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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 ( NO FEE REQUIRED)
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD
Commission file number 1-5571
________________________
RADIOSHACK CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Throckmorton Street, Suite 1800, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 415-3700
________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
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 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
As of March 21, 2001, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $5,887,090,827 based on the New York Stock
Exchange closing price.
As of March 21, 2001, there were 184,583,373 shares of the registrant's Common
Stock outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 2001 Annual Meeting of Stockholders are
incorporated by reference into Part III.
The Index to Exhibits is on Sequential Page No. 49.
Total Pages 60.
PART I
ITEM 1. BUSINESS.
GENERAL
On May 18, 2000, the stockholders of Tandy Corporation approved a change of the
name of the company to RadioShack Corporation ("RadioShack" or the "Company").
RadioShack was incorporated in Delaware in 1967. RadioShack primarily engages in
the retail sale of consumer electronics through the RadioShack(R) store
chain. Sales derived outside of the United States are not material.
RadioShack. At December 31, 2000, RadioShack operated 5,109 company-owned stores
located throughout the United States. These stores average approximately 2,300
square feet in gross area and are located in major malls and strip centers, as
well as individual storefronts. These locations carry a broad assortment of both
private label and third party branded products. The product lines include
electronic parts and accessories, cellular, PCS and conventional telephones,
audio and video equipment, direct-to-home ("DTH") satellite systems and personal
computers and related products, as well as specialized products such as scanners
and weather radios, among others. RadioShack also provides consumers access to
third party services such as cellular phone, PCS and pager activation, DTH
satellite programming, long distance telephone service, broadband and dial-up
Internet access and prepaid wireless airtime. At December 31, 2000, RadioShack
also had a network of 2,090 dealer/franchise outlets, including 54 located
outside of the U.S. These outlets provide private label and third party branded
products and services to smaller communities. The dealers are generally engaged
in other retail operations and augment their sales with RadioShack products.
Strategic Alliances. RadioShack has formed strategic alliances with
well-recognized companies. These alliances have or are expected to have a
significant impact on RadioShack's operations and financial strategy and
include:
At Home Corporation (Excite@Home) - On October 20, 2000, RadioShack
announced a strategic alliance with Excite@Home, the country's leading
broadband online service provider, whose major cable partners include
Comcast, AT&T and Cox, among others. Excite@Home service was rolled out in
RadioShack stores in November 2000 in select markets. The agreement also
encompasses joint marketing and an Excite@Home promotional display in
RadioShack stores.
Blockbuster Inc. ("Blockbuster") - On February 27, 2001, RadioShack
announced an alliance with Blockbuster to introduce a RadioShack "store-
within-a-store" concept within Blockbuster locations. The size of the
RadioShack merchandising areas will vary depending on the size of the
participating Blockbuster store, but may range from 600-square foot sections
to smaller kiosks. A wide selection of RadioShack's most popular product
and service offerings will be featured; however, specific inventory for the
stores will be determined as the program moves forward. The initial test
phase calls for 130 select Blockbuster stores in four markets to contain
"store-within-a-store" fixtures by summer 2001. If the test phase proves
successful and the alliance goes forward, management believes that this
alliance could provide access to complementary customer demographics, as
well as expand RadioShack's current outlet base.
Compaq Computer Corporation ("Compaq") - Compaq is the sole supplier of
personal computers sold through RadioShack retail stores, participating
dealer/franchise outlets and on the Company's website.
DIRECTV, Inc. ("DIRECTV") - RadioShack sells direct-to-home satellite
systems and activates customers for DTH satellite programming, provided
exclusively by DIRECTV.
Microsoft Corporation ("Microsoft") - Microsoft's in-store display allows
RadioShack customers to view demonstrations of narrowband and broadband
technology and subscribe to MSN(TM)dial-up or broadband Internet access, as
well as view, on-line or in the stores, a broad range of existing and future
products, solutions and services based on Microsoft technologies. As of
December 31, 2000, substantially all of the company-owned stores and
approximately half of the dealer/franchise outlets had been fixtured for the
Microsoft Internet Center @ RadioShack via a "store-within-a-store" concept.
Sprint Communications Company and Sprint PCS ("Sprint") - Through its
telecommunications alliance with Sprint, RadioShack customers have access to
wireless PCS telephones and service, prepaid calling cards and long distance
telephone service, as well as residential telephones and related telephony
products, at the "Sprint Store at RadioShack."
Thomson Multimedia ("Thomson") - Thomson, which owns the RCA brand, supplies
RadioShack with various RCA-branded audio and video components such as
televisions, DTH satellite systems, VCRs, camcorders, digital video disc
(DVD) players, digital cameras, CD shelf systems and other digital
entertainment products. RCA products are sold through the RCA Digital
Entertainment Center at RadioShack via a "store-within-a-store," launched in
June 2000.
Verizon Wireless ("Verizon") - On August 1, 2000, RadioShack announced a
multi-year wireless telephone alliance with Verizon, the nation's largest
wireless communications service provider. This strategic alliance will
permit approximately 4,300 company-owned RadioShack stores to consolidate
cellular service offerings with a single service provider, thereby creating
training, marketing, inventory, repair and other supply-chain synergies.
Additionally, RadioShack and Verizon will create and implement a "store-
within-a-store" concept, which management anticipates launching in mid-2001.
In addition to RadioShack's existing relationship with Sprint PCS, the
Verizon alliance allows RadioShack to offer a second national wireless
carrier in a majority of the Company's retail stores. RadioShack continues
to offer cellular service in its other retail outlets through various
cellular carriers in areas not covered by Verizon.
RadioShack.com, LLC. ("RadioShack.com") In October 1999, RadioShack launched its
www.RadioShack.com website. As of December 31, 2000, there were over 22,000
products available through the website. An additional 10,000 products are
anticipated to be added in 2001. Online customers can purchase, return or
exchange products available on the RadioShack website at their local RadioShack.
Retail Support Operations.
RadioShack International Procurement Limited Partnership ("RSIP") - RSIP is
100% owned by RadioShack and its subsidiaries. RSIP serves the wide-ranging
international import/export, sourcing, evaluation, logistics and quality
control needs of the Company. RSIP also provides services for outside
customers, primarily InterTAN, Inc. ("InterTAN"). Most of RSIP's activity
for InterTAN involves sourcing of goods from manufacturers in Asia.
Consumer Electronics Manufacturing - RadioShack operates seven manufacturing
facilities in the United States and one overseas manufacturing operation in
China. These eight manufacturing facilities employed approximately 3,700
employees as of December 31, 2000. RadioShack manufactures a variety of
products, primarily sold through its retail outlets, including telephony,
antennas, wire and cable products and a wide variety of "hard to find" parts
and accessories for consumer electronic products.
RadioShack Customer Support - Using state-of-the-art telephone and data
networks, RadioShack Customer Support responds to more than six million
phone calls and emails annually. The responses include answers to technical
questions, customer service inquiries and direct sales requests related to
RadioShack's catalog operations, its website and "hard to find" products
offered through the RadioShack Unlimited program.
RadioShack Installation Services ("RSIS") - RSIS, through its 69 field
offices located in 30 states, designs, installs and maintains cabling
systems for the transmission of video, voice and data, primarily for home
use. RSIS provides these services to both RadioShack and other outside
parties. Services for RadioShack consist primarily of customer DTH
satellite system installations, but also include installations relating to
broadband Internet access.
RadioShack Service Centers - RadioShack maintains a service and support
network to service the consumer electronics and personal computer retail
industry in the U.S. At December 31, 2000, there were 56 RadioShack Service
Centers in the U.S. which repair name brand and private label products sold
from the Company's various sales channels. RadioShack is also a vendor-
authorized service provider for such leading manufacturers as Compaq, Sony,
Hitachi, Hewlett-Packard, RCA/Thomson and Nokia, among others and also
performs repairs for third-party service centers and extended service plan
providers under national service agreements.
RadioShack Technology Services - The Company's management information system
architecture is composed of a distributed, online network of computers that
links all stores, customer channels, delivery locations, service centers,
credit providers, distribution facilities and the corporate offices into a
fully integrated system. Each store has its own server to support the point
of sale system. This design also allows store management to track sales
and/or inventory at the product, customer or sales associate level. This
division provides the majority of programming and system analysis needs of
the Company.
Regional Distribution Centers - There are 10 distribution centers which ship
over one million cartons each month to the company-owned retail stores and
dealer/franchise outlets. Four of these distribution centers also serve as
fulfillment centers for on-line purchases made through www.RadioShack.com.
SEASONALITY
As is the case with other retail businesses, RadioShack's net sales and other
revenues are greater during the Christmas season 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. See
Note 21 of the "Notes to Consolidated Financial Statements" for quarterly data.
PATENTS AND TRADEMARKS
RadioShack owns or is licensed to use many trademarks and service marks related
to its business in the United States and in foreign countries. Radio Shack,
RadioShack, RadioShack.com, You've got questions. We've got answers, America's
Home Connectivity Store and Around The Corner and Around The Clock are some of
the marks most widely used by the Company. RadioShack believes that the
RadioShack name and marks are well recognized by consumers, and that the name
and marks are associated with high-quality service. RadioShack's manufactured
products are sold primarily under the RadioShack trademark. RadioShack also owns
various patents relating to electronic products designed and manufactured by
RadioShack. RadioShack believes that the loss of the RadioShack name and
RadioShack marks would be material to its business.
SUPPLIERS
RadioShack's marketing strategy depends, in part, upon its ability to offer both
private label and third party branded products, as well as third party services,
to its customers. RadioShack utilizes a large number of suppliers located in
various parts of the world to obtain its raw materials and private label
merchandise. Management does not expect a lack of availability of raw material
or any single private label product to have a material impact on its operations.
In terms of third party branded products sold by RadioShack, no single vendor
provided in excess of 10% of RadioShack's aggregate product purchases in 2000.
