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Radioshack 10-K 2010 Documents found in this filing:UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
________________________
FORM
10-K
For the fiscal year
ended December 31, 2009
OR
Commission file
number 1-5571
________________________
 RADIOSHACK
CORPORATION
(Exact name of
registrant as specified in its charter)
________________________
SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
SECURITIES REGISTERED PURSUANT TO
SECTION 12(g) OF THE ACT:> None
Indicate by check
mark if the registrant is a well-known seasoned issuer, as defined in Rule 405
of the Securities Act. Yes X
No __
Indicate by check
mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes __ No X
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 X
No __
1
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes __ No __
Indicate by check
mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.__
Indicate by check
mark if the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).
Yes __ No X
As
of June 30, 2009, the aggregate market value of the voting common stock of the
registrant held by non-affiliates of the registrant was $1,295,767,233 based on
the New York Stock Exchange closing price. For the purposes of this disclosure
only, the registrant has assumed that its directors, executive officers and
beneficial owners of 5% or more of the registrant’s common stock as of June 30,
2009, are the affiliates of the registrant.
As
of February 16, 2010,
there were 125,236,678
shares of the registrant's Common Stock outstanding.
Documents
Incorporated by Reference
Portions of the
Proxy Statement for the 2010 Annual Meeting of Stockholders are incorporated by
reference into Part III.
2
3
PART
I
GENERAL
RadioShack
Corporation was incorporated in Delaware in 1967. We primarily engage in the
retail sale of consumer electronics goods and services through our RadioShack
store chain and non-RadioShack-branded kiosk operations. Our strategy is to
provide cost-effective solutions to meet the routine electronics needs and
distinct electronics wants of our customers. Throughout this report, the terms
“our,” “we,” “us” and “RadioShack” refer to RadioShack Corporation,
including its subsidiaries.
Our day-to-day
focus is concentrated in four major areas:
Additional
information regarding our business segments is presented below and in
Management’s Discussion and Analysis of Financial Condition and Results of
Operations (“MD&A”) elsewhere in this Annual Report on Form 10-K. For
information regarding the net sales and operating revenues and operating income
for each of our business segments for fiscal years ended December 31, 2009, 2008
and 2007, please see Note 15 – “Segment Reporting” in the Notes to Consolidated
Financial Statements.
U.S.
RADIOSHACK COMPANY-OPERATED STORES
At
December 31, 2009, we operated 4,476 U.S. company-operated stores under the
RadioShack brand located throughout the United States, as well as in Puerto Rico
and the U.S. Virgin Islands. These stores are located in major shopping malls
and strip centers, as well as individual storefronts. Each location carries a
broad assortment of both name brand and private brand consumer electronics
products.
Our product lines
are categorized into a number of platforms. Our wireless platform includes
postpaid and prepaid wireless handsets and communication devices such as
scanners and GPS products. Our accessory platform includes home entertainment,
wireless, music, computer, video game and GPS accessories; media storage; power
adapters; digital imaging products and headphones. Our modern home platform
includes home audio and video end-products, personal computing products,
residential telephones, and Voice over Internet Protocol products. Our personal
electronics platform includes digital cameras, digital music players, toys,
satellite radios, video gaming hardware, camcorders, and general radios. Our
power platform includes general and special purpose batteries and battery
chargers. Our technical platform includes wire and cable, connectivity products,
components and tools, and hobby products. We also provide consumers access to
third-party services such as wireless telephone activation, prepaid wireless
airtime, extended service plans, and AT&T’s ConnecTech service.
KIOSKS
At
December 31, 2009, we operated 562 kiosks located throughout the United States.
These kiosks are primarily inside Sam’s Club and Target store locations. These
locations, which are not RadioShack-branded, primarily offer wireless handsets
and their associated accessories. We also provide consumers access to
third-party wireless telephone services.
In
February 2009, we signed a contract extension with Sam’s Club through March 31,
2011, with a transition period ending June 30, 2011, to continue operating
kiosks in certain Sam’s Club locations. As part of the terms of the contract
extension, we assigned the operation of 66 kiosk locations to Sam’s Club in
2009. We will assign at least 22 locations to Sam’s Club in 2010, and Sam’s Club
still has the right to assume the operations of up to 23 additional kiosk
locations.
In
April 2009 we agreed with Sprint Nextel to cease our arrangement to jointly
operate the Sprint-branded kiosks in operation at that date. This agreement
allowed us to operate these kiosks under the Sprint name
4
for a reasonable
period of time, allowing us to transition the kiosks to a new format. In August
2009, we transitioned these kiosks to multiple wireless carrier
RadioShack-branded locations. They are now managed and reported as extensions of
existing RadioShack company-operated stores located in the same shopping
malls.
