Radio Shack 2012 Annual Report Download - page 23

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21
driven by decreased unit sales in our Sprint and AT&T
postpaid wireless businesses. Some of the factors
contributing to our lower unit sales were changes in Sprint’s
customer and credit models and the discontinuation of
Sprint’s early upgrade program for certain customers that
began in mid-2011; higher sales in the third quarter of 2011
related to a special wireless handset promotion; the soft
postpaid market due to consumer anticipation of the iPhone
5 launch; and inventory supply constraints during the initial
iPhone 5 launch period.
The increase in average cost per unit was driven by the
change in our sales mix towards higher cost smartphones
such as the Apple iPhone and Android-based smartphones.
The increase in the average revenue per postpaid unit was
primarily driven by a change in our sales mix towards
higher-priced smartphones, which was partially offset by an
increase in commissions repaid to wireless service
providers related to customers whose wireless handsets
were deactivated from a wireless network because either
they could not afford to, or chose not to, pay the higher
monthly payments for wireless service associated with their
smartphones. We have undertaken initiatives to reduce
wireless service deactivations in 2013. For further
discussion of our accounting for these service
deactivations, see “Critical Accounting Policies and
Estimates” later in this MD&A.
Target Mobile Centers
In October 2012, we exercised our contractual right to notify
Target of our intention to stop operating the Target Mobile
centers if we could not amend the current arrangement. An
acceptable arrangement was not negotiated; therefore, we
will exit this business by April 8, 2013. We project that our
Target Mobile business will not be profitable in the first
quarter of 2013.
Capital Transactions
During 2012 we took a number of actions regarding our
liquidity:
• On July 25, 2012, we suspended our dividend
payments to preserve cash as a result of our
operating performance
• In the second half of the year, we borrowed a total of
$175 million in advance of the maturity of our 2.50%
convertible senior notes due August 1, 2013 (“2013
Convertible Notes”)
• In the third quarter, we repurchased $88.1 million
principal amount of the 2013 Convertible Notes at a
discount to their par value
For further discussion of our liquidity position, please see
“Liquidity Outlook” later in this MD&A.
RESULTS OF OPERATIONS
2012 COMPARED WITH 2011
Net Sales and Operating Revenues
Consolidated net sales and operating revenues are as
follows:
Year Ended December 31,
(In millions) 2012 2011
2010
U.S. RadioShack
company-operated
stores
$ 3,456.5
$ 3,663.3
$ 3,808.2
Target Mobile centers
(1
)
426.5 342.4 64.6
Other 374.8 372.3 393.0
Consolidated net sales
and operating revenues
$ 4,257.8
$ 4,378.0
$ 4,265.8
Consolidated net sales and
operating revenues
(decrease) increase
(2.7%)
2.6%
4.7%
Comparable store sales
(decrease) increase (2)
(3.5%)
(2.2%)
4.1%
(1)
In October 2012, we exercised our contractual right to notify Target of
our intention to stop operating the Target Mobile centers if we could not
amend the current arrangement. An acceptable arrangement was not
negotiated; therefore, we will exit this business by April 8, 2013.
(2)
Comparable store sales include the sales of U.S. and Mexico
RadioShack company-operated stores and Target Mobile centers with
more than 12 full months of recorded sales.