UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-5571
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RADIOSHACK CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Throckmorton Street, Suite 1800, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 415-3700
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares outstanding of the issuer's Common Stock, $1 par value, on
July 31, 2001 was 183,085,826.
Index to Exhibits is on Sequential Page No. 15. Total pages 26.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RADIOSHACK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
(In millions, except per share amounts) 2001 2000 2001 2000
- -------------------------------------- --------- --------- --------- ---------
Net sales and operating revenues $ 1,039.5 $ 1,023.3 $ 2,179.0 $ 2,070.6
Cost of products sold 527.1 489.7 1,120.1 1,021.0
--------- --------- --------- ---------
Gross profit 512.4 533.6 1,058.9 1,049.6
--------- --------- --------- ---------
Operating expenses (income):
Selling, general and administrative 398.0 377.6 803.2 751.6
Depreciation and amortization 27.5 26.2 55.2 51.9
Loss on sale of Computer City 12.4 -- 12.4 --
Restricted stock awards -- -- -- (1.0)
--------- --------- --------- ---------
Total operating expenses 437.9 403.8 870.8 802.5
--------- --------- --------- ---------
Operating income 74.5 129.8 188.1 247.1
Interest income 4.2 4.2 8.6 8.8
Interest expense (12.2) (12.4) (25.2) (21.9)
Provision for loss on Internet-related investment -- -- (30.0) --
--------- --------- --------- ---------
Income before income taxes 66.5 121.6 141.5 234.0
Provision for income taxes 25.3 46.2 53.8 88.9
--------- --------- --------- ---------
Net income 41.2 75.4 87.7 145.1
Preferred dividends 1.2 1.3 2.5 2.7
--------- --------- --------- ---------
Net income available to common shareholders $ 40.0 $ 74.1 $ 85.2 $ 142.4
========= ========= ========= =========
Net income available per common share:
Basic $ 0.22 $ 0.40 $ 0.46 $ 0.76
========= ========= ========= =========
Diluted $ 0.21 $ 0.38 $ 0.44 $ 0.72
========= ========= ========= =========
Shares used in computing earnings per common share:
Basic 185.9 187.0 186.3 188.0
========= ========= ========= =========
Diluted 193.1 197.2 194.3 198.1
========= ========= ========= =========
Dividends declared per common share $ 0.055 $ 0.055 $ 0.110 $ 0.110
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
RADIOSHACK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31, June 30,
2001 2000 2000
(In millions, except for share amounts) (Unaudited) (Unaudited)
- -------------------------------------- ----------- ----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 336.1 $ 130.7 $ 85.9
Accounts and notes receivable, net 294.6 464.7 231.5
Inventories, at lower of cost or market 974.1 1,164.3 1,047.3
Other current assets 68.6 58.5 82.9
--------- --------- ---------
Total current assets 1,673.4 1,818.2 1,447.6
Property, plant and equipment, net 461.3 456.8 451.6
Other assets, net of accumulated amortization 146.5 301.5 306.7
--------- --------- ---------
Total assets $ 2,281.2 $ 2,576.5 $ 2,205.9
========= ========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities of
long-term debt $ 68.9 $ 478.6 $ 408.6
Accounts payable 183.5 234.8 225.9
Accrued expenses 252.9 330.1 238.0
Income taxes payable 116.9 188.9 143.0
--------- --------- ---------
Total current liabilities 622.2 1,232.4 1,015.5
Long-term debt, excluding current maturities 595.5 302.9 317.1
Other non-current liabilities 68.0 60.9 53.0
--------- --------- ---------
Total liabilities 1,285.7 1,596.2 1,385.6
--------- --------- ---------
Minority interest in consolidated subsidiary 100.0 100.0 100.0
Common stock put options -- -- 4.0
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized
Series A junior participating, 300,000 shares designated
and none issued -- -- --
Series B convertible (TESOP), 100,000 shares authorized;
67,100, 68,800 and 71,200 shares issued, respectively 67.1 68.8 71.2
Common stock, $1 par value, 650,000,000 shares authorized;
236,033,000 shares issued 236.0 236.0 236.0
Additional paid-in capital 129.7 116.1 102.9
Retained earnings 1,723.2 1,661.5 1,470.1
Treasury stock, at cost; 52,090,000, 50,269,000 and
50,236,000 shares, respectively (1,252.4) (1,189.6) (1,147.0)
Unearned deferred compensation (7.5) (11.5) (16.0)
Accumulated other comprehensive loss (0.6) (1.0) (0.9)
--------- --------- ---------
Total stockholders' equity 895.5 880.3 716.3
Commitments and contingent liabilities
--------- --------- ---------
Total liabilities and stockholders' equity $ 2,281.2 $ 2,576.5 $ 2,205.9
========= ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
RADIOSHACK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
June 30,
-------------------
(In millions) 2001 2000
- ------------ -------- --------
Cash flows from operating activities:
Net income $ 87.7 $ 145.1
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Provision for loss on Internet-related investment 30.0 --
Loss on sale of Computer City 12.4 --
Depreciation and amortization 55.2 51.9
Restricted stock awards -- (1.0)
Other items 18.1 14.0
Changes in operating assets and liabilities:
Receivables 152.7 70.1
Inventories 190.2 (185.9)
Other current assets (11.4) (9.0)
Accounts payable, accrued expenses and income taxes (196.0) (96.0)
-------- --------
Net cash provided (used) by operating activities 338.9 (10.8)
-------- --------
Investing activities:
Additions to property, plant and equipment (62.1) (59.2)
Proceeds from sale of property, plant and equipment 3.1 1.0
Proceeds from sale of minority interest in consolidated -- 100.0
subsidiary
Proceeds from sale of equity securities -- 17.4
Proceeds from payment of CompUSA note 123.6 --
Investment in securities -- (30.0)
Other investing activities (4.2) (2.5)
-------- --------
Net cash provided by investing activities 60.4 26.7
-------- --------
Financing activities:
Purchases of treasury stock (87.6) (311.1)
Exercise of common stock put options -- (8.6)
Proceeds from sale of common stock put options 0.3 0.5
Sales of treasury stock to employee stock plans 28.6 27.8
Proceeds from exercise of stock options 4.4 3.7
Dividends paid (22.1) (22.6)
Changes in short-term borrowings, net (461.3) 222.6
Additions to long-term borrowings 346.4 --
Repayments of long-term borrowings (2.6) (6.9)
-------- --------
Net cash used by financing activities (193.9) (94.6)
-------- --------
Increase (decrease) in cash and cash equivalents 205.4 (78.7)
Cash and cash equivalents, beginning of period 130.7 164.6
-------- --------
Cash and cash equivalents, end of period $ 336.1 $ 85.9
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - PLAIN ENGLISH DISCLOSURE
You may notice that we changed some of the text in the notes, as well as the
"management's discussion" section of this document. The substance is the same,
but we have made it more readable using the "plain English" guidelines issued by
the Securities and Exchange Commission. We hope this is helpful to you.