We
are currently conducting a test rollout of kiosk locations in approximately 100
Target stores. This test will be completed in 2010. At the conclusion of the
test, a determination will be made with Target regarding whether these
operations will be expanded or closed.
OTHER
In
addition to the reportable segments discussed above, we have other sales
channels and support operations described as follows:
Support
Operations:
Our retail stores,
along with our kiosks and dealer outlets, are supported by an established
infrastructure. Below are the major components of this support
structure.
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SEASONALITY
As
with most other specialty retailers, our net sales and operating revenues,
operating income and cash flows are greater during the fourth quarter, which
includes the majority of the holiday shopping season in the U.S., than during
other periods of the year. There is a corresponding pre-seasonal inventory
build-up, which requires working capital related to the anticipated increased
sales volume. This is described in “Cash Requirements” under MD&A. Also,
refer to Note 16 – “Quarterly Data (Unaudited)” in the Notes to Consolidated
Financial Statements for data showing seasonality trends. We expect this
seasonality to continue.
PATENTS
AND TRADEMARKS
We
own or are licensed to use many trademarks and service marks related to our
RadioShack stores in the United States and in foreign countries. We believe the
RadioShack name and marks are well recognized by consumers, and that the name
and marks are associated with high-quality products and services. We also
believe the loss of the RadioShack name and RadioShack marks would materially
adversely affect our business. Our private brand manufactured products are sold
primarily under the RadioShack, AUVIO, Accurian, Enercell or Gigaware
trademarks. We also own various patents and patent applications relating to
consumer electronics products.
We
do not own any material patents or trademarks associated with our kiosk
operations.
SUPPLIERS
AND NAME BRAND RELATIONSHIPS
Our business
strategy depends, in part, upon our ability to offer name brand and private
brand products, as well as to provide our customers access to third-party
services. We utilize a large number of suppliers located in various parts of the
world to obtain raw materials and private brand merchandise. We do not expect a
lack of availability of raw materials or any single private brand product to
have a material effect on our operations overall or on any of our operating
segments. We have formed vendor and third-party service provider relationships
with well-recognized companies such as Sprint Nextel, AT&T, T-Mobile, Apple,
Casio, Garmin, Hewlett-Packard, Microsoft, Research In Motion, Samsung, and
SanDisk. In the aggregate, these relationships have or are expected to have a
significant effect on both our operations and financial strategy. Certain of
these relationships are important to our business; the loss of or disruption in
supply from these relationships could materially adversely affect our net sales
and operating revenues. Additionally, we have been limited from time to time by
various vendors and suppliers on an economic basis where demand has exceeded
supply.
ORDER
BACKLOG
We
have no material backlog of orders in any of our operating segments for the
products or services we sell.
COMPETITION
Due to consumer
demand for wireless products and services, as well as rapid consumer acceptance
of new digital technology products, the consumer electronics retail business
continues to be highly competitive, driven primarily by technology and product
cycles.
In
the consumer electronics retailing business, competitive factors include price,
quality, features, product availability, consumer services, manufacturing and
distribution capability, brand reputation and the number of competitors. We
compete in the sale of our products and services with several retail formats
including national, regional, and independent consumer electronics retailers. We
compete with department and specialty retail stores in more select product
categories. We compete with wireless providers in the wireless telephone
category through their own retail and online presence. We compete with mass
merchandisers and other alternative channels of distribution, such as mail order
and e-commerce retailers, on a more widespread basis. Numerous domestic and
foreign companies also
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manufacture
products similar to ours for other retailers, which are sold under
nationally-recognized brand names or private brands.
Management believes
two primary factors differentiate us from our competition. First, we have an
extensive physical retail presence with convenient locations throughout the
United States. Second, our specially trained sales staff is capable of providing
cost-effective solutions for our customers’ routine electronics needs and
distinct electronics wants, assisting with the selection of appropriate products
and accessories and, when applicable, assisting customers with service
activation.
We
cannot give assurance that we will compete successfully in the future, given the
highly competitive nature of the consumer electronics retail business. Also, in
light of the ever-changing nature of the consumer electronics retail industry,
we would be adversely affected if our competitors were able to offer their
products at significantly lower prices. Additionally, we would be adversely
affected if our competitors were able to introduce innovative or technologically
superior products not yet available to us, or if we were unable to obtain
certain products in a timely manner or for an extended period of time.
Furthermore, our business would be adversely affected if we failed to offer
value-added solutions or if our competitors were to enhance their ability to
provide these value-added solutions.
