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Mail Stop 0308
June 22, 2005
Mr. R. Richard Fontaine
c/o GameStop Corp.
625 Westport Parkway
Grapevine, Texas 76051
Re: GSC Holdings Corp.
Registration Statement on Form S-4
Filed May 23, 2005
File No. 333-125161
Electronics Boutique Holdings Corp.
Form 10-K/A for Fiscal Year Ended January 29, 2005
Filed May 20, 2005
Form 10-Q for Fiscal Quarter Ended April 30, 2005
Filed June 9, 2005
File No. 0-24603
Dear Mr. Fontaine:
We have limited our review of your filing to those issues we
have addressed in our comments. Where indicated, we think you
should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form S-4
Unaudited Pro Forma Condensed Consolidated Financial Data
Unaudited Pro Forma Condensed Consolidated Balance Sheet, page 135
1. Please remember to update you pro forma financial statements.
2. We note that you have not included an adjustment to increase
the
value of acquired inventory. Please tell us what was your
consideration of SFAS 141 paragraph 37(c)(1). If you have not been
able to come up with an estimate of the adjustment, please tell us
why you have not been able to estimate this item.
3. Revise your disclosures to explain more fully what is
represented
by this adjustment (c) to intangible assets. Please explain in
more
detail the components of the increase in intangible assets of $1.1
billion. We note your disclosures that you have not completed
your
assessment of fair values. Please tell us when you expect to more
fully complete your assessment and what prevents you from
identifying
and valuing specific individual components such as the non-compete
agreement with Mr. Kim.
4. According to the store locations listed in your respective Form
10-K`s, it appears that you may have overlapping locations in
several
cities. Please tell us whether you have any plans to close stores
and incur associated costs within the twelve month period
following
the acquisition. If these costs are expected to be material,
please
disclose them in the notes to your pro forma financial statements.
Unaudited Pro Forma Condensed Consolidated Statement of
Operations,
page 137
5. We note that executives at Electronics Boutique Holdings Corp.
will receive additional compensation under a Merger Bonus Plan
established in connection with this transaction. Please revise
your
pro forma presentation to include the amounts paid to the
executives
of both merger partners under new or existing compensation plans
as a
result of the merger transactions. Please tell us the nature of
any
amounts being paid and the terms and conditions under which
payments
will be paid. If other new employment agreements have been
executed
as a result of or in connection with the mergers, please tell us
and
revise your presentation to include the impact of these
liabilities
in your pro forma financial statements. Your disclosures should
explain any assumptions used to determine the amounts reflected in
your pro forma adjustments.
6. Your disclosures on page 93 discuss your voting agreement with
the
Kim Group in connection with the merger transactions. Please tell
us
and disclose if you paid any consideration in connection with this
agreement. If so, please tell us where that amount is reflected
in
your pro forma statement of operations.
7. Please disclose the basis for the assumptions used to calculate
the amount of interest you expect to incur on new long-term debt.
8. Please tell us and disclose the terms and conditions of any
contingent considerations and their impact on future earnings.
Electronics Boutique Holdings Corp. - Form 10-K/A for the year
ended
January 29, 2005
Item 1. Business, page 1
9. Please disclose in tabular form for each period presented the
amount or percentage of total revenue or sales contributed by each
class of similar products or services. See Item 101(c)(1)(i) of
Regulation S-K.
Competitive Strengths
Pre-played Products, page 9
10. Your disclosures indicate that pre-played products have become
your fastest growing product line and that you receive many of
these
products as trade-ins on new products. Please tell us and revise
your disclosures to clarify the sources which supply you with pre-
played or used video game products. If you obtain used video game
products from sources other than walk-in customers, please
disclose
how much from each source.
11. You disclose that you operate a product reclamation center
that
tests, cleans, relabels, re-packages and re-distributes traded-in
products that are received from customers as trade-ins and credit
on
new products. Please explain to us the annual costs of your
product
reclamation center, the number of people involved and generally
how
it operates. Please tell us what line item on your consolidated
statement of operations you include these costs and why.
Innovative Marketing, pages 10-11
12. You disclose that during August 2004 you launched a new
customer
loyalty program called EB EDGE CARD that offers customers a
discount
on pre-played video game products purchased from your web site or
any
retail store. Please explain to us how the program operates, the
benefits customer can earn, the cost to join the program, if any,
your accounting treatment of the benefits earned under the
program.
Please tell us whether you believe that EITF 00-22 applies to your
program and the reasons supporting your conclusion.
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Results of Operations, page 24
General
13. We note your disclosures on page 9 relating to pre-played
products that this product line has become your fastest growing
category and that you now expect net sales from pre-played
products
at certain retail stores to exceed net sales from new video game
products. However, you do not discuss in your management`s
discussion and analysis the contribution that pre-played products
have on net sales and gross margin for each period presented.
Please
provide us the net sales, gross profits and related gross margin
percentages for new and pre-played video game products for all
periods presented and explain to us why you do not discuss the
impact
of this product line has on your business. Refer to Item
303(a)(3)
of Regulation S-K.
Fiscal 2005 Compared to Fiscal 2004, page 24
14. Your disclosures state that 479 new stores were opened during
fiscal 2005 generating a sales volume of approximately $288
million,
or $601,000 per store. Please tell us and revise your disclosures
to
explain the reason why the 399 new stores opened during fiscal
2004
only generated a sales volume of approximately $139 million, or
only
$348,000 per store, which is $253,000 or 42% less sales per store.