However, certain vendors, strategic allies and service providers are important
to RadioShack's business and the loss of or disruption in supply from one of
these could have a material adverse effect on RadioShack's sales. Additionally,
certain suppliers have, at times, limited their supply of products to
RadioShack.
BACKLOG ORDERS
RadioShack has no material backlog of orders for the products or services it
sells.
COMPETITION
Despite rising consumer demand for wireless communications products and
services, as well as a rapid consumer acceptance of new digital technology
products, the consumer electronics retail business still remains highly
competitive, driven by technology and product cycles, as well as the overall
state of the economy.
In the consumer electronics retailing business, competitive factors include
price, product availability, quality and features, consumer services,
manufacturing and distribution capability, brand reputation and the number of
competitors. RadioShack competes in the sale of its products and services with
several retail formats. Consumer electronics retailers include both Circuit City
and Best Buy/MusicLand. Department and specialty stores, such as Sears and The
Home Depot, compete on more of a select product scale. Sprint and Verizon
compete directly with RadioShack through their own retail and online presence.
Mass merchants such as Wal-Mart and Target, and other alternative channels of
distribution such as mail order and e-commerce, compete with RadioShack on a
more widespread basis. With respect to the products sold by RadioShack, numerous
domestic and foreign companies also manufacture similar products for other
retailers, which are sold under nationally recognized brand names or private
labels.
Management believes RadioShack has two primary factors differentiating itself
from the competition. First is its extensive physical retail presence of
approximately 7,200 conveniently located retail outlets nationwide.
Additionally, RadioShack's specially trained sales staff is capable of providing
enhanced product explanations, assisting customers with service activation,
where applicable, and assisting with the selection of appropriate products and
accessories.
Another differentiating factor is RadioShack's strategic alliances with
well-recognized companies. These alliances with such companies as Sprint,
Verizon, Thomson and Compaq, among others, augment the strong position that
RadioShack has historically maintained in its core product categories such as
batteries, communications equipment, telephony, antennas and parts and
accessories. Additionally, RadioShack is able to leverage name brand
recognition, marketing efforts and advertising campaigns with its allies and
also create cross-revenue opportunities for repair service income, residual
income, consumer acquisition fees and rebates.
Given the highly competitive nature of the consumer electronics retail business,
no assurance can be given that RadioShack will continue to compete successfully
with respect to each of the factors referenced above. Also, in light of the
ever-changing nature of the electronics retail industry, RadioShack would be
adversely affected if its competitors were able to offer their products at
significantly lower prices, introduce innovative or technologically superior
products not yet available to RadioShack, or if RadioShack was unable to obtain
certain products in a timely manner or for an extended period of time.
With respect to the expansion of the Internet, management does not believe
e-commerce retailers currently provide significant competition to RadioShack.
This, however, could change and become significant over time. Management further
believes that RadioShack is well positioned to meet the increasing competition
from Internet retailers with its www.RadioShack.com website, coupled with
RadioShack's extensive physical retail presence, service capabilities and wide
assortment of consumer electronics products.
EMPLOYEES
As of December 31, 2000, RadioShack had approximately 43,600 employees.
Approximately 10,000 temporary retail employees were hired for the holiday
selling season; however, less than 3,000 of these temporary employees remained
at year-end. RadioShack's employees are not covered by collective bargaining
agreements nor are they members of labor unions. RadioShack's management
considers its relationship with its employees to be good.
ITEM 2. PROPERTIES.
Information on RadioShack's properties is in Management's Discussion and
Analysis and the financial statements included in this Form 10-K and is
incorporated into this Item 2 by reference. The following items are discussed
further on the referenced pages:
Page
Retail Outlets............................... 12
Property, Plant and Equipment................ 36
Commitments and Contingent Liabilities....... 40
RadioShack leases, rather than owns, most of its retail and service center
facilities. RadioShack stores are located primarily in major shopping malls,
stand-alone buildings or shopping centers owned by other entities. RadioShack
owns most of the property on which its executive offices are located in downtown
Fort Worth, Texas, all distribution centers, except for two which are leased,
and most of its manufacturing facilities located throughout the United States.
The Company leases seven administrative offices and one manufacturing plant in
the Asia Pacific region. RSIS headquarters and field offices are also leased.
Existing distribution center and office facilities are reviewed periodically to
determine if RadioShack's space is adequate to meet its needs in the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS.
RadioShack has various claims, lawsuits, disputes with third parties,
investigations and pending actions involving allegations of negligence, product
defects, discrimination, infringement of intellectual property rights, tax
deficiencies, violations of permits or licenses, breach of contract, various
labor related claims and other matters against RadioShack and its subsidiaries
incident to the operation of its business. The liability, if any, associated
with these matters was not determinable at December 31, 2000. Although
occasional adverse settlements or resolutions may occur and negatively impact
earnings in the year of settlement, it is the opinion of management that their
ultimate resolution will not have a materially adverse effect on RadioShack's
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART III).
The following is a list of RadioShack Corporation's executive officers and their
ages, positions and length of service with the Company as of February 28, 2001.
Position Years with
Name (Date Elected to Current Position) Age Company
---- ---------------------------------- --- -------
>
Leonard H. Roberts Chairman of the Board and Chief Executive 52 7 (1)
Officer, RadioShack Corporation (May 1999)
David J. Edmondson President and Chief Operating Officer, 41 6 (2)
RadioShack Corporation (December 2000)
David Christopher Executive Vice President, RadioShack Corporation 58 34 (3)
(October 1998) and President, RadioShack
International Procurement (July 1990)
Evelyn V. Follit Senior Vice President (May 1999) and Chief 54 4 (4)
Information Officer (July 1998), RadioShack
Corporation
Mark C. Hill Senior Vice President (October 1998), 49 4 (5)
Corporate Secretary and General Counsel
(July 1997), RadioShack Corporation
Laura K. Moore Senior Vice President - Public Relations and 39 2 (6)
Corporate Communications, RadioShack Corporation
(October 2000)
Francesca M. Spinelli Senior Vice President - People, RadioShack 47 3 (7)
Corporation (December 1999)
Loren K. Jensen Acting Chief Financial Officer (January 2001) and 40 5 (8)
Vice President-Finance (February 2000), RadioShack
Corporation
There are no family relationships among the executive officers listed and there
are no arrangements or understandings pursuant to which any of them were
appointed as executive officers. All executive officers of RadioShack
Corporation are elected by the Board of Directors annually to serve for the
ensuing year, or until their successors are elected. All of the executive
officers listed above have served RadioShack in various capacities over the past
five years, except for Mr. Hill and Mmes. Follit, Moore and Spinelli.
(1) Mr. Roberts was elected Chairman of the Board and Chief Executive Officer
of RadioShack Corporation effective May 1999. Mr. Roberts was President of
RadioShack Corporation from December 1995 until December 2000 and President
of the RadioShack division from July 1993 until December 2000.
(2) Mr. Edmondson served as Senior Vice President, RadioShack Corporation and
Executive Vice President and Chief Operating Officer of the RadioShack
division from October 1998 to December 2000, when he was elected President
and Chief Operating Officer, RadioShack Corporation. Mr. Edmondson served
as Senior Vice President of Marketing and Advertising, RadioShack from
November 1995 to October 1998.
(3) Mr. Christopher served as Executive Vice President of the RadioShack
division from January 1992 until October 1998, when he was elected
Executive Vice President, RadioShack Corporation. Mr. Christopher has also
served as President of RadioShack International Procurement since July
1990.
(4) Ms. Follit served as Vice President and Chief Information Officer,
RadioShack Corporation from July 1998 to May 1999, when she was elected
Senior Vice President and Chief Information Officer, RadioShack
Corporation. Ms. Follit served as Vice President of Human Capital for
RadioShack Corporation from October 1997 to July 1998. Prior to joining
RadioShack Corporation, she was Vice President-Operations and Engineering
for A.C. Nielsen Corporation from October 1996 to March 1997. Ms. Follit
held various management positions at Dun & Bradstreet Corporation, ITT and
IBM from 1970 to October 1996.
(5) Mr. Hill served as Vice President, Corporate Secretary and General Counsel,
RadioShack Corporation from July 1997 to October 1998, when he was elected
Senior Vice President, RadioShack Corporation. He continues to serve as
Corporate Secretary and General Counsel of the Company. Prior to joining
RadioShack, Mr. Hill practiced law for 21 years and was a partner with the
law firm of Haynes and Boone LLP for the last 13 of those years.
(6) Ms. Moore served as Vice President - Corporate Communications and Public
Relations from November 1998 to October 2000, when she was elected Senior
Vice President - Public Relations and Corporate Communications. Prior to
joining RadioShack Corporation, she was employed by Zale Corporation where
she served as Vice President, Corporate Communications from 1995 to 1998.
(7) Ms. Spinelli served as Vice President - People, RadioShack Corporation
from July 1998 to December 1999, when she was elected Senior Vice President
- People, RadioShack Corporation. Prior to joining RadioShack Corporation
in 1998, Ms. Spinelli served as Corporate Vice President of Organizational
Development of Wal-Mart Stores, Inc. where she was employed approximately 5
years.
(8) Mr. Jensen served as Vice President and Treasurer, RadioShack Corporation
from May 1995 to February 2000, when he was elected Vice President -
Finance. In January 2001, he was appointed Acting Chief Financial Officer
upon the death of Dwain H. Hughes who served as Senior Vice President
and Chief Financial Officer from January 1995 to January 2001. Prior
to joining RadioShack Corporation in 1995, Mr. Jensen served as Senior Vice
President of Texas Commerce Bank where he was employed for almost 10 years.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
PRICE RANGE OF COMMON STOCK (Restated for two-for-one stock split payable in
June 1999) The trading symbol on the New York Stock Exchange for the Company's
common stock was changed from "TAN" to "RSH" effective May 31, 2000.
RadioShack's 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 RadioShack's common stock, as reported in the composite transactions
quotations of consolidated trading for issues on the New York Stock Exchange,
for each quarter of the two years ended December 31, 2000.
