Table of Contents
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q

þ	 	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	FOR THE QUARTERLY PERIOD ENDED AUGUST 2, 2008	
OR	
o	 	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 	 	FOR THE TRANSITION PERIOD FROM TO	
 
COMMISSION FILE NO. 1-32637
 
GameStop Corp.
(Exact name of registrant as specified in its Charter)

Delaware	 	20-2733559	
(State or other jurisdiction of
incorporation or organization)	 	(I.R.S. Employer
Identification No.)	
 	 	 	
625 Westport Parkway,
Grapevine, Texas	 	76051
(Zip Code)	
(Address of principal executive offices)	 	 	
 
Registrant’s telephone number, including area code:
(817) 424-2000
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  þ      No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	 	Accelerated filer o	 	Non-accelerated filer o	 	Smaller reporting company  o	
 	 	(Do not check if a smaller reporting company)       	
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o      No  þ
 
Number of shares of $.001 par value Class A Common Stock outstanding as of August 28, 2008: 163,714,623

 
 
TABLE OF CONTENTS

 	 	 	 	Page No.	
 	 	 	 	 	 	 	 	 	
PART I — FINANCIAL INFORMATION	
 	Item 1.	 	 	Financial Statements	 	 	2	 	
 	 	 	 	Condensed Consolidated Balance Sheets — August 2, 2008 (unaudited), August 4, 2007 (unaudited) and February 2, 2008	 	 	2	 	
 	 	 	 	Condensed Consolidated Statements of Operations (unaudited) — For the 13 weeks and 26 weeks ended August 2, 2008 and August 4, 2007	 	 	3	 	
 	 	 	 	Condensed Consolidated Statement of Stockholders’ Equity (unaudited) — August 2, 2008	 	 	4	 	
 	 	 	 	Condensed Consolidated Statements of Cash Flows (unaudited) — For the 26 weeks ended August 2, 2008 and August 4, 2007	 	 	5	 	
 	 	 	 	Notes to Condensed Consolidated Financial Statements	 	 	6	 	
 	Item 2.	 	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	 	 	23	 	
 	Item 3.	 	 	Quantitative and Qualitative Disclosures About Market Risk	 	 	34	 	
 	Item 4.	 	 	Controls and Procedures	 	 	35	 	
 	
PART II — OTHER INFORMATION	
 	Item 1.	 	 	Legal Proceedings	 	 	35	 	
 	Item 1A.	 	 	Risk Factors	 	 	36	 	
 	Item 4.	 	 	Submission of Matters to a Vote of Security Holders	 	 	36	 	
 	Item 6.	 	 	Exhibits	 	 	37	 	
SIGNATURES	 	 	40	 	
EXHIBIT INDEX	 	 	41	 	
 Certification of CEO Pursuant to Section 302	
 Certification of CFO Pursuant to Section 302	
 Certification of CEO Pursuant to Section 906	
 Certification of CFO Pursuant to Section 906	

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PART I — FINANCIAL INFORMATION

ITEM 1.  	Financial Statements	
 
GAMESTOP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 	 	August 2,
	 	 	August 4,
	 	 	February 2,
	 	
 	 	2008	 	 	2007	 	 	2008	 	
 	 	(Unaudited)	 	 	(Unaudited)	 	 	 	 	
 	 	(In thousands, except per share data)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
ASSETS:	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	539,898	 	 	$	349,277	 	 	$	857,414	 	
Receivables, net	 	 	60,966	 	 	 	29,798	 	 	 	56,019	 	
Merchandise inventories, net	 	 	970,057	 	 	 	713,836	 	 	 	801,025	 	
Prepaid expenses and other current assets	 	 	68,470	 	 	 	51,951	 	 	 	52,778	 	
Prepaid taxes	 	 	58,689	 	 	 	74,952	 	 	 	—	 	
Deferred taxes	 	 	26,893	 	 	 	35,979	 	 	 	27,481	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	 	 	1,724,973	 	 	 	1,255,793	 	 	 	1,794,717	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Property and equipment:	 	 	 	 	 	 	 	 	 	 	 	 	
Land	 	 	12,033	 	 	 	11,298	 	 	 	11,870	 	
Buildings and leasehold improvements	 	 	414,896	 	 	 	334,904	 	 	 	378,611	 	
Fixtures and equipment	 	 	583,734	 	 	 	477,492	 	 	 	538,738	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total property and equipment	 	 	1,010,663	 	 	 	823,694	 	 	 	929,219	 	
Less accumulated depreciation and amortization	 	 	485,665	 	 	 	349,927	 	 	 	417,550	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net property and equipment	 	 	524,998	 	 	 	473,767	 	 	 	511,669	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill, net	 	 	1,447,572	 	 	 	1,402,845	 	 	 	1,402,440	 	
Deferred financing fees	 	 	7,656	 	 	 	11,406	 	 	 	8,963	 	
Deferred taxes	 	 	31,863	 	 	 	7,677	 	 	 	26,332	 	
Other noncurrent assets	 	 	35,335	 	 	 	30,017	 	 	 	31,770	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other assets	 	 	1,522,426	 	 	 	1,451,945	 	 	 	1,469,505	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	3,772,397	 	 	$	3,181,505	 	 	$	3,775,891	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY:	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	692,098	 	 	$	517,233	 	 	$	844,376	 	
Accrued liabilities	 	 	389,009	 	 	 	339,940	 	 	 	409,878	 	
Note payable, current portion	 	 	—	 	 	 	12,173	 	 	 	—	 	
Taxes payable	 	 	—	 	 	 	—	 	 	 	6,303	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	1,081,107	 	 	 	869,346	 	 	 	1,260,557	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior notes payable, long-term portion, net	 	 	545,220	 	 	 	573,993	 	 	 	574,473	 	
Senior floating rate notes payable, long-term portion	 	 	—	 	 	 	120,000	 	 	 	—	 	
Deferred rent and other long-term liabilities	 	 	82,299	 	 	 	72,492	 	 	 	78,415	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total long-term liabilities	 	 	627,519	 	 	 	766,485	 	 	 	652,888	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	1,708,626	 	 	 	1,635,831	 	 	 	1,913,445	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Commitments and contingencies (Note 10) 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred stock — authorized 5,000 shares; no shares issued or outstanding	 	 	—	 	 	 	—	 	 	 	—	 	
Class A common stock — $.001 par value; authorized 300,000 shares; 163,653, 158,993 and 161,007 shares issued and outstanding, respectively	 	 	164	 	 	 	159	 	 	 	161	 	
Additional paid-in-capital	 	 	1,288,727	 	 	 	1,145,706	 	 	 	1,208,474	 	
Accumulated other comprehensive income	 	 	33,384	 	 	 	19,359	 	 	 	31,603	 	
Retained earnings	 	 	741,496	 	 	 	380,450	 	 	 	622,208	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	2,063,771	 	 	 	1,545,674	 	 	 	1,862,446	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	3,772,397	 	 	$	3,181,505	 	 	$	3,775,891	 	

See accompanying notes to condensed consolidated financial statements.
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GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(In thousands, except per share data)	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	$	1,804,420	 	 	$	1,338,193	 	 	$	3,618,037	 	 	$	2,617,176	 	
Cost of sales	 	 	1,320,297	 	 	 	976,894	 	 	 	2,660,508	 	 	 	1,907,108	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	484,123	 	 	 	361,299	 	 	 	957,529	 	 	 	710,068	 	
Selling, general and administrative expenses	 	 	347,745	 	 	 	278,434	 	 	 	676,412	 	 	 	535,550	 	
Depreciation and amortization	 	 	36,309	 	 	 	32,118	 	 	 	71,145	 	 	 	63,153	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings	 	 	100,069	 	 	 	50,747	 	 	 	209,972	 	 	 	111,365	 	
Interest income	 	 	(1,628	)	 	 	(2,736	)	 	 	(6,570	)	 	 	(6,564	)	
Interest expense	 	 	10,839	 	 	 	16,082	 	 	 	24,269	 	 	 	34,026	 	
Debt extinguishment expense	 	 	—	 	 	 	2,027	 	 	 	2,331	 	 	 	8,751	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income tax expense	 	 	90,858	 	 	 	35,374	 	 	 	189,942	 	 	 	75,152	 	
Income tax expense	 	 	33,695	 	 	 	13,564	 	 	 	70,654	 	 	 	28,619	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	57,163	 	 	$	21,810	 	 	$	119,288	 	 	$	46,533	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per common share-basic	 	$	0.35	 	 	$	0.14	 	 	$	0.73	 	 	$	0.30	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares of common stock-basic	 	 	163,390	 	 	 	158,438	 	 	 	162,607	 	 	 	155,938	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per common share-diluted	 	$	0.34	 	 	$	0.13	 	 	$	0.71	 	 	$	0.29	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares of common stock-diluted	 	 	168,067	 	 	 	164,769	 	 	 	167,722	 	 	 	163,013	 	

See accompanying notes to condensed consolidated financial statements.
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GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

 	 	Class A
	 	 	 	 	 	Accumulated
	 	 	 	 	 	 	 	
 	 	Common Stock	 	 	Additional
	 	 	Other
	 	 	 	 	 	 	 	
 	 	 	 	 	Common
	 	 	Paid-in
	 	 	Comprehensive
	 	 	Retained
	 	 	 	 	
 	 	Shares	 	 	Stock	 	 	Capital	 	 	Income	 	 	Earnings	 	 	Total	 	
 	 	(In thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at February 2, 2008	 	 	161,007	 	 	$	161	 	 	$	1,208,474	 	 	$	31,603	 	 	$	622,208	 	 	$	1,862,446	 	
Comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings for the 26 weeks ended August 2, 2008	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	 	 	119,288	 	 	 	 	 	
Foreign currency translation	 	 	—	 	 	 	—	 	 	 	—	 	 	 	1,781	 	 	 	—	 	 	 	 	 	
Total comprehensive income	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	121,069	 	
Stock-based compensation	 	 	—	 	 	 	—	 	 	 	20,068	 	 	 	—	 	 	 	—	 	 	 	20,068	 	
Exercise of stock options and issuance of shares upon vesting of restricted stock grants (including tax benefit of $36,075)	 	 	2,646	 	 	 	3	 	 	 	60,185	 	 	 	—	 	 	 	—	 	 	 	60,188	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance at August 2, 2008	 	 	163,653	 	 	$	164	 	 	$	1,288,727	 	 	$	33,384	 	 	$	741,496	 	 	$	2,063,771	 	

See accompanying notes to condensed consolidated financial statements.
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GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	
 	 	(In thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net earnings	 	$	119,288	 	 	$	46,533	 	
Adjustments to reconcile net earnings to net cash flows used in operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization (including amounts in cost of sales)	 	 	71,802	 	 	 	63,625	 	
Amortization and retirement of deferred financing fees	 	 	1,304	 	 	 	3,228	 	
Amortization and retirement of original issue discount on senior notes	 	 	747	 	 	 	682	 	
Stock-based compensation expense	 	 	20,068	 	 	 	13,645	 	
Deferred taxes	 	 	(3,235	)	 	 	(1,282	)	
Excess tax benefits realized from exercise of stock-based awards	 	 	(33,010	)	 	 	(62,555	)	
Loss on disposal of property and equipment	 	 	2,634	 	 	 	1,527	 	
Increase in deferred rent and other long-term liabilities	 	 	3,794	 	 	 	6,312	 	
Increase in liability to landlords for tenant allowances, net	 	 	2,358	 	 	 	1,689	 	
Change in the value of foreign exchange contracts	 	 	(1,035	)	 	 	320	 	
Changes in operating assets and liabilities, net 	 	 	 	 	 	 	 	 	
Receivables, net	 	 	(3,829	)	 	 	5,647	 	
Merchandise inventories	 	 	(152,817	)	 	 	(19,720	)	
Prepaid expenses and other current assets	 	 	(13,235	)	 	 	(9,024	)	
Prepaid taxes	 	 	(31,693	)	 	 	6,129	 	
Accounts payable and accrued liabilities	 	 	(193,340	)	 	 	(253,394	)	
 	 	 	 	 	 	 	 	 	
Net cash flows used in operating activities	 	 	(210,199	)	 	 	(196,638	)	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Purchase of property and equipment	 	 	(81,540	)	 	 	(71,388	)	
Acquisitions, net of cash acquired	 	 	(50,299	)	 	 	1,062	 	
 	 	 	 	 	 	 	 	 	
Net cash flows used in investing activities	 	 	(131,839	)	 	 	(70,326	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Repurchase of notes payable	 	 	(30,000	)	 	 	(150,000	)	
Issuance of shares relating to stock options	 	 	26,738	 	 	 	46,782	 	
Excess tax benefits realized from exercise of stock-based awards	 	 	33,010	 	 	 	62,555	 	
Net increase (decrease) in other noncurrent assets and deferred financing fees	 	 	(5,219	)	 	 	3,528	 	
 	 	 	 	 	 	 	 	 	
Net cash flows provided by (used in) financing activities	 	 	24,529	 	 	 	(37,135	)	
 	 	 	 	 	 	 	 	 	
Exchange rate effect on cash and cash equivalents	 	 	(7	)	 	 	973	 	
 	 	 	 	 	 	 	 	 	
Net decrease in cash and cash equivalents	 	 	(317,516	)	 	 	(303,126	)	
Cash and cash equivalents at beginning of period	 	 	857,414	 	 	 	652,403	 	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	539,898	 	 	$	349,277	 	

See accompanying notes to condensed consolidated financial statements.
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)

1.  	Basis of Presentation	
 
GameStop Corp. (together with its predecessor companies, “GameStop,” “we,” “our,” or the “Company”), a Delaware corporation, is the world’s largest retailer of video games and entertainment software. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. All dollar and share amounts in the consolidated financial statements and notes to the consolidated financial statements are stated in thousands of U.S. dollars unless otherwise indicated.
 
The unaudited consolidated financial statements included herein reflect all adjustments (consisting only of normal, recurring adjustments) which are, in the opinion of the Company’s management, necessary for a fair presentation of the information for the periods presented. These unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and do not include all disclosures required under GAAP for complete financial statements. These consolidated financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the 52 weeks ended February 2, 2008 (“fiscal 2007”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. Changes in the estimates and assumptions used by management could have significant impact on the Company’s 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 2, 2008 are not indicative of the results to be expected for the 52 weeks ending January 31, 2009 (“fiscal 2008”).
 
Certain reclassifications have been made to conform the prior period data to the current interim period presentation.

2.  	Change in Accounting Principles	
 
Effective February 3, 2008, the Company implemented Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 157,  Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for its measurement and expands disclosures about fair value measurements. The Company elected to implement this Statement with the one-year deferral permitted by FASB Staff Position (“FSP”) 157-2 for nonfinancial assets and nonfinancial liabilities measured at fair value, except those that are recognized or disclosed on a recurring basis (at least annually). We do not expect any significant impact to our consolidated financial statements when we implement SFAS 157 for these assets and liabilities.
 
Due to our election under FSP 157-2, for fiscal 2008, SFAS 157 applies to our foreign exchange contracts, foreign currency options and cross-currency swaps (together, the “Foreign Currency Contracts”), Company-owned life insurance policies with a cash surrender value and certain nonqualified deferred compensation liabilities that are measured at fair value on a recurring basis in periods subsequent to initial recognition. The implementation of SFAS 157 did not result in a significant change in the method of calculating fair value of assets or liabilities. The primary impact from adoption was additional disclosures.
 
SFAS 157 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly through market-
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.
 
We value our Foreign Currency Contracts, Company-owned life insurance policies with cash surrender values and certain nonqualified deferred compensation liabilities based on Level 2 inputs using quotations provided by major market news services, such as Bloomberg and The Wall Street Journal, and industry-standard models that consider various assumptions, including quoted forward prices, time value, volatility factors, and contractual prices for the underlying instruments, as well as other relevant economic measures. When appropriate, valuations are adjusted to reflect credit considerations, generally based on available market evidence.
 
