Good morning and welcome to GameStop Corporation's fourth quarter and year-end sales and earnings results conference call. (Operator Instructions) I would like to remind you that this call is covered by the Safe Harbor disclosure contained in GameStop's public documents and is the property of GameStop. It is not for rebroadcast or use by any other party without the prior written consent of GameStop. At this time, I would like to turn the conference over to Mr. Dick Fontaine, Chairman and Chief Executive Officer of GameStop Corporation. Please go ahead, sir. Dick Fontaine: Thank you. Good morning and thank you for joining us to review GameStop's 2006 fiscal year and an even more promising forecast for 2007. As mentioned, I'm Dick Fontaine, GameStop's Chairman and CEO. With me this morning are Steve Morgan, our President; David Carlson, our Executive VP and Chief Financial Officer; and Dan DeMatteo, our Vice Chairman and Chief Operating Officer. This morning, as you all know, we released our 2006 fourth quarter and full year results and our forecast for the first quarter and full year's outlook for 2007. Obviously, I couldn’t be more positive about both. We have built a unique business model that continues to drive growing market share and positions us to take full advantage of the opportunities that are developing in this explosive business, worldwide, and we intend to stay aggressive. While the release contains the essentials, a number of performance indicators for 2006 certainly bear repeating. GameStop total sales exceeded $5 billion and grew by 72%. Net earnings exceeded $158 million for the year and grew by 57%. Our fourth quarter earnings per share exceeded guidance and represented the best fourth quarter for GameStop ever. Comp stores for the year increased by 12%. In 2006, we completed the integration of the…

Your first question comes from Colin Sebastian - Lazard Capital Markets. Colin Sebastian - Lazard Capital Markets: Thanks and congratulations on the quarter. One housekeeping question. Could you tell us what CapEx was for '06 and where you expect that to be in '07? Also, you mentioned the possibility of a price cut in the PS2 to $99. What would you believe the timing could be on that? Is that in your forecast for the year? How should we think about the linearity of comp store sales over the course of the year? Thank you. David Carlson: The CapEx in 2006 was somewhere around $135 million and we expect it to be between $135 million and $145 million in 2007. The linearity of comps, we believe that comps will be strongest in the first three quarters -- the first, second and third quarters -- and then in the fourth quarter when we are up against the launch of the PS3 and the Wii from last year, we expect comps to be a little more difficult, but still most likely in the double-digits. Dan DeMatteo: On the PS2 price cut, we have no knowledge from Sony that there will be a price cut. I think I mentioned that if sales slowed, they probably have enough profit in that unit that they could reduce it to $99. We have no knowledge that indeed they are. As a matter of fact, given the way they are selling right now, I would expect they would not at this point. Colin Sebastian - Lazard Capital Markets: I appreciate that. Lastly, any first impressions of the PS3 launch in Europe? Dick Fontaine: Yes, I've been talking to all of our European managing directors since the launch, and I think the summary of that was a very good launch falling somewhat short of what they would determine to be a great launch. We are probably more happy with how well we did selling through as a percentage of our reservations then perhaps some of the mass merchants. But I think we'd tab it exactly that way, a very good launch falling just short of a great one.

Your next question comes from Gary Balter - Credit Suisse. Gary Balter - Credit Suisse: First of all, congratulations on a great quarter and a great year. Just a couple of simple questions. One is, could you talk about the gross margin at the used game side? It was down a little bit and I am just wondering why. David Carlson: I think we have always said that what we're trying to do is optimize our gross margin dollars, not gross margin rate, and that there is a mix within used games like there is within our total mix that is ever changing. We have said that the gross margin rate would probably have about a 2% variability in any quarter, and this was well within our range. Gary Balter - Credit Suisse: While not putting you guys on the spot, while 30% to 33% in a cycle that given your mix looks like will be even stronger in '08, does it sound conservative to say 25%? David Carlson: For 2008 and 2009? Gary Balter - Credit Suisse: Yes. David Carlson: No, I don't think at this point. I think we are comfortable with at least 25% EPS growth in those two years, and I think we're going to be sticking with that. Gary Balter - Credit Suisse: What are you planning to do with the cash? David Carlson: At this point, we are looking at paying down debt, particularly here in 2007. As I said in the script, we are looking to pay down $250 million of bonds during 2007 and we will probably evaluate that after 2007. Gary Balter - Credit Suisse: Okay, but you seem to be much stronger than that in the cash line. David Carlson: Well, that is a year end cash balance and there is obviously year end payables that get paid off. So at this point, we are comfortable saying we would like to pay off $250 million this year. Dick Fontaine: I will also repeat what one of our Board members has stated and given the dynamic business and how we have found so many ways to grow in the future, cash is comfortable. So it is not necessarily burning a hole in our pocket. As I indicated on a broad scale, we intend to stay aggressive and continue to look for additional opportunities. The cash, I think you can be assured will be well applied and well used.

