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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2001
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
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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
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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 19, 2002, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $4,922,265,023 based on the New York Stock
Exchange closing price.
As of March 19, 2002, there were 175,182,212 shares of the registrant's Common
Stock outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 2002 Annual Meeting of Stockholders are
incorporated by reference into Part III.
The Index to Exhibits is on Sequential Page No. 48.
Total Pages 64.
PART I
ITEM 1. BUSINESS.
GENERAL
RadioShack Corporation was incorporated in Delaware in 1967. We primarily engage
in the retail sale of consumer electronics through the RadioShack(R) store
chain. Our sales derived outside of the United States are not material.
You may notice that we have changed some of the text in the "management's
discussion" section, as well as the notes of this document. The substance is the
same, but we have made it more readable using the "plain English" guidelines
issued by the Securities and Exchange Commission. We hope this is helpful to
you. Throughout this report, the terms "our," "we," and "us" refer to RadioShack
Corporation, including its subsidiaries.
RadioShack. At December 31, 2001, we operated 5,289 company-owned stores located
throughout the United States, as well as Puerto Rico and the Virgin Islands.
These stores average approximately 2,350 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. Our 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. We also provide consumers access to third party services such as
cellular phone and PCS activation, DTH satellite programming, long distance
telephone service, Internet access, prepaid wireless airtime and extended
warranties. At December 31, 2001, we also had a network of 2,119
dealer/franchise outlets, including 55 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 business with our products.
Strategic Alliances. We have formed strategic alliances with well-recognized
companies. These alliances have or are expected to have a significant impact on
both our operations and financial strategy and include:
Compaq Computer Corporation ("Compaq") - Compaq is the sole supplier of
personal computers sold through our retail stores, participating
dealer/franchise outlets and on our Web site.
DIRECTV, Inc. ("DIRECTV") - We sell direct-to-home satellite systems and
acquire customers for DTH satellite programming.
Echostar Satellite Corporation ("DISH Network") - On February 19, 2002, we
announced an agreement with DISH Network. This agreement will allow us to
provide our customers with an additional alternative in digital satellite
services. We anticipate that we will begin offering DISH Network service in
March 2002.
Microsoft Corporation ("Microsoft") - Microsoft's in-store display allows
our customers to view demonstrations of narrowband and broadband technology
and subscribe to MSNTM 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, 2001, all of
our stores and approximately half of the dealer/franchise outlets were
fixtured for the Microsoft Internet Center @ RadioShack via a
"store-within-a-store" concept.
Sprint Communications Company and Sprint PCS ("Sprint") - Through our
telecommunications alliance with Sprint, our 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
us with various RCA-branded audio and video components such as televisions,
DTH satellite systems, VCRs, camcorders, digital video disc (DVD) players,
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."
Verizon Wireless ("Verizon") - This strategic alliance with the nation's
largest wireless communications service provider permits approximately 4,300
company-owned stores to have a multiyear agreement with a single cellular
service provider, thereby creating training, marketing, inventory, repair
and other supply-chain synergies through the "Verizon Store at RadioShack."
We continue to offer cellular service in our other retail outlets through
various cellular carriers in areas not covered by Verizon.
Blockbuster Inc. ("Blockbuster") - On February 27, 2001, we announced an
alliance with Blockbuster to test a RadioShack "store-within-a-store"
concept within Blockbuster locations. The size of the our merchandising
areas varied depending on the size of the participating Blockbuster store,
but ranged from 600-square foot sections to smaller kiosks. A wide selection
of our most popular product and service offerings were featured. The initial
test phase called for 130 select Blockbuster stores in four markets to
contain "store-within-a-store" fixtures during the test period. The test
phase did not satisfy our financial expectations and we are currently
exiting this business.
Retail Support Operations. Our retail stores, along with our dealer outlets, are
supported by an extensive infrastructure. Below are the major components of this
support structure.
RadioShack International Procurement Limited Partnership ("RSIP") - RSIP,
which is owned by us, serves our wide-ranging international import/export,
sourcing, evaluation, logistics and quality control needs. RSIP also
provides services for outside customers, primarily InterTAN, Inc.
("InterTAN"). Most of RSIP's activity with InterTAN involves sourcing of
private label goods from manufacturers in Asia.
Consumer Electronics Manufacturing - We operate seven manufacturing
facilities in the United States and one overseas manufacturing operation in
China. These eight manufacturing facilities employed approximately 2,600
employees as of December 31, 2001. We manufacture a variety of products,
primarily sold through our 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.com - We launched our www.radioshack.com Web site in October
1999. Products, services and information are available through the Web site.
Online customers can purchase, return or exchange products available on our
Web site at their neighborhood RadioShack location.
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
our catalog operations, Web site and "hard to find" products.
RadioShack Installation Services ("RSIS") - RSIS, through its 56 field
offices located in 31 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 - We maintain a service and support network to
service the consumer electronics and personal computer retail industry in
the U.S. At December 31, 2001, we had 48 RadioShack Service Centers in the
U.S. and one in Puerto Rico that repair name brand and private label
products sold through our various sales channels. We are also a
vendor-authorized service provider for such leading manufacturers as Compaq,
Sony, Hewlett-Packard, RCA/Thomson, Nokia, Samsung and LG Electronics, among
others; we also perform repairs for third-party service centers and extended
service plan providers under our national service agreements.
RadioShack Technology Services - Our 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 our 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 our programming and system analysis needs.
Regional Distribution Centers - We have 8 distribution centers which ship
over one million cartons each month to our retail stores and
dealer/franchise outlets. Three of these distribution centers also serve as
fulfillment centers for online purchases.
SEASONALITY
As is the case with other retail businesses, our net sales and operating
revenues are greater during the winter holiday 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 23 of the "Notes to Consolidated Financial Statements" for quarterly data.
PATENTS AND TRADEMARKS
We own or are licensed to use many trademarks and service marks related to our
business in the United States and in foreign countries. Radio Shack, RadioShack,
RadioShack.com, and "You've got questions. We've got answers." are some of the
marks most widely used by us. We believe that the RadioShack name and marks are
well recognized by consumers and that the name and marks are associated with
high-quality service. Our manufactured products are sold primarily under the
RadioShack trademark. We also own various patents relating to electronic
products designed and manufactured by us. We believe that the loss of the
RadioShack name and RadioShack marks would be material to our business.
SUPPLIERS
Our marketing strategy depends, in part, upon our ability to offer both private
label and third party branded products, as well as third party services, to our
customers. We utilize a large number of suppliers located in various parts of
the world to obtain raw materials and private label merchandise. We do not
expect a lack of availability of raw material or any single private label
product to have a material impact on our operations. In terms of third party
branded products we sell, no single vendor provided in excess of 10% of our
aggregate product purchases in 2001. However, certain vendors, strategic allies
and service providers, as discussed in the strategic alliance section above, are
important to our business and the loss of or disruption in supply from one of
these could have a material adverse effect on sales. Additionally, certain
suppliers have, at times, limited their supply of products to us.
BACKLOG ORDERS
We have no material backlog of orders for the products or services that we sell.
COMPETITION
Due to rising consumer demand for wireless communications products and services,
as well as rapid consumer acceptance of new digital technology products, the
consumer electronics retail business still remains highly competitive, driven by
technology and product cycles.
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. We compete in the sale of our 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 category scale. Sprint and Verizon
compete directly with us 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 us on a more
widespread basis. With respect to the products we sell, 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 we have two primary factors differentiating us from our
competition. The first is our extensive physical retail presence with
approximately 7,200 conveniently located retail outlets in virtually every
neighborhood nationwide. Our 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.
Our strategic alliances with well-recognized companies represent the other
differentiating factor. These alliances with such companies as Sprint, Verizon,
Thomson and Compaq, among others, augment the strong position that we have
historically maintained in our core product categories such as batteries,
communications equipment, telephony, antennas, and parts and accessories.
Additionally, we are able to leverage name brand recognition, marketing efforts
and advertising campaigns with our 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 we will continue to compete successfully in the
future. Also, in light of the ever-changing nature of the electronics retail
industry, we would be adversely affected if our competitors were able to offer
their products at significantly lower prices. Additionally, we would be
adversely affected if our competitors were able to introduce innovative or
technologically superior products not yet available to us, or if we were unable
to obtain certain products in a timely manner or for an extended period of time.
Regarding the expansion of the Internet, we do not believe e-commerce retailers
currently represent significant competition. This, however, could change and
become significant over time. We further believe that we are well positioned to
meet the increasing competition from Internet retailers with our
www.radioshack.com Web site, coupled with our extensive physical retail
presence, service capabilities and wide assortment of consumer electronics
products.