The following table provides the fair value of our financial assets and liabilities measured on a recurring basis and recorded on our condensed consolidated balance sheet as of August 2, 2008:

 	 	August 2, 2008	 	
 	 	Level 2	 	
 	 	(In thousands)	 	
 	 	 	 	 	
Assets	 	 	 	 	
Foreign Currency Contracts	 	$	2,951	 	
Company-owned life insurance	 	 	3,220	 	
 	 	 	 	 	
Total assets	 	$	6,171	 	
 	 	 	 	 	
Liabilities	 	 	 	 	
Foreign Currency Contracts	 	$	11,165	 	
Non-qualified deferred compensation	 	 	1,424	 	
 	 	 	 	 	
Total liabilities	 	$	12,589	 	

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  (“SFAS 159”). This Statement permits entities the option to measure many financial instruments and certain other items at fair value at specific election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 was effective for our Company on February 3, 2008. The adoption of SFAS 159 did not have a material impact on our consolidated financial statements.

3.  	Business Combinations and Goodwill	
 
On April 5, 2008, the Company purchased all the outstanding stock of Free Record Shop Norway AS, a Norwegian private limited liability company (“FRS”), for $21,006, net of cash acquired. FRS operates 49 record stores in Norway and also operates office and warehouse facilities in Oslo, Norway. The Company is converting these stores into video game stores with an inventory assortment similar to its other stores in Norway. The acquisition was accounted for using the purchase method of accounting, with the excess of the purchase price over the net assets acquired, in the amount of $17,369, recorded as goodwill.
 
In 2003, the Company purchased a 51% controlling interest in GameStop Group Limited which operates stores in Ireland and the United Kingdom. Under the terms of the purchase agreement, the minority interest owners of the remaining 49% have the ability to require the Company to purchase their remaining shares in incremental percentages at a price to be determined based partially on the Company’s price to earnings ratio and GameStop Group Limited’s earnings. On May 21, 2008, the minority interest owners exercised their right to sell one-third of their shares, or approximately 16% of GameStop Group Limited, to the Company under the terms of the original purchase agreement for $27,383. The transaction was completed in June 2008 and recorded in accordance with the provisions of the Statement of Financial Accounting Standards No. 141,  Business Acquisitions .
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
During July 2008, the Company purchased certain assets and website operations from The Gamesman Limited, a video game and entertainment software retailer, including eight stores in New Zealand for $1,910. The acquisition was accounted for using the purchase method of accounting, with the excess of the purchase price over the net assets acquired, in the amount of $605, recorded as goodwill.
 
The pro forma effect assuming the above acquisitions were made at the beginning of fiscal 2007 is not material to the Company’s consolidated financial statements.

4.  	Accounting for Stock-Based Compensation	
 
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This valuation model requires the use of subjective assumptions, including expected option life, expected volatility and the expected employee forfeiture rate. The Company uses historical data to estimate the option life and the employee forfeiture rate, and uses historical volatility when estimating the stock price volatility. There were no options to purchase common stock granted during the 13 weeks ended August 2, 2008 and August 4, 2007. The options to purchase common stock granted during the 26 weeks ended August 2, 2008 and August 4, 2007 were 1,362 and 939, respectively, with a weighted-average fair value estimated at $15.45 and $10.16 per share, respectively, using the following assumptions:

 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	
 	 	 	 	 	 	 	 	 	
Volatility	 	 	38.2	%	 	 	40.5	%	
Risk-free interest rate	 	 	2.4	%	 	 	4.8	%	
Expected life (years)	 	 	3.5	 	 	 	4.0	 	
Expected dividend yield	 	 	0	%	 	 	0	%	
 
In the 13 weeks ended August 2, 2008 and August 4, 2007, the Company included compensation expense relating to stock option grants of $3,998 and $3,895, respectively, in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. In the 26 weeks ended August 2, 2008 and August 4, 2007, the Company included compensation expense relating to stock option grants of $8,818 and $8,071, respectively, in selling, general and administrative expenses. As of August 2, 2008, the unrecognized compensation expense related to the unvested portion of our stock options was $22,332 which is expected to be recognized over a weighted average period of 2.1 years. The total intrinsic value of options exercised during the 13 weeks ended August 2, 2008 and August 4, 2007 were $10,584 and $42,933, respectively. The total intrinsic value of options exercised during the 26 weeks ended August 2, 2008 and August 4, 2007 were $83,745 and $177,902, respectively.
 
There were no restricted stock shares granted during the 13 weeks ended August 2, 2008 and 7 shares of restricted stock were granted during the 13 weeks ended August 4, 2007 with a fair market value of $39.83 per share. During the 26 weeks ended August 2, 2008 and August 4, 2007, the Company granted 534 shares and 964 shares, respectively, of restricted stock. The shares had a fair market value of $49.95 and $26.78 per share, respectively, and vest in equal installments over three years. During the 13 weeks ended August 2, 2008 and August 4, 2007, the Company included compensation expense relating to the restricted share grants in the amount of $4,304 and $2,789, respectively, in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. During the 26 weeks ended August 2, 2008 and August 4, 2007, the Company included compensation expense relating to the restricted share grants in the amount of $11,251 and $5,574, respectively, in selling, general and administrative expenses. As of August 2, 2008, there was $29,640 of unrecognized compensation expense related to nonvested restricted stock awards that is expected to be recognized over a weighted average period of 2.1 years.
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.  	Computation of Net Earnings per Common Share	
 
On February 7, 2007, all outstanding shares of Class B common stock were converted into shares of Class A common stock on a one-for-one basis (the “Conversion”). In addition, as of February 9, 2007, the Board of Directors of the Company authorized a two-for-one stock split, effected by a one-for-one stock dividend to stockholders of record at the close of business on February 20, 2007, paid on March 16, 2007 (the “Stock Split”). The effect of the Conversion and the Stock Split has been retroactively applied to all periods presented in the condensed consolidated financial statements and notes thereto. The Company now has only Class A common stock outstanding and computes earnings per share in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share . A reconciliation of shares used in calculating basic and diluted net earnings per common share follows:

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(In thousands, except per share data)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	57,163	 	 	$	21,810	 	 	$	119,288	 	 	$	46,533	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average common shares outstanding	 	 	163,390	 	 	 	158,438	 	 	 	162,607	 	 	 	155,938	 	
Dilutive effect of options and restricted shares on common stock	 	 	4,677	 	 	 	6,331	 	 	 	5,115	 	 	 	7,075	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common shares and dilutive potential common shares	 	 	168,067	 	 	 	164,769	 	 	 	167,722	 	 	 	163,013	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings per common share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.35	 	 	$	0.14	 	 	$	0.73	 	 	$	0.30	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.34	 	 	$	0.13	 	 	$	0.71	 	 	$	0.29	 	

The following table contains information on restricted shares and options to purchase shares of Class A common stock which were excluded from the computation of diluted earnings per share because they were anti-dilutive:

 	 	Anti-
	 	Range of
	 	 	
 	 	Dilutive
	 	Exercise
	 	Expiration
	
 	 	Shares	 	Prices	 	Dates	
 	 	(In thousands, except per share data)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
13 Weeks Ended August 2, 2008	 	 	1,362	 	 	$	49.95	 	 	 	2018	 	
13 Weeks Ended August 4, 2007	 	 	3	 	 	 	—	 	 	 	2010	 	

6.  	Debt	
 
In October 2005, in connection with the Company’s merger with Electronics Boutique Holdings Corp. (“EB”) (the “merger”), the Company entered into a five-year, $400,000 Credit Agreement (the “Revolver”), including a $50,000 letter of credit sub-limit, secured by the assets of the Company and its U.S. subsidiaries. The Revolver places certain restrictions on the Company and its subsidiaries, including limitations on asset sales, additional liens and the incurrence of additional indebtedness. In April 2007, the Company amended the Revolver to extend the maturity date from October 11, 2010 to April 25, 2012, reduce the LIBO interest rate margin, reduce and fix the rate of the unused commitment fee and modify or delete certain other covenants.
 
The availability under the Revolver is limited to a borrowing base which allows the Company to borrow up to the lesser of (x) approximately 70% of eligible inventory and (y) 90% of the appraisal value of the inventory, in each case plus 85% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount available to borrow by their face value. The Company’s ability to pay cash dividends, redeem options and repurchase shares is generally prohibited, except that if availability under the Revolver is or will be after any such
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
payment equal to or greater than 25% of the borrowing base, the Company may repurchase its capital stock and pay cash dividends. In addition, in the event that credit extensions under the Revolver at any time exceed 80% of the lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio covenant of 1.5:1.0.
 
The interest rate on the Revolver is variable and, at the Company’s option, is calculated by applying a margin of (1) 0.0% to 0.25% above the higher of the prime rate of the administrative agent or the federal funds effective rate plus 0.50% or (2) 1.00% to 1.50% above the LIBO rate. The applicable margin is determined quarterly as a function of the Company’s consolidated leverage ratio. As of August 2, 2008, the applicable margin was 0.0% for prime rate loans and 1.00% for LIBO rate loans. In addition, the Company is required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver. As of August 2, 2008, there were no borrowings outstanding under the Revolver and letters of credit outstanding totaled $7,271.
 
In September 2007, the Company’s Luxembourg subsidiary entered into a discretionary, $20,000 Uncommitted Line of Credit (the “Line of Credit”) with Bank of America. There is no term associated with the Line of Credit and Bank of America may withdraw the facility at any time without notice. The Line of Credit will be made available to the Company’s 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 2, 2008, there was $3,730 of cash overdrafts outstanding under the Line of Credit and bank guarantees outstanding totaled $4,874.
 
In September 2005, the Company, along with GameStop, Inc. as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300,000 aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and U.S. $650,000 aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the Senior Floating Rate Notes, the “Notes”). The Notes were issued under an Indenture dated September 28, 2005 (the “Indenture”), by and among the Issuers, the subsidiary guarantors party thereto, and Citibank, N.A., as trustee (the “Trustee”). The net proceeds of the offering were used to pay the cash portion of the merger consideration paid to the stockholders of EB in connection with the merger.
 
The Senior Notes bear interest at 8.0% per annum, mature on October 1, 2012 and were priced at 98.688%, resulting in a discount at the time of issue of $8,528. The discount is being amortized using the effective interest method. As of August 2, 2008, the unamortized original issue discount was $4,780. The rate of interest on the Senior Floating Rate Notes prior to their redemption on October 1, 2007 was 9.2350% per annum. The Issuers pay interest on the Senior Notes semi-annually, in arrears, every April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15, and at maturity.
 
The Indenture contains affirmative and negative covenants customary for such financings, including, among other things, limitations on (1) the incurrence of additional debt, (2) restricted payments, (3) liens, (4) sale and leaseback transactions and (5) asset sales. Events of default provided for in the Indenture include, among other things, failure to pay interest or principal on the Notes, other breaches of covenants in the Indenture, and certain events of bankruptcy and insolvency. As of August 2, 2008, the Company was in compliance with all covenants associated with the Revolver and the Indenture.
 
Under certain conditions, the Issuers may on any one or more occasions prior to maturity redeem up to 100% of the aggregate principal amount of Senior Notes issued under the Indenture at redemption prices at or in excess of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date. The circumstances which would limit the percentage of the Notes which may be redeemed or which would require the Company to pay a premium in excess of 100% of the principal amount are defined in the Indenture. Upon a Change of Control (as defined in the Indenture), the Issuers are required to offer to purchase all of the Notes then outstanding at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. The Issuers may acquire Senior Notes by means other than redemption, whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws, so long as such acquisitions do not otherwise violate the terms of the Indenture.
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
In May 2006, the Company announced that its Board of Directors authorized the buyback of up to an aggregate of $100,000 of its Senior Floating Rate Notes and Senior Notes. As of February 3, 2007, the Company had repurchased the maximum authorized amount, having acquired $50,000 of its Senior Notes and $50,000 of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation.
 
On February 9, 2007, the Company announced that its Board of Directors authorized the buyback of up to an aggregate of an additional $150,000 of its Senior Notes and Senior Floating Rate Notes. As of August 4, 2007, the Company had repurchased the maximum authorized amount, having acquired $20,000 of its Senior Notes and $130,000 of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on retirement of this debt was $2,027 and $8,751 for the 13 and 26 week periods ended August 4, 2007, respectively, which consists of the premium paid to retire the Notes and the recognition of the deferred financing fees and the original issue discount on the Notes.
 
On June 28, 2007, the Company announced that its Board of Directors authorized the redemption of the remaining $120,000 of Senior Floating Rate Notes outstanding. The Company redeemed the Senior Floating Rate Notes on October 1, 2007 at the redemption price specified by the Senior Floating Rate Notes of 102.0%, plus all accrued and unpaid interest through the redemption date. The Company incurred a one-time pre-tax charge of $3,840 associated with the redemption, which represents a $2,400 redemption premium and $1,440 to recognize unamortized deferred financing costs.
 
On February 7, 2008, the Company announced that its Board of Directors authorized the buyback of up to an aggregate of an additional $130,000 of its Senior Notes. The timing and amount of the repurchases will be determined by the Company’s management based on their evaluation of market conditions and other factors. In addition, the repurchases may be suspended or discontinued at any time. As of August 2, 2008, the Company had repurchased $30,000 of its Senior Notes pursuant to this new authorization and delivered the Senior Notes to the Trustee for cancellation. The associated loss on retirement of debt is $2,331, which consists of the premium paid to retire the Senior Notes and the write-off of the deferred financing fees and the original issue discount on the Senior Notes.
 
During October 2007, the Company paid the final principal payment of $12,173 to Barnes & Noble, Inc. (“Barnes & Noble”) on the promissory note that was issued in connection with the repurchase of GameStop’s common stock held by Barnes & Noble, satisfying the promissory note in full. The note was unsecured and bore interest at 5.5% per annum.

7.  	Comprehensive Income	
 
Comprehensive income is net earnings, plus certain other items that are recorded directly to stockholders’ equity and consists of the following:

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(In thousands)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	57,163	 	 	$	21,810	 	 	$	119,288	 	 	$	46,533	 	
Other comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Foreign currency translation adjustments	 	 	(1,453	)	 	 	5,844	 	 	 	1,781	 	 	 	16,132	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total comprehensive income	 	$	55,710	 	 	$	27,654	 	 	$	121,069	 	 	$	62,665	 	

 	 	
8.  	Income Taxes	
 
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examination by tax authorities
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
for years before and including the fiscal year ended January 31, 2004. The Internal Revenue Service (“IRS”) commenced an examination of the Company’s U.S. income tax returns for the fiscal years ended January 29, 2005 and January 28, 2006 in the first quarter of fiscal 2007 that is anticipated to be completed in 2008. The Company does not anticipate any adjustments that would result in a material impact on its condensed consolidated financial statements.
 
For the 13 weeks ended August 2, 2008 and August 4, 2007, the Company recognized an increase of $3 and a decrease of $1,649 in the liability for unrecognized tax benefits, respectively, and an increase of $433 and $377 for interest and penalties, respectively. For the 26 weeks ended August 2, 2008 and August 4, 2007, the Company recognized a decrease of $657 and $1,388 in the liability for unrecognized tax benefits, respectively, and an increase of $757 and $819 for interest and penalties, respectively. As of August 2, 2008, the gross amount of unrecognized tax benefits, interest and penalties was $24,325. The total amount of unrecognized tax benefit that, if recognized, would affect the effective tax rate was $19,895 as of August 2, 2008. The Company had $4,430 in interest and penalties related to unrecognized tax benefits accrued as of August 2, 2008.
 
It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions could significantly increase or decrease within the next 12 months as a result of settling ongoing audits. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.
 
The tax provisions for the 13 weeks and 26 weeks ended August 2, 2008 and August 4, 2007 are based upon management’s estimate of the Company’s annualized effective tax rate.

9.  	Certain Relationships and Related Transactions	
 
The Company operates departments within nine bookstores operated by Barnes & Noble, a stockholder of the Company until November 2004 and an affiliate through a common stockholder who is the chairman of the Board of Directors of Barnes & Noble and a member of the Company’s Board of Directors. The Company pays a license fee to Barnes & Noble on the gross sales of such departments. Management deems the license fee to be reasonable and based upon terms equivalent to those that would prevail in an arm’s length transaction. During the 13 weeks ended August 2, 2008 and August 4, 2007, these charges amounted to $290 and $255, respectively. During the 26 weeks ended August 2, 2008 and August 4, 2007, these charges amounted to $584 and $487, respectively.
 
