Radio Shack 2012 Annual Report Download - page 63

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million and $9.9 million in 2012, 2011 and 2010,
respectively. The total income tax benefit recognized for all
stock-based compensation plans was $2.1 million and $2.6
million in 2011 and 2010, respectively. The tax benefit that
would have been recognized for all stock-based
compensation plans for 2012 was $2.7 million; however,
such benefit was offset by the valuation allowance against
our deferred tax assets. At December 31, 2012, there was
$2.7 million of unrecognized compensation expense related
to the unvested portion of our stock-based awards that is
expected to be recognized over a weighted-average period
of 2.04 years.
Deferred Stock Units: In 2004, the stockholders approved
the RadioShack 2004 Deferred Stock Unit Plan for Non-
Employee Directors (“Deferred Plan”), which was amended
in 2008. Under the plan, each non-employee director
receives a one-time initial grant of units equal to the
number of shares of our common stock that represent a fair
market value of $150,000 on the grant date, and an annual
grant of units equal to the number of shares of our common
stock that represent a fair market value of $105,000 on the
grant date.
Under the Deferred Plan, one-third of the units covered by an
award vest on each of the first three anniversaries of the date
of grant. Vesting of outstanding awards is accelerated under
certain circumstances. At termination of service, death,
disability or change in control of RadioShack, directors will
receive shares of common stock equal to the number of
vested units. Directors receive these shares in a lump sum.
We granted approximately 156,000, 53,000, and 29,000
units in 2012, 2011 and 2010, respectively. The weighted-
average grant-date fair value per unit granted was $5.00,
$14.80 and $21.75 in 2012, 2011 and 2010, respectively.
There were approximately 451,000 units outstanding and
464,000 units available for grant at December 31, 2012.
NOTE 9 – EMPLOYEE BENEFIT PLANS
The following benefit plans were in place during the periods
covered by the financial statements.
RadioShack 401(k) Plan: The RadioShack 401(k) Plan
(“401(k) Plan”), a defined contribution plan, allows a
participant to defer, by payroll deductions, from 1% to 75%
of the participant’s annual compensation, limited to certain
annual maximums set by the Internal Revenue Code. The
401(k) Plan also presently provides that our contribution to
each participant’s account maintained under the 401(k)
Plan be an amount equal to 100% of the participant’s
contributions up to 4% of the participant’s annual
compensation. This percentage contribution made by us is
discretionary and may change in the future. Our
contributions go directly to the 401(k) Plan and are made in
cash and invested according to the investment elections
made by the participant for the participant’s own
contributions. Company contributions to the 401(k) Plan
were $5.7 million, $5.6 million and $6.2 million for 2012,
2011 and 2010, respectively.
Supplemental Executive Retirement Plan: The Company
adopted an unfunded Supplemental Executive Retirement
Plan (“SERP”) effective January 1, 2006, for selected
officers of the Company. Upon retirement at age 55 years
or older, participants in the SERP are eligible to receive, for
ten years, an annual amount equal to a percentage of the
average of their five highest consecutive years of
compensation (base salary and bonus), to be paid in 120
monthly installments. The amount of the percentage
increases by 2 ½% for each year of participation in the
SERP, up to a maximum of 50%. At December 31, 2012,
there were nine participants in the plan. This plan has been
closed to new officers since 2007.
The net periodic benefit cost of the SERP defined benefit
plan was $1.3 million, $1.7 million and $1.7 million for 2012,
2011 and 2010, respectively. The benefit obligation was
$16.6 million and $19.1 million at December 31, 2012 and
2011, respectively.
NOTE 10 – INCOME TAXES
The following is a reconciliation of the federal statutory
income tax rate to our income tax expense:
Year Ended December 31,
(In millions) 2012 2011 2010
Components of (loss) income
from continuing operations:
United States $ (111.3) $ 117.0 $ 308.8
Foreign (2.8)
(9.7) 2.1
(Loss) income from continuing
operations before income
taxes
(114.1)
107.3
310.9
Statutory tax rate x 35.0% x 35.0% x 35.0%
Federal income tax (benefit)
expense at statutory rate (39.9) 37.6 108.8
Change in valuation
allowance 73.8 3.2 2.0
Foreign tax branch benefit (5.0)
(3.2) (2.0)
State income taxes,
net of federal effect (4.9)
2.1 8.3
Stock-based compensation
tax shortfall 1.7 0.9 0.6
Income tax credits (0.5)
(3.4) (1.1)
Unrecognized tax benefits (0.8)
2.5 1.0
U.S. deferred tax on foreign
earnings 0.3 (2.0) 0.8
Other, net 0.6 2.5 1.8
Total income tax expense $ 25.3 $ 40.2 $ 120.2
Effective tax rate (22.2%) 37.5% 38.7%