EMPLOYEES
As
of December 31, 2009, we employed approximately 36,700 people, including 1,900
temporary seasonal employees. Our employees are not covered by collective
bargaining agreements, nor are they members of labor unions. We consider our
relationship with our employees to be good.
AVAILABLE
INFORMATION
We
are subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, and rules and regulations adopted by the SEC under that Act.
The Exchange Act requires us to file reports, proxy statements and other
information with the SEC. Copies of these reports, proxy statements and other
information can be inspected and copied at:
SEC Public
Reference Room
100 F Street,
N.E.
Room
1580
Washington,
D.C. 20549-0213
You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. You may also obtain copies of any material we have
filed with the SEC by mail at prescribed rates from:
Public Reference
Section
Securities and
Exchange Commission
100 F Street,
N.E.
Washington,
D.C. 20549-0213
You may obtain
these materials electronically by accessing the SEC’s home page on the Internet
at:
http://www.sec.gov
In
addition, we make available, free of charge on our corporate Web site, our
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to these reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act, as well as our proxy statements, as soon as
reasonably practicable after we electronically file this material with, or
furnish it to, the SEC. You may review these documents, under the heading
“Investor Relations,” by accessing our corporate Web site:
http://www.radioshackcorporation.com
7
One should
carefully consider the following risks and uncertainties described below, as
well as other information set forth in this Annual Report on Form 10-K. There
may be additional risks that are not presently material or known, and the
following list should not be construed as an exhaustive list of all factors that
could cause actual results to differ materially from those expressed in
forward-looking statements made by us. If any of the events described below
occur, our business, financial condition, results of operations, liquidity or
access to the capital markets could be materially adversely
affected.
We
may be unable to successfully execute our strategy to provide cost-effective
solutions to meet the routine consumer electronics needs and distinct consumer
electronics wants of our customers.
To
achieve our strategy, we have undertaken a variety of strategic initiatives. Our
failure to successfully execute our strategy or the occurrence of certain
events, including the following, could materially adversely affect our ability
to maintain or grow our comparable store sales and our business
generally:
Adverse
changes in national and world-wide economic conditions could negatively affect
our business.
The continued
uncertainty in the economy could have a significant negative effect on U.S.
consumer spending, particularly discretionary spending for consumer electronics
products, which, in turn, could directly affect our sales. Consumer confidence,
recessionary and inflationary trends, equity market levels, consumer credit
availability, interest rates, consumers’ disposable income and spending levels,
energy prices, job growth, income tax rates and unemployment rates may affect
the volume of customer traffic and level of sales in our locations. Continued
negative trends of any of these economic conditions, whether national or
regional in nature, could adversely affect our results of operations, including
our net sales and profitability.
In
addition, potential disruptions in the capital and credit markets could have a
significant effect on our ability to access the U.S. and global capital and
credit markets, if needed. These potential disruptions in the capital and credit
market conditions could affect our ability to borrow under our credit facility,
or adversely affect the banks that underwrote our credit facility. The
availability of financing will depend on a variety of factors, such as economic
and market conditions and the availability of credit and our credit ratings. If
needed, we may not be able to successfully obtain any necessary additional
financing on favorable terms, or at all.
Our
inability to increase or maintain profitability of our operations could
adversely affect our results.
A
critical component of our business strategy is to improve our overall
profitability. Our ability to increase profitable sales in existing stores may
be affected by:
8
Any
reductions or changes in the growth rate of the wireless industry or changes in
the dynamics of the wireless communications industry could materially adversely
affect our results of operations.
Sales of wireless
handsets and the related commissions and residual income constitute a
significant portion of our total revenue. Consequently, changes in the wireless
industry, such as those discussed below, could materially adversely affect our
results of operations and financial condition.
Lack of growth in
the overall wireless industry tends to have a corresponding effect on our
wireless sales. Because growth in the wireless industry is often driven by the
adoption rate of new wireless handset and wireless service technologies, the
absence of these new technologies, our suppliers not providing us with these new
technologies, or the lack of consumer interest in adopting these new
technologies, could adversely affect our business.
Another change in
the wireless industry that could materially adversely affect our profitability
is wireless industry consolidation. Consolidation in the wireless industry could
lead to a concentration of competitive strength within a few wireless carriers,
which could adversely affect our business if our ability to obtain competitive
offerings from our wireless suppliers is reduced or as competition from wireless
carrier stores increases.
Our
competition is both intense and varied, and our failure to effectively compete
could materially adversely affect our results of operations.