Until June 2005, GameStop participated in Barnes & Noble’s workers’ compensation, property and general liability insurance programs. The costs incurred by Barnes & Noble under these programs were allocated to GameStop based upon total payroll expense, property and equipment, and insurance claim history of GameStop. Management deemed the allocation methodology to be reasonable. Although the Company secured its own insurance coverage, costs will likely continue to be incurred by Barnes & Noble on insurance claims which were incurred under its programs prior to June 2005 and any such costs applicable to insurance claims against the Company will be allocated to the Company. During the 13 weeks ended August 2, 2008 and August 4, 2007, these allocated charges amounted to $31 and $69, respectively. During the 26 weeks ended August 2, 2008 and August 4, 2007, these allocated charges amounted to $104 and $135, respectively.
 
In October 2004, the Company’s Board of Directors authorized a repurchase of the common stock held by Barnes & Noble. The Company repurchased 12,214 shares of its common stock at a price equal to $9.13 per share for aggregate consideration before expenses of $111,520. The Company paid $37,500 in cash and issued a promissory note in the principal amount of $74,020, which was payable in installments and bore interest at 5.5% per annum, payable when principal installments were due. The Company’s final scheduled principal payment of $12,173 was paid in October 2007. Interest expense on the promissory note for the 13 weeks and 26 weeks ended August 4, 2007 totaled $169 and $338, respectively.
 
In May 2005, the Company entered into an arrangement with Barnes & Noble under which www.gamestop.com  became the exclusive specialty video game retailer listed on  www.bn.com , Barnes & Noble’s e-commerce site. Under the terms of this agreement, the Company pays a fee to Barnes & Noble for sales of video
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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
game or PC entertainment products sold through www.bn.com.  The fee to Barnes & Noble was $72 and $45 for the 13 weeks ended August 2, 2008 and August 4, 2007, respectively, and $143 and $99 for the 26 weeks ended August 2, 2008 and August 4, 2007, respectively.

10.  	Commitments and Contingencies	
 
On February 14, 2005, and as amended, Steve Strickland, as personal representative of the Estate of Arnold Strickland, deceased, Henry Mealer, as personal representative of the Estate of Ace Mealer, deceased, and Willie Crump, as personal representative of the Estate of James Crump, deceased, filed a wrongful death lawsuit against GameStop, Sony, Take-Two Interactive, Rock Star Games and Wal-Mart (collectively, the “Defendants”) and Devin Moore, alleging that Defendants’ actions in designing, manufacturing, marketing and supplying Defendant Moore with violent video games were negligent and contributed to Defendant Moore killing Arnold Strickland, Ace Mealer and James Crump. Moore was found guilty of capital murder in a criminal trial and was sentenced to death in August 2005.
 
Plaintiffs’ new Alabama counsel has named a new expert, a psychiatrist who testified at the criminal trial on behalf of the criminal defendant, who will opine (if allowed) that violent video games were a substantial factor in causing the murders. This same testimony from this same expert was excluded in the criminal trial from the same judge hearing this case. The motion to bar this testimony in this case is set for October 30, 2008. The ruling on this motion will have an effect on whether the case is able to proceed. There is no current trial date. The Company does not believe there is sufficient information to estimate the amount of the possible loss, if any, resulting from the lawsuit.
 
In the ordinary course of the Company’s business, the Company is, from time to time, subject to various other legal proceedings. Management does not believe that any such other legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition or results of operations.

11.  	Significant Product Information	
 
The Company is principally engaged in the sale of new and used video game systems and software, personal computer entertainment software and related accessories. The following table sets forth sales (in millions) by significant product category for the periods indicated:

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	 	Percent
	 	 	 	 	 	Percent
	 	 	 	 	 	Percent
	 	 	 	 	 	Percent
	 	
 	 	Sales	 	 	of Total	 	 	Sales	 	 	of Total	 	 	Sales	 	 	of Total	 	 	Sales	 	 	of Total	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
New video game hardware	 	$	379.7	 	 	 	21.0	%	 	$	293.8	 	 	 	22.0	%	 	$	718.7	 	 	 	19.9	%	 	$	575.2	 	 	 	22.0	%	
New video game software	 	 	705.0	 	 	 	39.1	%	 	 	494.2	 	 	 	36.9	%	 	 	1,497.8	 	 	 	41.4	%	 	 	954.8	 	 	 	36.5	%	
Used video game products	 	 	471.5	 	 	 	26.1	%	 	 	357.3	 	 	 	26.7	%	 	 	887.2	 	 	 	24.5	%	 	 	683.7	 	 	 	26.1	%	
Other	 	 	248.2	 	 	 	13.8	%	 	 	192.9	 	 	 	14.4	%	 	 	514.3	 	 	 	14.2	%	 	 	403.5	 	 	 	15.4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	1,804.4	 	 	 	100.0	%	 	$	1,338.2	 	 	 	100.0	%	 	$	3,618.0	 	 	 	100.0	%	 	$	2,617.2	 	 	 	100.0	%	

Other products include PC entertainment and other software and accessories, magazines and character-related merchandise.
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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 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	 	Gross
	 	 	 	 	 	Gross
	 	 	 	 	 	Gross
	 	 	 	 	 	Gross
	 	
 	 	Gross
	 	 	Profit
	 	 	Gross
	 	 	Profit
	 	 	Gross
	 	 	Profit
	 	 	Gross
	 	 	Profit
	 	
 	 	Profit	 	 	Percent	 	 	Profit	 	 	Percent	 	 	Profit	 	 	Percent	 	 	Profit	 	 	Percent	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross Profit:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
New video game hardware	 	$	22.6	 	 	 	6.0	%	 	$	21.5	 	 	 	7.3	%	 	$	43.0	 	 	 	6.0	%	 	$	43.1	 	 	 	7.5	%	
New video game software	 	 	145.3	 	 	 	20.6	%	 	 	100.2	 	 	 	20.3	%	 	 	301.9	 	 	 	20.2	%	 	 	192.0	 	 	 	20.1	%	
Used video game products	 	 	234.1	 	 	 	49.7	%	 	 	173.2	 	 	 	48.5	%	 	 	438.2	 	 	 	49.4	%	 	 	337.5	 	 	 	49.4	%	
Other	 	 	82.1	 	 	 	33.1	%	 	 	66.4	 	 	 	34.4	%	 	 	174.4	 	 	 	33.9	%	 	 	137.5	 	 	 	34.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	484.1	 	 	 	26.8	%	 	$	361.3	 	 	 	27.0	%	 	$	957.5	 	 	 	26.5	%	 	$	710.1	 	 	 	27.1	%	

 	 	
12.  	Segment Information	
 
The Company operates its business in the following segments: United States, Canada, Australia and Europe. Segment results for the United States include retail operations in 50 states, the District of Columbia, Puerto Rico and Guam, electronic commerce websites under the names  www.gamestop.com  and www.ebgames.com  and  Game Informer  magazine. Segment results for Canada include retail operations in Canada and segment results for Australia include retail operations in Australia and New Zealand. Segment results for Europe include retail operations in 12 European countries.
14

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The Company measures segment profit using operating earnings which is defined as income from continuing operations before intercompany royalty fees, net interest expense and income taxes. The basis of segmentation and the measurement of segment profit or loss have not changed since the end of fiscal 2007 and there has been no material change in total assets by segment since February 2, 2008. Transactions between reportable segments consist primarily of royalties, management fees, intersegment loans and related interest. Information on segments appears in the following tables.

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(In thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales by operating segment were as follows:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
United States	 	$	1,316,912	 	 	$	1,026,646	 	 	$	2,694,043	 	 	$	2,030,735	 	
Canada	 	 	114,725	 	 	 	84,613	 	 	 	243,628	 	 	 	164,690	 	
Australia	 	 	147,977	 	 	 	93,840	 	 	 	251,408	 	 	 	166,099	 	
Europe	 	 	224,806	 	 	 	133,094	 	 	 	428,958	 	 	 	255,652	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	1,804,420	 	 	$	1,338,193	 	 	$	3,618,037	 	 	$	2,617,176	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment operating earnings (loss) were as follows:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
United States	 	$	82,411	 	 	$	38,077	 	 	$	175,168	 	 	$	91,684	 	
Canada	 	 	5,670	 	 	 	5,523	 	 	 	11,472	 	 	 	9,175	 	
Australia	 	 	13,733	 	 	 	8,007	 	 	 	21,547	 	 	 	12,477	 	
Europe	 	 	(1,745	)	 	 	(860	)	 	 	1,785	 	 	 	(1,971	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	100,069	 	 	$	50,747	 	 	$	209,972	 	 	$	111,365	 	

 	 	
13.  	Supplemental Cash Flow Information	

 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	
 	 	(In thousands) (Unaudited)	 	
 	 	 	 	 	 	 	 	 	
Cash paid during the period for:	 	 	 	 	 	 	 	 	
Interest	 	$	25,216	 	 	$	31,497	 	
 	 	 	 	 	 	 	 	 	
Income taxes	 	$	103,571	 	 	$	27,863	 	

 	 	
14.  	Consolidating Financial Statements	
 
In order to finance the merger, as described in Note 6, on September 28, 2005, the Company, along with GameStop, Inc. as co-issuer, completed the offering of the Notes. As of February 2, 2008, the Senior Floating Rate Notes have been completely redeemed. The direct and indirect U.S. wholly-owned subsidiaries of the Company, excluding GameStop, Inc., as co-issuer, have guaranteed the Senior Notes on a senior unsecured basis with unconditional guarantees.
 
The following condensed consolidating financial statements present the financial position as of August 2, 2008, August 4, 2007 and February 2, 2008 and results of operations for the 13 and 26 weeks ended August 2, 2008 and August 4, 2007 and cash flows for the 26 weeks ended August 2, 2008 and August 4, 2007 of the Company’s guarantor and non-guarantor subsidiaries.
15

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Balance Sheet

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 2,
	 	 	August 2,
	 	 	 	 	 	August 2,
	 	
 	 	2008	 	 	2008	 	 	Eliminations	 	 	2008	 	
 	 	(Amounts in thousands, except per share amounts)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ASSETS:	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	461,690	 	 	$	78,208	 	 	$	—	 	 	$	539,898	 	
Receivables, net	 	 	260,476	 	 	 	25,345	 	 	 	(224,855	)	 	 	60,966	 	
Merchandise inventories, net	 	 	611,605	 	 	 	358,452	 	 	 	—	 	 	 	970,057	 	
Prepaid expenses and other current assets	 	 	43,250	 	 	 	25,220	 	 	 	—	 	 	 	68,470	 	
Prepaid taxes	 	 	62,886	 	 	 	(4,197	)	 	 	—	 	 	 	58,689	 	
Deferred taxes	 	 	23,680	 	 	 	3,213	 	 	 	—	 	 	 	26,893	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	 	 	1,463,587	 	 	 	486,241	 	 	 	(224,855	)	 	 	1,724,973	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property and equipment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Land	 	 	2,670	 	 	 	9,363	 	 	 	—	 	 	 	12,033	 	
Buildings and leasehold improvements	 	 	262,740	 	 	 	152,156	 	 	 	—	 	 	 	414,896	 	
Fixtures and equipment	 	 	459,365	 	 	 	124,369	 	 	 	—	 	 	 	583,734	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total property and equipment	 	 	724,775	 	 	 	285,888	 	 	 	—	 	 	 	1,010,663	 	
Less accumulated depreciation and amortization	 	 	379,721	 	 	 	105,944	 	 	 	—	 	 	 	485,665	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net property and equipment	 	 	345,054	 	 	 	179,944	 	 	 	—	 	 	 	524,998	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment	 	 	589,832	 	 	 	—	 	 	 	(589,832	)	 	 	—	 	
Goodwill, net	 	 	1,096,622	 	 	 	350,950	 	 	 	—	 	 	 	1,447,572	 	
Deferred financing fees	 	 	7,636	 	 	 	20	 	 	 	—	 	 	 	7,656	 	
Deferred taxes	 	 	7,378	 	 	 	24,485	 	 	 	—	 	 	 	31,863	 	
Other noncurrent assets	 	 	15,340	 	 	 	19,995	 	 	 	—	 	 	 	35,335	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other assets	 	 	1,716,808	 	 	 	395,450	 	 	 	(589,832	)	 	 	1,522,426	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	3,525,449	 	 	$	1,061,635	 	 	$	(814,687	)	 	$	3,772,397	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY:	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	549,020	 	 	$	143,078	 	 	$	—	 	 	$	692,098	 	
Accrued liabilities	 	 	296,736	 	 	 	317,128	 	 	 	(224,855	)	 	 	389,009	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	845,756	 	 	 	460,206	 	 	 	(224,855	)	 	 	1,081,107	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior notes payable, long-term portion, net	 	 	545,220	 	 	 	—	 	 	 	—	 	 	 	545,220	 	
Deferred rent and other long-term liabilities	 	 	70,702	 	 	 	11,597	 	 	 	—	 	 	 	82,299	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total long-term liabilities	 	 	615,922	 	 	 	11,597	 	 	 	—	 	 	 	627,519	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	1,461,678	 	 	 	471,803	 	 	 	(224,855	)	 	 	1,708,626	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred stock — authorized 5,000 shares; no shares issued or outstanding	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Class A common stock — $.001 par value; authorized 300,000 shares; 163,653 shares issued and outstanding	 	 	164	 	 	 	—	 	 	 	—	 	 	 	164	 	
Additional paid-in-capital	 	 	1,288,727	 	 	 	420,191	 	 	 	(420,191	)	 	 	1,288,727	 	
Accumulated other comprehensive income	 	 	33,384	 	 	 	10,349	 	 	 	(10,349	)	 	 	33,384	 	
Retained earnings	 	 	741,496	 	 	 	159,292	 	 	 	(159,292	)	 	 	741,496	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	2,063,771	 	 	 	589,832	 	 	 	(589,832	)	 	 	2,063,771	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	3,525,449	 	 	$	1,061,635	 	 	$	(814,687	)	 	$	3,772,397	 	

16

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Balance Sheet

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 4,
	 	 	August 4,
	 	 	 	 	 	August 4,
	 	