EMPLOYEES
As of December 31, 2001, we had approximately 41,400 employees. Approximately
10,000 temporary retail employees were hired for the holiday selling season;
however, approximately 3,600 of these temporary employees remained at year-end.
Our employees are not covered by collective bargaining agreements nor are they
members of labor unions. We consider our relationship with our employees to be
good.
ITEM 2. PROPERTIES.
Information on our properties is located 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................ 35
Commitments and Contingent Liabilities....... 40
We lease, rather than own, most of our retail and service center facilities. Our
stores are located primarily in major shopping malls, stand-alone buildings or
shopping centers owned by other entities. We lease most of the property on which
our executive offices are located in downtown Fort Worth, Texas, two
distribution centers in the United States, and seven administrative offices and
one manufacturing plant in the Asia Pacific region. RSIS headquarters and field
offices are also leased. We own the property on which the other six distribution
centers are located, in addition to most of our manufacturing facilities located
throughout the United States. We periodically review our existing distribution
center and office facilities to determine if these spaces are adequate to meet
our needs in the foreseeable future.
We also own land purchased in 2001 in Fort Worth, Texas, on which our new
corporate headquarters will be constructed beginning in late 2002.
ITEM 3. LEGAL PROCEEDINGS.
We are currently a party to a class action lawsuit filed in the Superior Court
of Orange County, California, relating to the calculation of earned overtime
wages for certain of our former and current employees in that state. While the
alleged damages in this lawsuit are substantial, we believe that we have
meritorious defenses and we are vigorously defending this case. We believe that
if an adverse resolution of the litigation occurs, it could have a material
adverse effect on our results of operations for the year in which resolution
occurs. However, we do not believe that such an adverse resolution would have a
material adverse effect on our financial condition or liquidity. The liability,
if any, associated with this matter was not determinable at December 31, 2001.
We have various other pending claims, lawsuits, disputes with third parties,
investigations and actions incident to the operation of our business. Although
occasional adverse settlements or resolutions may occur and negatively impact
earnings in the year of settlement, it is our opinion that their ultimate
resolution will not have a materially adverse effect on our financial condition
or liquidity. The liability, if any, associated with these various matters was
not determinable at December 31, 2001.
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 2001.
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 us as of February 28, 2002.
Position Years with
Name (Date Elected to Current Position) Age Company
---- --------------------------------- --- -------
Leonard H. Roberts Chairman of the Board and Chief Executive 53 8 (1)
Officer (May 1999)
David J. Edmondson President and Chief Operating Officer 42 7 (2)
(December 2000)
Evelyn V. Follit Senior Vice President (May 1999) and Chief Information 55 4 (3)
Officer (October 1998)
Mark C. Hill Senior Vice President (October 1998), Corporate 50 5 (4)
Secretary and General Counsel (July 1997)
Laura K. Moore Senior Vice President - Public Relations and Corporate 39 3 (5)
Communications (October 2000)
Michael D. Newman Senior Vice President and Chief Financial 45 1 (6)
Officer (May 2001)
Francesca M. Spinelli Senior Vice President - People (December 1999) 48 4 (7)
There are no family relationships among the executive officers listed and there
are no arrangements or understandings under which any of them were appointed as
executive officers. All executive officers of RadioShack Corporation are
appointed by the Board of Directors annually to serve for the ensuing year, or
until their successors are appointed. All of the executive officers listed above
have served RadioShack in various capacities over the past five years, except
for Mr. Newman 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, prior to his appointment as
President and Chief Operating Officer, RadioShack Corporation. Mr.
Edmondson served as Senior Vice President of Marketing and Advertising of
the RadioShack division from November 1995 to October 1998.
(3) Ms. Follit served as Vice President and Chief Information Officer,
RadioShack Corporation, from July 1998 to May 1999, when she was appointed
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.
(4) Mr. Hill served as Vice President, Corporate Secretary and General Counsel,
RadioShack Corporation, from July 1997 to October 1998, when he was
appointed Senior Vice President, RadioShack Corporation. He continues to
serve as Corporate Secretary and General Counsel for us. 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.
(5) Ms. Moore served as Vice President - Corporate Communications and Public
Relations for RadioShack Corporation from November 1998 to October 2000,
when she was appointed Senior Vice President - Public Relations and
Corporate Communications, RadioShack Corporation. Prior to joining
RadioShack Corporation, she was employed by Zale Corporation where she
served as Vice President, Corporate Communications from 1995 to 1998.
(6) Mr. Newman has served as Senior Vice President and Chief Financial Officer,
RadioShack Corporation, since May 2001. Prior to joining RadioShack
Corporation, he was Vice President and Chief Financial Officer of Intimate
Brands, Inc. from June 2000 to December 2000, and Vice President and Chief
Financial Officer of Hussmann International from 1996 to 2000.
(7) Ms. Spinelli served as Vice President - People, RadioShack Corporation,
from July 1998 to December 1999, when she was appointed 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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
PRICE RANGE OF COMMON STOCK
Our common stock is listed on the New York Stock Exchange and trades under the
symbol "RSH". The following table presents the high and low trading prices for
our common stock, as reported in the composite transactions quotations of
consolidated trading for issues on the New York Stock Exchange, for each quarter
of the two years ended December 31, 2001.
Dividends Dividends
Quarter Ended High Low Declared Paid
------------- ---- --- -------- ----
December 31, 2001 $ 31.60 $ 23.11 $ -- $ 0.055
September 30, 2001 33.85 20.10 0.055 0.055
June 30, 2001 38.50 25.27 0.055 0.055
March 31, 2001 56.50 31.31 0.055 0.055
December 31, 2000 $ 72.94 $ 39.34 $ 0.055 $ 0.055
September 30, 2000 69.75 45.56 0.055 0.055
June 30, 2000 59.50 38.25 0.055 0.055
March 31, 2000 57.25 35.06 0.055 0.055
HOLDERS OF RECORD
At March 19, 2002, there were 31,671 holders of record of our common stock.
DIVIDENDS
The Board of Directors reviews our dividend policy annually. On July 25, 2001,
we announced that we would pay cash dividends on an annual, instead of
quarterly, basis beginning in 2002. Dividends declared in 2002 and thereafter,
if any, will be paid annually in December.
ITEM 6. SELECTED FINANCIAL DATA.
SELECTED FINANCIAL DATA (UNAUDITED)
RADIOSHACK CORPORATION AND SUBSIDIARIES
Year Ended December 31,
(Dollars and shares in millions, except per 2001 2000 1999 1998(1) 1997
share amounts and ratios) --------------------------------------------------------------
Statements of Income Data
Net sales and operating revenues $4,775.7 $4,794.7 $4,126.2 $4.787.9 $5,372.2
Operating income $ 359.3 $ 629.7 $ 497.3 $ 134.3 $ 336.8
Net income $ 166.7 $ 368.0 $ 297.9 $ 61.3 $ 186.9
Net income available per common share:
Basic $ 0.88 $ 1.94 $ 1.51 $ 0.28 $ 0.84
Diluted $ 0.85 $ 1.84 $ 1.43 $ 0.27 $ 0.82
Shares used in computing earnings per common share:
Basic 183.8 187.3 194.2 201.2 214.4
Diluted 191.2 197.7 205.0 211.4 224.5
Gross profit as a percent of sales 48.1% 49.4% 50.5% 41.9% 37.5%
SG&A expense as a percent of sales 35.9% 34.1% 36.2% 33.0% 29.4%
Balance Sheet Data
Inventories $ 949.8 $1,164.3 $ 861.4 $ 912.1 $1,205.2
Total assets $2,245.1 $2,576.5 $2,142.0 $1,993.6 $2,317.5
Working capital $ 887.9 $ 585.8 $ 478.1 $ 419.1 $ 739.1
Capital structure:
Current debt $ 105.5 $ 478.6 $ 188.9 $ 233.2 $ 299.5
Long-term debt $ 565.4 $ 302.9 $ 319.4 $ 235.1 $ 236.1
Total debt $ 670.9 $ 781.5 $ 508.3 $ 468.3 $ 535.6
Total debt, net of cash and cash equivalents $ 269.5 $ 650.8 $ 343.7 $ 403.8 $ 429.7
Stockholders' equity $ 778.1 $ 880.3 $ 830.7 $ 848.2 $1,058.6
Total capitalization $1,449.0 $1,661.8 $1,339.0 $1,316.5 $1,594.2
Long-term debt as a % of total capitalization 39.0% 18.2% 23.9% 17.9% 14.8%
Total debt as a % of total capitalization(2) 46.3% 47.0% 38.0% 35.6% 33.6%
Book value per common share at year end $ 4.40 $ 4.74 $ 4.36 $ 4.35 $ 5.17
Financial Ratios:
Return on average stockholders' equity 20.1%(3) 43.0% 35.5%(4) 6.4%(5) 16.1%
Return on invested capital (6) 11.4%(3) 22.1% 26.5%(4) 3.5%(5) 13.2%
Return on average assets 6.9%(3) 15.6% 14.4%(4) 2.8%(5) 7.6%
Annual inventory turnover 2.3 2.4 2.3 2.6 2.6
Ratio of earnings to fixed charges (7) 3.28 5.69 5.51 1.84 3.52
Other Data:
Dividends declared per common share $ 0.165 $ 0.220 $ 0.205 $ 0.200 $ 0.200
Dividends paid per common share $ 0.220 $ 0.220 $ 0.200 $ 0.200 $ 0.200
Capital expenditures $ 139.2 $ 119.6 $ 102.4 $ 131.5 $ 118.4
Number of RadioShack outlets at year end 7,373 7,199 7,186 7,030 6,906
Average square footage per company-owned store 2,350 2,300 2,300 2,200 2,200
Comparable company-owned store sales increase 1% 11% 12% 7% 2%
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 related Notes.