Throughout this report, the terms "our," "we," and "us" refer to RadioShack
Corporation, including its subsidiaries.
NOTE 2 - BASIS OF FINANCIAL STATEMENTS
We prepared the accompanying unaudited consolidated financial statements in
accordance with the instructions to Form 10-Q and we did not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In management's opinion, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation are included. However, operating results for the six months ended
June 30, 2001 do not necessarily indicate the results you might expect for the
year ending December 31, 2001. If you desire further information, you should
refer to our consolidated financial statements and management's discussion and
analysis of financial condition and results of operations included in our 2000
Annual Report on Form 10-K for the year ended December 31, 2000.
NOTE 3 - LOSS ON SALE OF COMPUTER CITY, INC.
On August 31, 1998, we sold 100% of the outstanding common stock of our Computer
City, Inc. subsidiary to CompUSA Inc. for cash and an unsecured note of $136.0
million. On June 22, 2001 we received $123.6 million for the final settlement of
the purchase price and settlement of the $136.0 million note. Thus, we incurred
an additional loss from the sale of Computer City, Inc. of $12.4 million, before
taxes.
NOTE 4 - PROVISION FOR LOSS ON INTERNET-RELATED INVESTMENT
During the second quarter of 2000, we made a $30.0 million investment in
Digital:Convergence Corporation, a privately-held Internet technology company.
In the first quarter of 2001 we believed that our investment experienced a
decline in value that, in our opinion, is other than temporary. This belief was
due to the uncertainty surrounding Digital:Convergence's ability to secure
sufficient additional funding or to complete an initial public offering. As
such, we recorded a loss provision equal to our initial investment.
NOTE 5 - DEBT OFFERING
On May 11, 2001, we issued $350.0 million of 10-year 7 3/8% notes in a private
offering to initial purchasers who offered the notes to qualified institutional
buyers by relying upon SEC Rule 144A. The interest rate on the notes is 7.375%
per annum with interest payable on November 15 and May 15 of each year. Payment
of interest on the notes commences on November 15, 2001 and the notes mature on
May 15, 2011. On August 3, 2001 we exchanged substantially all of these notes
for a similar amount of publicly registered notes through the use of an exchange
offer under an SEC form S-4 registration statement, which became effective June
22, 2001. The net effect of this exchange is that no additional debt was issued
on August 3, 2001 and substantially all of the notes are now registered with the
SEC.
NOTE 6 - REVOLVING CREDIT FACILITY
In the second quarter of 2001, we renewed our existing $300.0 million 364-day
revolving credit facility and also extended the maturity date to June 2002. The
terms of the 364-day revolving credit facility remained similar to the previous
facility. Our $300.0 million five-year revolving credit facility maturing June
2003 did not change. The revolving credit facilities will support any future
commercial paper borrowings and are otherwise available for general corporate
purposes.
NOTE 7 - BASIC AND DILUTED EARNINGS PER SHARE
The following schedule is a reconciliation of the numerators and denominators
used in computing our basic and diluted EPS calculations for the three and six
months ended June 30, 2001 and 2000, respectively. Basic EPS excludes the effect
of potentially dilutive securities, while diluted EPS reflects the potential
dilution that would have occurred if our securities or other contracts to issue
common stock were exercised, converted, or resulted in the issuance of our
common stock that would have then shared in our earnings.
Three Months Ended Three Months Ended
June 30, 2001 June 30, 2000
------------------------------------- -------------------------------------
Income Shares Per Share Income Shares Per Share
(In millions, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -------------------------------------- ----------- ----------- --------- ----------- ----------- ---------
Net income $ 41.2 $ 75.4
Less: Preferred stock dividends (1.2) (1.3)
--------- ---------
Basic EPS
Net income available to common
shareholders 40.0 185.9 $ 0.22 74.1 187.0 $ 0.40
========= =========
Effect of dilutive securities:
Dividends on Series B preferred stock 1.2 1.3
Additional contribution required for TESOP
if preferred stock had been converted (0.8) 5.8 (0.8) 6.2
Stock options 1.4 4.0
--------- --------- --------- ---------
Diluted EPS
Net income available to common
shareholders plus assumed conversions $ 40.4 193.1 $ 0.21 $ 74.6 197.2 $ 0.38
========= ========= ========= ========= ========= =========
Six Months Ended Six Months Ended
June 30, 2001 June 30, 2000
------------------------------------- -------------------------------------
Income Shares Per Share Income Shares Per Share
(In millions, except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -------------------------------------- ----------- ----------- --------- ----------- ----------- ---------
Net income $ 87.7 $ 145.1
Less: Preferred stock dividends (2.5) (2.7)
--------- ---------
Basic EPS
Net income available to common
shareholders 85.2 186.3 $ 0.46 142.4 188.0 $ 0.76
========= =========
Effect of dilutive securities:
Dividends on Series B preferred stock 2.5 2.7
Additional contribution required for TESOP
if preferred stock had been converted (1.7) 5.9 (1.7) 6.2
Stock options 2.1 3.9
--------- --------- --------- ---------
Diluted EPS
Net income available to common
shareholders plus assumed conversions $ 86.0 194.3 $ 0.44 $ 143.4 198.1 $ 0.72
========= ========= ========= ========= ========= =========
NOTE 8 - COMPREHENSIVE INCOME
Comprehensive income for the three months ended June 30, 2001 and 2000 was $41.8
million and $75.6 million, respectively, and comprehensive income for the six
months ended June 30, 2001 and 2000 was $88.1 million and $145.0 million,
respectively.
