ITEM 1.
Financial Statements
GAMESTOP CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
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|
|
|
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|
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August 3,
2013
|
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|
July 28,
2012
|
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|
February 2,
2013
|
|
|
|
(In millions, except per share data)
|
|
|
|
(Unaudited)
|
|
ASSETS:
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
199.5
|
|
|
$
|
138.7
|
|
|
$
|
635.8
|
|
Receivables, net
|
|
|
55.7
|
|
|
|
40.2
|
|
|
|
73.6
|
|
Merchandise inventories, net
|
|
|
1,004.4
|
|
|
|
980.2
|
|
|
|
1,171.3
|
|
Deferred income taxes current
|
|
|
55.2
|
|
|
|
43.3
|
|
|
|
61.7
|
|
Prepaid taxes
|
|
|
50.9
|
|
|
|
61.5
|
|
|
|
|
|
Prepaid expenses
|
|
|
96.2
|
|
|
|
88.4
|
|
|
|
61.2
|
|
Other current assets
|
|
|
2.6
|
|
|
|
27.1
|
|
|
|
7.3
|
|
|
|
|
|
|
|
|
|
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|
|
|
Total current assets
|
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|
1,464.5
|
|
|
|
1,379.4
|
|
|
|
2,010.9
|
|
|
|
|
|
|
|
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|
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|
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Property and equipment:
|
|
|
|
|
|
|
|
|
Land
|
|
|
20.7
|
|
|
|
22.1
|
|
|
|
22.5
|
|
Buildings and leasehold improvements
|
|
|
594.3
|
|
|
|
594.5
|
|
|
|
606.4
|
|
Fixtures and equipment
|
|
|
939.2
|
|
|
|
889.7
|
|
|
|
926.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
1,554.2
|
|
|
|
1,506.3
|
|
|
|
1,554.9
|
|
Less accumulated depreciation and amortization
|
|
|
1,074.8
|
|
|
|
976.9
|
|
|
|
1,030.1
|
|
|
|
|
|
|
|
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Net property and equipment
|
|
|
479.4
|
|
|
|
529.4
|
|
|
|
524.8
|
|
Goodwill
|
|
|
1,365.1
|
|
|
|
1,981.8
|
|
|
|
1,383.1
|
|
Other intangible assets, net
|
|
|
144.4
|
|
|
|
189.5
|
|
|
|
153.4
|
|
Other noncurrent assets
|
|
|
57.0
|
|
|
|
51.7
|
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|
61.4
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total noncurrent assets
|
|
|
2,045.9
|
|
|
|
2,752.4
|
|
|
|
2,122.7
|
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|
|
|
|
|
|
|
|
|
|
|
|
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Total assets
|
|
$
|
3,510.4
|
|
|
$
|
4,131.8
|
|
|
$
|
4,133.6
|
|
|
|
|
|
|
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|
|
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LIABILITIES AND STOCKHOLDERS EQUITY:
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Current liabilities:
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|
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|
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|
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Accounts payable
|
|
$
|
356.8
|
|
|
$
|
462.1
|
|
|
$
|
870.9
|
|
Accrued liabilities
|
|
|
843.1
|
|
|
|
721.2
|
|
|
|
741.0
|
|
Income taxes payable
|
|
|
|
|
|
|
|
|
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|
103.4
|
|
Revolver debt outstanding
|
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|
50.0
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total current liabilities
|
|
|
1,249.9
|
|
|
|
1,183.3
|
|
|
|
1,715.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
27.3
|
|
|
|
60.9
|
|
|
|
31.5
|
|
Other long-term liabilities
|
|
|
76.5
|
|
|
|
98.3
|
|
|
|
100.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
103.8
|
|
|
|
159.2
|
|
|
|
132.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,353.7
|
|
|
|
1,342.5
|
|
|
|
1,847.3
|
|
|
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|
Commitments and contingencies (Note 7)
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Stockholders equity:
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Preferred stock authorized 5.0 shares; no shares issued or outstanding
|
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Class A common stock $.001 par value; authorized 300.0 shares; 127.1, 134.5 and 128.2 shares issued,
117.1, 124.5 and 118.2 shares outstanding, respectively
|
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|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Additional paid-in-capital
|
|
|
286.3
|
|
|
|
479.1
|
|
|
|
348.3
|
|
Accumulated other comprehensive income
|
|
|
98.3
|
|
|
|
111.4
|
|
|
|
164.4
|
|
Retained earnings
|
|
|
1,772.0
|
|
|
|
2,198.7
|
|
|
|
1,773.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
2,156.7
|
|
|
|
2,789.3
|
|
|
|
2,286.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
3,510.4
|
|
|
$
|
4,131.8
|
|
|
$
|
4,133.6
|
|
|
|
|
|
|
|
|
|
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|
|
See accompanying notes to condensed consolidated financial statements.
1
GAMESTOP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
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|
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|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions, except per share data)
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
Net sales
|
|
$
|
1,383.7
|
|
|
$
|
1,550.2
|
|
|
$
|
3,249.0
|
|
|
$
|
3,552.4
|
|
Cost of sales
|
|
|
902.3
|
|
|
|
1,030.9
|
|
|
|
2,189.3
|
|
|
|
2,433.2
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
Gross profit
|
|
|
481.4
|
|
|
|
519.3
|
|
|
|
1,059.7
|
|
|
|
1,119.2
|
|
Selling, general and administrative expenses
|
|
|
421.6
|
|
|
|
440.9
|
|
|
|
870.8
|
|
|
|
881.3
|
|
Depreciation and amortization
|
|
|
41.0
|
|
|
|
43.9
|
|
|
|
82.9
|
|
|
|
88.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
18.8
|
|
|
|
34.5
|
|
|
|
106.0
|
|
|
|
149.5
|
|
Interest income
|
|
|
(0.1
|
)
|
|
|
(0.2
|
)
|
|
|
(0.2
|
)
|
|
|
(0.4
|
)
|
Interest expense
|
|
|
1.4
|
|
|
|
1.1
|
|
|
|
2.4
|
|
|
|
1.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
17.5
|
|
|
|
33.6
|
|
|
|
103.8
|
|
|
|
148.2
|
|
Income tax expense
|
|
|
7.0
|
|
|
|
12.6
|
|
|
|
38.7
|
|
|
|
54.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
10.5
|
|
|
|
21.0
|
|
|
|
65.1
|
|
|
|
93.4
|
|
Net loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income attributable to GameStop Corp.
|
|
$
|
10.5
|
|
|
$
|
21.0
|
|
|
$
|
65.1
|
|
|
$
|
93.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share attributable to GameStop Corp.
|
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
$
|
0.55
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share attributable to GameStop Corp.
|
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
$
|
0.55
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
$
|
0.275
|
|
|
$
|
0.15
|
|
|
$
|
0.55
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding basic
|
|
|
117.9
|
|
|
|
128.7
|
|
|
|
118.1
|
|
|
|
131.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding diluted
|
|
|
119.2
|
|
|
|
129.1
|
|
|
|
119.3
|
|
|
|
132.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
2
GAMESTOP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
Consolidated net income
|
|
$
|
10.5
|
|
|
$
|
21.0
|
|
|
$
|
65.1
|
|
|
$
|
93.4
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(48.0
|
)
|
|
|
(59.0
|
)
|
|
|
(66.1
|
)
|
|
|
(58.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
(37.5
|
)
|
|
|
(38.0
|
)
|
|
|
(1.0
|
)
|
|
|
35.0
|
|
Comprehensive loss attributable to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to GameStop Corp.
|
|
$
|
(37.5
|
)
|
|
$
|
(38.0
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
35.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
3
GAMESTOP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
Retained
Earnings
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
Balance at February 2, 2013
|
|
|
118.2
|
|
|
$
|
0.1
|
|
|
$
|
348.3
|
|
|
$
|
164.4
|
|
|
$
|
1,773.5
|
|
|
$
|
2,286.3
|
|
Net income for the 26 weeks ended August 3, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65.1
|
|
|
|
65.1
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66.1
|
)
|
|
|
|
|
|
|
(66.1
|
)
|
Dividends
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(66.6
|
)
|
|
|
(66.6
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
11.5
|
|
|
|
|
|
|
|
|
|
|
|
11.5
|
|
Purchase of treasury stock
|
|
|
(3.4
|
)
|
|
|
|
|
|
|
(114.4
|
)
|
|
|
|
|
|
|
|
|
|
|
(114.4
|
)
|
Exercise of stock options and issuance of shares upon vesting of restricted stock grants (including tax benefit of
$1.6)
|
|
|
2.3
|
|
|
|
|
|
|
|
40.9
|
|
|
|
|
|
|
|
|
|
|
|
40.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at August 3, 2013
|
|
|
117.1
|
|
|
$
|
0.1
|
|
|
$
|
286.3
|
|
|
$
|
98.3
|
|
|
$
|
1,772.0
|
|
|
$
|
2,156.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Dividends declared per common share were $0.55 in the 26 weeks ended August 3, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GameStop Corp. Stockholders
|
|
|
Noncontrolling
Interest
|
|
|
Total
|
|
|
|
Class A
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Other
Comprehensive
Income
|
|
|
Retained
Earnings
|
|
|
|
|
|
Shares
|
|
|
Common
Stock
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
Balance at January 28, 2012
|
|
|
136.8
|
|
|
$
|
0.1
|
|
|
$
|
726.6
|
|
|
$
|
169.7
|
|
|
$
|
2,145.7
|
|
|
$
|
(1.9
|
)
|
|
$
|
3,040.2
|
|
Purchase of subsidiary shares from noncontrolling interest
|
|
|
|
|
|
|
|
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) for the 26 weeks ended July 28, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93.5
|
|
|
|
(0.1
|
)
|
|
|
93.4
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58.3
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
(58.4
|
)
|
Dividends
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(40.5
|
)
|
|
|
|
|
|
|
(40.5
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Purchase of treasury stock
|
|
|
(13.0
|
)
|
|
|
|
|
|
|
(257.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(257.9
|
)
|
Exercise of stock options and issuance of shares upon vesting of restricted stock grants (including tax benefit of
$0.4)
|
|
|
0.7
|
|
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 28, 2012
|
|
|
124.5
|
|
|
$
|
0.1
|
|
|
$
|
479.1
|
|
|
$
|
111.4
|
|
|
$
|
2,198.7
|
|
|
$
|
|
|
|
$
|
2,789.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
Dividends declared per common share were $0.30 in the 26 weeks ended July 28, 2012.
|
See accompanying notes to condensed consolidated financial statements.