(1) Includes operations of Computer City, Inc. for only eight months, due to
the sale to CompUSA Inc. on August 31, 1998.
(2) Total debt includes capital leases and TESOP indebtedness. Capitalization
is defined as total debt plus total stockholders' equity.
(3) Excluding $125.1 million (net of taxes) for charges related to loss on sale
of assets, impairment of long-lived assets, employee separation and other
related costs, provision for loss on Internet-related investment, and store
closure and non-strategic inventory charges in 2001, return on average
stockholders' equity would have been 33.0%, return on invested capital
would have been 19.9%, and return on average assets would have been 12.1%.
(4) 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%, return on invested capital would have been 27.1%, and return on
average assets would have been 14.7%.
(5) Excluding $183.9 million (net of taxes) for provisions related to
restricted stock awards and loss on sale of Computer City, Inc., as well as
Computer City, Inc. operating losses and other business write-downs in
1998, return on average stockholders' equity would have been 23.6%, return
on invested capital would have been 21.0%, and return on average assets
would have been 11.4%.
(6) Return on invested capital is defined as adjusted operating income divided
by invested capital. Adjusted operating income is calculated by adding back
goodwill charges and adding implied interest on operating leases to
operating income; this total is then reduced by cash income taxes paid to
arrive at adjusted operating income. Invested capital is the sum of working
capital; property, plant and equipment, net; other assets; the present
value of operating leases and accumulated goodwill amortization. When
arriving at invested capital, working capital and other assets are reduced
by accounts and notes receivable which we do not consider a normal part of
our business.
(7) 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS ("MD&A").
FACTORS THAT MAY AFFECT FUTURE RESULTS
Matters discussed in MD&A include forward-looking statements within the meaning
of the federal securities laws. This includes statements concerning management's
plans and objectives relating to our operations or economic performance and
related assumptions. Forward-looking statements are made based on management's
expectations and beliefs concerning future events and, therefore, involve a
number of risks and uncertainties. Management cautions that forward-looking
statements are not guarantees and actual results could differ materially from
those expressed or implied in the forward-looking statements. Important factors
that could cause our actual results of operations or financial condition to
differ include, but are not necessarily limited to:
o changes in national or regional U.S. economic conditions, including, but
not limited to, recessionary trends, consumer credit availability, interest
rates, inflation, consumers' disposable income and spending levels, job
security and unemployment, and overall consumer confidence;
o continuing terrorist activities in the U.S., as well as the resulting
international war on terrorism;
o the disruption of nationwide or regional transportation systems;
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 execute our strategic initiatives, including
our strategic business units and emerging sales channels, as well as new
alliances which may be formed with other retailers and third party service
providers;
o the presence or absence of new services or products and product features in
the merchandise categories we sell and unexpected changes in our actual
merchandise sales mix;
o the inability to maintain profitable contracts or execute business plans
with providers of third party branded products and with service providers
relating to cellular and PCS telephones and direct-to-home ("DTH")
satellite programming;
o the inability to collect the level of anticipated residual income, consumer
acquisition fees and rebates for products and third party services offered
by us;
o the inability to successfully maintain our strategic alliances, including
those with Compaq, DIRECTV, DISH Network, Microsoft, RCA, Sprint, and/or
Verizon Wireless;
o the lack of availability or access to sources of inventory;
o changes in the financial markets that would reduce or eliminate access to
longer term capital or short-term credit availability;
o the inability to attract, 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 our service-driven operating strategies;
o the imposition of new restrictions or regulations regarding the sale of
products and/or services we sell or changes in tax rules and regulations
applicable to us;
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 our retail locations, especially during the peak winter
holiday season.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires us to make
estimates that affect the reported value of assets, liabilities, revenues and
expenses. Our estimates are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis for our conclusions. We continually evaluate the
information used to make these estimates as our business and the economic
environment changes. The use of estimates is pervasive throughout our financial
statements, but the accounting policies and estimates we consider most critical
are as follows:
Revenue Recognition - Revenue is recognized when product delivery has occurred
or services have been rendered, net of an estimate for returned goods. We sell
certain products, such as wireless phones and satellite systems that customers
need in order to use the services of our strategic partners. In most cases, our
strategic partner will pay us a fee or commission for obtaining their new
customer, as well as a recurring monthly residual which is a portion of the
customer's monthly fee with our strategic partner. Both the fee and the monthly
residual are recorded as revenue. To determine the proper amount of revenue to
record, we evaluate the contract terms, historical results and trends of service
provider customer deactivations, non-activations and special pricing agreements,
as well as any promotions or other incentives. In addition to determining the
proper amount to record, we must also determine the appropriate classification
within the financial statements. Different revenues would have been recorded if
we had made different assumptions or evaluations.
Receivables - We record receivables based on the amount of revenue recognized
for a particular transaction. Our receivables are primarily comprised of amounts
due from strategic partners, commercial customers and dealer/franchisees. The
carrying amount of the receivables is continually evaluated based on the
likelihood of collection. An allowance for doubtful accounts is established for
estimated losses resulting from the inability of our customers to make required
payments. Factors such as customer creditworthiness, payment terms, historical
results and economic conditions are considered when making these decisions. The
actual collection of receivables could be different from our recorded value.
Inventory - Inventory is our largest asset class. Our inventory is primarily
comprised of finished goods and is recorded at the lower of cost or market using
the average cost method. We make estimates regarding the carrying value of our
inventory on an item-by-item basis. If the amount we expect to receive from the
sale of the inventory is less than its cost, we write down the cost of the
inventory to its realizable value. If actual market conditions at the time of
sale are less favorable than expected, additional inventory write-downs may be
required.
Accruals - The amount of liability we record for claims such as insurance,
warranty and pending litigation claims requires us to make judgments about the
amount of expenses that will ultimately be incurred. We use our past history and
experience, as well as other specific circumstances surrounding these claims in
evaluating the amount of liability that we should record. Actual results may be
different from these estimates.
Income Taxes - We are subject to income tax in many jurisdictions, including the
U.S., states and localities, and abroad. We must first determine which revenues
and expenses should be included in each taxing jurisdiction. This process
involves the estimation of our actual current tax exposure, together with the
assessment of temporary differences resulting from differing treatment of items
for tax and accounting purposes. These differences in the timing of deductions
result in deferred tax assets and liabilities that are recorded on our balance
sheet. If different judgments had been used, our tax liability could have been
different.
RETAIL OUTLETS
Average December 31,
Store Size --------------------------------
(Sq. Ft.) 2001 2000 1999
- --------------------------------------------------------------------------------
Company-owned 2,350 5,127 5,109 5,087
Cool Things @ Blockbuster(1) N/A 127 --- ---
Dealer/franchise N/A 2,119 2,090 2,099
------- ------- -------
7,373 7,199 7,186
======= ======= =======
(1)Stores closed in early 2002.
Space Owned and Leased
Approximate Square Footage
at December 31,
-------------------------------------------------------------------------
2001 2000
---------------------------------- -----------------------------------
(In thousands) Owned Leased Total Owned Leased Total
- ------------------------------------------------------------------------------------------------
Retail
RadioShack -- 12,286 12,286 -- 12,113 12,113
Support Operations
Manufacturing 502 201 703 502 201 703
Distribution centers
and office space(1) 3,176 2,927 6,103 4,107 1,532 5,639
-------- --------- --------- --------- --------- ---------
3,678 15,414 19,092 4,609 13,846 18,455
======== ========= ========= ========= ========= =========
(1) Due to the sale and lease-back of our corporate headquarters in late 2001, 1.0 million
square feet of office space were changed from owned to leased.
