Radio Shack 2011 Annual Report Download - page 38

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interest, if any. As of December 31, 2011, none of the
conditions allowing holders of the 2013 Convertible Notes
to convert or requiring us to repurchase the 2013
Convertible Notes had been met.
Concurrent with the issuance of the 2013 Convertible
Notes, we entered into note hedge transactions with
Citigroup and Bank of America whereby we have the option
to purchase up to 15.8 million (originally 15.5 million)
shares of our common stock at a price of $23.77 per share
(originally $24.25 per share) (the “Convertible Note
Hedges”), and we sold warrants to the same financial
institutions whereby they have the option to purchase up to
15.8 million shares (originally 15.5 million shares) of our
common stock at a per share price of $35.88 (originally
$36.60) (the “Warrants”). The Convertible Note Hedges and
Warrants were structured to reduce the potential future
share dilution associated with the conversion of the 2013
Convertible Notes. The Convertible Note Hedges and
Warrants are separate contracts with the two financial
institutions, are not part of the terms of the 2013
Convertible Notes, and do not affect the rights of holders
under the 2013 Convertible Notes. A holder of the 2013
Convertible Notes does not have any rights with respect to
the Convertible Note Hedges or Warrants.
For a more detailed description of the 2013 Convertible
Notes, Convertible Note Hedges, and Warrants, please see
Note 4 – “Indebtedness and Borrowing Facilities” and Note
5 – “Stockholders’ Equity” in the Notes to Consolidated
Financial Statements.
Operating Leases: We use operating leases, primarily for
our retail locations and our corporate campus, to lower our
capital requirements.
Capitalization
The following table sets forth information about our
capitalization on the dates indicated.
December 31,
2011 2010
(Dollars in millions)
Dollars
% of Total
Capitalization
Dollars
% of Total
Capitalization
Short-term debt $ -- 0.0% $ 308.0
20.8%
Long-term debt 670.6
47.1 331.8
22.4
Total debt 670.6
47.1 639.8
43.2
Stockholders’
equity 753.3
52.9 842.5
56.8
Total capitalization
$1,423.9
100.0% $1,482.3
100.0%
Our debt-to-total capitalization ratio increased in 2011 from
2010, primarily due to the repurchase of $113.3 million of
our common stock in 2011.
Dividends: We have paid common stock cash dividends
for 25 consecutive years. On October 25, 2011, we
announced that our Board of Directors declared an
increase in the annual dividend on the Company’s common
stock to $0.50 per share in 2011, compared with $0.25 per
share paid in 2010, and changed the annual dividend
payout to a quarterly payout. The annual cash dividend of
$0.50 per share for 2011 was paid on December 15, 2011,
to stockholders of record at the close of business on
November 25, 2011. The dividend payment of $49.6 million
was funded from cash on hand. The Company expects
dividends will be paid on a quarterly basis beginning in the
first quarter of 2012 and will be funded from cash on hand
and operating cash flows.
Share Repurchases: In October 2011, our Board of
Directors approved an authorization for a total share
repurchase of $200 million of the Company’s common
stock to be executed through open market or private
transactions. During the fourth quarter of 2011, we
repurchased 0.9 million shares or $11.9 million of our
common stock under this program. We announced on
January 30, 2012, that we have suspended further share
repurchases under this program.
During the second quarter of 2011, we paid $101.4 million
to purchase 6.3 million shares of our common stock in open
market purchases under our 2008 share repurchase
program. These purchases completed our $610 million
2008 share repurchase authorization.
The declaration of dividends, the dividend rate, and the
amount and timing of share repurchases are at the sole
discretion of our Board of Directors, and plans for future
dividends and share repurchases may be revised by the
Board of Directors at any time. RadioShack's dividend and
share repurchase programs could be affected by, among
other things, changes in RadioShack's results of
operations, capital expenditures, cash flows, and applicable
tax laws.
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
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.
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