GameStop 10Q 2009 Q1 Quarterly report

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 MAY 3, 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 FILENO. 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” inRule 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 inRule 12b-2 of the Exchange Act). Yes o No þ

Number of shares of $.001 par value Class A Common Stock outstanding as of June 6, 2008: 163,356,001

TABLE OF CONTENTS


			Page No.

PART I — FINANCIAL INFORMATION
	Item 1.	Financial Statements		2
		Condensed Consolidated Balance Sheets — May 3, 2008 (unaudited), May 5, 2007 (unaudited) and February 2, 2008		2
		Condensed Consolidated Statements of Operations (unaudited) — For the 13 weeks ended May 3, 2008 and May 5, 2007		3
		Condensed Consolidated Statement of Stockholders’ Equity (unaudited) — May 3, 2008		4
		Condensed Consolidated Statements of Cash Flows (unaudited) — For the 13 weeks ended May 3, 2008 and May 5, 2007		5
		Notes to Condensed Consolidated Financial Statements		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		32
	Item 4.	Controls and Procedures		32

PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings		33
	Item 1A.	Risk Factors		33
	Item 6.	Exhibits		34
SIGNATURES				37
EXHIBIT INDEX				38
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

PART I — FINANCIAL INFORMATION


ITEM 1.	*Financial Statements*

GAMESTOP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS


	May 3,		May 5,		February 2,
	2008		2007		2008
	(Unaudited)		(Unaudited)
	(In thousands, except per share data)

ASSETS:
Current assets:
Cash and cash equivalents	$	625,986	$	307,328	$	857,414
Receivables, net		66,662		38,856		56,019
Merchandise inventories, net		988,584		793,517		801,025
Prepaid expenses and other current assets		56,603		45,721		52,778
Prepaid taxes		—		52,136		—
Deferred taxes		24,764		36,220		27,481

Total current assets		1,762,599		1,273,778		1,794,717

Property and equipment:
Land		12,032		11,168		11,870
Buildings and leasehold improvements		396,278		318,215		378,611
Fixtures and equipment		560,051		447,649		538,738

		968,361		777,032		929,219
Less accumulated depreciation and amortization		451,472		317,276		417,550

Net property and equipment		516,889		459,756		511,669

Goodwill, net		1,415,509		1,403,557		1,402,440
Deferred financing fees		8,136		12,549		8,963
Deferred taxes		29,059		7,260		26,332
Other noncurrent assets		35,593		29,878		31,770

Total other assets		1,488,297		1,453,244		1,469,505

Total assets	$	3,767,785	$	3,186,778	$	3,775,891


LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	781,927	$	597,444	$	844,376
Accrued liabilities		365,926		287,394		409,878
Note payable, current portion		—		12,173		—
Taxes payable		4,674		—		6,303

Total current liabilities		1,152,527		897,011		1,260,557

Senior notes payable, long-term portion, net		544,992		573,760		574,473
Senior floating rate notes payable, long-term portion		—		163,614		—
Deferred rent and other long-term liabilities		79,857		70,951		78,415

Total long-term liabilities		624,849		808,325		652,888

Total liabilities		1,777,376		1,705,336		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; 163,263, 157,414 and 161,007 shares issued and outstanding, respectively		163		157		161
Additionalpaid-in-capital		1,271,076		1,109,130		1,208,474
Accumulated other comprehensive income		34,837		13,515		31,603
Retained earnings		684,333		358,640		622,208

Total stockholders’ equity		1,990,409		1,481,442		1,862,446

Total liabilities and stockholders’ equity	$	3,767,785	$	3,186,778	$	3,775,891

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	13 Weeks Ended
	May 3,			May 5,
	2008			2007
	(In thousands, except per share data)
	(Unaudited)

Sales	$	1,813,617		$	1,278,983
Cost of sales		1,340,211			930,214

Gross profit		473,406			348,769
Selling, general and administrative expenses		328,667			257,116
Depreciation and amortization		34,836			31,035

Operating earnings		109,903			60,618
Interest income		(4,942	)		(3,828	)
Interest expense		13,430			17,944
Debt extinguishment expense		2,331			6,724

Earnings before income tax expense		99,084			39,778
Income tax expense		36,959			15,055

Net earnings	$	62,125		$	24,723

Net earnings per common share-basic	$	0.38		$	0.16

Weighted average shares of common stock-basic		161,825			153,439

Net earnings per common share-diluted	$	0.37		$	0.15

Weighted average shares of common stock-diluted		167,377			161,256

See accompanying notes to condensed consolidated financial statements.

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 13 weeks ended May 3, 2008		—		—		—		—		62,125
Foreign currency translation		—		—		—		3,234		—
Total comprehensive income												65,359
Stock-based compensation		—		—		11,766		—		—		11,766
Exercise of stock options and issuance of shares upon vesting of restricted stock grants (including tax benefit of $32,156)		2,256		2		50,836		—		—		50,838

Balance at May 3, 2008		163,263	$	163	$	1,271,076	$	34,837	$	684,333	$	1,990,409

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	13 Weeks Ended
	May 3,			May 5,
	2008			2007
	(In thousands)
	(Unaudited)

Cash flows from operating activities:
Net earnings	$	62,125		$	24,723
Adjustments to reconcile net earnings to net cash flows used in operating activities:
Depreciation and amortization (including amounts in cost of sales)		35,148			31,187
Amortization and retirement of deferred financing fees		826			2,087
Amortization and retirement of original issue discount on senior notes		518			449
Stock-based compensation expense		11,766			6,962
Deferred taxes		2,328			(1,393	)
Excess tax benefits realized from exercise of stock-based awards		(30,044	)		(48,343	)
Loss on disposal of property and equipment		666			389
Increase in deferred rent and other long-term liabilities		4,659			5,472
Increase in liability to landlords for tenant allowances, net		1,358			628
Change in the value of foreign exchange contracts		2,011			319
Changes in operating assets and liabilities, net
Receivables, net		(9,351	)		(3,457	)
Merchandise inventories		(171,929	)		(106,393	)
Prepaid expenses and other current assets		(413	)		(4,897	)
Prepaid taxes		28,760			11,329
Accounts payable and accrued liabilities		(139,135	)		(213,545	)

Net cash flows used in operating activities		(200,707	)		(294,483	)

