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
OCTOBER 31,
2009
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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 has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). 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)
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 $.001 par value Class A Common
Stock outstanding as of November 27, 2009: 164,767,330
PART I
FINANCIAL INFORMATION
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ITEM 1.
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Financial
Statements
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GAMESTOP
CORP.
CONDENSED
CONSOLIDATED BALANCE SHEETS
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October 31,
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November 1,
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January 31,
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2009
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2008
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2009
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(Unaudited)
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(Unaudited)
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(In thousands, except per share data)
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ASSETS:
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Current assets:
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Cash and cash equivalents
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$
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292,027
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$
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478,056
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$
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578,141
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Receivables, net
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52,543
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50,730
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65,981
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Merchandise inventories, net
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1,733,962
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1,424,249
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1,075,792
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Deferred income taxes current
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24,503
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29,200
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23,615
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Prepaid taxes
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13,073
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68,222
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Prepaid expenses
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61,514
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56,759
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59,101
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Other current assets
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16,472
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45,690
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15,411
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Total current assets
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2,194,094
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2,152,906
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1,818,041
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Property and equipment:
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Land
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11,819
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10,229
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10,397
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Buildings and leasehold improvements
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516,492
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404,660
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454,651
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Fixtures and equipment
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692,660
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590,565
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619,845
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Total property and equipment
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1,220,971
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1,005,454
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1,084,893
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Less accumulated depreciation and amortization
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629,276
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502,348
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535,639
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Net property and equipment
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591,695
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503,106
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549,254
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Goodwill, net
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1,931,672
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1,443,782
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1,862,107
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Other intangible assets
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279,567
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13,388
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247,790
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Deferred taxes
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28,681
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Other noncurrent assets
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38,980
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21,838
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35,398
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Total noncurrent assets
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2,841,914
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2,010,795
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2,694,549
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Total assets
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$
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5,036,008
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$
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4,163,701
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$
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4,512,590
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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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1,328,041
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$
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1,102,639
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$
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1,047,963
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Accrued liabilities
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510,296
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366,147
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498,253
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Taxes payable
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16,495
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Total current liabilities
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1,838,337
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1,468,786
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1,562,711
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Senior notes payable, long-term portion, net
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447,121
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545,462
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545,712
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Other long-term liabilities
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111,127
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85,273
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104,486
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Total long-term liabilities
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558,248
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630,735
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650,198
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Total liabilities
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2,396,585
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2,099,521
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2,212,909
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Commitments and Contingencies (Note 11)
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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 $.001 par value;
authorized 300,000 shares; 164,752, 163,776 and
163,843 shares issued and outstanding, respectively
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165
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164
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164
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Additional
paid-in-capital
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1,334,481
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1,299,721
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1,307,453
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Accumulated other comprehensive income (loss)
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122,944
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(23,870
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)
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(28,426
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)
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Retained earnings
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1,181,833
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788,165
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1,020,490
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Total stockholders equity
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2,639,423
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2,064,180
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2,299,681
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Total liabilities and stockholders equity
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$
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5,036,008
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$
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4,163,701
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$
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4,512,590
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See accompanying notes to condensed consolidated financial
statements.
2
GAMESTOP
CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
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13 Weeks Ended
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39 Weeks Ended
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October 31,
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November 1,
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October 31,
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November 1,
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2009
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2008
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2009
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2008
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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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1,834,727
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$
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1,695,746
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$
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5,553,984
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$
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5,313,783
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Cost of sales
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1,311,643
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1,222,317
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3,993,381
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3,882,825
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Gross profit
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523,084
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473,429
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1,560,603
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1,430,958
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Selling, general and administrative expenses
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391,210
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335,722
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1,151,815
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1,012,134
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Depreciation and amortization
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41,605
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35,767
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119,109
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106,912
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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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90,269
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85,335
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289,679
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295,307
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Interest income
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(480
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)
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(3,672
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)
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(1,459
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)
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(10,242
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)
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Interest expense
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10,946
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12,479
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34,881
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36,748
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Debt extinguishment expense
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2,461
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5,323
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2,331
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Earnings before income tax expense
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77,342
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76,528
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250,934
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266,470
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Income tax expense
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|
25,117
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29,859
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89,591
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100,513
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Net earnings
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$
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52,225
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$
|
46,669
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$
|
161,343
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|
$
|
165,957
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Net earnings per common share-basic
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$
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0.32
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$
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0.29
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$
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0.98
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|
$
|
1.02
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Weighted average shares of common stock-basic
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164,702
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|
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163,736
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164,604
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|
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162,983
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Net earnings per common share-diluted
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$
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0.31
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$
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0.28
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$
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0.96
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$
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0.99
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Weighted average shares of common stock-diluted
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168,113
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167,995
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167,981
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|
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167,813
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See accompanying notes to condensed consolidated financial
statements.
3
GAMESTOP
CORP.
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
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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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Shares
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Stock
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Capital
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Income (Loss)
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Earnings
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Total
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|
(In thousands)
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|
(Unaudited)
|
|
|
Balance at January 31, 2009
|
|
|
163,843
|
|
|
$
|
164
|
|
|
$
|
1,307,453
|
|
|
$
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(28,426
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)
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|
$
|
1,020,490
|
|
|
$
|
2,299,681
|
|
Comprehensive income:
|
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|
|
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|
|
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|
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|
|
|
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|
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|
|
|
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Net earnings for the 39 weeks ended October 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
161,343
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|
|
|
161,343
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Foreign currency translation
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|
|
|
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|
|
|
|
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|
151,370
|
|
|
|
|
|
|
|
151,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
312,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Stock-based compensation
|
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|
|
|
|
|
|
|
|
|
23,226
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|
|
|
|
|
|
|
|
|
|
|
23,226
|
|
Exercise of stock options and issuance of shares upon vesting of
restricted stock grants (including tax expense of $405)
|
|
|
909
|
|
|
|
1
|
|
|
|
3,802
|
|
|
|
|
|
|
|
|
|
|
|
3,803
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at October 31, 2009
|
|
|
164,752
|
|
|
$
|
165
|
|
|
$
|
1,334,481
|
|
|
$
|
122,944
|
|
|
$
|
1,181,833
|
|
|
$
|
2,639,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
4
GAMESTOP
CORP.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
161,343
|
|
|
$
|
165,957
|
|
Adjustments to reconcile net earnings to net cash flows used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
120,315
|
|
|
|
107,913
|
|
Amortization and retirement of deferred financing fees and issue
discounts
|
|
|
4,176
|
|
|
|
2,814
|
|
Stock-based compensation expense
|
|
|
23,226
|
|
|
|
28,433
|
|
Deferred income taxes
|
|
|
(5,325
|
)
|
|
|
(8,285
|
)
|
Excess tax (benefits) expense realized from exercise of
stock-based awards
|
|
|
453
|
|
|
|
(33,925
|
)
|
Loss on disposal of property and equipment
|
|
|
4,713
|
|
|
|
3,960
|
|
Changes in other long-term liabilities
|
|
|
6,524
|
|
|
|
10,612
|
|
Change in the value of foreign exchange contracts
|
|
|
2,835
|
|
|
|
(22,027
|
)
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
17,012
|
|
|
|
2,736
|
|
Merchandise inventories
|
|
|
(578,288
|
)
|
|
|
(688,441
|
)
|
Prepaid expenses and other current assets
|
|
|
478
|
|
|
|
(14,364
|
)
|
Prepaid income taxes and accrued income taxes payable
|
|
|
(30,159
|
)
|
|
|
(39,359
|
)
|
Accounts payable and accrued liabilities
|
|
|
198,848
|
|
|
|
280,391
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(73,849
|
)
|
|
|
(203,585
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(122,122
|
)
|
|
|
(132,758
|
)
|
Acquisitions, net of cash acquired
|
|
|
(5,208
|
)
|
|
|
(50,800
|
)
|
Other
|
|
|
(13,823
|
)
|
|
|
2,429
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(141,153
|
)
|
|
|
(181,129
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(100,000
|
)
|
|
|
(30,000
|
)
|
Borrowings from the revolver
|
|
|
115,000
|
|
|
|
|
|
Repayments of revolver borrowings
|
|
|
(115,000
|
)
|
|
|
|
|
Issuance of shares relating to stock options
|
|
|
4,208
|
|
|
|
28,432
|
|
Excess tax benefits (expense) realized from exercise of
stock-based awards
|
|
|
(453
|
)
|
|
|
33,925
|
|
Other
|
|
|
(57
|
)
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
(96,302
|
)
|
|
|
30,857
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
25,190
|
|
|
|
(25,501
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(286,114
|
)
|
|
|
(379,358
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
578,141
|
|
|
|
857,414
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
292,027
|
|
|
$
|
478,056
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
5
GAMESTOP
CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
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 the instructions to Quarterly
Report on
Form 10-Q
and Article 10 of
Regulation S-X.
Accordingly, they 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 January 31, 2009 (fiscal
2008). 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 October 31, 2009 are
not indicative of the results to be expected for the
52 weeks ending January 30, 2010 (fiscal
2009).
Certain reclassifications have been made to conform the prior
period data to the current interim period presentation.
The Company evaluated subsequent events through the time of
filing this Quarterly Report on
Form 10-Q
on December 9, 2009. No significant events occurred
subsequent to the balance sheet date but prior to the filing of
this report that would have a material impact on our condensed
consolidated financial statements.
|
|
2.
|
New
Accounting Pronouncements
|
In June 2009, the Financial Accounting Standards Board
(FASB) codified accounting literature into a single
source of authoritative principles, except for certain
authoritative rules and interpretive releases issued by the
Securities and Exchange Commission (SEC) which are
also sources of authoritative GAAP for SEC registrants, which
became effective for our Company in August 2009. Since the
codification did not alter existing U.S. GAAP, it did not
have an impact on our condensed consolidated financial
statements. All references to pre-codified U.S. GAAP have
been removed from this
Form 10-Q.
In May 2009, the FASB issued new accounting and disclosure
guidance for recognized and non-recognized subsequent events
that occur after the balance sheet date but before financial
statements are issued. The new guidance also requires disclosure
of the date through which an entity has evaluated subsequent
events and the basis for that date. The new guidance was
effective for our Company beginning with our Quarterly Report on
Form 10-Q
for the period ended August 1, 2009, and is being applied
prospectively. This change in accounting policy had no impact on
our consolidated financial statements.
6
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In April 2009, the FASB issued updated accounting guidance that
requires disclosures about fair value of financial instruments
for interim reporting periods and requires those disclosures in
summarized financial information for publicly traded companies
at interim reporting periods. The updated accounting guidance
was effective for the Company for the period ended
August 1, 2009. See Note 4.
In March 2008, the FASB amended existing disclosure requirements
related to derivative and hedging activities, which became
effective for the Company on February 1, 2009 and is being
applied prospectively. As a result of the amended disclosure
requirements, the Company is required to provide expanded
qualitative and quantitative disclosures about derivatives and
hedging activities in each interim and annual period. The
adoption of the new disclosure requirements had no impact on our
consolidated financial statements.
In December 2007, the FASB amended its guidance on accounting
for business combinations. The new accounting guidance 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. It also establishes
disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. The new
accounting guidance for business combinations was effective for
our Company on February 1, 2009, and we will apply it
prospectively to all business combinations subsequent to the
effective date. The adoption of this new accounting policy did
not have a significant impact on our consolidated financial
statements and the impact that its adoption will have on our
consolidated financial statements in future periods will depend
on the nature and size of business combinations completed
subsequent to the date of adoption.
In December 2007, the FASB issued new accounting and disclosure
guidance related to noncontrolling interests in subsidiaries
(previously referred to as minority interests). The updated
accounting guidance requires all entities to report
noncontrolling interests in subsidiaries as a component of
equity in the consolidated financial statements and also
establishes disclosure requirements that clearly identify and
distinguish between controlling and noncontrolling interests and
requires the separate disclosure of income attributable to
controlling and noncontrolling interests. The new accounting
guidance was effective for our Company on February 1, 2009.
The adoption of this new accounting policy did not have a
significant impact on our consolidated financial statements.