In
the retail consumer electronics marketplace, the level of competition is
intense. We compete with consumer electronics retail stores similarly situated
to our stores as well as big-box retailers, large specialty retailers and
discount or warehouse retailers and, to a lesser extent, with alternative
channels of distribution such as e-commerce, telephone shopping services and
mail order. We also compete with wireless carriers’ retail presence, as
discussed above. Some of these other competitors are larger than us and have
greater market presence and financial and other resources than us, which may
provide them with a competitive advantage.
Changes in the
amount and degree of promotional intensity or merchandising strategy exerted by
our current competitors and potential new competition could present us with
difficulties in retaining existing customers and attracting new customers. In
addition, pressure from our competitors could require us to reduce prices or
increase our costs in one product category or across all our product categories.
As a result of this competition, we may experience lower sales, margins or
profitability, which could materially adversely affect our results of
operations.
In
addition, some of our competitors may use strategies such as lower pricing,
wider selection of products, larger store size, higher advertising intensity,
improved store design, and more efficient sales methods. While we attempt to
differentiate ourselves from our competitors by focusing on the electronics
specialty retail market, our business model may not enable us to compete
successfully against existing and future competitors.
We
may not be able to maintain our historical gross margin levels.
Historically, we
have maintained gross margin levels ranging from 45% to 48%. We may not be able
to maintain these margin levels in the future due to various factors, including
increased sales of lower margin products, such as personal electronics products
and name brand products, or declines in average selling prices of key products.
If sales of lower margin items continue to increase and become a larger
percentage of our business, our gross margin will be adversely
affected.
9
Our
inability to effectively manage our receivable levels, particularly with our
service providers, could adversely affect our results of
operations.
We
maintain significant receivable balances from various service providers, such as
Sprint Nextel, AT&T, and T-Mobile, consisting of commissions, residuals and
other funds related to these relationships. Changes in the financial markets or
financial condition of these service providers could cause a delay or failure in
receiving these funds. A significant delay or failure to receive these payments
could adversely affect our financial results or financial
condition.
Our
inability to effectively manage our inventory levels, particularly excess or
inadequate amounts of inventory, could adversely affect our results of
operations.
We
source inventory both domestically and internationally, and our inventory levels
are subject to a number of factors, some of which are beyond our control. These
factors, including technology advancements, reduced consumer spending and
consumer disinterest in our product offerings, could lead to excess inventory
levels. Additionally, we may not accurately assess product life cycles, leaving
us with excess inventory. To reduce this excess inventory, we may be required to
lower our prices, adversely affecting our results of operations.
Alternatively, we
may have inadequate inventory levels for particular items, including popular
selling merchandise, due to factors such as unanticipated high demand for
certain products, unavailability of products from our vendors, import delays,
labor unrest, untimely deliveries or the disruption of international, national
or regional transportation systems. The effect of the occurrence of any of these
factors on our inventory supply could adversely affect our results of operations
or financial condition.
Our
inability to attract, retain and grow an effective management team or changes in
the cost or availability of a suitable workforce to manage and support our
strategies could adversely affect our results of operations.
Our success depends
in large part upon our ability to attract, motivate and retain a qualified
management team and employees. Qualified individuals needed to fill necessary
positions could be in short supply. The inability to recruit and retain such
individuals on a continuous basis could result in high employee turnover at our
stores and in our company generally, which could materially adversely affect our
business and results of operations. Additionally, competition for qualified
employees requires us to continually assess our compensation structure.
Competition for qualified employees has required, and in the future could
require, us to pay higher wages to attract a sufficient number of qualified
employees, resulting in higher labor compensation expense. In addition, mandated
changes in the federal minimum wage may adversely affect our compensation
expense.
Our
inability to successfully identify and enter into relationships with developers
of new technologies or the failure of these new technologies to be adopted by
the market could adversely affect our ability to increase or maintain our sales
and profitability. Additionally, the absence of new services or products and
product features in the merchandise categories we sell could adversely affect
our sales and profitability.
Our ability to
maintain and increase revenues depends, to a large extent, on the periodic
introduction and availability of new products and technologies. If we fail to
identify these new products and technologies, or if we fail to enter into
relationships with their developers prior to widespread distribution within the
market, our sales and profitability could be adversely affected. Any new
products or technologies we identify may have a limited sales life.
Furthermore, it is
possible that new products or technologies will never achieve widespread
consumer acceptance, also adversely affecting our sales and profitability.
Finally, the lack of innovative consumer electronics products, features or
services that can be effectively featured in our store model could also
adversely affect our ability to increase or maintain our sales and
profitability.
10
Failure
to create, maintain and renew profitable relationships with name brand product
and service providers could adversely affect our sales and
profitability.
