Radio Shack 2010 Annual Report Download - page 42

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Accelerated Share Repurchase Program: As mentioned
above, in August 2010, we entered into an accelerated
share repurchase program with two investment banks to
repurchase shares of our common stock under our
approved share repurchase program. On August 24, 2010,
we paid $300 million to the investment banks in exchange
for an initial delivery of 11.7 million shares to us. At the
conclusion of the ASR program, we received an additional
3.2 million shares. The 14.9 million shares delivered to us
were based on the average daily volume weighted average
price of our common stock over a period beginning
immediately after the effective date of the ASR agreements
and ending on November 2, 2010.
Treasury Stock Retirement: In December 2010, our
Board of Directors approved the retirement of 45.0 million
shares of our common stock held as treasury stock. These
shares returned to the status of authorized and unissued.
OFF-BALANCE SHEET ARRANGEMENTS
Other than the operating leases described above, we do
not have any off-balance sheet financing arrangements,
transactions, or special purpose entities.
INFLATION
With the exception of increased energy costs in the first half
of 2008, inflation has not significantly affected us over the
past three years. We do not expect inflation to have a
significant effect on our operations in the foreseeable
future.
OTHER MATTERS
Separate from our wireless service provider settlement
agreement in July 2010, we notified T-Mobile that they had
breached their agreement with us. Under the agreement, T-
Mobile has until March 21, 2011, to cure the breaches. In
the event that T-Mobile is unable to cure the breaches, we
have the right to terminate the agreement. The outcome of
this action is uncertain and the ultimate resolution of this
matter could have a material adverse effect on our results
of operations, financial condition and business operations.
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
Our consolidated financial statements are prepared in
accordance with generally accepted accounting principles
(“GAAP”) in the United States. The application of GAAP
requires us to make estimates and assumptions that affect
the reported values of assets and liabilities at the date of
the financial statements, the reported amount of revenues
and expenses during the reporting period, and the related
disclosures of contingent assets and liabilities. The use of
estimates is pervasive throughout our financial statements
and is affected by management’s judgment and
uncertainties. Our estimates, assumptions and judgments
are based on historical experience, current market trends
and other factors that we believe to be relevant and
reasonable at the time the consolidated financial
statements are prepared. We continually evaluate the
information used to make these estimates as our business
and the economic environment change. Actual results may
differ materially from these estimates under different
assumptions or conditions.
In the Notes to Consolidated Financial Statements, we
describe the significant accounting policies used in the
preparation of our consolidated financial statements. The
accounting policies and estimates we consider most critical
are revenue recognition; inventory valuation; estimation of
reserves and valuation allowances specifically related to
insurance, tax and legal contingencies; valuation of long-
lived assets and intangibles, including goodwill; and stock-
based compensation.
We consider an accounting policy or estimate to be critical
if it requires difficult, subjective or complex judgments, and
is material to the portrayal of our financial condition,
changes in financial condition or results of operations. The
selection, application and disclosure of our critical
accounting policies and estimates have been reviewed by
the Audit and Compliance Committee of our Board of
Directors.
Revenue Recognition
Description
Our revenue is derived principally from the sale of name
brand and private brand products and services to
consumers. Revenue is recognized, net of an estimate for
customer refunds and product returns, when persuasive
evidence of an arrangement exists, delivery has occurred
or services have been rendered, the sales price is fixed or
determinable, and collectability is reasonably assured.
Certain products, such as wireless telephone handsets,
require the customer to use the services of a third-party
service provider. The third-party service provider pays us
an upfront commission for obtaining a new customer and, in
some cases, a monthly recurring residual amount based
upon the ongoing arrangement between the service
provider and the customer. Our sale of an activated
wireless telephone handset is the single event required to
meet the delivery criterion for both the upfront commission
and the recurring residual revenue. Upfront commission
revenue, net of estimated wireless service deactivations, is
generally recognized at the time an activated wireless
telephone handset is sold to the customer at the point-of-
sale. Recurring residual revenue is recognized as earned
under the terms of each contract with the service provider,
which is typically as the service provider bills its customer,
generally on a monthly basis.