 	 	2007	 	 	2007	 	 	Eliminations	 	 	2007	 	
 	 	(Amounts in thousands, except per share amounts)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ASSETS:	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	296,131	 	 	$	53,146	 	 	$	—	 	 	$	349,277	 	
Receivables, net	 	 	150,193	 	 	 	9,580	 	 	 	(129,975	)	 	 	29,798	 	
Merchandise inventories, net	 	 	491,422	 	 	 	222,414	 	 	 	—	 	 	 	713,836	 	
Prepaid expenses and other current assets	 	 	34,208	 	 	 	17,743	 	 	 	—	 	 	 	51,951	 	
Prepaid taxes	 	 	68,416	 	 	 	6,536	 	 	 	—	 	 	 	74,952	 	
Deferred taxes	 	 	34,065	 	 	 	1,914	 	 	 	—	 	 	 	35,979	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	 	 	1,074,435	 	 	 	311,333	 	 	 	(129,975	)	 	 	1,255,793	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property and equipment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Land	 	 	2,670	 	 	 	8,628	 	 	 	—	 	 	 	11,298	 	
Buildings and leasehold improvements	 	 	226,956	 	 	 	107,948	 	 	 	—	 	 	 	334,904	 	
Fixtures and equipment	 	 	385,307	 	 	 	92,185	 	 	 	—	 	 	 	477,492	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total property and equipment	 	 	614,933	 	 	 	208,761	 	 	 	—	 	 	 	823,694	 	
Less accumulated depreciation and amortization	 	 	283,535	 	 	 	66,392	 	 	 	—	 	 	 	349,927	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net property and equipment	 	 	331,398	 	 	 	142,369	 	 	 	—	 	 	 	473,767	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment	 	 	488,069	 	 	 	—	 	 	 	(488,069	)	 	 	—	 	
Goodwill, net	 	 	1,097,027	 	 	 	305,818	 	 	 	—	 	 	 	1,402,845	 	
Deferred financing fees	 	 	11,387	 	 	 	19	 	 	 	—	 	 	 	11,406	 	
Deferred taxes	 	 	(5,788	)	 	 	13,465	 	 	 	—	 	 	 	7,677	 	
Other noncurrent assets	 	 	17,285	 	 	 	12,732	 	 	 	—	 	 	 	30,017	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other assets	 	 	1,607,980	 	 	 	332,034	 	 	 	(488,069	)	 	 	1,451,945	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	3,013,813	 	 	$	785,736	 	 	$	(618,044	)	 	$	3,181,505	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY:	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	416,476	 	 	$	100,757	 	 	$	—	 	 	$	517,233	 	
Accrued liabilities	 	 	280,738	 	 	 	189,177	 	 	 	(129,975	)	 	 	339,940	 	
Note payable, current portion	 	 	12,173	 	 	 	—	 	 	 	—	 	 	 	12,173	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	709,387	 	 	 	289,934	 	 	 	(129,975	)	 	 	869,346	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior notes payable, long-term portion, net	 	 	573,993	 	 	 	—	 	 	 	—	 	 	 	573,993	 	
Senior floating rate notes payable, long-term portion	 	 	120,000	 	 	 	—	 	 	 	—	 	 	 	120,000	 	
Deferred rent and other long-term liabilities	 	 	64,759	 	 	 	7,733	 	 	 	—	 	 	 	72,492	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total long-term liabilities	 	 	758,752	 	 	 	7,733	 	 	 	—	 	 	 	766,485	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	1,468,139	 	 	 	297,667	 	 	 	(129,975	)	 	 	1,635,831	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred stock — authorized 5,000 shares; no shares issued or outstanding	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Class A common stock — $.001 par value; authorized 300,000 shares; 158,993 shares issued and outstanding	 	 	159	 	 	 	—	 	 	 	—	 	 	 	159	 	
Additional paid-in-capital	 	 	1,145,706	 	 	 	391,670	 	 	 	(391,670	)	 	 	1,145,706	 	
Accumulated other comprehensive income	 	 	19,359	 	 	 	5,229	 	 	 	(5,229	)	 	 	19,359	 	
Retained earnings	 	 	380,450	 	 	 	91,170	 	 	 	(91,170	)	 	 	380,450	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	1,545,674	 	 	 	488,069	 	 	 	(488,069	)	 	 	1,545,674	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	3,013,813	 	 	$	785,736	 	 	$	(618,044	)	 	$	3,181,505	 	

17

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Balance Sheet

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	February 2,
	 	 	February 2,
	 	 	 	 	 	February 2,
	 	
 	 	2008	 	 	2008	 	 	Eliminations	 	 	2008	 	
 	 	(Amounts in thousands, except per share amounts)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
ASSETS:	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	671,333	 	 	$	186,081	 	 	$	—	 	 	$	857,414	 	
Receivables, net	 	 	198,923	 	 	 	22,616	 	 	 	(165,520	)	 	 	56,019	 	
Merchandise inventories, net	 	 	501,861	 	 	 	299,164	 	 	 	—	 	 	 	801,025	 	
Prepaid expenses and other current assets	 	 	37,119	 	 	 	15,659	 	 	 	—	 	 	 	52,778	 	
Deferred taxes	 	 	24,153	 	 	 	3,328	 	 	 	—	 	 	 	27,481	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current assets	 	 	1,433,389	 	 	 	526,848	 	 	 	(165,520	)	 	 	1,794,717	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property and equipment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Land	 	 	2,670	 	 	 	9,200	 	 	 	—	 	 	 	11,870	 	
Buildings and leasehold improvements	 	 	246,907	 	 	 	131,704	 	 	 	—	 	 	 	378,611	 	
Fixtures and equipment	 	 	427,623	 	 	 	111,115	 	 	 	—	 	 	 	538,738	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total property and equipment	 	 	677,200	 	 	 	252,019	 	 	 	—	 	 	 	929,219	 	
Less accumulated depreciation and amortization	 	 	331,176	 	 	 	86,374	 	 	 	—	 	 	 	417,550	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net property and equipment	 	 	346,024	 	 	 	165,645	 	 	 	—	 	 	 	511,669	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investment	 	 	543,088	 	 	 	—	 	 	 	(543,088	)	 	 	—	 	
Goodwill, net	 	 	1,096,622	 	 	 	305,818	 	 	 	—	 	 	 	1,402,440	 	
Deferred financing fees	 	 	8,943	 	 	 	20	 	 	 	—	 	 	 	8,963	 	
Deferred taxes	 	 	7,378	 	 	 	18,954	 	 	 	—	 	 	 	26,332	 	
Other noncurrent assets	 	 	15,155	 	 	 	16,615	 	 	 	—	 	 	 	31,770	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total other assets	 	 	1,671,186	 	 	 	341,407	 	 	 	(543,088	)	 	 	1,469,505	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total assets	 	$	3,450,599	 	 	$	1,033,900	 	 	$	(708,608	)	 	$	3,775,891	 	

LIABILITIES AND STOCKHOLDERS’ EQUITY:	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	$	635,722	 	 	$	208,654	 	 	$	—	 	 	$	844,376	 	
Accrued liabilities	 	 	318,314	 	 	 	257,084	 	 	 	(165,520	)	 	 	409,878	 	
Taxes payable	 	 	(8,842	)	 	 	15,145	 	 	 	—	 	 	 	6,303	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	945,194	 	 	 	480,883	 	 	 	(165,520	)	 	 	1,260,557	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Senior notes payable, long-term portion, net	 	 	574,473	 	 	 	—	 	 	 	—	 	 	 	574,473	 	
Deferred rent and other long-term liabilities	 	 	68,486	 	 	 	9,929	 	 	 	—	 	 	 	78,415	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total long-term liabilities	 	 	642,959	 	 	 	9,929	 	 	 	—	 	 	 	652,888	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities	 	 	1,588,153	 	 	 	490,812	 	 	 	(165,520	)	 	 	1,913,445	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Preferred stock — authorized 5,000 shares; no shares issued or outstanding	 	 	—	 	 	 	57,407	 	 	 	(57,407	)	 	 	—	 	
Class A common stock — $.001 par value; authorized 300,000 shares; 161,007 shares issued and outstanding	 	 	161	 	 	 	31,484	 	 	 	(31,484	)	 	 	161	 	
Additional paid-in-capital	 	 	1,208,474	 	 	 	296,860	 	 	 	(296,860	)	 	 	1,208,474	 	
Accumulated other comprehensive income (loss)	 	 	31,603	 	 	 	11,262	 	 	 	(11,262	)	 	 	31,603	 	
Retained earnings	 	 	622,208	 	 	 	146,075	 	 	 	(146,075	)	 	 	622,208	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	1,862,446	 	 	 	543,088	 	 	 	(543,088	)	 	 	1,862,446	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	3,450,599	 	 	$	1,033,900	 	 	$	(708,608	)	 	$	3,775,891	 	

18

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Statement of Operations

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 2,
	 	 	August 2,
	 	 	 	 	 	August 2,
	 	
For the 13 Weeks Ended August 2, 2008	 	2008	 	 	2008	 	 	Eliminations	 	 	2008	 	
 	 	(Amounts in thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	$	1,316,912	 	 	$	487,508	 	 	$	—	 	 	$	1,804,420	 	
Cost of sales	 	 	953,602	 	 	 	366,695	 	 	 	—	 	 	 	1,320,297	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	363,310	 	 	 	120,813	 	 	 	—	 	 	 	484,123	 	
Selling, general and administrative expenses	 	 	254,517	 	 	 	93,228	 	 	 	—	 	 	 	347,745	 	
Depreciation and amortization	 	 	26,382	 	 	 	9,927	 	 	 	—	 	 	 	36,309	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings	 	 	82,411	 	 	 	17,658	 	 	 	—	 	 	 	100,069	 	
Interest income	 	 	(6,750	)	 	 	(6,477	)	 	 	11,599	 	 	 	(1,628	)	
Interest expense	 	 	12,387	 	 	 	10,051	 	 	 	(11,599	)	 	 	10,839	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income tax expense	 	 	76,774	 	 	 	14,084	 	 	 	—	 	 	 	90,858	 	
Income tax expense	 	 	28,449	 	 	 	5,246	 	 	 	—	 	 	 	33,695	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	48,325	 	 	$	8,838	 	 	$	—	 	 	$	57,163	 	

GameStop Corp.
Condensed Consolidating Statement of Operations

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 4,
	 	 	August 4,
	 	 	 	 	 	August 4,
	 	
For the 13 Weeks Ended August 4, 2007	 	2007	 	 	2007	 	 	Eliminations	 	 	2007	 	
 	 	(Amounts in thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	$	1,026,646	 	 	$	311,547	 	 	$	—	 	 	$	1,338,193	 	
Cost of sales	 	 	743,847	 	 	 	233,047	 	 	 	—	 	 	 	976,894	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	282,799	 	 	 	78,500	 	 	 	—	 	 	 	361,299	 	
Selling, general and administrative expenses	 	 	220,037	 	 	 	58,397	 	 	 	—	 	 	 	278,434	 	
Depreciation and amortization	 	 	24,685	 	 	 	7,433	 	 	 	—	 	 	 	32,118	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings	 	 	38,077	 	 	 	12,670	 	 	 	—	 	 	 	50,747	 	
Interest income	 	 	(4,750	)	 	 	(4,174	)	 	 	6,188	 	 	 	(2,736	)	
Interest expense	 	 	15,921	 	 	 	6,349	 	 	 	(6,188	)	 	 	16,082	 	
Debt extinguishment expense	 	 	2,027	 	 	 	—	 	 	 	—	 	 	 	2,027	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income tax expense	 	 	24,879	 	 	 	10,495	 	 	 	—	 	 	 	35,374	 	
Income tax expense	 	 	9,937	 	 	 	3,627	 	 	 	—	 	 	 	13,564	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	14,942	 	 	$	6,868	 	 	$	—	 	 	$	21,810	 	

19

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Statement of Operations

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 2,
	 	 	August 2,
	 	 	 	 	 	August 2,
	 	
For the 26 Weeks Ended August 2, 2008	 	2008	 	 	2008	 	 	Eliminations	 	 	2008	 	
 	 	(Amounts in thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	$	2,694,043	 	 	$	923,994	 	 	$	—	 	 	$	3,618,037	 	
Cost of sales	 	 	1,966,803	 	 	 	693,705	 	 	 	—	 	 	 	2,660,508	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	727,240	 	 	 	230,289	 	 	 	—	 	 	 	957,529	 	
Selling, general and administrative expenses	 	 	500,105	 	 	 	176,307	 	 	 	—	 	 	 	676,412	 	
Depreciation and amortization	 	 	51,967	 	 	 	19,178	 	 	 	—	 	 	 	71,145	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings	 	 	175,168	 	 	 	34,804	 	 	 	—	 	 	 	209,972	 	
Interest income	 	 	(12,874	)	 	 	(13,522	)	 	 	19,826	 	 	 	(6,570	)	
Interest expense	 	 	24,681	 	 	 	19,414	 	 	 	(19,826	)	 	 	24,269	 	
Debt extinguishment expense	 	 	2,331	 	 	 	—	 	 	 	—	 	 	 	2,331	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income tax expense	 	 	161,030	 	 	 	28,912	 	 	 	—	 	 	 	189,942	 	
Income tax expense	 	 	59,321	 	 	 	11,333	 	 	 	—	 	 	 	70,654	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	101,709	 	 	$	17,579	 	 	$	—	 	 	$	119,288	 	

GameStop Corp.
Condensed Consolidating Statement of Operations

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 4,
	 	 	August 4,
	 	 	 	 	 	August 4,
	 	
For the 26 Weeks Ended August 4, 2007	 	2007	 	 	2007	 	 	Eliminations	 	 	2007	 	
 	 	(Amounts in thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	$	2,030,735	 	 	$	586,441	 	 	$	—	 	 	$	2,617,176	 	
Cost of sales	 	 	1,467,375	 	 	 	439,733	 	 	 	—	 	 	 	1,907,108	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	563,360	 	 	 	146,708	 	 	 	—	 	 	 	710,068	 	
Selling, general and administrative expenses	 	 	422,717	 	 	 	112,833	 	 	 	—	 	 	 	535,550	 	
Depreciation and amortization	 	 	48,959	 	 	 	14,194	 	 	 	—	 	 	 	63,153	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings	 	 	91,684	 	 	 	19,681	 	 	 	—	 	 	 	111,365	 	
Interest income	 	 	(10,113	)	 	 	(8,019	)	 	 	11,568	 	 	 	(6,564	)	
Interest expense	 	 	33,831	 	 	 	11,763	 	 	 	(11,568	)	 	 	34,026	 	
Debt extinguishment expense	 	 	8,751	 	 	 	—	 	 	 	—	 	 	 	8,751	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income tax expense	 	 	59,215	 	 	 	15,937	 	 	 	—	 	 	 	75,152	 	
Income tax expense	 	 	22,924	 	 	 	5,695	 	 	 	—	 	 	 	28,619	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	36,291	 	 	$	10,242	 	 	$	—	 	 	$	46,533	 	

20

Table of Contents
 
GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Statement of Cash Flows

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 2,
	 	 	August 2,
	 	 	 	 	 	August 2,
	 	
For the 26 Weeks Ended August 2, 2008	 	2008	 	 	2008	 	 	Eliminations	 	 	2008	 	
 	 	(Amounts in thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	101,709	 	 	$	17,579	 	 	$	—	 	 	$	119,288	 	
Adjustments to reconcile net earnings to net cash flows used in operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization (including amounts in cost of sales)	 	 	52,591	 	 	 	19,211	 	 	 	—	 	 	 	71,802	 	
Amortization and retirement of deferred financing fees	 	 	1,304	 	 	 	—	 	 	 	—	 	 	 	1,304	 	
Amortization and retirement of original issue discount on senior notes	 	 	747	 	 	 	—	 	 	 	—	 	 	 	747	 	
Stock-based compensation expense	 	 	20,068	 	 	 	—	 	 	 	—	 	 	 	20,068	 	
Deferred taxes	 	 	473	 	 	 	(3,708	)	 	 	—	 	 	 	(3,235	)	
Excess tax benefits realized from exercise of stock-based awards	 	 	(33,010	)	 	 	—	 	 	 	—	 	 	 	(33,010	)	
Loss on disposal of property and equipment	 	 	1,039	 	 	 	1,595	 	 	 	—	 	 	 	2,634	 	
Increase in deferred rent and other long-term liabilities	 	 	2,567	 	 	 	1,227	 	 	 	—	 	 	 	3,794	 	
Increase in liability to landlords for tenant allowances, net	 	 	2,100	 	 	 	258	 	 	 	—	 	 	 	2,358	 	
Change in the value of foreign exchange contracts	 	 	(278	)	 	 	(757	)	 	 	—	 	 	 	(1,035	)	
Changes in operating assets and liabilities, net	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Receivables, net	 	 	(2,219	)	 	 	(1,610	)	 	 	—	 	 	 	(3,829	)	
Merchandise inventories	 	 	(109,745	)	 	 	(43,072	)	 	 	—	 	 	 	(152,817	)	
Prepaid expenses and other current assets	 	 	(5,646	)	 	 	(7,589	)	 	 	—	 	 	 	(13,235	)	
Prepaid taxes	 	 	(20,595	)	 	 	(11,098	)	 	 	—	 	 	 	(31,693	)	
Accounts payable and accrued liabilities	 	 	(196,120	)	 	 	2,780	 	 	 	—	 	 	 	(193,340	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash flows used in operating activities	 	 	(185,015	)	 	 	(25,184	)	 	 	—	 	 	 	(210,199	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase of property and equipment	 	 	(51,946	)	 	 	(29,594	)	 	 	—	 	 	 	(81,540	)	
Acquisitions, net of cash acquired	 	 	—	 	 	 	(50,299	)	 	 	—	 	 	 	(50,299	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash flows used in investing activities	 	 	(51,946	)	 	 	(79,893	)	 	 	—	 	 	 	(131,839	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repurchase of notes payable	 	 	(30,000	)	 	 	—	 	 	 	—	 	 	 	(30,000	)	
Issuance of shares relating to stock options	 	 	26,738	 	 	 	—	 	 	 	—	 	 	 	26,738	 	
Excess tax benefits realized from exercise of stock-based awards	 	 	33,010	 	 	 	—	 	 	 	—	 	 	 	33,010	 	
Net increase in other noncurrent assets and deferred financing fees	 	 	(2,430	)	 	 	(2,789	)	 	 	—	 	 	 	(5,219	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash flows provided by (used in) financing activities	 	 	27,318	 	 	 	(2,789	)	 	 	—	 	 	 	24,529	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exchange rate effect on cash and cash equivalents	 	 	—	 	 	 	(7	)	 	 	—	 	 	 	(7	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net decrease in cash and cash equivalents	 	 	(209,643	)	 	 	(107,873	)	 	 	—	 	 	 	(317,516	)	
Cash and cash equivalents at beginning of period	 	 	671,333	 	 	 	186,081	 	 	 	—	 	 	 	857,414	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	461,690	 	 	$	78,208	 	 	$	—	 	 	$	539,898	 	