Dividends
Quarter Ended High Low Declared
- ------------- -------- -------- --------
December 31, 2000 $ 72.94 $ 39.34 $ 0.055
September 30, 2000 69.75 45.56 0.055
June 30, 2000 59.50 38.25 0.055
March 31, 2000 57.25 35.06 0.055
December 31, 1999 $ 79.50 $ 41.38 $ 0.055
September 30, 1999 56.75 37.38 0.050
June 30, 1999 51.00 30.09 0.050
March 31, 1999 32.06 20.59 0.050
HOLDERS OF RECORD
At March 21, 2001 there were 31,087 holders of record of RadioShack's common
stock.
DIVIDENDS
The Board of Directors reviews RadioShack's dividend policy annually. On October
25, 1999, RadioShack announced a 10% increase in the quarterly cash dividend
from $0.050 per share to $0.055 per share for shareholders of record on January
3, 2000.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA (UNAUDITED)
RADIOSHACK CORPORATION AND SUBSIDIARIES
Year Ended December 31,
(In millions, except per share ------------------------------------------------------------
amounts and ratios) 2000 1999 1998(1) 1997 1996
====================================================================================================
Operations
Net sales and operating revenues $4,794.7 $4,126.2 $4,787.9 $5,372.2 $6,285.5
======== ======== ======== ======== ========
Income (loss) before income taxes $ 593.6 $ 480.5 $ 99.7 $ 303.9 $ (145.6)
Provision (benefit) for income taxes 225.6 182.6 38.4 117.0 (54.0)
-------- -------- -------- -------- --------
Net income (loss) $ 368.0 $ 297.9 $ 61.3 $ 186.9 $ (91.6)
======== ======== ======== ======== ========
Net income (loss) available per
common share:
Basic $ 1.94 $ 1.51 $ 0.28 $ 0.84 $ (0.41)
======== ======== ======== ======== ========
Diluted $ 1.84 $ 1.43 $ 0.27 $ 0.82 $ (0.41)
======== ======== ======== ======== ========
Shares used in computing earnings per
common share:
Basic 187.3 194.2 201.2 214.4 239.3
======== ======== ======== ======== ========
Diluted 197.7 205.0 211.4 224.5 239.3
======== ======== ======== ======== ========
Dividends declared per common share $ 0.220 $ 0.205 $ 0.200 $ 0.200 $ 0.200
======== ======== ======== ======== ========
Ratio of earnings to fixed charges(2) 5.69 5.51 1.84 3.52 N/A
SELECTED FINANCIAL DATA (UNAUDITED) Continued
RADIOSHACK CORPORATION AND SUBSIDIARIES
Year Ended December 31,
(In millions, except per ---------------------------------------------------------------------
share amounts and ratios) 2000 1999 1998(1) 1997 1996
- ---------------------------------------------------------------------------------------------------------
Financial Position
Inventories $ 1,164.3 $ 861.4 $ 912.1 $ 1,205.2 $ 1,420.5
Total assets $ 2,576.5 $ 2,142.0 $ 1,993.6 $ 2,317.5 $ 2,583.4
Working capital $ 585.8 $ 478.1 $ 419.1 $ 739.1 $ 746.3
Current ratio 1.48 to 1 1.52 to 1 1.48 to 1 1.76 to 1 1.63 to 1
Capital structure:
Current debt (3) $ 478.6 $ 188.9 $ 233.2 $ 299.5 $ 258.0
Long-term debt (3) $ 302.9 $ 319.4 $ 235.1 $ 236.1 $ 104.3
Total debt $ 781.5 $ 508.3 $ 468.3 $ 535.6 $ 362.3
Total debt, net of cash and
cash equivalents $ 650.8 $ 343.7 $ 403.8 $ 429.7 $ 240.8
Stockholders' equity $ 880.3 $ 830.7 $ 848.2 $ 1,058.6 $ 1,264.8
Total capitalization $ 1,661.8 $ 1,339.0 $ 1,316.5 $ 1,594.2 $ 1,627.1
Long-term debt as a % of
total capitalization 18.2% 23.9% 17.9% 14.8% 6.4%
Total debt as a % of total
capitalization (4) 47.0% 38.0% 35.6% 33.6% 22.3%
Stockholders' equity per
common share $ 4.43 $ 4.07 $ 4.13 $ 4.98 $ 5.37
Financial Ratios
Return on average
stockholders' equity 43.0% 35.5%(5) 6.4%(6) 16.1% N/A(7)
Percent of sales:
Income (loss) before income taxes 12.4% 11.7% 2.1% 5.7% (2.3)%
Net income (loss) 7.7% 7.2% 1.3% 3.5% (1.5)%
This table should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Notes thereto.
(1) Includes operations of Computer City, Inc. for only eight months, due to
the sale to CompUSA Inc. on August 31, 1998.
(2) Earnings used in computing the ratio of earnings to fixed charges consist
of pre-tax earnings and fixed charges. Fixed charges are defined as
interest expense related to debt, amortization expense related to deferred
financing costs and a portion of rental charges. Pre-tax earnings were not
sufficient to cover fixed charges during 1996 by approximately $145.6
million. Excluding $230.3 million (net of taxes) in restructuring and
other charges, the 1996 ratio of earnings to fixed charges would have been
2.57.
(3) Includes current portion of capital leases and TESOP indebtedness.
(4) Total debt includes capital leases and TESOP indebtedness. Capitalization
is defined as total debt plus total stockholders' equity.
(5) Excluding a $5.9 million (net of taxes) provision related to restricted
stock awards in 1999, return on average stockholders' equity would have
been 33.1%.
(6) Excluding $183.9 million (net of taxes) for provisions related to
restricted stock awards and loss on sale of Computer City, as well as
Computer City operating losses and other business writedowns in 1998,
return on average stockholders' equity would have been 23.6%.
(7) Excluding $230.3 million (net of taxes) in restructuring and other charges
in 1996, return on average stockholders' equity would have been 8.9%.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ("MD&A").
FACTORS THAT MAY AFFECT FUTURE RESULTS
With the exception of historical information, the matters discussed in MD&A
contain forward-looking statements that involve various risks and uncertainties
and are indicated by words such as "anticipates," "expects," "believes," "will,"
"should," "could," and similar words and phrases. Factors that could cause
RadioShack Corporation's ("RadioShack" or the "Company") actual results to
differ materially from management's projections, forecasts, estimates and
expectations include, but are not limited to, the following:
o changes in the amount and degree of promotional intensity exerted by current
competitors and potential new competition from both retail stores and
alternative methods or channels of distribution, such as e-commerce,
telephone shopping services and mail order;
o the inability to successfully implement and execute RadioShack's strategic
initiatives, including the development of its new strategic business units
("SBUs") and emerging sales channels, as well as new alliances which may be
formed with other retailers, such as Blockbuster Inc. ("Blockbuster") and
third party service providers;
o changes in general U.S. or regional U.S. economic conditions including, but
not limited to, consumer credit availability, interest rates, inflation,
personal discretionary spending levels and consumer sentiment and confidence
about the economy in general;
o the inability to successfully market and execute the www.RadioShack.com(SM)
website and its coordination with RadioShack retail outlets and the
Company's other existing and/or emerging sales channels;
o the presence or absence of new services or products and product features in
the merchandise categories RadioShack sells and unexpected changes in
RadioShack's actual merchandise sales mix;
o the inability to maintain profitable contracts or execute business plans
with service providers relating to cellular and PCS telephones, direct-to-
home ("DTH") satellite programming, Internet access and high-speed
bandwidth;
o the inability to collect the level of anticipated residual income, consumer
acquisition fees and rebates for products and third party services offered
by RadioShack;
o the inability to successfully implement and execute RadioShack's strategic
alliances with Microsoft Corporation ("Microsoft"), Cellco Partnership (dba
Verizon Wireless), At Home Corporation (Excite@Home) and/or Blockbuster;
o the inability of the Company to fully recover investments made in the
securities of other companies;
o lack of availability or access to sources of supply inventory (as a large
importer of consumer electronic products from Asia, unfavorable trade
imbalances could negatively affect RadioShack);
o the inability to retain and grow an effective management team in a dynamic
environment or changes in the cost or availability of a suitable work force
to manage and support RadioShack's service-driven operating strategies;
o the imposition of new restrictions or regulations regarding the sale of
products and/or services RadioShack sells or changes in tax rules and
regulations applicable to RadioShack;
o the adoption rate and market demand for high-speed Internet and other
Internet-related services; or
o the occurrence of severe weather events which prohibit consumers from
travelling to the Company's retail locations, especially during the peak
Christmas season.
Both the United States retail industry and the specialty retail industry in
particular are dynamic by nature and have undergone significant changes over the
past several years. RadioShack's ability to anticipate and successfully respond
to continuing challenges is key to achieving its expectations.
STOCK SPLIT
On May 25, 1999, RadioShack's Board of Directors declared a two-for-one split of
RadioShack common stock, payable on June 21, 1999. All references to the number
of shares (other than common stock issued or outstanding for 1998 on the
accompanying Consolidated Statement of Stockholders' Equity), per share amounts,
cash dividends and any other reference to shares, unless otherwise noted, have
been adjusted to reflect the split on a retroactive basis. Previously awarded
stock options, restricted stock awards and all other agreements payable in
RadioShack's common stock have also been adjusted or amended to reflect the
split.
