Radio Shack 2010 Annual Report Download - page 66

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stock and other relevant guidance 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 the FASB’s accounting guidance in
calculating earnings per share, the Warrants will have no
effect 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 effect on diluted net
income per share.
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.
NOTE 7 – STOCK-BASED INCENTIVE PLANS
We have implemented several plans to award employees
with stock-based compensation, which are described
below.
Incentive Stock 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
of our Board of Directors (“MD&C”) 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 become immediately and fully exercisable.
Repricing or exchanging options for lower priced options is
not permitted under the ISPs without shareholder approval.
A brief description of each of our incentive stock plans with
awards still outstanding is included below:
1997 Incentive Stock Plan (“1997 ISP”): The 1997
ISP permitted the grant of up to 11.0 million shares in
the form of incentive stock options (“ISOs”), non-
qualified stock options (options which are not ISOs)
(“NQs”) and restricted stock. The 1997 ISP expired on
February 27, 2007, and no further grants may be made
under this plan.
1999 Incentive Stock Plan (“1999 ISP”): The 1999
ISP permitted the grant of up to 9.5 million shares in
the form of NQs. Grants of restricted stock,
performance awards and options intended to qualify as
ISO’s under the Internal Revenue Code were not
authorized under this plan. The 1999 ISP also
permitted directors to elect to receive shares in lieu of
cash payments for their annual retainer fees and board
and committee meeting fees. The 1999 ISP expired on
February 23, 2009, and no further grants may be made
under this plan.
2001 Incentive Stock Plan (“2001 ISP”): The 2001
ISP permitted the grant of up to 9.2 million shares in
the form of ISOs and NQs. The 2001 ISP also
permitted directors to elect to receive shares in lieu of
cash payments for their annual retainer fees and board
and committee meeting fees. The 2001 ISP was
terminated in 2009 upon the shareholder approval of
the 2009 ISP and no further grants may be made
under this plan.
2009 Incentive Stock Plan (“2009 ISP”): The 2009
ISP permits the grant of up to 11.0 million shares in the
form of ISOs, NQs, restricted stock, restricted stock
units, stock appreciation rights, or other stock-based
awards. The 2009 ISP also permits directors to elect to
receive shares in lieu of cash payments for their annual
retainer fees and board and committee meeting fees.
Full-value awards granted under the 2009 ISP, such as
restricted stock and restricted stock units, will reduce
the number of shares available for grant by 1.68
shares for each share or unit granted. Stock options
and stock appreciation rights will reduce the number of
shares available for grant by one share for each stock
option or stock appreciation right granted. This plan
expires on February 18, 2019. As of December 31,
2010, there were 9.8 million shares available for grants
under the 2009 ISP.