Radio Shack 2011 Annual Report Download - page 62

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3.2 million shares. The 14.9 million shares delivered to us
was 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.
Dividends Declared: We paid a per share annual dividend
of $0.50, $0.25, and $0.25 in 2011, 2010 and 2009,
respectively. The dividends were paid in December of each
year.
Call Spread Transactions: In connection with the
issuance of the 2013 Convertible Notes (see Note 4 –
“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
(initially 15.5 million shares) of our common stock at an
initial 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.
The exercise price of the Convertible Note Hedges is linked
to our 2013 Convertible Notes. In 2011, the Convertible
Note Anti-Dilutive Provision was triggered. See Note 4 -
“Indebtedness and Borrowing Facilities,” for more
information on the Convertible Note Anti-Dilutive Provision.
As a result, at December 31, 2011, the Convertible Note
Hedges entitled us to purchase 15.8 million shares of our
common stock at a price per share of $23.77.
Also concurrent with the issuance of the 2013 Convertible
Notes, we sold warrants (the “Warrants”) permitting the
purchasers to acquire shares of our common stock. The
Warrants were initially exercisable for 15.5 million shares of
our common stock at an initial exercise price of $36.60 per
share. We received $39.9 million in proceeds for the sale of
the Warrants. The Warrants may be settled at various dates
beginning in November 2013 and ending in March 2014.
The Warrants provide for net share settlement. In no event
will we be required to deliver a number of shares in
connection with the transaction in excess of twice the
aggregate number of Warrants.
The exercise price of the Warrants is linked to our 2013
Convertible Notes. In 2011, a Convertible Note Anti-Dilutive
Provision was triggered. As a result, at December 31, 2011,
the Warrants were exercisable for 15.8 million shares of our
common stock at an exercise price of $35.88 per share.
We determined that the Convertible Note Hedges and
Warrants meet the requirements of the FASB’s accounting
guidance for accounting for derivative financial instruments
indexed to, and potentially settled in, a company's own
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 $35.88 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 6 – PLANT CLOSURE
During the second quarter of 2011, we ceased production
operations in our Chinese manufacturing plant. Since
production operations ceased, we have continued to
acquire inventory similar to that previously produced by this
facility from alternative product sourcing channels. In
conjunction with the plant closing, we incurred total costs of
$11.4 million in 2011. We incurred $7.7 million in
compensation expense for severance packages for the
termination of approximately 1,500 employees. We
recorded a foreign currency exchange loss of $1.5 million
related to the reversal of our foreign currency cumulative
translation adjustment, which is classified as a selling,
general and administrative expense. The remaining $2.2
million related to an inventory valuation loss, accelerated
depreciation, and other general and administrative costs.
Substantially all of these costs were incurred in the second
quarter of 2011. Future costs to manage the liquidation,