Radio Shack 2012 Annual Report Download - page 6

4
centers also serves as a fulfillment center for our online
customers and as a distribution center that ships store
fixtures to our U.S. and Mexico company-operated stores
and Target Mobile centers.
RadioShack Technology Services (“RSTS”) - Our
management information system architecture is composed
of a distributed, online network of computers that links all
stores, Target Mobile centers, customer channels, delivery
locations, service centers, credit providers, distribution
facilities and our home office into a fully integrated system.
Each retail location has its own server to support the point-
of-sale (“POS”) system. The majority of our U.S. company-
operated stores and Target Mobile centers communicate
through a broadband network, which provides efficient
access to customer support data. This design also allows
store management to track daily sales and inventory at the
product or sales associate level. RSTS provides the
majority of our programming and systems analysis needs.
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.
SEASONALITY
As with most other specialty retailers, our net sales and
operating revenues are greater during the fourth calendar
quarter, which includes the majority of the holiday shopping
season in the U.S., than during other periods of the year.
There is a corresponding pre-seasonal inventory build-up,
which requires working capital related to the anticipated
increased sales volume. This is described in “Cash
Requirements” in our MD&A. Also, refer to Note 17 –
“Quarterly Data (Unaudited)” in the Notes to Consolidated
Financial Statements for data showing seasonality trends.
We expect this seasonality to continue.
PATENTS AND TRADEMARKS
We own or are licensed to use many trademarks and
service marks related to our RadioShack stores in the
United States and in foreign countries. We believe the
RadioShack name and marks are well recognized by
consumers, and that the name and marks are associated
with high-quality products and services. We also believe the
loss of the RadioShack name and RadioShack marks
would materially adversely affect our business. Our private
brands include RadioShack, AUVIO, Enercell and
Gigaware. We also own various patents and patent
applications relating to consumer electronics products.
SUPPLIERS AND NAME BRAND RELATIONSHIPS
Our business strategy depends, in part, upon our ability to
offer name brand and private brand products, as well as to
provide our customers access to third-party services. We
utilize a large number of suppliers located in various parts
of the world to obtain name brand and private brand
merchandise. We have formed vendor and third-party
service provider relationships with well-recognized
companies such as Sprint, AT&T, Verizon Wireless
(“Verizon”), T-Mobile, Apple, Garmin, Hewlett-Packard, HTC,
Microsoft, Research In Motion, Samsung and SanDisk. In the
aggregate, these relationships have or are expected to have
a significant effect on both our operations and financial
strategy.
ORDER BACKLOG
We have no material backlog of orders in any of our
operating segments for the products or services we sell.
COMPETITION
Due to consumer demand for wireless products and
services, as well as rapid consumer acceptance of new
digital technology products, the consumer electronics retail
business continues to be highly competitive, driven
primarily by technology and short product cycles.
In the consumer electronics retail business, competitive
factors include convenient retail locations, price, quality,
features, product availability, consumer services,
distribution capability, brand reputation and the number of
competitors. We compete in the sale of our products and
services with several retail formats, including national,
regional, and independent consumer electronics retailers.
We compete with department and specialty retail stores in
more select product categories. We compete with wireless
providers in the wireless handset category through their
own retail and online presence. We compete with big-box
retailers, discount and warehouse retailers, and Internet
retailers on a more widespread basis. Numerous domestic
and foreign companies manufacture products for other
retailers that are similar to our privately-branded products
and are sold under nationally-recognized brand names or
private brands.
Management believes two primary factors differentiate us
from our competition. First, we have an extensive physical