Radio Shack 2008 Annual Report Download - page 40

CAPITAL STRUCTURE AND FINANCIAL CONDITION
We consider our capital structure and financial condition to be strong. We had $814.8 million in cash and
cash equivalents at December 31, 2008, for our funding needs. Additionally, we have available to us a
$325 million bank credit facility. As of December 31, 2008, we had no borrowings under this credit facility.
Debt Obligations
Convertible Notes: In August 2008, we issued $375 million principal amount of convertible senior notes
due August 1, 2013, (the “Convertible Notes”) in a private offering. Each $1,000 of principal of the
Convertible Notes is initially convertible, under certain circumstances, into 41.2414 shares of our common
stock (or a total of approximately 15.5 million shares), which is the equivalent of $24.25 per share, subject
to adjustment upon the occurrence of specified events set forth under terms of the Convertible Notes.
Upon conversion, we would pay the holder the cash value of the applicable number of shares of our
common stock, up to the principal amount of the note. Amounts in excess of the principal amount, if any,
(the “excess conversion value”) may be paid in cash or in stock, at our option. Holders may convert their
Convertible Notes into common stock on the net settlement basis described above at any time from May
1, 2013, until the close of business on July 29, 2013, or if, and only if, one of the following conditions
occurs:
• During any calendar quarter, and only during such calendar quarter, if the closing price of our
common stock for at least 20 trading days in the period of 30 consecutive trading days ending on
the last trading day of the preceding calendar quarter exceeds 130% of the conversion price per
share of common stock in effect on the last day of such preceding calendar quarter
• During the five consecutive business days immediately after any 10 consecutive trading day
period in which the average trading price per $1,000 principal amount of Convertible Notes was
less than 98% of the product of the closing price of the common stock on such date and the
conversion rate on such date
• We make specified distributions to holders of our common stock or specified corporate
transactions occur
Concurrent with the issuance of the Convertible Notes, we entered into note hedge transactions with Citi
and Bank of America whereby we have the option to purchase up to 15.5 million shares of our common
stock at a price of $24.25 per share (the “Convertible Note Hedges”), and we sold warrants to the same
financial institutions whereby they have the option to purchase up to 15.5 million shares of our common
stock at a per share price of $36.60 (the “Warrants”). The Convertible Note Hedges and Warrants were
structured to reduce the potential future share dilution associated with the conversion of the Convertible
Notes. The Convertible Note Hedges and Warrants are separate contracts with the two financial
institutions, are not part of the terms of the Convertible Notes, and do not affect the rights of holders under
the Convertible Notes. A holder of the Convertible Notes does not have any rights with respect to the
Convertible Note Hedges or Warrants.
The net proceeds retained by RadioShack as a result of the issuance of the Convertible Notes, the
purchase of the Convertible Note Hedges, and the proceeds received from the issuance of the Warrants
were approximately $319.2 million. We completed these transactions to secure a source of liquidity in
preparation for our $300 million credit facility expiring in June of 2009. On September 11, 2008, we
terminated this credit facility.
For a more detailed description of the Convertible Notes, Convertible Note Hedges and Warrants, please
see Note 5 – “Indebtedness and Borrowing Facilities” and Note 6 – “Stockholders’ Equity” in the Notes to
Consolidated Financial Statements.
Long-Term Notes: On May 11, 2001, we issued $350 million of 10-year 7.375% notes in a private
offering to qualified institutional buyers under SEC Rule 144A. The annual interest rate on the notes is
7.375% per annum with interest payable on November 15 and May 15 of each year. The notes contain
certain non-financial covenants and mature on May 15, 2011. In August 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 exchange resulted in substantially all of the notes becoming registered with
the SEC and did not result in additional debt being issued.
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