RESULTS OF OPERATIONS
2001 COMPARED WITH 2000
- -----------------------
NET SALES AND OPERATING REVENUES
Sales decreased slightly to $4,775.7 million in 2001 from $4,794.7 million in
2000. This decrease was primarily the result of a decline in sales to our
dealer/franchise outlets in 2001, partially offset by a slight increase in
comparable company-owned store sales and the opening of 18 new stores, net of
store closures. We expect a comparable store sales gain for 2002.
During 2001, we reorganized our marketing and merchandising departments into
three product groups which we call Strategic Business Units ("SBU"). These SBUs
relate to our position of "Connecting People," "Connecting Places" and
"Connecting Things" in the consumer electronics marketplace. A detailed
explanation of each unit is provided below. Each SBU is responsible for specific
products and third party relationships. These SBUs work with our brand
management, sales channels and support groups, which together allow RadioShack
to target the right customer through the right sales channel with the
appropriate support.
Each SBU is designed to find more efficient and convenient ways to serve our
sales channels. In addition to our 5,127 company-owned stores and 2,119
dealer/franchise outlets, our existing and emerging sales channels include the
www.radioshack.com Web site and catalog operations, as well as a sophisticated
outbound and inbound telephone call center.
The Connecting People SBU consists of the wireless communication, wired
communication and radio communication departments. The wireless communication
department includes products such as wireless handsets and cigarette lighter
adapters, in addition to prepaid wireless refill services and residuals. The
wired communication products department includes products like cordless phones
and phone cords, plus prepaid long distance cards. Products such as FRS radios
and scanners are part of the radio communication department. Our strategic
alliances for the Connecting People SBU include both Sprint and Verizon.
The Connecting Places SBU has two departments, home entertainment and computers.
The home entertainment department includes audio and video products and services
such as DTH satellite systems, residuals, installation services, DVDs and
accessories. The computer department includes personal computers and
accessories, hand-held computers, Internet devices and services. This SBU is
responsible for our strategic alliances with Compaq, DIRECTV, DISH Network,
Microsoft and Thomson.
The Connecting Things SBU includes the accessories, batteries and technical
departments, as well as the personal electronics, seasonal and portable audio
departments. Products include AC and DC power adapters, general and special
purpose batteries, wire and connectors, toys and radio control cars, giftables
and personal portable audio.
The following table summarizes our new retail sales breakdown by SBU and SBU
departments as a percent of total retail sales (excluding outside sales from our
retail support operations):
Percent of RadioShack Retail Sales
Year Ended December 31,
------------------------------------------------
2001 2000 1999
-------------- -------------- --------------
Connecting People
Wireless communication 27.4% 24.5% 24.7%
Wired communication 8.2 9.0 10.5
Radio communication 2.9 3.2 4.2
-------------- -------------- --------------
38.5 36.7 39.4
-------------- -------------- --------------
Connecting Places
Home entertainment 23.4 23.7 18.6
Computers 9.8 11.8 11.3
-------------- -------------- --------------
33.2 35.5 29.9
-------------- -------------- --------------
Connecting Things
Accessories, batteries and
technical 15.2 14.9 16.8
Personal electronics,
seasonal and portable audio 11.3 12.0 13.2
-------------- -------------- --------------
26.5 26.9 30.0
-------------- -------------- --------------
Service plans, repair and
other 1.8 0.9 0.7
-------------- -------------- --------------
100.0% 100.0% 100.0%
============== ============== ==============
Connecting People Strategic Business Unit: Sales in the wireless communication
department, which includes cellular and PCS telephones and accessories, as well
as the related residuals and prepaid airtime services, increased 12.7% in
dollars and increased to 27.4% of total retail sales in 2001, from 24.5% in
2000. This sales increase was due to an increase in sales of wireless phones and
accessories, plus related residuals, offset somewhat by a decrease in prepaid
wireless airtime. The wired communication department, which includes residential
telephones, answering machines and other related telephony products, decreased
9.1% in dollars and decreased as a percentage of total retail sales to 8.2% in
2001 from 9.0% in 2000. The decrease in this department was primarily the result
of declining sales of residential telephones, and was partially offset by
increased sales of telephone accessories. The radio communication department
decreased 8.0% in dollars and decreased as a percentage of total retail sales to
2.9% in 2001, from 3.2% in 2000. The decrease in this department was primarily
the result of a decrease in CB radio and scanner sales. The Connecting People
SBU is expected to increase sales for 2002, primarily driven by increases in the
wireless communication department.
Connecting Places Strategic Business Unit: The home entertainment department,
which consists of all home audio and video products, including DTH satellites,
installation services and related residuals, decreased 1.0% in dollars and
decreased slightly as a percentage of total retail sales to 23.4% in 2001 from
23.7% in 2000. This dollar decrease was primarily attributable to a decrease in
sales of satellite dishes, which was partially offset by increased sales of
video and cable accessories. The computer department, which includes not only
computers and related accessories, but narrow and broadband connectivity, as
well as home automation and networking, decreased 16.5% in dollars and decreased
as a percentage of total retail sales to 9.8% in 2001, from 11.8% in 2000. These
decreases were primarily attributable to a 26% decline in unit sales of CPUs and
an 11% decrease in the average selling price of CPUs from the prior year. The
Connecting Places SBU is expected to have a sales decrease for 2002, primarily
due to lower sales of computer CPUs and DTH satellite systems.
Connecting Things Strategic Business Unit: The accessories, batteries and
technical departments increased 2.2% in dollars and increased as a percentage of
total retail sales to 15.2% in 2001, from 14.9% in 2000. These increases were
primarily due to increased sales of batteries and, to a lesser extent, increased
AC adapter and wireless charger accessories sales. The personal electronics,
seasonal and portable audio departments decreased 4.9% in dollars, as well as
decreasing as a percentage of total retail sales to 11.3% in 2001 from 12.0% in
2000, due primarily to decreased sales of toys and giftables. The Connecting
Things SBU is expected to have a sales increase in 2002, primarily driven by
accessories, batteries and digital audio products.
GROSS PROFIT
2001 gross profit was $2,296.8 million or 48.1% of net sales and operating
revenues, compared with $2,369.6 million or 49.4% of net sales and operating
revenues in 2000. Gross profit for 2001 was reduced by a $26.2 million charge in
the fourth quarter for a write-down of non-strategic inventory product lines
which we intend to exit. Excluding this charge, gross profit would have been
48.6% of net sales and operating revenues. The decline in the gross profit
percentage from 49.4% to 48.6% was due to a decrease in the wireless
communication gross margin, coupled with this department's increase in sales as
a percent of total sales. This gross profit decrease was partially offset by a
decrease in the total retail sales mix for the computer department, which has a
lower gross margin than our overall average gross margin, as well as an increase
in the gross profit percentage for the accessories, batteries and technical
departments. Management anticipates that gross profit, as a percentage of net
sales and operating revenues, will increase during 2002, when compared to 2001,
enhanced by sales mix changes and an expected increase in residual income.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
The table below summarizes the breakdown of various components of our
consolidated selling, general and administrative ("SG&A") expense and its
related percentage of total sales and operating revenues.
Year Ended December 31,
-----------------------------------------------------------------------
2001 2000 1999
------------------- -------------------- --------------------
% of % of % of
Sales & Sales & Sales &
(In millions) Dollars Revenues Dollars Revenues Dollars Revenues
- ---------------------------------------------- -------------------- --------------------
Payroll and commissions $ 740.3 15.5% $ 748.7 15.6% $ 693.9 16.8%
Advertising 253.9 5.3 227.1 4.7 199.9 4.8
Rent 230.3 4.8 215.2 4.5 205.5 5.0
Other taxes 111.8 2.4 98.6 2.1 91.2 2.2
Utilities and telephone 73.2 1.5 69.4 1.4 62.2 1.5
Insurance 60.6 1.3 56.4 1.2 47.6 1.2
Credit card fees 34.9 0.7 31.7 0.7 27.5 0.7
Stock purchase
and savings plans 20.3 0.4 22.8 0.5 21.0 0.5
Bad debt 14.5 0.3 3.6 0.1 0.9 --
Printing, postage and
office supplies 12.2 0.3 13.6 0.3 11.3 0.3
Repairs and maintenance 11.4 0.2 11.6 0.2 12.0 0.3
Travel 10.4 0.2 13.8 0.3 10.5 0.3
Store closing costs 7.6 0.2 -- -- -- --
Other 132.5 2.8 120.1 2.5 112.5 2.6
-------------------- -------------------- --------------------
$1,713.9 35.9% $1,632.6 34.1% $1,496.0 36.2%
==================== ==================== ====================
Our SG&A expense increased 5.0% in dollars and increased as a percent of net
sales and operating revenues to 35.9% for the year ended December 31, 2001, from
34.1% for the year ended December 31, 2000. This 1.8 percentage point increase
in the SG&A percentage in 2001 was primarily attributable to an increase in
advertising expense during 2001, without proportional sales growth. An increase
in the rent expense in 2001 also contributed to the SG&A expense increase.