NOTE 9 - BUSINESS RESTRUCTURING
In 1996 and 1997, we initiated certain restructuring programs in which a number
of our former McDuff, Computer City and Incredible Universe retail stores were
closed. We still have certain real estate obligations related to some of these
stores. At December 31, 2000, the balance in the restructuring reserve was $11.0
million and consisted of the remaining estimated real estate obligations to be
paid. During the three and six months ended June 30, 2001, the charges incurred
from the real estate obligations approximated the payments received from
sublessees, leaving a balance in the reserve of $11.0 million at June 30, 2001.
NOTE 10 - RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"),
which establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. We use derivatives only in limited circumstances. We adopted
SFAS 133 effective January 1, 2001 and the impact was not material at June 30,
2001.
NOTE 11 - SUBSEQUENT EVENT
In November 1999, we formed a limited liability company, RadioShack.com LLC. In
January 2000, Microsoft Corporation contributed $100.0 million for 100% of the
preferred units in this company. On July 6, 2001, we purchased all of
Microsoft's preferred units in RadioShack.com LLC for $88.0 million, thereby
eliminating the minority interest in RadioShack.com LLC.
On August 2, 2001 we entered into several interest rate swap agreements which
effectively swapped fixed rate interest payments for short-term floating rate
payments. The notional amount of debt affected by these transactions was $150.0
million. These fixed rate instruments have interest rates between 6.8% and 7.2%
and maturities ranging from 2004 to 2007.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION ("MD&A")
FACTORS THAT MAY AFFECT FUTURE RESULTS
Matters discussed in MD&A include forward-looking statements within the meaning
of the federal securities laws. This includes statements concerning management's
plans and objectives relating to our operations or economic performance and
related assumptions. Forward-looking statements are made based on management's
expectations and beliefs concerning future events and, therefore, involve a
number of risks and uncertainties. Management cautions that forward-looking
statements are not guarantees and actual results could differ materially from
those expressed or implied in the forward-looking statements. Important factors
that could cause our actual results of operations or financial condition to
differ include, but are not necessarily limited to:
o changes in the amount and degree of promotional intensity exerted by current
competitors and potential new competition from both retail stores and
alternative methods or channels of distribution, such as e-commerce,
telephone shopping services and mail order;
o the inability to successfully execute our strategic initiatives, including
the development of our new strategic business units ("SBUs") and emerging
sales channels, as well as new alliances which may be formed with other
retailers and third party service providers;
o changes in general U.S. or regional U.S. economic conditions, including, but
not limited to, consumer credit availability, interest rates, inflation,
consumer spending levels and consumer confidence about the economy in
general;
o the presence or absence of new services or products and product features in
the merchandise categories we sell and unexpected changes in our actual
merchandise sales mix;
o the inability to maintain profitable contracts or execute business plans
with providers of third party branded products and with service providers
relating to cellular and PCS telephones, direct-to-home ("DTH") satellite
programming, Internet access and high-speed bandwidth;
o the inability to collect the level of anticipated residual income, consumer
acquisition fees and rebates for products and third party services offered
by us;
o the inability to successfully implement and execute our strategic alliances,
including those with Microsoft, Verizon Wireless, Excite@Home and/or
Blockbuster;
o the lack of availability or access to sources of supply inventory;
o the inability to retain and grow an effective management team in a dynamic
environment or changes in the cost or availability of a suitable work force
to manage and support our service-driven operating strategies;
o the imposition of new restrictions or regulations regarding the sale of
products and/or services we sell or changes in tax rules and regulations
applicable to us;
o the adoption rate and market demand for high-speed Internet and other
Internet-related services; or
o the occurrence of severe weather events which prohibit consumers from
travelling to our retail locations, especially during the peak Christmas
season.
RESULTS OF OPERATIONS
Net Sales and Operating Revenues
Sales increased to $1,039.5 million for the quarter ended June 30, 2001,
compared to $1,023.3 million in the corresponding prior year period. For the six
months ended June 30, 2001, our overall sales increased 5.2% to $2,179.0
million, compared to $2,070.6 million for the same period in 2000. Comparable
store sales increased 1.5% for the second quarter and 4.5% for the six-month
period ended June 30, 2001, respectively, when compared to the prior year second
quarter and six-month periods. Our sales increases for both the three and
six-month periods were driven primarily by increased sales of wireless phones
and by parts, accessories and specialty equipment, as well as residual income
relating to our wireless service providers. For the six-month period, DTH
satellite systems and services also contributed to the six-month sales increase.
Looking forward to the second half of 2001, we expect sales to be flat to
slightly up, reflecting the continuation of difficult retail sales trends.
Sales of communications products increased almost 11% during the three months
and approximately 8% during the six months ended June 30, 2001, respectively,
when compared to the same periods in the prior year. This sales increase was due
primarily to increases in both unit and dollar sales of cellular telephones. We
expect sales of wireless phones to continue to increase for the fiscal year
2001, though to a lesser extent than last year.
Sales in the parts, accessories and specialty equipment category increased
approximately 3% and 5% during the three and six-month periods ended June 30,
2001, respectively, when compared to the same periods in the prior year. These
increases resulted primarily from the sale of specialty batteries and computer
accessories.
Sales in the audio and video category decreased approximately 3% during the
three months ended June 30, 2001, but increased 6% during the six months ended
June 30, 2001, when compared to the same periods in the prior year. This
decrease during the second quarter of 2001 was primarily the result of strong
sales in the second quarter of 2000, due to the launch of the RCA Digital
Entertainment Center at RadioShack.