Cash flows from investing activities:
Purchase of property and equipment		(36,405	)		(28,027	)
Acquisitions, net of cash acquired		(16,995	)		350

Net cash flows used in investing activities		(53,400	)		(27,677	)

Cash flows from financing activities:
Repurchase of notes payable		(30,000	)		(106,386	)
Issuance of shares relating to stock options		20,426			29,971
Excess tax benefits realized from exercise of stock-based awards		30,044			48,343
Net (increase) decrease in other noncurrent assets and deferred financing fees		(4,361	)		4,337

Net cash flows provided by (used in) financing activities		16,109			(23,735	)

Exchange rate effect on cash and cash equivalents		6,570			820

Net decrease in cash and cash equivalents		(231,428	)		(345,075	)
Cash and cash equivalents at beginning of period		857,414			652,403

Cash and cash equivalents at end of period	$	625,986		$	307,328

See accompanying notes to condensed consolidated financial statements.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, unless otherwise indicated, 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 consolidated financial statements are condensed and, therefore, do not include all of the information and footnotes required by generally accepted accounting principles. These consolidated financial statements should be read in conjunction with the Company’s annual report onForm 10-K for the 52 weeks ended February 2, 2008 (“fiscal 2007”). The preparation of financial statements in conformity with generally accepted accounting principles 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 13 weeks ended May 3, 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 (“SFAS 157”),Fair Value Measurements, 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 underFSP 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-corroborated inputs. Level 3 inputs are unobservable inputs for the asset or liability reflecting our assumptions about pricing by market participants.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 May 3, 2008:


	May 3, 2008
	Level 2
	(In thousands)

Assets
Foreign currency contracts	$	1,883
Company owned life insurance		3,441

Total assets	$	5,324

Liabilities
Foreign currency contracts	$	12,610
Nonqualified deferred compensation		1,449

Total liabilities	$	14,059

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 $16,995, 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. 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 $13,069, recorded as goodwill. The pro forma effect assuming the acquisition of FRS at the beginning of fiscal 2007 is not material to the Company’s consolidated financial statements.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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 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. The options to purchase common stock granted during the 13 weeks ended May 3, 2008 and May 5, 2007 were 1,362 and 939, respectively, with a weighted-average fair value estimated at $15.45 and $10.16, respectively, using the following assumptions:


	13 Weeks Ended
	May 3,			May 5,
	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 May 3, 2008 and May 5, 2007, the Company included compensation expense relating to stock option grants of $4,820 and $4,176, respectively, in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. As of May 3, 2008, the unrecognized compensation expense related to the unvested portion of our stock options was $26,330, which is expected to be recognized over a weighted average period of 2.2 years. The total intrinsic value of options exercised during the 13 weeks ended May 3, 2008 and May 5, 2007 were $73,161 and $134,969, respectively.

The restricted stock granted during the 13 weeks ended May 3, 2008 and May 5, 2007 were 534 shares and 956 shares, respectively. The shares had a fair market value of $49.95 and $26.68 per share, respectively, and vest in equal annual installments over three years. During the 13 weeks ended May 3, 2008 and May 5, 2007, the Company included compensation expense relating to the restricted share grants in the amount of $6,946 and $2,786, respectively, in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. As of May 3, 2008, there was $33,944 of unrecognized compensation expense related to nonvested restricted stock awards that is expected to be recognized over a weighted average period of 2.3 years.

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
	May 3,		May 5,
	2008		2007
	(In thousands, except per share data)

Net earnings	$	62,125	$	24,723

Weighted average common shares outstanding		161,825		153,439
Dilutive effect of options and restricted shares on common stock		5,552		7,817

Common shares and dilutive potential common shares		167,377		161,256

Net earnings per common share:
Basic	$	0.38	$	0.16

Diluted	$	0.37	$	0.15

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 May 3, 2008		1,302	$	49.95		2018
13 Weeks Ended May 5, 2007		900	$	26.68		2017


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 U.S. 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

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 May 3, 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 May 3, 2008, there were no borrowings outstanding under the Revolver and letters of credit outstanding totaled $7,046.

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 May 3, 2008, there were no borrowings outstanding under the Line of Credit and bank guarantees outstanding totaled $4,435.

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 (the “Indenture”), dated September 28, 2005, 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 May 3, 2008, the unamortized original issue discount was $5,008. 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 May 3, 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.

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 May 5, 2007, the Company repurchased $106,386 of the Notes, having acquired $20,000 of its Senior Notes and $86,386 of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on retirement of this debt was $6,724, which consists of the premium paid to retire the Notes and the write-off of the deferred financing fees and the original issue discount on the Notes. As of February 2, 2008, the Company repurchased an additional $43,614 of its Senior Floating Rate Notes to complete the $150,000 buyback in fiscal 2007.

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 May 3, 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.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


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
	May 3,		May 5,
	2008		2007
	(In thousands)

Net earnings	$	62,125	$	24,723
Other comprehensive income:
Foreign currency translation adjustments		3,234		10,288

Total comprehensive income	$	65,359	$	35,011


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 for years before and including the fiscal year ended January 31, 2004 (“fiscal 2003”). 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 (“fiscal 2004”) and January 28, 2006 (“fiscal 2005”) 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 consolidated financial statements.

For the quarter ended May 3, 2008, the Company recognized a $657 decrease in the liability for unrecognized tax benefits and an increase of $321 for interest and penalties. As of May 3, 2008, the gross amount of unrecognized tax benefits, interest and penalties was $23,889. The total amount of unrecognized tax benefit that, if recognized, would affect the effective tax rate was $19,892 as of May 3, 2008. The Company had $3,997 in interest and penalties related to unrecognized tax benefits as of May 3, 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 ended May 3, 2008 and May 5, 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 May 3, 2008 and May 5, 2007, these charges amounted to $294 and $232, 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

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company will be allocated to the Company. During the 13 weeks ended May 3, 2008 and May 5, 2007, these allocated charges amounted to $73 and $66, 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 ended May 5, 2007 totaled $169.

In May 2005, we entered into an arrangement with Barnes & Noble under whichwww.gamestop.com became the exclusive specialty video game retailer listed onwww.bn.com, Barnes & Noble’se-commerce site. Under the terms of this agreement, the Company pays a fee to Barnes & Noble for sales of video game or PC entertainment products sold throughwww.bn.com. For the 13 weeks ended May 3, 2008 and May 5, 2007, the fee to Barnes & Noble totaled $71 and $54, 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.