Payroll expense decreased by $8.4 million to $740.3 million in 2001 and
decreased as a percent of net sales and operating revenues to 15.5% in 2001,
compared to 15.6% in 2000. These decreases were due primarily to a reduction in
our labor force during 2001 and reduced incentive pay resulting from a decrease
in operating income. Advertising expense increased $26.8 million to $253.9
million and increased to 5.3% as a percentage of net sales and operating
revenues in 2001, compared to $227.1 million and 4.7% of sales in 2000. Both the
dollar and percentage point increases were due primarily to a decrease in
advertising contributions from our various alliance partners and, to a lesser
extent, an increase in TV commercials. Rent expense increased by $15.1 million
to $230.3 million in 2001 and increased as a percent of net sales and operating
revenues to 4.8% in 2001 from 4.5% in 2000. The rent increase was partially due
to new company-owned store openings throughout the year, as well as the addition
of the Cool Things @ Blockbuster test stores. The relocation of existing stores
to larger locations, as well as a renewal of store leases at higher rates, also
contributed to the rent expense increase. Bad debt expense increased by $10.9
million to $14.5 million in 2001 and increased as a percentage of net sales and
operating revenues to 0.3% in 2001 from 0.1% in 2000. The bad debt increase was
primarily related to both bankruptcies and uncollected accounts receivable, as
well as a note receivable from Digital:Convergence Corporation. Store closing
costs of $7.6 million in 2001 relate to the closure of 35 underperforming stores
prior to the expiration of their leases. In 2002, we expect SG&A expense to
increase slightly in dollars, but decrease slightly as a percentage of net sales
and operating revenues due to increasing sales volume.
DEPRECIATION
Depreciation and amortization expense increased $1.0 million dollars to $108.3
million and increased as a percent of net sales and operating revenues to 2.3%
in 2001 from 2.2% in 2000. We expect depreciation and amortization expense to
decrease in 2002. This expected decrease is the result of the sale-leaseback of
our corporate headquarters and the January 1, 2002, adoption of SFAS No. 142,
"Accounting for Goodwill and Other Intangible Assets," which eliminates
amortization of goodwill.
LOSS ON SALE OF ASSETS
In the fourth quarter of 2001, we sold and leased back most of our corporate
headquarters at a loss of $44.8 million. On June 22, 2001 we received $123.6
million for the settlement of the purchase price and settlement of the $136.0
million note which was received in connection with the sale of Computer City,
Inc. in 1998. Thus, we incurred an additional loss from the sale of Computer
City, Inc. of $12.4 million.
IMPAIRMENT OF LONG-LIVED ASSETS
AmeriLink Corporation, also known as RadioShack Installation Services ("RSIS"),
was acquired in 1999 to provide us with residential installation capabilities
for the technologies and services offered in our retail stores. Since its
acquisition, RSIS has incurred operating losses and negative cash flows. In 2000
and in 2001, we attempted to restructure and reorganize RSIS, but due to the
overall slowdown in the economy and the lag in the market for home Internet
connectivity services, RSIS continued to report losses. During the fourth
quarter of 2001, we prepared a revised analysis of its estimated future cash
flows, which indicated that its long-lived assets were impaired. The carrying
value of RSIS's long-lived assets (principally goodwill and fixed assets)
exceeded the discounted present value of the estimated future cash flows by
approximately $37.0 million. An impairment of goodwill for that amount was
recorded and included in the accompanying 2001 Consolidated Statement of Income.
The remaining balance of RSIS's goodwill is $8.1 million, which will now be
subject to future impairment analyses.
Our strategic alliance with Blockbuster to introduce a RadioShack
"store-within-a-store" at Blockbuster locations did not provide sufficient cash
flows to recover our investment in fixtures and other fixed assets. An
impairment loss of $2.8 million was recorded for those assets in 2001 and is
included in the accompanying Consolidated Statement of Income.
EMPLOYEE SEPARATION AND OTHER COSTS
During the third quarter of 2001, as part of our effort to control operating
costs, we incurred approximately $13.5 million in charges related to a reduction
of our labor force, primarily for early retirements and involuntary and
voluntary employee severance. In addition, during the fourth quarter, $4.8
million in charges were incurred relating to the closure of RSIS's national
commercial installation business. These costs are primarily comprised of
severance costs, write-offs of certain fixed assets and future lease
commitments. Costs incurred which impact continuing activities were excluded
from this charge.
NET INTEREST EXPENSE
Interest expense, net of interest income, was $37.8 million for 2001 versus
$36.1 million for 2000.
Interest expense decreased to $50.8 million in 2001, from $53.9 million in 2000.
This decrease was primarily the result of a decrease in the average debt
outstanding throughout 2001. Interest income decreased almost 27% to $13.0
million in 2001 from $17.8 million in 2000, due primarily to repayment of
various notes receivable associated with our exit of other retail formats in
previous years.
Interest income earned, including accretion of discount if applicable, on the
amounts outstanding during the three years ended December 31, 2001, 2000 and
1999 was as follows:
Year Ended December 31,
--------------------------------------------
(In millions) 2001 2000 1999
- ------------- ------------ ------------ ------------
CompUSA $ 6.1 $ 12.9 $ 12.9
Fry's 0.2 0.9 2.9
Other (includes short-
term investment interest) 6.7 4.0 4.6
------------ ------------ ------------
Total interest income $ 13.0 $ 17.8 $ 20.4
============ ============ ============
Interest expense, net of interest income, is expected to be up during 2002, when
compared to 2001.
PROVISION FOR LOSS ON INTERNET-RELATED INVESTMENT
During the second quarter of 2000, we made a $30.0 million investment in
Digital:Convergence Corporation, a privately-held Internet technology company.
In the first quarter of 2001, we believed that our investment had experienced a
decline in value that, in our opinion, was other than temporary. This belief was
due to the uncertainty surrounding Digital:Convergence's ability to secure
sufficient additional funding or to complete an initial public offering. As
such, we recorded a loss provision equal to our initial investment.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of 42.8% for 2001
and 38.0% for 2000. The increase in the effective tax rate in 2001 is the result
of the impairment of RSIS goodwill discussed above, which is not deductible for
tax purposes. We anticipate that the effective tax rate will be approximately
38.0% in 2002.
2000 COMPARED WITH 1999
- -----------------------
NET SALES AND OPERATING REVENUES
Percent of RadioShack Retail Sales
Year Ended December 31,
------------------------------
2000 1999
------------- -------------
Communications 27.9% 29.3%
Electronic parts, accessories and
specialty equipment 24.8 27.2
Audio and video 22.5 17.1
Personal electronics and seasonal 8.6 9.4
Personal computers and peripherals 8.7 8.7
Services, residuals and other 7.5 8.3
------------- -------------
100.0% 100.0%
============= =============
Our 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. The 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. The communications category decreased 1.4 percentage
points of total retail sales in 2000 primarily due to the audio and video
category becoming a larger percentage of total retail sales. Sales of electronic
parts, accessories and specialty equipment decreased 2.4 percentage points of
total retail sales in 2000, despite a 5% sales gain. Sales in the audio and
video category increased 5.4 percentage points in 2000, 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. Personal
electronics and seasonal products decreased 0.8 percentage points of the retail
sales mix in 2000, due primarily to an overall shift in the product mix
described above. Sales of personal computers and peripherals were unchanged as a
percent of the retail sales mix in 2000, despite a 12% unit sales gain in CPUs,
and had a 15% dollar sales gain for the year. 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, decreased 0.8
percentage points as a percent of the retail sales mix in 2000. This increase in
sales was primarily due to an increase in residual income received from our
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. In 2000, we earned approximately
$104.0 million of residual income, compared to $63.0 million in 1999.
GROSS PROFIT
Gross profit was $2,369.6 million or 49.4% of net sales and operating revenues
in 2000, 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 our product offerings to increased sales of third party branded
audio and video products, primarily DTH satellite systems, which have a lower
gross margin than our overall gross margin. 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.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Our SG&A expense increased 9.1%, but decreased as a percent of net sales and
operating revenues to 34.1% for the year ended December 31, 2000 from 36.2% for
the year ended December 31, 1999. This 2.1 percentage point decrease in the SG&A
percentage was due primarily to the favorable effect of our increased sales
during 2000.
