Radio Shack 2012 Annual Report Download - page 50

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RadioShack Global Sourcing (“RSGS”) - RSGS serves
our wide-ranging international import/export, sourcing,
evaluation, logistics and quality control needs. RSGS’s
activities support our name brand and private brand
businesses.
DISCONTINUED OPERATIONS
In February 2009 we signed a contract extension with
Sam’s Club through March 31, 2011, with a transition
period that ended on June 30, 2011, to continue operating
wireless kiosks in certain Sam’s Club locations. As of
December 31, 2010, we operated 417 of these kiosks. All of
these kiosks were transitioned to Sam’s Club by June 30,
2011. We determined that the cash flows from these kiosks
were eliminated from our ongoing operations. Therefore,
these operations were classified as discontinued operations
and the operating results of these kiosks are presented in
our Consolidated Statements of Income as discontinued
operations, net of income taxes, for all periods presented.
We incurred no significant gain or loss associated with the
transition of these kiosks to Sam’s Club. We redeployed
substantially all of our Sam’s Club kiosk employees to
nearby RadioShack stores or Target Mobile centers, and
we redistributed our Sam’s Club kiosk inventory to our
remaining retail channels. Net sales and operating
revenues related to these discontinued operations were
$62.9 million and $206.9 million for 2011 and 2010,
respectively. The amount of income before income taxes
for these discontinued operations was $8.4 million and
$25.2 million for 2011 and 2010, respectively.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial
statements include the accounts of RadioShack
Corporation and all majority-owned domestic and foreign
subsidiaries. All intercompany accounts and transactions
are eliminated in consolidation.
Use of Estimates: The preparation of financial statements
in accordance with accounting principles generally
accepted in the United States requires us to make
estimates and assumptions that affect the reported
amounts of assets and liabilities, related revenues and
expenses, and the disclosure of gain and loss contingencies
at the date of the financial statements and during the periods
presented. We base these estimates on historical results and
various other assumptions believed to be reasonable, all of
which form the basis for making estimates concerning the
carrying values of assets and liabilities that are not readily
available from other sources. Actual results could differ
materially from those estimates.
Cash and Cash Equivalents: Cash on hand in stores,
deposits in banks, credit card receivables, and all highly
liquid investments with a maturity of three months or less at
the time of purchase are considered cash and cash
equivalents. We carry our cash equivalents at cost, which
approximates fair value because of the short maturity of the
instruments. The weighted-average annualized interest
rates were 0.2% and 0.3% at December 31, 2012 and
2011, respectively, for cash equivalents totaling $408.2
million and $426.2 million, respectively. We maintain zero
balance cash disbursement accounts with certain banks.
Outstanding checks in excess of deposits with these banks
totaled $108.3 million and $81.9 million at December 31,
2012 and 2011, respectively, and are classified as accounts
payable in the Consolidated Balance Sheets. Changes in
these overdraft amounts are reported in the Consolidated
Statements of Cash Flows as a financing activity.
Restricted Cash: We have pledged cash as collateral for a
standby letter of credit issued to our general liability
insurance provider. We have the ability to withdraw this
cash at any time and instead provide a letter of credit
issued under our asset-based revolving credit facility that
expires in January 2016 similar to the letter of credit that
was issued under this facility at December 31, 2011. We
have elected to pledge this cash as collateral to reduce our
costs associated with our general liability insurance.
Restricted cash totaled $26.5 million at December 31,
2012, and is included in other current assets in our
Consolidated Balance Sheets.
Accounts Receivable and Allowance for Doubtful
Accounts: Concentrations of credit risk with respect to
customer and dealer receivables are limited due to the
large number of customers and dealers and their location in
many different geographic areas of the country. We
establish an allowance for doubtful accounts based on
factors surrounding the credit risk of specific customers,
historical trends and other information. Historically, such
losses, in the aggregate, have not exceeded our estimates.
Account balances are charged against the allowance when
we believe it is probable that the receivable will not be
recovered. We have concentration of credit risk from
service providers in the wireless telephone industry,
primarily Sprint, AT&T, and Verizon Wireless (“Verizon”).
The average payment term for these receivable balances is
approximately 45 days.
Inventories: Our inventories are stated at the lower of cost
- on a first-in first-out basis - or market value and are
comprised primarily of finished goods. Included in the cost
of the inventories are in-bound freight expenses to our
distribution centers, out-bound freight expenses to our retail
outlets, and other direct costs relating to merchandise
acquisition and distribution. Also included in the cost of
inventory are certain vendor allowances that are not a
reimbursement of specific, incremental and identifiable