The court’s scheduling order anticipated a Frye hearing in April 2007, at which plaintiffs’ causation theory and experts’ credentials were to be challenged. However, that hearing did not take place and plaintiffs’ Alabama and Florida counsel withdrew. New Alabama counsel has entered their appearance for plaintiffs and a new scheduling order for the Frye expert-causation hearing has been set. It is anticipated that the issue of the admissibility of plaintiffs’ expert testimony will be decided in late fall 2008. 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.

In 2003, the Company purchased a 51% controlling interest in GameStop Group Limited. 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 16% of GameStop Group Limited, to the Company under the terms of the original purchase agreement. The transaction was completed in June 2008 for $27,111. The Company already consolidates the results of GameStop Group Limited; therefore, the additional acquisition will not have a material effect on the Company’s financial statements.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


11.	Significant Products

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
	May 3,					May 5,
	2008					2007
			Percent					Percent
	Sales		of Total			Sales		of Total

Sales:
New video game hardware	$	339.0		18.7	%	$	281.4		22.0	%
New video game software		792.8		43.7	%		460.6		36.0	%
Used video game products		415.7		22.9	%		326.4		25.5	%
Other		266.1		14.7	%		210.6		16.5	%

Total	$	1,813.6		100.0	%	$	1,279.0		100.0	%

Other products include PC entertainment and other software and accessories, magazines and character-related merchandise.

The following table sets forth gross profit (in millions) and gross profit percentages by significant product category for the periods indicated:


	13 Weeks Ended
	May 3,					May 5,
	2008					2007
			Gross					Gross
	Gross		Profit			Gross		Profit
	Profit		Percent			Profit		Percent

Gross Profit:
New video game hardware	$	20.4		6.0	%	$	21.6		7.7	%
New video game software		156.6		19.8	%		91.8		19.9	%
Used video game products		204.1		49.1	%		164.3		50.3	%
Other		92.3		34.7	%		71.1		33.8	%

Total	$	473.4		26.1	%	$	348.8		27.3	%


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 nameswww.gamestop.com andwww.ebgames.com andGame Informermagazine. 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.

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 have been no material changes 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.

Net sales by operating segment were as follows:


	13 Weeks Ended
	May 3,		May 5,
	2008		2007

United States	$	1,377,131	$	1,004,089
Canada		128,903		80,077
Australia		103,431		72,259
Europe		204,152		122,558

Total	$	1,813,617	$	1,278,983

Segment operating earnings (loss) were as follows:


	13 Weeks Ended
	May 3,		May 5,
	2008		2007

United States	$	92,757	$	53,607
Canada		5,802		3,652
Australia		7,814		4,470
Europe		3,530		(1,111	)

Total	$	109,903	$	60,618


13.	Supplemental Cash Flow Information


	13 Weeks Ended
	May 3,		May 5,
	2008		2007

Cash paid during the period for:
Interest	$	24,862	$	28,086

Income taxes	$	4,876	$	4,805


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 May 3, 2008, May 5, 2007 and February 2, 2008 and results of operations and cash flows for the 13 weeks ended May 3, 2008 and May 5, 2007 of the Company’s guarantor and non-guarantor subsidiaries.

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Balance Sheet


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries					Consolidated
	May 3,			May 3,					May 3,
	2008			2008		Eliminations			2008
	(Amounts in thousands, except per share amounts)
	(Unaudited)

ASSETS:
Current assets:
Cash and cash equivalents	$	538,724		$	87,262	$	—		$	625,986
Receivables, net		210,089			22,377		(165,804	)		66,662
Merchandise inventories, net		626,010			362,574		—			988,584
Prepaid expenses and other current assets		37,775			18,828		—			56,603
Deferred taxes		21,526			3,238		—			24,764

Total current assets		1,434,124			494,279		(165,804	)		1,762,599

Property and equipment:
Land		2,670			9,362		—			12,032
Buildings and leasehold improvements		254,574			141,704		—			396,278
Fixtures and equipment		442,539			117,512		—			560,051

		699,783			268,578		—			968,361
Less accumulated depreciation and amortization		354,850			96,622		—			451,472

Net property and equipment		344,933			171,956		—			516,889

Investment		555,065			—		(555,065	)		—
Goodwill, net		1,096,622			318,887		—			1,415,509
Deferred financing fees		8,116			20		—			8,136
Deferred taxes		7,378			21,681		—			29,059
Other noncurrent assets		17,240			18,353		—			35,593

Total other assets		1,684,421			358,941		(555,065	)		1,488,297

Total assets	$	3,463,478		$	1,025,176	$	(720,869	)	$	3,767,785


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT):
Current liabilities:
Accounts payable	$	595,716		$	186,211	$	—		$	781,927
Accrued liabilities		274,775			256,955		(165,804	)		365,926
Taxes payable		(11,336	)		16,010		—			4,674

Total current liabilities		859,155			459,176		(165,804	)		1,152,527

Senior notes payable, long-term portion, net		544,992			—		—			544,992
Deferred rent and other long-term liabilities		68,922			10,935		—			79,857

Total long-term liabilities		613,914			10,935		—			624,849

Total liabilities		1,473,069			470,111		(165,804	)		1,777,376

Stockholders’ equity (deficit):
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—			—		—			—
Class A common stock — $.001 par value; authorized 300,000 shares; 163,263 shares issued and outstanding		163			—		—			163
Additionalpaid-in-capital		1,271,076			388,139		(388,139	)		1,271,076
Accumulated other comprehensive income (loss)		34,837			12,110		(12,110	)		34,837
Retained earnings		684,333			154,816		(154,816	)		684,333

Total stockholders’ equity (deficit)		1,990,409			555,065		(555,065	)		1,990,409

Total liabilities and stockholders’ equity (deficit)	$	3,463,478		$	1,025,176	$	(720,869	)	$	3,767,785

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Balance Sheet


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	May 5,			May 5,						May 5,
	2007			2007			Eliminations			2007
	(Amounts in thousands, except per share amounts)
	(Unaudited)

ASSETS:
Current assets:							��
Cash and cash equivalents	$	252,057		$	55,271		$	—		$	307,328
Receivables, net		136,207			9,347			(106,698	)		38,856
Merchandise inventories, net		553,489			240,028			—			793,517
Prepaid expenses and other current assets		31,458			14,263			—			45,721
Prepaid taxes		54,950			(2,814	)		—			52,136
Deferred taxes		34,394			1,826			—			36,220