In September 2006, the FASB issued new accounting guidance which
defines fair value, establishes a framework for measuring fair
value and expands disclosure requirements about fair value
measurements. However, in February 2008, the FASB delayed the
effective date of the new accounting guidance for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The
adoption of this new accounting guidance for our nonfinancial
assets and nonfinancial liabilities on February 1, 2009 did
not have a significant impact on our consolidated financial
statements.
|
|
3.
|
Business
Combinations and Goodwill
|
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 $580,407, net of cash acquired. Micromania is a leading
retailer of video and computer games in France with 361
locations, 328 of which were operating on the date of the
acquisition. The purpose of the acquisition was to expand the
Companys presence in Europe.
7
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The condensed consolidated financial statements include the
results of Micromania from the date of acquisition and are
reported in the European segment. The purchase price has been
allocated based on estimated fair values as of the acquisition
date. The purchase price was allocated as follows:
|
|
|
|
|
|
|
November 17, 2008
|
|
|
|
(In thousands)
|
|
|
Current assets
|
|
$
|
187,661
|
|
Property, plant & equipment
|
|
|
34,164
|
|
Goodwill
|
|
|
412,325
|
|
Intangible assets:
|
|
|
|
|
Tradename
|
|
|
131,560
|
|
Leasehold rights and interests
|
|
|
103,955
|
|
|
|
|
|
|
Total intangible assets
|
|
|
235,515
|
|
Other long-term assets
|
|
|
7,786
|
|
Current liabilities
|
|
|
(220,237
|
)
|
Long-term liabilities
|
|
|
(76,807
|
)
|
|
|
|
|
|
Total purchase price
|
|
$
|
580,407
|
|
|
|
|
|
|
In determining the preliminary purchase price allocation,
management considered, among other factors, the Companys
intention to use the acquired assets. Revisions to the
preliminary purchase price allocation may result as additional
information becomes available. The total weighted-average
amortization period for the intangible assets, excluding
goodwill and the Micromania tradename, is approximately ten
years. The intangible assets are being amortized based upon the
pattern in which the economic benefits of the intangible assets
are being utilized, with no expected residual value. None of the
goodwill is deductible for income tax purposes.
The acquisition of Micromania is an important part of the
Companys European and overall growth strategy and gave the
Company an immediate entrance into the second largest video game
market in Europe. The amount the Company paid in excess of the
fair value of the net assets acquired was primarily for
(i) the expected future cash flows derived from the
existing business and its infrastructure, (ii) the
geographical benefits from adding stores in a new large growing
market without cannibalizing existing sales,
(iii) expanding the Companys expertise in the
European video game market as a whole, and (iv) increasing
the Companys impact on the European market, including
increasing its purchasing power.
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 operated 49 record stores in Norway. The Company
has converted the FRS 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 $17,981, recorded as goodwill.
The Company has included the results of operations of FRS, which
were not material, in its financial statements beginning on the
closing date of the acquisition on April 5, 2008.
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 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. Shares representing approximately 16% were purchased
in June 2008 for $27,383 and in July 2009 an additional 16% was
purchased for $4,667, bringing the Companys total interest
in GameStop Group Limited to approximately 84%. The Company
already consolidates the results of GameStop Group Limited;
therefore, any additional amounts acquired will not have a
material effect on the Companys financial statements.
8
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During July 2008, the Company purchased certain assets and Web
site 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 acquisitions of Micromania,
FRS and The Gamesman Limited at the beginning of fiscal 2008 is
not material to the Companys consolidated financial
statements.
|
|
4.
|
Fair
Value Measurements and Financial Instruments
|
The Company defines fair value as the price that would be
received from selling an asset or paid to transfer a liability
in an orderly transaction between market participants at the
measurement date. Fair value accounting guidance applies to our
forward 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.
Fair value accounting guidance 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 assets and
liabilities measured on a recurring basis and recorded on our
condensed consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2009
|
|
|
November 1, 2008
|
|
|
January 31, 2009
|
|
|
|
Level 2
|
|
|
Level 2
|
|
|
Level 2
|
|
|
|
(In thousands)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
$
|
12,648
|
|
|
$
|
42,862
|
|
|
$
|
12,104
|
|
Company-owned life insurance
|
|
|
2,530
|
|
|
|
2,408
|
|
|
|
2,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
15,178
|
|
|
$
|
45,270
|
|
|
$
|
14,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
$
|
28,461
|
|
|
$
|
12,418
|
|
|
$
|
11,766
|
|
Nonqualified deferred compensation
|
|
|
1,008
|
|
|
|
1,019
|
|
|
|
905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
29,469
|
|
|
$
|
13,437
|
|
|
$
|
12,671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company uses 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. We do not use derivative financial instruments for
trading or
9
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
speculative purposes. We are exposed to counterparty credit risk
on all of our derivative financial instruments and cash
equivalent investments. The Company manages counterparty risk
according to the guidelines and controls established under
comprehensive risk management and investment policies. We
continuously monitor our counterparty credit risk and utilize a
number of different counterparties to minimize our exposure to
potential defaults. We do not require collateral under
derivative or investment agreements.
The fair values of derivative instruments not receiving hedge
accounting treatment in the condensed consolidated balance
sheets presented herein were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2009
|
|
|
November 1, 2008
|
|
|
January 31, 2009
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
12,648
|
|
|
$
|
42,460
|
|
|
$
|
12,104
|
|
Other noncurrent assets
|
|
|
|
|
|
|
402
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
(27,857
|
)
|
|
|
(10,411
|
)
|
|
|
(10,164
|
)
|
Other long-term liabilities
|
|
|
(604
|
)
|
|
|
(2,007
|
)
|
|
|
(1,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
$
|
(15,813
|
)
|
|
$
|
30,444
|
|
|
$
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2009, the Company had a series of Forward
Currency Contracts outstanding, with a gross notional value of
$540,998 and a net notional value of $242,267. For the 13 and
39 week periods ended October 31, 2009, the Company
recognized losses of $2,156 and $14,997, respectively, in
selling, general and administrative expenses related to the
trading of derivative instruments. As of November 1, 2008,
the Company had a series of Forward Currency Contracts
outstanding, with a gross notional value of $1,453,328 and a net
notional value of $664,939. For the 13 and 39 week periods
ended November 1, 2008, the Company recognized gains of
$20,522 and $12,413, respectively, in selling, general and
administrative expenses related to the trading of derivative
instruments.
The Companys carrying value of financial instruments
approximate their fair value, except for differences with
respect to the senior notes. As of October 31, 2009, the
carrying value of the senior notes was $447,121 and the fair
value was $463,725.
|
|
5.
|
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 October 31, 2009 and
November 1, 2008. The options to purchase common stock
granted during the 39 weeks ended October 31, 2009 and
November 1, 2008 were 1,419 and 1,362, respectively, with a
weighted-average fair value estimated at $9.45 and $15.45 per
share, respectively, using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
Volatility
|
|
|
47.9
|
%
|
|
|
38.2
|
%
|
Risk-free interest rate
|
|
|
1.5
|
%
|
|
|
2.4
|
%
|
Expected life (years)
|
|
|
3.5
|
|
|
|
3.5
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
10
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In the 13 weeks ended October 31, 2009 and
November 1, 2008, the Company included compensation expense
relating to stock option grants of $3,030 and $3,916,
respectively, in selling, general and administrative expenses in
the accompanying condensed consolidated statements of
operations. In the 39 weeks ended October 31, 2009 and
November 1, 2008, the Company included compensation expense
relating to stock option grants of $8,472 and $12,733,
respectively, in selling, general and administrative expenses.
As of October 31, 2009, the unrecognized compensation
expense related to the unvested portion of our stock options was
$16,362, which is expected to be recognized over a weighted
average period of 1.8 years. The total intrinsic values of
options exercised during the 13 weeks ended October 31,
2009 and November 1, 2008 were $648 and $3,236,
respectively. The total intrinsic values of options exercised
during the 39 weeks ended October 31, 2009 and
November 1, 2008 were $3,375 and $86,981, respectively.
During the 13 weeks ended October 31, 2009 and
November 1, 2008, the Company granted 43 shares and
67 shares, respectively, of restricted stock which had a
fair market value of $23.43 and $43.24 per share, respectively.
The restricted shares vest in equal annual installments over
three years. During the 39 weeks ended October 31,
2009 and November 1, 2008, the Company granted
614 shares and 602 shares, respectively, of restricted
stock which had a weighted-average fair market value of $25.84
and $49.20 per share, respectively. The restricted shares vest
in equal annual installments over three years. During the
13 weeks ended October 31, 2009 and November 1,
2008, the Company included compensation expense relating to the
restricted share grants in the amount of $4,946 and $4,449,
respectively, in selling, general and administrative expenses in
the accompanying condensed consolidated statements of
operations. During the 39 weeks ended October 31, 2009
and November 1, 2008, the Company included compensation
expense relating to the restricted share grants in the amount of
$14,754 and $15,700, respectively, in selling, general and
administrative expenses. As of October 31, 2009, there was
$24,555 of unrecognized compensation expense related to
nonvested restricted stock awards that is expected to be
recognized over a weighted average period of 1.8 years.
|
|
6.
|
Computation
of Net Earnings per Common Share
|
The Company has Class A common stock outstanding. A
reconciliation of shares used in calculating basic and diluted
net earnings per common share follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands, except per share data)
|
|
|
Net earnings
|
|
$
|
52,225
|
|
|
$
|
46,669
|
|
|
$
|
161,343
|
|
|
$
|
165,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
164,702
|
|
|
|
163,736
|
|
|
|
164,604
|
|
|
|
162,983
|
|
Dilutive effect of options and restricted shares on common stock
|
|
|
3,411
|
|
|
|
4,259
|
|
|
|
3,377
|
|
|
|
4,830
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares and dilutive potential common shares
|
|
|
168,113
|
|
|
|
167,995
|
|
|
|
167,981
|
|
|
|
167,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.32
|
|
|
$
|
0.29
|
|
|
$
|
0.98
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.31
|
|
|
$
|
0.28
|
|
|
$
|
0.96
|
|
|
$
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 October 31, 2009
|
|
|
3,641
|
|
|
$
|
26.02 - 49.95
|
|
|
|
2010 - 2019
|
|
13 Weeks Ended November 1, 2008
|
|
|
1,342
|
|
|
$
|
49.95
|
|
|
|
2010 - 2018
|
|
In October 2005, 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 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 extension of the Revolver
to 2012 reduces our exposure to the current tightening in the
credit markets.
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
October 31, 2009, 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.
During the 39 weeks ended October 31, 2009, the
Company borrowed and repaid $115,000 under the Revolver. As of
October 31, 2009, there were no borrowings outstanding
under the Revolver and letters of credit outstanding totaled
$8,546.
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
October 31, 2009, there were no cash overdrafts outstanding
under the Line of Credit and bank guarantees outstanding totaled
$5,899.
In September 2005, the Company, along with GameStop, Inc. as
co-issuer (together with the Company, the Issuers),
completed the offering of $650,000 aggregate principal amount of
Senior Notes due 2012 (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 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 method. As of
October 31, 2009, the unamortized original issue discount
was $2,879. The Issuers pay interest on the Notes
12
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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 October 31, 2009, 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 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 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.
As of November 1, 2008 and October 31, 2009, the only
long-term debt outstanding was the Notes.
Between May 2006 and August 2007, the Company repurchased
$70,000 of the Notes under previously announced buybacks
authorized by its Board of Directors. All of the authorized
amounts were repurchased and the Notes were delivered to the
Trustee for cancellation.