Payroll expense increased by $54.8 million to $748.7 million in 2000, but
decreased as a percent of net sales and operating revenues to 15.6% in 2000,
compared to 16.8% in 1999. This dollar increase was due primarily to our retail
store expansions and increases in personnel, commissions, bonuses and other
incentives resulting from strong comparable store sales and profits. Rent
expense increased in dollars by $9.7 million to $215.2 million in 2000, but
decreased as a percent of net sales and operating revenues to 4.5% in 2000 from
5.0% in 1999. The rent increase was due primarily to new store openings
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 stores sales on the expense rate structure. Advertising expense
increased $27.2 million in dollars, but decreased as a percentage of 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 our sales increase.
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 our average debt
outstanding throughout 2000, due to share repurchases and our 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 our liquidation of other retail formats.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of 38.0% for both
2000 and 1999.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 142, "Accounting for
Goodwill and Other Intangible Assets" ("FAS 142"), in July 2001, which
establishes accounting and reporting standards for goodwill and other intangible
assets. FAS 142 became effective for all fiscal quarters of fiscal years
beginning after December 15, 2001. Among other things, FAS 142 eliminates the
amortization of goodwill, but requires an annual review of the possible
impairment of goodwill. We adopted FAS 142 effective January 1, 2002.
The Financial Accounting Standards Board issued SFAS No. 144, "Accounting for
the Impairment of Long-Lived Assets" ("FAS 144"), in October 2001, which
establishes accounting and reporting standards for impairment and disposition of
long-lived assets (except unidentifiable intangibles), including discontinued
operations. FAS 144 became effective for all financial statements issued for
fiscal years beginning after December 15, 2001 and, generally, its provisions
are to be applied prospectively. We adopted FAS 144 effective January 1, 2002
and are analyzing the provisions, as they relate to our accounting policies. The
impact, if any, of this adoption has not been determined at this time.
CASH FLOW AND LIQUIDITY
Year Ended December 31,
------------------------------------------------
(In millions) 2001 2000 1999
- ------------- -------------- -------------- --------------
Operating activities $ 775.8 $ 116.5 $ 561.6
Investing activities (2.3) (134.0) (121.0)
Financing activities (502.8) (16.4) (340.5)
In 2001, cash flow provided by operating activities was $775.8 million, compared
to $116.5 million and $561.6 million in 2000 and 1999, respectively. Cash flow
from net income, adjusted for non-cash items, decreased $103.9 million in 2001
from 2000. This decrease was primarily due to a decrease in operating profit in
2001. The increase in cash flow from operating activities was the result of
$763.2 million of cash provided by working capital components. Changes in
inventory provided $213.9 million in cash in 2001, compared to a use of $302.9
million in 2000, reflecting better inventory management. Additionally, changes
in accounts receivable, consisting primarily of amounts due from our strategic
partners, provided $165.8 million in cash during 2001, when compared to a use of
$149.0 million in the prior year. This favorable change resulted from an
enhanced collection effort and improved receivables management.
Investing activities used $2.3 million in cash in 2001, compared to $134.0
million and $121.0 million used in 2000 and 1999, respectively. Capital
expenditures approximated $139.2 million in 2001, compared to $119.6 million in
2000 and $102.4 million in 1999. Capital expenditures for these years consisted
primarily of our retail store expansions and remodels and upgrades of
information systems. In addition, in 2001 we purchased the land for our new
corporate headquarters building. We anticipate that the capital expenditure
requirement for 2002 will approximate $130.0 million to $135.0 million. These
expenditures will primarily relate to our future store expansions and remodels
and updated information systems. On June 22, 2001, we received $123.6 million
for the settlement of the purchase price of Computer City, Inc. and settlement
of the $136.0 million CompUSA note.
Cash used by financing activities was $502.8 million in 2001, compared to $16.4
million and $340.5 million in 2000 and 1999, respectively. Purchases of treasury
stock required cash of $308.3 million, $400.6 million and $422.2 million in
2001, 2000 and 1999, respectively. (See "Capital Structure and Financial
Condition" below for further information on our stock repurchase programs.) The
2001, 2000 and 1999 stock repurchases were partially funded by $53.7 million,
$66.3 million and $81.5 million, respectively, received from the sale of
treasury stock to employee stock plans and from stock option exercises.
Dividends paid, net of tax, in 2001, 2000 and 1999 amounted to $43.7 million,
$44.7 million and $42.5 million, respectively. The increase in dividends paid in
2000 resulted from an increase in the per share dividend in 2000. On July 6,
2001, we purchased all of Microsoft's preferred units in RadioShack.com LLC for
$88.0 million, thereby eliminating the minority interest in RadioShack.com LLC.
The long-term notes we issued in 2001 provided approximately $346.1 million in
cash, the majority of which was used to repay short-term debt. Additionally, in
1999 we received $100.6 million in cash from medium-term notes; the majority of
the proceeds was used to repay current maturities of long-term debt. However, in
2000 the increase in short-term debt was used primarily to fund increases in
accounts receivable, stock repurchases and additional inventory.
Our free cash flow, defined as our cash flow from operations less dividends paid
and capital expenditures, was $592.9 million in 2001, compared to a negative
free cash flow of $47.8 million in 2000 for the reasons described above. We
expect free cash flow to be approximately $200.0 to $250.0 million in 2002.
CAPITAL STRUCTURE AND FINANCIAL CONDITION
Management considers our financial structure and condition solid. At December
31, 2001, total capitalization was $1,449.0 million, which consisted of $670.9
million of debt and $778.1 million of equity. This resulted in a debt-to-total
capitalization ratio of 46.3%. The prior year debt-to-total capitalization ratio
was 47.0%. The decrease resulted from utilizing the strong cash flow during 2001
to reduce total debt by $110.6 million. Long-term debt as a percentage of total
capitalization was 39.0% at December 31, 2001, compared to 18.2% at December 31,
2000 and 23.9% at December 31, 1999. This increase in 2001 was due to the
issuance of $350.0 million of 10-year 7 3/8% notes due May 15, 2011.
Our debt is considered investment grade by the rating agencies. On November 16,
2001, Fitch reduced their ratings from A to A- and F1 to F2. All other ratings
were unchanged during the year. Below are their latest ratings by category.
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 F2
Our debt primarily consists of medium-term notes and two issuances of 10-year
long-term notes.
We have a $300.0 million Debt Shelf Registration Statement ("Shelf
Registration") which became effective in August 1997. In August 1997, we issued
$150.0 million of 10-year unsecured long-term 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. These
notes are due September 1, 2007.
We also issued, in various amounts and on various dates from December 1997
through September 1999, medium-term notes totaling $150.0 million under the
Shelf Registration. At December 31, 2001, $146.0 million of these notes remained
outstanding. The interest rates at December 31, 2001, for the outstanding $146.0
million medium-term notes ranged from 6.09% to 7.35% and had a weighted average
coupon rate of 6.6%. These notes have maturities ranging from 2002 to 2008.
On May 11, 2001, we issued $350.0 million of 10-year 7 3/8% notes in a private
offering to initial purchasers who offered the notes to qualified institutional
buyers by relying upon SEC Rule 144A. The interest rate on the notes is 7.375%
per annum with interest payable on November 15 and May 15 of each year. Payment
of interest on the notes commenced on November 15, 2001, and the notes mature on
May 15, 2011. On August 3, 2001, under the terms of an exchange offering filed
with the SEC, we exchanged substantially all of these notes for a similar amount
of publicly registered notes. The net effect of this exchange was that no
additional debt was issued on August 3, 2001, and substantially all of the notes
are now publicly registered with the SEC.
During the third quarter of 2001, we entered into several interest rate swap
agreements, with maturities ranging from 2004 to 2007, to manage our exposure to
interest rate movements by effectively converting a portion of our long-term
debt from fixed to variable rates. The notional amount of the interest rate
swaps subject to variable rates is $150.0 million. Under these agreements, we
have contracted to pay a variable rate based upon LIBOR and to receive fixed
rate payments ranging from 6.95% to 7.35%. We have designated the agreements as
fair value hedging instruments. At December 31, 2001, we recorded an asset of
$2.9 million (its fair value) for the swap agreements and adjusted the fair
value of the related debt by the same amount. The effect of these agreements was
a reduction in interest expense of $1.3 million during 2001, when compared to
the fixed rates. At current interest rates, we expect this favorable condition
to occur again in 2002. We entered into these agreements to balance our debt
portfolio by changing from all fixed interest rates to a mixture of fixed and
floating interest rates, thereby taking advantage of lower short-term rates.
From time to time, we utilize short-term debt such as commercial paper issuance
and uncommitted bank loans to supplement our short-term financing needs. The
commercial paper and the short-term seasonal bank debt have a typical maturity
of 90 days or less. The amount of commercial paper that could be outstanding
during 2001 was limited to a maximum of $600.0 million. Our commercial paper
program is supported by our revolving credit facility, which is described below.