Total current assets		1,062,555			317,921			(106,698	)		1,273,778

Property and equipment:
Land		2,670			8,498			—			11,168
Buildings and leasehold improvements		218,128			100,087			—			318,215
Fixtures and equipment		362,061			85,588			—			447,649

		582,859			194,173			—			777,032
Less accumulated depreciation and amortization		259,911			57,365			—			317,276

Net property and equipment		322,948			136,808			—			459,756

Investment		484,562			—			(484,562	)		—
Goodwill, net		1,097,739			305,818			—			1,403,557
Deferred financing fees		12,531			18			—			12,549
Deferred taxes		(5,787	)		13,047			—			7,260
Other noncurrent assets		18,483			11,395			—			29,878

Total other assets		1,607,528			330,278			(484,562	)		1,453,244

Total assets	$	2,993,031		$	785,007		$	(591,260	)	$	3,186,778


LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT):
Current liabilities:
Accounts payable	$	463,956		$	133,488		$	—		$	597,444
Accrued liabilities		234,041			160,051			(106,698	)		287,394
Note payable, current portion		12,173			—			—			12,173

Total current liabilities		710,170			293,539			(106,698	)		897,011

Senior notes payable, long-term portion, net		573,760			—			—			573,760
Senior floating rate notes payable, long-term portion		163,614			—			—			163,614
Deferred rent and other long-term liabilities		64,045			6,906			—			70,951

Total long-term liabilities		801,419			6,906			—			808,325

Total liabilities		1,511,589			300,445			(106,698	)		1,705,336

Stockholders’ equity (deficit):
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—			—			—			—
Class A common stock — $.001 par value; authorized 300,000 shares; 157,414 shares issued and outstanding		157			—			—			157
Additionalpaid-in-capital		1,109,130			389,441			(389,441	)		1,109,130
Accumulated other comprehensive income (loss)		13,515			1,613			(1,613	)		13,515
Retained earnings		358,640			93,508			(93,508	)		358,640

Total stockholders’ equity (deficit)		1,481,442			484,562			(484,562	)		1,481,442

Total liabilities and stockholders’ equity (deficit)	$	2,993,031		$	785,007		$	(591,260	)	$	3,186,778

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

		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 (DEFICIT):
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 (deficit):
Preferred stock — authorized 5,000 shares; no shares issued or outstanding		—			—		—			—
Class A common stock — $.001 par value; authorized 300,000 shares; 161,007 shares issued and outstanding		161			—		—			161
Additionalpaid-in-capital		1,208,474			385,751		(385,751	)		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 (deficit)		1,862,446			543,088		(543,088	)		1,862,446

Total liabilities and stockholders’ equity (deficit)	$	3,450,599		$	1,033,900	$	(708,608	)	$	3,775,891

GAMESTOP CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

GameStop Corp.
Condensed Consolidating Statement of Operations


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	May 3,			May 3,						May 3,
For the 13 Weeks Ended May 3, 2008	2008			2008			Eliminations			2008
	(Amounts in thousands)
	(Unaudited)

Sales	$	1,377,131		$	436,486		$	—		$	1,813,617
Cost of sales		1,013,201			327,010			—			1,340,211

Gross profit		363,930			109,476			—			473,406
Selling, general and administrative expenses		245,588			83,079			—			328,667
Depreciation and amortization		25,585			9,251			—			34,836

Operating earnings		92,757			17,146			—			109,903
Interest income		(6,124	)		(7,045	)		8,227			(4,942	)
Interest expense		12,294			9,363			(8,227	)		13,430
Debt extinguishment expense		2,331			—			—			2,331

Earnings before income tax expense		84,256			14,828			—			99,084
Income tax expense		30,872			6,087			—			36,959

Net earnings	$	53,384		$	8,741		$	—		$	62,125

GameStop Corp.
Condensed Consolidating Statement of Operations


	Issuers and
	Guarantor			Non-Guarantor
	Subsidiaries			Subsidiaries						Consolidated
	May 5,			May 5,						May 5,
For the 13 Weeks Ended May 5, 2007	2007			2007			Eliminations			2007
	(Amounts in thousands)
	(Unaudited)

Sales	$	1,004,089		$	274,894		$	—		$	1,278,983
Cost of sales		723,528			206,686			—			930,214

Gross profit		280,561			68,208			—			348,769
Selling, general and administrative expenses		202,680			54,436			—			257,116
Depreciation and amortization		24,274			6,761			—			31,035

Operating earnings		53,607			7,011			—			60,618
Interest income		(5,363	)		(3,845	)		5,380			(3,828	)
Interest expense		17,910			5,414			(5,380	)		17,944
Debt extinguishment expense		6,724			—			—			6,724

Earnings before income tax expense		34,336			5,442			—			39,778
Income tax expense		12,987			2,068			—			15,055

Net earnings	$	21,349		$	3,374		$	—		$	24,723

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
	May 3,			May 3,					May 3,
For the 13 Weeks Ended May 3, 2008	2008			2008			Eliminations		2008
	(Amounts in thousands)
	(Unaudited)

Cash flows from operating activities:
Net earnings	$	53,384		$	8,741		$	—	$	62,125
Adjustments to reconcile net earnings to net cash flows used in operating activities:
Depreciation and amortization (including amounts in cost of sales)		25,892			9,256			—		35,148
Amortization and retirement of deferred financing fees		826			—			—		826
Amortization and retirement of original issue discount on senior notes		518			—			—		518
Stock-based compensation expense		11,766			—			—		11,766
Deferred taxes		2,627			(299	)		—		2,328
Excess tax benefits realized from exercise of stock-based awards		(30,044	)		—			—		(30,044	)
Loss on disposal of property and equipment		566			100			—		666
Increase in deferred rent and other long-term liabilities		4,054			605			—		4,659
Increase in liability to landlords for tenant allowances, net		1,183			175			—		1,358
Change in the value of foreign exchange contracts		2,641			(630	)		—		2,011
Changes in operating assets and liabilities, net
Receivables, net		(10,881	)		1,530			—		(9,351	)
Merchandise inventories		(124,149	)		(47,780	)		—		(171,929	)
Prepaid expenses and other current assets		(380	)		(33	)		—		(413	)
Prepaid taxes		27,918			842			—		28,760
Accounts payable and accrued liabilities		(90,751	)		(48,384	)		—		(139,135	)