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 the Notes. The timing and amount of the
repurchases was to be determined by the Companys
management based on their evaluation of market conditions and
other factors. In addition, the repurchases may have been
suspended or discontinued at any time. As of November 1,
2008, the Company had repurchased $30,000 of the Notes pursuant
to this authorization. The associated loss on retirement of debt
was $2,331, which consisted of the premium paid to retire the
Notes and the write-off of the deferred financing fees and the
original issue discount on the Notes. The Company did not
repurchase any other Notes during fiscal 2008. In the
39 weeks ended October 31, 2009, the Company
repurchased $100,000 of the Notes pursuant to this
authorization. The associated loss on retirement of debt was
$5,323, which consisted of the premium paid to retire the Notes
and the write-off of the deferred financing fees and the
original issue discount on the Notes. All Notes repurchased in
fiscal 2008 and fiscal 2009 were delivered to the Trustee for
cancellation and no additional buybacks have been authorized. As
of October 31, 2009, there were $450,000 of outstanding
Notes.
|
|
8.
|
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
Net earnings
|
|
$
|
52,225
|
|
|
$
|
46,669
|
|
|
$
|
161,343
|
|
|
$
|
165,957
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
34,223
|
|
|
|
(57,254
|
)
|
|
|
151,370
|
|
|
|
(55,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
86,448
|
|
|
$
|
(10,585
|
)
|
|
$
|
312,713
|
|
|
$
|
110,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company and its subsidiaries file income tax returns in the
U.S. federal jurisdiction and various states and foreign
jurisdictions. The Company is currently under examination by the
Internal Revenue Service for the Companys U.S. income
tax returns for the fiscal years ended February 3, 2007 and
February 2, 2008. The Company does not expect any material
adjustments to its condensed consolidated financial statements
as a result of these audits.
Our effective tax rates for the 13 weeks ended
October 31, 2009 and November 1, 2008 include $251 of
net tax benefit and $1,317 of net tax expense, respectively,
related to amounts recorded for changes in our uncertain tax
positions, including interest and penalties. Our effective tax
rates for the 39 weeks ended October 31, 2009 and
November 1, 2008 include $6,149 and $1,811, respectively,
of net tax expense related to amounts recorded for changes in
our uncertain tax positions, including interest and penalties.
The components of the net change in uncertain tax positions were
individually insignificant.
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 settlements of ongoing audits
and statutes of limitations expiring. 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
October 31, 2009 and November 1, 2008 are based upon
managements estimate of the Companys annualized
effective tax rate.
|
|
10.
|
Certain
Relationships and Related Transactions
|
The Company operates departments within eight bookstores
operated by Barnes & Noble, Inc.
(Barnes & Noble), a related party 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. The Company 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
October 31, 2009 and November 1, 2008, these charges
amounted to $227 and $262, respectively. During the
39 weeks ended October 31, 2009 and November 1,
2008, these charges amounted to $688 and $846, 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 $40 and $70 for the
13 weeks ended October 31, 2009 and November 1,
2008, respectively, and $160 and $213 for the 39 weeks
ended October 31, 2009 and November 1, 2008,
respectively.
Until June 2005, the Company participated in Barnes &
Nobles workers compensation, property and general
liability insurance programs. The costs incurred by
Barnes & Noble under these programs were allocated to
the Company based upon total payroll expense, property and
equipment, and insurance claim history of the Company. 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 October 31, 2009 and November 1,
2008, these charges amounted to $25 and $16, respectively.
During the 39 weeks ended October 31, 2009 and
November 1, 2008, these charges amounted to $130 and $120,
respectively.
14
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11.
|
Commitments
and 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 named an expert, a psychologist who
testified at the criminal trial on behalf of the criminal
defendant, who plaintiffs indicated would testify 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 was argued on December 12, 2008.
On July 30, 2009, the trial court entered its Order
granting summary judgment for all defendants, dismissing the
case with prejudice on the grounds that plaintiffs
experts testimony did not satisfy the Frye standard for
expert admissibility. Subsequent to the entry of the Order, the
plaintiffs filed a notice of appeal.
The Company does not believe there is sufficient information to
estimate the amount of the possible loss, if any, resulting from
the lawsuit if the plaintiffs appeal is successful.
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, results of operations or liquidity.
|
|
12.
|
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
|
(Unaudited)
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
321.4
|
|
|
|
17.5
|
%
|
|
$
|
328.4
|
|
|
|
19.3
|
%
|
|
$
|
1,018.6
|
|
|
|
18.3
|
%
|
|
$
|
1,047.1
|
|
|
|
19.7
|
%
|
New video game software
|
|
|
769.4
|
|
|
|
41.9
|
%
|
|
|
703.3
|
|
|
|
41.5
|
%
|
|
|
2,169.7
|
|
|
|
39.1
|
%
|
|
|
2,201.1
|
|
|
|
41.4
|
%
|
Used video game products
|
|
|
507.7
|
|
|
|
27.7
|
%
|
|
|
425.1
|
|
|
|
25.1
|
%
|
|
|
1,617.0
|
|
|
|
29.1
|
%
|
|
|
1,312.4
|
|
|
|
24.7
|
%
|
Other
|
|
|
236.2
|
|
|
|
12.9
|
%
|
|
|
238.9
|
|
|
|
14.1
|
%
|
|
|
748.7
|
|
|
|
13.5
|
%
|
|
|
753.2
|
|
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,834.7
|
|
|
|
100.0
|
%
|
|
$
|
1,695.7
|
|
|
|
100.0
|
%
|
|
$
|
5,554.0
|
|
|
|
100.0
|
%
|
|
$
|
5,313.8
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products include PC entertainment and other software,
accessories and magazines.
15
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
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
|
|
$
|
26.8
|
|
|
|
8.3
|
%
|
|
$
|
25.4
|
|
|
|
7.7
|
%
|
|
$
|
72.6
|
|
|
|
7.1
|
%
|
|
$
|
68.4
|
|
|
|
6.5
|
%
|
New video game software
|
|
|
173.8
|
|
|
|
22.6
|
%
|
|
|
158.5
|
|
|
|
22.5
|
%
|
|
|
472.8
|
|
|
|
21.8
|
%
|
|
|
460.4
|
|
|
|
20.9
|
%
|
Used video game products
|
|
|
240.0
|
|
|
|
47.3
|
%
|
|
|
204.8
|
|
|
|
48.2
|
%
|
|
|
760.5
|
|
|
|
47.0
|
%
|
|
|
643.0
|
|
|
|
49.0
|
%
|
Other
|
|
|
82.5
|
|
|
|
34.9
|
%
|
|
|
84.7
|
|
|
|
35.5
|
%
|
|
|
254.7
|
|
|
|
34.0
|
%
|
|
|
259.2
|
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
523.1
|
|
|
|
28.5
|
%
|
|
$
|
473.4
|
|
|
|
27.9
|
%
|
|
$
|
1,560.6
|
|
|
|
28.1
|
%
|
|
$
|
1,431.0
|
|
|
|
26.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, Guam and Puerto Rico, the electronic
commerce Web site www.gamestop.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 13 European countries.
The fiscal 2009 results of the European segment include
Micromanias results.
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 2008 and there has been no material change in
total assets by segment since January 31, 2009.
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales by operating segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,200,873
|
|
|
$
|
1,278,351
|
|
|
$
|
3,857,808
|
|
|
$
|
3,972,394
|
|
Canada
|
|
|
115,399
|
|
|
|
116,125
|
|
|
|
303,266
|
|
|
|
359,753
|
|
Australia
|
|
|
114,190
|
|
|
|
97,906
|
|
|
|
328,707
|
|
|
|
349,314
|
|
Europe
|
|
|
404,265
|
|
|
|
203,364
|
|
|
|
1,064,203
|
|
|
|
632,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,834,727
|
|
|
$
|
1,695,746
|
|
|
$
|
5,553,984
|
|
|
$
|
5,313,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating earnings excluding merger-related expenses
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
69,014
|
|
|
$
|
86,260
|
|
|
$
|
245,327
|
|
|
$
|
261,428
|
|
Canada
|
|
|
7,801
|
|
|
|
7,377
|
|
|
|
16,004
|
|
|
|
18,849
|
|
Australia
|
|
|
6,629
|
|
|
|
6,898
|
|
|
|
21,056
|
|
|
|
28,445
|
|
Europe
|
|
|
6,825
|
|
|
|
1,405
|
|
|
|
7,292
|
|
|
|
3,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
90,269
|
|
|
$
|
101,940
|
|
|
$
|
289,679
|
|
|
$
|
311,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
14.
|
Supplemental
Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
39 Weeks Ended
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
43,793
|
|
|
$
|
43,892
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
119,886
|
|
|
$
|
143,877
|
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
Consolidating
Financial Statements
|
As described in Note 7, on September 28, 2005, the
Company, along with GameStop, Inc. as co-issuer, completed the
offering of the Notes. The direct and indirect
U.S. wholly-owned subsidiaries of the Company, excluding
GameStop, Inc., as co-issuer, have guaranteed the Notes on a
senior unsecured basis with unconditional guarantees.
The following condensed consolidating financial statements
present the financial position of the Companys guarantor
and non-guarantor subsidiaries as of October 31, 2009,
November 1, 2008 and January 31, 2009 and results of
operations for the 13 and 39 weeks ended October 31,
2009 and November 1, 2008 and cash flows for the
39 weeks ended October 31, 2009 and November 1,
2008.
