sales increased slightly by $30.7 million, or 2.6%,
from $1,191.6 million in the 13 weeks ended
November 3, 2007 to $1,222.3 million in the
13 weeks ended November 1, 2008 as a result of the
increase in sales and the changes in gross profit discussed
below.
26
Gross profit increased by $53.8 million, or 12.8%, from
$419.6 million in the 13 weeks ended November 3,
2007 to $473.4 million in the 13 weeks ended
November 1, 2008. Gross profit as a percentage of sales
increased from 26.0% in the 13 weeks ended November 3,
2007 to 27.9% in the 13 weeks ended November 1, 2008.
The gross profit percentage increase was caused primarily by the
shift in sales from new video game hardware to new video game
software and used video game products as a percentage of total
sales in the third quarter of fiscal 2008. New video game
software and used video game products typically carry a much
higher gross margin than hardware sales. Gross profit as a
percentage of sales on new video game hardware and new video
game software increased from 7.4% and 20.7%, respectively, in
the 13 weeks ended November 3, 2007 to 7.7% and 22.5%,
respectively, in the 13 weeks ended November 1, 2008,
due primarily to an increase in vendor allowances received in
excess of advertising expenses, which are recorded as a
reduction in cost of sales. Gross profit as a percentage of
sales on used video game products and the other product category
had no significant change from the same period in the prior
fiscal year.
Selling, general and administrative expenses increased by
$46.7 million, or 16.2%, from $289.0 million in the
13 weeks ended November 3, 2007 to $335.7 million
in the 13 weeks ended November 1, 2008. This increase
was primarily attributable to the increase in the number of
stores in operation and the related increases in store,
distribution and corporate office operating expenses, as well as
increased costs associated with foreign currency translation,
which was a loss of $7.7 million in the 13 weeks ended
November 1, 2008, compared to a gain of $3.0 million
in the 13 weeks ended November 3, 2007. Selling,
general and administrative expenses at 17.9% percent of sales in
the 13 weeks ended November 3, 2007 were primarily a
result of the leveraging of expenses associated with the
dramatic increase in hardware and software sales resulting from
the launch of Halo 3 in September 2007. Selling, general
and administrative expenses at 19.8% percent of sales in the
13 weeks ended November 1, 2008 represented a return
to normal levels of leveraging of expenses. Included in selling,
general and administrative expenses is $8.4 million and
$6.7 million in stock-based compensation expense for the
13 weeks ended November 1, 2008 and November 3,
2007, respectively.
Depreciation and amortization expense increased
$2.1 million from $33.7 million in the 13 weeks
ended November 3, 2007 to $35.8 million in the
13 weeks ended November 1, 2008. This increase was
primarily due to capital expenditures associated with the
opening of 191 new stores during the third quarter of fiscal
2008 and investments in management information systems.
The Companys results of operations for the 13 weeks
ended November 1, 2008 include $16.6 million in
expenses associated with the acquisition of SFMI Micromania
(Micromania) on November 17, 2008. The
merger-related expenses consisted of losses associated with the
change in foreign exchange rates related to the funding of the
Micromania acquisition.
Interest income increased from $2.6 million in the
13 weeks ended November 3, 2007 to $3.7 million
in the 13 weeks ended November 1, 2008 due primarily
to interest income earned on higher invested cash balances.
Interest expense decreased from $14.5 million in the
13 weeks ended November 3, 2007 to $12.5 million
in the 13 weeks ended November 1, 2008 primarily due
to the retirement of $30.0 million of the Companys
senior notes since November 3, 2007 and the redemption
during the 13 weeks ended November 3, 2007 of
$120.0 million of the Companys senior floating rate
notes. Debt extinguishment expense of $3.8 million was
recognized in the 13 weeks ended November 3, 2007 as a
result of premiums paid related to debt retirement and the
recognition of deferred financing fees and unamortized original
issue discount.
Income tax expense for the 13 weeks ended November 3,
2007 and the 13 weeks ended November 1, 2008 was based
upon managements estimate of the Companys annualized
effective tax rate. Income tax expense was $29.2 million,
or 36.0%, for the 13 weeks ended November 3, 2007
compared to $29.9 million, or 39.0% for the 13 weeks
ended November 1, 2008. The increase in the effective tax
rate was due primarily to the mix of tax rates on earnings and
losses in our international operations and the impact of income
tax expense related to unrecognized tax benefits, interest and
penalties associated with our uncertain tax positions.
The factors described above led to a decrease in operating
earnings of $11.6 million, or 12.0%, from
$96.9 million in the 13 weeks ended November 3,
2007 to $85.3 million in the 13 weeks ended
November 1, 2008, and a decrease in net earnings of
$5.3 million, or 10.2%, from $52.0 million in the
13 weeks ended November 3, 2007 to $46.7 million
in the 13 weeks ended November 1, 2008.
27
39 weeks
ended November 1, 2008 compared with the 39 weeks
ended November 3, 2007
Sales increased by $1,085.4 million, or 25.7%, from
$4,228.4 million in the 39 weeks ended
November 3, 2007 to $5,313.8 million in the
39 weeks ended November 1, 2008. The increase in sales
was attributable to the comparable store sales increase of 14.1%
for the 39-week period ended November 1, 2008, the addition
of non-comparable store sales from the 1,112 stores opened since
February 3, 2007 of approximately $434.2 million, and
increases related to changes in foreign exchange rates of
$61.0 million. Stores are included in our comparable store
sales base beginning in the thirteenth month of operation and
exclude the effect of changes in foreign exchange rates. The
comparable store sales increase was driven by strong sales of
new video game software which is typical as the installed base
of the new hardware platforms increases in the years following
their launch.
New video game hardware sales increased $98.0 million, or
10.3%, from $949.1 million in the 39 weeks ended
November 3, 2007 to $1,047.1 million in the
39 weeks ended November 1, 2008, primarily due to
continued expansion of the installed base of the new hardware
platforms and the increase in store count since the end of
fiscal 2007. New video game software sales increased
$609.4 million, or 38.3%, from $1,591.7 million in the
39 weeks ended November 3, 2007 to
$2,201.1 million in the 39 weeks ended
November 1, 2008, primarily due to the strong sales of new
video game titles and the increased sales related to the new
hardware platforms, as well as the new stores added since the
end of fiscal 2007. Used video game product sales increased
$272.4 million, or 26.2%, from $1,040.0 million in the
39 weeks ended November 3, 2007 to
$1,312.4 million in the 39 weeks ended
November 1, 2008. Used video game product sales grew
primarily due to an increase in store count and an increase in
the availability of hardware and software associated with the
new hardware platforms as those platforms age and expand. Sales
of other product categories grew 16.3%, or $105.6 million,
from the 39 weeks ended November 3, 2007 to the
39 weeks ended November 1, 2008, due to the increase
in store count and the increase in new hardware platform
accessories sales.
As a percentage of sales, new video game hardware and the other
products category decreased in the 39 weeks ended
November 1, 2008 compared to the 39 weeks ended
November 3, 2007. This was due to the strong sales of new
video game software driven by the continued expansion of the
installed base of the new video game consoles mentioned earlier
and a strong lineup of video game titles in fiscal 2008.
Cost of sales increased by $784.1 million, or 25.3%, from
$3,098.7 million in the 39 weeks ended
November 3, 2007 to $3,882.8 million in the
39 weeks ended November 1, 2008 as a result of the
increase in sales and the changes in gross profit discussed
below.