RETAIL OUTLETS
Average December 31,
Store Size -----------------------------------
(Sq. Ft.) 2000 1999 1998
- -------------------------------------------------------------------------------
Company-Owned 2,300 5,109 5,087 5,039
Dealer/Franchise N/A 2,090 2,099 1,991
------- ------- -------
7,199 7,186 7,030
======= ======= =======
Space Owned and Leased
Approximate Square Footage
at December 31,
---------------------------------------------------------------
2000 1999
----------------------------- -----------------------------
(In thousands) Owned Leased Total Owned Leased Total
- ----------------------------------------------------------------------------------------
Retail
RadioShack -- 12,113 12,113 -- 11,990 11,990
Other 102 -- 102 162 -- 162
------ ------ ------ ------ ------ ------
102 12,113 12,215 162 11,990 12,152
Support Operations
Manufacturing 502 201 703 505 201 706
Distribution centers
and office space 3,659 1,532 5,191 3,496 1,512 5,008
------ ------ ------ ------ ------ ------
4,263 13,846 18,109 4,163 13,703 17,866
====== ====== ====== ====== ====== ======
RESULTS OF OPERATIONS
2000 COMPARED WITH 1999
- -----------------------
NET SALES AND OPERATING REVENUES
RadioShack's overall sales increased 16.2% to $4,794.7 million in 2000 from
$4,126.2 million in 1999, due primarily to a 10.9% comparable company-owned
store sales gain and the opening of 22 new stores, net of store closures.
Additionally, sales to RadioShack's dealer/franchise outlets experienced strong
growth throughout the year. RadioShack's comparable store sales increase was due
primarily to increased sales of communications products and sales of audio and
video equipment, which includes DTH satellite systems and services. Despite
weakening in the retail sector, RadioShack expects a positive store sales gain
for 2001. The following table summarizes RadioShack's retail sales breakdown by
category as a percent of total RadioShack retail sales (excluding outside sales
from retail support operations):
Percent of RadioShack Retail Sales
Year Ended December 31,
----------------------------------------------
2000 1999 1998 1997 1996
------ ------ ------ ------ ------
Communications 27.9% 29.3% 28.5% 27.5% 24.4%
Electronic parts, accessories
and specialty equipment 24.8 27.2 30.0 31.5 32.3
Audio and video 22.5 17.1 15.5 16.8 18.0
Personal electronics and seasonal 8.6 9.4 10.4 11.6 12.4
Personal computers and peripherals 8.7 8.7 9.1 9.4 10.4
Services and other 7.5 8.3 6.5 3.2 2.5
------ ------ ------ ------ ------
100.0% 100.0% 100.0% 100.0% 100.0%
====== ====== ====== ====== ======
The communications category includes wireless communications such as cellular
and PCS telephones, as well as residential telephones, answering machines,
pagers and other related telephony products. The communications category
increased 10% in dollars, but decreased as a percentage of total retail sales to
27.9% in 2000, from 29.3% in 1999. This category decrease was due to the audio
and video category becoming a larger percentage of total retail sales. Unit
sales of PCS and cellular telephones increased 23% over the prior year to 4.1
million units. Unit and dollar sales of both PCS and cellular telephones are
expected to continue to increase in 2001.
Sales of electronic parts, accessories and specialty equipment decreased as a
percentage of total retail sales in 2000 when compared to 1999, despite a 5%
sales gain. The category was 24.8% of RadioShack's retail sales mix in 2000,
down from 27.2% in 1999, primarily due to the audio and video category becoming
a higher percent of the product mix in 2000. This category is expected to
increase in sales, but decrease as a percentage of RadioShack's retail sales mix
in 2001.
Sales in the audio and video category increased approximately 47% in 2000, when
compared to 1999, due primarily to the June 2000 launch of The RCA Digital
Entertainment Center at RadioShack and a significant increase in DTH satellite
system and services sales. In addition, the audio and video category increased
from 17.1% of the retail sales mix in 1999 to 22.5% in 2000. This category
includes televisions, VCRs, camcorders, digital video disc (DVD) players,
digital cameras, CD shelf systems and other digital entertainment products, in
addition to DTH satellite systems and services. Management believes the audio
and video category will continue to increase in dollar sales and as a percent of
RadioShack's total retail sales in 2001.
Personal electronics and seasonal products decreased to 8.6% of RadioShack's
retail sales mix in 2000 from 9.4% in 1999, due primarily to an overall shift in
the product mix described above. This category experienced a 5% sales increase
over the prior year as a result of increased sales of giftable items, electronic
gadgets and remote control cars.
Sales of personal computers and peripherals were 8.7% of RadioShack's retail
sales in both 2000 and 1999. This category had a 12% unit sales gain in CPUs and
had a 15% dollar sales gain for the year. The average selling price of CPUs
decreased 6%, in line with the general market decline. The average selling price
of CPUs and monitors, for the industry in general as well as for RadioShack, is
expected to decrease slightly in 2001. Despite this downward trend, management
believes that the higher unit sales volumes of personal computers and
peripherals, as well as anticipated increased sales of handheld computers and
Internet appliances, will contribute to increased sales of this category. In
addition, increases in sales in the personal computer and peripherals category
should strengthen sales of higher gross margin products and services, such as
accessories and extended service contracts.
Sales in the services and other category, which includes residual income, as
well as income from prepaid wireless airtime, repair services and extended
service contracts, increased approximately 7% in dollars, but decreased as a
percent of RadioShack retail sales to 7.5% in 2000 from 8.3% in 1999. The
increase in sales was primarily due to an increase in residual income received
from RadioShack's third party providers of wireless communications, offset by a
decrease in sales of prepaid wireless airtime. Sales in the services and other
category also decreased due to the reclassification of RadioShack.com sales from
this category to the appropriate product categories in 2000. Residual income is
also earned on sales of Sprint long distance and paging services. Residual
income varies by third party service provider, but is typically a portion of the
continuing service revenue paid by the consumer to the service provider
throughout the ensuing months and/or years of that consumer's subscription. In
2000, RadioShack earned approximately $104.0 million of residual income,
compared to $63.0 million in 1999. At year end, the Company earned residual
income on approximately 6.1 million service provider subscribers. Residual
income is expected to continue to increase in 2001; however, increases are
dependent upon such factors as continued usage of certain services and stability
of average revenue per subscriber, among other factors.
Think Growth Initiative: In December 2000, RadioShack announced its new Think
Growth initiative. This initiative is designed to generate incremental sales and
profit opportunities beyond the Company's existing category and customer base.
Three Strategic Business Units were formed to better align the organization with
its business strategy of demystifying technology for the mass market and,
ultimately, to become America's Connectivity Solution. The three SBUs formed
were The Connecting People SBU, The Connecting Places SBU and The Connecting
Things SBU.
The Connecting Things SBU will focus on RadioShack's core product offerings of
parts and accessories, seasonal products including toys, personal electronics
and batteries, in addition to parts and components offered to commercial
customers. In light of increased sales of giftable items and an increased
business to business customer focus through RadioShack's online presence and
planned direct marketing efforts, along with the advent of digital convergence
which requires additional accessories, management anticipates enhanced sales
growth for these highly profitable products.
The Connecting People SBU will concentrate on communications products and third
party services which not only include current offerings, but also capture such
emerging technologies as combining wireless products and the Internet, as well
as high-speed video phones. The various products included in this SBU are
telephone and telephone accessories, wireless phones and accessories, pagers and
other related services, as well as radio communications devices. The Company's
strategic allies for the Connecting People SBU include both Sprint and Verizon.
The Connecting Places SBU's focus will include personal computers, Internet
appliances, hand-held computer devices and related products, audio and video
products and services, including DTH satellite systems and services and dial-up
and broadband Internet access, among others. Many of the products and services
in this SBU are aimed at providing customer solutions for connecting to and
utilizing high-speed bandwidth. Bandwidth refers to volume at which data can be
transmitted and, depending on the volume delivered, may enable consumers to have
such capabilities as instant and/or high-speed Internet access, movies on demand
and multiple phone/fax connections through a single phone or cable line. This
SBU utilizes the Company's strategic alliances with Compaq, DIRECTV,
Excite@Home, Microsoft and Thomson to offer convenience, service and product
specialties.
Each SBU is designed to find more efficient and convenient ways to serve
RadioShack sales channels. In addition to its 5,100 company-owned stores and
2,100 dealer/franchise outlets, RadioShack's existing and emerging sales
channels include the www.RadioShack.com website and catalog operations, as well
as a sophisticated outbound and inbound telephone call center.
In terms of its online presence, the Company's clicks and mortar strategy is
designed to not only draw repeat traffic to its website, but also to
RadioShack's retail stores. RadioShack.com derives a significant portion of its
revenue from sales to businesses, government agencies and educational
institutions. These commercial customers may order product via the web, phone,
mail or fax with no minimum order required. In 2001, RadioShack plans to further
enhance its sales to commercial customers via direct mail and telemarketing
efforts.
On February 27, 2001, RadioShack announced an alliance with Blockbuster, to
introduce a RadioShack "store-within-a-store" concept within Blockbuster
locations. The size of the RadioShack merchandising areas will vary depending on
the size of the participating Blockbuster store, but may range from 600-square
foot sections to smaller kiosks. A wide selection of RadioShack's most popular
product and service offerings will be featured; however, specific inventory for
the stores will be determined as the program moves forward. The initial test
phase calls for 130 select Blockbuster stores in four markets to contain
"store-within-a-store" fixtures by summer 2001. If the test phase proves
successful and the alliance goes forward, management believes that this alliance
could provide access to complementary demographics, as well as expand
RadioShack's current outlet base.
GROSS PROFIT
Gross profit for RadioShack was $2,369.6 million or 49.4% of net sales and
operating revenues, compared with $2,083.5 million or 50.5% of net sales and
operating revenues in 1999. This gross profit percentage decrease was partially
due to a shift within RadioShack's product offerings to increased sales of third
party branded audio and video products, primarily DTH satellite systems, which
have a lower gross margin than RadioShack overall. To a lesser degree, the gross
profit percentage decrease was due to a decrease in the wireless communications
gross margin. The decrease was further impacted by increased sales to
dealer/franchise stores, which have a lower gross margin percentage than sales
to retail customers. This decrease was partially offset by an increase in
residual income, which has 100% gross margin, as well as by an increase in the
gross profit percentages for both the personal computer and peripherals category
and the parts, accessories and specialty equipment category. Management
anticipates that gross profit as a percentage of net sales and operating
revenues could continue to decrease during 2001, when compared to 2000. An
expected increase in residual income should partially offset this decrease.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The table below summarizes the breakdown of various components of RadioShack's
consolidated selling, general and administrative ("SG&A") expense and its
related percentage of total sales and operating revenues.