In the second quarter of 2001, we renewed our existing $300.0 million 364-day
revolving credit facility and also extended the maturity date to June 2002. The
terms of the 364-day revolving credit facility remained similar to the previous
facility. Our $300.0 million five-year revolving credit facility maturing June
2003 did not change. The revolving credit facilities will support any future
commercial paper borrowings and are otherwise available 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.
We use operating leases, primarily for our retail locations, distribution
centers and corporate headquarters, to lower our capital requirements. We do not
have any other off-balance sheet financing arrangements.
Management believes that our present borrowing capacity is greater than our
established credit lines and long-term debt in place.
On December 14, 2000, we announced that our Board of Directors had authorized
management to purchase up to 10.0 million shares of our common stock. During
2001, 9.3 million shares were repurchased for $250.4 million. Additionally, on
December 13, 2001, we announced that our Board of Directors had expanded that
existing program to allow management to purchase up to 25.0 million shares of
our common stock. The expanded program has no expiration date.
The purchases under the share repurchase program 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 2002 in the open
market with funding of the programs coming from existing cash balances, excess
free cash flow and short-term borrowings, if needed.
In the fourth quarter of 2001, we announced the sale of our corporate
headquarters building and our plans to construct a new headquarters in Fort
Worth, Texas. We entered into sale-leaseback agreements whereby our existing
corporate headquarters land and buildings were sold and leased back to us. These
agreements provide us with the time necessary to arrange for the construction of
the new facility. Currently, our plans are to finance the new corporate campus
with an off-balance sheet operating lease arrangement. We believe that this type
of structure, when used as designed and in moderation, enables us to maintain
financial flexibility and is appropriate. Management recognizes that this type
of financing is under review and that the structure may change, making it
uneconomical to execute and requiring us to record the new corporate campus and
related debt on our balance sheet. We have explored alternatives in the event
that changes occur and believe that we have a number of viable options available
to finance our corporate headquarters facility.
The tables below, as well as the information contained in Note 7 - "Indebtedness
and Borrowing Facilities" to our financial statements, summarizes our various
repayment requirements, interest rates and available credit lines.
The table below contains the contractual commitments associated with our debt
obligations, lease obligations, and marketing agreements.
(In millions) December 31,
- --------------------------------------------------------------------------------------------------------
2002 2003 2004 2005 2006 Thereafter Total
----------------------------------------------------------------------------
Debt principal $ 85.3 $ 20.0 $ 39.5 $ -- $ 5.1 $500.8 $ 650.7
Debt interest 42.6 39.7 38.6 36.7 36.7 120.4 314.7
Capital leases 2.4 -- -- -- -- -- 2.4
Operating leases 172.6 152.5 118.4 80.0 48.6 79.9 652.0
Marketing agreements 62.3 8.1 1.5 -- -- -- 71.9
- --------------------------------------------------------------------------------------------------------
$365.2 $220.3 $198.0 $116.7 $ 90.4 $701.1 $1,691.7
============================================================================
The table below contains our credit commitments from various financial institutions.
(In millions)
- --------------------------------------------------------------------------------------------------------
Commitment Expiration Per Period
--------------------------------------------------------
Total Amounts Less than
Credit Commitments Committed 1 year 1-3 years 4-5 years Over 5 years
- --------------------------------------------------------------------------------------------------------
Lines of credit $ 600.0 $ 300.0 $ 300.0 -- --
Stand-by letters of credit 3.2 1.7 1.5 -- --
- --------------------------------------------------------------------------------------------------------
Total commercial commitments $ 603.2 $ 301.7 $ 301.5 -- --
========================================================================
INFLATION
Inflation has not significantly impacted us over the past three years.
Management does not expect inflation to have a significant impact on operations
in the foreseeable future, unless global or geo-political situations
substantially affect the world economy.
ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
At December 31, 2001, we did not have any derivative instruments that materially
increased our exposure to market risks for interest rates, foreign currency
rates, commodity prices or other market price risks other than the interest rate
swaps noted above. We do not use derivatives for speculative purposes.
Our exposure to market risks results from changes in short-term interest rates.
Interest rate risk exists principally with respect to $150.0 million of
indebtedness, which, because of the interest rate swaps discussed in Note 2 of
the financial statements, effectively bears interest at short-term floating
rates. In the future, an unfavorable change of 100 basis points in the interest
rate applicable to this floating-rate indebtedness could result in additional
interest expense of $1.5 million annually. This assumption assumes no change in
the principal or the incurring of additional indebtedness.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to our Consolidated Financial Statements is found on page 24. Our
Financial Statements and Notes to these 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.
We 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 under Regulation 14A. The information called for by this Item with
respect to directors has been omitted under General Instruction G(3). This
information is incorporated by reference from the Proxy Statement for the 2002
Annual Meeting. For information relating to our Executive Officers, see Part I
of this report. The Section 16(a) reporting information is incorporated by
reference from the Proxy Statement for the 2002 Annual Meeting.
ITEM 11. EXECUTIVE COMPENSATION.
We 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 under Regulation 14A. The information called for by this Item with
respect to executive compensation has been omitted under General Instruction
G(3). This information is incorporated by reference from the Proxy Statement for
the 2002 Annual Meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
We 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 under Regulation 14A. The information called for by this Item with
respect to security ownership of certain beneficial owners and management has
been omitted under General Instruction G(3). This information is incorporated by
reference from the Proxy Statement for the 2002 Annual Meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
We 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 under Regulation 14A. The information called for by this Item with
respect to certain relationships and transactions with management and others has
been omitted under General Instruction G(3). This information is incorporated by
reference from the Proxy Statement for the 2002 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 25.
2. None
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 48, which
immediately precedes such exhibits.
Certain instruments defining the rights of holders of our long-term debt are not
filed as exhibits to this report because the total amount of securities
authorized thereunder does not exceed ten percent of the our total assets on a
consolidated basis. We hereby agree to furnish the Securities and Exchange
Commission copies of such instruments upon request.
(b)Reports on Form 8-K.
On December 19 2001, we announced moves to strengthen and restructure our
asset base. The Form 8-K was filed on December 21, 2001.
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, 2002 /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, 2002.
Signature Title
/s/ Leonard H. Roberts Chairman, Chief Executive Officer and Director
- -----------------------------(Chief Executive Officer)
Leonard H. Roberts
/s/ Michael D. Newman Senior Vice President and Chief Financial Officer
- -----------------------------(Principal Financial Officer)
Michael D. Newman
/s/ Richard L. Ramsey Vice President and Controller
- -----------------------------(Principal Accounting Officer)
Richard L. Ramsey
/s/ Frank J. Belatti Director Director
- ----------------------------- -----------------------------
Frank J. Belatti Jack L. Messman
/s/ Ronald E. Elmquist Director /s/ William G. Morton, Jr. Director
- ----------------------------- -----------------------------
Ronald E. Elmquist William G. Morton, Jr.