Gross profit increased by $301.4 million, or 26.7%, from
$1,129.6 million in the 39 weeks ended
November 3, 2007 to $1,431.0 million in the
39 weeks ended November 1, 2008. Gross profit as a
percentage of sales increased from 26.7% in the 39 weeks
ended November 3, 2007 to 26.9% in the 39 weeks ended
November 1, 2008. Gross profit as a percentage of sales on
new video game hardware decreased from 7.4% of sales for the
39 weeks ended November 3, 2007 to 6.5% for the
39 weeks ended November 1, 2008 due to a change in the
mix of hardware units sold and a reduction in warranty
attachment sales during fiscal 2008. Gross profit as a
percentage of sales on new video game software increased from
20.4% for the 39 weeks ended November 3, 2007 to 20.9%
for the 39 weeks ended November 1, 2008. Gross profit
as a percentage of sales on used video game products and the
other product category had no significant change from the same
period in the prior fiscal year.
Selling, general and administrative expenses increased by
$187.6 million, or 22.8%, from $824.5 million in the
39 weeks ended November 3, 2007 to
$1,012.1 million in the 39 weeks ended
November 1, 2008. This increase was primarily attributable
to the increase in the number of stores in operation and related
increases in store, distribution and corporate office operating
expenses during fiscal 2008. Selling, general and administrative
expenses as a percentage of sales decreased from 19.5% in the
39 weeks ended November 3, 2007 to 19.0% in the
39 weeks ended November 1, 2008. The decrease in
selling, general and administrative expenses as a percentage of
sales was primarily due to leveraging as a result of the higher
sales of the new hardware platforms and their related software.
Selling, general and administrative expenses include
$28.4 million and $20.3 million in stock-based
compensation expense for the 39 weeks ended
November 1, 2008 and November 3, 2007, respectively.
Depreciation and amortization expense increased
$10.0 million from $96.9 million for the 39 weeks
ended November 3, 2007 to $106.9 million in the
39 weeks ended November 1, 2008. This increase was
primarily due to
28
capital expenditures associated with the opening of 526 new
stores during the 39 weeks ended November 1, 2008 and
investments in management information systems.
As discussed previously, the Companys results of
operations for the 39 weeks ended November 1, 2008
include $16.6 million in merger-related expenses associated
with the acquisition of Micromania.
Interest income increased from $9.2 million in the
39 weeks ended November 3, 2007 to $10.2 million
in the 39 weeks ended November 1, 2008. Interest
expense decreased from $48.6 million in the 39 weeks
ended November 3, 2007 to $36.7 million in the
39 weeks ended November 1, 2008 primarily due to the
retirement of $30.0 million of the Companys senior
notes since November 3, 2007 and the retirement of the
$270.0 million in senior notes and senior floating rate
notes in the 39 week periods ended November 3, 2007.
Debt extinguishment expense of $2.3 million and
$12.6 million was recognized in the 39 week periods
ended November 1, 2008 and November 3, 2007,
respectively, as a result of premiums paid related to debt
retirement and the recognition of deferred financing fees and
unamortized original issue discount.
Income tax expense for the 39 weeks ended November 3,
2007 and the 39 weeks ended November 1, 2008 was based
upon managements estimate of the Companys annualized
effective tax rate. Income tax expense was $57.8 million
for the 39 weeks ended November 3, 2007 compared to
$100.5 million for the 39 weeks ended November 1,
2008.
The factors described above led to an increase in operating
earnings of $87.0 million, or 41.8%, from
$208.3 million in the 39 weeks ended November 3,
2007 to $295.3 million in the 39 weeks ended
November 1, 2008, and an increase in net earnings of
$67.5 million, or 68.5%, from $98.5 million in the
39 weeks ended November 3, 2007 to $166.0 million
in the 39 weeks ended November 1, 2008.
Segment
Performance
The Company operates its business in the following segments:
United States, Australia, Canada and Europe. The following
tables provide a summary of our sales and operating earnings by
reportable segment and do not include merger-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
November 1,
|
|
|
November 3,
|
|
|
November 1,
|
|
|
November 3,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
Sales by operating segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,278.4
|
|
|
$
|
1,241.2
|
|
|
$
|
3,972.4
|
|
|
$
|
3,271.9
|
|
Canada
|
|
|
116.1
|
|
|
|
115.9
|
|
|
|
359.8
|
|
|
|
280.6
|
|
Australia
|
|
|
97.9
|
|
|
|
89.4
|
|
|
|
349.3
|
|
|
|
255.5
|
|
Europe
|
|
|
203.3
|
|
|
|
164.7
|
|
|
|
632.3
|
|
|
|
420.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,695.7
|
|
|
$
|
1,611.2
|
|
|
$
|
5,313.8
|
|
|
$
|
4,228.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings by operating segment excluding merger-related
expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
86.2
|
|
|
$
|
73.9
|
|
|
$
|
261.4
|
|
|
$
|
165.6
|
|
Canada
|
|
|
7.4
|
|
|
|
10.0
|
|
|
|
18.9
|
|
|
|
19.2
|
|
Australia
|
|
|
6.9
|
|
|
|
7.3
|
|
|
|
28.4
|
|
|
|
19.8
|
|
Europe
|
|
|
1.4
|
|
|
|
5.7
|
|
|
|
3.2
|
|
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
101.9
|
|
|
$
|
96.9
|
|
|
$
|
311.9
|
|
|
$
|
208.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
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 websites www.gamestop.com
and www.ebgames.com and Game Informer magazine. As
of November 1, 2008, the United States segment included
4,264 GameStop stores, compared to 4,008 stores on
November 3, 2007. Sales for the 13 and 39 weeks ended
November 1, 2008 increased 3.0% and 21.4%, respectively,
compared to the 13 and 39 weeks ended November 3,
2007. Sales for the 13 weeks ended November 1, 2008
increased due to the opening of 428 new stores since
August 4, 2007, including 94 stores in the 13 weeks
ended November 1, 2008. Sales at existing stores decreased
slightly in the 13 weeks ended November 1, 2008 due to
the difficult comparison to the 13 weeks ended
November 3, 2007 which included the launch of Halo
3. Sales for the 39 weeks ended November 1, 2008
increased as a result of increased sales at existing stores and
the opening of 576 stores since February 3, 2007, including
248 stores in the 39 weeks ended November 1, 2008.
Sales at existing stores in the 39 weeks ended
November 1, 2008 increased due to strong sales of new video
game software and used video game products which is typical in
the years following the release of new hardware platforms. As
the installed base of the new hardware platforms expands, more
new software titles become available and trade-ins of used video
game products applied toward the purchase of new video games
lead to increased sales of new and used video game products.
Segment operating income for the 13 weeks ended
November 1, 2008 increased by 16.6% compared to the
13 weeks ended November 3, 2007, driven by a higher
gross margin percentage resulting from an increase in vendor
allowances received in excess of advertising expenses and a
shift in sales to higher margin categories as the new hardware
platforms mature. Segment operating income for the 39 weeks
ended November 1, 2008 increased by 57.9% compared to the
39 weeks ended November 3, 2007, driven by strong
sales of new video game software and used video game products
and their related accessories, as well as the leveraging of
selling, general and administrative expenses.
Canada
As of November 1, 2008, the Canadian segment had 318 stores
compared to 277 stores as of November 3, 2007. Sales in the
Canadian segment in the 13 and 39 weeks ended
November 1, 2008 increased 0.2% and 28.2%, respectively,
compared to the 13 and 39 weeks ended November 3,
2007. The increase in sales in the 13 weeks ended
November 1, 2008 was attributable to additional sales at
the 46 stores opened since August 4, 2007, offset by a
slight decline in same store sales due to the launch of Halo
3 in September 2007. The increase in sales in the
39 weeks ended November 1, 2008 was primarily
attributable to increased sales at existing stores and the
additional sales at the 51 stores opened since February 3,
2007. The increase in sales at existing stores in the
39 weeks ended November 1, 2008 was driven by strong
sales of new video game software related to the continued
expansion of the installed base of new hardware platforms.