Sales within the personal computers and peripherals category decreased
approximately 26% during the three months ended June 30, 2001, while remaining
relatively flat for the six months ended June 30, 2001, when compared to the
corresponding periods in the prior year. The average selling price of personal
computers decreased approximately 15% and 10% during the three and six months
ended June 30, 2001, respectively, when compared to 2000. Increased sales of
handheld pocket PCs, Internet devices and monitors were offset by decreased
sales of desktop personal computers, printers and laptops for the six-month
period.
Sales in the personal electronics category decreased approximately 8% and 4% for
the three and six months ended June 30, 2001, respectively, when compared to the
same periods in the prior year, primarily as a result of decreased sales of
electronic gift items.
Sales in the services and other category, which includes residuals and income
from prepaid wireless airtime, repair services and extended service contracts,
increased 8% and 7% during the three and six month periods, respectively, when
compared to the corresponding periods of 2000. During the second quarter and
first six months of 2001, the increase in residual income was partially offset
by a decrease in sales of prepaid wireless airtime.
RadioShack Retail Outlets
June 30, March 31, December 31, September 30, June 30,
2001 2001 2000 2000 2000
--------- --------- --------- --------- --------
Company-owned 5,105 5,099 5,109 5,082 5,060
Cool Things @ Blockbuster 96 -- -- -- --
Dealer/Franchise 2,079 2,067 2,090 2,092 2,073
--------- -------- --------- --------- --------
Total number of retail outlets 7,280 7,166 7,199 7,174 7,133
========= ======== ========= ========= ========
Gross Profit
During the second quarter of 2001, gross profit dollars decreased 4.0% to $512.4
million and 2.8 percentage points to 49.3% of net sales and operating revenues,
when compared to the second quarter of 2000. For the six months ended June 30,
2001, gross profit dollars increased slightly to $1,058.9 million, but decreased
2.1 percentage points to 48.6% of net sales and operating revenues, versus the
corresponding period in 2000. These gross profit percentage point decreases were
attributable to inventory markdowns of slower moving products, as well as to
promotional markdowns taken on personal computers. In addition, we experienced
some margin erosion, as wireless communication sales became a larger part of our
total sales. Wireless phones have a lower gross margin than the company average.
We also experienced a shift in our wireless sales mix from TDMA cellular
technology to lower gross margin CDMA cellular technology. These decreases were
partially offset by an increase in residual income, which has 100% gross margin,
as well as by an increase in the gross profit percentage for the parts,
accessories and specialty equipment category. We anticipate that gross profit as
a percentage of net sales and operating revenues will continue to decrease, but
at a lesser rate during the remainder of 2001, when compared to the same prior
year periods.
Selling, General and Administrative Expense
Our SG&A expense increased 5.4% or $20.4 million and 6.9% or $51.6 million for
the quarter and six months ended June 30, 2001, respectively, when compared to
the same periods in the prior year. This represents 1.4 and 0.6 percentage point
increases to 38.3% and 36.9% of net sales and operating revenues for the quarter
and six months ended June 30, 2001, respectively, when compared to the same
periods the prior year. This increase in percentage points was primarily due to
lost leverage from less than anticipated sales.
For both the three and six months ended June 30, 2001, our advertising expense
increased in dollars and as a percentage of net sales and operating revenues,
when compared to the same periods the prior year. This increase related
primarily to a continued shift from print to broadcast media. Rent expense
increased in dollars and as a percent of sales and operating revenues for the
three and six months ended June 30, 2001, when compared to the same periods in
the prior year. These increases were due to both lease renewals at slightly
higher rates and an increase in the average size of our new stores. Our payroll
expense decreased in dollars and as a percent of sales and operating revenues
for the quarter ended June 30, 2001, when compared to the same period the prior
year. However, our payroll expense increased in dollars while decreasing as a
percent of sales and operating revenues for the six months ended June 30, 2001,
in comparison to the same period the prior year. Payroll expense increased in
dollars during the six month period ended June 30, 2001 due to retail store
expansion and increases in commissions, bonuses and other incentives resulting
from overall increases in comparable store sales and profits. Management
anticipates that RadioShack will maintain slight leverage improvement in its
major expense categories for the remainder of 2001, dependent upon planned
continuous sales growth.
Net Interest Expense
Interest expense, net of interest income, for the three and six months ended
June 30, 2001 was $8.0 million and $16.6 million, respectively, versus $8.2
million and $13.1 million for the comparable three and six months in 2000. The
increase in interest expense for the six months ended June 30, 2001 was higher
than in the prior year due to higher average debt outstanding during the first
four months of 2001, compared to the first four months of 2000. We expect
interest expense, net of interest income, to increase during the remainder of
2001, when compared to the prior year. This expected increase is due primarily
to the pay-off of the CompUSA note receivable on June 22, 2001, which eliminated
the associated interest income.
Provision for Income Taxes
Provision for income taxes for each quarterly period is based on the estimate of
the annual effective tax rate for the year, which we evaluate quarterly. The
effective tax rate for the second quarters of both 2001 and 2000 was 38.0%.
FINANCIAL CONDITION
Cash flow provided by operating activities approximated $338.9 million in the
six month period ended June 30, 2001, compared to cash flow used by operating
activities of $10.8 million in the prior year. This $349.7 million increase in
operating cash flow was primarily attributable to reductions of $190.2 million
in inventory and $152.7 million in accounts receivable during the six month
period ended June 30, 2001. These decreases were partially offset by reductions
in accounts payable, accrued expenses and income taxes payable during the first
six months of 2001.
Inventory at June 30, 2001 decreased $190.2 million or 16.3% since December 31,
2000 and also decreased $73.2 million or 7.0% since June 30, 2000. The decreases
since December 31, 2000 and June 30, 2000 were primarily due to sales of
satellite systems, wireless telephones and desktop personal computers, as well
as improved inventory management.