17
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
|
October 31,
|
|
|
|
2009
|
|
|
2009
|
|
|
Eliminations
|
|
|
2009
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
151,629
|
|
|
$
|
140,398
|
|
|
$
|
|
|
|
$
|
292,027
|
|
Receivables, net
|
|
|
241,452
|
|
|
|
683,089
|
|
|
|
(871,998
|
)
|
|
|
52,543
|
|
Merchandise inventories, net
|
|
|
1,049,944
|
|
|
|
684,018
|
|
|
|
|
|
|
|
1,733,962
|
|
Deferred income taxes current
|
|
|
21,645
|
|
|
|
2,858
|
|
|
|
|
|
|
|
24,503
|
|
Prepaid taxes
|
|
|
(3,654
|
)
|
|
|
16,727
|
|
|
|
|
|
|
|
13,073
|
|
Prepaid expenses
|
|
|
39,866
|
|
|
|
21,648
|
|
|
|
|
|
|
|
61,514
|
|
Other current assets
|
|
|
1,398
|
|
|
|
15,074
|
|
|
|
|
|
|
|
16,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,502,280
|
|
|
|
1,563,812
|
|
|
|
(871,998
|
)
|
|
|
2,194,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
9,149
|
|
|
|
|
|
|
|
11,819
|
|
Buildings and leasehold improvements
|
|
|
290,335
|
|
|
|
226,157
|
|
|
|
|
|
|
|
516,492
|
|
Fixtures and equipment
|
|
|
548,581
|
|
|
|
144,079
|
|
|
|
|
|
|
|
692,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
841,586
|
|
|
|
379,385
|
|
|
|
|
|
|
|
1,220,971
|
|
Less accumulated depreciation and amortization
|
|
|
472,216
|
|
|
|
157,060
|
|
|
|
|
|
|
|
629,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
369,370
|
|
|
|
222,325
|
|
|
|
|
|
|
|
591,695
|
|
Investment
|
|
|
2,032,792
|
|
|
|
|
|
|
|
(2,032,792
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,096,622
|
|
|
|
835,050
|
|
|
|
|
|
|
|
1,931,672
|
|
Other intangible assets
|
|
|
4,345
|
|
|
|
275,222
|
|
|
|
|
|
|
|
279,567
|
|
Other noncurrent assets
|
|
|
10,058
|
|
|
|
28,922
|
|
|
|
|
|
|
|
38,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent assets
|
|
|
3,513,187
|
|
|
|
1,361,519
|
|
|
|
(2,032,792
|
)
|
|
|
2,841,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,015,467
|
|
|
$
|
2,925,331
|
|
|
$
|
(2,904,790
|
)
|
|
$
|
5,036,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
868,770
|
|
|
$
|
459,271
|
|
|
$
|
|
|
|
$
|
1,328,041
|
|
Accrued liabilities
|
|
|
1,004,792
|
|
|
|
377,502
|
|
|
|
(871,998
|
)
|
|
|
510,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,873,562
|
|
|
|
836,773
|
|
|
|
(871,998
|
)
|
|
|
1,838,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
447,121
|
|
|
|
|
|
|
|
|
|
|
|
447,121
|
|
Other long-term liabilities
|
|
|
55,361
|
|
|
|
55,766
|
|
|
|
|
|
|
|
111,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
502,482
|
|
|
|
55,766
|
|
|
|
|
|
|
|
558,248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,376,044
|
|
|
|
892,539
|
|
|
|
(871,998
|
)
|
|
|
2,396,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 164,752 shares issued and
outstanding
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
165
|
|
Additional
paid-in-capital
|
|
|
1,334,481
|
|
|
|
1,757,782
|
|
|
|
(1,757,782
|
)
|
|
|
1,334,481
|
|
Accumulated other comprehensive income
|
|
|
122,944
|
|
|
|
64,615
|
|
|
|
(64,615
|
)
|
|
|
122,944
|
|
Retained earnings
|
|
|
1,181,833
|
|
|
|
210,395
|
|
|
|
(210,395
|
)
|
|
|
1,181,833
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,639,423
|
|
|
|
2,032,792
|
|
|
|
(2,032,792
|
)
|
|
|
2,639,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
5,015,467
|
|
|
$
|
2,925,331
|
|
|
$
|
(2,904,790
|
)
|
|
$
|
5,036,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
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 taxes
|
|
|
72,885
|
|
|
|
(4,663
|
)
|
|
|
|
|
|
|
68,222
|
|
Prepaid expenses
|
|
|
43,132
|
|
|
|
13,627
|
|
|
|
|
|
|
|
56,759
|
|
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
|
|
Other intangible assets
|
|
|
9,370
|
|
|
|
4,018
|
|
|
|
|
|
|
|
13,388
|
|
Deferred taxes
|
|
|
7,378
|
|
|
|
21,303
|
|
|
|
|
|
|
|
28,681
|
|
Other noncurrent assets
|
|
|
12,020
|
|
|
|
9,818
|
|
|
|
|
|
|
|
21,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
January 31,
|
|
|
January 31,
|
|
|
|
|
|
January 31,
|
|
|
|
2009
|
|
|
2009
|
|
|
Eliminations
|
|
|
2009
|
|
|
|
(Amounts in thousands, except per share amounts)
|
|
|
ASSETS:
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
373,178
|
|
|
$
|
204,963
|
|
|
$
|
|
|
|
$
|
578,141
|
|
Receivables, net
|
|
|
195,677
|
|
|
|
678,203
|
|
|
|
(807,899
|
)
|
|
|
65,981
|
|
Merchandise inventories, net
|
|
|
637,257
|
|
|
|
438,535
|
|
|
|
|
|
|
|
1,075,792
|
|
Deferred income taxes current
|
|
|
21,088
|
|
|
|
2,527
|
|
|
|
|
|
|
|
23,615
|
|
Prepaid expenses
|
|
|
40,957
|
|
|
|
18,144
|
|
|
|
|
|
|
|
59,101
|
|
Other current assets
|
|
|
6,262
|
|
|
|
9,149
|
|
|
|
|
|
|
|
15,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,274,419
|
|
|
|
1,351,521
|
|
|
|
(807,899
|
)
|
|
|
1,818,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
|
2,670
|
|
|
|
7,727
|
|
|
|
|
|
|
|
10,397
|
|
Buildings and leasehold improvements
|
|
|
281,481
|
|
|
|
173,170
|
|
|
|
|
|
|
|
454,651
|
|
Fixtures and equipment
|
|
|
509,585
|
|
|
|
110,260
|
|
|
|
|
|
|
|
619,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
793,736
|
|
|
|
291,157
|
|
|
|
|
|
|
|
1,084,893
|
|
Less accumulated depreciation and amortization
|
|
|
436,068
|
|
|
|
99,571
|
|
|
|
|
|
|
|
535,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment
|
|
|
357,668
|
|
|
|
191,586
|
|
|
|
|
|
|
|
549,254
|
|
Investment
|
|
|
1,870,083
|
|
|
|
|
|
|
|
(1,870,083
|
)
|
|
|
|
|
Goodwill, net
|
|
|
1,096,622
|
|
|
|
765,485
|
|
|
|
|
|
|
|
1,862,107
|
|
Other intangible assets
|
|
|
|
|
|
|
247,790
|
|
|
|
|
|
|
|
247,790
|
|
Other noncurrent assets
|
|
|
5,621
|
|
|
|
29,777
|
|
|
|
|
|
|
|
35,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent assets
|
|
|
3,329,994
|
|
|
|
1,234,638
|
|
|
|
(1,870,083
|
)
|
|
|
2,694,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
4,604,413
|
|
|
$
|
2,586,159
|
|
|
$
|
(2,677,982
|
)
|
|
$
|
4,512,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY:
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
736,805
|
|
|
$
|
311,158
|
|
|
$
|
|
|
|
$
|
1,047,963
|
|
Accrued liabilities
|
|
|
985,240
|
|
|
|
320,912
|
|
|
|
(807,899
|
)
|
|
|
498,253
|
|
Taxes payable
|
|
|
2,971
|
|
|
|
13,524
|
|
|
|
|
|
|
|
16,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,725,016
|
|
|
|
645,594
|
|
|
|
(807,899
|
)
|
|
|
1,562,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior notes payable, long-term portion, net
|
|
|
545,712
|
|
|
|
|
|
|
|
|
|
|
|
545,712
|
|
Other long-term liabilities
|
|
|
34,004
|
|
|
|
70,482
|
|
|
|
|
|
|
|
104,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
579,716
|
|
|
|
70,482
|
|
|
|
|
|
|
|
650,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
2,304,732
|
|
|
|
716,076
|
|
|
|
(807,899
|
)
|
|
|
2,212,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock authorized 5,000 shares; no
shares issued or outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A common stock $.001 par value;
authorized 300,000 shares; 163,843 shares issued and
outstanding
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
164
|
|
Additional
paid-in-capital
|
|
|
1,307,453
|
|
|
|
1,699,630
|
|
|
|
(1,699,630
|
)
|
|
|
1,307,453
|
|
Accumulated other comprehensive income (loss)
|
|
|
(28,426
|
)
|
|
|
(33,800
|
)
|
|
|
33,800
|
|
|
|
(28,426
|
)
|
Retained earnings
|
|
|
1,020,490
|
|
|
|
204,253
|
|
|
|
(204,253
|
)
|
|
|
1,020,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,299,681
|
|
|
|
1,870,083
|
|
|
|
(1,870,083
|
)
|
|
|
2,299,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
4,604,413
|
|
|
$
|
2,586,159
|
|
|
$
|
(2,677,982
|
)
|
|
$
|
4,512,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
|
October 31,
|
|
For the 13 Weeks Ended October 31, 2009
|
|
2009
|
|
|
2009
|
|
|
Eliminations
|
|
|
2009
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
1,200,873
|
|
|
$
|
633,854
|
|
|
$
|
|
|
|
$
|
1,834,727
|
|
Cost of sales
|
|
|
841,623
|
|
|
|
470,020
|
|
|
|
|
|
|
|
1,311,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
359,250
|
|
|
|
163,834
|
|
|
|
|
|
|
|
523,084
|
|
Selling, general and administrative expenses
|
|
|
264,599
|
|
|
|
126,611
|
|
|
|
|
|
|
|
391,210
|
|
Depreciation and amortization
|
|
|
25,586
|
|
|
|
16,019
|
|
|
|
|
|
|
|
41,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
69,065
|
|
|
|
21,204
|
|
|
|
|
|
|
|
90,269
|
|
Interest income
|
|
|
(10,902
|
)
|
|
|
(6,274
|
)
|
|
|
16,696
|
|
|
|
(480
|
)
|
Interest expense
|
|
|
10,630
|
|
|
|
17,012
|
|
|
|
(16,696
|
)
|
|
|
10,946
|
|
Debt extinguishment expense
|
|
|
2,461
|
|
|
|
|
|
|
|
|
|
|
|
2,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
66,876
|
|
|
|
10,466
|
|
|
|
|
|
|
|
77,342
|
|
Income tax expense
|
|
|
19,425
|
|
|
|
5,692
|
|
|
|
|
|
|
|
25,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
47,451
|
|
|
$
|
4,774
|
|
|
$
|
|
|
|
$
|
52,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
GAMESTOP
CORP.
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
GameStop
Corp.
Condensed Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuers and
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-Guarantor
|
|
|
|
|
|
|
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
|
|
|
Consolidated
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
|
October 31,
|
|
For the 39 Weeks Ended October 31, 2009
|
|
2009
|
|
|
2009
|
|
|
Eliminations
|
|
|
2009
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Sales
|
|
$
|
3,857,808
|
|
|
$
|
1,696,176
|
|
|
$
|
|
|
|
$
|
5,553,984
|
|
Cost of sales
|
|
|
2,741,355
|
|
|
|
1,252,026
|
|
|
|
|
|
|
|
3,993,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
1,116,453
|
|
|
|
444,150
|
|
|
|
|
|
|
|
1,560,603
|
|
Selling, general and administrative expenses
|
|
|
795,758
|
|
|
|
356,057
|
|
|
|
|
|
|
|
1,151,815
|
|
Depreciation and amortization
|
|
|
75,337
|
|
|
|
43,772
|
|
|
|
|
|
|
|
119,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
245,358
|
|
|
|
44,321
|
|
|
|
|
|
|
|
289,679
|
|
Interest income
|
|
|
(33,108
|
)
|
|
|
(7,433
|
)
|
|
|
39,082
|
|
|
|
(1,459
|
)
|
Interest expense
|
|
|
34,111
|
|
|
|
39,852
|
|
|
|
(39,082
|
)
|
|
|
34,881
|
|
Debt extinguishment expense
|
|
|
5,323
|
|
|
|
|
|
|
|
|
|
|
|
5,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
239,032
|
|
|
|
11,902
|
|
|
|
|
|
|
|
250,934
|
|
Income tax expense
|
|
|
79,354
|
|
|
|
10,237
|
|
|
|
|
|
|
|
89,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
159,678
|
|
|
$
|
1,665
|
|
|
$
|
|
|
|
$
|
161,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
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
|
|
|
|
October 31,
|
|
|
October 31,
|
|
|
|
|
|
October 31,
|
|
For the 39 Weeks Ended October 31, 2009
|
|
2009
|
|
|
2009
|
|
|
Eliminations
|
|
|
2009
|
|
|
|
(Amounts in thousands)
|
|
|
|
(Unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
159,687
|
|
|
$
|
1,656
|
|
|
$
|
|
|
|
$
|
161,343
|
|
Adjustments to reconcile net earnings to net cash flows provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of
sales)
|
|
|
76,483
|
|
|
|
43,832
|
|
|
|
|
|
|
|
120,315
|
|
Amortization and retirement of deferred financing fees and issue
discounts
|
|
|
4,176
|
|
|
|
|
|
|
|
|
|
|
|
4,176
|
|
Stock-based compensation expense
|
|
|
23,226
|
|
|
|
|
|
|
|
|
|
|
|
23,226
|
|
Deferred income taxes
|
|
|
(557
|
)
|
|
|
(4,768
|
)
|
|
|
|
|
|
|
(5,325
|
)
|
Excess tax expense realized from exercise of stock-based awards
|
|
|
453
|
|
|
|
|
|
|
|
|
|
|
|
453
|
|
Loss on disposal of property and equipment
|
|
|
1,936
|
|
|
|
2,777
|
|
|
|
|
|
|
|
4,713
|
|
Changes in other long-term liabilities
|
|
|
7,750
|
|
|
|
(1,226
|
)
|
|
|
|
|
|
|
6,524
|
|
Change in the value of foreign exchange contracts
|
|
|
2,336
|
|
|
|
499
|
|
|
|
|
|
|
|
2,835
|
|
Changes in operating assets and liabilities, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
12,947
|
|
|
|
4,065
|
|
|
|
|
|
|
|
17,012
|
|
Merchandise inventories
|
|
|
(412,687
|