Segment operating income for the 13 and 39 weeks ended
November 1, 2008 decreased by 26.0% and 1.6%, respectively,
compared to the 13 and 39 weeks ended November 3,
2007. The decrease in operating income when compared to the
prior year was due primarily to a lower gross margin percentage
driven by economic and competitive issues stemming from changes
in foreign exchange rates. In addition, for the 13 and
39 week periods ended November 1, 2008, changes in
exchange rates when compared to the prior year had the effect of
decreasing operating earnings by $0.6 million and
increasing operating earnings by $0.4 million, respectively.
Australia
Segment results for Australia include retail operations in
Australia and New Zealand. As of November 1, 2008, the
Australian segment included 337 stores, compared to 262 at
November 3, 2007. Sales for the 13 and 39 weeks ended
November 1, 2008 increased 9.5% and 36.7%, respectively,
compared to the 13 and 39 weeks ended November 3,
2007. The increase in sales was due to higher sales at existing
stores and the additional sales at the 95 and 119 stores opened
since August 4, 2007 and February 3, 2007,
respectively. The increase in sales at existing stores for the
13 weeks ended November 1, 2008 was due to higher
sales of new video game software, driven by a strong software
title lineup and higher sales of used video game products. The
increase in sales at existing stores for the 39 weeks ended
November 1, 2008 was due to a strong video game software
title lineup and the availability of
30
the new hardware platforms in fiscal 2008 when compared to the
prior fiscal year following the launch of the Sony PlayStation 3
in the first quarter of fiscal 2007. In addition, the new
hardware platforms drove an increase in used product sales as
the installed base of platforms increased and more software
became available.
Segment operating income in the 13 weeks ended
November 1, 2008 decreased by 5.5% when compared to the
13 weeks ended November 3, 2007 and increased 43.4% in
the 39 weeks ended November 1, 2008 when compared to
the 39 weeks ended November 3, 2007. The decrease in
operating income in the 13 weeks ended November 1,
2008 was primarily due to higher selling, general and
administrative expenses associated with the increase in the
number of stores in operation and the impact of changes in
foreign currency exchange rates. The increase in operating
earnings for the 39 weeks ended November 1, 2008 was
due to the higher sales and related gross margin discussed above
offset by the higher selling, general and administrative
expenses associated with the increase in the number of stores in
operation. For the 13 and 39 week periods ended
November 1, 2008, changes in exchange rates when compared
to the prior year had the effect of decreasing operating
earnings by $0.7 million and increasing operating earnings
by $1.8 million, respectively.
Europe
Segment results for Europe include retail operations in 12
European countries. As of November 1, 2008, the European
segment operated 815 stores compared to 576 stores as of
November 3, 2007. For the 13 and 39 weeks ended
November 1, 2008, European sales increased 23.4% and 50.4%,
respectively, compared to the 13 and 39 weeks ended
November 3, 2007. The increase in sales for the
13 weeks ended November 1, 2008 was primarily due to
the additional sales at the 307 stores opened since
August 4, 2007 including the 49 stores acquired from Free
Record Shop Norway AS, a Norwegian private limited liability
company (FRS), in Norway during the first quarter of
fiscal 2008. The increase in sales for the 39 weeks ended
November 1, 2008 was due to the increase in sales at
existing stores and the additional sales at the 366 stores
opened since February 3, 2007 as well as the stores
acquired from FRS. The increase in sales at existing stores for
the 39 weeks ended November 1, 2008 was due to strong
sales of new video game software and the availability of the new
hardware platforms in fiscal 2008 when compared to the prior
fiscal year following the launch of the Sony PlayStation 3 in
the first quarter of fiscal 2007. In addition, the new hardware
platforms drove an increase in used product sales as the
installed base of the platforms increased and more software
became available.
The segment operating income in Europe for the 13 and
39 weeks ended November 1, 2008 decreased to
$1.4 million and $3.2 million, respectively, compared
to the operating earnings in the 13 and 39 weeks ended
November 3, 2007 of $5.7 million and
$3.7 million, respectively. The decrease in the operating
earnings was driven by the increase in selling, general and
administrative expenses associated with the continued expansion
in stores operating in the European segment, offset by the sales
and margin increases discussed previously. In addition, for the
13 and 39 weeks ended November 1, 2008, changes in
exchange rates when compared to the prior year had the effect of
decreasing operating earnings by $0.4 million and
increasing operating earnings by $0.3 million when compared
to the 13 and 39 weeks ended November 3, 2007,
respectively.
Seasonality
The Companys business, like that of many retailers, is
seasonal, with the major portion of the sales and operating
profit realized during the fiscal quarter which includes the
holiday selling season.
Liquidity
and Capital Resources
Cash
Flows
During the 39 weeks ended November 1, 2008, cash used
in operations was $199.8 million, compared to cash used in
operations of $139.4 million during the 39 weeks ended
November 3, 2007. The increase of cash used in operations
of $60.3 million from the 39 weeks ended
November 3, 2007 to the 39 weeks ended
November 1, 2008 was primarily due to an increase in cash
provided by net earnings, including the non-cash adjustments to
net earnings, of $33.7 million and a decrease in the excess
tax benefits realized from the exercise of stock-based awards of
$58.7 million. Also contributing to the increase in cash
used in operations for the 39 weeks ended November 1,
2008 compared to the same period ended November 3, 2007 was
an increase in working capital of $152.7 million
31
primarily due to an increase in merchandise inventories of
$241.1 million resulting from an increase in store count
and sales levels as well as purchases made in anticipation of
software launches early in November 2008 and fourth quarter
seasonal activity.
Cash used in investing activities was $183.6 million and
$123.7 million during the 39 weeks ended
November 1, 2008 and November 3, 2007, respectively.
During the 39 weeks ended November 1, 2008,
$132.8 million of cash was used primarily to open new
stores in the U.S. and internationally and to invest in
information systems. In addition, the Company used
$50.8 million, net of cash acquired, to acquire FRS, The
Gamesman Limited and an increased ownership interest in GameStop
Group Limited. During the 39 weeks ended November 3,
2007, $124.8 million of cash was used primarily to open 417
new stores and to invest in information systems, offset by
$1.1 million of cash received related to the finalization
of the purchase price of Game Brands Inc. which was acquired
during the fourth fiscal quarter of the 53 weeks ended
February 3, 2007.
Cash provided by financing activities was $29.5 million for
the 39 weeks ended November 1, 2008 and cash used in
financing activities for the 39 weeks ended
November 3, 2007 was $119.0 million. The cash provided
by financing activities for the 39 weeks ended
November 1, 2008 was primarily due to the issuance of
shares relating to stock option exercises of $28.4 million
and $33.9 million for the realization of tax benefits
relating to the stock option exercises and vested restricted
stock, respectively. These inflows were offset by the repurchase
of $30.0 million of principal value of the Companys
senior notes. The cash used in financing activities for the
39 weeks ended November 3, 2007 was primarily due to
the repurchase of $20.0 million and $250.0 million of
principal value of the Companys senior notes and senior
floating rate notes, respectively, and the $12.2 million
principal payment made in October 2007 on the Barnes &
Noble, Inc. (Barnes & Noble) promissory
note. These cash outflows were offset by $64.3 million
received for the issuance of shares relating to stock option
exercises and $92.6 million for the realization of tax
benefits relating to the stock option exercises and vested
restricted stock.