Year Ended December 31,
---------------------------------------------------------------------
2000 1999 1998
--------------------- ---------------------- ----------------------
% of % of % of
Sales & Sales & Sales &
(In millions) Dollars Revenues Dollars Revenues Dollars(2) Revenues
- -------------------------------------------------- ---------------------- ----------------------
Payroll and commissions $ 836.2 17.4% $ 741.8(1) 18.0% $ 734.1(1) 15.3%
Rent 215.2 4.5 205.5 5.0 217.4 4.5
Advertising 227.1 4.7 199.9 4.8 208.7 4.4
Other taxes 98.6 2.1 91.2 2.2 96.1 2.0
Utilities and telephone 69.4 1.4 62.2 1.5 71.5 1.5
Insurance 56.4 1.2 47.6 1.2 50.6 1.1
Credit card fees 31.7 0.7 27.5 0.7 38.6 0.8
Stock purchase
and savings plans 22.8 0.5 21.0 0.5 20.4 0.4
Other 76.2 1.6 89.7 2.1 142.9 3.0
--------------------- ---------------------- ----------------------
$1,633.6 34.1% $1,486.4 36.0% $1,580.3 33.0%
===================== ====================== ======================
(1) Excludes compensation expense for restricted stock awards of $9.6 million
and $82.6 million relating to 1999 and 1998, respectively.
(2) Includes expenses related to Computer City, Inc. ("Computer City") before
its sale to CompUSA Inc.("CompUSA") on August 31, 1998.
RadioShack's SG&A expense increased 9.9% in dollars, but decreased as a percent
of net sales and operating revenues to 34.1% for the year ended December 31,
2000 from 36.0% for the year ended December 31, 1999. This 1.9 percentage point
decrease in the SG&A percentage in 2000 was due primarily to the favorable
effect of increased sales at RadioShack during 2000.
Payroll expense for RadioShack increased by $94.4 million to $836.2 million in
2000, but decreased as a percent of net sales and operating revenues to 17.4% in
2000, compared to 18.0% in 1999. This dollar increase was due primarily to
RadioShack retail store expansions and increases in personnel, commissions,
bonuses and other incentives resulting from RadioShack's strong comparable store
sales and profits.
Rent expense for the Company increased in dollars by $9.7 million to $215.2
million in 2000, but decreased as a percent of RadioShack's net sales and
operating revenues to 4.5% in 2000 from 5.0% in 1999. The rent increase was due
primarily to 22 new RadioShack store openings, net of store closures, throughout
the year, as well as lease renewals at slightly higher rates. The 0.5 percentage
point decrease was due primarily to the favorable effect of increased comparable
RadioShack stores sales on the expense rate structure.
Advertising expense for RadioShack increased $27.2 million in dollars, but
decreased as a percentage of RadioShack's net sales and operating revenues to
$227.1 million and 4.7% of sales in 2000, compared to $199.9 million and 4.8% of
sales in 1999. The dollar increase was due primarily to a shift in advertising
from print to television advertising. In addition, the decrease as a percentage
of sales and operating revenues reflects the sales leverage gained from
RadioShack's sales increase.
In 2001, RadioShack's SG&A expense is expected to increase in dollars due to
additional sales volume and normal inflation, but decrease as a percentage of
net sales and operating revenues. This decreased percentage of net sales and
operating revenue is expected as a result of increased sales leverage gained
from anticipated comparable store sales increases and, to a lesser extent, an
increase in new store openings.
NET INTEREST EXPENSE
Interest expense, net of interest income, was $36.1 million for 2000 versus
$16.8 million for 1999.
Interest expense increased to $53.9 million in 2000, from $37.2 million in 1999.
This increase was primarily the result of an increase in RadioShack's average
debt outstanding throughout 2000, due to share repurchases and the Company's
investment in inventory, as well as to an increase in short-term interest rates
when compared to the prior year. Interest income decreased almost 13% to $17.8
million in 2000 from $20.4 million in 1999, due primarily to repayment of
various notes receivable associated with the Company's liquidation of other
retail formats.
Interest expense, net of interest income, is expected to decrease slightly
during 2001, primarily due to an anticipated decrease in short-term debt levels.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of 38.0% for both
2000 and 1999.
1999 COMPARED WITH 1998
- -----------------------
NET SALES AND OPERATING REVENUES
Consolidated net sales and operating revenues decreased 13.8% from $4,787.9
million in 1998 to $4,126.2 million in 1999; this decrease was attributable
primarily to the sale of Computer City to CompUSA on August 31, 1998.
Consolidated comparable store sales for 1999 are not meaningful, due to this
sale. Prior to 1999, the Company operated two segments, RadioShack and Computer
City.
RadioShack Segment
- ------------------
Sales for the RadioShack segment in 1999 increased 14.9% from $3,591.2 million
in 1998 to $4,126.2 million in 1999; this increase was due primarily to a 12.2%
comparable company-owned store sales gain and the opening of 48 new stores, net
of store closures. RadioShack's comparable store sales increase was driven
primarily by increased sales of communications products, prepaid wireless
airtime and sales of audio and video equipment, including DTH satellite systems
and services. The communications category, the largest product category of
RadioShack's retail sales mix in 1999, increased as a percentage of total retail
sales in 1999, primarily due to a 50% increase in unit sales of PCS and cellular
telephones. Sales of electronic parts, accessories and specialty equipment
decreased 2.8 percentage points of total retail sales in 1999, despite a 4%
sales gain. Personal electronics and seasonal products decreased 1.0 percentage
point of RadioShack's retail sales mix in 1999. Both of these product categories
decreased as a percent of total retail sales, due primarily to the
communications category and the services and other category becoming a higher
percent of the product mix in 1999. The audio and video category experienced a
sales increase of approximately 27% during 1999, due primarily to a strong
increase in sales of DTH satellite systems and services. Sales of personal
computers and peripherals were 8.7% of RadioShack's retail sales in 1999,
compared to 9.1% in 1998, despite a large unit gain and a 10% sales gain for the
year. The average selling price of CPUs decreased 16% in 1999, in line with the
general market decline. Sales in the services and other category increased in
1999 in dollars and as a percent of RadioShack retail sales, due to an increase
in sales of prepaid wireless airtime, as well as to an increase in residual
income received from RadioShack's third party providers of communications and
DTH satellite programming services. In 1999, RadioShack earned approximately
$63.0 million of residual income, compared to $34.2 million in 1998.
Computer City Segment
- ---------------------
Computer City was sold to CompUSA effective August 31, 1998.
GROSS PROFIT
Gross profit for RadioShack Corporation in 1999 was $2,083.5 million or 50.5% of
net sales and operating revenues, compared with $2,004.4 million or 41.9% of net
sales and operating revenues in 1998. This increase in gross profit as a
percentage of net sales and operating revenues was primarily the result of
RadioShack retail sales constituting all of the Company's consolidated net sales
and operating revenues in 1999, when compared to 1998. Computer City was sold to
CompUSA on August 31, 1998. Computer City had an inherently lower gross margin
percentage than consolidated RadioShack Corporation.
The RadioShack segment's gross profit increased 11.4% in dollars for 1999 versus
1998, but decreased as a percentage of RadioShack's total sales by 1.6
percentage points for the same period. This percentage decrease was due
primarily to mix shifts within RadioShack's product offerings as sales of lower
margin categories increased as a portion of the overall sales volume. The
decrease in gross margin was partially offset by an increase in residual income,
which has 100% gross margin.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
RadioShack Corporation's 1999 SG&A expense decreased slightly in dollars, but
increased as a percent of net sales and operating revenues to 36.0% versus 33.0%
in 1998. The higher SG&A percentage in 1999 was due to RadioShack becoming the
only operating unit in 1999 (see "Gross Profit" above). The RadioShack segment
operated at a higher relative SG&A expense level than the Company as whole in
1998. Excluding Computer City and other closed units, the Company's SG&A expense
as a percentage of sales would have approximated 37.7% in 1998.
Despite the sale of Computer City in 1998, payroll expense for the Company
increased in dollars and as a percent of net sales and operating revenues to
18.0% in 1999 from 15.3% in 1998. This increase was due primarily to RadioShack
retail store expansions, changes in compensation plans and increases in
personnel, commissions, bonuses and other incentives resulting from RadioShack's
strong comparable store sales and profits. Rent expense for RadioShack
Corporation decreased in dollars in comparison with 1998, but increased as a
percent of net sales and operating revenues to 5.0% in 1999 from 4.5% in 1998.
This increase was due to the sale of Computer City, which had lower rent expense
as a percentage of sales than the Company as a whole. Rent expense for the
RadioShack segment increased in dollars in 1999, but decreased as a percent of
sales. Advertising expense for consolidated RadioShack Corporation decreased in
dollars, but increased as a percent of net sales and operating revenues in 1999,
when compared to 1998, due to the sale of Computer City. There was also a dollar
decrease in advertising expense for the RadioShack segment in 1999 from 1998.
The dollar decrease resulted from an increase in marketing development funds
received from third party service providers.
RESTRICTED STOCK AWARDS
On February 1, 1998, RadioShack Corporation granted approximately 649,500
restricted stock awards consisting of 500 shares each to 1,299 RadioShack store
managers not included in the February 1, 1997 restricted stock grant. The
February 1998 restricted stock awards had a weighted average fair market value
of $19.61 per share when granted. This restricted stock grant was to vest on
February 2, 2003, if managers receiving the grants were employed by the Company
at a store manager or higher position, at that time. However, the grants
provided that the restricted shares would vest early if RadioShack common stock
closed at $29.0625 or more for any 20 consecutive trading days beginning
February 1, 2000. At December 31, 1999, it was probable that the 348,000 shares
that remained outstanding under this grant would vest under the early vesting
provisions. The resulting charge to compensation expense of $14.7 million,
including related payroll taxes, was recorded in the fourth quarter of 1999.