Our large selection
of name brand products and service providers makes up a significant portion of
our overall sales. In the aggregate, these relationships have or are expected to
have a significant effect on both our operations and financial strategy. If we
are unable to create, maintain or renew our relationships with such third
parties on profitable terms or at all, our sales and our profitability could be
adversely affected.
The
occurrence of severe weather events or natural disasters could significantly
damage or destroy our retail locations, could prohibit consumers from traveling
to our retail locations, or could prevent us from resupplying our stores or
distribution centers, especially during the peak winter holiday shopping
season.
If
severe weather or a catastrophic natural event, such as a hurricane or
earthquake, occurs in a particular region and damages or destroys a significant
number of our stores in that area, our sales would be reduced accordingly. In
addition, if severe weather, such as heavy snowfall or extreme temperatures,
discourages or restricts customers in a particular region from traveling to our
stores, our sales would also be adversely affected. If severe weather occurs
during the fourth quarter holiday season, the adverse effect on our sales and
gross profit could be even greater than at other times during the year because
we generate a significant portion of our sales and gross profit during this
period.
We
have continuing obligations under leases related to discontinued retail
operations that could materially adversely affect our results of
operations.
We
have ongoing obligations under retail leases for locations that we assigned to
other businesses. The majority of these lease obligations arose from leases, for
which CompUSA Inc. assumed responsibility as part of the sale of our Computer
City, Inc. subsidiary to CompUSA in August 1998. Because the company that
assumed responsibility for these leases has ceased operations, we may be
responsible for rent due under the leases, which could materially adversely
affect our results of operations.
Failure
to comply with, or the additional implementation of, laws, rules, and
regulations regarding our business could adversely affect our business and our
results of operations.
We
are subject to various foreign, federal, state, and local laws, rules and
regulations including, but not limited to, the Fair Labor Standards Act and
ERISA, each as amended, and regulations promulgated by the Federal Trade
Commission, Securities and Exchange Commission, Internal Revenue Service, United
States Department of Labor, Occupational Safety and Health Administration, and
Environmental Protection Agency. Failure to properly adhere to these and other
applicable laws, rules and regulations could result in the imposition of
penalties or adverse legal judgments and could adversely affect our business and
our results of operations. Similarly, the cost of complying with
newly-implemented laws, rules and regulations could adversely affect our
business and our results of operations.
Risks
associated with the suppliers from whom our raw materials and products are
sourced could materially adversely affect our sales and
profitability.
We
utilize a large number of suppliers located in various parts of the world to
obtain raw materials, private brand merchandise, and other products. If any of
our key vendors fail to supply us with products, we may not be able to meet the
demands of our customers, and our sales and profitability could be adversely
affected.
We
purchase a significant portion of our inventory from manufacturers located in
China. Changes in trade regulations (including tariffs on imports) could
increase the cost of those items. Although our purchases are denominated in U.S.
dollars, changes in the Chinese currency exchange rate against the U.S. dollar
or other foreign currencies could cause our vendors to increase the prices of
items we purchase from them. The occurrence of any of these events could
materially adversely affect our results of operations.
11
Our ability to find
qualified vendors that meet our standards and supply products in a timely and
efficient manner is a significant challenge, especially with respect to goods
sourced from outside the United States. Merchandise quality issues, product
safety concerns, trade restrictions, difficulties in enforcing intellectual
property rights in foreign countries, work stoppages, transportation capacity
and costs, tariffs, political or financial instability, foreign currency
exchange rates, monetary, tax and fiscal policies, inflation, deflation,
outbreak of pandemics and other factors relating to foreign trade are beyond our
control. These and other issues affecting our vendors could materially adversely
affect our sales and profitability.
Our
business is heavily dependent upon information systems, which could result in
higher maintenance costs and business disruption.
Our business is
heavily dependent upon information systems, given the number of individual
transactions we process each year. Our information systems include an in-store
point-of-sale system that provides information used to track sales performance,
inventory replenishment, product availability information, product margin
information and customer information. In addition, we are in the process of
upgrading our in-store point-of-sale system and related processes. These systems
are complex and require integration with each other, with some of our service
providers, and with business processes, which may increase the risk of
disruption.
Our information
systems are also subject to damage or interruption from power outages, computer
and telecommunications failures, computer viruses, security breaches,
catastrophic events and usage errors by our employees. If we encounter damage to
our systems, difficulty implementing new systems, or difficulty maintaining and
upgrading current systems, our business operations could be disrupted, our sales
could decline, and our expenses could increase.
Failure
to protect the integrity and security of our customers’ information could expose
us to litigation, as well as materially damage our standing with our
customers.