Sources
of Liquidity
We utilize cash generated from operations and have funds
available to us under our revolving credit facility to cover
seasonal fluctuations in cash flows and to support our various
growth initiatives. Our cash and cash equivalents are carried at
cost, which approximates market value, and consist primarily of
time deposits with highly rated commercial banks and money
market investment funds holding direct U.S. Treasury
obligations.
In October 2005, in connection with the merger with EB, the
Company entered into a five-year, $400 million Credit
Agreement (the Revolver), including a
$50 million letter of credit sub-limit, secured by the
assets of the Company and its U.S. subsidiaries. The
Revolver places certain restrictions on the Company and its
subsidiaries, including limitations on asset sales, additional
liens and the incurrence of additional indebtedness. In April
2007, the Company amended the Revolver to extend the maturity
date from October 11, 2010 to April 25, 2012, reduce
the LIBO interest rate margin, reduce and fix the rate of the
unused commitment fee and modify or delete certain other
covenants.
The availability under the Revolver is limited to a borrowing
base which allows the Company to borrow up to the lesser of
(x) approximately 70% of eligible inventory and
(y) 90% of the appraisal value of the inventory, in each
case plus 85% of eligible credit card receivables, net of
certain reserves. Letters of credit reduce the amount available
to borrow by their face value. The Companys ability to pay
cash dividends, redeem options, and repurchase shares is
generally prohibited, except that if availability under the
Revolver is or will be after any such payment equal to or
greater than 25% of the borrowing base, the Company may
repurchase its capital stock and pay cash dividends. In
addition, in the event that credit extensions under the Revolver
at any time exceed 80% of the lesser of the total commitment or
the borrowing base, the Company will be subject to a fixed
charge coverage ratio covenant of 1.5:1.0.
The per annum interest rate on the Revolver is variable and, at
the Companys option, is calculated by applying a margin of
(1) 0.0% to 0.25% above the higher of the prime rate of the
administrative agent or the federal funds effective rate plus
0.50% or (2) 1.00% to 1.50% above the LIBO rate. The
applicable margin is determined quarterly as a function of the
Companys consolidated leverage ratio. As of
November 1, 2008, the applicable margin was 0.0% for prime
rate loans and 1.00% for LIBO rate loans. In addition, the
Company is required to pay a commitment
32
fee of 0.25% for any unused portion of the total commitment
under the Revolver. As of November 1, 2008, there were no
borrowings outstanding under the Revolver and letters of credit
outstanding totaled $7.5 million.
In September 2008, in connection with the acquisition of
Micromania, the Company accepted a Commitment Letter (the
Commitment) from Bank of America, N.A. and Banc of
America Securities LLC to provide a $150 million junior
term loan facility (the Term Loans). The Commitment
provides for term loans up to an aggregate of $150 million,
consisting of a $50 million secured term loan and a
$100 million unsecured term loan, subject to the execution
and delivery of definitive loan documents, an amendment to the
existing Revolver permitting the Term Loans, and the completion
of other documents and conditions customary for the Term Loans.
In October 2008, the Company amended the Revolver to permit both
the acquisition of Micromania and the Term Loans. In addition,
during any period for which the Term Loans are outstanding, the
amendment increases the applicable margin under the Revolver
(i) payable on LIBO rate loans to a range of 1.5% to 2.0%
from the current range of 1.0% to 1.5% and (ii) payable on
prime rate loans to a range of 0.5% to 0.75% from the current
range of 0.0% to 0.25%. The margins applicable prior to the
entry into the amendment shall apply once the Term Loans are no
longer outstanding.
In September 2007, the Companys Luxembourg subsidiary
entered into a discretionary, $20 million Uncommitted Line
of Credit (the Line of Credit) with Bank of America.
There is no term associated with the Line of Credit and Bank of
America may withdraw the facility at any time without notice.
The Line of Credit will be made available to the Companys
foreign subsidiaries for use primarily as a bank overdraft
facility for short-term liquidity needs and for the issuance of
bank guarantees and letters of credit to support operations. As
of November 1, 2008, there were $0.1 million of cash
overdrafts outstanding under the Line of Credit and bank
guarantees outstanding totaled $4.4 million.
In September 2005, the Company, along with GameStop, Inc. as
co-issuer (together with the Company, the Issuers),
completed the offering of U.S. $300 million aggregate
principal amount of Senior Floating Rate Notes due 2011 (the
Senior Floating Rate Notes) and
U.S. $650 million aggregate principal amount of Senior
Notes due 2012 (the Senior Notes and, together with
the Senior Floating Rate Notes, the Notes). The
Notes were issued under an Indenture, dated September 28,
2005 (the Indenture), by and among the Issuers, the
subsidiary guarantors party thereto, and Citibank, N.A., as
trustee (the Trustee). The net proceeds of the
offering were used to pay the cash portion of the merger
consideration paid to the stockholders of EB in connection with
the merger.
The Senior Notes bear interest at 8.0% per annum, mature on
October 1, 2012 and were priced at 98.688%, resulting in a
discount at the time of issue of $8.5 million. The discount
is being amortized using the effective interest method. As of
November 1, 2008, the unamortized original issue discount
was $4.5 million. The rate of interest on the Senior
Floating Rate Notes prior to their redemption on October 1,
2007 was 9.2350% per annum. The Issuers pay interest on the
Senior Notes semi-annually, in arrears, every April 1 and
October 1, to holders of record on the immediately
preceding March 15 and September 15, and at maturity.
The Indenture contains affirmative and negative covenants
customary for such financings, including, among other things,
limitations on (1) the incurrence of additional debt,
(2) restricted payments, (3) liens, (4) sale and
leaseback transactions and (5) asset sales. Events of
default provided for in the Indenture include, among other
things, failure to pay interest or principal on the Notes, other
breaches of covenants in the Indenture, and certain events of
bankruptcy and insolvency. As of November 1, 2008, the
Company was in compliance with all covenants associated with the
Revolver and the Indenture.
Under certain conditions, the Issuers may on any one or more
occasions prior to maturity redeem up to 100% of the aggregate
principal amount of Senior Notes issued under the Indenture at
redemption prices at or in excess of 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the
redemption date. The circumstances which would limit the
percentage of the Notes which may be redeemed or which would
require the Company to pay a premium in excess of 100% of the
principal amount are defined in the Indenture. Upon a Change of
Control (as defined in the Indenture), the Issuers are required
to offer to purchase all of the Notes then outstanding at 101%
of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase. The Issuers may
acquire Senior Notes by means other than redemption, whether by
tender offer, open market purchases,
33
negotiated transactions or otherwise, in accordance with
applicable securities laws, so long as such acquisitions do not
otherwise violate the terms of the Indenture.
Uses
of Capital
Our future capital requirements will depend on the number of new
stores opened and the timing of those openings within a given
fiscal year. The Company opened 526 stores in the 39 weeks
ended November 1, 2008 and expects to open approximately
600 stores in total during fiscal 2008 excluding the 328 stores
acquired from Micromania. Capital expenditures for fiscal 2008
are projected to be approximately $175 million, to be used
primarily to fund new store openings and invest in distribution
and information systems in support of operations.
In May 2006, the Company announced that its Board of Directors
authorized the buyback of up to an aggregate of
$100 million of its Senior Floating Rate Notes and Senior
Notes. As of February 3, 2007, the Company had repurchased
the maximum authorized amount, having acquired $50 million
of its Senior Notes and $50 million of its Senior Floating
Rate Notes, and delivered the Notes to the Trustee for
cancellation.
