Radio Shack 2013 Annual Report Download - page 6

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DISCONTINUED OPERATIONS
In the third quarter of 2010, we signed a multi-year
agreement to operate retail locations in Target stores
(“Target Mobile”) throughout most of the United States.
These retail locations, which were not RadioShack-
branded, offered wireless handsets with activation of third-
party postpaid wireless services. At December 31, 2012,
we operated 1,522 Target Mobile centers.
We ceased operating all of our Target Mobile centers prior
to March 31, 2013. Upon ceasing these operations, we
transitioned substantially all of our Target Mobile center
employees to a third-party service provider that will
continue to operate these locations on Target Corporation’s
behalf. We concluded that the cash flows from these
centers were eliminated from our ongoing operations.
Therefore, the results of these operations, net of income
taxes, have been presented as discontinued operations in
the Consolidated Statements of Income for all periods
presented.
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. All of these
kiosks were transitioned to Sam’s Club by June 30, 2011.
We concluded that the cash flows from these kiosks were
eliminated from our ongoing operations. Therefore, the
results of these operations, net of income taxes, have been
presented as discontinued operations in our Consolidated
Statements of Income 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 15 –
“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, Apple,
Garmin, Hewlett-Packard, HTC, Microsoft, Blackberry,
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
certain product categories. We compete with wireless
providers in our mobility platform 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
retail presence with convenient locations throughout the
United States. Second, our specially trained sales staff is
capable of providing cost-effective solutions for our
customers’ needs, assisting with the selection of
appropriate products and accessories and, when
applicable, assisting customers with service activation.
EMPLOYEES
At December 31, 2013, we employed approximately 27,500
people. Our U.S. employees are not covered by collective
bargaining agreements, nor are they members of labor
unions. We consider our relationship with our employees to
be good.
AVAILABLE INFORMATION
We are subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and rules and regulations adopted by the
U.S. Securities and Exchange Commission (the “SEC”)
under that Act. The Exchange Act requires us to file
reports, proxy statements and other information with the
SEC.