Radio Shack 2008 Annual Report Download - page 72

stock in open market purchases. During 2008, we repurchased approximately 0.1 million shares or $1.4
million of our common stock under this plan. As of December 31, 2008, there were no further share
repurchases authorized under this plan.
In July 2008, our Board of Directors approved a share repurchase program with no expiration date
authorizing management to repurchase up to $200 million of our common stock. During the third quarter
of 2008, we repurchased 6.0 million shares or $110.0 million of our common stock under this plan. As of
December 31, 2008, there was $90.0 million available for share repurchases under this plan.
Dividends Declared: We declared dividends of $0.25 for each of the years 2008, 2007 and 2006,
respectively, which were paid annually in December.
Call Spread Transactions: In connection with the issuance of the 2013 Convertible Notes (see Note 5 -
"Indebtedness and Borrowing Facilities"), we entered into separate convertible note hedge transactions and
separate warrant transactions related to our common stock with Citi and Bank of America to reduce the
potential dilution upon conversion of the Convertible Notes.
Under the terms of the convertible note hedge arrangements (the “Convertible Note Hedges”), we paid $86.3
million for a forward purchase option contract under which we are entitled to purchase a fixed number of
shares of our common stock at a price per share of $24.25. In the event of the conversion of the Convertible
Notes, this forward purchase option contract allows us to purchase, at a fixed price equal to the implicit
conversion price of common shares issued under the Convertible Notes, a number of common shares equal
to the common shares that we issue to a note holder upon conversion. Settlement terms of this forward
purchase option allow us to elect cash or share settlement based on the settlement option we choose in
settling the conversion feature of the Convertible Notes. The Convertible Note Hedges expire on August 1,
2013.
Also concurrent with the issuance of the 2013 Convertible Notes, we sold warrants (the “Warrants”)
permitting the purchasers to acquire shares of our common stock. The Warrants are currently exercisable for
15.5 million shares of RadioShack common stock at a current exercise price of $36.60 per share. We
received $39.9 million in proceeds for the sale of the Warrants. The Warrants may be settled at various dates
in November 2013 through March 2014. The warrants provide for net share settlement. In no event shall we
be required to deliver a number of shares in connection with the transaction in excess of twice the aggregate
number of warrants.
We determined that the Convertible Note Hedges and Warrants meet the requirements of Emerging Issues
Task Force Issue No. 00-19, "Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled In, a Company's Own Stock," and other relevant literature and, therefore, are classified as equity
transactions. As a result, we recorded the purchase of the Convertible Note Hedges as a reduction in
additional paid-in capital and the proceeds of the Warrants as an increase to additional paid-in capital in the
Consolidated Balance Sheets, and we will not recognize subsequent changes in the fair value of the
agreements in the financial statements.
In accordance with SFAS 128, the Warrants will have no impact on diluted net income per share until our
common stock price exceeds the per share strike price of $36.60 for the Warrants. We will include the effect
of additional shares that may be issued upon exercise of the Warrants using the treasury stock method. The
Convertible Note Hedges are antidilutive and, therefore, will have no impact on diluted net income per share.
NOTE 7 – STOCK-BASED INCENTIVE PLANS
We have implemented several plans to award employees with stock-based compensation, which are
described below.
Stock Option Plans: Under the Incentive Stock Plans (“ISPs”) described below, the exercise price of options
must be equal to or greater than the fair market value of a share of our common stock on the date of grant.
The Management Development and Compensation Committee (“MD&C”) of our Board of Directors specifies
the terms for grants of options under these ISPs; terms of these options may not exceed ten years. Grants of
options generally vest over three years and grants typically have a term of seven or ten years. Option
agreements issued under the ISPs generally provide that, in the event of a change in control, all options
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