)
|
|
|
(165,601
|
)
|
|
|
|
|
|
|
(578,288
|
)
|
Prepaid expenses and other current assets
|
|
|
1,092
|
|
|
|
(614
|
)
|
|
|
|
|
|
|
478
|
|
Prepaid income taxes and accrued income taxes payable
|
|
|
278
|
|
|
|
(30,437
|
)
|
|
|
|
|
|
|
(30,159
|
)
|
Accounts payable and accrued liabilities
|
|
|
86,775
|
|
|
|
112,073
|
|
|
|
|
|
|
|
198,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(36,105
|
)
|
|
|
(37,744
|
)
|
|
|
|
|
|
|
(73,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(88,388
|
)
|
|
|
(33,734
|
)
|
|
|
|
|
|
|
(122,122
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
(5,208
|
)
|
|
|
|
|
|
|
(5,208
|
)
|
Other
|
|
|
(754
|
)
|
|
|
(13,069
|
)
|
|
|
|
|
|
|
(13,823
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(89,142
|
)
|
|
|
(52,011
|
)
|
|
|
|
|
|
|
(141,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of notes payable
|
|
|
(100,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(100,000
|
)
|
Borrowings from the revolver
|
|
|
115,000
|
|
|
|
|
|
|
|
|
|
|
|
115,000
|
|
Repayments of revolver borrowings
|
|
|
(115,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(115,000
|
)
|
Issuance of shares relating to stock options
|
|
|
4,208
|
|
|
|
|
|
|
|
|
|
|
|
4,208
|
|
Excess tax expense realized from exercise of stock-based awards
|
|
|
(453
|
)
|
|
|
|
|
|
|
|
|
|
|
(453
|
)
|
Other
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
(57
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(96,302
|
)
|
|
|
|
|
|
|
|
|
|
|
(96,302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate effect on cash and cash equivalents
|
|
|
|
|
|
|
25,190
|
|
|
|
|
|
|
|
25,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(221,549
|
)
|
|
|
(64,565
|
)
|
|
|
|
|
|
|
(286,114
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
373,178
|
|
|
|
204,963
|
|
|
|
|
|
|
|
578,141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
151,629
|
|
|
$
|
140,398
|
|
|
$
|
|
|
|
$
|
292,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23
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 and issue
discounts
|
|
|
2,814
|
|
|
|
|
|
|
|
|
|
|
|
2,814
|
|
Stock-based compensation expense
|
|
|
28,433
|
|
|
|
|
|
|
|
|
|
|
|
28,433
|
|
Deferred income 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
|
|
Changes in other long-term liabilities
|
|
|
8,451
|
|
|
|
2,161
|
|
|
|
|
|
|
|
10,612
|
|
Change in the value of foreign exchange contracts
|
|
|
(22,239
|
)
|
|
|
212
|
|
|
|
|
|
|
|
(22,027
|
)
|
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
|
|
|
(9,017
|
)
|
|
|
(5,347
|
)
|
|
|
|
|
|
|
(14,364
|
)
|
Prepaid income taxes and accrued income taxes payable
|
|
|
(29,659
|
)
|
|
|
(9,700
|
)
|
|
|
|
|
|
|
(39,359
|
)
|
Accounts payable and accrued liabilities
|
|
|
(68,353
|
)
|
|
|
348,744
|
|
|
|
|
|
|
|
280,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) operating activities
|
|
|
(385,153
|
)
|
|
|
181,568
|
|
|
|
|
|
|
|
(203,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
)
|
Other
|
|
|
1,790
|
|
|
|
639
|
|
|
|
|
|
|
|
2,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(83,565
|
)
|
|
|
(97,564
|
)
|
|
|
|
|
|
|
(181,129
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Other
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows provided by (used in) financing activities
|
|
|
30,857
|
|
|
|
|
|
|
|
|
|
|
|
30,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
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 January 31, 2009 filed with the
Securities and Exchange Commission (the SEC) on
April 1, 2009 (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 October 31, 2009,
we operated 6,391 stores in the United States, Australia, Canada
and Europe, primarily under the names GameStop and EB Games. We
also operate an electronic commerce Web site under the name
www.gamestop.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 30, 2010 (fiscal 2009) and ended
January 31, 2009 (fiscal 2008) consist of
52 weeks.
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 SFMI
Micromania SAS (Micromania) for $580.4 million,
net of cash acquired in the transaction (the Micromania
acquisition). Micromania is a leading retailer of video
and computer games in France with 361 locations, 328 of which
were operating on the date of acquisition. The Companys
operating results for the 13 and 39 week periods ended
October 31, 2009 include Micromanias results, whereas
the operating results of the comparable periods of fiscal 2008
exclude Micromanias results.
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, subject to the timing of the release of new video
game titles and the impact of the overall worldwide economy.
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 2008
Annual Report on
Form 10-K.
25
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
71.5
|
|
|
|
72.1
|
|
|
|
71.9
|
|
|
|
73.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
28.5
|
|
|
|
27.9
|
|
|
|
28.1
|
|
|
|
26.9
|
|
Selling, general and administrative expenses
|
|
|
21.3
|
|
|
|
19.8
|
|
|
|
20.7
|
|
|
|
19.0
|
|
Depreciation and amortization
|
|
|
2.3
|
|
|
|
2.1
|
|
|
|
2.2
|
|
|
|
2.0
|
|
Merger-related expenses
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
4.9
|
|
|
|
5.0
|
|
|
|
5.2
|
|
|
|
5.6
|
|
Interest expense, net
|
|
|
0.6
|
|
|
|
0.5
|
|
|
|
0.6
|
|
|
|
0.5
|
|
Debt extinguishment expense
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
4.2
|
|
|
|
4.5
|
|
|
|
4.5
|
|
|
|
5.0
|
|
Income tax expense
|
|
|
1.4
|
|
|
|
1.7
|
|
|
|
1.6
|
|
|
|
1.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
2.8
|
%
|
|
|
2.8
|
%
|
|
|
2.9
|
%
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company continually reviews the financial performance of its
stores and seeks to increase profitability by relocating or
closing selected stores. During the 39 weeks ended
October 31, 2009, the Company closed 126 stores, 28 of
which were in the third quarter. The store closings included
many locations in which we operated a GameStop store and a
former EB Games store in very close proximity and the
determination was made to close one of the locations upon the
expiration of the store lease.
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 October 31, 2009 and November 1,
2008, these purchasing, receiving and distribution costs
amounted to $15.6 million and $12.6 million,
respectively. For the 39 weeks ended October 31, 2009
and November 1, 2008, these purchasing, receiving and
distribution costs amounted to $45.2 million and
$38.5 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 October 31, 2009 and November 1,
2008, these processing fees amounted to $12.1 million and
$12.5 million, respectively. For the 39 weeks ended
October 31, 2009 and November 1, 2008, these
processing fees amounted to $36.7 million and
$39.1 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 0.2% of sales or less for all periods presented
herein.
26
The following table sets forth sales (in millions) by
significant product category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
|
|
Percent
|
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
Sales
|
|
|
of Total
|
|
|
|
(Unaudited)
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
321.4
|
|
|
|
17.5
|
%
|
|
$
|
328.4
|
|
|
|
19.3
|
%
|
|
$
|
1,018.6
|
|
|
|
18.3
|
%
|
|
$
|
1,047.1
|
|
|
|
19.7
|
%
|
New video game software
|
|
|
769.4
|
|
|
|
41.9
|
%
|
|
|
703.3
|
|
|
|
41.5
|
%
|
|
|
2,169.7
|
|
|
|
39.1
|
%
|
|
|
2,201.1
|
|
|
|
41.4
|
%
|
Used video game products
|
|
|
507.7
|
|
|
|
27.7
|
%
|
|
|
425.1
|
|
|
|
25.1
|
%
|
|
|
1,617.0
|
|
|
|
29.1
|
%
|
|
|
1,312.4
|
|
|
|
24.7
|
%
|
Other
|
|
|
236.2
|
|
|
|
12.9
|
%
|
|
|
238.9
|
|
|
|
14.1
|
%
|
|
|
748.7
|
|
|
|
13.5
|
%
|
|
|
753.2
|
|
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,834.7
|
|
|
|
100.0
|
%
|
|
$
|
1,695.7
|
|
|
|
100.0
|
%
|
|
$
|
5,554.0
|
|
|
|
100.0
|
%
|
|
$
|
5,313.8
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other products include PC entertainment and other software,
accessories and magazines.
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
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
|
|
$
|
26.8
|
|
|
|
8.3
|
%
|
|
$
|
25.4
|
|
|
|
7.7
|
%
|
|
$
|
72.6
|
|
|
|
7.1
|
%
|
|
$
|
68.4
|
|
|
|
6.5
|
%
|
New video game software
|
|
|
173.8
|
|
|
|
22.6
|
%
|
|
|
158.5
|
|
|
|
22.5
|
%
|
|
|
472.8
|
|
|
|
21.8
|
%
|
|
|
460.4
|
|
|
|
20.9
|
%
|
Used video game products
|
|
|
240.0
|
|
|
|
47.3
|
%
|
|
|
204.8
|
|
|
|
48.2
|
%
|
|
|
760.5
|
|
|
|
47.0
|
%
|
|
|
643.0
|
|
|
|
49.0
|
%
|
Other
|
|
|
82.5
|
|
|
|
34.9
|
%
|
|
|
84.7
|
|
|
|
35.5
|
%
|
|
|
254.7
|
|
|
|
34.0
|
%
|
|
|
259.2
|
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
523.1
|
|
|
|
28.5
|
%
|
|
$
|
473.4
|
|
|
|
27.9
|
%
|
|
$
|
1,560.6
|
|
|
|
28.1
|
%
|
|
$
|
1,431.0
|
|
|
|
26.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks
ended October 31, 2009 compared with the 13 weeks
ended November 1, 2008
Sales increased by $139.0 million, or 8.2%, from
$1,695.7 million in the 13 weeks ended
November 1, 2008 to $1,834.7 million in the
13 weeks ended October 31, 2009. The increase in sales
was primarily attributable to the addition of non-comparable
store sales from the 616 stores opened since August 2, 2008
combined with the additional sales from the Micromania
acquisition for an approximate total of $250.7 million and
increases related to changes in foreign exchange rates of
$18.3 million. These increases were partially offset by the
comparable store sales decrease of 7.8% for the third quarter of
fiscal 2009. 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 decrease in
comparable store sales was due primarily to a slow-down in
hardware unit sell-through and the decrease in average selling
prices of hardware units, as well as a decrease in consumer
traffic as a result of the macroeconomic weakness during the
third quarter of fiscal 2009.
New video game hardware sales decreased $7.0 million, or
2.1%, from $328.4 million in the 13 weeks ended
November 1, 2008 to $321.4 million in the
13 weeks ended October 31, 2009, primarily due to the
factors discussed above, offset by increases related to new and
acquired stores. New video game software sales increased
$66.1 million, or 9.4%, from $703.3 million in the
13 weeks ended November 1, 2008 to $769.4 million
in the 13 weeks ended October 31, 2009, primarily due
to increases related to new and acquired stores. Used video game
product sales increased $82.6 million, or 19.4%, from
$425.1 million in the 13 weeks ended November 1,
2008 to $507.7 million in the 13 weeks ended
October 31, 2009. Used video game product sales increased
due to an increase in store count and an increase in the
availability of hardware and software associated with the
current generation
27
hardware platforms as those platforms age and expand. Sales of
other product categories declined by 1.1%, or $2.7 million,
from the 13 weeks ended November 1, 2008 to the
13 weeks ended October 31, 2009.
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
October 31, 2009 compared to the 13 weeks ended
November 1, 2008. This was primarily due to a slow-down in
hardware unit sell-through, as well as increased used video game
product sales as this business continues to expand, particularly
internationally.
Cost of sales increased by $89.3 million, or 7.3%, from
$1,222.3 million in the 13 weeks ended
November 1, 2008 to $1,311.6 million in the
13 weeks ended October 31, 2009 as a result of the
increase in sales and the changes in gross profit discussed
below.
Gross profit increased by $49.7 million, or 10.5%, from
$473.4 million in the 13 weeks ended November 1,
2008 to $523.1 million in the 13 weeks ended
October 31, 2009. Gross profit as a percentage of sales
increased from 27.9% in the 13 weeks ended November 1,
2008 to 28.5% in the 13 weeks ended October 31, 2009.