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GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
GameStop Corp.
Condensed Consolidating Statement of Cash Flows

 	 	Issuers and
	 	 	 	 	 	 	 	 	 	 	
 	 	Guarantor
	 	 	Non-Guarantor
	 	 	 	 	 	 	 	
 	 	Subsidiaries
	 	 	Subsidiaries
	 	 	 	 	 	Consolidated
	 	
 	 	August 4,
	 	 	August 4,
	 	 	 	 	 	August 4,
	 	
For the 26 Weeks Ended August 4, 2007	 	2007	 	 	2007	 	 	Eliminations	 	 	2007	 	
 	 	(Amounts in thousands)
	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	$	36,291	 	 	$	10,242	 	 	$	—	 	 	$	46,533	 	
Adjustments to reconcile net earnings to net cash flows provided by (used in) operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization (including amounts in cost of sales)	 	 	49,427	 	 	 	14,198	 	 	 	—	 	 	 	63,625	 	
Amortization and retirement of deferred financing fees	 	 	3,228	 	 	 	—	 	 	 	—	 	 	 	3,228	 	
Amortization and retirement of original issue discount on senior notes	 	 	682	 	 	 	—	 	 	 	—	 	 	 	682	 	
Stock-based compensation expense	 	 	13,645	 	 	 	—	 	 	 	—	 	 	 	13,645	 	
Deferred taxes	 	 	(748	)	 	 	(534	)	 	 	—	 	 	 	(1,282	)	
Excess tax benefits realized from exercise of stock-based awards	 	 	(62,555	)	 	 	—	 	 	 	—	 	 	 	(62,555	)	
Loss on disposal of property and equipment	 	 	808	 	 	 	719	 	 	 	—	 	 	 	1,527	 	
Increase in deferred rent and other long-term liabilities	 	 	2,397	 	 	 	3,915	 	 	 	—	 	 	 	6,312	 	
Increase in liability to landlords for tenant allowances, net	 	 	1,496	 	 	 	193	 	 	 	—	 	 	 	1,689	 	
Change in the value of foreign exchange contracts	 	 	2,940	 	 	 	(2,620	)	 	 	—	 	 	 	320	 	
Changes in operating assets and liabilities, net
Receivables, net	 	 	5,040	 	 	 	607	 	 	 	—	 	 	 	5,647	 	
Merchandise inventories	 	 	3,715	 	 	 	(23,435	)	 	 	—	 	 	 	(19,720	)	
Prepaid expenses and other current assets	 	 	(3,371	)	 	 	(5,653	)	 	 	—	 	 	 	(9,024	)	
Prepaid taxes	 	 	13,843	 	 	 	(7,714	)	 	 	—	 	 	 	6,129	 	
Accounts payable and accrued liabilities	 	 	(267,164	)	 	 	13,770	 	 	 	—	 	 	 	(253,394	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash flows provided by (used in) operating activities	 	 	(200,326	)	 	 	3,688	 	 	 	—	 	 	 	(196,638	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase of property and equipment	 	 	(55,740	)	 	 	(15,648	)	 	 	—	 	 	 	(71,388	)	
Acquisitions, net of cash acquired	 	 	1,062	 	 	 	—	 	 	 	—	 	 	 	1,062	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash flows used in investing activities	 	 	(54,678	)	 	 	(15,648	)	 	 	—	 	 	 	(70,326	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repurchase of notes payable	 	 	(150,000	)	 	 	—	 	 	 	—	 	 	 	(150,000	)	
Issuance of shares relating to stock options	 	 	46,782	 	 	 	—	 	 	 	—	 	 	 	46,782	 	
Excess tax benefits realized from exercise of stock-based awards	 	 	62,555	 	 	 	—	 	 	 	—	 	 	 	62,555	 	
Net decrease (increase) in other noncurrent assets and deferred financing fees	 	 	9,284	 	 	 	(5,756	)	 	 	—	 	 	 	3,528	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash flows used in financing activities	 	 	(31,379	)	 	 	(5,756	)	 	 	—	 	 	 	(37,135	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Exchange rate effect on cash and cash equivalents	 	 	—	 	 	 	973	 	 	 	—	 	 	 	973	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net decrease in cash and cash equivalents	 	 	(286,383	)	 	 	(16,743	)	 	 	—	 	 	 	(303,126	)	
Cash and cash equivalents at beginning of period	 	 	582,514	 	 	 	69,889	 	 	 	—	 	 	 	652,403	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	296,131	 	 	$	53,146	 	 	$	—	 	 	$	349,277	 	

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ITEM 2.  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
 
The following discussion should be read in conjunction with the information contained in our consolidated financial statements, including the notes thereto. Statements regarding future economic performance, management’s plans and objectives, and any statements concerning assumptions related to the foregoing contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations constitute forward-looking statements. Certain factors, which may cause actual results to vary materially from these forward-looking statements, accompany such statements or appear in GameStop’s Annual Report on Form 10-K for the fiscal year ended February 2, 2008 filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2008 (the “Form 10-K”), including the factors disclosed under “Item 1A. Risk Factors.”
 
General
 
GameStop Corp. (together with its predecessor companies, “GameStop,” “we,” “our,” or the “Company”) is the world’s largest retailer of video game products and PC entertainment software. We sell new and used video game hardware, video game software and accessories, as well as PC entertainment software and related accessories and other merchandise. As of August 2, 2008, we operated 5,557 stores in the United States, Australia, Canada and Europe, primarily under the names GameStop and EB Games. We also operate electronic commerce websites under the names  www.gamestop.com  and  www.ebgames.com  and publish Game Informer , the industry’s largest multi-platform video game magazine in the United States based on circulation.
 
Our fiscal year is composed of 52 or 53 weeks ending on the Saturday closest to January 31. The fiscal years ending January 31, 2009 (“fiscal 2008”) and ended February 2, 2008 (“fiscal 2007”) consist of 52 weeks.
 
Growth in the video game industry is driven by the introduction of new technology. In 2005 in the North American markets, Sony introduced the PlayStation Portable (the “PSP”) in March and Microsoft introduced the Xbox 360 in November. In November 2006, Nintendo introduced the Wii hardware platform worldwide and Sony introduced the PlayStation 3 hardware platform in the North American markets. Sony introduced the PlayStation 3 platform in the Australian and European markets in March 2007. Typically, following the introduction of new video game platforms, sales of new video game hardware increase as a percentage of total sales in the first full year following introduction. As video game platforms mature, the sales mix attributable to complementary video game software and accessories, which generate higher gross margins, generally increases in the subsequent years. The net effect is generally a decline in gross margins in the first full year following new platform releases and an increase in gross margins in the years subsequent to the first full year following the launch period. Unit sales of maturing video game platforms are typically also driven by manufacturer-funded retail price reductions, further driving sales of related software and accessories. We expect that the installed base of the hardware platforms listed above and sales of related software and accessories will increase in the future. The Company’s gross margin in the 13 and 26 weeks ended August 2, 2008 and August 4, 2007 was impacted by the recent launches of these new products and manufacturer-funded retail price reductions on certain of these products.
 
Critical Accounting Policies
 
Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and do not include all disclosures required under GAAP for complete financial statements. Preparation of these statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in these financial statements. For a summary of significant accounting policies and the means by which we develop estimates thereon, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2007 Annual Report on Form 10-K.
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Consolidated Results of Operations
 
The following table sets forth certain statement of operations items as a percentage of sales for the periods indicated:

 	 	13 Weeks Ended	 	26 Weeks Ended	
 	 	August 2,
	 	August 4,
	 	August 2,
	 	August 4,
	
 	 	2008	 	2007	 	2008	 	2007	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Statement of Operations Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	 	 	100.0	%	
Cost of sales	 	 	73.2	 	 	 	73.0	 	 	 	73.5	 	 	 	72.9	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	26.8	 	 	 	27.0	 	 	 	26.5	 	 	 	27.1	 	
Selling, general and administrative expenses	 	 	19.3	 	 	 	20.8	 	 	 	18.7	 	 	 	20.4	 	
Depreciation and amortization	 	 	2.0	 	 	 	2.4	 	 	 	2.0	 	 	 	2.4	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings	 	 	5.5	 	 	 	3.8	 	 	 	5.8	 	 	 	4.3	 	
Interest expense, net	 	 	0.5	 	 	 	1.0	 	 	 	0.5	 	 	 	1.1	 	
Debt extinguishment expense	 	 	—	 	 	 	0.2	 	 	 	0.1	 	 	 	0.3	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings before income tax expense	 	 	5.0	 	 	 	2.6	 	 	 	5.2	 	 	 	2.9	 	
Income tax expense	 	 	1.8	 	 	 	1.0	 	 	 	1.9	 	 	 	1.1	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net earnings	 	 	3.2	%	 	 	1.6	%	 	 	3.3	%	 	 	1.8	%	

The Company includes purchasing, receiving and distribution costs in selling, general and administrative expenses, rather than cost of goods sold, in the statement of operations. For the 13 weeks ended August 2, 2008 and August 4, 2007, these purchasing, receiving and distribution costs amounted to $13.8 million and $10.4 million, respectively. For the 26 weeks ended August 2, 2008 and August 4, 2007, these purchasing, receiving and distribution costs amounted to $25.9 million and $19.4 million, respectively. The Company includes processing fees associated with purchases made by check and credit cards in cost of sales, rather than selling, general and administrative expenses, in the statement of operations. For the 13 weeks ended August 2, 2008 and August 4, 2007, these processing fees amounted to $13.6 million and $10.2 million, respectively. For the 26 weeks ended August 2, 2008 and August 4, 2007, these processing fees amounted to $26.5 million and $19.2 million, respectively. As a result of these classifications, our gross margins are not comparable to those retailers that include purchasing, receiving and distribution costs in cost of sales and include processing fees associated with purchases made by check and credit cards in selling, general and administrative expenses. The reclassifications had no material net effect on the 13 weeks and 26 weeks ended August 2, 2008 and August 4, 2007.
 
The following table sets forth sales (in millions) by significant product category for the periods indicated:

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	 	Percent
	 	 	 	 	 	Percent
	 	 	 	 	 	Percent
	 	 	 	 	 	Percent
	 	
 	 	Sales	 	 	of Total	 	 	Sales	 	 	of Total	 	 	Sales	 	 	of Total	 	 	Sales	 	 	of Total	 	
 	 	(Unaudited)	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
New video game hardware	 	$	379.7	 	 	 	21.0	%	 	$	293.8	 	 	 	22.0	%	 	$	718.7	 	 	 	19.9	%	 	$	575.2	 	 	 	22.0	%	
New video game software	 	 	705.0	 	 	 	39.1	%	 	 	494.2	 	 	 	36.9	%	 	 	1,497.8	 	 	 	41.4	%	 	 	954.8	 	 	 	36.5	%	
Used video game products	 	 	471.5	 	 	 	26.1	%	 	 	357.3	 	 	 	26.7	%	 	 	887.2	 	 	 	24.5	%	 	 	683.7	 	 	 	26.1	%	
Other	 	 	248.2	 	 	 	13.8	%	 	 	192.9	 	 	 	14.4	%	 	 	514.3	 	 	 	14.2	%	 	 	403.5	 	 	 	15.4	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	1,804.4	 	 	 	100.0	%	 	$	1,338.2	 	 	 	100.0	%	 	$	3,618.0	 	 	 	100.0	%	 	$	2,617.2	 	 	 	100.0	%	

Other products include PC entertainment and other software and accessories, magazines and character-related merchandise.
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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 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	 	 	 	Gross
	 	 	 	 	 	Gross
	 	 	 	 	 	Gross
	 	 	 	 	 	Gross
	 	
 	 	Gross
	 	 	Profit
	 	 	Gross
	 	 	Profit
	 	 	Gross
	 	 	Profit
	 	 	Gross
	 	 	Profit
	 	
 	 	Profit	 	 	Percent	 	 	Profit	 	 	Percent	 	 	Profit	 	 	Percent	 	 	Profit	 	 	Percent	 	
 	 	 	 	 	 	 	 	 	 	 	(Unaudited)	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross Profit:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
New video game hardware	 	$	22.6	 	 	 	6.0	%	 	$	21.5	 	 	 	7.3	%	 	$	43.0	 	 	 	6.0	%	 	$	43.1	 	 	 	7.5	%	
New video game software	 	 	145.3	 	 	 	20.6	%	 	 	100.2	 	 	 	20.3	%	 	 	301.9	 	 	 	20.2	%	 	 	192.0	 	 	 	20.1	%	
Used video game products	 	 	234.1	 	 	 	49.7	%	 	 	173.2	 	 	 	48.5	%	 	 	438.2	 	 	 	49.4	%	 	 	337.5	 	 	 	49.4	%	
Other	 	 	82.1	 	 	 	33.1	%	 	 	66.4	 	 	 	34.4	%	 	 	174.4	 	 	 	33.9	%	 	 	137.5	 	 	 	34.1	%	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	484.1	 	 	 	26.8	%	 	$	361.3	 	 	 	27.0	%	 	$	957.5	 	 	 	26.5	%	 	$	710.1	 	 	 	27.1	%	

13 weeks ended August 2, 2008 compared with the 13 weeks ended August 4, 2007
 
Sales increased by $466.2 million, or 34.8%, from $1,338.2 million in the 13 weeks ended August 4, 2007 to $1,804.4 million in the 13 weeks ended August 2, 2008. The increase in sales was attributable to the comparable store sales increase of 20.0% for the second quarter of fiscal 2008, the addition of non-comparable store sales from the 835 stores opened since May 5, 2007 of approximately $268.8 million and increases related to changes in foreign exchange rates of $36.0 million. Stores are included in our comparable store sales base beginning in the thirteenth month of operation and exclude the effect of changes in foreign exchange rates. The comparable store sales increase was driven by strong sales of new video game software which is typical as the installed base of the new hardware platforms increases in the years following their launch. The new software sales increase was spread across all platforms and included several strong video game titles, such as Wii Fit, Metal Gear Solid 4, and Grand Theft Auto IV.
 
New video game hardware sales increased $85.9 million, or 29.2%, from $293.8 million in the 13 weeks ended August 4, 2007 to $379.7 million in the 13 weeks ended August 2, 2008, primarily due to continued expansion of the installed base of the new hardware platforms and the increase in store count since the end of the second quarter of fiscal 2007. New video game software sales increased $210.8 million, or 42.7%, from $494.2 million in the 13 weeks ended August 4, 2007 to $705.0 million in the 13 weeks ended August 2, 2008, primarily due to the strong sales of new video game titles and the increased sales related to the new hardware platforms discussed above, as well as the new stores added since last year. Used video game product sales also grew due to an increase in store count and an increase in the availability of hardware and software associated with the new hardware platforms as those platforms age and expand. Used video game product sales increased $114.2 million, or 32.0%, from $357.3 million in the 13 weeks ended August 4, 2007 to $471.5 million in the 13 weeks ended August 2, 2008. Sales of other product categories grew 28.7%, or $55.3 million, from the 13 weeks ended August 4, 2007 to the 13 weeks ended August 2, 2008, due to the increase in store count and the increase in new hardware platform accessories sales.
 
As a percentage of sales, new video game hardware, used video game products and the other product category decreased in the 13 weeks ended August 2, 2008 compared to the 13 weeks ended August 4, 2007. This was due to the strong sales of new video game software driven by the continued expansion of the installed base of the new video game consoles mentioned earlier and a strong lineup of video game titles released in the quarter.
 