Increasing costs
associated with information security, including increased investments in
technology, the costs of compliance with consumer protection laws, and costs
resulting from consumer fraud could cause our business and our results of
operations to be adversely affected. Additionally, if a significant compromise
in the security of our customer information, including personal identification
data, were to occur, it could materially adversely affect our reputation,
business, results of operations, or financial condition, and could increase the
costs we incur to protect against such security breaches.
We
are subject to other litigation risks and may face liabilities as a result of
allegations and negative publicity.
Our operations
expose us to litigation risks, such as class action lawsuits involving
employees, consumers and shareholders. For example, from time to time putative
class actions have been brought against us relating to various labor matters.
Defending against lawsuits and other proceedings may involve significant expense
and divert management’s attention and resources from other matters. In addition,
if any lawsuits were brought against us and resulted in a finding of substantial
legal liability, it could cause significant reputational harm to us and
otherwise materially adversely affect our business, results of operations, or
financial condition.
Terrorist
activities and governmental efforts to thwart them could materially adversely
affect our results of operations.
A
terrorist attack or series of attacks on the United States could have a
significant adverse effect on its economy. This downturn in the economy could,
in turn, materially adversely affect our results of operations. The potential
for future terrorist attacks, the national and international responses to
terrorist attacks, and other acts of war or hostility could cause greater
uncertainty and cause the economy to suffer in ways that we cannot
predict.
12
We
conduct business outside the United States, which presents potential
risks.
Some of our assets
are held and a portion of our revenue is generated in Mexico, China and Hong
Kong. Part of our growth strategy is to expand our international business
because we believe the growth rates and the opportunity to implement operating
improvements may be greater than those typically achievable in the United
States. International operations entail significant risks and uncertainties,
including, without limitation:
Any of these
factors, by itself or in combination with others, could materially adversely
affect our business, results of operations or financial condition.
We
may be unable to keep existing stores in current locations or open new stores in
desirable locations, which could adversely affect our sales and
profitability.
We
may be unable to keep existing stores in current locations or open new stores in
desirable locations in the future. We compete with other retailers and
businesses for suitable locations for our stores. Local land use, local zoning
issues, environmental regulations and other regulations may affect our ability
to find suitable locations and also influence the cost of leasing, building or
buying our stores. We also may have difficulty negotiating real estate leases
and purchase agreements on acceptable terms. Further, to relocate or open new
stores successfully, we must hire and train employees for the new location.
Construction, environmental, zoning and real estate delays may negatively affect
store openings and increase costs and capital expenditures. In addition, when we
open new stores in markets where we already have a presence, our existing
locations may experience a decline in sales as a result, and when we open stores
in new markets, we may encounter difficulties in attracting customers due to a
lack of customer familiarity with our brand, our lack of familiarity with local
customer preferences, and seasonal differences in the market. We cannot be
certain that new or relocated stores will produce the anticipated sales or
return on investment or that existing stores will not be adversely affected by
new or expanded competition in their market areas.
None.
Information on our
properties is located in MD&A and the financial statements included in this
Annual Report on Form 10-K and is incorporated into this Item 2 by
reference.
The following items
are discussed further in the Notes to Consolidated Financial
Statements:
13
We
lease, rather than own, most of our retail facilities. Our stores are located in
shopping malls, stand-alone buildings and shopping centers owned by other
entities. We lease administrative offices throughout the United States and one
manufacturing plant in China. We closed our leased distribution center in
Columbus, Ohio, during the first half of 2008. We own the property on which our
five distribution centers and two manufacturing facilities are located within
the United States. In 2008, we amended the lease for the buildings and certain
property at our corporate headquarters located in downtown Fort Worth, Texas.
The amended lease is for a reduced amount of space, requires no lease payments,
and expires in June of 2011, with one two-year option to renew approximately
half of the space at market-based rents.
RETAIL
LOCATIONS
The table below
shows our retail locations at December 31, 2009, allocated among U.S. and Mexico
company-operated stores, kiosks and dealer and other outlets.
Real
Estate Owned and Leased
14
Below is
a listing at December 31, 2009, of our retail locations within the United States
and its territories:
* Does
not include international dealers.
15
Refer to Note 13 –
“Commitments and Contingencies” in the Notes to Consolidated Financial
Statements.
No
matters were submitted to a vote of security holders during the fourth quarter
of 2009.
EXECUTIVE
OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART III).
The following is a
list, as of February 9, 2010, of our executive officers and their ages and
positions.
There are no family
relationships among the executive officers listed, and there are no undisclosed
arrangements or understandings under which any of them were appointed as
executive officers. All executive officers of RadioShack Corporation are
appointed by the Board of Directors to serve until their successors are
appointed or until their death, resignation, retirement, or removal from
office.