Your next question comes from Bill Armstrong - C.L. King and Associates. Bill Armstrong - C.L. King & Associates: Dave, just a clarification. Is your goal to pay down $250 million just in '07 or is that cumulative, including the pay downs from last year? David Carlson: No, that is just in 2007. We paid down $100 million in 2006 and our expectation is to pay $250 million in 2007. Bill Armstrong - C.L. King & Associates: Dan, you made a couple of comments on Wii supplies and I didn't catch all of them. Could you just maybe give us a little color on supplies of the Nintendo Wii right now and the outlook? Dan DeMatteo: Well, we have none right now, so the outlook is good. I believe next week we get our first allocations in of Wii and DS and we are quite pleased with those numbers. So we were concerned about the dryness here in March, but it looks like April is going to be good. Bill Armstrong - C.L. King & Associates: Do you think this will be a recurring problem in terms of Nintendo not being able to get enough supply or do you think you are still just seeing the big initial surge in demand? Dan DeMatteo: I don't think it's going to be an issue going forward. This is just my opinion. I think they intentionally dried up supply because they made their numbers for the year. Their new year starts April 1 and I think we're going to see supply flowing. Dick Fontaine: I think we would see more units, certainly, but I think given the history of this business, we could probably expect some lumpiness in terms of how products flow. Bill Armstrong - C.L. King & Associates: You had a 14th week during the quarter. Could you give us a little color on what that contributed to sales and earnings per share? David Carlson: It was about $99 million of sales in the 14th week and it was about, I would say, a penny of EPS earnings.

Your next question comes from David Magee - SunTrust Robinson Humphrey. David Magee - SunTrust Robinson Humphrey: Dave, could you comment on what your expectations are for the year with regards to the gross margin direction? Are you still being impacted by the same freight issue in the first half of the year? David Carlson: The gross margin we are looking at going down 75 to 100 basis points during 2007 mostly due to the mix of hardware. No, we don't see the freight issue continuing. That was really a launch issue and the sales were so strong during the fourth quarter there was a lot of replenishment of titles and hardware that usually doesn't take place in other times of the year. It was more a four-week phenomenon. David Magee - SunTrust Robinson Humphrey: With regards to your new stores this year, is there a meaningful change in the size of the store as you go forward? Dick Fontaine: I wouldn't say meaningful. I think in general terms, we are probably with the expansive nature of the consoles, we probably would be more open to slightly larger stores, but again, I would not jump to a significant conclusion. Still in the neighborhood of about 1,500 square feet would still probably serve as the general guideline. David Magee - SunTrust Robinson Humphrey: Lastly, how did the online business do relative to expectations and is that becoming more or less vibrant relative to plans? Dan DeMatteo: The online business met our expectations last year and it is continuing to grow. As a matter of fact, this year, we will be making significant investment in improving our online site and the interaction between our online site and stores. For example, you will be able to order online, pick up in store, reserve online, pick up in store, et cetera. So we are making significant investments in the continuous development of our online business. Dick Fontaine: Incidentally, David, you have kind of opened it up when you talk about some of the divisions that we haven't mentioned ourselves. I would also like to point out that it was another really phenomenal growth year for Game Informer, our magazine, which exceeded the 2.7 million subscriber level. We probably should have come forward and talked about not only dotcom but also Game Informer. There is an awful lot of good things going on, pretty much in all areas of the company at the moment.