On February 9, 2007, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $150 million of its Senior Notes and Senior
Floating Rate Notes. As of August 4, 2007, the Company had
repurchased the maximum authorized amount, having acquired
$20 million of its Senior Notes and $130 million of
its Senior Floating Rate Notes, and delivered the Notes to the
Trustee for cancellation. The associated loss on the retirement
of this debt was $8.8 million for the 39 week period
ended November 3, 2007, which consists of the premium paid
to retire the Notes and the recognition of the deferred
financing fees and the original issue discount on the Notes.
On June 28, 2007, the Company announced that its Board of
Directors authorized the redemption of the remaining
$120 million of Senior Floating Rate Notes outstanding. The
Company redeemed the Senior Floating Rate Notes on
October 1, 2007 at the redemption price specified by the
Senior Floating Rate Notes of 102.00%, plus all accrued and
unpaid interest through the redemption date. The Company
incurred a one-time pre-tax charge of $3.8 million
associated with the redemption, which represents a
$2.4 million redemption premium and $1.4 million to
recognize unamortized deferred financing costs.
On February 7, 2008, the Company announced that its Board
of Directors authorized the buyback of up to an aggregate of an
additional $130 million of its Senior Notes. The timing and
amount of the repurchases will be determined by the
Companys management based on their evaluation of market
conditions and other factors. In addition, the repurchases may
be suspended or discontinued at any time. As of November 1,
2008, the Company had repurchased $30 million of its Senior
Notes pursuant to this new authorization and delivered the
Senior Notes to the Trustee for cancellation. The associated
loss on retirement of debt is $2.3 million, which consists
of the premium paid to retire the Senior Notes and the write-off
of the deferred financing fees and the original issue discount
on the Senior Notes.
During October 2007, the Company paid the final principal
payment of $12.2 million to Barnes & Noble on the
promissory note that was issued in connection with the
repurchase of GameStops common stock held by
Barnes & Noble, satisfying the promissory note in
full. The note was unsecured and bore interest at 5.5% per annum.
On April 5, 2008, the Company purchased all the outstanding
stock of FRS for $21.0 million, net of cash acquired. FRS
operates 49 record stores in Norway and also operates office and
warehouse facilities in Oslo, Norway. The Company intends to
convert 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 Companys price to earnings ratio and
GameStop Group Limiteds 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 the Statement of Financial Accounting Standards
No. 141, Business Acquisitions.
34
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 Micromania
from L Capital, LV Capital, Europ@web and other shareholders of
Micromania for approximately $628.5 million (EUR
496.9 million). Micromania is a leading retailer of video
and computer games in France with 328 locations. The
Company funded the transaction with cash on hand, a draw on its
existing revolving credit facility 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.
Recent
Accounting Policies
In October 2008, the Financial Accounting Standards Board
(FASB) issued
FSP 157-3,
Determining the Fair Value of a Financial Asset When The
Market for That Asset Is Not Active
(FSP 157-3),
to clarify how an entity would determine fair value in an
inactive market.
FSP 157-3
is effective immediately and applies to our financial statements
for the period ended November 1, 2008. The application of
the provisions of
FSP 157-3
did not materially impact our consolidated financial statements
for the period ended November 1, 2008. The Company does not
currently own any securities, including cash equivalents, for
which a dislocated market or other problem exists.
In March 2008, the FASB issued Statement of Financial Accounting
Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities an amendment of
FASB Statement No. 133 (SFAS 161).
SFAS 161 requires enhanced disclosures about how and why an
entity uses derivative instruments, how derivative instruments
and related hedged items are accounted for and their effect on
an entitys financial position, financial performance, and
cash flows. SFAS 161 is effective for the Company on
February 1, 2009. The Company is currently evaluating the
impact that the adoption of SFAS 161 may have on its
consolidated financial statements.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 141 (revised 2007), Business
Combinations (SFAS 141(R)).
SFAS 141(R) amends the principles and requirements for how
an acquirer recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill
acquired. SFAS 141(R) also establishes disclosure
requirements to enable the evaluation of the nature and
financial effects of the business combination. SFAS 141(R)
is effective for the Company on February 1, 2009, and the
Company will apply SFAS 141(R) prospectively to all
business combinations subsequent to the effective date.
In December 2007, the FASB issued Statement of Financial
Accounting Standards No. 160, Noncontrolling Interests
in Consolidated Financial Statements an amendment of
Accounting Research Bulletin No. 51
(SFAS 160). SFAS 160 establishes
accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the
controlling and noncontrolling interests and requires the
separate disclosure of income attributable to controlling and
noncontrolling interests. SFAS 160 is effective for fiscal
years beginning after December 15, 2008. The Company is
currently evaluating the impact that the adoption of
SFAS 160 will have on its consolidated financial statements.
In February 2007, the FASB issued Statement of Financial
Accounting Standards No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities
(SFAS 159). This statement permits entities
the option to measure many financial instruments and certain
other items at fair value at specific election dates. Unrealized
gains and losses on items for which the fair value option has
been elected are reported in earnings. SFAS 159 was
effective for our Company on February 3, 2008. The adoption
of SFAS 159 did not have a material impact on our
consolidated financial statements.
In September 2006, the FASB issued Statement of Financial
Accounting Standards No. 157, Fair Value Measurements
(SFAS 157), which defines fair value,
establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS 157 applies
to other accounting pronouncements that
35
require or permit fair value measurements. The Company adopted
SFAS 157 on February 3, 2008 as required for its
financial assets and liabilities. However, in February 2008, the
FASB issued FASB Staff Position (FSP)
157-2,
Effective Date of FASB Statement No. 157, which
delays the effective date of SFAS 157 for all non-financial
assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial
statements on a recurring basis. The adoption of SFAS 157
for our financial assets and liabilities did not have a material
impact on the Companys financial condition and results of
operations. We do not believe the adoption of SFAS 157 for
our non-financial assets and liabilities, effective
February 1, 2009, will have a material impact on our
consolidated financial statements.
Disclosure
Regarding Forward-looking Statements
This report on
Form 10-Q
and other oral and written statements made by the Company to the
public contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). The forward-looking
statements involve a number of risks and uncertainties. A number
of factors could cause our actual results, performance,
achievements or industry results to be materially different from
any future results, performance or achievements expressed or
implied by these forward-looking statements. These factors
include, but are not limited to:
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our reliance on suppliers and vendors for sufficient quantities
of their products and for new product releases;
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general economic conditions in the U.S. and internationally
and specifically, economic conditions affecting the electronic
game industry and the retail industry and the availability of
credit;
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the competitive environment in the electronic game industry;
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our ability to open and operate new stores;
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our ability to attract and retain qualified personnel;
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the impact and costs of litigation and regulatory compliance;
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unanticipated litigation results;
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the risks involved with our international operations;
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alternate sources of distribution of video game
software; and
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other factors described in the
Form 10-K,
including those set forth under the caption Item 1A.
Risk Factors.
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In some cases, forward-looking statements can be identified by
the use of terms such as anticipates,
believes, continues, could,
estimates, expects, intends,
may, plans, potential,
predicts, pro forma, should,
seeks, will or similar expressions.
These statements are only predictions based on current
expectations and assumptions and involve known and unknown
risks, uncertainties and other factors that may cause our or our
industrys actual results, levels of activity, performance
or achievements to be materially different from any future
results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. You
should not place undue reliance on these forward-looking
statements.
Although we believe that the expectations reflected in our
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise after the date of this
Form 10-Q.
In light of these risks and uncertainties, the forward-looking
events and circumstances contained in this
Form 10-Q
may not occur, causing actual results to differ materially from
those anticipated or implied by our forward-looking statements.
36
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ITEM 3.
