Radio Shack 2013 Annual Report Download - page 54

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$16.0 million, and $16.1 million in 2013, 2012 and 2011,
respectively, for the amortization of the discount on the
liability component.
2011 Long-Term Notes: In 2001 we issued $350 million of
10-year 7.375% notes (“2011 Notes”). Interest was payable
on November 15 and May 15 of each year. In March 2011,
we redeemed all of our remaining 2011 Notes. The
redemption of these notes resulted in a loss on
extinguishment of debt of $4.1 million, which was classified
as other loss on our Consolidated Statements of Income.
NOTE 6 – STOCKHOLDERS’ EQUITY
Dividends: We paid $0.125 per share dividends in the first
and second quarters of 2012. On July 25, 2012, we
announced that we were suspending our dividend. We paid
a per share annual dividend of $0.50 in 2011.
2011 Share Repurchase Program: In October 2011 our
Board of Directors approved a share repurchase program
with no expiration date authorizing management to
repurchase up to $200 million of our common stock to be
executed through open market or private transactions.
During the fourth quarter of 2011, we paid $11.9 million to
purchase approximately 0.9 million shares of our common
stock in open market purchases. As of December 31, 2011,
there was $188.1 million available for share repurchases
under this program. We announced on January 30, 2012,
that we had suspended further share repurchases under
this program.
2008 Share Repurchase Program: During the second
quarter of 2011, we paid $101.4 million to purchase 6.3
million shares of our common stock in open market
purchases. This completed our purchases under our 2008
share repurchase program.
Call Spread Transactions: In connection with the
issuance of the 2013 Convertible Notes (see Note 5 –
“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.
The convertible note hedge arrangements (the “Convertible
Note Hedges”) expired on August 1, 2013. Under the terms
of the Convertible Note Hedges, we paid $86.3 million for a
forward purchase option contract under which we were
entitled to purchase a fixed number of shares (15.8 million
shares) of our common stock at a price per share of
$23.77. In the event of the conversion of the 2013
Convertible Notes, this forward purchase option contract
allowed 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 would have issued to a note
holder upon conversion. Settlement terms of this forward
purchase option allowed us to elect cash or share
settlement based on the settlement option we would have
chosen in settling the conversion feature of the 2013
Convertible Notes.
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 exercisable for 15.8 million shares of our
common stock at an exercise price of $35.88 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. At
December 31, 2013, the remaining outstanding Warrants
were exercisable for 8.4 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 do 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 were
antidilutive and, therefore, had no effect on diluted net
income per share.