Vesting of these restricted stock awards occurred on February 29, 2000, when
RadioShack's common stock closed above the targeted amount for the twentieth
consecutive trading day. Vesting resulted in the issuance of 336,000 shares of
RadioShack's common stock at a fair market value of $37.53 per share.
In the fourth quarter of 1998, RadioShack Corporation recorded estimated
compensation expense of $82.6 million related to the early vesting of restricted
stock awards that had been granted to 4,907 store managers on February 1, 1997.
These awards vested on March 1, 1999 and the actual price of the stock and the
number of shares vested differed from the estimated accrual at December 31,
1998. The amount of this difference, $5.1 million, was recorded as a credit to
expense in the first quarter of 1999.
NET INTEREST EXPENSE
Interest expense, net of interest income, was $16.8 million for 1999 versus
$34.6 million for 1998. Interest expense decreased 18.1% in 1999, due to
RadioShack no longer having to incur interest expense on Computer City capital
lease obligations, as well as to a corresponding decrease in the Company's
average debt outstanding during 1999.
Interest income increased almost 90% to $20.4 million in 1999 from $10.8 million
in 1998, due primarily to interest from the $136.0 million CompUSA note
receivable which was outstanding for a full year.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of 38.0% for 1999
compared with 38.5% for 1998. The decrease in 1999 resulted primarily from
improved utilization of foreign tax credits and implementation of certain state
income tax initiatives.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"),
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. RadioShack uses derivatives only in limited circumstances.
The Company adopted SFAS 133 effective January 1, 2001 and the impact was not
material.
CASH FLOW AND LIQUIDITY
Year Ended December 31,
--------------------------------
(In millions) 2000 1999 1998
-------- -------- --------
Operating activities $ 116.5 $ 561.6 $ 414.8
Investing activities (34.0) (121.0) (93.0)
Financing activities (116.4) (340.5) (363.2)
In 2000, cash flow provided by operating activities was $116.5 million, compared
to $561.6 million and $414.8 million in 1999 and 1998, respectively. Cash flow
from net income, adjusted for non-cash items, increased $63.4 million from 1999
to 2000. This increase was primarily due to increased operating profit at
RadioShack. The decrease in cash flow from operating activities was the result
of a $508.5 million use of cash by working capital components. Inventory
increased $302.9 million over the prior year period, reflecting an increased
level of inventory required by higher sales levels and increased inventory
levels of wireless phones, DTH satellite systems, and landline phones.
Additionally, an increase of $149.0 million in accounts receivable consisted
primarily of amounts due from RadioShack's strategic allies in the form of
consumer acquisition fees, marketing support and rebate programs.
Investing activities used $34.0 million in cash in 2000, compared to $121.0
million and $93.0 million used in 1999 and 1998, respectively. Capital
expenditures approximated $119.6 million in 2000, compared to $102.4 million in
1999 and $131.5 million in 1998. Capital expenditures for 2000 consisted
primarily of RadioShack store expansions and remodels, costs related to a new
distribution facility, upgrades of information systems, and the purchase of
vehicles for the RadioShack Installation Services division. Capital expenditures
for 1999 and 1998 were used primarily for retail expansion and upgrading
information systems, including Year 2000 (Y2K) initiatives. Management
anticipates that the capital expenditure requirement for 2001 will approximate
$130.0 million to $135.0 million. These expenditures will primarily relate to
RadioShack future store expansions and remodels, updated information systems
and, to a lesser extent, upgrades relating to RadioShack's distribution and
manufacturing facilities. On January 4, 2000, RadioShack received $100.0 million
in cash from Microsoft, which related to Microsoft's investment in
RadioShack.com, LLC, a limited liability company formed by RadioShack and
Microsoft for the purpose of marketing and selling electronics products on the
Internet. In June 2000, RadioShack made a $30.0 million dollar investment in
Digital:Convergence Corporation, an Internet technology company. In addition,
the Company generated $17.9 million in cash during 2000 from the sale of equity
securities.
Cash used by financing activities was $116.4 million in 2000, compared to $340.5
million and $363.2 million in 1999 and 1998, respectively. Purchases of treasury
stock required cash of $400.6 million, $422.2 million and $337.4 million in
2000, 1999 and 1998, respectively. (See "Capital Structure and Financial
Condition" below for further information on RadioShack's stock repurchase
programs.) The 2000, 1999 and 1998 stock repurchases were partially funded by
$66.3 million, $81.5 million and $57.8 million, respectively, received from the
sale of treasury stock to employee stock plans and from stock option exercises.
Dividends paid, net of tax, in 2000, 1999 and 1998 amounted to $44.7 million,
$42.5 million and $44.8 million, respectively. The increase in dividends paid in
2000 resulted from an increase in the per share dividend. Medium-term notes
issued by RadioShack provided approximately $101.6 million and $45.7 million in
cash in 1999 and 1998, respectively, the majority of which was used to repay
current maturities of long-term debt. In 2000, the increase in short-term debt
was used primarily to fund increases in accounts receivable, share repurchases
and additional inventory. In 1999, RadioShack used excess cash flow to decrease
its short-term debt from the prior year by $42.3 million.
The current credit ratings for RadioShack, which are generally considered
investment grade, follow:
Standard
Category Moody's and Poor's Fitch
-------- ------- ---------- -----
Medium-Term Notes Baa1 A- A
ESOP Senior Notes Baa1 A- A
Commercial Paper P-2 A-2 F1
CAPITAL STRUCTURE AND FINANCIAL CONDITION
RadioShack's available borrowing facilities as of December 31, 2000 are detailed
in Note 6 - "Indebtedness and Borrowing Facilities" of the Notes.
On December 14, 2000, RadioShack announced that its Board of Directors had
authorized management to purchase up to 10.0 million additional shares of its
common stock with a new share repurchase program, upon completion of its
existing 60.0 million share program in December 2000. The new program has no
expiration date. During 2000, 3.4 million shares were repurchased for $167.4
million under both programs, including 0.1 million shares for $6.6 million under
the new 10.0 million share program. An additional 0.2 million shares were
repurchased for $9.5 million from January 1, 2001 to March 19, 2001.
Additionally, on October 26, 1998, RadioShack announced that its Board of
Directors had authorized the repurchase of up to 10.0 million shares of
RadioShack's common stock for an indefinite period of time to be used to offset
the dilution of grants under RadioShack's incentive stock plans (see Note 13 -
"Stock Options and Performance Awards" of the Notes). Approximately 3.0 million
shares were repurchased in 2000 for $144.4 million, bringing the total share
repurchases at December 31, 2000 under this program to 10.0 million shares
totaling $398.9 million. No more shares may be repurchased under this program.
The purchases under the share repurchase programs described above are in
addition to the shares required for employee stock purchase plans, which are
purchased throughout the year. Purchases will continue to be made in 2001 in the
open market with funding of the programs coming from excess free cash flow and
short-term borrowings, if needed.
RadioShack's primary source of short-term debt consists of short-term seasonal
bank debt and commercial paper, which have maturities of less than 90 days. In
the second quarter of 2000, RadioShack increased its $200.0 million 364-day
revolving credit facility to $300.0 million and also extended the maturity date
to June 2001. The terms of the 364-day revolving credit facility remain similar
to the previous facility. RadioShack also has a $300.0 million five-year
revolving credit facility maturing June 2003. The revolving credit facilities
are used as backup for the commercial paper program and may also be utilized for
general corporate purposes. Annual commitment fees for the facilities are 0.07%
of the $300.0 million 364-day facility and 0.085% of the $300.0 million
multiyear facility, whether used or unused. During the second quarter of 2001,
RadioShack plans to extend the 364-day facility to June 2002.
The total debt-to-capitalization ratio was 47.0% at December 31, 2000, 38.0% at
December 31, 1999 and 35.6% at December 31, 1998. These increases in the
debt-to-capitalization ratios result from an increase in debt levels related
primarily to the share repurchase program and increased inventory and accounts
receivable levels.
RadioShack has a $300.0 million Debt Shelf Registration Statement ("Shelf
Registration"). In August 1997, RadioShack issued $150.0 million of 10 year
unsecured notes under the Shelf Registration. The interest rate on the notes is
6.95% per annum with interest payable on September 1 and March 1 of each year,
commencing March 1, 1998. The notes are due September 1, 2007. In December 1997
and January 1998, RadioShack issued $4.0 million and $45.0 million,
respectively, in medium-term notes under the remaining $150.0 million Shelf
Registration. An additional $32.0 million, $37.0 million and $32.0 million of
medium-term notes were issued in January 1999, August 1999 and September 1999,
respectively, completing the remaining 1997 Shelf Registration. RadioShack's
medium and long-term notes outstanding at December 31, 2000 under the 1997 Shelf
Registration totaled $300.0 million. The interest rates at December 31, 2000 for
the outstanding $150.0 million in medium-term notes ranged from 6.09% to 7.35%,
with a weighted average coupon rate of 6.6%. These medium-term notes have
varying maturities ranging from 2001 to 2008.
RadioShack's management believes that its present borrowing capacity is greater
than the established credit lines and long-term debt in place. It is anticipated
that RadioShack will review the medium to longer-term debt markets in calendar
2001. If these markets are available to the Company at favorable terms, it is
likely that longer maturity debt will be issued to repay short-term debt and to
adjust the mix of short-term versus long-term debt.
INFLATION
Inflation has not significantly impacted RadioShack over the past three years.
Management does not expect inflation to have a significant impact on operations
in the foreseeable future, unless global situations substantially affect the
world economy.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
RadioShack does not have any derivative instruments that materially increase the
Company's exposure to market risks for interest rates, foreign currency rates,
commodity prices or other market price risks. RadioShack does not use
derivatives for speculative purposes.