Your next question comes from Edward Williams - BMO Capital Markets. Edward Williams - BMO Capital Markets: I wanted to talk about Europe if we could. What was the percentage of revenues from Europe in '06? If we were to look at the relative profitability of that geographic segment, how does it compare to the company average? David Carlson: We will be releasing that in our 10-K, but it was approximately 20% of our total revenue came from international. Edward Williams - BMO Capital Markets: Europe as a piece of the international, is it half of it or two-thirds of it? David Carlson: It's about half of the international. Edward Williams - BMO Capital Markets: If we were look at the margin contribution from the international segment of the business, how does that compare to the company average? Dick Fontaine: Well the international on the new side, the margins are slightly higher to be offset, just to put in perspective, with slightly higher rents. The big variable in the international business is that we have been in this and the international, while we have seen so far really no resistance whatsoever in any country to the used business model that we have developed, the fact of the matter is it is more immature in Europe and running maybe about half of what we have in the U.S., but growing. So we don't have the margin contribution coming from the used that we have in the U.S. although we're heading in that direction. So net-net, slightly less; but on a forecast basis, we are expecting it has more potential to increase. Edward Williams - BMO Capital Markets: Any idea as to how long you think it might take? Is it a two-year or a three-year type of timeframe to get the…

Your next question comes from Arvind Bhatia - Sterne Agee. Arvind Bhatia - Sterne Agee: Good morning, guys. I would like to add my congratulations. First question on the returns on new stores, I think you mentioned they were the highest in your history. Could you give us some more color? I know first-year stores typically you've indicated have about 25% ROI. Can you tell us where these stores are running and the new ones that you opened in '06? If you could talk a little bit further out in '08, given 25% EPS growth guidance can you give us some color on top line, what kind of comps, especially as you go up against the two big titles this year that you should be looking at in '08? Dick Fontaine: Let me take on the real estate portion of that. The truth of the matter is that as we went into 2006 and consciously slowed down somewhat our domestic expansion -- again as I stated to give our field more wiggle room to do a better job of integrating these two concerns -- I fully expected that what would happen is that with our real estate team being able to focus more on gold versus silver that our expectations would end up being fulfilled and being higher and that is the case. A number of things really came into play. Number one, being somewhat more selective clearly paid off. There is no question about it. That ties into the second major dynamic change and the fact of the matter is that we have had more negotiating latitude and have been not forced into committing as early in some projects as we did, frankly, when we were competing with Electronic Boutique. Now that we have come together and we are…

We have time for one last question from Evan Wilson - Pacific Crest Securities. Evan Wilson - Pacific Crest Securities: David, did you say on the call 15% to 17% comps same stores for this year? I think it says 14% to 16% in the release. David Carlson: I had misspoke there. You are right, it is 14% to 16%. I apologize. Evan Wilson - Pacific Crest Securities: When you guys are speaking about the store opening guidance, am I correct to assume you're talking about a net number for this year? Dick Fontaine: No, that is a gross number. We will also probably this year close something in the neighborhood of 75 stores around the world, something like that. Again, I would reinforce what I am sure all of you know, that in a portfolio the size of GameStop's, an active closing program is a very profitable thing to do. So anything in the neighborhood as far as I am concerned of 75 to 100 well chosen and with transfer sale possibilities, and lease variability actually is generally a very healthy sign. Evan Wilson - Pacific Crest Securities: To follow on the back of one of Arvind's questions, you said that the bond buyback is in the guidance. What amount of interest expense does the guidance assume for the full fiscal year? David Carlson: We're looking at somewhere between $50 million and $55 million of interest expense net. Dick Fontaine: Thank you for joining us today. Again, I just want to repeat what everyone around this table feels is that not only are we tremendously proud of all of the people who have delivered this year for GameStop and our shareholders, but we really believe that under Steve Morgan's guidance the field is in better position than they have been in the past. We feel ready to take on the new challenges that we have established for ourselves. Clearly, we see this being a growth story into a growth industry and we really like the way the platforms are shaping up, as you can tell. We will be seeing you at the end of the first quarter. Thanks for joining us today.