Radio Shack 2003 Annual Report Download - page 30

RADIOSHACK 2003 Annual Report
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2003, and made no material adjustments to our consolidated
financial statements as a result of this adoption.
In November 2002, the FASB issued Interpretation No.45,
“Guarantor’s Accounting and Disclosure Requirements for
Guarantees, Including Guarantees of Indebtedness of
Others.” FIN 45 is effective for guarantees issued or modified
after December 31, 2002.The disclosure requirements were
effective for certain guarantees existing at December 31,
2002, and expand the disclosures required by a guarantor
about its obligations under a guarantee. FIN 45 also
requires that we recognize guarantees entered into or
modified after December 31, 2002, as a liability for the fair
value of the obligation undertaken in the issuance of the
guarantee.We adopted FIN 45 on January 1, 2003, its
effective date, and, aside from the required disclosure pro-
visions, made no material adjustments to our consolidated
financial statements as a result of this adoption.
In January 2003, the FASB issued Interpretation 46,
“Consolidation of Variable Interest Entities – An Interpretation
of ARB No.51.” FIN 46 is intended to clarify the application
of ARB No.51,“Consolidated Financial Statements,”to cer-
tain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial sup-
port. For those entities, a controlling financial interest
cannot be identified based on an evaluation of voting inter-
ests and may be achieved through arrangements that do
not involve voting interests.The consolidation requirement
of FIN 46 is effective immediately to variable interests in
variable interest entities (“VIEs”) created or obtained after
January 31, 2003. FIN 46 also sets forth certain disclosures
regarding interests in VIEs that are deemed significant, even
if consolidation is not required. In December 2003, the FASB
issued FIN 46 (revised December 2003),“Consolidation of
Variable Interest Entities” (FIN 46R), which delayed the effec-
tive date of the application to us of FIN 46 to non-special
purpose VIEs acquired or created before February 1, 2003,
to the interim period ending on March 31, 2004, and pro-
vided additional technical clarifications to implementation
issues.We have determined that FIN 46 does not apply to
our dealer/franchise outlets and we do not expect to make
material adjustments to our consolidated financial state-
ments as a result of the adoption of this Interpretation.
In November 2002, the EITF reached a consensus on Issue
No.02-16,“Accounting for Consideration Received from a
Vendor by a Customer (Including a Reseller of the Vendor’s
Products).” EITF 02-16 provides guidance on how cash
consideration received by a customer from a vendor should
be classified in the customer’s statement of income. EITF
02-16 is effective prospectively for new arrangements,includ-
ing modifications of existing arrangements, entered into
after December 31, 2002.We adopted EITF 02-16 effective
January 1, 2003, and made no material adjustments to our
consolidated financial statements as a result of this adoption.
In November 2003, the EITF reached a consensus on Issue
No. 03-10,“Application of EITF Issue No. 02-16,‘Accounting
by a Customer (Including a Reseller) for Certain Consideration
Received from a Vendor,’ by Resellers to Sales Incentives
Offered to Consumers by Manufacturers.”EITF 03-10 provides
guidance on how cash consideration received by a cus-
tomer from a vendor should be classified in the customer’s
statement of income. EITF 03-10 is effective prospectively
for new arrangements, including modification of existing
arrangements, entered into after December 31, 2003.We
adopted EITF 03-10 effective January 1, 2004, and made no
material adjustments to our consolidated financial state-
ments as a result of this adoption.
Cash Flow and Liquidity
A summary of cash flows from operating, investing and
financing activities is outlined in the table below.
Year Ended December 31,
(In millions)2003 2002 2001
Operating activities $ 651.9 $ 521.6 $ 775.8
Investing activities (188.9) (99.0) (2.3)
Financing activities (274.8) (377.5) (502.8)
In 2003, cash flows provided by operating activities was
$651.9 million, compared to $521.6 million and $775.8 mil-
lion in 2002 and 2001, respectively.
During the year ended December 31, 2003, changes in
accounts receivable, consisting primarily of amounts due
from our various vendors and third-party service providers,
provided $17.2 million in cash, compared to $68.2 million in
the prior year. Cash provided by accounts receivable in
2003 and 2002 was the result of reductions of vendor
and service provider receivables and dealer/franchise
receivables, due to increased collections and lower sales of
satellite television hardware.
During the year ended December 31, 2003, changes in
inventory provided $202.3 million in cash, compared to a
$21.4 million cash usage during 2002.The decrease in
inventory since December 31, 2002, was primarily the result
of supply chain initiatives, including a greater focus on
reducing weeks-of-supply.