4
GAMESTOP CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions)
|
|
|
|
(Unaudited)
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
$
|
65.1
|
|
|
$
|
93.4
|
|
Adjustments to reconcile net income to net cash flows used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization (including amounts in cost of sales)
|
|
|
84.2
|
|
|
|
89.6
|
|
Stock-based compensation expense
|
|
|
11.5
|
|
|
|
10.4
|
|
Deferred income taxes
|
|
|
1.0
|
|
|
|
(3.4
|
)
|
Loss on disposal of property and equipment
|
|
|
3.4
|
|
|
|
2.0
|
|
Other, net
|
|
|
(2.5
|
)
|
|
|
0.2
|
|
Changes in other long-term liabilities
|
|
|
(22.4
|
)
|
|
|
(6.7
|
)
|
Changes in operating assets and liabilities, net:
|
|
|
|
|
|
|
|
|
Receivables, net
|
|
|
16.9
|
|
|
|
23.5
|
|
Merchandise inventories
|
|
|
142.2
|
|
|
|
133.6
|
|
Prepaid expenses and other current assets
|
|
|
(31.8
|
)
|
|
|
(20.9
|
)
|
Prepaid income taxes and accrued income taxes payable
|
|
|
(152.9
|
)
|
|
|
(145.2
|
)
|
Accounts payable and accrued liabilities
|
|
|
(389.3
|
)
|
|
|
(350.3
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities
|
|
|
(274.6
|
)
|
|
|
(173.8
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(47.3
|
)
|
|
|
(53.6
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
|
|
|
(1.5
|
)
|
Other
|
|
|
1.4
|
|
|
|
(2.1
|
)
|
|
|
|
|
|
|
|
|
|
Net cash flows used in investing activities
|
|
|
(45.9
|
)
|
|
|
(57.2
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Purchase of treasury shares
|
|
|
(114.4
|
)
|
|
|
(246.6
|
)
|
Dividends paid
|
|
|
(66.2
|
)
|
|
|
(40.3
|
)
|
Borrowings from the revolver
|
|
|
130.0
|
|
|
|
36.0
|
|
Repayments of revolver borrowings
|
|
|
(80.0
|
)
|
|
|
(36.0
|
)
|
Issuance of shares relating to stock options
|
|
|
39.3
|
|
|
|
1.6
|
|
Excess tax benefits realized from exercise of stock-based awards
|
|
|
3.1
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Net cash flows used in financing activities
|
|
|
(88.2
|
)
|
|
|
(284.9
|
)
|
Exchange rate effect on cash and cash equivalents
|
|
|
(27.6
|
)
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(436.3
|
)
|
|
|
(516.3
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
635.8
|
|
|
|
655.0
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
199.5
|
|
|
$
|
138.7
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
5
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.
|
Summary of Significant Accounting Policies
|
Basis of Presentation
GameStop Corp. (together with its predecessor companies, GameStop, we, us, our, or the Company), a Delaware corporation, is the worlds
largest multichannel video game retailer. We sell new and pre-owned video game hardware, physical and digital video game software, accessories, as well as PC entertainment software, new and pre-owned mobile and consumer electronics products and
other merchandise. The unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting only of
normal, recurring adjustments) which are, in our opinion, necessary for a fair presentation of the information for the periods presented. These unaudited condensed consolidated interim financial statements 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 consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with our annual report on Form 10-K for the 53 weeks ended February 2,
2013 (fiscal 2012). The preparation of financial statements in conformity with GAAP requires us 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, we have made our 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 us could have a significant impact on our financial results. Actual results could differ from those estimates.
Due to the seasonal nature of the business, the results of operations for the 26 weeks ended August 3, 2013 are
not indicative of the results to be expected for the 52 weeks ending February 1, 2014 (fiscal 2013).
Restricted
Cash
Restricted cash of $10.4 million, $12.0 million and $13.4 million as of August 3,
2013, July 28, 2012 and February 2, 2013, respectively, consists primarily of bank deposits serving as collateral for bank guarantees issued on behalf of our foreign subsidiaries and is included in other noncurrent assets in our
condensed consolidated balance sheets.
Recently Issued Accounting Standards
In July 2013, accounting standards update (ASU) 2013-11
Income Taxes (Topic 740): Presentation of an
Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
was issued requiring an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the
financial statements as either a reduction to a deferred tax asset or separately as a liability depending on the existence, availability and/or use of an operating loss carry forward, a similar tax loss, or a tax credit carry forward. This ASU
will be effective for us beginning the first quarter of 2014. We do not expect that this ASU will have an impact on our condensed consolidated financial statements as we currently do not have any unrecognized tax benefits in the same jurisdictions
in which we have tax loss or credit carryovers.
6
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In March 2013, ASU 2013-05
Foreign Currency Matters (Topic
830)
was issued providing guidance with respect to the release of cumulative translation adjustments into net income when a parent company sells either a part or all of an investment in a foreign entity. The ASU requires the release of
cumulative translation adjustments when a company no longer holds a controlling financial interest in a foreign subsidiary or a group of assets that constitutes a business within a foreign entity. This ASU will be effective for us beginning the
first quarter of 2014. We are evaluating the effect of this ASU, but do not expect it to have a significant impact on our condensed consolidated financial statements.
In February 2013, ASU 2013-02
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income
was issued regarding disclosure of amounts reclassified out of accumulated other comprehensive income by component. An entity is required to present either on the face of the statement of operations
or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same
reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This ASU was effective for our annual and interim
periods beginning in fiscal 2013. The ASU had no effect on our condensed consolidated financial statements.
2.
|
Accounting for Stock-Based Compensation
|
The following is a summary of the stock-based awards granted during the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended August 3, 2013
|
|
|
26 Weeks Ended July 28, 2012
|
|
|
|
Shares
|
|
|
Weighted Average
Grant Date
Fair
Value
|
|
|
Shares
|
|
|
Weighted Average
Grant Date
Fair
Value
|
|
|
|
(In thousands, except per share data)
|
|
Stock options time-vested
|
|
|
457
|
|
|
$
|
7.10
|
|
|
|
|
|
|
|
|
|
Restricted stock awards time-vested
|
|
|
916
|
|
|
$
|
24.82
|
|
|
|
784
|
|
|
$
|
23.66
|
|
Restricted stock awards performance-based
|
|
|
262
|
|
|
$
|
24.82
|
|
|
|
626
|
|
|
$
|
23.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based awards
|
|
|
1,635
|
|
|
|
|
|
|
|
1,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For stock options granted, we record stock-based compensation expense in earnings based
on the grant-date fair value. 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, expected dividend yield and expected employee forfeiture rate. We use historical data to estimate the option life, dividend yield and the employee forfeiture rate, and use historical volatility when estimating the stock price
volatility. The following assumptions were used with respect to the stock options granted:
|
|
|
|
|
|
|
26 Weeks Ended
August
3,
2013
|
|
Volatility
|
|
|
46.4
|
%
|
Risk-free interest rate
|
|
|
1.0
|
%
|
Expected life (years)
|
|
|
5.6
|
|
Expected dividend yield
|
|
|
4.3
|
%
|
7
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Total stock-based compensation recognized in selling, general and
administrative expenses was as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions)
|
|
Stock-based compensation expense
|
|
$
|
6.0
|
|
|
$
|
5.5
|
|
|
$
|
11.5
|
|
|
$
|
10.4
|
|
As of August 3, 2013, the unrecognized compensation expense related to the unvested
portion of our stockbased awards was $44.9 million, which is expected to be recognized over a weighted average period of 2.2 years. The total intrinsic value of options exercised during the 13 weeks ended August 3, 2013 and
July 28, 2012 was $10.5 million and $0.7 million, respectively. The total intrinsic value of options exercised during the 26 weeks ended August 3, 2013 and July 28, 2012 was $21.1 million and $1.1 million, respectively.
