Radio Shack 2008 Annual Report Download - page 45

employees, with $3.6 million in benefits paid to that date. Additionally, as part of our store closure
activities, we incurred and recognized in SG&A $6.1 million in expenses in 2006 primarily in connection
with fees paid to outside liquidators and for close-out promotional activities for the 481 stores.
All stores identified for closure under the restructuring program were closed as of July 31, 2006.
Additionally, we continue to negotiate buy-out agreements with our landlords; however, remaining lease
obligations of $0.8 million still existed at December 31, 2008. There is uncertainty as to when, and at what
cost, we will fully settle all remaining lease obligations.
Distribution Center Consolidations: We closed a distribution center located in Southaven, Mississippi,
and sold a distribution center in Charleston, South Carolina, in 2006. During the year ended December 31,
2006, we recognized a lease obligation charge in SG&A in the amount of $2.0 million on the lease of the
Southaven distribution center and a gain of $2.7 million on the sale of the Charleston distribution center.
We also incurred a $0.5 million charge related to severance for approximately 100 employees.
Additionally, there were $0.4 million in other expenses.
Service Center Operations: We closed or sold five service center locations during the year ended
December 31, 2006, resulting in the elimination of approximately 350 positions. We recognized charges to
SG&A of $1.2 million and $0.9 million related to lease obligations and severance, respectively. This
severance obligation was paid as of December 31, 2006. Additionally, there were $0.1 million in other
expenses.
Overhead Cost Reductions: Management conducted a review of our cost structure to identify potential
sources of cost reductions. In connection with this review, we made decisions to lower these costs,
including reducing our advertising spend rate in connection with adjustments to our media mix. During the
year ended December 31, 2006, we reduced our workforce by approximately 514 positions, primarily
within our corporate headquarters. We recorded charges to SG&A for termination benefits and related
costs of $11.9 million, of which $6.4 million had been paid as of December 31, 2006. During 2007,
severance payments totaling $5.0 million were paid, leaving an accrued severance balance of $0.7 million
as of December 31, 2007.
Inventory Update: We replaced underperforming merchandise with new, faster-moving merchandise.
We recorded a pre-tax charge to cost of products sold of approximately $62 million during the fourth
quarter of 2005, as a result of both our normal inventory review process and the inventory update aspect
of our restructuring program.
The following table summarizes the activity related to the 2006 restructuring program from February 17,
2006, through December 31, 2007:
Asset Accelerated
(In millions) Severance Leases Impairments Depreciation Other Total
Total charges for 2006 $ 16.1 $ 12.3 $ 9.2 $ 2.1 $ 4.9 $ 44.6
Total spending for 2006,
net of amounts realized
from sale of fixed assets
(10.4)
(8.5)
--
--
(4.6)
(23.5)
Total non-cash items -- 0.9 (9.2) (2.1) (0.2) (10.6)
Accrual at December 31,
2006 5.7 4.7 -- -- 0.1 10.5
Total spending for 2007 (5.0) (3.9) -- -- (0.1) (9.0)
Additions for 2007 -- 1.4 -- -- -- 1.4
Accrual at December 31,
2007 $ 0.7 $ 2.2 $ -- $ -- $ -- $ 2.9
We made cash payments during 2008 in the amount of $2.1 million. The total remaining accrual at
December 31, 2008, was $0.8 million related to remaining lease obligations.
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