The gross profit percentage increase was caused primarily by the
increase in higher margin used video game product sales and new
video game software as a percentage of total sales in the third
quarter of fiscal 2009 and the decrease in sales from new video
game hardware as a percentage of total sales. Gross profit as a
percentage of sales on new video game hardware increased from
7.7% in the prior year quarter to 8.3% of sales this quarter,
primarily due to an increase in sales of product replacement
plans during the third quarter of fiscal 2009. Gross profit as a
percentage of sales on new video game software had no
significant change from the same period in the prior fiscal
year. Gross profit as a percentage of sales on used video game
products decreased from 48.2% in the 13 weeks ended
November 1, 2008 to 47.3% in the 13 weeks ended
October 31, 2009, primarily due to increased sales of used
products in the international segments as a percentage of total
sales. International used product sales have a lower margin due
to the immaturity of the used business model in those segments.
Selling, general and administrative expenses increased by
$55.5 million, or 16.5%, from $335.7 million in the
13 weeks ended November 1, 2008 to $391.2 million
in the 13 weeks ended October 31, 2009. 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. Selling,
general and administrative expenses as a percent of sales
increased from 19.8% in the 13 weeks ended November 1,
2008 to 21.3% in the 13 weeks ended October 31, 2009.
The increase in the selling, general and administrative expenses
as a percentage of sales was primarily due to deleveraging of
fixed costs as a result of the decrease in comparable store
sales in the third quarter of fiscal 2009. Included in selling,
general and administrative expenses is $8.0 million and
$8.4 million in stock-based compensation expense for the
13 weeks ended October 31, 2009 and November 1,
2008, respectively.
Depreciation and amortization expense increased
$5.8 million from $35.8 million in the 13 weeks
ended November 1, 2008 to $41.6 million in the
13 weeks ended October 31, 2009. This increase was
primarily due to the acquisition of Micromania, capital
expenditures associated with the opening of 86 new stores during
the third quarter of fiscal 2009 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 Micromania acquisition 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 resulting from the investment of excess cash
balances decreased from $3.7 million in the 13 weeks
ended November 1, 2008 to $0.5 million in the
13 weeks ended October 31, 2009 due primarily to lower
invested cash balances and lower interest rates. Interest
expense decreased from $12.5 million in the 13 weeks
ended November 1, 2008 to $10.9 million in the
13 weeks ended October 31, 2009, primarily due to the
retirement of $100.0 million of the Companys senior
notes since November 1, 2008. Debt extinguishment expense
of $2.5 million was recognized in the 13 weeks ended
October 31, 2009 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 1,
2008 and the 13 weeks ended October 31, 2009 was based
upon managements estimate of the Companys annualized
effective tax rate. Income tax expense was $29.9 million,
or 39.0%, of earnings before income tax expense for the
13 weeks ended November 1, 2008
28
compared to $25.1 million, or 32.5% for the 13 weeks
ended October 31, 2009. The decrease in the effective
income tax rate in the 13 weeks ended October 31, 2009
was due to variability in the accounting related to the
Companys uncertain tax positions.
The factors described above led to an increase in operating
earnings of $5.0 million, or 5.9%, from $85.3 million
in the 13 weeks ended November 1, 2008 to
$90.3 million in the 13 weeks ended October 31,
2009, and an increase in net earnings of $5.5 million, or
11.8%, from $46.7 million in the 13 weeks ended
November 1, 2008 to $52.2 million in the 13 weeks
ended October 31, 2009.
39 weeks
ended October 31, 2009 compared with the 39 weeks
ended November 1, 2008
Sales increased by $240.2 million, or 4.5%, from
$5,313.8 million in the 39 weeks ended
November 1, 2008 to $5,554.0 million in the
39 weeks ended October 31, 2009. The increase in sales
was attributable to the addition of non-comparable store sales
from the 951 stores opened since February 2, 2008, combined
with additional sales from the Micromania acquisition for an
approximate total of $736.2 million, offset by a decrease
in comparable store sales of 7.8% and decreases related to
changes in foreign exchange rates of $129.2 million for the
39-week period ended October 31, 2009 when compared to the
39-week period ended November 1, 2008. The decrease in
comparable store sales was due primarily to weaker new title
releases in fiscal 2009 when compared to fiscal 2008, which
included several strong video game titles, as well as weak
consumer traffic worldwide and a slow-down in hardware unit
sell-through.
New video game hardware sales decreased $28.5 million, or
2.7%, from $1,047.1 million in the 39 weeks ended
November 1, 2008 to $1,018.6 million in the
39 weeks ended October 31, 2009, primarily due to a
decrease in consumer traffic as a result of the continued
macroeconomic weakness, partially offset by the additional sales
at the new stores added since last year through growth and
acquisition. New video game software sales decreased
$31.4 million, or 1.4%, from $2,201.1 million in the
39 weeks ended November 1, 2008 to
$2,169.7 million in the 39 weeks ended
October 31, 2009, primarily due to a decrease in consumer
traffic and a lack of new video game titles released in fiscal
2009, compared to fiscal 2008, offset by sales from new and
acquired stores added since last year. Used video game product
sales increased $304.6 million, or 23.2%, from
$1,312.4 million in the 39 weeks ended
November 1, 2008 to $1,617.0 million in the
39 weeks ended October 31, 2009. Used video game
product sales increased due to the additional sales at new
stores added since last year through growth and acquisition, as
well as an increase in the availability of hardware and software
associated with the current generation hardware platforms as
those platforms age and expand. Sales of other product
categories declined slightly by 0.6%, or $4.5 million, from
the 39 weeks ended November 1, 2008 to the
39 weeks ended October 31, 2009.
As a percentage of sales, used video game products increased and
new video game hardware, new video game software and other
product sales decreased in the 39 weeks ended
October 31, 2009 compared to the 39 weeks ended
November 1, 2008. This was primarily due to a decrease in
sales of new video game software due to a lack of new software
titles released in fiscal 2009 when compared to fiscal 2008, a
slow-down in hardware unit sell-through, as well as an increase
in sales of used video game products as this business continues
to expand, particularly internationally.
Cost of sales increased by $110.6 million, or 2.8%, from
$3,882.8 million in the 39 weeks ended
November 1, 2008 to $3,993.4 million in the
39 weeks ended October 31, 2009 primarily as a result
of the increase in sales and the changes in gross profit
discussed below.
Gross profit increased by $129.6 million, or 9.1%, from
$1,431.0 million in the 39 weeks ended
November 1, 2008 to $1,560.6 million in the
39 weeks ended October 31, 2009. Gross profit as a
percentage of sales increased from 26.9% in the 39 weeks
ended November 1, 2008 to 28.1% in the 39 weeks ended
October 31, 2009. The gross profit percentage increase was
caused primarily by the increase in higher margin used video
game product sales as a percentage of total sales in the
39 weeks ended October 31, 2009 when compared to the
39 weeks ended November 1, 2008. Gross profit as a
percentage of sales on new video game hardware increased from
6.5% of sales for the 39 weeks ended November 1, 2008
to 7.1% for the 39 weeks ended October 31, 2009,
primarily due to an increase in sales of product replacement
plans during fiscal 2009. Gross profit as a percentage of sales
on new video game software increased from 20.9% for the
39 weeks ended November 1, 2008 to 21.8% for the
39 weeks ended October 31, 2009, primarily due to the
mix of software sales and margin in the various countries in
which we
29
operate. Gross profit as a percentage of sales on used video
game products decreased from 49.0% for the 39 weeks ended
November 1, 2008 to 47.0% for the 39 weeks ended
October 31, 2009, primarily due to increased sales of used
products in the international segments as a percentage of total
sales. International used product sales have a lower margin due
to the immaturity of the used business model in those segments.
Gross profit as a percentage of sales on the other product sales
category decreased slightly in fiscal 2009 when compared to
fiscal 2008.
Selling, general and administrative expenses increased by
$139.7 million, or 13.8%, from $1,012.1 million in the
39 weeks ended November 1, 2008 to
$1,151.8 million in the 39 weeks ended
October 31, 2009. 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 2009. Selling, general and administrative
expenses as a percentage of sales increased from 19.0% in the
39 weeks ended November 1, 2008 to 20.7% in the
39 weeks ended October 31, 2009. The increase in
selling, general and administrative expenses as a percentage of
sales was primarily due to deleveraging of fixed costs as a
result of the decrease in comparable store sales in fiscal 2009.
Selling, general and administrative expenses include
$23.2 million and $28.4 million in stock-based
compensation expense for the 39 weeks ended
October 31, 2009 and November 1, 2008, respectively.
Depreciation and amortization expense increased
$12.2 million from $106.9 million for the
39 weeks ended November 1, 2008 to $119.1 million
in the 39 weeks ended October 31, 2009. This increase
was primarily due to the acquisition of Micromania, capital
expenditures associated with the opening of 310 new stores
during the 39 weeks ended October 31, 2009 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 resulting from the investment of excess cash
balances decreased from $10.2 million in the 39 weeks
ended November 1, 2008 to $1.5 million in the
39 weeks ended October 31, 2009, due primarily to
lower invested cash balances and lower interest rates during
fiscal 2009. Interest expense decreased from $36.7 million
in the 39 weeks ended November 1, 2008 to
$34.9 million in the 39 weeks ended October 31,
2009, primarily due to the retirement of $100.0 million of
the Companys senior notes since November 1, 2008
offset by short term borrowings on the revolver. Debt
extinguishment expense of $5.3 million and
$2.3 million was recognized in the 39 weeks ended
October 31, 2009 and November 1, 2008, 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 1,
2008 and the 39 weeks ended October 31, 2009 was based
upon managements estimate of the Companys annualized
effective tax rate. Income tax expense was $100.5 million
for the 39 weeks ended November 1, 2008 compared to
$89.6 million for the 39 weeks ended October 31,
2009.
The factors described above led to a decrease in operating
earnings of $5.6 million, or 1.9%, from $295.3 million
in the 39 weeks ended November 1, 2008 to
$289.7 million in the 39 weeks ended October 31,
2009, and a decrease in net earnings of $4.7 million, or
2.8%, from $166.0 million in the 39 weeks ended
November 1, 2008 to $161.3 million in the
39 weeks ended October 31, 2009.
30
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
|
|
|
|
October 31,
|
|
|
November 1,
|
|
|
October 31,
|
|
|
November 1,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
|
Sales by operating segment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,200.9
|
|
|
$
|
1,278.4
|
|
|
$
|
3,857.8
|
|
|
$
|
3,972.4
|
|
Canada
|
|
|
115.4
|
|
|
|
116.1
|
|
|
|
303.3
|
|
|
|
359.8
|
|
Australia
|
|
|
114.2
|
|
|
|
97.9
|
|
|
|
328.7
|
|
|
|
349.3
|
|
Europe
|
|
|
404.2
|
|
|
|
203.3
|
|
|
|
1,064.2
|
|
|
|
632.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,834.7
|
|
|
$
|
1,695.7
|
|
|
$
|
5,554.0
|
|
|
$
|
5,313.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings by operating segment excluding merger-related
expenses are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
69.0
|
|
|
$
|
86.2
|
|
|
$
|
245.3
|
|
|
$
|
261.4
|
|
Canada
|
|
|
7.8
|
|
|
|
7.4
|
|
|
|
16.0
|
|
|
|
18.9
|
|
Australia
|
|
|
6.6
|
|
|
|
6.9
|
|
|
|
21.1
|
|
|
|
28.4
|
|
Europe
|
|
|
6.9
|
|
|
|
1.4
|
|
|
|
7.3
|
|
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
90.3
|
|
|
$
|
101.9
|
|
|
$
|
289.7
|
|
|
$
|
311.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
States
Segment results for the United States include retail operations
in 50 states, the District of Columbia, Guam and Puerto
Rico, the electronic commerce Web site www.gamestop.com
and Game Informer magazine. As of October 31, 2009, the
United States segment included 4,403 GameStop stores, compared
to 4,264 stores on November 1, 2008. Sales for the 13 and
39 weeks ended October 31, 2009 decreased 6.1% and
2.9%, respectively, compared to the 13 and 39 weeks ended
November 1, 2008 as a result of decreased sales at existing
stores offset by the opening of 333 stores since August 2,
2008 and 487 stores since February 2, 2008, including 48
and 172 stores in the 13 and 39 weeks ended
October 31, 2009, respectively. Sales at existing stores
decreased partially due to a decrease in consumer traffic as a
result of the continued macroeconomic weakness and a slow-down
in hardware unit sales, offset by an increase in used video game
product sales due to an increase in the availability of hardware
and software associated with the current generation hardware
platforms as those platforms age and expand. Segment operating
income for the 13 and 39 weeks ended October 31, 2009
decreased by 20.0% and 6.2%, respectively, compared to the 13
and 39 weeks ended November 1, 2008 due to the impact
of lower revenues and the deleveraging of selling, general and
administrative expenses for fiscal 2009.