16
17
PART
II
PRICE
RANGE OF COMMON STOCK
Our common stock is
listed on the New York Stock Exchange and trades under the symbol "RSH." The
following table presents the high and low trading prices for our common stock,
as reported in the composite transaction quotations of consolidated trading for
issues on the New York Stock Exchange, for each quarter in the two years ended
December 31, 2009.
HOLDERS
OF RECORD
At
February 16, 2010, there were 18,050 holders of record of our common
stock.
DIVIDENDS
The Board of
Directors annually reviews our dividend policy. On November 9, 2009, our Board
of Directors declared an annual dividend of $0.25 per share. The dividend was
paid on December 16, 2009, to stockholders of record on November 27,
2009.
The following table
sets forth information concerning purchases made by or on behalf of RadioShack
or any affiliated purchaser (as defined in the SEC’s rules) of RadioShack common
stock for the periods indicated.
PURCHASES
OF EQUITY SECURITIES BY RADIOSHACK
18
RADIOSHACK
STOCK COMPARATIVE PERFORMANCE GRAPH
The
following stock performance graph and related information shall not be deemed
“soliciting material” or “filed” with the SEC, nor shall such information be
incorporated by reference into any of our future filings under the Securities
Act of 1933, as amended, or the Exchange Act, except to the extent that we
specifically incorporate it by reference in the filing.
The graph below
compares the cumulative total shareholder return on RadioShack common stock for
the last five years with the cumulative total return on the Standard &
Poor's 500 Index, of which we are a component, and the Standard & Poor's
Specialty Retail Index, of which we are also a component. The S&P Specialty
Retail Index is a capitalization-weighted index of domestic equities traded on
the NYSE and NASDAQ, and includes high-capitalization stocks representing the
specialty retail sector of the S&P 500. The graph assumes an investment of
$100 at the close of trading on December 31, 2004, in RadioShack common stock,
the S&P 500 Index and the S&P Specialty Retail Index.
*
Cumulative Total Return assumes dividend reinvestment.
Information Source:
Standard & Poor's, a division of The McGraw-Hill Companies Inc.
19
RADIOSHACK
CORPORATION AND SUBSIDIARIES
This table should
be read in conjunction with MD&A and the Consolidated Financial Statements
and related Notes.
20
The following table
is a reconciliation of adjusted EBITDA to net income.
21
This MD&A
section discusses our results of operations, liquidity and financial condition,
risk management practices, critical accounting policies, and estimates and
certain factors that may affect our future results, including economic and
industry-wide factors. Our MD&A should be read in conjunction with our
consolidated financial statements and accompanying notes, included in this
Annual Report on Form 10-K, as well as the Risk Factors set forth in Item 1A
above.
OVERVIEW
Highlights related
to the year ended December 31, 2009, include:
22
RESULTS
OF OPERATIONS
Due to our adoption
of the FASB’s new rules regarding accounting for convertible debt, certain 2008
amounts have been adjusted from the amounts included in our Annual Report on
Form 10-K for the year ended December 31, 2008. Refer to Note 2 – “Summary of
Significant Accounting Policies” under the section titled “New Accounting
Standards” in the Notes to Consolidated Financial Statements for discussion of
these adjustments.
Net
Sales and Operating Revenues
Consolidated net sales
increased 1.2% or $51.5 million to $4,276.0 million for the year ended December
31, 2009, compared with $4,224.5 million in
2008. This increase was primarily due to a comparable store sales increase of
1.3% in 2009.
The increase in comparable store sales was driven primarily by increased sales
in our wireless and modern home platforms, but was partially offset by decreased
sales in our accessory and personal electronics platforms.
Consolidated net
sales and operating revenues for our two reportable segments and other sales are
as follows:
The following table
provides a summary of our consolidated net sales and operating revenues by
platform and as a percent of net sales and operating revenues. These
consolidated platform sales include sales from our U.S. RadioShack
company-operated stores and kiosks, as well as other sales.
23
2009
COMPARED WITH 2008
U.S.
RadioShack Company-Operated Stores Segment
The following table
provides a summary of our net sales and operating revenues by platform and as a
percent of net sales and operating revenues for the U.S. RadioShack
company-operated stores segment.
Sales in our
wireless platform (includes postpaid and prepaid wireless handsets, commissions,
residual income and communication devices such as scanners and GPS products)
increased 25.3%
in 2009. This sales increase was driven by increased sales in our Sprint Nextel
postpaid wireless business, the addition of T-Mobile as a postpaid wireless
carrier, and increased sales of prepaid wireless handsets. These increases were
partially offset by decreased sales of GPS products.