3.
|
Computation of Net Income Per Common Share
|
A reconciliation of shares used in calculating basic and diluted net income per common share is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions, except per share data)
|
|
Consolidated net income attributable to GameStop Corp.
|
|
$
|
10.5
|
|
|
$
|
21.0
|
|
|
$
|
65.1
|
|
|
$
|
93.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
117.9
|
|
|
|
128.7
|
|
|
|
118.1
|
|
|
|
131.3
|
|
Dilutive effect of options and restricted shares on common stock(1)
|
|
|
1.3
|
|
|
|
0.4
|
|
|
|
1.2
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares and dilutive potential common shares
|
|
|
119.2
|
|
|
|
129.1
|
|
|
|
119.3
|
|
|
|
132.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
$
|
0.55
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.09
|
|
|
$
|
0.16
|
|
|
$
|
0.55
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes 1.6 million, 5.5 million, 1.8 million and 3.9 million share-based awards for the 13 weeks ended August 3, 2013, the 13 weeks ended
July 28, 2012, the 26 weeks ended August 3, 2013 and the 26 weeks ended July 28, 2012, respectively, because their effects were antidilutive.
|
4.
|
Fair Value Measurements and Financial Instruments
|
Recurring Fair Value Measurements and Derivative Financial Instruments
Fair value is defined 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.
8
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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 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 at fair value on a recurring basis and recorded on our condensed consolidated balance sheets (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
February 2,
2013
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
$
|
2.6
|
|
|
$
|
27.1
|
|
|
$
|
7.3
|
|
Other noncurrent assets
|
|
|
0.3
|
|
|
|
6.0
|
|
|
|
0.9
|
|
Company-owned life insurance(1)
|
|
|
5.4
|
|
|
|
3.2
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
8.3
|
|
|
|
36.3
|
|
|
|
11.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Foreign Currency Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
12.8
|
|
|
|
1.7
|
|
|
|
9.1
|
|
Other long-term liabilities
|
|
|
8.0
|
|
|
|
|
|
|
|
4.4
|
|
Nonqualified deferred compensation(2)
|
|
|
1.0
|
|
|
|
0.9
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
21.8
|
|
|
$
|
2.6
|
|
|
$
|
14.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Recognized in other non-current assets in our condensed consolidated balance sheets.
|
(2)
|
Recognized in accrued liabilities in our condensed consolidated balance sheets.
|
We use Foreign Currency Contracts to manage currency risk primarily related to intercompany loans denominated in
non-functional currencies and certain foreign currency assets and liabilities. These Foreign Currency Contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby
offsetting the current earnings effect of the re-measurement of related intercompany loans and foreign currency assets and liabilities. The total gross notional value of derivatives related to our Foreign Currency Contracts was $692.3 million and
$576.4 million as of August 3, 2013 and July 28, 2012, respectively. The total net notional value of derivatives related to our Foreign Currency Contracts was $60.5 million and $91.5 million as of August 3, 2013 and July 28,
2012, respectively.
9
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Activity related to the trading of derivative instruments and the
offsetting impact of related intercompany loans and foreign currency assets and liabilities recognized in selling, general and administrative expense is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
Gains (losses) on the changes in fair value of derivative instruments
|
|
$
|
(19.7
|
)
|
|
$
|
18.7
|
|
|
$
|
(10.3
|
)
|
|
$
|
16.9
|
|
Gains (losses) on the re-measurement of related intercompany loans and foreign currency assets and liabilities
|
|
|
22.2
|
|
|
|
(20.5
|
)
|
|
|
13.4
|
|
|
|
(18.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, net
|
|
$
|
2.5
|
|
|
$
|
(1.8
|
)
|
|
$
|
3.1
|
|
|
$
|
(1.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. We manage counterparty risk according to the guidelines and controls established under our 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.
Nonrecurring Fair Value Measurements
In addition to assets and liabilities that are recorded at fair value on a recurring basis, we record certain assets and
liabilities at fair value on a nonrecurring basis as required by GAAP. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges. We did not record any impairment charges related to assets measured at
fair value on a nonrecurring basis during the 26 weeks ended August 3, 2013 or July 28, 2012.
Other Fair Value Disclosures
The carrying value of our cash equivalents, receivables, net, accounts payable and revolver debt
outstanding approximates the fair value due to their short maturities.
On January 4, 2011, we entered into a $400 million credit agreement (the
Revolver), which amended and restated, in its entirety, our prior credit agreement entered into in October 2005 (the Credit Agreement). The Revolver provides for a five-year, $400 million asset-based facility, including a $50
million letter of credit sublimit, secured by substantially all of the Companys and its domestic subsidiaries assets. We have the ability to increase the facility, which matures in January 2016, by $150 million under certain
circumstances. The extension of the Revolver to 2016 reduces our exposure to potential tightening or other adverse changes in the credit markets.
The availability under the Revolver is limited to a borrowing base which allows us to borrow up to 90% of the appraisal value of the inventory, in each case plus 90% of eligible credit card receivables,
net of certain reserves. Letters of credit reduce the amount available to borrow by their face value. Our ability to pay cash dividends, redeem options and repurchase shares is generally permitted, except under certain circumstances, including if
Revolver excess availability is less than 20%, or is projected to be within 12 months after such
10
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
payment. In addition, if Revolver usage is projected to be equal to or greater than 25% of total commitments during the prospective 12-month period, we are subject to meeting a fixed charge
coverage ratio of 1.1:1.0 prior to making such payments. In the event that excess availability under the Revolver is at any time less than the greater of (1) $40.0 million or (2) 12.5% of the lesser of the total commitment or the borrowing
base, we will be subject to a fixed charge coverage ratio covenant of 1.1:1.0.
The Revolver places certain
restrictions on us and our subsidiaries, including limitations on asset sales, additional liens, investments, loans, guarantees, acquisitions and the incurrence of additional indebtedness. Absent consent from our lenders, we may not incur more
than $750 million of additional unsecured indebtedness to be limited to $250 million in general unsecured obligations and $500 million in unsecured obligations to finance acquisitions valued at $500 million or more.
The per annum interest rate under the Revolver is variable and is calculated by applying a margin (1) for prime rate
loans of 1.25% to 1.50% above the highest of (a) the prime rate of the administrative agent, (b) the federal funds effective rate plus 0.50% or (c) the London Interbank Offered (LIBO) rate for a 30-day interest period as
determined on such day plus 1.00%, and (2) for LIBO rate loans of 2.25% to 2.50% above the LIBO rate. The applicable margin is determined quarterly as a function of our average daily excess availability under the facility. In addition, we are
required to pay a commitment fee of 0.375% or 0.50%, depending on facility usage, for any unused portion of the total commitment under the Revolver. As of August 3, 2013, the applicable margin was 1.25% for prime rate loans and 2.25% for LIBO
rate loans, while the required commitment fee was 0.50% for the unused portion of the Revolver.
The Revolver
provides for customary events of default with corresponding grace periods, including failure to pay any principal or interest when due, failure to comply with covenants, any material representation or warranty made by us or the borrowers
proving to be false in any material respect, certain bankruptcy, insolvency or receivership events affecting us or our subsidiaries, defaults relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of
the Company or certain of its subsidiaries. During the 26 weeks ended August 3, 2013, we borrowed $130.0 million under the Revolver and repaid $80.0 million, leaving an outstanding balance of $50.0 million as of August 3, 2013. During
the 26 weeks ended July 28, 2012, we borrowed and repaid $36.0 million under the Revolver. Average borrowings under the Revolver for the 13 weeks and 26 weeks ended August 3, 2013 were $44.2 million and $22.1 million, respectively. Our
average interest rates on those outstanding borrowings for the 13 weeks and 26 weeks ended August 3, 2013 were 2.9% for both periods. As of August 3, 2013, total availability under the Revolver was $253.3 million, there was $50.0 million
of borrowings outstanding and standby letters of credit outstanding totaled $9.0 million. We are currently in compliance with the requirements of the Revolver.
In September 2007, our Luxembourg subsidiary entered into a discretionary $20.0 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 is available to our 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 August 3, 2013, there were no cash overdrafts outstanding under the Line of Credit and bank guarantees outstanding totaled $4.6 million.
We file income tax returns in the U.S. federal jurisdiction and various states and foreign
jurisdictions. The Internal Revenue Service (IRS) is currently examining our U.S. income tax returns for the fiscal years ended on January 28, 2012, January 29, 2011, January 30, 2010 and January 31, 2009.
We do not anticipate any adjustments that would result in a material impact on our condensed consolidated financial statements as a result of these audits.
11
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We accrue for the effects of uncertain tax positions and the related
potential penalties and interest. Our recorded liability for unrecognized tax benefits decreased by $8.5 million during the 13 weeks ended August 3, 2013 and by $17.9 million during the 26 weeks ended August 3, 2013. The decrease in the
liability for unrecognized tax benefits was primarily the result of payments made to settle certain U.S. federal income tax items and did not have a material impact on our income tax provision. There were no material adjustments to our recorded
liability for unrecognized tax benefits during the 13 and 26 weeks ended July 28, 2012. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions could significantly
increase or decrease during the next 12 months. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.
The income tax provisions for the 13 weeks and 26 weeks ended August 3, 2013 and July 28, 2012 are based upon managements estimate of our annualized effective tax rate.
7.
|
Commitments and Contingencies
|
In the ordinary course of business, we are, from time to time, subject to various legal proceedings,
including matters involving wage and hour employee class actions and consumer class actions. We may enter into discussions regarding settlement of these and other types of lawsuits, and may enter into settlement agreements, if we believe settlement
is in the best interest of our stockholders. We do not believe that any such existing legal proceedings or settlements, individually or in the aggregate, will have a material effect on our financial condition, results of operations or liquidity.