Cost of sales increased by $343.4 million, or 35.2%, from $976.9 million in the 13 weeks ended August 4, 2007 to $1,320.3 million in the 13 weeks ended August 2, 2008 as a result of the increase in sales and the changes in gross profit discussed below.
 
Gross profit increased by $122.8 million, or 34.0%, from $361.3 million in the 13 weeks ended August 4, 2007 to $484.1 million in the 13 weeks ended August 2, 2008. Gross profit as a percentage of sales decreased slightly from 27.0% in the 13 weeks ended August 4, 2007 to 26.8% in the 13 weeks ended August 2, 2008. Gross profit as a
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percentage of sales on new video game hardware decreased from 7.3% in the prior year quarter to 6.0% of sales this quarter due to a change in the mix of hardware units sold and a reduction in warranty attachment sales during the second quarter of fiscal 2008. Gross profit as a percentage of sales on used video game products increased from 48.5% in the 13 weeks ended August 4, 2007 to 49.7% in the 13 weeks ended August 2, 2008 due to fewer promotional activities during the second quarter of fiscal 2008.
 
Selling, general and administrative expenses increased by $69.3 million, or 24.9%, from $278.4 million in the 13 weeks ended August 4, 2007 to $347.7 million in the 13 weeks ended August 2, 2008. This increase was primarily attributable to the increase in the number of stores in operation and the related increases in store, distribution and corporate office operating expenses. Selling, general and administrative expenses as a percentage of sales decreased from 20.8% in the 13 weeks ended August 4, 2007 to 19.3% in the 13 weeks ended August 2, 2008. The decrease in selling, general and administrative expenses as a percentage of sales was primarily due to leveraging as a result of the higher sales discussed above. Included in selling, general and administrative expenses is $8.3 million and $6.7 million in stock-based compensation expense for the 13 weeks ended August 2, 2008 and August 4, 2007, respectively.
 
Depreciation and amortization expense increased $4.2 million from $32.1 million for the 13 weeks ended August 4, 2007 to $36.3 million in the 13 weeks ended August 2, 2008. This increase was primarily due to capital expenditures associated with the opening of 125 new stores during the second quarter of fiscal 2008 and investments in management information systems.
 
Interest income resulting from the investment of excess cash balances decreased from $2.7 million in the 13 weeks ended August 4, 2007 to $1.6 million in the 13 weeks ended August 2, 2008. Interest expense decreased from $16.1 million in the 13 weeks ended August 4, 2007 to $10.8 million in the 13 weeks ended August 2, 2008 primarily due to the retirement of $30 million of the Company’s senior notes and $120 million of the Company’s senior floating rate notes since August 4, 2007. Debt extinguishment expense of $2.0 million was recognized in the 13 weeks ended August 4, 2007 as a result of premiums paid related to debt retirement and the write-off of deferred financing fees and unamortized original issue discount.
 
Income tax expense for the 13 weeks ended August 4, 2007 and the 13 weeks ended August 2, 2008 was based upon management’s estimate of the Company’s annualized effective tax rate. Income tax expense was $13.6 million for the 13 weeks ended August 4, 2007 compared to $33.7 million for the 13 weeks ended August 2, 2008.
 
The factors described above led to an increase in operating earnings of $49.4 million, or 97.4%, from $50.7 million in the 13 weeks ended August 4, 2007 to $100.1 million in the 13 weeks ended August 2, 2008, and an increase in net earnings of $35.4 million, or 162.4%, from $21.8 million in the 13 weeks ended August 4, 2007 to $57.2 million in the 13 weeks ended August 2, 2008.
 
26 weeks ended August 2, 2008 compared with the 26 weeks ended August 4, 2007
 
Sales increased by $1,000.8 million, or 38.2%, from $2,617.2 million in the 26 weeks ended August 4, 2007 to $3,618.0 million in the 26 weeks ended August 2, 2008. The increase in sales was attributable to the comparable store sales increase of 23.5% for the 26 week-period ended August 2, 2008, the addition of non-comparable store sales from the 921 stores opened since February 3, 2007 of approximately $306.2 million, and increases related to changes in foreign exchange rates of $77.1 million. Stores are included in our comparable store sales base beginning in the thirteenth month of operation and exclude the effect of changes in foreign exchange rates. The comparable store sales increase was driven by strong sales of new video game software, which is typical as the installed base of the new hardware platforms increases in the years following their launch.
 
New video game hardware sales increased $143.5 million, or 24.9%, from $575.2 million in the 26 weeks ended August 4, 2007 to $718.7 million in the 26 weeks ended August 2, 2008, primarily due to continued expansion of the installed base of the new hardware platforms and the increase in store count since the end of fiscal 2007. New video game software sales increased $543.0 million, or 56.9%, from $954.8 million in the 26 weeks ended August 4, 2007 to $1,497.8 million in the 26 weeks ended August 2, 2008, primarily due to the strong sales of new video game titles and the increased sales related to the new hardware platforms, as well as the new stores added since the end of fiscal 2007. Used video game product sales also grew primarily due to an increase in store count and
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an increase in the availability of hardware and software associated with the new hardware platforms as those platforms age and expand. Used video game product sales increased $203.5 million, or 29.8%, from $683.7 million in the 26 weeks ended August 4, 2007 to $887.2 million in the 26 weeks ended August 2, 2008. Sales of other product categories grew 27.5%, or $110.8 million, from the 26 weeks ended August 4, 2007 to the 26 weeks ended August 2, 2008, due to the increase in store count and the increase in new hardware platform accessories sales.
 
As a percentage of sales, new video game hardware, used video game products and the other product category decreased in the 26 weeks ended August 2, 2008 compared to the 26 weeks ended August 4, 2007. This was due to the strong sales of new video game software driven by the continued expansion of the installed base of the new video game consoles mentioned earlier and a strong lineup of video game titles in fiscal 2008.
 
Cost of sales increased by $753.4 million, or 39.5%, from $1,907.1 million in the 26 weeks ended August 4, 2007 to $2,660.5 million in the 26 weeks ended August 2, 2008 as a result of the increase in sales and the changes in gross profit discussed below.
 
Gross profit increased by $247.4 million, or 34.8%, from $710.1 million in the 26 weeks ended August 4, 2007 to $957.5 million in the 26 weeks ended August 2, 2008. Gross profit as a percentage of sales decreased from 27.1% in the 26 weeks ended August 4, 2007 to 26.5% in the 26 weeks ended August 2, 2008. The gross profit percentage decrease was caused primarily by the increase in sales of new video game software as a percentage of total sales in the 26 weeks ended August 2, 2008, which resulted in a decrease in sales of higher margin used video game products and other products as a percentage of total sales. Gross profit as a percentage of sales on new video game hardware decreased from 7.5% of sales for the 26 weeks ended August 4, 2007 to 6.0% of sales for the 26 weeks ended August 2, 2008 due to a change in the mix of hardware units sold and a reduction in warranty attachment sales during fiscal 2008. Gross profit as a percentage of sales on new video game software, used video game products and the other product category had no significant change from the same period in the prior fiscal year.
 
Selling, general and administrative expenses increased by $140.8 million, or 26.3%, from $535.6 million in the 26 weeks ended August 4, 2007 to $676.4 million in the 26 weeks ended August 2, 2008. This increase was primarily attributable to the increase in the number of stores in operation and the related increases in store, distribution and corporate office operating expenses during fiscal 2008. Selling, general and administrative expenses as a percentage of sales decreased from 20.4% in the 26 weeks ended August 4, 2007 to 18.7% in the 26 weeks ended August 2, 2008. The decrease in selling, general and administrative expenses as a percentage of sales was primarily due to leveraging as a result of the higher sales discussed above. Selling, general and administrative expenses include $20.1 million and $13.6 million in stock-based compensation expense for the 26 weeks ended August 2, 2008 and August 4, 2007, respectively.
 
Depreciation and amortization expense increased $7.9 million from $63.2 million for the 26 weeks ended August 4, 2007 to $71.1 million in the 26 weeks ended August 2, 2008. This increase was primarily due to capital expenditures associated with the opening of 335 new stores during the 26 weeks ended August 2, 2008 and investments in management information systems.
 
Interest income remained at $6.6 million for both 26-week periods ended August 4, 2007 and August 2, 2008. Interest expense decreased from $34.0 million in the 26 weeks ended August 4, 2007 to $24.3 million in the 26 weeks ended August 2, 2008 primarily due to the retirement of $120 million of the Company’s senior floating rate notes and $30 million of the Company’s senior notes since August 4, 2007. Debt extinguishment expense of $2.3 million was recognized in the 26 weeks ended August 2, 2008 as a result of premiums paid related to debt retirement and the write-off of deferred financing fees and unamortized original issue discount.
 
Income tax expense for the 26 weeks ended August 4, 2007 and the 26 weeks ended August 2, 2008 was based upon management’s estimate of the Company’s annualized effective tax rate. Income tax expense was $28.6 million for the 26 weeks ended August 4, 2007 compared to $70.7 million for the 26 weeks ended August 2, 2008.
 
The factors described above led to an increase in operating earnings of $98.6 million, or 88.5%, from $111.4 million in the 26 weeks ended August 4, 2007 to $210.0 million in the 26 weeks ended August 2, 2008, and an increase in net earnings of $72.8 million, or 156.6%, from $46.5 million in the 26 weeks ended August 4, 2007 to $119.3 million in the 26 weeks ended August 2, 2008.
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Segment Performance
 
The Company operates its business in the following segments: United States, Australia, Canada and Europe. The following tables provide a summary of our sales and operating earnings (loss) by reportable segment:

 	 	13 Weeks Ended	 	 	26 Weeks Ended	 	
 	 	August 2,
	 	 	August 4,
	 	 	August 2,
	 	 	August 4,
	 	
 	 	2008	 	 	2007	 	 	2008	 	 	2007	 	
 	 	(In millions)	 	
 	 	 	 	 	(Unaudited)	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales by operating segment are as follows:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
United States	 	$	1,316.9	 	 	$	1,026.7	 	 	$	2,694.0	 	 	$	2,030.7	 	
Canada	 	 	114.7	 	 	 	84.6	 	 	 	243.6	 	 	 	164.7	 	
Australia	 	 	148.0	 	 	 	93.8	 	 	 	251.4	 	 	 	166.1	 	
Europe	 	 	224.8	 	 	 	133.1	 	 	 	429.0	 	 	 	255.7	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	1,804.4	 	 	$	1,338.2	 	 	$	3,618.0	 	 	$	2,617.2	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating earnings (loss) by operating segment are as follows:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
United States	 	$	82.4	 	 	$	38.1	 	 	$	175.2	 	 	$	91.7	 	
Canada	 	 	5.7	 	 	 	5.5	 	 	 	11.5	 	 	 	9.2	 	
Australia	 	 	13.7	 	 	 	8.0	 	 	 	21.5	 	 	 	12.5	 	
Europe	 	 	(1.7	)	 	 	(0.8	)	 	 	1.8	 	 	 	(2.0	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total	 	$	100.1	 	 	$	50.8	 	 	$	210.0	 	 	$	111.4	 	

United States
 
Segment results for the United States include retail operations in 50 states, the District of Columbia, Puerto Rico and Guam, the electronic commerce websites  www.gamestop.com  and  www.ebgames.com  and Game Informer  magazine. As of August 2, 2008, the United States segment included 4,180 GameStop stores, compared to 3,918 on August 4, 2007. Sales for the 13 and 26 weeks ended August 2, 2008 increased 28.3% and 32.7%, respectively, compared to the 13 and 26 weeks ended August 4, 2007 as a result of increased sales at existing stores and the opening of 436 new stores since May 5, 2007 and 482 stores since February 3, 2007, including 68 and 154 stores in the 13 and 26 weeks ended August 2, 2008, respectively. Sales at existing stores increased due to strong sales of new video game software and used video game products which is typical in the years following the release of new hardware platforms. As the installed base of the new hardware platforms expands, more new software titles become available and trade-ins of used video game products applied toward the purchase of new video games lead to increased sales of new and used video game products. Segment operating income for the 13 and 26 weeks ended August 2, 2008 increased by 116.3% and 91.1%, respectively, compared to the 13 and 26 weeks ended August 4, 2007 driven by strong sales of new video game software and used video game products and their related accessories, as well as the leveraging of selling, general and administrative expenses.
 
Canada
 
Sales in the Canadian segment in the 13 and 26 weeks ended August 2, 2008 increased 35.6% and 47.9%, respectively, compared to the 13 and 26 weeks ended August 4, 2007. The increase in sales was primarily attributable to increased sales at existing stores and the additional sales at the 45 and 49 stores opened since May 5, 2007 and February 3, 2007, respectively. As of August 2, 2008, the Canadian segment had 316 stores compared to 272 stores at August 4, 2007. The increase in sales at existing stores was driven by strong sales of new video game software related to the new hardware platforms. Segment operating income for the 13 and 26 weeks ended August 2, 2008 increased by 3.6% and 25.0%, respectively, compared to the 13 and 26 weeks ended August 4, 2007 driven by the increased sales discussed above and the leveraging of selling, general and administrative expenses and the favorable impact of changes in exchange rates since the prior year. For the 13 and 26 weeks ended August 2, 2008,
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changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.3 million and $1.1 million, respectively.
 
Australia
 
Segment results for Australia include retail operations in Australia and New Zealand. As of August 2, 2008, the Australian segment included 316 stores, compared to 243 at August 4, 2007. Sales for the 13 and 26 weeks ended August 2, 2008 increased 57.8% and 51.4%, respectively, compared to the 13 and 26 weeks ended August 4, 2007. The increase in sales was due to higher sales at existing stores and the additional sales at the 83 and 98 stores opened since May 5, 2007 and February 3, 2007, respectively. The increase in sales at existing stores was primarily due to a strong software title lineup and the availability of the new hardware platforms in the second quarter of fiscal 2008 when compared to the prior fiscal year following the launch of the Sony PlayStation 3 in the first quarter of fiscal 2007. In addition, the new hardware platforms drove an increase in used product sales as the installed base of the platforms increased and more software became available. Segment operating income in the 13 and 26 weeks ended August 2, 2008 increased by 71.3% and 72.0%, respectively, when compared to the 13 and 26 weeks ended August 4, 2007. The increase was driven by the increased sales discussed above and the leveraging of selling, general and administrative expenses. For the 13 and 26 weeks ended August 2, 2008, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $1.5 million and $2.4 million, respectively.
 
Europe
 
Segment results for Europe include retail operations in 12 European countries. As of August 2, 2008, the European segment operated 745 stores compared to 521 stores as of August 4, 2007. For the 13 and 26 weeks ended August 2, 2008, European sales increased 68.9% and 67.8%, respectively, compared to the 13 and 26 weeks ended August 4, 2007. The increase in sales was primarily due to the increase in sales at existing stores and the additional sales at the 271 and 292 stores opened since May 5, 2007 and February 3, 2007, respectively, including the 49 stores acquired from Free Record Shop Norway AS, a Norwegian private limited liability company (“FRS”), in Norway during the first quarter of fiscal 2008. The increase in sales at existing stores was primarily due to a strong software title lineup and the availability of the new hardware platforms in the second quarter of fiscal 2008 when compared to the prior fiscal year following the launch of the Sony PlayStation 3 in the first quarter of fiscal 2007. In addition, the new hardware platforms drove an increase in used product sales as the installed base of the platforms increased and more software became available.
 
The segment operating loss in Europe was $1.7 million in the 13 weeks ended August 2, 2008 compared to the operating loss in the 13 weeks ended August 4, 2007 of $0.8 million. The segment operating income in Europe for the 26 weeks ended August 2, 2008 was $1.8 million compared to the operating loss in the 26 weeks ended August 4, 2007 of $2.0 million. The increase in the operating loss for the 13 weeks ended August 2, 2008 compared to the 13 weeks ended August 4, 2007 was primarily due to the increased selling, general and administrative expenses associated with the operation and conversion of the FRS stores to the GameStop format. The increase in operating earnings in the 26 weeks ended August 2, 2008 compared to the 26 weeks ended August 4, 2007 was due to the increase in sales and related margin, offset by the increase in selling, general and administrative expenses discussed for this quarter.
 