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Quantitative
and Qualitative Disclosures About Market Risk
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Interest
Rate Exposure
We do not use derivative financial instruments to hedge interest
rate exposure. We limit our interest rate risks by investing our
excess cash balances in short-term, highly-liquid instruments
with a maturity of one year or less. In addition, the Senior
Notes outstanding issued in connection with the merger carry a
fixed interest rate. We do not expect any material losses from
our invested cash balances, and we believe that our interest
rate exposure is modest.
Foreign
Currency Risk
The Company follows the provisions of Statement of Financial
Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities
(SFAS 133), as amended by Statement of
Financial Accounting Standards No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities
and Statement of Financial Accounting Standards
No. 157, Fair Value Measurements
(SFAS 157). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at fair
value while SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. Changes in the fair value of
derivatives are recorded each period in current earnings or
other comprehensive income, depending on whether the derivative
is designated as part of a hedge transaction, and if it is,
depending on the type of hedge transaction.
The Company uses forward exchange contracts, foreign currency
options and cross-currency swaps, (together, the Foreign
Currency Contracts) to manage currency risk primarily
related to intercompany loans denominated in non-functional
currencies and certain foreign currency assets and liabilities.
These Foreign Currency Contracts are not designated as hedges
and, therefore, changes in the fair values of these derivatives
are recognized in earnings, thereby offsetting the current
earnings effect of the re-measurement of related intercompany
loans and foreign currency assets and liabilities. The aggregate
fair value of the Foreign Currency Contracts as of
November 1, 2008 was an asset of $30.4 million as
measured by observable inputs obtained from market news
reporting services, such as Bloomberg and The Wall Street
Journal, and industry-standard models that consider various
assumptions, including quoted forward prices, time value,
volatility factors, and contractual prices for the underlying
instruments, as well as other relevant economic measures. A
hypothetical strengthening or weakening of 10% in the foreign
exchange rates underlying the Foreign Currency Contracts from
the market rate as of November 1, 2008 would result in a
gain in value of the forwards, options and swaps of
$4.3 million or $7.2 million, respectively.
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ITEM 4.
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Controls
and Procedures
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(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, the
Companys management conducted an evaluation, under the
supervision and with the participation of the principal
executive officer and principal financial officer, of the
Companys disclosure controls and procedures (as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Exchange Act). Based on this evaluation, the principal
executive officer and principal financial officer concluded
that, as of the end of the period covered by this report, the
Companys disclosure controls and procedures are effective.
Notwithstanding the foregoing, a control system, no matter how
well designed and operated, can provide only reasonable, not
absolute, assurance that it will detect or uncover failures
within the Company to disclose material information otherwise
required to be set forth in the Companys periodic reports.
(b) Changes in Internal Control over Financial Reporting
There was no change in the Companys internal control over
financial reporting (as such term is defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the Companys most recently
completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.
37
PART II
OTHER INFORMATION
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ITEM 1.
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Legal
Proceedings
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On February 14, 2005, and as amended, Steve Strickland, as
personal representative of the Estate of Arnold Strickland,
deceased, Henry Mealer, as personal representative of the Estate
of Ace Mealer, deceased, and Willie Crump, as personal
representative of the Estate of James Crump, deceased, filed a
wrongful death lawsuit against GameStop, Sony, Take-Two
Interactive, Rock Star Games and Wal-Mart (collectively, the
Defendants) and Devin Moore, alleging that
Defendants actions in designing, manufacturing, marketing
and supplying Defendant Moore with violent video games were
negligent and contributed to Defendant Moore killing Arnold
Strickland, Ace Mealer and James Crump. Moore was found guilty
of capital murder in a criminal trial and was sentenced to death
in August 2005.
Plaintiffs counsel has named a new expert, a psychologist
who testified at the criminal trial on behalf of the criminal
defendant, who will opine (if allowed) that violent video games
were a substantial factor in causing the murders. This same
testimony from this same expert was excluded in the criminal
trial from the same judge hearing this case. The testimony of
plaintiffs psychologist expert was heard by the Court on
October 30, 2008, and the motion to exclude that testimony
has been reset for final argument on December 12, 2008. The
ruling on this motion will have an effect on whether the case is
able to proceed. There is no current trial date. The Company
does not believe there is sufficient information to estimate the
amount of the possible loss, if any, resulting from the lawsuit.
In the ordinary course of our business, the Company is, from
time to time, subject to various other legal proceedings.
Management does not believe that any such other legal
proceedings, individually or in the aggregate, will have a
material adverse effect on the Companys financial
condition or results of operations.
In addition to the other information set forth in this
Form 10-Q,
you should carefully consider the factors discussed in
Item 1A. Risk Factors in our
Form 10-K
for the fiscal year ended February 2, 2008 filed with the
SEC on April 2, 2008. These risks could materially and
adversely affect our business, financial condition and results
of operations. The risks described in our
Form 10-K
have not changed materially, however, they are not the only
risks we face. Our operations could also be affected by
additional factors that are not presently known to us or by
factors that we currently consider immaterial to our business.
38
Exhibits
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of April 17, 2005, among
GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics Boutique
Holdings Corp., GameStop, Inc., GameStop Holdings Corp. (f/k/a
GameStop Corp.), Cowboy Subsidiary LLC and Eagle Subsidiary
LLC.(1)
|
|
2
|
.2
|
|
Sale and Purchase Agreement, dated September 30, 2008, between
EB International Holdings, Inc. and L Capital, LV Capital,
Europ@Web and other Micromania shareholders.(19)
|
|
2
|
.3
|
|
Amendment, dated November 17, 2008, to Sale and Purchase
Agreement for Micromania Acquisition listed as Exhibit 2.2
above.(21)
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation.(2)
|
|
3
|
.2
|
|
Amended and Restated Bylaws.(3)
|
|
4
|
.1
|
|
Indenture, dated September 28, 2005, by and among GameStop Corp.
(f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary
guarantors party thereto, and Citibank N.A., as trustee.(4)
|
|
4
|
.2
|
|
First Supplemental Indenture, dated October 8, 2005, by and
among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc.,
the subsidiary guarantors party thereto, and Citibank N.A., as
trustee.(5)
|
|
4
|
.3
|
|
Rights Agreement, dated as of June 27, 2005, between GameStop
Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as
Rights Agent.(3)
|
|
4
|
.4
|
|
Form of Indenture.(6)
|
|
10
|
.1
|
|
Separation Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a
GameStop Corp.).(7)
|
|
10
|
.2
|
|
Tax Disaffiliation Agreement, dated as of January 1, 2002,
between Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(8)
|
|
10
|
.3
|
|
Insurance Agreement, dated as of January 1, 2002, between Barnes
& Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop
Corp.).(8)
|
|
10
|
.4
|
|
Operating Agreement, dated as of January 1, 2002, between Barnes
& Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop
Corp.).(8)
|
|
10
|
.5
|
|
Second Amended and Restated 2001 Incentive Plan.(9)
|
|
10
|
.6
|
|
Second Amended and Restated Supplemental Compensation Plan.(10)
|
|
10
|
.7
|
|
Form of Option Agreement.(11)
|
|
10
|
.8
|
|
Form of Restricted Share Agreement.(12)
|
|
10
|
.9
|
|
Stock Purchase Agreement, dated as of October 1, 2004, by and
among GameStop Holdings Corp. (f/k/a GameStop Corp.), B&N
GameStop Holding Corp. and Barnes & Noble, Inc.(13)
|
|
10
|
.10
|
|
Promissory Note, dated as of October 1, 2004, made by GameStop
Holdings Corp. (f/k/a GameStop Corp.) in favor of B&N
GameStop Holding Corp.(13)
|
|
10
|
.11
|
|
Credit Agreement, dated as of October 11, 2005, by and among
GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries
of GameStop Corp., Bank of America, N.A. and the other lending
institutions listed in the Agreement, Bank of America, N.A. and
Citicorp North America, Inc., as Issuing Banks, Bank of America,
N.A., as Administrative Agent and Collateral Agent, Citicorp
North America, Inc., as Syndication Agent, and Merrill Lynch
Capital, a division of Merrill Lynch Business Financial Services
Inc., as Documentation Agent.(14)
|
|
10
|
.12
|
|
Guaranty, dated as of October 11, 2005, by GameStop Corp. (f/k/a
GSC Holdings Corp.) and certain subsidiaries of GameStop Corp.
in favor of the agents and lenders.(14)
|
|
10
|
.13
|
|
Security Agreement, dated October 11, 2005, by GameStop Corp.