Net cash flows used in operating activities		(124,830	)		(75,877	)		—		(200,707	)

Cash flows from investing activities:
Purchase of property and equipment		(25,206	)		(11,199	)		—		(36,405	)
Acquisitions, net of cash acquired		—			(16,995	)		—		(16,995	)

Net cash flows used in investing activities		(25,206	)		(28,194	)		—		(53,400	)

Cash flows from financing activities:
Repurchase of notes payable		(30,000	)		—			—		(30,000	)
Issuance of shares relating to stock options		20,426			—			—		20,426
Excess tax benefits realized from exercise of stock-based awards		30,044			—			—		30,044
Net decrease (increase) in other noncurrent assets and deferred financing fees		(3,043	)		(1,318	)		—		(4,361	)

Net cash flows provided by (used in) financing activities		17,427			(1,318	)		—		16,109

Exchange rate effect on cash and cash equivalents		—			6,570			—		6,570

Net decrease in cash and cash equivalents		(132,609	)		(98,819	)		—		(231,428	)
Cash and cash equivalents at beginning of period		671,333			186,081			—		857,414

Cash and cash equivalents at end of period	$	538,724		$	87,262		$	—	$	625,986

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
	May 5,			May 5,					May 5,
For the 13 Weeks Ended May 5, 2007	2007			2007			Eliminations		2007
	(Amounts in thousands)
	(Unaudited)

Cash flows from operating activities:
Net earnings	$	21,349		$	3,374		$	—	$	24,723
Adjustments to reconcile net earnings to net cash flows used in operating activities:
Depreciation and amortization (including amounts in cost of sales)		24,426			6,761			—		31,187
Amortization and retirement of deferred financing fees		2,087			—			—		2,087
Amortization and retirement of original issue discount on senior notes		449			—			—		449
Stock-based compensation expense		6,962			—			—		6,962
Deferred taxes		(1,078	)		(315	)		—		(1,393	)
Excess tax benefits realized from exercise of stock-based awards		(48,343	)		—			—		(48,343	)
Loss on disposal of property and equipment		525			(136	)		—		389
Increase in deferred rent and other long-term liabilities		2,011			3,461			—		5,472
Increase in liability to landlords for tenant allowances, net		505			123			—		628
Change in the value of foreign exchange contracts		1,541			(1,222	)		—		319
Changes in operating assets and liabilities, net
Receivables, net		(4,252	)		795			—		(3,457	)
Merchandise inventories		(58,352	)		(48,041	)		—		(106,393	)
Prepaid expenses and other current assets		(519	)		(4,378	)		—		(4,897	)
Prepaid taxes		14,225			(2,896	)		—		11,329
Accounts payable and accrued liabilities		(251,331	)		37,786			—		(213,545	)

Net cash flows used in operating activities		(289,795	)		(4,688	)		—		(294,483	)

Cash flows from investing activities:
Purchase of property and equipment		(21,959	)		(6,068	)		—		(28,027	)
Acquisitions, net of cash acquired		350			—			—		350

Net cash flows used in investing activities		(21,609	)		(6,068	)		—		(27,677	)

Cash flows from financing activities:
Repurchase of notes payable		(106,386	)		—			—		(106,386	)
Issuance of shares relating to stock options		29,971			—			—		29,971
Excess tax benefits realized from exercise of stock-based awards		48,343			—			—		48,343
Net decrease (increase) in other noncurrent assets and deferred financing fees		9,019			(4,682	)		—		4,337

Net cash flows used in financing activities		(19,053	)		(4,682	)		—		(23,735	)

Exchange rate effect on cash and cash equivalents		—			820			—		820

Net decrease in cash and cash equivalents		(330,457	)		(14,618	)		—		(345,075	)
Cash and cash equivalents at beginning of period		582,514			69,889			—		652,403

Cash and cash equivalents at end of period	$	252,057		$	55,271		$	—	$	307,328


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 onForm 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 May 3, 2008, we operated 5,453 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 nameswww.gamestop.com andwww.ebgames.com and publishGame 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 decreases, 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 weeks ended May 3, 2008 and May 5, 2007 were impacted by the recent launches of these new products.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles. 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 onForm 10-K.

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
	May 3,			May 5,
	2008			2007

Statement of Operations Data:
Sales		100.0	%		100.0	%
Cost of sales		73.9			72.7

Gross profit		26.1			27.3
Selling, general and administrative expenses		18.1			20.2
Depreciation and amortization		1.9			2.4

Operating earnings		6.1			4.7
Interest expense, net		0.5			1.1
Debt extinguishment expense		0.1			0.5

Earnings before income tax expense		5.5			3.1
Income tax expense		2.1			1.2

Net earnings		3.4	%		1.9	%

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 May 3, 2008 and May 5, 2007, these purchasing, receiving and distribution costs amounted to $12.1 million and $9.1 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 May 3, 2008 and May 5, 2007, these processing fees amounted to $12.9 million and $9.0 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 ended May 3, 2008 and May 5, 2007.

The following table sets forth sales (in millions) by significant product category for the periods indicated:


	13 Weeks Ended
	May 3,					May 5,
	2008					2007
			Percent					Percent
	Sales		of Total			Sales		of Total

Sales:
New video game hardware	$	339.0		18.7	%	$	281.4		22.0	%
New video game software		792.8		43.7	%		460.6		36.0	%
Used video game products		415.7		22.9	%		326.4		25.5	%
Other		266.1		14.7	%		210.6		16.5	%

Total	$	1,813.6		100.0	%	$	1,279.0		100.0	%

Other products include PC entertainment and other software and accessories, magazines and character-related merchandise.