The company is exposed to market risk from changes in interest rates. Interest
rate risk exists principally with respect to the Company's short-term
indebtedness that bears interest at floating rates. At December 31, 2000,
RadioShack had $461.3 million of indebtedness bearing interest at floating
rates. A hypothetical, instantaneous and unfavorable change of 100 basis points
in the interest rate applicable to floating-rate indebtedness at December 31,
2000 would have resulted in additional interest expense of $4.6 million assuming
no change in the principal or a reduction of such indebtedness.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to Consolidated Financial Statements is found on page 24. RadioShack's
Financial Statements and Notes to Consolidated Financial Statements follow the
index.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
RadioShack will file a definitive proxy statement with the Securities and
Exchange Commission not later than 120 days after the end of the year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to directors has been omitted pursuant to General Instruction
G(3). This information is incorporated by reference from the Proxy Statement for
the 2001 Annual Meeting. For information relating to the Executive Officers of
RadioShack, see Part I of this report. The Section 16(a) reporting information
is incorporated by reference from the Proxy Statement for the 2001 Annual
Meeting.
ITEM 11. EXECUTIVE COMPENSATION.
RadioShack will file a definitive proxy statement with the Securities and
Exchange Commission not later than 120 days after the end of the year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to executive compensation has been omitted pursuant to General
Instruction G(3). This information is incorporated by reference from the Proxy
Statement for the 2001 Annual Meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
RadioShack will file a definitive proxy statement with the Securities and
Exchange Commission not later than 120 days after the end of the year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to security ownership of certain beneficial owners and
management has been omitted pursuant to General Instruction G(3). This
information is incorporated by reference from the Proxy Statement for the 2001
Annual Meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
RadioShack will file a definitive proxy statement with the Securities and
Exchange Commission not later than 120 days after the end of the year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to certain relationships and transactions with management and
others has been omitted pursuant to General Instruction G(3). This information
is incorporated by reference from the Proxy Statement for the 2001 Annual
Meeting.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report.
1. Financial Statements
The financial statements filed as a part of this report are listed in the "Index
to Consolidated Financial Statements" on page 24.
3. Exhibits required by Item 601 of Regulation S-K
A list of the exhibits required by Item 601 of Regulation S-K and filed as part
of this report is set forth in the Index to Exhibits on page 49, which
immediately precedes such exhibits.
Certain instruments defining the rights of holders of long-term debt of
RadioShack and its consolidated subsidiaries are not filed as exhibits to this
report because the total amount of securities authorized thereunder does not
exceed ten percent of the total assets of the Company on a consolidated basis.
RadioShack hereby agrees to furnish the Securities and Exchange Commission
copies of such instruments upon request.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, RadioShack Corporation has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RADIOSHACK CORPORATION
March 22, 2001 /s/ Leonard H. Roberts
-------------------------
Leonard H. Roberts
Chairman and Chief Executive Officer,
RadioShack Corporation
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, RadioShack Corporation has duly caused this report to be signed on
its behalf by the following persons in the capacities indicated on this 22nd day
of March, 2001.
Signature Title
/s/ Leonard H. Roberts Chairman, Chief Executive Officer and Director
- --------------------------- (Chief Executive Officer)
Leonard H. Roberts
/s/ Loren K. Jensen Vice President - Finance and Acting Chief
- --------------------------- Financial Officer
Loren K. Jensen (Principal Financial Officer)
/s/ Richard L. Ramsey Vice President and Controller
- --------------------------- (Principal Accounting Officer)
Richard L. Ramsey
Director /s/ William G. Morton, Jr. Director
- --------------------------- ---------------------------
Frank J. Belatti William G. Morton, Jr.
/s/ Ronald E. Elmquist Director /s/ Thomas G. Plaskett Director
- --------------------------- ---------------------------
Ronald E. Elmquist Thomas G. Plaskett
/s/ Lawrence V. Jackson Director /s/ Alfred J. Stein Director
- --------------------------- ---------------------------
Lawrence V. Jackson Alfred J. Stein
/s/ Robert J. Kamerschen Director /s/ William E. Tucker Director
- --------------------------- ---------------------------
Robert J. Kamerschen William E. Tucker
/s/ Lewis F. Kornfeld, Jr. Director /s/ Edwina D. Woodbury Director
- --------------------------- ---------------------------
Lewis F. Kornfeld, Jr. Edwina D. Woodbury
- --------------------------- Director
Jack L. Messman
RADIOSHACK CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants............................... 25
Consolidated Statements of Income for each of the three
years in the period ended December 31, 2000................... 26
Consolidated Balance Sheets at December 31, 2000
and December 31, 1999......................................... 27
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2000................... 28
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 31, 2000......... 29-30
Notes to Consolidated Financial Statements...................... 31-48
All schedules have been omitted because they are not applicable, not required or
the information is included in the consolidated financial statements or notes
thereto.
Financial statements of 50% or less-owned companies accounted for by the equity
method have been omitted because they do not, considered individually or in the
aggregate, constitute a significant subsidiary.
Report of Independent Accountants
To the Board of Directors and Stockholders of
RadioShack Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index on page 24 present fairly, in all material respects, the financial
position of RadioShack Corporation and its subsidiaries (the "Company") at
December 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
- -------------------------------
PRICEWATERHOUSECOOPERS LLP
Fort Worth, Texas
February 21, 2001
Consolidated Statements of INCOME
RadioShack Corporation and Subsidiaries
Year Ended December 31,
-------------------------------------------------------------------
2000 1999 1998
% of % of % of
(In millions, except per share amounts) Dollars Revenues Dollars Revenues Dollars Revenues
- -------------------------------------------------------------------------------------------------------------
Net sales and operating revenues $4,794.7 100.0% $4,126.2 100.0% $4,787.9 100.0%
Cost of products sold 2,425.1 50.6 2,042.7 49.5 2,783.5 58.1
-------- -------- -------- -------- -------- --------
Gross profit 2,369.6 49.4 2,083.5 50.5 2,004.4 41.9
-------- -------- -------- -------- -------- --------
Operating expenses (income):
Selling, general and administrative 1,633.6 34.1 1,486.4 36.0 1,580.3 33.0
Depreciation and amortization 107.3 2.2 90.2 2.2 99.0 2.1
Restricted stock awards (1.0) -- 9.6 0.2 82.6 1.7
Provision for loss on sale of
Computer City -- -- -- -- 108.2 2.3
-------- -------- -------- -------- -------- --------
Total operating expenses 1,739.9 36.3 1,586.2 38.4 1,870.1 39.1
-------- -------- -------- -------- -------- --------
Operating income 629.7 13.1 497.3 12.1 134.3 2.8
Interest income 17.8 0.4 20.4 0.5 10.8 0.2
Interest expense (53.9) (1.1) (37.2) (0.9) (45.4) (0.9)
-------- -------- -------- -------- -------- --------
Income before income taxes 593.6 12.4 480.5 11.7 99.7 2.1
Provision for income taxes 225.6 4.7 182.6 4.5 38.4 0.8
-------- -------- -------- -------- -------- --------
Net income 368.0 7.7 297.9 7.2 61.3 1.3
Preferred dividends 5.3 0.1 5.5 0.1 5.8 0.1
-------- -------- -------- -------- -------- --------
Net income available to common
shareholders $ 362.7 7.6% $ 292.4 7.1% $ 55.5 1.2%
======== ======== ======== ======== ======== ========
Net income available per common
share:
Basic $ 1.94 $ 1.51 $ 0.28
======== ======== ========
Diluted $ 1.84 $ 1.43 $ 0.27
======== ======== ========
Shares used in computing earnings
per common share:
Basic 187.3 194.2 201.2
======== ======== ========
Diluted 197.7 205.0 211.4
======== ======== ========
Dividends declared per common share $ 0.220 $ 0.205 $ 0.200
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Balance Sheets
RadioShack Corporation and Subsidiaries
December 31,
------------------------
(In millions, except for share amounts) 2000 1999
- ------------------------------------------------------------- ---------
Assets
Current assets:
Cash and cash equivalents $ 130.7 $ 164.6
Accounts and notes receivable, net 464.7 286.1
Inventories, at lower of cost or market 1,164.3 861.4
Other current assets 58.5 91.2
--------- ---------
Total current assets 1,818.2 1,403.3
--------- ---------
Property, plant and equipment, net 456.8 446.8
Other assets, net of accumulated amortization 301.5 291.9
--------- ---------
Total assets $ 2,576.5 $ 2,142.0
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities of $ 478.6 $ 188.9
long-term debt
Accounts payable 234.8 234.8
Accrued expenses 330.1 350.8
Income taxes payable 188.9 150.7
--------- ---------
Total current liabilities 1,232.4 925.2
Long-term debt, excluding current maturities 302.9 319.4
Other non-current liabilities 60.9 45.7
--------- ---------
Total liabilities 1,596.2 1,290.3
--------- ---------
Minority interest in consolidated subsidiary 100.0 --
Common stock put options -- 21.0