Director /s/ Thomas G. Plaskett Director
- ----------------------------- -----------------------------
Richard J. Hernandez Thomas G. Plaskett
/s/ Lawrence V. Jackson Director 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
RADIOSHACK CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants............................... 26
Consolidated Statements of Income for each of the three
years in the period ended December 31, 2001................... 27
Consolidated Balance Sheets at December 31, 2001
and December 31, 2000......................................... 28
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2001................... 29
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 31, 2001......... 29
Notes to Consolidated Financial Statements...................... 30-47
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 25 present fairly, in all material respects, the financial
position of RadioShack Corporation and its subsidiaries (the "Company") at
December 31, 2001 and 2000 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001 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 20, 2002
CONSOLIDATED STATEMENTS OF INCOME
RadioShack Corporation and Subsidiaries
Year Ended December 31,
------------------------------------------------------------------------
2001 2000 1999
% of % of % of
(In millions, except per share amounts) Dollars Revenues Dollars Revenues Dollars Revenues
- -----------------------------------------------------------------------------------------------------------------
Net sales and operating revenues $4,775.7 100.0% $4,794.7 100.0% $4,126.2 100.0%
Cost of products sold 2,478.9 51.9 2,425.1 50.6 2,042.7 49.5
--------- --------- --------- --------- --------- ---------
Gross profit 2,296.8 48.1 2,369.6 49.4 2,083.5 50.5
--------- --------- --------- --------- --------- ---------
Operating expenses:
Selling, general and administrative 1,713.9 35.9 1,632.6 34.1 1,496.0 36.2
Depreciation and amortization 108.3 2.3 107.3 2.2 90.2 2.2
Loss on sale of assets 57.2 1.2 -- -- -- --
Impairment of long-lived assets 39.8 0.8 -- -- -- --
Employee separation and other costs 18.3 0.4 -- -- -- --
--------- --------- --------- --------- --------- ---------
Total operating expenses 1,937.5 40.6 1,739.9 36.3 1,586.2 38.4
--------- --------- --------- --------- --------- ---------
Operating income 359.3 7.5 629.7 13.1 497.3 12.1
Interest income 13.0 0.3 17.8 0.4 20.4 0.5
Interest expense (50.8) (1.1) (53.9) (1.1) (37.2) (0.9)
Provision for loss on Internet-
related investment (30.0) (0.6) -- -- -- --
--------- --------- --------- --------- --------- ---------
Income before income taxes 291.5 6.1 593.6 12.4 480.5 11.7
Provision for income taxes 124.8 2.6 225.6 4.7 182.6 4.5
--------- --------- --------- --------- --------- ---------
Net income 166.7 3.5 368.0 7.7 297.9 7.2
Preferred dividends 4.9 0.1 5.3 0.1 5.5 0.1
--------- --------- --------- --------- --------- ---------
Net income available to common
shareholders $ 161.8 3.4% $ 362.7 7.6% $ 292.4 7.1%
========= ========= ========= ========= ========= =========
Net income available per common
share:
Basic $ 0.88 $ 1.94 $ 1.51
========= ========= =========
Diluted $ 0.85 $ 1.84 $ 1.43
========= ========= =========
Shares used in computing earnings
per common share:
Basic 183.8 187.3 194.2
========= ========= =========
Diluted 191.2 197.7 205.0
========= ========= =========
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) 2001 2000
- ------------------------------------------------------------------------ --------
Assets
Current assets:
Cash and cash equivalents $ 401.4 $ 130.7
Accounts and notes receivable, net 276.3 464.7
Inventories, at lower of cost or market 949.8 1,164.3
Other current assets 86.8 58.5
-------- --------
Total current assets 1,714.3 1,818.2
Property, plant and equipment, net 417.7 456.8
Other assets, net of accumulated amortization 113.1 301.5
-------- --------
Total assets $2,245.1 $2,576.5
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities $ 105.5 $ 478.6
of long-term debt
Accounts payable 206.7 234.8
Accrued expenses 336.1 330.1
Income taxes payable 178.1 188.9
-------- --------
Total current liabilities 826.4 1,232.4
Long-term debt, excluding current maturities 565.4 302.9
Other non-current liabilities 75.2 60.9
-------- --------
Total liabilities 1,467.0 1,596.2
-------- --------
Minority interest in consolidated subsidiary -- 100.0
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;
64,500 and 68,800 shares issued, respectively 64.5 68.8
Common stock, $1 par value, 650,000,000 shares authorized;
236,033,000 shares issued 236.0 236.0
Additional paid-in capital 138.8 116.1
Retained earnings 1,787.3 1,661.5
Treasury stock, at cost; 59,233,000 and 50,269,000
shares, respectively (1,443.5) (1,189.6)
Unearned deferred compensation (4.3) (11.5)
Accumulated other comprehensive loss (0.7) (1.0)
-------- --------
Total stockholders' equity 778.1 880.3
Commitments and contingent liabilities (see Note 10) -------- --------
Total liabilities and stockholders' equity $2,245.1 $2,576.5
======== ========
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) 2001 2000 1999
------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 166.7 $ 368.0 $ 297.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loss on Internet-related investment 30.0 -- --
Impairment of long-lived assets 39.8 -- --
Loss on sale of assets 57.2 -- --
Depreciation and amortization 108.3 107.3 90.2
Deferred income taxes and other items (9.4) 32.1 58.6
Provision for credit losses and bad debts 14.5 3.6 0.9
Changes in operating assets and liabilities:
Receivables 165.8 (149.0) (29.3)
Inventories 213.9 (302.9) 52.6
Other current assets 1.7 (6.2) 15.1
Accounts payable, accrued expenses and income taxes (12.7) 63.6 75.6
-------- -------- --------
Net cash provided by operating activities 775.8 116.5 561.6
-------- -------- --------
Investing activities:
Additions to property, plant and equipment (139.2) (119.6) (102.4)
Proceeds from sale of property, plant and equipment 17.4 1.5 5.6
Proceeds from sale of equity securities -- 17.9 --
Proceeds from early retirement of CompUSA note 123.6 -- --
Investment in securities -- (30.0) (20.0)
Other investing activities (4.1) (3.8) (4.2)
-------- -------- --------
Net cash used by investing activities (2.3) (134.0) (121.0)
-------- -------- --------
Financing activities:
Purchases of treasury stock (308.3) (400.6) (422.2)
Exercise of common stock put options (2.1) (8.6) --
Proceeds from sale of common stock put options 0.3 0.5 4.4
Sale of treasury stock to stock plans 46.3 46.8 39.5
Proceeds from exercise of stock options 7.4 19.5 42.0
Proceeds from (purchase of) minority interest
in consolidated subsidiary (88.0) 100.0 --
Dividends paid (43.7) (44.7) (42.5)
Changes in short-term borrowings, net (443.6) 285.2 (42.3)
Additions to long-term borrowings 346.1 -- 100.6
Repayments of long-term borrowings (17.2) (14.5) (20.0)
-------- -------- --------
Net cash used by financing activities (502.8) (16.4) (340.5)
-------- -------- --------
Increase/(decrease) in cash and cash equivalents 270.7 (33.9) 100.1
Cash and cash equivalents, beginning of period 130.7 164.6 64.5
-------- -------- --------
Cash and cash equivalents, end of period $ 401.4 $ 130.7 $ 164.6
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
RadioShack Corporation and Subsidiaries
Shares at December 31, Dollars at December 31,
-------------------------------- --------------------------------
(In millions) 2001 2000 1999 2001 2000 1999
- ------------ -------- -------- -------- -------- -------- --------
Preferred stock
Beginning of year 0.1 0.1 0.1 $ 68.8 $ 72.8 $ 100.0
Cancellation of preferred stock, net of
repurchases -- -- -- (4.3) (4.0) (27.2)
-------- -------- -------- -------- -------- --------
End of year 0.1 0.1 0.1 $ 64.5 $ 68.8 $ 72.8
======== ======== ======== ======== ======== ========
Common stock
Beginning of year 236.0 235.8 139.2 $ 236.0 $ 235.8 $ 139.2
Two-for-one common stock split -- -- 96.6 -- -- 96.6
Restricted stock awards, net of
forfeitures -- 0.2 -- -- 0.2 --
-------- -------- -------- -------- -------- --------
End of year 236.0 236.0 235.8 $ 236.0 $ 236.0 $ 235.8
======== ======== ======== ======== ======== ========
Treasury stock
Beginning of year (50.2) (45.1) (41.8) $(1,189.6) $ (892.3) $(1,161.6)
Purchase of treasury stock (10.7) (7.9) (8.5) (296.4) (368.6) (435.9)
Issuance of common stock 1.3 1.5 2.2 33.5 29.9 37.1
Exercise of stock options and grant of
stock awards 0.4 1.3 3.0 9.0 30.1 51.6
Cancellation of preferred stock, net of
repurchases -- -- -- -- -- 28.8
Two-for-one common stock split -- -- -- -- -- 603.8
Other -- -- -- -- 11.3 (16.1)
-------- -------- -------- -------- -------- --------
End of year (59.2) (50.2) (45.1) $(1,443.5) $(1,189.6) $ (892.3)
======== ======== ======== ======== ======== ========
Additional paid-in capital
Beginning of year $ 116.1 $ 82.4 $ 109.7
Issuance of common stock 15.5 21.6 74.9
Restricted stock awards, net of
forfeitures (0.9) 7.0 (10.6)
Exercise of stock options and grant of
stock awards -- 3.5 28.6
Two-for-one common stock split -- -- (123.0)
Purchase of minority interest, net of
taxes 7.8 -- --
Other 0.3 1.6 2.8
-------- -------- --------
End of year $ 138.8 $ 116.1 $ 82.4
======== ======== ========
Retained earnings
Beginning of year $ 1,661.5 $ 1,353.3 $ 1,693.4
Net income 166.7 368.0 297.9
Series B convertible stock dividends,
net of taxes (3.2) (3.4) (3.6)
Cancellation of preferred stock, net of
repurchases (7.4) (14.4) (18.0)
Common stock cash dividends declared (30.3) (42.0) (38.6)
Two-for-one common stock split -- -- (577.8)
-------- -------- --------
End of year $ 1,787.3 $ 1,661.5 $ 1,353.3
======== ======== ========
Unearned deferred compensat