(f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop
Corp. in favor of Bank of America, N.A., as Collateral Agent for
the Secured Parties.(14)
|
|
10
|
.14
|
|
Patent and Trademark Security Agreement, dated as of October 11,
2005 by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain
subsidiaries of GameStop Corp. in favor of Bank of America,
N.A., as Collateral Agent.(14)
|
39
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.15
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between GameStop of Texas, L.P. and Bank
of America, N.A., as Collateral Agent.(14)
|
|
10
|
.16
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between Electronics Boutique of America,
Inc. and Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.17
|
|
Form of Securities Collateral Pledge Agreement, dated as of
October 11, 2005.(14)
|
|
10
|
.18
|
|
First Amendment, dated April 25, 2007, to Credit Agreement,
dated as of October 11, 2005, by and among GameStop Corp. (f/k/a
GSC Holdings Corp.), certain subsidiaries of GameStop Corp.,
Bank of America, N.A. and the other lending institutions listed
in the Amendment, Bank of America, N.A. and Citicorp North
America, Inc., as Issuing Banks, Bank of America, N.A., as
Administrative Agent and Collateral Agent, Citicorp North
America, Inc., as Syndication Agent, and Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., as
Documentation Agent.(15)
|
|
10
|
.19
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R.
Richard Fontaine.(16)
|
|
10
|
.20
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and
Daniel A. DeMatteo.(16)
|
|
10
|
.21
|
|
Executive Employment Agreement, dated as of April 3, 2006,
between GameStop Corp. and David W. Carlson.(17)
|
|
10
|
.22
|
|
Executive Employment Agreement, dated as of August 28, 2008,
between GameStop Corp. and J. Paul Raines.(18)
|
|
10
|
.23
|
|
Second Amendment, dated as of October 23, 2008, to Credit
Agreement, dated as of October 11, 2005, by and among GameStop
Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of
GameStop Corp., Bank of America, N.A. and the other lending
institutions listed in the Amendment, Bank of America, N.A. and
Citicorp North America, Inc., as Issuing Banks, Bank of America,
N.A., as Administrative Agent and Collateral Agent, Citicorp
North America, Inc., as Syndication Agent, and GE Business
Financial Services, Inc., as Documentation Agent.(21)
|
|
10
|
.24
|
|
Executive Employment Agreement, dated as of October 24, 2008,
between GameStop Corp. and Tony Bartel.(20)
|
|
10
|
.25
|
|
Term Loan Agreement, dated November 12, 2008, by and among
GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries
of GameStop Corp., Bank of America, N.A., as lender, Bank of
America, N.A., as Administrative Agent and Collateral Agent, and
Banc of America Securities LLC, as Sole Arranger and
Bookrunner.(21)
|
|
10
|
.26
|
|
Security Agreement, dated November 12, 2008, by and among
GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries
of GameStop Corp., Bank of America, N.A., as lender and Bank of
America, N.A., as Collateral Agent.(21)
|
|
10
|
.27
|
|
Patent and Trademark Security Agreement, dated as of November
12, 2008, by and among GameStop Corp. (f/k/a GSC Holdings
Corp.), certain subsidiaries of GameStop Corp., Bank of America,
N.A., as lender, and Bank of America, N.A., as Collateral
Agent.(21)
|
|
10
|
.28
|
|
Securities Collateral Pledge Agreement, dated November 12, 2008,
by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain
subsidiaries of GameStop Corp., Bank of America, N.A., as
lender, and Bank of America, N.A., as Collateral Agent.(21)
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
|
|
(1) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 18, 2005. |
40
|
|
|
(2) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
February 7, 2007. |
|
(3) |
|
Incorporated by reference to the Registrants Amendment
No. 1 to
Form S-4
filed with the Securities and Exchange Commission on
July 8, 2005. |
|
(4) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 30, 2005. |
|
(5) |
|
Incorporated by reference to the Registrants
Form 10-Q
for the fiscal quarter ended October 29, 2005 filed with
the Securities and Exchange Commission on December 8, 2005. |
|
(6) |
|
Incorporated by reference to the Registrants
Form S-3ASR
filed with the Securities and Exchange Commission on
April 10, 2006. |
|
(7) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 4 to
Form S-1
filed with the Securities and Exchange Commission on
February 5, 2002. |
|
(8) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 3 to
Form S-1
filed with the Securities and Exchange Commission on
January 24, 2002. |
|
(9) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2007 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 29, 2007. |
|
(10) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2008 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 23, 2008. |
|
(11) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 10-K
for the fiscal year ended January 29, 2005 filed with the
Securities and Exchange Commission on April 11, 2005. |
|
(12) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 12, 2005. |
|
(13) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
October 5, 2004. |
|
(14) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 12, 2005. |
|
(15) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
April 26, 2007. |
|
(16) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 15, 2005. |
|
(17) |
|
Incorporated by reference to the Registrants
Form 10-K
for the fiscal year ended January 28, 2006 filed with the
Securities and Exchange Commission on April 3, 2006. |
|
(18) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
September 4, 2008. |
|
(19) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 2, 2008. |
|
(20) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 30, 2008. |
|
(21) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
November 18, 2008. |
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GAMESTOP CORP.
David W. Carlson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: December 11, 2008
GAMESTOP CORP.
Robert A. Lloyd
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: December 11, 2008
42
GAMESTOP
CORP.
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of April 17, 2005, among
GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics Boutique
Holdings Corp., GameStop, Inc., GameStop Holdings Corp. (f/k/a
GameStop Corp.), Cowboy Subsidiary LLC and Eagle Subsidiary
LLC.(1)
|
|
2
|
.2
|
|
Sale and Purchase Agreement, dated September 30, 2008, between
EB International Holdings, Inc. and L Capital, LV Capital,
Europ@Web and other Micromania shareholders.(19)
|
|
2
|
.3
|
|
Amendment, dated November 17, 2008, to Sale and Purchase
Agreement for Micromania Acquisition listed as Exhibit 2.2
above.(21)
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation.(2)
|
|
3
|
.2
|
|
Amended and Restated Bylaws.(3)
|
|
4
|
.1
|
|
Indenture, dated September 28, 2005, by and among GameStop Corp.