At June 30, 2001, accounts receivable had decreased $170.1 million or 36.6%
since December 31, 2000 and increased $63.1 million or 27.3% since June 30,
2000. The decrease since year-end was primarily due to seasonal fluctuations, as
well as the collection of accounts receivable outstanding at year-end. The
increase since June 30, 2000 related primarily to increased vendor and service
provider receivables resulting from increased sales of wireless communications
and services, DTH satellite systems and services, and long distance service.
Cash provided by our investing activities was $60.4 million for the six months
ended June 30, 2001, compared to $26.7 million provided in the previous year.
During the second quarter of 2001, we received $123.6 million for the final
settlement of the CompUSA note. Investing activities for the six months ended
June 30, 2001 included capital expenditures totaling $62.1 million, primarily
for retail remodels and expansion and for upgrades of information systems. We
anticipate that capital expenditure requirements will approximate $55.0 million
to $65.0 million for the remainder of 2001, primarily to support RadioShack
store refurbishments and expansion, as well as new and enhanced information
systems.
Cash used by financing activities for the six months ended June 30, 2001 was
$193.9 million, compared to $94.6 million in the previous year. We purchased
$87.6 million of treasury stock for the six months ended June 30, 2001, compared
to $311.1 million during the same period of 2000. On May 11, 2001, we issued
$350.0 million of 10-year 7 3/8% notes in a private offering to initial
purchasers who offered the notes to qualified institutional buyers by relying
upon SEC Rule 144A. The interest rate on the notes is 7.375% per annum with
interest payable on November 15 and May 15 of each year. Payment of interest on
the notes commences on November 15, 2001 and the notes mature on May 15, 2011.
On August 3, 2001 we exchanged substantially all of these notes for a similar
amount of publicly registered notes through the use of an exchange offer under
an SEC form S-4 registration statement, which became effective June 22, 2001.
The net effect of this exchange is that no additional debt was issued on August
3, 2001 and substantially all of the notes are now registered with the SEC. The
net decrease in short-term debt of $461.3 million for the six-month period ended
June 30, 2001 was due to the repayment of short-term debt with funds received
from the 10-year notes issued.
During the second quarter of 2001, we repurchased 1.7 million shares of our
common stock for $49.5 million. This brought the total number of shares
repurchased since the inception of our 10.0 million-share repurchase program to
2.1 million shares totaling $65.7 million at June 30, 2001. In connection with
the share repurchase program, our Board of Directors has authorized us to sell
up to 4.6 million put options on our common stock, supplemented through equity
forwards, with an expiration date no later than December 31, 2002. We have sold
approximately 1.5 million put options since the inception of this program and
approximately 0.1 million put options remained outstanding at June 30, 2001. We
may continue to execute share repurchases, put options and equity forwards from
time to time in order to take advantage of attractive share price levels, as
determined by management. The timing and terms of the transactions, including
maturities, depend on market conditions, our liquidity and other considerations.
Total debt as a percentage of total capitalization was 42.6% at June 30, 2001,
compared to 47.0% at December 31, 2000 and 50.3% at June 30, 2000. Our decrease
in the debt-to-capitalization ratio since December 2000 resulted primarily from
a reduction in our debt due to decreases in both inventories and accounts
receivable. Long-term debt as a percentage of total capitalization was 38.2% at
June 30, 2001, compared to 18.2% at December 31, 2000 and 22.0% at June 30,
2000. This increase was due to the issuance of $350.0 million of 10-year 7 3/8%
notes due May 15, 2011.
In the second quarter of 2001, we renewed our existing $300.0 million 364-day
revolving credit facility and also extended the maturity date to June 2002. The
terms of the 364-day revolving credit facility remained similar to the previous
facility. We also have a $300.0 million five-year revolving credit facility
maturing June 2003. The revolving credit facilities will support any future
commercial paper borrowings and are otherwise available for general corporate
purposes. We believe that our present borrowing capacity is greater than our
established credit lines and long-term debt in place.
RECENT EVENTS
In November 1999, we formed a limited liability company, RadioShack.com LLC. In
January 2000, Microsoft Corporation contributed $100.0 million for 100% of the
issued preferred units in this company. On July 6, 2001, we purchased all of
Microsoft's preferred units in RadioShack.com LLC for $88.0 million, thereby
eliminating the minority interest in RadioShack.com LLC.
On July 25, 2001 we announced that we intend to pay cash dividends on an annual,
instead of quarterly, basis beginning in 2002. Dividends declared in 2002 and
after, at the discretion of our Board of Directors, will be paid annually in
December.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 141, "Business
Combinations" ("SFAS 141") in July 2001, which establishes accounting and
reporting standards for all business combinations. SFAS 141 becomes effective
for all business combinations initiated after June 30, 2001. We adopted SFAS 141
effective July 1, 2001.
The Financial Accounting Standards Board issued SFAS No. 142, "Accounting for
Goodwill and Other Intangible Assets" ("SFAS 142") in July 2001, which
establishes accounting and reporting standards for goodwill and other intangible
assets. SFAS 142 becomes effective for all fiscal quarters of fiscal years
beginning after December 15, 2001. Among other things, SFAS 142 eliminates the
amortization of goodwill, but requires an annual review of the possible
impairment of goodwill. We will adopt SFAS 142 effective January 1, 2002. Our
current goodwill amortization is approximately $2.5 million on an annual basis.
At June 30, 2001 we had $49.3 million of goodwill related primarily to the
acquisition of AmeriLink in July 1999.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.
At June 30, 2001, we did not have any derivative instruments that materially
increased our exposure to market risks for interest rates, foreign currency
rates, commodity prices or other market price risks. In addition, we do not use
derivatives for speculative purposes.
Our exposure to market risks results from changes in short-term interest rates.