Please also tell us if you closed any stores in either fiscal year
presented. Explain and disclose if the lower sale volume in the
first year is related to the product mix, location or a
combination
of these two factors. Refer to Item 303(a)(3) of Regulation S-K.
Liquidity and Capital Resources
General
15. We note that you do not include any amounts for purchase
obligations as required by Item 303(a)(5)(ii)(D) of Regulation S-
K.
Please tell us and revise your disclosures to include a separate
line
item in the table for all purchase obligations as required, or
explain to us why you do not believe it is appropriate to do so.
16. Please tell us the components and related amounts included in
the
deferred rent and other long-term liabilities line item of your
consolidated balance sheet. Please tell us why each item was not
included in your contractual obligations table. We note that
other
long-term liabilities reflected on your consolidated balance sheet
under GAAP are among the items required to be disclosed in the
table.
Refer to Item (a)(5) of Regulation S-K.
17. In a separately captioned section, please revise your
disclosures
to include any off-balance arrangements that have or are
reasonably
likely to have a current or future effect on your financial
condition. Your discussion should include all of the information
that is now required by Item 303(a)(4) of Regulation S-K. If
there
are none, please state this in your revised disclosures.
Consolidated Financial Statements
Consolidated Balance Sheets, page 34
Accounts Receivable
18. Please tell us the nature of the trade and vendor receivables
for
each of the balance sheet dates since most of your operations
entail
point of sale cash transactions. If amounts recorded involve
estimates, please explain to us how you determine the amounts
recorded.
Notes to Consolidated Financial Statements
Note 1. Organization and Summary of Significant Accounting
Policies
General
19. Please tell us and revise your disclosures to include your
accounting policy for gift certificates and how you determine the
amount of liability for all periods presented.
Description of Business, page 38
20. You disclose that you operate only one business segment.
Please
provide us with an analysis of how you determined that you have
only
one operating segment. We would expect your response to address
all
of the requirements of paragraph 10 of SFAS 131. If by chance you
aggregate more than one operating segment into one reportable
segment, please tell us how you meet all of the requirements of
paragraph 17 of SFAS 131. Please also tell us who in your
organization serves as your Chief Operating Decision Maker (CODM)
and
provide us with a copy of the financial information reviewed on a
monthly basis by your CODM. Please also provide us an
organizational chart showing the management structure under the
CODM
to help us understand how you manage the operational aspects of
your
business.
Merchandise Inventories, page 39
21. Please provide us with the components of your inventory,
including a summary of the amounts of new and used video game
products included in inventory for all periods presented.
Vendor Programs, page 39
22. You disclose your receipt of vendor allowances from vendors in
connection with the purchase or promotion of a vendor`s products,
along with the types of programs and arrangements that are funded
by
the allowances. For each type of program or arrangement, please
tell
us when you record the allowances and your basis for time in which
you recognize the allowance.
23. You disclose advertising expenses for all periods presented,
excluding vendor allowances, and the amount of vendor allowances
received that were netted against advertising expenses. Please
revise your disclosures to disclose include the following
additional
information with respect to allowances received from vendors:
* the number of vendors and the length of time of the agreements;
* the terms and conditions of the agreements;
* a statement that management would or would not continue to incur
the same level of advertising expenditures even if vendors
discontinued their support;
* in MD&A the impact that vendor allowances received have on your
results of operations in terms of generating additional revenues;
and
* the dollar amount of the excess that you recorded in cost of
goods
sold.
Refer to EITF 02-16 and paragraph .49 of SOP 93-7. Please show us
in
your supplemental response what your revised disclosures will look
like.
Note 6 - Game Group Services Agreement, page 46
24. You disclose that you terminated in January 2004 a management
services agreement with The Game Group Plc, a specialty
interactive
entertainment retailer based in the United Kingdom. We note that
you
recorded $4.7 million of the $15 million fee as revenue upon
execution of the agreement. Please explain to us what was
represented by the $4.7 million and why recognition at the time
the
agreement was executed was appropriate.
Note 7 - Related Party Transactions, page 46
25. Please tell us if you incurred a gain or loss on the sale of
BC
Sports Collectibles business to SCAC.
Note 12 - Legal Contingencies, page 50
26. We note your disclosures concerning the employment suit filed
in
New York State. Your disclosures indicate that the outcome of this
suit could have a material adverse impact on your company. Please
tell us in more detail what the plaintiff is seeking with regards
to
damages. Tell us whether it is possible to estimate a range of
possible loss.
Item 15. Exhibits, Financial Statement Schedules and Report on
Form
8-K
(a)(2) Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts, page 53
27. The amounts disclosed on Schedule II do not include the
amounts
recorded for estimated sales returns and allowances. Please
revise
Schedule II to include the amounts estimated for sales returns and
allowances for all periods presented. Refer to Rules 5-04(c) and
12-
09 of Regulation S-X.
Form 10-Q for Fiscal Quarter Ended April 30, 2005
General
28. Where applicable, please address the issues noted in the above
comments in your interim financial statements.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that the filing includes all information required under
the
Securities Act of 1933 and they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as a confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Milwood Hobbs, Staff Accountant, at (202)
551-
3241, or Michael Moran, Accounting Branch Chief, at (202) 551-3841
if
you have questions regarding comments on the financial statements
and
related matters. Please contact Matthew Benson, Attorney-Advisor,
at
(202) 551-3335 or me at (202) 551-3720 with any other questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: Jay M. Dorman, Esq.
Bryan Cave LLP
Fax: (212) 541-1418
R. Richard Fontaine
GSC Holdings Corp.
June 22, 2005
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