Radio Shack 2008 Annual Report Download - page 33

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In connection with the above sale to TCC, we entered into an agreement with TCC to convey certain
personal property located in the corporate headquarters and certain real property located in close
proximity to the corporate headquarters in exchange for an amended and restated lease to occupy a
reduced portion of the corporate headquarters for a shorter time period. The amended and restated lease
agreement provides for us to occupy approximately 40% of the corporate headquarters complex for a
primary term of three years with no rental payments required during the term. The agreement also
provides for a renewal option on approximately half of this space for an additional two years at market
rents.
This agreement resulted in a non-cash net charge to other SG&A of $12.1 million for the second quarter of
2008. This net amount consisted of a net loss of $2.8 million related to the assets conveyed to TCC and a
$9.3 million charge to reduce a receivable for economic development incentives associated with the
corporate headquarters to its net realizable value.
DEPRECIATION AND AMORTIZATION
The table below gives a summary of our total depreciation and amortization by segment.
Year Ended December 31,
(In millions) 2008 2007
2006
U.S. RadioShack company-operated stores $ 52.9 $ 53.4 $ 58.2
Kiosks 5.8 6.3 10.2
Other 1.8 1.7 2.3
Unallocated 38.8 51.3 57.5
Total depreciation and amortization $ 99.3 $ 112.7 $ 128.2
The table below provides an analysis of total depreciation and amortization.
Year Ended December 31,
(In millions) 2008 2007
2006
Depreciation and amortization expense $ 88.1 $ 102.7 $ 117.5
Depreciation and amortization included in
cost of products sold
11.2
10.0
10.7
Total depreciation and amortization $ 99.3 $ 112.7 $ 128.2
Total depreciation and amortization for 2008 declined $13.4 million or 11.9%. This decrease was primarily
due to reduced capital expenditures in 2006 and 2007 when compared with prior years.
IMPAIRMENT OF LONG-LIVED ASSETS AND OTHER CHARGES
Impairment of long-lived assets and other charges was $2.8 million and $2.7 million for 2008 and 2007,
respectively. These amounts were related primarily to our Sprint Nextel kiosk operations and
underperforming U.S. RadioShack company-operated stores. We recorded this amount based on the
remaining estimated future cash flows related to these specific stores. It was determined that the net book
value of many of the stores' long-lived assets was not recoverable. For the stores with insufficient estimated
cash flows, we wrote down the associated long-lived assets to their estimated fair value.
NET INTEREST EXPENSE
Consolidated interest expense, net of interest income, was $15.3 million for 2008 versus $16.2 million for
2007, a decrease of $0.9 million or 5.6%.
Interest expense decreased $8.9 million to $29.9 million in 2008 from $38.8 million in 2007. This decrease
was primarily attributable to lower interest rates on our floating rate debt exposure resulting from our
interest rate swaps. Due to the implementation of FASB Staff Position No. APB 14-1, “Accounting for
Convertible Debt Instruments That May Be Settled in Cash Upon Conversion,” for our convertible notes, we
will recognize additional non-cash interest expense of $14 million for the year ended December 31, 2009.
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