Interest rate risk exists principally with respect to $150.0 million
indebtedness, which, because of the interest rate swaps discussed in Note 11 of
the financial statements, effectively bears interest at short-term floating
rates. In the future, an unfavorable change of 100 basis points in the interest
rate applicable to this floating-rate indebtedness could result in additional
interest expense of $0.4 million for a three-month period. This assumption
assumes no change in the principal or the incurring of additional indebtedness.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We have various pending claims, lawsuits, disputes with third parties,
investigations and actions incident to the operation of our business. The
liability, if any, associated with these matters was not determinable at June
30, 2001. Although occasional adverse settlements or resolutions may occur and
negatively impact our earnings in the year of settlement, it is our opinion that
their ultimate resolution will not have a materially adverse effect on our
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
a) RadioShack held its Annual Meeting of Stockholders on May 17, 2001.
b) (1) RadioShack elected directors to serve for the ensuing year. Out of the
191,509,151 eligible votes, 158,679,050 votes were cast at the meeting
either by proxies solicited in accordance with Regulation 14A or by
security holders voting in person. There were 26,637,613 broker non-
votes. In the case of directors, abstentions are treated as votes
withheld and are included in the table. The tabulation of votes of the
matters submitted to a vote of security holders is set forth below:
VOTES VOTES
NAME OF DIRECTOR FOR WITHHELD
------------------------- ------------- -------------
Frank J. Belatti 155,948,137 2,730,913
Ronald E. Elmquist 155,943,646 2,735,404
Lawrence V. Jackson 151,363,087 7,315,963
Robert J. Kamerschen 156,072,724 2,606,326
Lewis F. Kornfeld, Jr. 153,513,677 5,165,373
Jack L. Messman 151,814,930 6,864,120
William G. Morton, Jr. 156,472,867 2,206,183
Thomas G. Plaskett 155,338,965 3,340,085
Leonard H. Roberts 156,459,812 2,219,238
Alfred J. Stein 156,461,868 2,217,182
William E. Tucker 156,009,210 2,669,840
Edwina D. Woodbury 155,986,597 2,692,453
(2) The stockholders voted to approve the adoption of the RadioShack
Corporation 2001 Incentive Stock Plan:
FOR AGAINST ABSTAIN
------- ------- -------
99,565,556 57,447,730 1,665,764
ITEM 5. OTHER INFORMATION
On May 17, 2001, we announced the appointment of Richard J. Hernandez to our
Board of Directors. Mr. Hernandez is currently President of the Corporate
Solutions Group for McKesson HBOC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Required by Item 601 of Regulation S-K.
A list of the exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Index to Exhibits on
page 15, which immediately precedes such exhibits.
b) Reports on Form 8-K.
On May 4, 2001, we announced a proposed note offering of approximately
$300.0 million. The Form 8-K was filed on May 4, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RadioShack Corporation
(Registrant)
Date: August 13, 2001 By /s/ Richard L. Ramsey
-----------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: August 13, 2001 /s/ Michael D. Newman
-----------------------------
Michael D. Newman
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
RADIOSHACK CORPORATION
INDEX TO EXHIBITS
Exhibit
Number Description
3a Restated Certificate of Incorporation of RadioShack Corporation
dated July 26, 1999 (filed as Exhibit 3a(i) to RadioShack's Form
10-Q filed on August 11, 1999 for the fiscal quarter ended June
30, 1999 and incorporated herein by reference).
3a(i) Certificate of Amendment of Restated Certificate of Incorporation
dated May 18, 2000. (Filed as Exhibit 3a to RadioShack's Form
10-Q filed on August 11, 2000 for the fiscal quarter ended June
30, 2000.)
3b RadioShack Corporation Bylaws Amended and Restated as of July 22,
2000. (Filed as Exhibit 3b to RadioShack's Form 10-Q filed on
August 11, 2000 for the fiscal quarter ended June 30, 2000.)
10a* Third Amendment to Revolving Credit Agreement (Facility A) dated
as of June 12, 2001 among RadioShack Corporation, the Lenders
listed therein, the Bank of America, N.A., as Agent, Citibank,
N.A.and Fleet National Bank, as Co-Syndication Agents, The Bank
of New York and First Union National Bank, as Co-Documentation
Agents, amending the Revolving Credit Agreement (Facility A)
dated as of June 25, 1998 (filed as Exhibit 4n to RadioShack's
Form 10Q filed on August 13, 1998).
11* Statement of Computation of Ratios of Earnings to Fixed Charges.
- ----------------------------
* filed with this report
EXHIBIT 10a
THIRD AMENDMENT TO
REVOLVING CREDIT AGREEMENT
(FACILITY A)
THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (Facility A) (this "Third
Amendment"), dated as of June 12, 2001 (but effective as of June 21, 2001), is
entered into among RADIOSHACK CORPORATION (formerly known as Tandy Corporation),
a Delaware corporation (the "Company"), the Lenders listed on the signature
pages hereof (the "Lenders"), CITIBANK, N.A. and FLEET NATIONAL BANK, as
Co-Syndication Agents for the Lenders (in such capacity, the "Co-Syndication
Agents"), THE BANK OF NEW YORK and FIRST UNION NATIONAL BANK, as Documentation
Agents for the Lenders (in such capacity, the "Documentation Agents"), and BANK
OF AMERICA, N.A. (formerly known as NationsBank, N.A.), as Agent for the Lenders
(in such capacity, the "Agent").
BACKGROUND
A. The Company, certain of the Lenders, the Co-Syndication Agents, the
Documentation Agents, and the Agent are parties to that certain Revolving Credit
Agreement (Facility A), dated as of June 25, 1998, as amended by that certain
First Amendment to Revolving Credit Agreement (Facility A), dated as of June 24,
1999, and that certain Second Amendment to Credit Agreement (Facility A), dated
as of June 22, 2000 (said Revolving Credit Agreement (Facility A), as amended,
the "Credit Agreement"; the terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
B. The Company, the Lenders, the Co-Syndication Agents, the Documentation Agents
and the Agent desire to (i) make certain amendments to the Credit Agreement,
(ii) add The Huntington National Bank as a new Lender ("Huntington"), and (iii)
remove SunTrust Bank ("SunTrust") as a Lender.