The following table sets forth gross profit (in millions) and gross profit percentages by significant product category for the periods indicated:


	13 Weeks Ended
	May 3,					May 5,
	2008					2007
			Gross					Gross
	Gross		Profit			Gross		Profit
	Profit		Percent			Profit		Percent

Gross Profit:
New video game hardware	$	20.4		6.0	%	$	21.6		7.7	%
New video game software		156.6		19.8	%		91.8		19.9	%
Used video game products		204.1		49.1	%		164.3		50.3	%
Other		92.3		34.7	%		71.1		33.8	%

Total	$	473.4		26.1	%	$	348.8		27.3	%

13 weeks ended May 3, 2008 compared with the 13 weeks ended May 5, 2007

Sales increased by $534.6 million, or 41.8%, from $1,279.0 million in the 13 weeks ended May 5, 2007 to $1,813.6 million in the 13 weeks ended May 3, 2008. The increase in sales was attributable to the comparable store sales increase of 27.1% for the first quarter of fiscal 2008, the addition of non-comparable store sales from the 796 stores opened since February 4, 2007 of approximately $144.8 million and increases related to changes in foreign exchange rates of $41.1 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. The new software sales increase was spread across all platforms and included several strong video game titles, such as Grand Theft Auto IV and Super Smash Bros. Brawl.

New video game hardware sales increased $57.6 million, or 20.5%, from $281.4 million in the 13 weeks ended May 5, 2007 to $339.0 million in the 13 weeks ended May 3, 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 first quarter of fiscal 2007. New video game software sales increased $332.2 million, or 72.1%, from $460.6 million in the 13 weeks ended May 5, 2007 to $792.8 million in the 13 weeks ended May 3, 2008, primarily due to the strong sales of new video game titles and the increased sales related to the new hardware systems 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 $89.3 million, or 27.4%, from $326.4 million in the 13 weeks ended May 5, 2007 to $415.7 million in the 13 weeks ended May 3, 2008. Sales of other product categories grew 26.4%, or $55.5 million, from the 13 weeks ended May 5, 2007 to the 13 weeks ended May 3, 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 May 3, 2008 compared to the 13 weeks ended May 5, 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 $410.0 million, or 44.1%, from $930.2 million in the 13 weeks ended May 5, 2007 to $1,340.2 million in the 13 weeks ended May 3, 2008 as a result of an increase in sales and the changes in gross profit discussed below.

Gross profit increased by $124.6 million, or 35.7%, from $348.8 million in the 13 weeks ended May 5, 2007 to $473.4 million in the 13 weeks ended May 3, 2008. Gross profit as a percentage of sales decreased from 27.3% in the 13 weeks ended May 5, 2007 to 26.1% in the 13 weeks ended May 3, 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 first quarter of fiscal 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 7.7% 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 first quarter of fiscal 2008. Gross profit as a percentage of sales on used video game products decreased from 50.3% in the 13 weeks ended May 5, 2007 to 49.1% in the 13 weeks ended May 3, 2008 due to higher refurbishment costs associated with an increase in production of refurbished hardware platforms during the first quarter of fiscal 2008.

Selling, general and administrative expenses increased by $71.6 million, or 27.8%, from $257.1 million in the 13 weeks ended May 5, 2007 to $328.7 million in the 13 weeks ended May 3, 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 20.2% in the 13 weeks ended May 5, 2007 to 18.1% in the 13 weeks ended May 3, 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 $11.8 million and $7.0 million in stock-based compensation expense for the 13 weeks ended May 3, 2008 and May 5, 2007, respectively.

Depreciation and amortization expense increased $3.8 million from $31.0 million for the 13 weeks ended May 5, 2007 to $34.8 million in the 13 weeks ended May 3, 2008. This increase was primarily due to capital expenditures associated with the opening of 210 new stores during the first quarter of fiscal 2008 and investments in management information systems.

Interest income resulting from the investment of excess cash balances increased from $3.8 million in the 13 weeks ended May 5, 2007 to $4.9 million in the 13 weeks ended May 3, 2008 due primarily to interest income earned on higher invested cash balances. Interest expense decreased from $17.9 million in the 13 weeks ended May 5, 2007 to $13.4 million in the 13 weeks ended May 3, 2008, primarily due to the retirement of $30.0 million of the Company’s senior notes and $163.6 million of the Company’s senior floating rate notes since May 5, 2007. Debt extinguishment expense of $6.7 million in the 13 weeks ended May 5, 2007 and $2.3 million in the 13 weeks ended May 3, 2008 was recognized 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 May 5, 2007 and the 13 weeks ended May 3, 2008 was based upon management’s estimate of the Company’s annualized effective tax rate. Income tax expense was $15.1 million for the 13 weeks ended May 5, 2007 compared to $37.0 million for the 13 weeks ended May 3, 2008. For the first quarter of fiscal 2007 and fiscal 2008, income tax expense included a charge of $0.7 million and $0.1 million, respectively, for unrecognized tax benefit, interest and penalties associated with our uncertain tax positions.

The factors described above led to an increase in operating earnings of $49.3 million, or 81.4%, from $60.6 million in the 13 weeks ended May 5, 2007 to $109.9 million in the 13 weeks ended May 3, 2008, and an increase in net earnings of $37.4 million, or 151.4%, from $24.7 million in the quarter ended May 5, 2007 to $62.1 million in the quarter ended May 3, 2008.

Segment Performance

The Company operates its business in the following segments: United States, Australia, Canada and Europe. The following tables provide a summary of our sales and operating earnings (loss) by reportable segment:


	13 Weeks Ended
	May 3,		May 5,
	2008		2007
	(In millions)
	(Unaudited)

Sales by operating segment are as follows:
United States	$	1,377.1	$	1,004.1
Canada		128.9		80.1
Australia		103.4		72.3
Europe		204.2		122.5

Total	$	1,813.6	$	1,279.0

Operating earnings (loss) by operating segment are as follows:
United States	$	92.8	$	53.6
Canada		5.8		3.6
Australia		7.8		4.5
Europe		3.5		(1.1	)

Total	$	109.9	$	60.6

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 websiteswww.gamestop.com andwww.ebgames.com andGame Informer magazine. As of May 3, 2008, the United States segment included 4,128 GameStop stores compared to 3,827 on May 5, 2007. Sales for the first quarter of fiscal 2008 increased 37.1% compared to the first quarter of fiscal 2007 as a result of increased sales at existing stores and the opening of 414 new stores since February 4, 2007, including 86 stores in the first quarter of fiscal 2008. 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 expand, 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. The two largest software titles launched during the first quarter of fiscal 2008 were Grand Theft Auto IV and Super Smash Bros. Brawl. Segment operating income increased by 73.1% compared to the first quarter of fiscal 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 first quarter of fiscal 2008 increased $48.8 million, or 60.9%, compared to the first quarter of fiscal 2007. The increase in sales was primarily attributable to increased sales at existing stores and the additional sales at the 45 stores opened since February 4, 2007. As of May 3, 2008, the Canadian segment had 312 stores compared to 271 stores at May 5, 2007. The increase in sales at existing stores was driven by strong sales of new video game software related to the new hardware platforms, including the release of Grand Theft Auto IV and Super Smash Bros. Brawl during the first quarter of fiscal 2008. Segment operating income increased by 61.1% compared to the first quarter of fiscal 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 weeks ended May 3, 2008, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.8 million.