Canada
As of October 31, 2009, the Canadian segment had 340 stores
compared to 318 stores as of November 1, 2008. Sales in the
Canadian segment in the 13 and 39 weeks ended
October 31, 2009 decreased 0.6% and 15.7%, respectively,
compared to the 13 and 39 weeks ended November 1,
2008. The decrease in sales was primarily attributable to
decreased sales at existing stores offset by the additional
sales at the 24 and 53 stores opened since August 2, 2008
and February 2, 2008, respectively. The decrease in sales
at existing stores was primarily due to weak consumer traffic
and a slow-down in hardware unit sell-through. Segment operating
income for the 13 weeks ended October 31, 2009
increased by 5.4% compared to the 13 weeks ended
November 1, 2008, primarily due to the increase in higher
margin used video game product sales as a percentage of total
sales for the 13 weeks ended October 31, 2009 when
compared to the prior year, offset by decreases in sales
discussed above and the related
31
margins. Segment operating income for the 39 weeks ended
October 31, 2009 decreased by 15.3% compared to the
39 weeks ended November 1, 2008 primarily due to
decreases in sales as discussed above, as well as the
unfavorable impact of changes in exchange rates which had the
effect of decreasing operating earnings by $1.5 million for
the 39 weeks ended October 31, 2009 when compared to
the prior year.
Australia
Segment results for Australia include retail operations in
Australia and New Zealand. As of October 31, 2009, the
Australian segment included 379 stores, compared to 337 at
November 1, 2008. Sales for the 13 weeks ended
October 31, 2009 increased by 16.6% when compared to the
13 weeks ended November 1, 2008, and decreased 5.9% in
the 39 weeks ended October 31, 2009 when compared to
the 39 weeks ended November 1, 2008. The increase in
sales for the 13 weeks ended October 31, 2009 was
primarily due to additional sales at the 65 stores opened since
August 2, 2008 and the favorable impact of changes in
exchange rates, which had the effect of increasing sales by
$10.6 million for the 13 weeks ended October 31,
2009 when compared to the prior year. The decrease in sales for
the 39 weeks ended October 31, 2009 was primarily due
to the unfavorable impact of changes in exchange rates, which
had the effect of decreasing sales by $47.4 million for the
39 weeks ended October 31, 2009 when compared to the
prior year, offset by the additional sales at the 102 stores
opened since February 2, 2008. Segment operating income in
the 13 and 39 weeks ended October 31, 2009 decreased
by 4.3% and 25.7%, respectively, when compared to the 13 and
39 weeks ended November 1, 2008. The decrease in
operating income in the 13 weeks ended October 31,
2009 was primarily due to the lower gross margin percentage as a
result of the costs of promotional programs conducted during the
quarter and higher selling, general and administrative expenses
associated with the increase in the number of stores in
operation, offset by the favorable impact of changes in foreign
currency exchange rates of $0.8 million. The decrease in
operating earnings for the 39 weeks ended October 31,
2009 was due to the decrease in sales at existing stores and the
increase in selling, general and administrative expenses
associated with the increase in the number of stores in
operation, as well as the unfavorable impact of changes in
exchange rates which had the effect of decreasing operating
earnings by $2.9 million for the 39-week period ended
October 31, 2009 when compared to the prior year.
Europe
Segment results for Europe include retail operations in 13
European countries. As of October 31, 2009, the European
segment operated 1,269 stores compared to 815 stores as of
November 1, 2008. For the 13 and 39 weeks ended
October 31, 2009, European sales increased 98.8% and 68.3%,
respectively, compared to the 13 and 39 weeks ended
November 1, 2008. The increase in sales was primarily due
to the additional sales at the 555 and 670 stores opened since
August 2, 2008 and February 2, 2008, respectively,
including 328 stores from the Micromania acquisition. Also
contributing to the increase in sales for the 13 weeks
ended October 31, 2009 was the favorable impact of changes
in exchange rates recognized in the 13 weeks ended
October 31, 2009 compared to the prior year period, which
had the effect of increasing sales by $7.0 million. The
increase in sales for the 39 weeks ended October 31,
2009 was due to the additional sales at the new and acquired
stores discussed above, offset by the unfavorable exchange rates
recognized in the 39 weeks ended October 31, 2009
compared to the prior year period, which had the effect of
decreasing sales by $58.1 million, as well as a decrease in
sales at existing stores. The decrease in sales at existing
stores was primarily driven by weak consumer traffic due to
continued macroeconomic weakness, a slow-down in hardware unit
sell-through and a lack of new video game title releases in
fiscal 2009.
The segment operating income in Europe for the 13 and
39 weeks ended October 31, 2009 increased to
$6.9 million and $7.3 million, respectively, compared
to the 13 and 39 weeks ended November 1, 2008 of
$1.4 million and $3.2 million, respectively. The
increase in operating earnings was primarily driven by the
operating results contributed by Micromania. In addition, for
the 13 and 39 weeks ended October 31, 2009, changes in
exchange rates when compared to the prior year had the effect of
increasing operating earnings by $0.7 million and
$2.4 million, 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.
32
Liquidity
and Capital Resources
Cash
Flows
During the 39 weeks ended October 31, 2009, cash used
in operations was $73.8 million, compared to cash used in
operations of $203.6 million during the 39 weeks ended
November 1, 2008. The decrease in cash used in operations
of $129.8 million from the 39 weeks ended
November 1, 2008 to the 39 weeks ended
October 31, 2009 was primarily due to a decrease in cash
used for working capital purposes of $67.0 million,
primarily driven by the decrease in inventory net of the
decrease in accounts payable and accrued liabilities. This
decrease in cash used was a result of decreased purchases in
fiscal 2009 compared to fiscal 2008, primarily due to a decrease
in hardware sales as a result of the continued macroeconomic
weakness and the lack of new titles available this year.
Inventory turnover also decreased in fiscal 2009 compared to
fiscal 2008, primarily due to the growth in the international
segments which have lower inventory turns compared to the United
States segment due to their lower overall store count and
multiple warehouse facilities. In addition, net cash flows used
in operations decreased due to an increase in cash provided by
net earnings, including the non-cash adjustments to net earnings
of $28.4 million and an increase in the operating
activities adjustment related to the excess tax benefits
realized from the exercise of stock-based awards of
$34.4 million.
Cash used in investing activities was $141.2 million and
$181.1 million during the 39 weeks ended
October 31, 2009 and November 1, 2008, respectively.
During the 39 weeks ended October 31, 2009,
$122.1 million and $13.8 million of cash was used
primarily to open new stores in the U.S. and
internationally and to invest in information systems. In
addition, during the 39 weeks ended October 31, 2009,
the Company used $5.2 million for acquisitions, primarily
related to the purchase of an increased ownership interest in
GameStop Group Limited. 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 Free Record Shop Norway AS, a Norwegian
private limited liability company (FRS), The
Gamesman Limited and an increased ownership interest in GameStop
Group Limited.
Cash used in financing activities was $96.3 million for the
39 weeks ended October 31, 2009 and cash provided by
financing activities for the 39 weeks ended
November 1, 2008 was $30.9 million. The cash used in
financing activities for the 39 weeks ended
October 31, 2009 was primarily due to the repurchase of
$100.0 million of principal value of the Companys
senior notes. 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, offset by the repurchase of
$30.0 million of principal value of the Companys
senior notes.
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, 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 extension of the Revolver
to 2012 reduces our exposure to the current tightening in the
credit markets.
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
33
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
October 31, 2009, 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.
During the 39 weeks ended October 31, 2009, the
Company borrowed and repaid $115 million under the
Revolver. As of October 31, 2009, there were no borrowings
outstanding under the Revolver and letters of credit outstanding
totaled $8.5 million.
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 October 31, 2009, there were no cash overdrafts
outstanding under the Line of Credit and bank guarantees
outstanding totaled $5.9 million.
In September 2005, the Company, along with GameStop, Inc. as
co-issuer (together with the Company, the Issuers),
completed the offering of $650 million aggregate principal
amount of Senior Notes due 2012 (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 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
October 31, 2009, the unamortized original issue discount
was $2.9 million. The Issuers pay interest on the 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 October 31, 2009, 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 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 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.
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 310 stores in the 39 weeks
ended October 31, 2009 and expects to open approximately
400 stores in total during fiscal 2009. Capital expenditures for
fiscal 2009 are
34
projected to be approximately $175 million, which will be
used primarily to fund new store openings and invest in
distribution and information systems in support of operations.
Between May 2006 and August 2007, the Company repurchased
$70 million of the Notes under previously announced
buybacks authorized by its Board of Directors. All of the
authorized amounts were repurchased and the Notes were delivered
to the Trustee for cancellation.
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 the Notes. The timing and amount
of the repurchases was to be determined by the Companys
management based on their evaluation of market conditions and
other factors. In addition, the repurchases may have been
suspended or discontinued at any time. As of November 1,
2008, the Company had repurchased $30 million of the Notes
pursuant to this authorization. The associated loss on
retirement of debt was $2.3 million, which consisted of the
premium paid to retire the Notes and the write-off of the
deferred financing fees and the original issue discount on the
Notes. The Company did not repurchase any other Notes during
fiscal 2008. In the 39 weeks ended October 31, 2009,
the Company repurchased $100 million of the Notes pursuant
to this authorization. The associated loss on retirement of debt
was $5.3 million, which consisted of the premium paid to
retire the Notes and the write-off of the deferred financing
fees and the original issue discount on the Notes. All Notes
repurchased in fiscal 2008 and fiscal 2009 were delivered to the
Trustee for cancellation and no additional buybacks have been
authorized. As of October 31, 2009, there were
$450 million of outstanding Notes.
We used cash to expand the Company through acquisitions during
fiscal 2008. On April 5, 2008, the Company purchased all
the outstanding stock of FRS for $21.0 million, net of cash
acquired. FRS operated 49 record stores in Norway and also
operated office and warehouse facilities in Oslo, Norway. The
Company converted 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 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. In June 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. In July
2009, an additional 16% was purchased for $4.7 million,
bringing the Companys total interest in GameStop Group
Limited to approximately 84%.
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 SFMI
Micromania from L Capital, LV Capital, Europ@web and other
shareholders of Micromania for approximately
$580.4 million, net of cash acquired. Micromania is a
leading retailer of video and computer games in France with 361
locations as of October 31, 2009. The Company funded the
transaction with cash on hand, a draw on the Revolver totaling
$275.0 million, and a $150.0 million junior term loan
facility (the Term Loans). As of January 31,
2009, the Revolver and the Term Loans were repaid in full.
Based on our current operating plans and despite the continued
weakness of the overall economy, 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 Notes, store expansion and
remodeling activities and corporate capital expenditure programs
for at least the next 12 months.
Recent
Accounting Policies
In May 2009, the Financial Accounting Standards Board
(FASB) issued new accounting and disclosure guidance
for recognized and non-recognized subsequent events that occur
after the balance sheet date but before financial statements are
issued. The new guidance also requires disclosure of the date
through which an entity has evaluated subsequent events and the
basis for that date. The new guidance was effective for our
Company beginning with our Quarterly Report on
Form 10-Q
for the period ended August 1, 2009, and is being applied
prospectively. This change in accounting policy had no impact on
our consolidated financial statements.
35
In April 2009, the FASB issued updated accounting guidance that
requires disclosures about fair value of financial instruments
for interim reporting periods and requires those disclosures in
summarized financial information for publicly traded companies
at interim reporting periods. The updated accounting guidance
was effective for our Company for the period ended
August 1, 2009 and has been reflected in Note 4 of our
Notes to Condensed Consolidated Financial Statements.