NOW, THEREFORE, in consideration of the covenants, conditions and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are all hereby acknowledged, the Company, the
Lenders, the Co-Syndication Agents, the Documentation Agents and the Agent
covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
------------------------------
(a) The definition of "Applicable Margin" set forth in Section 1.1 of the Credit
Agreement is hereby amended to read as follows:
"Applicable Margin" means, on any date, with respect to Eurodollar Loans or Base
Rate Loans, as the case may be, the applicable spreads set forth below based
upon the ratings applicable on such date to the Company's Index Debt.
Eurodollar Loan Base Rate Loan
Spread Spread
Category 1 0.215% 0%
----------
A or higher by S & P; or
A2 or higher by Moody's
Category 2 0.330% 0%
----------
A- by S & P; or
A3 by Moody's
Category 3 0.410% 0%
----------
BBB+ by S & P; or
Baa1 by Moody's
Category 4 0.515% 0%
----------
BBB by S & P; or
Baa2 by Moody's
Category 5 0.600% 0%
----------
BBB- by S & P; or
Baa3 by Moody's
For purposes of the foregoing, (a) if neither Moody's nor S&P shall have in
effect a rating for Index Debt, then both such rating agencies will be deemed to
have established ratings for Index Debt in Category 5; (b) if only one of
Moody's and S&P shall have in effect a rating for Index Debt, the Company and
the Lenders will negotiate in good faith to agree upon another rating agency to
be substituted by an amendment to this Agreement for the rating agency which
shall not have a rating in effect, and pending the effectiveness of such
amendment the Applicable Margin will be determined by reference to the available
rating; (c) if the rating established or deemed to have been established by
Moody's and S&P shall fall within different Categories, the Applicable Margin
shall be determined by reference to the superior (or numerically lower)
Category; provided, however, if the difference in the ratings established by
Moody's and S&P shall be more than two Categories, the Applicable Margin shall
be determined by reference to the Category which is one Category below the
superior (or numerically lower) Category; and (d) if any rating established or
deemed to have been established by Moody's or S&P shall be changed (other than
as a result of a change in the rating system of either Moody's or S&P), such
change shall be effective as of the date on which such change is first announced
by the rating agency making such change. Each change in the Applicable Margin
shall apply to all Eurodollar Loans that are outstanding at any time during the
period commencing on the effective date of such change and ending on the date
immediately preceding the effective date of the next such change. If the rating
system of either Moody's or S&P shall change prior to the Maturity Date, the
Company and the Lenders shall negotiate in good faith to amend the references to
specific ratings in this definition to reflect such changed rating system. In
addition, the Applicable Margin for Eurodollar Loans or Base Rate Loans shall be
increased above the per annum percentages set forth above by (a) 0.050% on each
Utilization Premium Date occurring when the Applicable Margin is determined by
reference to Category 1, (b) 0.100% on each Utilization Premium Date occurring
when the Applicable Margin is determined by reference to Category 2 and (c)
0.125% on each Utilization Premium Date when the Applicable Margin is determined
by reference to Category 3, 4 or 5.
(b) The definition of "Applicable Fee Percentage" set forth in Section 1.1 of
the Credit Agreement is hereby amended to read as follows:
"Applicable Fee Percentage" means, on any date, the applicable percentage set
forth below based upon the ratings applicable on such date to the Company's
senior, unsecured, non-credit-enhanced long term indebtedness for borrowed money
("Index Debt"):
Applicable Fee Percentage
Category 1 0.060%
----------
A or higher by S & P; and
A2 or higher by Moody's
Category 2 0.070%
----------
A- by S & P; and
A3 by Moody's
Category 3 0.090%
----------
BBB+ S & P; and
Baa1 by Moody's
Category 4 0.110%
----------
BBB by S & P; and
Baa2 by Moody's
Category 5 0.150%
----------
BBB- or lower by S & P; or
Baa3 or lower by Moody's
For purposes of the foregoing, (a) if neither Moody's nor S&P shall have in
effect a rating for Index Debt, then both such rating agencies will be deemed to
have established ratings for Index Debt in Category 5; (b) if only one of
Moody's and S&P shall have in effect a rating for Index Debt, the Company and
the Lenders will negotiate in good faith to agree upon another rating agency to
be substituted by an amendment to this Agreement for the rating agency which
shall not have a rating in effect, and pending the effectiveness of such
amendment the Applicable Fee Percentage will be determined by reference to the
available rating; (c) if the ratings established or deemed to have been
established by Moody's and S&P shall fall within different Categories, the
Applicable Fee Percentage shall be determined by reference to the superior (or
numerically lower) Category; provided, however, if the difference in the ratings
established by Moody's and S&P shall be more than two Categories, the Applicable
Fee Percentage shall be determined by reference to the Category which is one
Category below the superior (or numerically lower) Category; and (d) if any
rating established or deemed to have been established by Moody's or S&P shall be
changed (other than as a result of a change in the rating system of either
Moody's or S&P), such change shall be effective as of the date on which such
change is first announced by the rating agency making such change. Each change
in the Applicable Fee Percentage shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change. If the rating system of either Moody's
or S&P shall change prior to the Maturity Date, the Company and the Lenders
shall negotiate in good faith to amend the references to specific ratings in
this definition to reflect such changed rating system.
(c) The definition of "Co-Agent" is hereby deleted from Section 1.1 of the
Credit Agreement.
(d) The definition of "Co-Syndication Agent" is hereby added to Section 1.1 of
the Credit Agreement to read as follows:
"Co-Syndication Agent" means, collectively, Citibank, N.A. and Fleet National
Bank, and any successors thereto.
(e) The definition of "Designating Lender" is hereby added to Section 1.1 of the
Credit Agreement to read as follows:
"Designating Lender" has the meaning specified in Section 9.16.
(f) The definition of "Documentation Agent" is hereby added to Section 1.1 of
the Credit Agreement to read as follows:
"Documentation Agent" means, collectively, The Bank of New York and First
Union National Bank, and any successors thereto.
(g) The definition of "Managing Agent" is hereby deleted from Section 1.1 of the
Credit Agreement.