In addition, for the 26 weeks ended August 2, 2008, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.7 million. There was no material change in operating earnings related to the effect of the exchange rates for the 13 weeks ended August 2, 2008 when compared to the 13 weeks ended August 4, 2007.
 
Seasonality
 
The Company’s business, like that of many retailers, is seasonal, with the major portion of the sales and operating profit realized during the quarter which includes the holiday selling season.
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Liquidity and Capital Resources
 
Cash Flows
 
During the 26 weeks ended August 2, 2008, cash used in operations was $210.2 million, compared to cash used in operations of $196.6 million during the 26 weeks ended August 4, 2007. The increase of cash used in operations of $13.6 million from the 26 weeks ended August 4, 2007 to the 26 weeks ended August 2, 2008 was primarily due to an increase in cash provided by net earnings, including the non-cash adjustments to net earnings, of $81.5 million and a decrease in the operating activities adjustment related to the excess tax benefits realized from the exercise of stock-based awards of $29.5 million. Also contributing to the increase in cash used in operations for the 26 weeks ended August 2, 2008 compared to the same period ended August 4, 2007 was an increase in working capital of $124.6 million primarily due to an increase in merchandise inventories of $133.1 million due to an increase in store count and sales levels.
 
Cash used in investing activities was $131.8 million and $70.3 million during the 26 weeks ended August 2, 2008 and August 4, 2007, respectively. During the 26 weeks ended August 2, 2008, $81.5 million of cash was used primarily to open new stores in the U.S. and internationally and to invest in information systems. In addition, the Company used $50.3 million, net of cash acquired, to acquire FRS, The Gamesman Limited and an increased ownership interest in GameStop Group Limited. During the 26 weeks ended August 4, 2007, $71.4 million of cash was used primarily to open 236 new stores in the U.S. and internationally and to invest in information systems, offset by $1.1 million of cash received related to the finalization of the purchase price of Game Brands Inc. which was acquired during the fourth quarter of the 53 weeks ended February 3, 2007.
 
Cash provided by financing activities was $24.5 million for the 26 weeks ended August 2, 2008 and cash used in financing activities for the 26 weeks ended August 4, 2007 was $37.1 million. The cash provided by financing activities for the 26 weeks ended August 2, 2008 was primarily due to the issuance of shares relating to stock option exercises of $26.7 million and $33.0 million for the realization of tax benefits relating to the stock option exercises and vested restricted stock, respectively. These inflows were offset by the repurchase of $30.0 million of principal value of the Company’s senior notes. The cash used in financing activities for the 26 weeks ended August 4, 2007 was primarily due to the repurchase of $20.0 million and $130.0 million of principal value of the Company’s senior notes and senior floating rate notes, respectively. These cash outflows were offset by $46.8 million received for the issuance of shares relating to stock option exercises and $62.6 million for the realization of tax benefits relating to the stock option exercises and vested restricted stock.
 
Sources of Liquidity
 
We utilize cash generated from operations and have funds available to us under our revolving credit facility to cover seasonal fluctuations in cash flows and to support our various growth initiatives. Our cash and cash equivalents are carried at cost, which approximates market value, and consist primarily of time deposits with highly rated commercial banks and money market investment funds holding direct U.S. Treasury obligations.
 
In October 2005, in connection with the merger with EB, the Company entered into a five-year, $400 million Credit Agreement (the “Revolver”), including a $50 million letter of credit sub-limit, secured by the assets of the Company and its U.S. subsidiaries. The Revolver places certain restrictions on the Company and its subsidiaries, including limitations on asset sales, additional liens and the incurrence of additional indebtedness. In April 2007, the Company amended the Revolver to extend the maturity date from October 11, 2010 to April 25, 2012, reduce the LIBO interest rate margin, reduce and fix the rate of the unused commitment fee and modify or delete certain other covenants.
 
The availability under the Revolver is limited to a borrowing base which allows the Company to borrow up to the lesser of (x) approximately 70% of eligible inventory and (y) 90% of the appraisal value of the inventory, in each case plus 85% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount available to borrow by their face value. The Company’s ability to pay cash dividends, redeem options, and repurchase shares is generally prohibited, except that if availability under the Revolver is or will be after any such payment equal to or greater than 25% of the borrowing base, the Company may repurchase its capital stock and pay cash dividends. In addition, in the event that credit extensions under the Revolver at any time exceed 80% of the
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lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio covenant of 1.5:1.0.
 
The interest rate on the Revolver is variable and, at the Company’s option, is calculated by applying a margin of (1) 0.0% to 0.25% above the higher of the prime rate of the administrative agent or the federal funds effective rate plus 0.50% or (2) 1.00% to 1.50% above the LIBO rate. The applicable margin is determined quarterly as a function of the Company’s consolidated leverage ratio. As of August 2, 2008, the applicable margin was 0.0% for prime rate loans and 1.00% for LIBO rate loans. In addition, the Company is required to pay a commitment fee of 0.25% for any unused portion of the total commitment under the Revolver. As of August 2, 2008, there were no borrowings outstanding under the Revolver and letters of credit outstanding totaled $7.3 million.
 
In September 2007, the Company’s Luxembourg subsidiary entered into a discretionary, $20 million Uncommitted Line of Credit (the “Line of Credit”) with Bank of America. There is no term associated with the Line of Credit and Bank of America may withdraw the facility at any time without notice. The Line of Credit will be made available to the Company’s 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 2, 2008, there was $3.7 million of cash overdrafts outstanding under the Line of Credit and bank guarantees outstanding totaled $4.9 million.
 
In September 2005, the Company, along with GameStop, Inc. as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300 million aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and U.S. $650 million aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the Senior Floating Rate Notes, the “Notes”). The Notes were issued under an Indenture dated September 28, 2005 (the “Indenture”), by and among the Issuers, the subsidiary guarantors party thereto, and Citibank, N.A., as trustee (the “Trustee”). The net proceeds of the offering were used to pay the cash portion of the merger consideration paid to the stockholders of EB in connection with the merger.
 
The Senior Notes bear interest at 8.0% per annum, mature on October 1, 2012 and were priced at 98.688%, resulting in a discount at the time of issue of $8.5 million. The discount is being amortized using the effective interest method. As of August 2, 2008, the unamortized original issue discount was $4.8 million. The rate of interest on the Senior Floating Rate Notes prior to their redemption on October 1, 2007 was 9.2350% per annum. The Issuers pay interest on the Senior Notes semi-annually, in arrears, every April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15, and at maturity.
 
The Indenture contains affirmative and negative covenants customary for such financings, including, among other things, limitations on (1) the incurrence of additional debt, (2) restricted payments, (3) liens, (4) sale and leaseback transactions and (5) asset sales. Events of default provided for in the Indenture include, among other things, failure to pay interest or principal on the Notes, other breaches of covenants in the Indenture, and certain events of bankruptcy and insolvency. As of August 2, 2008, the Company was in compliance with all covenants associated with the Revolver and the Indenture.
 
Under certain conditions, the Issuers may on any one or more occasions prior to maturity redeem up to 100% of the aggregate principal amount of Senior Notes issued under the Indenture at redemption prices at or in excess of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date. The circumstances which would limit the percentage of the Notes which may be redeemed or which would require the Company to pay a premium in excess of 100% of the principal amount are defined in the Indenture. Upon a Change of Control (as defined in the Indenture), the Issuers are required to offer to purchase all of the Notes then outstanding at 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. The Issuers may acquire Senior Notes by means other than redemption, whether by tender offer, open market purchases, negotiated transactions or otherwise, in accordance with applicable securities laws, so long as such acquisitions do not otherwise violate the terms of the Indenture.
 
Uses of Capital
 
Our future capital requirements will depend on the number of new stores opened and the timing of those openings within a given fiscal year. The Company opened 335 stores in the 26 weeks ended August 2, 2008 and
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expects to open approximately 550 to 600 stores in total during fiscal 2008. Capital expenditures for fiscal 2008 are projected to be approximately $170 million to $180 million, to be used primarily to fund new store openings and invest in distribution and information systems in support of operations.
 
In May 2006, the Company announced that its Board of Directors authorized the buyback of up to an aggregate of $100 million of its Senior Floating Rate Notes and Senior Notes. As of February 3, 2007, the Company had repurchased the maximum authorized amount, having acquired $50 million of its Senior Notes and $50 million of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation.
 
On February 9, 2007, the Company announced that its Board of Directors authorized the buyback of up to an aggregate of an additional $150 million of its Senior Notes and Senior Floating Rate Notes. As of August 4, 2007, the Company had repurchased the maximum authorized amount, having acquired $20 million of its Senior Notes and $130 million of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on the retirement of this debt was $2.0 million and $8.8 million for the 13 and 26 week periods ended August 4, 2007, respectively, which consists of the premium paid to retire the Notes and the recognition of the deferred financing fees and the original issue discount on the Notes.
 
On June 28, 2007, the Company announced that its Board of Directors authorized the redemption of the remaining $120 million of Senior Floating Rate Notes outstanding. The Company redeemed the Senior Floating Rate Notes on October 1, 2007 at the redemption price specified by the Senior Floating Rate Notes of 102.00%, plus all accrued and unpaid interest through the redemption date. The Company incurred a one-time pre-tax charge of $3.8 million associated with the redemption, which represents a $2.4 million redemption premium and $1.4 million to recognize unamortized deferred financing costs.
 
On February 7, 2008, the Company announced that its Board of Directors authorized the buyback of up to an aggregate of an additional $130 million of its Senior Notes. The timing and amount of the repurchases will be determined by the Company’s management based on their evaluation of market conditions and other factors. In addition, the repurchases may be suspended or discontinued at any time. As of August 2, 2008, the Company had repurchased $30 million of its Senior Notes pursuant to this new authorization and delivered the Senior Notes to the Trustee for cancellation. The associated loss on retirement of debt is $2.3 million, which consists of the premium paid to retire the Senior Notes and the write-off of the deferred financing fees and the original issue discount on the Senior Notes.
 
During October 2007, the Company paid the final principal payment of $12.2 million to Barnes & Noble, Inc. (“Barnes & Noble”) on the promissory note that was issued in connection with the repurchase of GameStop’s common stock held by Barnes & Noble, satisfying the promissory note in full. The note was unsecured and bore interest at 5.5% per annum.
 
On April 5, 2008, the Company purchased all the outstanding stock of FRS for $21.0 million, net of cash acquired. FRS operates 49 record stores in Norway and also operates office and warehouse facilities in Oslo, Norway. The Company intends to convert these stores into video game stores with an inventory assortment similar to its other stores in Norway.
 
In 2003, the Company purchased a 51% controlling interest in GameStop Group Limited which operates stores in Ireland and the United Kingdom. Under the terms of the purchase agreement, the minority interest owners of the remaining 49% have the ability to require the Company to purchase their remaining shares in incremental percentages at a price to be determined based partially on the Company’s price to earnings ratio and GameStop Group Limited’s earnings. On May 21, 2008, the minority interest owners exercised their right to sell one-third of their shares, or approximately 16% of GameStop Group Limited, to the Company under the terms of the original purchase agreement for $27.4 million. The transaction was completed in June 2008 and recorded in accordance with the provisions of the Statement of Financial Accounting Standards No. 141,  Business Acquisitions.
 
Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under the Revolver will be sufficient to fund our operations, required payments on the Senior Notes, store expansion and remodeling activities and corporate capital expenditure programs for at least the next 12 months.
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Recent Accounting Policies
 
In March 2008, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 161,  Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133  (“SFAS 161”). SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and their effect on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for the Company on February 1, 2009. The Company is currently evaluating the impact that the adoption of SFAS 161 may have on its consolidated financial statements.
 
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007),  Business Combinations  (“SFAS 141(R)”). SFAS 141(R) amends the principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) is effective for the Company on February 1, 2009, and the Company will apply SFAS 141(R) prospectively to all business combinations subsequent to the effective date.
 
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51  (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the controlling and noncontrolling interests and requires the separate disclosure of income attributable to controlling and noncontrolling interests. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact that the adoption of SFAS 160 will have on its consolidated financial statements.
 
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  (“SFAS 159”). This statement permits entities the option to measure many financial instruments and certain other items at fair value at specific election dates. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS 159 was effective for our Company on February 3, 2008. The adoption of SFAS 159 did not have a material impact on our consolidated financial statements.
 
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements  (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The Company adopted SFAS 157 on February 3, 2008 as required for its financial assets and liabilities. However, in February 2008, the FASB issued FASB Staff Position 157-2,  Effective Date of FASB Statement No. 157 , which delays the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The adoption of SFAS 157 for our financial assets and liabilities did not have a material impact on the Company’s financial condition and results of operations. We do not believe the adoption of SFAS 157 for our non-financial assets and liabilities, effective February 1, 2009, will have a material impact on our consolidated financial statements.
 
Disclosure Regarding Forward-looking Statements
 
This report on Form 10-Q and other oral and written statements made by the Company to the public contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or
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achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to:

 	• 	our reliance on suppliers and vendors for sufficient quantities of their products and for new product releases;	
 	 	 	
 	• 	general economic conditions in the U.S. and internationally and specifically, economic conditions affecting the electronic game industry;	
 	 	 	
 	• 	the competitive environment in the electronic game industry;	
 	 	 	
 	• 	our ability to open and operate new stores;	
 	 	 	
 	• 	our ability to attract and retain qualified personnel;	
 	 	 	
 	• 	the impact and costs of litigation and regulatory compliance;	
 	 	 	
 	• 	unanticipated litigation results;	
 	 	 	
 	• 	the risks involved with our international operations;	
 	 	 	
 	• 	alternate sources of distribution of video game software; and	
 	 	 	
 	• 	other factors described in the Form 10-K, including those set forth under the caption “Item 1A. Risk Factors.”	
 
In some cases, forward-looking statements can be identified by the use of terms such as “anticipates,” “believes,” “continues,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “pro forma,” “should,” “seeks,” “will” or similar expressions. These statements are only predictions based on current expectations and assumptions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. You should not place undue reliance on these forward-looking statements.
 
Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Form 10-Q. In light of these risks and uncertainties, the forward-looking events and circumstances contained in this Form 10-Q may not occur, causing actual results to differ materially from those anticipated or implied by our forward-looking statements.

ITEM 3.  	Quantitative and Qualitative Disclosures About Market Risk	
 
Interest Rate Exposure
 
We do not use derivative financial instruments to hedge interest rate exposure. We limit our interest rate risks by investing our excess cash balances in short-term, highly-liquid instruments with a maturity of one year or less. In addition, the Senior Notes outstanding issued in connection with the merger carry a fixed interest rate. We do not expect any material losses from our invested cash balances, and we believe that our interest rate exposure is modest.
 
Foreign Currency Risk
 
The Company follows the provisions of Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities  (“SFAS 133”), as amended by Statement of Financial Accounting Standards No. 138,  Accounting for Certain Derivative Instruments and Certain Hedging Activities  and Statement of Financial Accounting Standards No. 157,  Fair Value Measurements  (“SFAS 157”). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value while SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if it is, depending on the type of hedge transaction.
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The Company uses forward exchange contracts, foreign currency options and cross-currency swaps, (together, the “Foreign Currency Contracts”) to manage currency risk primarily related to intercompany loans denominated in non-functional currencies and certain foreign currency assets and liabilities. These Foreign Currency Contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the re-measurement of related intercompany loans and foreign currency assets and liabilities. The aggregate fair value of the Foreign Currency Contracts at August 2, 2008 was a liability of $8.2 million as measured by observable inputs obtained from market news reporting services, such as Bloomberg and The Wall Street Journal, and industry-standard models that consider various assumptions, including quoted forward prices, time value, volatility factors, and contractual prices for the underlying instruments, as well as other relevant economic measures. A hypothetical strengthening or weakening of 10% in the foreign exchange rates underlying the Foreign Currency Contracts from the market rate as of August 2, 2008 would result in a (loss) or gain in value of the forwards, options and swaps of ($23.9 million) or $23.9 million, respectively.

ITEM 4.  	Controls and Procedures	
 
(a) Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this report, the Company’s management conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.
 