The following table sets forth net sales (in millions) by significant product category for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
147.8
|
|
|
|
10.7
|
%
|
|
$
|
183.3
|
|
|
|
11.8
|
%
|
|
$
|
389.6
|
|
|
|
12.0
|
%
|
|
$
|
531.8
|
|
|
|
15.0
|
%
|
New video game software
|
|
|
429.8
|
|
|
|
31.1
|
%
|
|
|
473.8
|
|
|
|
30.6
|
%
|
|
|
1,133.0
|
|
|
|
34.9
|
%
|
|
|
1,204.9
|
|
|
|
33.9
|
%
|
Pre-owned video game products
|
|
|
528.7
|
|
|
|
38.2
|
%
|
|
|
562.3
|
|
|
|
36.3
|
%
|
|
|
1,101.3
|
|
|
|
33.9
|
%
|
|
|
1,181.4
|
|
|
|
33.3
|
%
|
Other
|
|
|
277.4
|
|
|
|
20.0
|
%
|
|
|
330.8
|
|
|
|
21.3
|
%
|
|
|
625.1
|
|
|
|
19.2
|
%
|
|
|
634.3
|
|
|
|
17.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,383.7
|
|
|
|
100.0
|
%
|
|
$
|
1,550.2
|
|
|
|
100.0
|
%
|
|
$
|
3,249.0
|
|
|
|
100.0
|
%
|
|
$
|
3,552.4
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
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
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
15.5
|
|
|
|
10.5
|
%
|
|
$
|
16.4
|
|
|
|
8.9
|
%
|
|
$
|
35.7
|
|
|
|
9.2
|
%
|
|
$
|
39.3
|
|
|
|
7.4
|
%
|
New video game software
|
|
|
98.9
|
|
|
|
23.0
|
%
|
|
|
107.7
|
|
|
|
22.7
|
%
|
|
|
247.1
|
|
|
|
21.8
|
%
|
|
|
257.7
|
|
|
|
21.4
|
%
|
Pre-owned video game products
|
|
|
250.6
|
|
|
|
47.4
|
%
|
|
|
269.5
|
|
|
|
47.9
|
%
|
|
|
521.4
|
|
|
|
47.3
|
%
|
|
|
573.8
|
|
|
|
48.6
|
%
|
Other
|
|
|
116.4
|
|
|
|
42.0
|
%
|
|
|
125.7
|
|
|
|
38.0
|
%
|
|
|
255.5
|
|
|
|
40.9
|
%
|
|
|
248.4
|
|
|
|
39.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
481.4
|
|
|
|
34.8
|
%
|
|
$
|
519.3
|
|
|
|
33.5
|
%
|
|
$
|
1,059.7
|
|
|
|
32.6
|
%
|
|
$
|
1,119.2
|
|
|
|
31.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We operate our 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
,
Game Informer
magazine, the online video gaming Web
site
www.kongregate.com
, a digital PC game distribution platform available at
www.gamestop.com/pcgames
, the streaming technology company Spawn Labs, and an online consumer electronics marketplace available at
www.buymytronics.com
. Segment results for Canada include retail and e-commerce operations in Canada and segment results for Australia include retail and e-commerce operations in Australia and New Zealand. Segment results for Europe include
retail operations in 11 European countries and e-commerce operations in six countries. We measure segment profit using operating earnings, which is defined as income from continuing operations before intercompany royalty fees, net interest expense
and income taxes. There has been no material change in total assets by segment since February 2, 2013. Transactions between reportable segments consist primarily of royalties, management fees, intersegment loans and related interest.
Information on segments appears in the following tables.
Net sales by segment were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
United States
|
|
$
|
942.4
|
|
|
$
|
1,058.5
|
|
|
$
|
2,295.3
|
|
|
$
|
2,517.8
|
|
Canada
|
|
|
67.7
|
|
|
|
76.9
|
|
|
|
155.7
|
|
|
|
174.5
|
|
Australia
|
|
|
112.4
|
|
|
|
128.9
|
|
|
|
226.5
|
|
|
|
235.4
|
|
Europe
|
|
|
261.2
|
|
|
|
285.9
|
|
|
|
571.5
|
|
|
|
624.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,383.7
|
|
|
$
|
1,550.2
|
|
|
$
|
3,249.0
|
|
|
$
|
3,552.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
GAMESTOP CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Operating earnings (loss) by segment were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
United States
|
|
$
|
43.4
|
|
|
$
|
40.6
|
|
|
$
|
136.2
|
|
|
$
|
155.7
|
|
Canada
|
|
|
(0.7
|
)
|
|
|
0.4
|
|
|
|
1.8
|
|
|
|
2.9
|
|
Australia
|
|
|
1.1
|
|
|
|
3.7
|
|
|
|
2.6
|
|
|
|
2.3
|
|
Europe
|
|
|
(25.0
|
)
|
|
|
(10.2
|
)
|
|
|
(34.6
|
)
|
|
|
(11.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating earnings
|
|
|
18.8
|
|
|
|
34.5
|
|
|
|
106.0
|
|
|
|
149.5
|
|
Interest income
|
|
|
0.1
|
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
0.4
|
|
Interest expense
|
|
|
(1.4
|
)
|
|
|
(1.1
|
)
|
|
|
(2.4
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
$
|
17.5
|
|
|
$
|
33.6
|
|
|
$
|
103.8
|
|
|
$
|
148.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
Cash paid (in millions) during the period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
1.2
|
|
|
$
|
1.1
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
206.1
|
|
|
$
|
199.8
|
|
|
|
|
|
|
|
|
|
|
Dividend
On August 20, 2013, our Board of Directors approved a quarterly cash dividend to our stockholders of $0.275 per share of Class A Common Stock payable on September 19, 2013 to stockholders
of record at the close of business on September 3, 2013. Future dividends will be subject to approval by our Board of Directors.
Share Repurchase
As of September 4, 2013, we have purchased an additional 0.3 million shares of our Class A Common Stock for an average price per share of $50.27 since August 3, 2013.
14
Consolidated Results of Operations
The following table sets forth certain statement of operations items as a percentage of net sales for the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of sales
|
|
|
65.2
|
|
|
|
66.5
|
|
|
|
67.4
|
|
|
|
68.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
34.8
|
|
|
|
33.5
|
|
|
|
32.6
|
|
|
|
31.5
|
|
Selling, general and administrative expenses
|
|
|
30.5
|
|
|
|
28.4
|
|
|
|
26.8
|
|
|
|
24.8
|
|
Depreciation and amortization
|
|
|
2.9
|
|
|
|
2.8
|
|
|
|
2.5
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
|
|
|
1.4
|
|
|
|
2.3
|
|
|
|
3.3
|
|
|
|
4.2
|
|
Interest expense, net
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
1.3
|
|
|
|
2.2
|
|
|
|
3.2
|
|
|
|
4.2
|
|
Income tax expense
|
|
|
0.5
|
|
|
|
0.8
|
|
|
|
1.2
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
0.8
|
|
|
|
1.4
|
|
|
|
2.0
|
|
|
|
2.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income attributable to GameStop Corp.
|
|
|
0.8
|
%
|
|
|
1.4
|
%
|
|
|
2.0
|
%
|
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We include purchasing, receiving and distribution costs in selling, general and
administrative expenses, rather than in cost of sales, in the statement of operations. We include processing fees associated with purchases
16
made by credit cards in cost of sales, rather than selling, general and administrative expenses, in the statement of operations. As a result of these classifications, our gross margins are not
comparable to those retailers that include purchasing, receiving and distribution costs in cost of sales and include processing fees associated with purchases made by credit cards in selling, general and administrative expenses. The net effect of
these classifications as a percentage of net sales has not historically been material.
The following table
sets forth net sales (in millions) and percentage of total net sales by significant product category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3, 2013
|
|
|
July 28, 2012
|
|
|
August 3, 2013
|
|
|
July 28, 2012
|
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
|
Net
Sales
|
|
|
Percent
of Total
|
|
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
147.8
|
|
|
|
10.7
|
%
|
|
$
|
183.3
|
|
|
|
11.8
|
%
|
|
$
|
389.6
|
|
|
|
12.0
|
%
|
|
$
|
531.8
|
|
|
|
15.0
|
%
|
New video game software
|
|
|
429.8
|
|
|
|
31.1
|
%
|
|
|
473.8
|
|
|
|
30.6
|
%
|
|
|
1,133.0
|
|
|
|
34.9
|
%
|
|
|
1,204.9
|
|
|
|
33.9
|
%
|
Pre-owned video game products
|
|
|
528.7
|
|
|
|
38.2
|
%
|
|
|
562.3
|
|
|
|
36.3
|
%
|
|
|
1,101.3
|
|
|
|
33.9
|
%
|
|
|
1,181.4
|
|
|
|
33.3
|
%
|
Other
(1)
|
|
|
277.4
|
|
|
|
20.0
|
%
|
|
|
330.8
|
|
|
|
21.3
|
%
|
|
|
625.1
|
|
|
|
19.2
|
%
|
|
|
634.3
|
|
|
|
17.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,383.7
|
|
|
|
100.0
|
%
|
|
$
|
1,550.2
|
|
|
|
100.0
|
%
|
|
$
|
3,249.0
|
|
|
|
100.0
|
%
|
|
$
|
3,552.4
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Other products include PC entertainment and other software, digital products and currency, mobile products, including tablets and refurbished mobile
devices, accessories and revenues associated with
Game Informer
magazine and our PowerUp Rewards and other loyalty programs.
