Radio Shack 2009 Annual Report Download - page 70

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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. We incurred $0.2 million in expenses and adjusted the carrying value of the tendered notes by an
incremental $0.8 million to reflect a proportionate write-off of the balance associated with our fair value
hedge included in long-term debt. This transaction resulted in a loss of $1.6 million classified as other loss
on our consolidated statements of income.
A portion of these notes were hedged by our interest rate swaps. Upon repurchase of these notes, we were
required to discontinue the hedge accounting treatment associated with these derivative instruments which
used the short-cut method. The remaining balance associated with our fair value hedge was recorded as an
adjustment to the carrying value of these notes and is being amortized to interest expense over the
remaining term of the notes. At December 31, 2009, this carrying value adjustment was $4.4 million. See
Note 11 - “Derivative Financial Instruments,” for more information on our interest rate swaps.
Credit Facilities: Our $325 million credit facility provides us a source of liquidity. Interest charges under
this facility are derived using a base LIBOR rate plus a margin which changes based on our credit ratings.
This facility has customary terms and covenants, and we were in compliance with these covenants at
December 31, 2009. As of December 31, 2009, we had $291.3 million in borrowing capacity available
under our existing credit facility due to the issuance of standby letters of credit. We incurred no
borrowings from this facility during 2009. This facility expires in May of 2011.
On September 11, 2008, we terminated our $300 million credit facility, which was set to expire in June of
2009. This facility was no longer required due to the issuance of our 2013 Convertible Notes.
NOTE 6 - STOCKHOLDERS’ EQUITY
Stock Repurchase Programs: In February 2005, our Board of Directors approved a share repurchase
program with no expiration date authorizing management to repurchase up to $250 million of our common
stock in open market purchases. During 2008, we repurchased approximately 0.1 million shares or $1.4
million of our common stock under this program. As of December 31, 2008, there were no further share
repurchases authorized under this program.
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 program. As
of December 31, 2008, there was $90.0 million available for share repurchases under this program. In
August 2009, our Board of Directors approved a $200 million increase in this share repurchase program.
As of December 31, 2009, $290 million of the total authorized amount was available for share
repurchases under this program.
Dividends Declared: We declared an annual dividend of $0.25 per share in November of 2009, 2008
and 2007. The dividends were paid in December of each year.
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 Citigroup and Bank of America to
reduce the potential dilution upon conversion of the 2013 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 2013
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 2013 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 2013 Convertible Notes. The Convertible Note Hedges
expire on August 1, 2013.