(b) Changes in Internal Control over Financial Reporting
 
There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
PART II — OTHER INFORMATION

ITEM 1.  	Legal Proceedings	
 
On February 14, 2005, and as amended, Steve Strickland, as personal representative of the Estate of Arnold Strickland, deceased, Henry Mealer, as personal representative of the Estate of Ace Mealer, deceased, and Willie Crump, as personal representative of the Estate of James Crump, deceased, filed a wrongful death lawsuit against GameStop, Sony, Take-Two Interactive, Rock Star Games and Wal-Mart (collectively, the “Defendants”) and Devin Moore, alleging that Defendants’ actions in designing, manufacturing, marketing and supplying Defendant Moore with violent video games were negligent and contributed to Defendant Moore killing Arnold Strickland, Ace Mealer and James Crump. Moore was found guilty of capital murder in a criminal trial and was sentenced to death in August 2005.
 
Plaintiffs’ new Alabama counsel has named a new expert, a psychiatrist who testified at the criminal trial on behalf of the criminal defendant, who will opine (if allowed) that violent video games were a substantial factor in causing the murders. This same testimony from this same expert was excluded in the criminal trial from the same judge hearing this case. The motion to bar this testimony in this case is set for October 30, 2008. The ruling on this motion will have an effect on whether the case is able to proceed. There is no current trial date. The Company does not believe there is sufficient information to estimate the amount of the possible loss, if any, resulting from the lawsuit.
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In the ordinary course of the Company’s business, the Company is, from time to time, subject to various other legal proceedings. Management does not believe that any such other legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s financial condition or results of operations.
 
There have been no other material developments in previously reported legal proceedings during the fiscal quarter covered by this Form 10-Q.

ITEM 1A.  	Risk Factors	
 
In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in our Form 10-K for the fiscal year ended February 2, 2008 filed with the SEC on April 2, 2008. These risks could materially and adversely affect our business, financial condition and results of operations. The risks described in our Form 10-K have not changed materially, however, they are not the only risks we face. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

ITEM 4.  	Submission of Matters to a Vote of Security Holders	
 
The Company’s Annual Meeting of Stockholders was held on June 24, 2008. At the close of business on the record date for the meeting (which was May 1, 2008), there were 163,189,494 shares of Class A common stock outstanding and entitled to vote at the meeting. Holders of 149,513,837 shares of Class A common stock (with one vote per share) were present at the meeting, either in person or by proxy.
 
The Company’s stockholders approved, by the following vote, the amendment and restatement of the Amended and Restated GameStop Corp. Supplemental Compensation Plan which increases the maximum cash bonus payable to any participating executive officer with respect to any fiscal year from $2,500,000 to $3,500,000.

In Favor	 	Against	 	Abstained	 	Broker Non-Votes	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	124,092,297	 	 	 	7,919,758	 	 	 	1,074,456	 	 	 	16,427,326	 	
 
The following individuals were elected to the Company’s Board of Directors to hold office for a term of three years and until their respective successors are duly elected and qualified, with the vote specified below:

Nominee	 	In Favor	 	 	Withheld	 	
 	 	 	 	 	 	 	 	 	
Leonard Riggio	 	 	147,135,326	 	 	 	2,378,511	 	
Stanley (Mickey) Steinberg	 	 	147,112,230	 	 	 	2,401,607	 	
Gerald R. Szczepanski	 	 	147,157,055	 	 	 	2,356,782	 	
Lawrence S. Zilavy	 	 	146,944,655	 	 	 	2,569,182	 	
 
The following individuals continue to serve on the Company’s Board of Directors until the expiration of their terms: R. Richard Fontaine, Daniel A. DeMatteo, Jerome L. Davis, Steven R. Koonin, Michael N. Rosen, Stephanie M. Shern and Edward A. Volkwein.
 
The Company’s stockholders also ratified the appointment of BDO Seidman, LLP as the registered independent public accounting firm of the Company for the fiscal year ending January 31, 2009 by the following vote:

In Favor	 	Against	 	Abstained	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	148,050,681	 	 	 	405,773	 	 	 	1,057,383	 	 	 	 	 	

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ITEM 6.  	Exhibits	
 
Exhibits

Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	2	.1	 	Agreement and Plan of Merger, dated as of April 17, 2005, among GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics Boutique Holdings Corp., GameStop, Inc., GameStop Holdings Corp. (f/k/a GameStop Corp.), Cowboy Subsidiary LLC and Eagle Subsidiary LLC.(1)	
 	3	.1	 	Second Amended and Restated Certificate of Incorporation.(2)	
 	3	.2	 	Amended and Restated Bylaws.(3)	
 	4	.1	 	Indenture, dated September 28, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(4)	
 	4	.2	 	First Supplemental Indenture, dated October 8, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(5)	
 	4	.3	 	Rights Agreement, dated as of June 27, 2005, between GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as Rights Agent.(3)	
 	4	.4	 	Form of Indenture.(6)	
 	10	.1	 	Separation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(7)	
 	10	.2	 	Tax Disaffiliation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)	
 	10	.3	 	Insurance Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)	
 	10	.4	 	Operating Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)	
 	10	.5	 	Second Amended and Restated 2001 Incentive Plan.(9)	
 	10	.6	 	Second Amended and Restated Supplemental Compensation Plan.(10)	
 	10	.7	 	Form of Option Agreement.(11)	
 	10	.8	 	Form of Restricted Share Agreement.(12)	
 	10	.9	 	Stock Purchase Agreement, dated as of October 1, 2004, by and among GameStop Holdings Corp. (f/k/a GameStop Corp.), B&N GameStop Holding Corp. and Barnes & Noble, Inc.(13)	
 	10	.10	 	Promissory Note, dated as of October 1, 2004, made by GameStop Holdings Corp. (f/k/a GameStop Corp.) in favor of B&N GameStop Holding Corp.(13)	
 	10	.11	 	Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Agreement, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(14)	
 	10	.12	 	Guaranty, dated as of October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of the agents and lenders.(14)	
 	10	.13	 	Security Agreement, dated October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent for the Secured Parties.(14)	
 	10	.14	 	Patent and Trademark Security Agreement, dated as of October 11, 2005 by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent.(14)	
 	10	.15	 	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between GameStop of Texas, L.P. and Bank of America, N.A., as Collateral Agent.(14)	
 	10	.16	 	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between Electronics Boutique of America, Inc. and Bank of America, N.A., as Collateral Agent.(14)	
 	10	.17	 	Form of Securities Collateral Pledge Agreement, dated as of October 11, 2005.(14)	

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Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	10	.18	 	First Amendment, dated April 25, 2007, to Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Amendment, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(15)	
 	10	.19	 	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R. Richard Fontaine.(16)	
 	10	.20	 	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and Daniel A. DeMatteo.(16)	
 	10	.21	 	Executive Employment Agreement, dated as of April 3, 2006, between GameStop Corp. and David W. Carlson.(17)	
 	10	.22	 	Executive Employment Agreement, dated as of August 28, 2008, between GameStop Corp. and J. Paul Raines.(18)	
 	31	.1	 	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	31	.2	 	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	32	.1	 	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	32	.2	 	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	

 	 	 	
(1)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 18, 2005.	
 	 	 	
(2)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2007.	
 	 	 	
(3)	 	Incorporated by reference to the Registrant’s Amendment No. 1 to Form S-4 filed with the Securities and Exchange Commission on July 8, 2005.	
 	 	 	
(4)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 30, 2005.	
 	 	 	
(5)	 	Incorporated by reference to the Registrant’s Form 10-Q for the fiscal quarter ended October 29, 2005 filed with the Securities and Exchange Commission on December 8, 2005.	
 	 	 	
(6)	 	Incorporated by reference to the Registrant’s Form S-3ASR filed with the Securities and Exchange Commission on April 10, 2006.	
 	 	 	
(7)	 	Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 4 to Form S-1 filed with the Securities and Exchange Commission on February 5, 2002.	
 	 	 	
(8)	 	Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 3 to Form S-1 filed with the Securities and Exchange Commission on January 24, 2002.	
 	 	 	
(9)	 	Incorporated by reference to Appendix A to the Registrant’s Proxy Statement for 2007 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 29, 2007.	
 	 	 	
(10)	 	Incorporated by reference to Appendix A to the Registrant’s Proxy Statement for 2008 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 23, 2008.	
 	 	 	
(11)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 10-K for the fiscal year ended January 29, 2005 filed with the Securities and Exchange Commission on April 11, 2005.	
 	 	 	
(12)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 12, 2005.	

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(13)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on October 5, 2004.	
 	 	 	
(14)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on October 12, 2005.	
 	 	 	
(15)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 26, 2007.	
 	 	 	
(16)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 15, 2005.	
 	 	 	
(17)	 	Incorporated by reference to the Registrant’s Form 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006.	
 	 	 	
(18)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 4, 2008.	

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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
GAMESTOP CORP.

 	By: 	/s/  DAVID W. CARLSON	
David W. Carlson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
 
Date: September 11, 2008
 
GAMESTOP CORP.

 	By: 	/s/  ROBERT A. LLOYD	
Robert A. Lloyd
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
 
Date: September 11, 2008
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GAMESTOP CORP.
 
EXHIBIT INDEX

Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	2	.1	 	Agreement and Plan of Merger, dated as of April 17, 2005, among GameStop Corp. (f/k/a GSC Holdings Corp.), Electronics Boutique Holdings Corp., GameStop, Inc., GameStop Holdings Corp. (f/k/a GameStop Corp.), Cowboy Subsidiary LLC and Eagle Subsidiary LLC.(1)	
 	3	.1	 	Second Amended and Restated Certificate of Incorporation.(2)	
 	3	.2	 	Amended and Restated Bylaws.(3)	
 	4	.1	 	Indenture, dated September 28, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(4)	
 	4	.2	 	First Supplemental Indenture, dated October 8, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), GameStop, Inc., the subsidiary guarantors party thereto, and Citibank N.A., as trustee.(5)	
 	4	.3	 	Rights Agreement, dated as of June 27, 2005, between GameStop Corp. (f/k/a GSC Holdings Corp.) and The Bank of New York, as Rights Agent.(3)	
 	4	.4	 	Form of Indenture.(6)	
 	10	.1	 	Separation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(7)	
 	10	.2	 	Tax Disaffiliation Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)	
 	10	.3	 	Insurance Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)	
 	10	.4	 	Operating Agreement, dated as of January 1, 2002, between Barnes & Noble, Inc. and GameStop Holdings Corp. (f/k/a GameStop Corp.).(8)	
 	10	.5	 	Second Amended and Restated 2001 Incentive Plan.(9)	
 	10	.6	 	Second Amended and Restated Supplemental Compensation Plan.(10)	
 	10	.7	 	Form of Option Agreement.(11)	
 	10	.8	 	Form of Restricted Share Agreement.(12)	
 	10	.9	 	Stock Purchase Agreement, dated as of October 1, 2004, by and among GameStop Holdings Corp. (f/k/a GameStop Corp.), B&N GameStop Holding Corp. and Barnes & Noble, Inc.(13)	
 	10	.10	 	Promissory Note, dated as of October 1, 2004, made by GameStop Holdings Corp. (f/k/a GameStop Corp.) in favor of B&N GameStop Holding Corp.(13)	
 	10	.11	 	Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Agreement, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(14)	
 	10	.12	 	Guaranty, dated as of October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of the agents and lenders.(14)	
 	10	.13	 	Security Agreement, dated October 11, 2005, by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent for the Secured Parties.(14)	
 	10	.14	 	Patent and Trademark Security Agreement, dated as of October 11, 2005 by GameStop Corp. (f/k/a GSC Holdings Corp.) and certain subsidiaries of GameStop Corp. in favor of Bank of America, N.A., as Collateral Agent.(14)	
 	10	.15	 	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between GameStop of Texas, L.P. and Bank of America, N.A., as Collateral Agent.(14)	
 	10	.16	 	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between Electronics Boutique of America, Inc. and Bank of America, N.A., as Collateral Agent.(14)	

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Exhibit
	 	 	
Number	 	Description	
 	 	 	 	 	
 	10	.17	 	Form of Securities Collateral Pledge Agreement, dated as of October 11, 2005.(14)	
 	10	.18	 	First Amendment, dated April 25, 2007, to Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Amendment, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(15)	
 	10	.19	 	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R. Richard Fontaine.(16)	
 	10	.20	 	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and Daniel A. DeMatteo.(16)	
 	10	.21	 	Executive Employment Agreement, dated as of April 3, 2006, between GameStop Corp. and David W. Carlson.(17)	
 	10	.22	 	Executive Employment Agreement, dated as of August 28, 2008, between GameStop Corp. and J. Paul Raines.(18)	
 	31	.1	 	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	31	.2	 	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	32	.1	 	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	32	.2	 	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	

 	 	 	
(1)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 18, 2005.	
 	 	 	
(2)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 7, 2007.	
 	 	 	
(3)	 	Incorporated by reference to the Registrant’s Amendment No. 1 to Form S-4 filed with the Securities and Exchange Commission on July 8, 2005.	
 	 	 	
(4)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 30, 2005.	
 	 	 	
(5)	 	Incorporated by reference to the Registrant’s Form 10-Q for the fiscal quarter ended October 29, 2005 filed with the Securities and Exchange Commission on December 8, 2005.	
 	 	 	
(6)	 	Incorporated by reference to the Registrant’s Form S-3ASR filed with the Securities and Exchange Commission on April 10, 2006.	
 	 	 	
(7)	 	Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 4 to Form S-1 filed with the Securities and Exchange Commission on February 5, 2002.	
 	 	 	
(8)	 	Incorporated by reference to GameStop Holdings Corp.’s Amendment No. 3 to Form S-1 filed with the Securities and Exchange Commission on January 24, 2002.	
 	 	 	
(9)	 	Incorporated by reference to Appendix A to the Registrant’s Proxy Statement for 2007 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 29, 2007.	
 	 	 	
(10)	 	Incorporated by reference to Appendix A to the Registrant’s Proxy Statement for 2008 Annual Meeting of Stockholders filed with the Securities and Exchange Commission on May 23, 2008.	
 	 	 	
(11)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 10-K for the fiscal year ended January 29, 2005 filed with the Securities and Exchange Commission on April 11, 2005.	
 	 	 	
(12)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on September 12, 2005.	
42

Table of Contents

(13)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on October 5, 2004.	
 	 	 	
(14)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on October 12, 2005.	
 	 	 	
(15)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 26, 2007.	
 	 	 	
(16)	 	Incorporated by reference to GameStop Holdings Corp.’s Form 8-K filed with the Securities and Exchange Commission on April 15, 2005.	
 	 	 	
(17)	 	Incorporated by reference to the Registrant’s Form 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006.	
 	 	 	
(18)	 	Incorporated by reference to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 4, 2008.	

43

Exhibit 31.1
 
CERTIFICATION PURSUANT TO
17 CFR 240.13a-14(a)/15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Daniel A. DeMatteo, certify that:
 
1. I have reviewed this report on Form 10-Q of GameStop Corp.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 	By: 	/s/  Daniel A. DeMatteo	
Daniel A. DeMatteo
Chief Executive Officer
GameStop Corp.
 
Date: September 11, 2008

Exhibit 31.2
 
CERTIFICATION PURSUANT TO
17 CFR 240.13a-14(a) /15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, David W. Carlson, certify that:
 
1. I have reviewed this report on Form 10-Q of GameStop Corp.;
 
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 	By: 	/s/  David W. Carlson	
David W. Carlson
Executive Vice President and Chief Financial Officer
GameStop Corp.
 
Date: September 11, 2008

Exhibit 32.1
 
CERTIFICATION PURSUANT TO
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the quarterly report of GameStop Corp. (the “Company”) on Form 10-Q for the period ended August 2, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel A. DeMatteo, Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/  Daniel A. DeMatteo
Daniel A. DeMatteo
Chief Executive Officer
GameStop Corp.
September 11, 2008
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2
 
CERTIFICATION PURSUANT TO
RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934
AND 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the quarterly report of GameStop Corp. (the “Company”) on Form 10-Q for the period ended August 2, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David W. Carlson, Executive Vice President and Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/  David W. Carlson
David W. Carlson
Executive Vice President and
Chief Financial Officer
GameStop Corp.
September 11, 2008
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.