|
The following table sets forth gross profit (in millions) and gross profit percentages by significant product category for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3, 2013
|
|
|
July 28, 2012
|
|
|
August 3, 2013
|
|
|
July 28, 2012
|
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
|
Gross
Profit
|
|
|
Gross
Profit
Percent
|
|
Gross Profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New video game hardware
|
|
$
|
15.5
|
|
|
|
10.5
|
%
|
|
$
|
16.4
|
|
|
|
8.9
|
%
|
|
$
|
35.7
|
|
|
|
9.2
|
%
|
|
$
|
39.3
|
|
|
|
7.4
|
%
|
New video game software
|
|
|
98.9
|
|
|
|
23.0
|
%
|
|
|
107.7
|
|
|
|
22.7
|
%
|
|
|
247.1
|
|
|
|
21.8
|
%
|
|
|
257.7
|
|
|
|
21.4
|
%
|
Pre-owned video game products
|
|
|
250.6
|
|
|
|
47.4
|
%
|
|
|
269.5
|
|
|
|
47.9
|
%
|
|
|
521.4
|
|
|
|
47.3
|
%
|
|
|
573.8
|
|
|
|
48.6
|
%
|
Other
|
|
|
116.4
|
|
|
|
42.0
|
%
|
|
|
125.7
|
|
|
|
38.0
|
%
|
|
|
255.5
|
|
|
|
40.9
|
%
|
|
|
248.4
|
|
|
|
39.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
481.4
|
|
|
|
34.8
|
%
|
|
$
|
519.3
|
|
|
|
33.5
|
%
|
|
$
|
1,059.7
|
|
|
|
32.6
|
%
|
|
$
|
1,119.2
|
|
|
|
31.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13 weeks ended August 3, 2013 compared with the 13 weeks ended July 28, 2012
Net Sales
Net sales decreased by $166.5 million, or 10.7%, from $1,550.2 million in the 13 weeks ended July 28, 2012 to $1,383.7 million in the 13 weeks ended August 3, 2013. The
decrease in net sales was primarily attributable to a decrease in comparable store sales of 10.7% for the second quarter of fiscal 2013 offset slightly by changes related to foreign exchange rates, which had the effect of increasing net sales by
$2.0 million when compared to the second quarter of fiscal 2012. The decrease in comparable store sales was primarily due to a decrease in sales across all categories related to the late stages of the current console cycle. Refer to the note to the
Selected
17
Financial Data table in Item 6. Selected Financial Data in our Form 10-K for a discussion of the calculation of comparable store sales.
New video game hardware sales decreased $35.5 million, or 19.4%, from $183.3 million in the 13 weeks ended
July 28, 2012 to $147.8 million in the 13 weeks ended August 3, 2013. The decrease in new video game hardware sales is primarily due to a decrease in hardware unit sell-through related to being in the late stages of the current
console cycle. The new video game hardware sales declines were offset partially by sales of the Nintendo Wii U which launched in the fourth quarter of fiscal 2012.
New video game software sales decreased $44.0 million, or 9.3%, from $473.8 million in the 13 weeks ended
July 28, 2012 to $429.8 million in the 13 weeks ended August 3, 2013, primarily due to a reduced number of new title releases in the second quarter of fiscal 2013 as compared to the prior year quarter coupled with a reduction in
consumer demand due to the late stages of the current console cycle.
Pre-owned video game product sales
decreased by $33.6 million, or 6.0%, from $562.3 million in the 13 weeks ended July 28, 2012 to $528.7 million in the 13 weeks ended August 3, 2013. The decrease in pre-owned video game product sales was primarily due to a
decrease in store traffic related to lower video game demand due to the late stages of the current console cycle.
Other product sales decreased $53.4 million, or 16.1%, from $330.8 million in the 13 weeks ended July 28, 2012 to $277.4 million in the 13 weeks ended August 3, 2013. The decrease in
other product sales was primarily due to decreases in accessories sales associated with hardware sales declines and lower PC entertainment software sales due to the launch of
Diablo III
in the prior year comparable quarter, partially offset
by increases in sales of mobile and digital products as we continue to focus on expanding these lines of business.
As a percentage of net sales, new video game hardware sales and other product sales decreased and new video game software sales and pre-owned video game product sales increased in the 13 weeks ended
August 3, 2013 compared to the 13 weeks ended July 28, 2012. The change in the mix of sales was primarily due to the decreases in new video game hardware sales and other product sales discussed above.
Cost of Sales
Cost of sales decreased by $128.6 million, or 12.5%, from $1,030.9 million in the 13 weeks ended July 28, 2012 to $902.3 million in the 13 weeks ended August 3, 2013 as
a result of the decrease in sales discussed above and the changes in gross profit discussed below.
Gross Profit
Gross profit decreased by $37.9 million, or 7.3%, from $519.3 million in the 13 weeks
ended July 28, 2012 to $481.4 million in the 13 weeks ended August 3, 2013. Gross profit as a percentage of net sales increased from 33.5% in the 13 weeks ended July 28, 2012 to 34.8% in the 13 weeks ended
August 3, 2013. The gross profit percentage increase was primarily due to a shift in sales from new hardware to pre-owned and an increase in sales of our mobile and digital products.
Gross profit as a percentage of sales on new video game hardware increased from 8.9% in the 13 weeks ended July 28,
2012 to 10.5% in the 13 weeks ended August 3, 2013, primarily due to an increase in the attachment rate of product replacement plan sales on new hardware units when compared to the prior year. Gross profit as a percentage of sales on new video
game software increased slightly from 22.7% in the 13 weeks ended July 28, 2012 to 23.0% in the 13 weeks ended August 3, 2013. Gross profit as a percentage of sales on pre-owned video game products decreased from 47.9% in the 13
weeks ended July 28, 2012 to 47.4% in the 13 weeks ended August 3, 2013 due to an increase in promotional activities when compared to the prior year. Gross profit as a percentage of sales on other product sales increased from 38.0% in the
13 weeks ended July 28, 2012 to 42.0% in the 13 weeks ended August 3, 2013 primarily due to the high mix of PC entertainment sales in the prior year
18
comparable quarter due to the launch of
Diablo III
in that quarter. New PC entertainment software has a lower gross profit percentage than accessories, mobile or digital sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $19.3 million, or 4.4%, from $440.9 million in the
13 weeks ended July 28, 2012 to $421.6 million in the 13 weeks ended August 3, 2013. This decrease was primarily due to cost control activities as a result of the decline in sales at the end of the current console cycle and
lower store count. This was partially offset by changes in foreign exchange rates which had the effect of increasing expenses by $1.4 million when compared to the second quarter of fiscal 2012. Selling, general and administrative expenses as a
percentage of net sales increased from 28.4% in the 13 weeks ended July 28, 2012 to 30.5% in the 13 weeks ended August 3, 2013. The increase in selling, general and administrative expenses as a percentage of net sales was
primarily due to deleveraging of fixed costs as a result of the decrease in comparable store sales during the second quarter of fiscal 2013. Included in selling, general and administrative expenses is $6.0 million and $5.4 million in
stock-based compensation expense for the 13-week periods ended August 3, 2013 and July 28, 2012, respectively.
Depreciation and Amortization
Depreciation and amortization expense decreased $2.9 million, or 6.6%, from $43.9 million in the 13 weeks ended July 28, 2012 to $41.0 million in the 13 weeks ended August 3,
2013. This decrease was primarily due to a decrease in capital expenditures in recent years when compared to prior years, which included significant investments in our loyalty and digital initiatives, as well as a decrease in new store openings and
investments in management information systems.
Interest Income and Expense
Interest income from the investment of excess cash balances decreased slightly from $0.2 million in the
13 weeks ended July 28, 2012 to $0.1 million in the 13 weeks ended August 3, 2013. Interest expense increased slightly from $1.1 million in the 13 weeks ended July 28, 2012 to $1.4 million in the 13 weeks
ended August 3, 2013.
Income Tax
Income tax expense was $7.0 million, or 40.0% of earnings before income tax expense, for the 13 weeks ended
August 3, 2013 compared to $12.6 million, or 37.5% of earnings before income tax expense, for the 13 weeks ended July 28, 2012 and was based upon an estimate of our annualized effective tax rate. The higher effective tax rate for
the second quarter of fiscal 2013 was a result of the earnings mix in the foreign countries where we operate against overall lower earnings before income taxes.
Operating Earnings and Net Income
The factors described
above led to a decrease in operating earnings of $15.7 million from $34.5 million in the 13 weeks ended July 28, 2012 to $18.8 million in the 13 weeks ended August 3, 2013, and a decrease in consolidated net income
of $10.5 million from $21.0 million in the 13 weeks ended July 28, 2012 to $10.5 million in the 13 weeks ended August 3, 2013.
19
26 weeks ended August 3, 2013 compared with the 26 weeks ended July 28,
2012
Net Sales
Net sales decreased by $303.4 million, or 8.5%, from $3,552.4 million in the 26 weeks ended July 28, 2012 to $3,249.0 million in the 26 weeks ended August 3, 2013. The
decrease in net sales was primarily attributable to a decrease in comparable store sales of 8.4% for the 26 weeks ended August 3, 2013 when compared to the 26 weeks ended July 28, 2012 and changes related to foreign exchange rates, which
had the effect of decreasing sales by $4.1 million for the 26 weeks ended August 3, 2013 when compared to the 26 weeks ended July 28, 2012. The decrease in comparable store sales was primarily due to a decrease in sales across all
categories related to the late stages of the current console cycle.