In March 2008, the FASB amended existing disclosure requirements
related to derivative and hedging activities, which became
effective for the Company on February 1, 2009 and is being
applied prospectively. As a result of the amended disclosure
requirements, the Company is required to provide expanded
qualitative and quantitative disclosures about derivatives and
hedging activities in each interim and annual period. The
adoption of the new disclosure requirements had no impact on our
consolidated financial statements.
In December 2007, the FASB amended its guidance on accounting
for business combinations. The new accounting guidance 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. It also establishes
disclosure requirements to enable the evaluation of the nature
and financial effects of the business combination. The new
accounting guidance for business combinations was effective for
our Company on February 1, 2009, and we will apply it
prospectively to all business combinations subsequent to the
effective date. The adoption of this new accounting policy did
not have a significant impact on our consolidated financial
statements and the impact that its adoption will have on our
consolidated financial statements in future periods will depend
on the nature and size of business combinations completed
subsequent to the date of adoption.
In December 2007, the FASB issued new accounting and disclosure
guidance related to noncontrolling interests in subsidiaries
(previously referred to as minority interests). The updated
accounting guidance requires all entities to report
noncontrolling interests in subsidiaries as a component of
equity in the consolidated financial statements and also
establishes disclosure requirements that clearly identify and
distinguish between controlling and noncontrolling interests and
requires the separate disclosure of income attributable to
controlling and noncontrolling interests. The new accounting
guidance was effective for our Company on February 1, 2009.
The adoption of this new accounting policy did not have a
significant impact on our consolidated financial statements.
In September 2006, the FASB issued new accounting guidance which
defines fair value, establishes a framework for measuring fair
value and expands disclosure requirements about fair value
measurements. However, in February 2008, the FASB delayed the
effective date of the new accounting guidance for all
nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The
adoption of this new accounting guidance for our nonfinancial
assets and nonfinancial liabilities on February 1, 2009 did
not have a significant 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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|
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|
|
our reliance on suppliers and vendors for sufficient quantities
of their products and for new product releases;
|
|
|
|
general economic conditions in the U.S. and internationally
and specifically, economic conditions affecting the electronic
game industry, the retail industry and the banking and financial
services market;
|
|
|
|
the competitive environment in the electronic game industry;
|
|
|
|
our ability to open and operate new stores;
|
36
|
|
|
|
|
alternate sources of distribution of video game software;
|
|
|
|
our ability to attract and retain qualified personnel;
|
|
|
|
the impact and costs of litigation and regulatory compliance;
|
|
|
|
unanticipated litigation results;
|
|
|
|
the risks involved with our international operations; and
|
|
|
|
other factors described in the
Form 10-K,
including those set forth under the caption Item 1A.
Risk Factors.
|
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.
|
|
ITEM 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
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 Notes
outstanding 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 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.
The 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. For the 13 and
39 week periods ended October 31, 2009, the Company
recognized a $2.2 million and $15.0 million loss,
respectively, in selling, general and administrative expenses
related to the trading of derivative instruments. The aggregate
fair value of the Foreign Currency Contracts as of
October 31, 2009 was a liability of $15.8 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 October 31, 2009 would result in a
(loss) or gain in value of the forwards, options and swaps of
($26.3 million) or $26.3 million, respectively.
We do not use derivative financial instruments for trading or
speculative purposes. We are exposed to counterparty credit risk
on all of our derivative financial instruments and cash
equivalent investments. The Company manages counterparty risk
according to the guidelines and controls established under
comprehensive risk
37
management and investment policies. We continuously monitor our
counterparty credit risk and utilize a number of different
counterparties to minimize our exposure to potential defaults.
We do not require collateral under derivative or investment
agreements.
|
|
ITEM 4.
|
Controls
and Procedures
|
(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) at the reasonable assurance level. 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 designed to provide reasonable
assurance of achieving their objectives and that the
Companys disclosure controls and procedures are effective
at the reasonable assurance level. 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. Micromania operates
on different information technology systems than the Company.
The Company is currently evaluating the internal control
processes at Micromania and changes to certain processes,
information technology systems, and other components of internal
controls resulting from this evaluation may occur.
PART II
OTHER INFORMATION
|
|
ITEM 1.
|
Legal
Proceedings
|
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 named an expert, a psychologist who
testified at the criminal trial on behalf of the criminal
defendant, who plaintiffs indicated would testify 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 was argued on December 12, 2008.
On July 30, 2009, the trial court entered its Order
granting summary judgment for all defendants, dismissing the
case with prejudice on the grounds that plaintiffs
experts testimony did not satisfy the Frye standard for
expert admissibility. Subsequent to the entry of the Order, the
plaintiffs filed a notice of appeal.
The Company does not believe there is sufficient information to
estimate the amount of the possible loss, if any, resulting from
the lawsuit if the plaintiffs appeal is successful.
38
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, results of operations or liquidity.
There have been no other material developments in previously
reported legal proceedings during the fiscal quarter covered by
this
Form 10-Q.
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 January 31, 2009 filed with the
SEC on April 1, 2009. 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.
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.(2)
|
|
2
|
.3
|
|
Amendment, dated November 17, 2008, to Sale and Purchase
Agreement for Micromania Acquisition listed as Exhibit 2.2
above.(3)
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation.(4)
|
|
3
|
.2
|
|
Amended and Restated Bylaws.(5)
|
|
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.(6)
|
|
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.(7)
|
|
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.(5)
|
|
4
|
.4
|
|
Form of Indenture.(8)
|
|
10
|
.1
|
|
Insurance Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(9)
|
|
10
|
.2
|
|
Operating Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(9)
|
|
10
|
.3
|
|
Fourth Amended and Restated 2001 Incentive Plan.(17)
|
|
10
|
.4
|
|
Second Amended and Restated Supplemental Compensation Plan.(11)
|
|
10
|
.5
|
|
Form of Option Agreement.(12)
|
|
10
|
.6
|
|
Form of Restricted Share Agreement.(13)
|
|
10
|
.7
|
|
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)
|
39
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.8
|
|
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
|
.9
|
|
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
|
.10
|
|
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)
|
|
10
|
.11
|
|
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
|
.12
|
|
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
|
.13
|
|
Form of Securities Collateral Pledge Agreement, dated as of
October 11, 2005.(14)
|
|
10
|
.14
|
|
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
|
.15
|
|
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.(3)
|
|
10
|
.16
|
|
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.(3)
|
|
10
|
.17
|
|
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.(3)
|
|
10
|
.18
|
|
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.(3)
|
|
10
|
.19
|
|
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.(3)
|
|
10
|
.20
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and R. Richard
Fontaine.(10)
|
|
10
|
.21
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and Daniel A.
DeMatteo.(10)
|
|
10
|
.22
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and David W.
Carlson.(10)
|
|
10
|
.23
|
|
Amendment to Amended and Restated Executive Employment
Agreement, dated August 24, 2009, between GameStop Corp.
and David W. Carlson.(16)
|
|
10
|
.24
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and Tony
Bartel.(10)
|
|
10
|
.25
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and J. Paul
Raines.(10)
|
40
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.26
|
|
Executive Employment Agreement, dated August 24, 2009,
between GameStop Corp. and Catherine Smith.(16)
|
|
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.
|
|
101
|
.INS
|
|
XBRL Instance Document
|
|
101
|
.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
101
|
.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101
|
.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101
|
.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
101
|
.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
(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
October 2, 2008. |
|
(3) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
November 18, 2008. |
|
(4) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
February 7, 2007. |
|
(5) |
|
Incorporated by reference to the Registrants Amendment
No. 1 to
Form S-4
filed with the Securities and Exchange Commission on
July 8, 2005. |
|
(6) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 30, 2005. |
|
(7) |
|
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. |
|
(8) |
|
Incorporated by reference to the Registrants
Form S-3ASR
filed with the Securities and Exchange Commission on
April 10, 2006. |
|
(9) |
|
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. |
|
(10) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
January 7, 2009. |
|
(11) |
|
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. |
|
(12) |
|
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. |
|
(13) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 12, 2005. |
41
|
|
|
(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 the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
August 25, 2009. |
|
(17) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2009 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 22, 2009. |
42
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.
|
|
|
|
By:
|
/s/ Catherine
R. Smith
|
Catherine R. Smith
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: December 9, 2009
GAMESTOP CORP.
Robert A. Lloyd
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
Date: December 9, 2009
43
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.(2)
|
|
2
|
.3
|
|
Amendment, dated November 17, 2008, to Sale and Purchase
Agreement for Micromania Acquisition listed as Exhibit 2.2
above.(3)
|
|
3
|
.1
|
|
Second Amended and Restated Certificate of Incorporation.(4)
|
|
3
|
.2
|
|
Amended and Restated Bylaws.(5)
|
|
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.(6)
|
|
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.(7)
|
|
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.(5)
|
|
4
|
.4
|
|
Form of Indenture.(8)
|
|
10
|
.1
|
|
Insurance Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(9)
|
|
10
|
.2
|
|
Operating Agreement, dated as of January 1, 2002, between
Barnes & Noble, Inc. and GameStop Holdings Corp.
(f/k/a GameStop Corp.).(9)
|
|
10
|
.3
|
|
Fourth Amended and Restated 2001 Incentive Plan.(17)
|
|
10
|
.4
|
|
Second Amended and Restated Supplemental Compensation Plan.(11)
|
|
10
|
.5
|
|
Form of Option Agreement.(12)
|
|
10
|
.6
|
|
Form of Restricted Share Agreement.(13)
|
|
10
|
.7
|
|
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
|
.8
|
|
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
|
.9
|
|
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
|
.10
|
|
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)
|
|
10
|
.11
|
|
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
|
.12
|
|
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
|
.13
|
|
Form of Securities Collateral Pledge Agreement, dated as of
October 11, 2005.(14)
|
44
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.14
|
|
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
|
.15
|
|
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.(3)
|
|
10
|
.16
|
|
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.(3)
|
|
10
|
.17
|
|
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.(3)
|
|
10
|
.18
|
|
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.(3)
|
|
10
|
.19
|
|
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.(3)
|
|
10
|
.20
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and R. Richard
Fontaine.(10)
|
|
10
|
.21
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and Daniel A.
DeMatteo.(10)
|
|
10
|
.22
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and David W.
Carlson.(10)
|
|
10
|
.23
|
|
Amendment to Amended and Restated Executive Employment
Agreement, dated August 24, 2009, between GameStop Corp.
and David W. Carlson.(16)
|
|
10
|
.24
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and Tony
Bartel.(10)
|
|
10
|
.25
|
|
Amended and Restated Executive Employment Agreement, dated
December 31, 2008, between GameStop Corp. and J. Paul
Raines.(10)
|
|
10
|
.26
|
|
Executive Employment Agreement, dated August 24, 2009,
between GameStop Corp. and Catherine Smith.(16)
|
|
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.
|
|
101
|
.INS
|
|
XBRL Instance Document
|
45
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
101
|
.SCH
|
|
XBRL Taxonomy Extension Schema
|
|
101
|
.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
101
|
.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
101
|
.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
101
|
.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
(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
October 2, 2008. |
|
(3) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
November 18, 2008. |
|
(4) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
February 7, 2007. |
|
(5) |
|
Incorporated by reference to the Registrants Amendment
No. 1 to
Form S-4
filed with the Securities and Exchange Commission on
July 8, 2005. |
|
(6) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 30, 2005. |
|
(7) |
|
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. |
|
(8) |
|
Incorporated by reference to the Registrants
Form S-3ASR
filed with the Securities and Exchange Commission on
April 10, 2006. |
|
(9) |
|
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. |
|
(10) |
|
Incorporated by reference to the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
January 7, 2009. |
|
(11) |
|
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. |
|
(12) |
|
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. |
|
(13) |
|
Incorporated by reference to GameStop Holdings Corp.s
Form 8-K
filed with the Securities and Exchange Commission on
September 12, 2005. |
|
(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 the Registrants
Form 8-K
filed with the Securities and Exchange Commission on
August 25, 2009. |
|
(17) |
|
Incorporated by reference to Appendix A to the
Registrants Proxy Statement for 2009 Annual Meeting of
Stockholders filed with the Securities and Exchange Commission
on May 22, 2009. |
46