Sales in our
accessory platform (includes home entertainment, wireless, music, computer,
video game and GPS accessories; media storage; power adapters; digital imaging
products and headphones) decreased 10.7% in 2009. This
sales decrease was primarily driven by decreased sales in digital-to-analog
converter boxes, wireless accessories, imaging accessories, and media storage,
but was partially offset by increased sales of television antennas. Consolidated
sales of converter boxes were $170.1 million and $204.8 million in 2009 and
2008, respectively. The decrease in converter box sales occurred in the second
half of the year after the transition to digital television occurred in June
2009. We expect sales of converter boxes to be minimal in 2010.
Sales in our modern
home platform (includes home audio and video end-products, personal computing
products, residential telephones, and Voice over Internet Protocol (“VoIP”)
products) increased 2.0% in 2009. In this
platform we recorded sales gains in netbooks, digital televisions, and VoIP
products, which were substantially offset by sales declines in laptops,
residential telephones, and DVD players.
Sales in our
personal electronics platform (includes digital cameras, digital music players,
toys, satellite radios, video gaming hardware, camcorders, and general radios)
decreased 21.9%
in 2009. This decrease was driven primarily by sales declines in digital
cameras, digital music players, video game consoles, satellite radios, and
toys.
Sales in our power
platform (includes general and special purpose batteries and battery chargers)
decreased 9.9%
in 2009. This decrease was primarily driven by decreased sales of both general
and special purpose batteries. Our sales performance in this platform was
negatively affected by the disruption during the transition process of the
assortment to our Enercell brand. This transition process will be complete in
the first quarter of 2010.
Sales in our
technical platform (includes wire and cable, connectivity products, components
and tools, and hobby products) decreased 2.1% in 2009. We
recorded an increase in sales of wire and cable products, which was more than
offset by decreased sales across most of the other product categories in this
platform.
24
Sales in our
service platform (includes prepaid wireless airtime, extended service plans,
AT&T’s ConnecTech service, and bill payment revenue) increased 17.4% in 2009. This
increase was driven primarily by increased sales of prepaid wireless airtime and
extended service plans.
Kiosks
Segment
Kiosk sales consist
primarily of handset sales, postpaid and prepaid commission revenue and related
wireless accessory sales. Kiosk sales decreased 11.8% or $33.5 million in 2009.
We realized a sales increase in our Sam’s Club business, which was offset by a
reduced number of kiosk locations. This decrease in locations was partially due
to the closure of underperforming Sprint-branded kiosk locations in the first
half of 2009 and the closure of the remainder of our Sprint-branded kiosks in
the third quarter. For more information regarding the reduction in kiosk
outlets, see the Retail Locations table in Item 2 – “Properties” in this Annual
Report on Form 10-K.
In
June 2009, Sam’s Club notified us of their intent to exercise their right to
assume operation of certain kiosk locations. This could result in the transfer
of up to approximately 45 kiosks to Sam’s Club starting in the first quarter of
2010. For more information
regarding our arrangement with Sam’s Club, see the Kiosks section in Item 1 –
“Business” in this Annual Report on Form 10-K.
Other
Sales
Other sales include
sales to our independent dealers, outside sales through our service centers,
sales generated by our www.radioshack.com Web site
and our Mexican subsidiary, sales to commercial customers, and outside sales of
our global sourcing operations and manufacturing. Other sales increased $45.2
million or 13.7% in 2009. This sales increase was primarily attributable to the
consolidation of our Mexican subsidiary for all of 2009, but was partially
offset by decreased sales to our independent dealers. Our Mexican subsidiary
represented less than 5% of consolidated net sales and operating revenues in
2009.
Gross
Profit
Consolidated gross
profit and gross margin are as follows:
Consolidated gross
profit and gross margin for 2009 were $1,962.5 million and 45.9%, respectively,
compared with $1,922.7 million and 45.5% in 2008, resulting in a 2.1% increase
in gross profit dollars and a 40 basis point increase in our gross
margin.
The improvement in
gross margin was partially driven by improved product mix combined with fewer
markdowns as a result of more effective promotional productivity, inventory
management and higher sell-through of seasonal products.
25
Selling,
General and Administrative Expense
Our consolidated
SG&A expense decreased 0.1% or $1.9 million in 2009. This
represents a 40 basis point decrease as a percentage of net sales and operating
revenues compared to 2008.
The table below
summarizes the breakdown of various components of our consolidated SG&A
expense and its related percentage of total net sales and operating
revenues.
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