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized
Series A junior participating, 300,000 shares
designated and none issued -- --
Series B convertible (TESOP), 100,000 shares
authorized; 68,800 and 72,800 shares issued,
respectively 68.8 72.8
Common stock, $1 par value, 650,000,000 shares
authorized; 236,033,000 and 235,840,000 shares
issued, respectively 236.0 235.8
Additional paid-in capital 116.1 82.4
Retained earnings 1,661.5 1,353.3
Treasury stock, at cost; 50,269,000 and
45,113,000 shares, respectively (1,189.6) (892.3)
Unearned deferred compensation (11.5) (20.5)
Accumulated other comprehensive loss (1.0) (0.8)
--------- ---------
Total stockholders' equity 880.3 830.7
Commitments and contingent liabilities (see Note 10)
--------- ---------
Total liabilities and stockholders' equity $ 2,576.5 $ 2,142.0
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Cash Flows
RadioShack Corporation and Subsidiaries
Year Ended December 31,
-----------------------------------
(In millions) 2000 1999 1998
- --------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 368.0 $ 297.9 $ 61.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Restricted stock awards (1.0) 9.6 82.6
Provision for loss on sale of Computer City -- -- 108.2
Depreciation and amortization 107.3 90.2 99.0
Deferred income taxes and other items 33.1 49.0 (4.0)
Provision for credit losses and bad debts 3.6 0.9 8.4
Changes in operating assets and liabilities:
Receivables (149.0) (29.3) (32.6)
Inventories (302.9) 52.6 85.6
Other current assets (6.2) 15.1 17.7
Accounts payable, accrued expenses and income taxes 63.6 75.6 (11.4)
--------- --------- ---------
Net cash provided by operating activities 116.5 561.6 414.8
--------- --------- ---------
Investing activities:
Additions to property, plant and equipment (119.6) (102.4) (131.5)
Proceeds from sale of property, plant and equipment 1.5 5.6 6.7
Proceeds from sale of Computer City -- -- 36.5
Proceeds from sale of minority interest in consolidated
subsidiary 100.0 -- --
Investment in securities (30.0) (20.0) --
Proceeds from sale of equity securities 17.9 -- --
Other investing activities (3.8) (4.2) (4.7)
--------- --------- ---------
Net cash used by investing activities (34.0) (121.0) (93.0)
--------- --------- ---------
Financing activities:
Purchases of treasury stock (400.6) (422.2) (337.4)
Exercise of common stock put options (8.6) -- --
Proceeds from sale of common stock put options 0.5 4.4 0.3
Sale of treasury stock to stock plans 46.8 39.5 35.4
Proceeds from exercise of stock options 19.5 42.0 22.4
Dividends paid (44.7) (42.5) (44.8)
Changes in short-term borrowings, net 285.2 (42.3) (44.9)
Additions to long-term borrowings -- 100.6 45.7
Repayments of long-term borrowings (14.5) (20.0) (39.9)
--------- --------- ---------
Net cash used by financing activities (116.4) (340.5) (363.2)
--------- --------- ---------
Increase/(decrease) in cash and cash equivalents (33.9) 100.1 (41.4)
Cash and cash equivalents, beginning of period 164.6 64.5 105.9
--------- --------- ---------
Cash and cash equivalents, end of period $ 130.7 $ 164.6 $ 64.5
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Statements of Stockholders' Equity
RadioShack Corporation and Subsidiaries
Common Stock Treasury Stock
Preferred ------------------- -------------------
(In millions) Stock Shares Dollars Shares Dollars
- -----------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 100.0 138.3 $ 138.3 (36.0) $ (836.1)
Comprehensive income:
Net income -- -- -- -- --
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Reclassification for losses included in
net income
Net unrealized gain on foreign currency
translation
Other comprehensive income -- -- -- -- --
Comprehensive income
Purchase of treasury stock -- -- -- (7.5) (339.3)
Sale of treasury stock to employee stock plans -- -- -- 0.8 19.3
Restricted stock awards -- 0.9 0.9 (0.3) (29.1)
Exercise of stock options and grant of stock
awards -- -- -- 1.2 29.9
Series B convertible stock dividends,
net of taxes of $2.1 -- -- -- -- --
Deferred compensation earned -- -- -- -- --
Repurchase of preferred stock -- -- -- -- (6.3)
Common stock cash dividends declared -- -- -- -- --
------------------------------------------------------
Balance at December 31, 1998 100.0 139.2 139.2 (41.8) (1,161.6)
Comprehensive income:
Net income -- -- -- -- --
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Comprehensive income -- -- -- -- --
Purchase of treasury stock -- -- -- (8.5) (435.9)
Common stock put options -- -- -- -- (16.1)
Sale of treasury stock to employee stock plans -- -- -- 0.4 9.3
Restricted stock awards -- -- -- -- 1.5
Purchase of AmeriLink Corporation -- -- -- 1.8 25.5
Dealer/Franchisee Rewards Program -- -- -- -- 0.8
Exercise of stock options and grant of stock
awards -- -- -- 3.0 51.6
Series B convertible stock dividends,
net of taxes of $1.9 -- -- -- -- --
Deferred compensation earned -- -- -- -- --
Cancellation of preferred stock, net of
repurchases (27.2) -- -- -- 28.8
Common stock cash dividends declared -- -- -- -- --
Two-for-one common stock split -- 96.6 96.6 -- 603.8
------------------------------------------------------
Balance at December 31, 1999 72.8 235.8 235.8 (45.1) (892.3)
Comprehensive income:
Net income -- -- -- -- --
Other comprehensive loss, net of tax:
Foreign currency translation adjustments
Comprehensive income -- -- -- -- --
Purchase of treasury stock -- -- -- (7.9) (368.6)
Common stock put options -- -- -- -- (3.5)
Expired common stock put options -- -- -- -- 14.8
Sale of treasury stock to employee stock plans -- -- -- 1.2 25.3
Restricted stock awards, net of forfeitures -- 0.2 0.2 0.2 3.0
Dealer/Franchisee Rewards Program -- -- -- 0.1 1.6
Exercise of stock options and grant of stock
awards -- -- -- 1.3 30.1
Series B convertible stock dividends,
net of taxes of $1.9 -- -- -- -- --
Deferred compensation earned -- -- -- -- --
Cancellation of preferred stock, net of
repurchases (4.0) -- -- -- --
Common stock cash dividends declared -- -- -- -- --
------------------------------------------------------
Balance at December 31, 2000 $ 68.8 236.0 $ 236.0 (50.2) $(1,189.6)
======================================================
The accompanying notes are an integral part of these consolidated financial
statements.
Consolidated Statements of Stockholders' Equity - continued
RadioShack Corporation and Subsidiaries
Unearned Accumulated
Additional Deferred Other
Paid-In Retained Compen- Comprehensive Comprehensive
(In millions) Capital Earnings sation Loss Total Income
- -------------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 $ 19.2 $1,676.3 $ (37.4) $ (1.7) $1,058.6
Comprehensive income:
Net income -- 61.3 -- -- 61.3 $ 61.3
Other comprehensive income, net of tax:
Foreign currency translation adjustments (0.7)
Reclassification for losses included
in net income 1.4
-------
Net unrealized gain on foreign
currency translation 0.7
-------
Other comprehensive income -- -- -- 0.7 0.7 0.7
-------
Comprehensive income $ 62.0
=======
Purchase of treasury stock -- -- -- -- (339.3)
Sale of treasury stock to employee stock
plans 16.0 -- -- -- 35.3
Restricted stock awards 68.8 -- (4.2) -- 36.4
Exercise of stock options and grant of
stock awards 5.7 -- -- -- 35.6
Series B convertible stock dividends,
net of taxes of $2.1 -- (3.7) -- -- (3.7)
Deferred compensation earned -- -- 10.1 -- 10.1
Repurchase of preferred stock -- -- -- -- (6.3)
Common stock cash dividends declared -- (40.5) -- -- (40.5)
------------------------------------------------------------
Balance at December 31, 1998 109.7 1,693.4 (31.5) (1.0) 848.2
Comprehensive income:
Net income -- 297.9 -- -- 297.9 $ 297.9
Other comprehensive income, net of tax:
Foreign currency translation adjustments -- -- -- 0.2 0.2 0.2
-------
Comprehensive income $ 298.1
=======
Purchase of treasury stock -- -- -- -- (435.9)
Common stock put options 2.8 -- -- -- (13.3)
Sale of treasury stock to employee stock
plans 30.3 -- -- -- 39.6
Restricted stock awards (10.6) -- (0.5) -- (9.6)
Purchase of AmeriLink Corporation 43.7 -- -- -- 69.2
Dealer/Franchisee Rewards Program 0.9 -- -- -- 1.7
Exercise of stock options and grant of
stock awards 28.6 -- -- -- 80.2
Series B convertible stock dividends,
net of taxes of $1.9 -- (3.6) -- -- (3.6)
Deferred compensation earned -- -- 11.5 -- 11.5
Cancellation of preferred stock, net of
repurchases -- (18.0) -- -- (16.4)
Common stock cash dividends declared -- (38.6) -- -- (38.6)
Two-for-one common stock split (123.0) (577.8) -- -- (0.4)
------------------------------------------------------------
Balance at December 31, 1999 82.4 1,353.3 (20.5) (0.8) 830.7
Comprehensive income:
Net income -- 368.0 -- -- 368.0 $ 368.0
Other comprehensive loss, net of tax:
Foreign currency translation adjustments -- -- -- (0.2) (0.2) (0.2)
-------
Comprehensive income $ 367.8
=======
Purchase of treasury stock -- -- -- -- (368.6)
Common stock put options -- -- -- -- (3.5)
Expired common stock put options 1.6 -- -- -- 16.4
Sale of treasury stock to employee stock
plans 20.3 -- -- -- 45.6
Restricted stock awards, net of
forfeitures 7.0 -- 0.2 -- 10.4
Dealer/Franchisee Rewards Program 1.3 -- -- -- 2.9
Exercise of stock options and grant of
stock awards 3.5 -- -- -- 33.6
Series B convertible stock dividends,
net of taxes of $1.9 -- (3.4) -- -- (3.4)
Deferred compensation earned -- -- 8.8 -- 8.8
Cancellation of preferred stock, net of
repurchases -- (14.4) -- -- (18.4)
Common stock cash dividends declared -- (42.0) -- -- (42.0)
------------------------------------------------------------
Balance at December 31, 2000 $ 116.1 $1,661.5 $ (11.5) $ (1.0) $ 880.3
============================================================
The accompanying notes are an integral part of these consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RadioShack Corporation and Subsidiaries
NOTE 1 - DESCRIPTION OF BUSINESS
RadioShack Corporation ("RadioShack" or the "Company"), through its
approximately 7,200 company-owned and dealer/franchise retail outlets, is the
nation's largest consumer electronics chain. RadioShack's sales and operating
revenues primarily relate to private label and third party branded consumer
electronics, brand name personal computers, wireless commu