New video game hardware sales decreased
$142.2 million, or 26.7%, from $531.8 million in the 26 weeks ended July 28, 2012 to $389.6 million in the 26 weeks ended August 3, 2013. The decrease in new video game hardware sales is primarily due to a decrease in
hardware unit sell-through related to being in the late stages of the current console cycle and higher sales of the Sony PlayStation Vita in the first half of fiscal 2012 due to its launch in the first quarter of that year. These sales declines were
offset partially by sales of the Nintendo Wii U which launched in the fourth quarter of fiscal 2012.
New
video game software sales decreased $71.9 million, or 6.0%, from $1,204.9 million in the 26 weeks ended July 28, 2012 to $1,133.0 million in the 26 weeks ended August 3, 2013, primarily due to declines in sales of catalog
software (software beyond its initial launch period) due to the late stages of the console cycle, partially offset by stronger sales of new release video game titles in the 26 weeks ended August 3, 2013 when compared to the 26 weeks
ended July 28, 2012.
Pre-owned video game product sales decreased $80.1 million, or 6.8%, from $1,181.4
million in the 26 weeks ended July 28, 2012 to $1,101.3 million in the 26 weeks ended August 3, 2013. The decrease in pre-owned video game product sales was primarily due to a decrease in store traffic related to lower video game
demand due to the late stages of the current console cycle.
Other product sales decreased by
$9.2 million, or 1.5%, from $634.3 million in the 26 weeks ended July 28, 2012 to $625.1 million in the 26 weeks ended August 3, 2013. The slight decrease in other product sales was primarily due to decreases in accessories
sales associated with hardware sales declines and lower PC entertainment software sales due to the launch of
Diablo III
in the prior year second quarter, almost entirely offset by increases in sales of mobile and digital products as we
continue to focus on expanding these lines of business.
As a percentage of net sales, new video game software
sales, pre-owned video game product sales and other product sales increased and new video game hardware sales decreased in the 26 weeks ended August 3, 2013 compared to the 26 weeks ended July 28, 2012. The change in the mix of sales was
primarily due to the decreases in new video game hardware sales as discussed above.
Cost of Sales
Cost of sales decreased by $243.9 million, or 10.0%, from $2,433.2 million in the 26 weeks ended
July 28, 2012 to $2,189.3 million in the 26 weeks ended August 3, 2013, primarily as a result of the decrease in sales discussed above and the changes in gross profit discussed below.
Gross Profit
Gross profit decreased by $59.5 million, or 5.3%, from $1,119.2 million in the 26 weeks ended July 28, 2012 to $1,059.7 million in the 26 weeks ended August 3, 2013. Gross
profit as a percentage of net sales increased from 31.5% in the 26 weeks ended July 28, 2012 to 32.6% in the 26 weeks ended August 3, 2013. The gross profit percentage increase was primarily due to the change in sales mix driven
by the decrease in new video
20
game hardware sales as a percentage of total net sales and the increase in gross profit as a percentage of sales on new video game hardware products and other video game products. Gross profit as
a percentage of sales on new video game hardware increased from 7.4% in the 26 weeks ended July 28, 2012 to 9.2% in the 26 weeks ended August 3, 2013 primarily due to an increase in the attachment rate of product replacement plan
sales on new hardware units when compared to the prior year. Gross profit as a percentage of sales on new video game software increased slightly from 21.4% in the 26 weeks ended July 28, 2012 to 21.8% in the 26 weeks ended
August 3, 2013. Gross profit as a percentage of sales on pre-owned video game products decreased from 48.6% in the 26 weeks ended July 28, 2012 to 47.3% in the 26 weeks ended August 3, 2013 primarily due to an increase in
promotional activities when compared to the prior year. Gross profit as a percentage of sales on other product sales increased from 39.2% in the 26 weeks ended July 28, 2012 to 40.9% in the 26 weeks ended August 3, 2013 primarily due
to the increase in mobile and digital sales and a decrease in sales of PC entertainment software in the second quarter of 2013 when compared to the second quarter of 2012. New PC entertainment software has a lower gross profit percentage than
accessories, mobile or digital sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses decreased by $10.5 million, or 1.2%, from $881.3 million in the
26 weeks ended July 28, 2012 to $870.8 million in the 26 weeks ended August 3, 2013. This decrease was primarily due to cost control activities as a result of the decline in sales at the end of the current console cycle and
lower store count. Selling, general and administrative expenses as a percentage of net sales increased from 24.8% in the 26 weeks ended July 28, 2012 to 26.8% in the 26 weeks ended August 3, 2013. The increase in selling, general
and administrative expenses as a percentage of net sales was primarily due to deleveraging of fixed costs as a result of the decrease in comparable store sales. Included in selling, general and administrative expenses is $11.5 million and $10.4
million in stock-based compensation expense for the 26 weeks ended August 3, 2013 and July 28, 2012, respectively.
Depreciation and Amortization
Depreciation and
amortization expense decreased $5.5 million, or 6.2%, from $88.4 million in the 26 weeks ended July 28, 2012 to $82.9 million in the 26 weeks ended August 3, 2013. This decrease was primarily due to a decrease in
capital expenditures in recent years when compared to prior years, which included significant investments in our loyalty and digital initiatives, as well as a decrease in new store openings and investments in management information systems.
Interest Income and Expense
Interest income from the investment of excess cash balances decreased slightly from $0.4 million in the 26 weeks ended July 28, 2012 to $0.2 million in the 26 weeks ended August 3, 2013.
Interest expense increased from $1.7 million in the 26 weeks ended July 28, 2012 to $2.4 million in the 26 weeks ended August 3, 2013.
Income Tax
Income tax expense was $38.7 million, or
37.3% of earnings before income tax expense, for the 26 weeks ended August 3, 2013 compared to $54.8 million, or 37.0% of earnings before income tax expense, for the 26 weeks ended July 28, 2012 and was based upon an
estimate of our annualized effective tax rate.
Operating Earnings and Net Income
The factors described above led to a decrease in operating earnings of $43.5 million from $149.5 million in the
26 weeks ended July 28, 2012 to $106.0 million in the 26 weeks ended August 3, 2013, and a decrease in consolidated net income of $28.3 million from $93.4 million in the 26 weeks ended July 28, 2012 to
$65.1 million in the 26 weeks ended August 3, 2013.
21
Noncontrolling Interests
The $0.1 million net loss attributable to noncontrolling interests for the 26 weeks ended July 28, 2012 represents
the portion of the minority interest stockholders net loss of our non-wholly owned subsidiaries included in our consolidated net income. The remaining noncontrolling interests were purchased during the second quarter of fiscal 2012.
Segment Performance
We operate our business in the following segments: United States, Australia, Canada and Europe. The following tables provide a summary of our net sales and operating earnings (loss) by reportable segment:
Net sales by operating segment are as follows:
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13 Weeks Ended
|
|
|
26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions)
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|
United States
|
|
$
|
942.4
|
|
|
$
|
1,058.5
|
|
|
$
|
2,295.3
|
|
|
$
|
2,517.8
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|
Canada
|
|
|
67.7
|
|
|
|
76.9
|
|
|
|
155.7
|
|
|
|
174.5
|
|
Australia
|
|
|
112.4
|
|
|
|
128.9
|
|
|
|
226.5
|
|
|
|
235.4
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|
Europe
|
|
|
261.2
|
|
|
|
285.9
|
|
|
|
571.5
|
|
|
|
624.7
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total
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$
|
1,383.7
|
|
|
$
|
1,550.2
|
|
|
$
|
3,249.0
|
|
|
$
|
3,552.4
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|
|
|
|
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|
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Operating earnings (loss) by segment are as follows:
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13 Weeks Ended
|
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26 Weeks Ended
|
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
August 3,
2013
|
|
|
July 28,
2012
|
|
|
|
(In millions)
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United States
|
|
$
|
43.4
|
|
|
$
|
40.6
|
|
|
$
|
136.2
|
|
|
$
|
155.7
|
|
Canada
|
|
|
(0.7
|
)
|
|
|
0.4
|
|
|
|
1.8
|
|
|
|
2.9
|
|
Australia
|
|
|
1.1
|
|
|
|
3.7
|
|
|
|
2.6
|
|
|
|
2.3
|
|
Europe
|
|
|
(25.0
|
)
|
|
|
(10.2
|
)
|
|
|
(34.6
|
)
|
|
|
(11.4
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18.8
|
|
|
$
|
34.5
|
|
|
$
|
106.0
|
|
|
$
|
149.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
Segment results for the United States include retail operations in all 50 states, the District of Columbia, Puerto
Rico and Guam, the electronic commerce Web site
www.gamestop.com
,
Game Informer
magazine,
www.kongregate.com
, a digital PC game distribution platform available at
www.gamestop.com/pcgames
, Spawn Labs and an online
consumer electronics marketplace available at
www.buymytronics.com
. As of August 3, 2013, the United States segment included 4,290 GameStop stores, compared to 4,448 stores on July 28, 2012.
