Radio Shack 2009 Annual Report Download - page 42

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In June and August 2003, we entered into interest rate swap agreements with underlying notional amounts
of debt of $100 million and $50 million, respectively, and both with maturities in May 2011. Our counterparty
for these swaps is Citigroup. These swaps effectively convert a portion of our long-term fixed rate debt to a
variable rate. For more information regarding our interest rate swaps, refer to Note 11 – “Derivative Financial
Instruments.”
In September 2009, we completed a tender offer to purchase for cash any and all of these notes. Upon
expiration of the offer, $43.2 million of the aggregate outstanding principal amount of the notes was validly
tendered and accepted. We paid a total of $46.6 million, which consisted of the purchase price of $45.4
million for the tendered notes plus $1.2 million in accrued and unpaid interest, to the holders of the tendered
notes.
Operating Leases: We use operating leases, primarily for our retail locations and our corporate campus, to
lower our capital requirements.
Continuing Lease Obligations: We have obligations under retail leases for locations that we assigned to
other businesses. The majority of these lease obligations arose from leases for which CompUSA Inc.
(“CompUSA”) assumed responsibility as part of its purchase of our Computer City, Inc. subsidiary in
August 1998. Because the company that assumed responsibility for these leases has ceased operations,
we may be responsible for rent due under the leases.
Following an announcement by CompUSA in February 2007 of its intention to close as many as 126
stores and an announcement in December 2007 that it had been acquired by Gordon Brothers Group,
CompUSA’s stores ceased operations in January 2008. We may be responsible for rent due on a portion
of the leases that relate to the closed stores. As of February 8, 2010, we had been named as a defendant
in a total of 12 lawsuits from lessors seeking payment from us, six of which had been resolved.
Based on all available information pertaining to the status of these lawsuits, and after applying the
FASB’s accounting guidance on accounting for contingencies, the balance of our accrual for these
obligations was $6.2 million and $9.0 million at December 31, 2009 and 2008, respectively. We have
continued to monitor this situation and will update our accrual to reflect new information on outstanding
litigation and settlements as more information becomes available.
Capitalization
The following table sets forth information about our capitalization on the dates indicated.
December 31,
2009 2008
(Dollars in millions)
Dollars
% of Total
Capitalization Dollars
% of Total
Capitalization
Short-term debt $ 41.6 2.4% $ 39.3 2.5%
Long-term debt 627.8 36.6 659.5 42.3
Total debt 669.4 39.0 698.8 44.8
Stockholders’ equity 1,048.3 61.0 860.8 55.2
Total capitalization $ 1,717.7 100.0% $ 1,559.6 100.0%
Our debt-to-total capitalization ratio decreased in 2009 from 2008, due to the repurchase of $43.2 million
of our 2011 Notes and an increase in stockholders’ equity primarily due to 2009 net income.
Dividends: We have paid common stock cash dividends for 23 consecutive years. On November 9,
2009, our Board of Directors declared an annual dividend of $0.25 per share. The dividend was paid on
December 16, 2009, to stockholders of record on November 27, 2009. The dividend payment of $31.3
million was funded from cash on hand.