Australia

Segment results for Australia include retail operations in Australia and New Zealand. As of May 3, 2008, the Australian segment included 291 stores compared to 234 stores at May 5, 2007. Sales for the first quarter of fiscal 2008 increased 43.0% to $103.4 million compared to first quarter fiscal 2007 sales of $72.3 million. The increase in sales was due to an increase in sales at existing stores and the additional sales at the 73 stores opened since February 4, 2007. The increase in sales at existing stores was driven by a strong software title lineup available for all hardware platforms. Sales in the first quarter of fiscal 2007 included the impact of the Australian market launch of the Sony PlayStation 3 in March 2007. The new hardware platforms drove an increase in used product sales in the first quarter of fiscal 2008 as the installed base of the platforms increased and more software became available. Segment operating income increased by 73.3% to $7.8 million in the first quarter of fiscal 2008 from $4.5 million in the first quarter of fiscal 2007. The increase was driven by the increased sales discussed above and the leveraging of the fixed components of selling, general and administrative expenses. For the 13 weeks ended May 3, 2008, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.9 million.

Europe

Segment results for Europe include retail operations in 12 European countries. As of May 3, 2008, the European segment operated 722 stores, 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, compared to 484 stores as of May 5, 2007. For the 13 weeks ended May 3, 2008, European sales increased $81.7 million, or 66.7%, compared to the 13 weeks ended May 5, 2007. The increase in sales for the quarter was primarily due to the increase in sales at existing stores and the additional sales at the 264 stores opened since February 4, 2007. The increase in sales at existing stores was driven by a strong software title lineup available for all hardware platforms. Sales in the first quarter of fiscal 2007 included the impact of the European market launch of the Sony PlayStation 3 in March 2007. The new hardware platforms drove an increase in used product sales in the first quarter of fiscal 2008 as the installed base of the platforms increased and more software became available.

The segment operating income in Europe increased to $3.5 million in the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007 operating loss of $1.1 million. The increase in operating income was driven by the increase in sales and related margin dollars discussed above, the leveraging of the fixed components of selling, general and administrative expenses, both of which reflect the continued maturation of our operations in the European markets, and the favorable impact of changes in exchange rates since the prior year. For the 13 weeks ended May 3, 2008, changes in exchange rates when compared to the prior year had the effect of increasing operating earnings by $0.7 million.

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.

Liquidity and Capital Resources

Cash Flows

During the 13 weeks ended May 3, 2008, cash used in operations was $200.7 million, compared to cash used in operations of $294.5 million during the 13 weeks ended May 5, 2007. The decrease in cash used in operations of $93.8 million from the 13 weeks ended May 5, 2007 to the 13 weeks ended May 3, 2008 was primarily due to an increase in cash provided by net earnings, including the non-cash adjustments to net earnings, of $50.6 million as previously discussed and a decrease in the operating activities adjustment related to the excess tax benefits realized from the exercise of stock-based awards of $18.3 million. Also contributing to the decrease in cash used in operations for the first quarter of fiscal 2008 compared to the first quarter of fiscal 2007 was a decrease in working capital of $24.9 million primarily due to a decrease in prepaid taxes as a result of the increase in net earnings over the past year.

Cash used in investing activities was $53.4 million and $27.7 million during the 13 weeks ended May 3, 2008 and May 5, 2007, respectively. During the 13 weeks ended May 3, 2008, $36.4 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 $17.0 million, net of cash acquired, to purchase FRS, a 49-store retail chain located in Norway. During the 13 weeks ended May 5, 2007, $28.0 million of cash was used primarily to open new stores in the U.S. and internationally and to invest in information systems, offset by $0.4 million of cash received related to the finalization of the purchase price of Game Brands Inc., which was acquired during the fourth quarter of fiscal 2006.

Cash provided by financing activities was $16.1 million for the thirteen weeks ended May 3, 2008 and cash used in financing activities for the thirteen weeks ended May 5, 2007 was $23.7 million. The cash flow provided by financing activities for the quarter ended May 3, 2008 was primarily due to the issuance of shares relating to stock option exercises of $20.4 million and $30.0 million for the realization of tax benefits relating to the stock option exercises and vested restricted stock. These inflows were offset by the repurchase of $30.0 million of principal value of the Company’s Senior Notes. The cash flow used in financing activities for the quarter ended May 5, 2007 was primarily due to the repurchase of $20.0 million and $86.4 million of principal value of the Company’s Senior Notes and Senior Floating Rate Notes, respectively. These cash outflows were offset by $30.0 million received for the issuance of shares relating to stock option exercises and $48.3 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 U.S. 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.

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 May 3, 2008, there were no borrowings outstanding under the Line of Credit and bank guarantees outstanding totaled $4.4 million.

In September 2005, the Company, along with GameStop, Inc. as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300 million aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and U.S. $650 million aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the Senior Floating Rate Notes, the “Notes”). The Notes were issued under an Indenture (the “Indenture”), dated September 28, 2005, 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 May 3, 2008, the unamortized original issue discount was $5.0 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.

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 210 stores in the 13 weeks ended May 3, 2008 and expects to open approximately 550 to 600 stores in 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 May 5, 2007, the Company repurchased $106.4 million of the Notes, having acquired $20 million of its Senior Notes and $86.4 million of its Senior Floating Rate Notes, and delivered the Notes to the Trustee for cancellation. The associated loss on retirement of this debt was $6.7 million, which consists of the premium paid to retire the Notes and the write-off of the deferred financing fees and the original issue discount on the Notes. As of February 2, 2008,

the Company repurchased an additional $43.6 million of its Senior Floating Rate Notes to complete the $150 million buyback in fiscal 2007.

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 102.0%, 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 May 3, 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 $17.0 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.

Based on our current operating plans, we believe that available cash balances, cash generated from our operating activities and funds available under the Revolver will be sufficient to fund our operations, required payments on the Senior Notes, store expansion and remodeling activities and corporate capital expenditure programs for at least the next 12 months.