Net sales for the 13 weeks ended August 3, 2013 decreased $116.1 million, or 11.0%, compared to the 13 weeks ended
July 28, 2012 due primarily to a 10.2% decrease in comparable store sales. The decrease in comparable store sales was primarily due to a decrease in sales across all categories due to the late stages of the current console cycle. The decrease
in new video game hardware sales is primarily due to a decrease in hardware unit sell-through related to being in the late stages of the current console cycle and higher sales of the Sony PlayStation Vita which launched in the first quarter of
fiscal 2012. These sales declines were partially offset by the sales of the Nintendo Wii U which launched in the fourth quarter of fiscal 2012. The decrease in new video
22
game software sales in the second quarter of fiscal 2013 is primarily due to a reduction in new software title launches as compared to the second quarter of fiscal 2012 coupled with declining
consumer demand due to the late stages of the console cycle. The decrease in pre-owned video game product sales in the second quarter of fiscal 2013 was primarily due to a decrease in store traffic related to lower video game demand due to the late
stages of the current console cycle. The decrease in other product sales in the second quarter of fiscal 2013 was primarily due to decreases in sales of accessories and lower sales of PC entertainment software as compared to the second quarter of
fiscal 2012 due to the launch of
Diablo III
, offset partially by increases in sales of mobile and digital products.
Net sales for the 26 weeks ended August 3, 2013 decreased $222.5 million, or 8.8%, compared to the 26 weeks ended July 28, 2012 due primarily to a 8.2% decrease in comparable store sales. The
decrease in comparable store sales was primarily due to a decrease in sales across all categories. The decrease in new video game hardware sales is primarily due to a decrease in hardware unit sell-through related to being in the late stages of the
current console cycle and higher sales of the Sony PlayStation Vita which launched in the first quarter of fiscal 2012. The decrease in new video game software sales is primarily due to declines in sales of catalog software due to the late stages of
the current console cycle in the 26 weeks ended August 3, 2013 when compared to the 26 weeks ended July 28, 2012. The decrease in pre-owned video game product sales is due primarily to a decrease in store traffic related to the lack of new
release video game titles in the 26 weeks ended August 3, 2013 when compared to the 26 weeks ended July 28, 2012 and lower hardware demand due to the late stages of the current console cycle. The decrease in other product sales is due
primarily to decreases in sales of accessories and lower sales of PC entertainment software as compared to the second quarter of fiscal 2012 due to the launch of
Diablo III
, almost entirely offset by increases in sales of mobile and digital
products.
Segment operating earnings for the 13 weeks ended August 3, 2013 increased by $2.8 million
compared to the 13 weeks ended July 28, 2012, driven primarily by cost control and a higher product margin. Segment operating income decreased $19.5 million for the 26 weeks ended August 3, 2013 compared to the 26 weeks ended July 28,
2012, driven primarily by the decrease in comparable store sales.
Canada
Segment results for Canada include retail operations in Canada and their e-commerce site. As of August 3, 2013, the
Canadian segment had 334 stores compared to 341 stores as of July 28, 2012. Net sales in the Canadian segment in the 13 and 26 weeks ended August 3, 2013 decreased 12.0% and 10.8%, respectively, compared to the 13 and 26 weeks ended
July 28, 2012. The decrease in net sales was primarily due to a decrease in comparable store sales of 8.7% and 7.3%, respectively, and the impact of changes in exchange rates, which had the effect of decreasing sales by $1.0 million and $3.0
million, respectively, in the 13 and 26 weeks ended August 3, 2013 when compared to the same periods in fiscal 2012. Excluding the impact of changes in exchange rates, net sales in the Canadian segment decreased by 10.7% and 9.1% in the 13 and
26 weeks ended August 3, 2013, respectively, compared to the same periods in fiscal 2012. The decrease in comparable store sales was primarily due to a decrease in store traffic related to lower video game demand due to the late stages of the
current console cycle and a decrease in sales of PC entertainment software due primarily to the release of
Diablo III
in the second quarter of fiscal 2012.
Segment operating earnings for both the 13 and 26 weeks ended August 3, 2013 decreased by $1.1 million, compared to
the 13 and 26 weeks ended July 28, 2012, due primarily to a decrease in gross profit due to lower sales for the 13 and 26 weeks ended August 3, 2013 when compared to the prior year periods.
Australia
Segment results for Australia include retail operations and e-commerce sites in Australia and New Zealand. As of August 3, 2013, the Australian segment included 414 stores, compared to 416 stores as
of July 28, 2012. Net sales for the 13 and 26 weeks ended August 3, 2013 decreased 12.8% and 3.8%, respectively, compared to the 13 and 26 weeks ended July 28, 2012. The decrease in net sales for the 13 weeks ended August 3, 2013
was
23
primarily due to a decrease in comparable store sales of 6.5%, and the impact of changes in exchange rates, which had the effect of decreasing sales by $7.3 million when compared to the same
period in fiscal 2012. The decrease in comparable store sales in the second quarter of fiscal 2013 was primarily due to a decrease in store traffic related to lower video game demand due to the late stages of the current console cycle and a decrease
in sales of PC entertainment software due primarily to the release of
Diablo III
in the second quarter of fiscal 2012. The decrease in net sales for the 26 weeks ended August 3, 2013 was attributable to the impact of exchange rates,
which had the effect of decreasing sales by $9.2 million when compared to the same period in fiscal 2012. Excluding the impact of changes in exchange rates, net sales in the Australian segment decreased by 7.1% and increased by 0.1% in the 13 and 26
weeks ended August 3, 2013, respectively, compared to the same periods in fiscal 2012.
Segment operating
income in the 13 and 26 weeks ended August 3, 2013 decreased by $2.6 million and increased by $0.3 million, respectively, when compared to the 13 and 26 weeks ended July 28, 2012. The decrease in segment operating income for the 13 weeks
ended August 3, 2013 when compared to the same period of the prior year is primarily due to a decrease in gross margin due to lower sales for the 13 weeks ended August 3, 2013. Segment operating income for the 26 weeks ended August 3,
2013 was relatively flat when compared to the same period in fiscal 2012.
Europe
Segment results for Europe include retail store operations in 11 European countries and e-commerce sites in six
countries. As of August 3, 2013, the European segment included 1,467 stores compared to 1,423 stores as of July 28, 2012. For the 13 and 26 weeks ended August 3, 2013, European net sales decreased 8.6% and 8.5%, respectively, compared
to the 13 and 26 weeks ended July 28, 2012. Excluding the impact of changes in exchange rates, net sales in the European segment decreased 12.2% and 9.8%, respectively, in the 13 and 26 weeks ended August 3, 2013 when compared to the prior
year periods. This decrease in sales is primarily due to a decrease in comparable store sales of 14.5% and 12.5%, respectively, in the 13 and 26 weeks ended August 3, 2013. The decrease in sales at comparable stores was primarily due to weak
consumer traffic and a slow-down in hardware unit sell-through as a result of being in the late stages of the current console cycle, and a decrease in sales of PC entertainment software due primarily to the release of
Diablo III
in the second
quarter of fiscal 2012.
The segment operating loss in Europe in the 13 and 26 weeks ended August 3, 2013
compared to the operating loss in the 13 and 26 weeks ended July 28, 2012 increased by $14.8 million and $23.2 million, respectively. The increase in the operating loss for the 13 and 26 weeks ended August 3, 2013 compared to the 13 and 26
weeks ended July 28, 2012 is primarily due to the decrease in comparable store sales discussed above. The operating loss also included the unfavorable impact of changes in exchange rates, which had the effect of increasing the operating loss by
$0.7 million and $0.5 million, respectively for the 13 and 26 weeks ended August 3, 2013.
Seasonality
Our business, like that of many retailers, is seasonal, with the major portion of the net sales and operating profit
realized during the fourth fiscal quarter which includes the holiday selling season.
Liquidity and Capital Resources
Cash Flows
During the 26 weeks ended August 3, 2013, cash used in operations was $274.6 million, compared to cash used in operations of $173.8 million during the 26 weeks ended July 28,
2012. The increase in cash used in operations of $100.8 million was primarily due to an increase in cash used in operations for working capital which increased $55.6 million from $359.3 million in the 26 weeks ended July 28, 2012 to $414.9
million in the 26 weeks ended August 3, 2013. The increase in cash used in operations for working capital was due primarily to
24
the change in cash related to accounts payable and accrued liabilities and the change in the payment of income taxes from year to year. The increase in cash used related to accounts payable and
accrued liabilities for the 26 weeks ended August 3, 2013 compared to the 26 weeks ended July 28, 2012 was primarily due to changes in the timing of trade payable payments. Our business is highly seasonal, with a disproportionate
amount of sales and purchases occurring in the fourth quarter of each year. During the first 26 weeks of each fiscal year, we have traditionally had a significant use of cash associated with the pay down of accounts payable from
year-end. Due to the late stages of the current console cycle, we have decreased purchases of new products and our inventory mix is shifting towards more pre-owned products, including pre-owned mobile products that do not have offsetting
accounts payable. These factors also negatively impacted our accounts payable leverage during the quarter. Cash used in operations was also impacted by a $15.7 million increase in cash used for other long-term liabilities. This increase is primarily
a result of a $17.9 million payment made to settle certain U.S. federal income tax items. Additionally, the increase in cash used in operations was also attributed to a $29.5 million decrease in net income adjusted for noncash items.
Cash used in investing activities was $45.9 million and $57.2 million during the 26 weeks ended
August 3, 2013 and July 28, 2012, respectively. During the 26 weeks ended August 3, 2013, $47.3 million of cash was used primarily to invest in information systems, invest in digital initiatives and open new stores and
remodel existing stores in the U.S. and internationally. During the 26 weeks ended July 28, 2012, $53.6 million of cash was used primarily to invest in information systems, invest in digital initiatives and open new stores and remodel
existing stores in the U.S. and internationally.