(f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary
guarantors party thereto, and Citibank N.A., as trustee.(4)
|
|
4
|
.2
|
|
First Supplemental Indenture, dated October 8, 2005, by and
among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc.,
the subsidiary guarantors party thereto, and Citibank N.A., as
trustee.(5)
|
|
4
|
.3
|
|
Rights Agreement, dated as of June 27, 2005, between GameStop
Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as
Rights Agent.(3)
|
|
4
|
.4
|
|
Form of Indenture.(6)
|
|
10
|
.1
|
|
Separation Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a
GameStop Corp.).(7)
|
|
10
|
.2
|
|
Tax Disaffiliation Agreement, dated as of January 1, 2002,
between Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(8)
|
|
10
|
.3
|
|
Insurance Agreement, dated as of January 1, 2002, between Barnes
& Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop
Corp.).(8)
|
|
10
|
.4
|
|
Operating Agreement, dated as of January 1, 2002, between Barnes
& Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop
Corp.).(8)
|
|
10
|
.5
|
|
Second Amended and Restated 2001 Incentive Plan.(9)
|
|
10
|
.6
|
|
Second Amended and Restated Supplemental Compensation Plan.(10)
|
|
10
|
.7
|
|
Form of Option Agreement.(11)
|
|
10
|
.8
|
|
Form of Restricted Share Agreement.(12)
|
|
10
|
.9
|
|
Stock Purchase Agreement, dated as of October 1, 2004, by and
among GameStop Holdings Corp. (f/k/a GameStop Corp.), B&N
GameStop Holding Corp. and Barnes & Noble, Inc.(13)
|
|
10
|
.10
|
|
Promissory Note, dated as of October 1, 2004, made by GameStop
Holdings Corp. (f/k/a GameStop Corp.) in favor of B&N
GameStop Holding Corp.(13)
|
|
10
|
.11
|
|
Credit Agreement, dated as of October 11, 2005, by and among
GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries
of GameStop Corp., Bank of America, N.A. and the other lending
institutions listed in the Agreement, Bank of America, N.A. and
Citicorp North America, Inc., as Issuing Banks, Bank of America,
N.A., as Administrative Agent and Collateral Agent, Citicorp
North America, Inc., as Syndication Agent, and Merrill Lynch
Capital, a division of Merrill Lynch Business Financial Services
Inc., as Documentation Agent.(14)
|
|
10
|
.12
|
|
Guaranty, dated as of October 11, 2005, by GameStop Corp. (f/k/a
GSC Holdings Corp.) and certain subsidiaries of GameStop Corp.
in favor of the agents and lenders.(14)
|
|
10
|
.13
|
|
Security Agreement, dated October 11, 2005, by GameStop Corp.
(f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop
Corp. in favor of Bank of America, N.A., as Collateral Agent for
the Secured Parties.(14)
|
|
10
|
.14
|
|
Patent and Trademark Security Agreement, dated as of October 11,
2005 by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain
subsidiaries of GameStop Corp. in favor of Bank of America,
N.A., as Collateral Agent.(14)
|
43
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.15
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between GameStop of Texas, L.P. and Bank
of America, N.A., as Collateral Agent.(14)
|
|
10
|
.16
|
|
Mortgage, Security Agreement, and Assignment and Deeds of Trust,
dated October 11, 2005, between Electronics Boutique of America,
Inc. and Bank of America, N.A., as Collateral Agent.(14)
|
|
10
|
.17
|
|
Form of Securities Collateral Pledge Agreement, dated as of
October 11, 2005.(14)
|
|
10
|
.18
|
|
First Amendment, dated April 25, 2007, to Credit Agreement,
dated as of October 11, 2005, by and among GameStop Corp. (f/k/a
GSC Holdings Corp.), certain subsidiaries of GameStop Corp.,
Bank of America, N.A. and the other lending institutions listed
in the Amendment, Bank of America, N.A. and Citicorp North
America, Inc., as Issuing Banks, Bank of America, N.A., as
Administrative Agent and Collateral Agent, Citicorp North
America, Inc., as Syndication Agent, and Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., as
Documentation Agent.(15)
|
|
10
|
.19
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R.
Richard Fontaine.(16)
|
|
10
|
.20
|
|
Executive Employment Agreement, dated as of April 11, 2005,
between GameStop Holdings Corp. (f/k/a GameStop Corp.) and
Daniel A. DeMatteo.(16)
|
|
10
|
.21
|
|
Executive Employment Agreement, dated as of April 3, 2006,
between GameStop Corp. and David W. Carlson.(17)
|
|
10
|
.22
|
|
Executive Employment Agreement, dated as of August 28, 2008,
between GameStop Corp. and J. Paul Raines.(18)
|
|
10
|
.23
|
|
Second Amendment, dated as of October 23, 2008, to Credit
Agreement, dated as of October 11, 2005, by and among GameStop
Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of
GameStop Corp., Bank of America, N.A. and the other lending
institutions listed in the Amendment, Bank of America, N.A. and
Citicorp North America, Inc., as Issuing Banks, Bank of America,
N.A., as Administrative Agent and Collateral Agent, Citicorp
North America, Inc., as Syndication Agent, and GE Business
Financial Services, Inc., as Documentation Agent.(21)
|
|
10
|
.24
|
|
Executive Employment Agreement, dated as of October 24, 2008,
between GameStop Corp. and Tony Bartel.(20)
|
|
10
|
.25
|
|
Term Loan Agreement, dated November 12, 2008, by and among
GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries
of GameStop Corp., Bank of America, N.A., as lender, Bank of
America, N.A., as Administrative Agent and Collateral Agent, and
Banc of America Securities LLC, as Sole Arranger and
Bookrunner.(21)
|
|
10
|
.26
|
|
Security Agreement, dated November 12, 2008, by and among
GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries
of GameStop Corp., Bank of America, N.A., as lender and Bank of
America, N.A., as Collateral Agent.(21)
|
|
10
|
.27
|
|
Patent and Trademark Security Agreement, dated as of November
12, 2008, by and among GameStop Corp. (f/k/a GSC Holdings
Corp.), certain subsidiaries of GameStop Corp., Bank of America,
N.A., as lender, and Bank of America, N.A., as Collateral
Agent.(21)
|
|
10
|
.28
|
|
Securities Collateral Pledge Agreement, dated November 12, 2008,
by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain
subsidiaries of GameStop Corp., Bank of America, N.A., as
lender, and Bank of America, N.A., as Collateral Agent.(21)
|
|
31
|
.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
31
|
.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32
|
.1
|
|
Certification of Chief Executive Officer pursuant to Rule
13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
|
32
|
.2
|
|
Certification of Chief Financial Officer pursuant to Rule
13a-14(b) under the Securities Exchange Act of 1934 and
18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|
44
|
|
|
(1) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 18, 2005. |
|
(2) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
February 7, 2007. |
|
(3) |
|
Incorporated by reference to the Registrants Amendment
No. 1 to
Form S-4
filed with the Securities and Exchange Commission on
July 8, 2005. |
|
(4) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 30, 2005. |
|
(5) |
|
Incorporated by reference to the Registrants
Form 10-Q
for the fiscal quarter ended October 29, 2005 filed with
the Securities and Exchange Commission on December 8, 2005. |
|
(6) |
|
Incorporated by reference to the Registrants
Form S-3ASR
filed with the Securities and Exchange Commission on
April 10, 2006. |
|
(7) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 4 to
Form S-1
filed with the Securities and Exchange Commission on
February 5, 2002. |
|
(8) |
|
Incorporated by reference to GameStop Holdings Corp.s
Amendment No. 3 to
Form S-1
filed with the Securities and Exchange Commission on
January 24, 2002. |
|
(9) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2007 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 29, 2007. |
|
(10) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2008 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 23, 2008. |
|
(11) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 10-K
for the fiscal year ended January 29, 2005 filed with the
Securities and Exchange Commission on April 11, 2005. |
|
(12) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 12, 2005. |
|
(13) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
October 5, 2004. |
|
(14) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 12, 2005. |
|
(15) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
April 26, 2007. |
|
(16) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
April 15, 2005. |
|
(17) |
|
Incorporated by reference to the Registrants
Form 10-K
for the fiscal year ended January 28, 2006 filed with the
Securities and Exchange Commission on April 3, 2006. |
|
(18) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
September 4, 2008. |
|
(19) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 2, 2008. |
|
(20) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
October 30, 2008. |
|
(21) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
November 18, 2008. |
45