Recent Accounting Pronouncements

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161,Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133(“SFAS 161”). SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and their effect on an 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 Position157-2,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 onForm 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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The forward-looking statements involve a number of risks and uncertainties. A number of factors could cause our actual results, performance, achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, but are not limited to:


	•	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 theForm 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 thisForm 10-Q. In light of these risks and uncertainties, the forward-looking events and circumstances contained in thisForm 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 Activitiesand Statement of Financial Accounting Standards No. 157,Fair Value Measurements(“SFAS 157”). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at fair value while SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether the derivative is designated as part of a hedge transaction, and if it is, depending on the type of hedge transaction.

The Company uses forward exchange contracts, foreign currency options and cross-currency swaps, (together, the “Foreign Currency Contracts”) to manage currency risk primarily related to intercompany loans denominated in non-functional currencies and certain foreign currency assets and liabilities. These Foreign Currency Contracts are not designated as hedges and, therefore, changes in the fair values of these derivatives are recognized in earnings, thereby offsetting the current earnings effect of the re-measurement of related intercompany loans and foreign currency assets and liabilities. The aggregate fair value of the Foreign Currency Contracts at May 3, 2008 was a liability of $10.7 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 May 3, 2008 would result in a (loss) or gain in value of the forwards, options and swaps of ($19.2 million) or $19.2 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 inRules 13a-15(e) and15d-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 inRules 13a-15(f) and15d-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*

There have been no other material developments in previously reported legal proceedings during the fiscal quarter covered by thisForm 10-Q.


ITEM 1A.	*Risk Factors*

In addition to the other information set forth in thisForm 10-Q, you should carefully consider the factors discussed in “Item 1A. Risk Factors” in ourForm 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 ourForm 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 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	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)


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)
	31	.1	Certification of Chief Executive Officer pursuant toRule 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 toRule 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 toRule 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 toRule 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.’sForm 8-K filed with the Securities and Exchange Commission on April 18, 2005.

(2)		Incorporated by reference to the Registrant’sForm 8-K filed with the Securities and Exchange Commission on February 7, 2007.

(3)		Incorporated by reference to the Registrant’s Amendment No. 1 toForm S-4 filed with the Securities and Exchange Commission on July 8, 2005.

(4)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on September 30, 2005.

(5)		Incorporated by reference to the Registrant’sForm 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’sForm 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 toForm 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 toForm 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 the Registrant’sForm 10-Q for the fiscal quarter ended July 29, 2006 filed with the Securities and Exchange Commission on September 5, 2006.

(11)		Incorporated by reference to GameStop Holdings Corp.’sForm 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.’sForm 8-K filed with the Securities and Exchange Commission on September 12, 2005.

(13)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on October 5, 2004.


(14)		Incorporated by reference to the Registrant’sForm 8-K filed with the Securities and Exchange Commission on October 12, 2005.

(15)		Incorporated by reference to the Registrant’sForm 8-K filed with the Securities and Exchange Commission on April 26, 2007.

(16)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on April 15, 2005.

(17)		Incorporated by reference to the Registrant’sForm 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006.

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: June 12, 2008

GAMESTOP CORP.


	By:	/s/ Robert A. Lloyd

Robert A. Lloyd

Senior Vice President and Chief Accounting Officer

(Principal Accounting Officer)

Date: June 12, 2008

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	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)


Exhibit
Number			Description

	10	.15	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between GameStop of Texas, L.P. and Bank of America, N.A., as Collateral Agent.(14)
	10	.16	Mortgage, Security Agreement, and Assignment and Deeds of Trust, dated October 11, 2005, between Electronics Boutique of America, Inc. and Bank of America, N.A., as Collateral Agent.(14)
	10	.17	Form of Securities Collateral Pledge Agreement, dated as of October 11, 2005.(14)
	10	.18	First Amendment, dated April 25, 2007, to Credit Agreement, dated as of October 11, 2005, by and among GameStop Corp. (f/k/a GSC Holdings Corp.), certain subsidiaries of GameStop Corp., Bank of America, N.A. and the other lending institutions listed in the Amendment, Bank of America, N.A. and Citicorp North America, Inc., as Issuing Banks, Bank of America, N.A., as Administrative Agent and Collateral Agent, Citicorp North America, Inc., as Syndication Agent, and Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as Documentation Agent.(15)
	10	.19	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and R. Richard Fontaine.(16)
	10	.20	Executive Employment Agreement, dated as of April 11, 2005, between GameStop Holdings Corp. (f/k/a GameStop Corp.) and Daniel A. DeMatteo.(16)
	10	.21	Executive Employment Agreement, dated as of April 3, 2006, between GameStop Corp. and David W. Carlson.(17)
	31	.1	Certification of Chief Executive Officer pursuant toRule 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 toRule 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 toRule 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 toRule 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.’sForm 8-K filed with the Securities and Exchange Commission on April 18, 2005.

(2)		Incorporated by reference to the Registrant’sForm 8-K filed with the Securities and Exchange Commission on February 7, 2007.

(3)		Incorporated by reference to the Registrant’s Amendment No. 1 toForm S-4 filed with the Securities and Exchange Commission on July 8, 2005.

(4)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on September 30, 2005.

(5)		Incorporated by reference to the Registrant’sForm 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’sForm 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 toForm 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 toForm 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 the Registrant’sForm 10-Q for the fiscal quarter ended July 29, 2006 filed with the Securities and Exchange Commission on September 5, 2006.


(11)		Incorporated by reference to the Registrant’sForm 10-K for the fiscal quarter ended January 29, 2005 filed with the Securities and Exchange Commission on April 11, 2005.

(12)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on September 12, 2005.

(13)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on October 5, 2004.

(14)		Incorporated by reference to the Registrant’sForm 8-K filed with the Securities and Exchange Commission on October 12, 2005.

(15)		Incorporated by reference to the Registrant’sForm 8-K filed with the Securities and Exchange Commission on April 26, 2007.

(16)		Incorporated by reference to GameStop Holdings Corp.’sForm 8-K filed with the Securities and Exchange Commission on April 15, 2005.

(17)		Incorporated by reference to the Registrant’sForm 10-K for the fiscal year ended January 28, 2006 filed with the Securities and Exchange Commission on April 3, 2006.

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Avg

GameStop (GME) 10-Q2009 Q1 Quarterly report

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