Cash used in financing activities was $88.2 million and
$284.9 million for the 26 weeks ended August 3, 2013 and July 28, 2012, respectively. The cash used in financing activities for the 26 weeks ended August 3, 2013 was primarily due to the purchase of $114.4 million of
treasury shares and the payment of dividends on our Class A Common Stock of $66.2 million, offset partially by the cash received from net Revolver (as defined below) borrowings of $50 million and the issuance of shares associated with stock
option exercises of $39.3 million. The cash used in financing activities for the 26 weeks ended July 28, 2012 was primarily due to the purchase of $246.6 million of treasury shares and the payment of dividends on our Class A Common
Stock of $40.3 million. In addition, we borrowed and repaid $36.0 million against our Revolver during the 26 weeks ended July 28, 2012.
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 and consist primarily of
time deposits with highly rated commercial banks.
On January 4, 2011, we entered into a $400
million credit agreement (the Revolver), which amended and restated, in its entirety, our prior credit agreement entered into in October 2005 (the Credit Agreement). The Revolver provides for a five-year, $400 million
asset-based facility, including a $50 million letter of credit sublimit, secured by substantially all of the Companys and its domestic subsidiaries assets. We have the ability to increase the facility, which matures in January 2016, by
$150 million under certain circumstances. The extension of the Revolver to 2016 reduces our exposure to potential tightening or other adverse changes in the credit markets.
The availability under the Revolver is limited to a borrowing base which allows us to borrow up to 90% of the appraisal
value of the inventory, in each case plus 90% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount available to borrow by their face value. Our ability to pay cash dividends, redeem options and repurchase
shares is generally permitted, except under certain circumstances, including if Revolver excess availability is less than 20%, or is projected to be within 12 months after such payment. In addition, if Revolver usage is projected to be equal to or
greater than 25% of total commitments during the prospective 12-month period, we are subject to meeting a fixed charge coverage ratio of 1.1:1.0 prior to making such payments. In the event that excess availability under the Revolver is at any time
less than the
25
greater of (1) $40.0 million or (2) 12.5% of the lesser of the total commitment or the borrowing base, we will be subject to a fixed charge coverage ratio covenant of 1.1:1.0.
The Revolver places certain restrictions on us and our subsidiaries, including limitations on asset sales,
additional liens, investments, loans, guarantees, acquisitions and the incurrence of additional indebtedness. Absent consent from our lenders, we may not incur more than $750 million of additional unsecured indebtedness to be limited to $250
million in general unsecured obligations and $500 million in unsecured obligations to finance acquisitions valued at $500 million or more. The per annum interest rate under the Revolver is variable and is calculated by applying a margin (1) for
prime rate loans of 1.25% to 1.50% above the highest of (a) the prime rate of the administrative agent, (b) the federal funds effective rate plus 0.50% or (c) the London Interbank Offered (LIBO) rate for a 30-day interest
period as determined on such day plus 1.00%, and (2) for LIBO rate loans of 2.25% to 2.50% above the LIBO rate. The applicable margin is determined quarterly as a function of our average daily excess availability under the facility. In
addition, we are required to pay a commitment fee of 0.375% or 0.50%, depending on facility usage, for any unused portion of the total commitment under the Revolver. As of August 3, 2013, the applicable margin was 1.25% for prime rate loans and
2.25% for LIBO rate loans, while the required commitment fee was 0.50% for the unused portion of the Revolver.
The Revolver provides for customary events of default with corresponding grace periods, including failure to pay any
principal or interest when due, failure to comply with covenants, any material representation or warranty made by us or the borrowers proving to be false in any material respect, certain bankruptcy, insolvency or receivership events affecting
us or our subsidiaries, defaults relating to certain other indebtedness, imposition of certain judgments and mergers or the liquidation of the Company or certain of its subsidiaries. As of August 3, 2013, total availability under the
Revolver was $253.3 million, there was $50.0 million of borrowings outstanding under the Revolver and standby letters of credit outstanding totaled $9.0 million. During the 26 weeks ended July 28, 2012, we borrowed and repaid $36.0 million
under the Revolver. Average borrowings under the Revolver for the 13 weeks and 26 weeks ended August 3, 2013 were $44.2 million and $22.1 million, respectively. Our average interest rate on those borrowings for the 13 weeks and 26 weeks ended
August 3, 2013 was 2.9% for both periods. We are currently in compliance with the requirements of the Revolver.
In September 2007, our Luxembourg subsidiary entered into a discretionary $20.0 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 is available to our 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 August 3, 2013, there were no cash overdrafts outstanding under the Line of Credit and bank guarantees outstanding totaled $4.6 million.
Uses of Capital
Our future capital requirements will depend on the number of new stores we open and the timing of those openings within a given fiscal year, as well as the investments we will make in e-commerce, digital
and other strategic initiatives. We opened 72 stores in the 26 weeks ended August 3, 2013 and we expect to open approximately 115 stores in fiscal 2013, including the 44 stores acquired in France during the first quarter. Capital
expenditures for fiscal 2013 are projected to be approximately $135 million, to be used primarily to fund continued digital initiatives, new store openings, store remodels and invest in distribution and information systems in support of
operations.
Since 2010, our Board of Directors has from time to time authorized the repurchase of our common
stock. Our current authorization, made in November 2012, allows us to repurchase up to $500 million of shares. During the 26 weeks ended August 3, 2013, we repurchased 3.4 million shares for an average price per share of $33.58, leaving
$310.9 million available under the November 2012 authorization. As of September 4, 2013, we have purchased an additional 0.3 million shares of our Class A Common Stock for an average price per share of $50.27 since August 3,
2013, leaving $296.9 million available under this authorization. The amounts, timing and
26
prices of share repurchases that are effected under the Companys share repurchase programs, pursuant to such authorizations, are directed by our senior management.
During the first quarter of fiscal 2012, our Board of Directors approved the initiation of a quarterly cash dividend to
our stockholders of Class A Common Stock. During the 26 week periods ended August 3, 2013 and July 28, 2012, we paid $66.2 million and $40.3 million, respectively, in dividends. During the first and second quarters of fiscal 2012, we
declared cash dividends of $0.15 per share for each quarter. During the first and second quarters of fiscal 2013, we declared cash dividends of $0.275 per share for each quarter. Our Board of Directors approved a quarterly cash dividend to our
stockholders of $0.275 per Class A common share payable on September 19, 2013 to stockholders of record at the close of business on September 3, 2013. Future dividends will be subject to approval by our Board of Directors.
Based on our current operating plans, we believe that available cash balances, cash generated from our operating
activities and funds available under the Revolver will be sufficient to fund our operations, digital initiatives, store openings and remodeling activities and corporate capital expenditure programs, including the payment of dividends declared by the
Board of Directors, for at least the next 12 months.
Recent Accounting Pronouncements
In July 2013, accounting standards update (ASU) 2013-11
Income Taxes (Topic 740): Presentation of an
Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
was issued requiring an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the
financial statements as either a reduction to a deferred tax asset or separately as a liability depending on the existence, availability and/or use of an operating loss carry forward, a similar tax loss, or a tax credit carry forward. This ASU
will be effective for us beginning the first quarter of 2014. We do not expect that this ASU will have an impact on our consolidated financial statements as we currently do not have any unrecognized tax benefits in the same jurisdictions in which we
have tax loss or credit carryovers.
In March 2013, ASU 2013-05
Foreign Currency Matters (Topic
830)
was issued providing guidance with respect to the release of cumulative translation adjustments into net income when a parent company sells either a part or all of an investment in a foreign entity. The ASU requires the release of
cumulative translation adjustments when a company no longer holds a controlling financial interest in a foreign subsidiary or a group of assets that constitutes a business within a foreign entity. This ASU will be effective for us beginning the
first quarter of 2014. We are evaluating the effect of this ASU, but do not expect it to have a significant impact on our condensed consolidated financial statements.
In February 2013, ASU 2013-02
Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of
Accumulated Other Comprehensive Income
was issued regarding disclosure of amounts reclassified out of accumulated other comprehensive income by component. An entity is required to present either on the face of the statement of operations
or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same
reporting period. For amounts not reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This ASU was effective for our annual and interim
periods beginning in fiscal 2013. The ASU had no effect on our condensed 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
27
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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the introduction of next-generation consoles, the features of such consoles, including any restrictions or conditions that may adversely affect our
pre-owned business or the ability to play prior generation video games on such consoles, and the impact on demand for existing products;
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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 Europe, the electronic game industry and
the retail industry;
|
|
|
|
alternate sources of distribution of video game software and content;
|
|
|
|
alternate means to play video games;
|
|
|
|
the competitive environment in the electronic game industry;
|
|
|
|
the growth of mobile, social and browser gaming;
|
|
|
|
our ability to open and operate new stores and to efficiently close underperforming stores;
|
|
|
|
our ability to attract and retain qualified personnel;
|
|
|
|
our ability to effectively integrate and operate acquired companies, including digital gaming and technology-based companies that are outside of the
Companys historical operating expertise;
|
|
|
|
the impact and costs of litigation and regulatory compliance;
|
|
|
|
unanticipated litigation results, including third-party litigation;
|
|
|
|
the amounts, timing and prices of any share repurchases made by the Company under its share repurchase programs;
|
|
|
|
the risks involved with our international operations, including continued efforts to consolidate back-office support and close under-performing
stores; 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, seeks, should, 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.
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