(h) The definition of "Maturity Date" set forth in Section 1.1 of the Credit
Agreement is hereby amended to read as follows:
"Maturity Date" means June 19, 2002, or the earlier of termination of the
Commitments pursuant to Section 7.1.
(i) Section 1.1 of the Credit Agreement is hereby amended by adding the defined
term "Consolidated EBITDAR" thereto in proper alphabetical order as follows:
"Consolidated EBITDAR" means, for any period, for the Company and its
Subsidiaries, calculated on a consolidated basis, the sum of (a)
Consolidated EBITDA for such period, plus (b) lease and rental expense for
such period.
(j) Section1.1 of the Credit Agreement is hereby amended by adding the defined
term "Fixed Charge Coverage Ratio" thereto in proper alphabetical order as
follows:
"Fixed Charge Coverage Ratio" means, as of any date of determination, the
ratio of (a) Consolidated EBITDAR for the period of four fiscal quarters
ending on such date to (b) the sum of (i) interest expense (including
interest expense in respect of Capital Leases) of the Company and its
Subsidiaries on a consolidated basis for the period of four fiscal quarters
ending on such date and (ii) lease and rental expense of the Company and its
Subsidiaries for the four fiscal quarters ending on such date.
(k) Section 1.1 of the Credit Agreement is hereby amended by adding the defined
term "SPV" thereto in proper alphabetical order to read as follows:
"SPV" has the meaning specified in Section 9.16.
(l) Section 5.5(c) of the Credit Agreement is hereby amended to read as follows:
"(c) Officer's Certificate. Together with the financial statements furnished
by the Company under the preceding clauses (a) and (b), a certificate of the
Company's Chief Financial Officer, Vice President and Treasurer or Vice
President and Controller dated the date of such annual audit report or such
quarterly financial statement, as the case may be, to the effect that no
Event of Default or Default, has occurred or is continuing, or if there is
such event, describing it and the steps, if any, being taken to cure it, and
containing a calculation, in form and substance satisfactory to the Agent,
to evidence compliance with Sections 6.9 and 6.12;
(m) Article VI of the Credit Agreement is hereby amended by adding a new Section
6.12 thereto to read as follows:
Section 6.12 Fixed Charge Coverage Ratio. The Company will not permit the
Fixed Charge Coverage Ratio to be less than 2.00 to 1 at the end of any
fiscal quarter.
(n) Section 9.7(b) of the Credit Agreement is hereby amended by adding the
following sentence to the end thereof to read as follows:
Notwithstanding anything in this Section 9.7 to the contrary, Section 9.16
may not be amended or modified without the written consent of the
Designating Lender affected thereby.
(o) Section 9.12 of the Credit Agreement is hereby amended to read as follows:
Section 9.12 No Duties of Co-Syndication Agents and Documentation Agents.
The Company and the Lenders acknowledge that the Co-Syndication Agents and
the Documentation Agents shall have no duties, responsibilities or
liabilities in their respective capacities as Co-Syndication Agents and
Documentation Agents.
(p) Article IX of the Credit Agreement is hereby amended by adding a new Section
9.16 thereto to read as follows:
Section 9.16. Designation.
(a) Notwithstanding anything to the contrary contained in this Agreement or
in any other Loan Document, if Company gives a Notice of Borrowing under
Section 2.3 of this Agreement any Lender (a "Designating Lender") may grant
to one or more special purpose funding vehicles (each, an "SPV"), identified
as such in writing from time to time by the Designating Lender to the Agent
and the Company, the option to provide to the Company all or any part of any
Loan that such Designating Lender would otherwise be obligated to make to
the Company pursuant to this Agreement; provided that (i) nothing herein
shall constitute a commitment by any SPV to make any Loan, (ii) if an SPV
elects not to exercise such option or otherwise fails to provide all or any
part of such Loan, the Designating Lender shall be obligated to make such
Loan pursuant to the terms hereof, (iii) the Designating Lender shall remain
liable for any indemnity or other payment obligation with respect to its
Commitment hereunder, and all other contractual obligations of the
Designating Lender under this Agreement, provided that funding by an SPV
under the Designating Lender's Commitment shall be effective to discharge
the Designating Lender's obligation to fund under the Commitment to the same
extent as if the Designating Lender had funded the Loans, (iv) the SPV shall
only be entitled to the cost protection provisions contained in Sections
2.12 through 2.14 to the same extent that the Designating Lender would be
entitled to the benefit of such cost protection provisions and (v) the
Company shall not otherwise incur any additional costs, liabilities or
obligations under this Agreement or any other Loan Document as a result of a
Designating Lender granting such option to any SPV. The making of a Loan by
an SPV hereunder shall utilize the Commitment of the Designating Lender to
the same extent, and as if, such Loan were made by such Designating Lender.
(b) As to any Loans or portion thereof made by it, each SPV shall have all
the rights that a Lender making such Loans or portion thereof would have had
under this Agreement; provided, however, that each SPV shall have granted to
its Designating Lender an irrevocable power of attorney in form and
substance satisfactory to Company and Agent, to deliver and receive all
communications and notices under this Agreement (and any other Loan
Document) and to exercise on such SPV's behalf, all of such SPV's voting
rights under this Agreement; it being understood that such irrevocable power
of attorney shall grant the related Designating Lender the sole, absolute
and independent discretion to exercise such SPV's voting rights, which power
of attorney shall provide that Company may deal solely with the Designating
Lender with respect to delivery and receipt of all communications and
notices, and with respect to voting rights arising from the Designating
Lender's Commitment. The Company, the Agent and the other Lenders may rely
on the acts, statements and representations of the Designating Lender with
respect to this Agreement, the Note issued to the Designating Lender, the
Commitment of the Designating Lender hereunder and all actions taken by the
Designating Lender for itself and under the power of attorney granted by the
SPV to the Designating Lender. No additional Note shall be required to
evidence the Loans or portion thereof made by an SPV; and the related
Designating Lender shall be deemed to hold its Note as agent for such SPV to
the extent of the Loans or portion thereof funded by such SPV. In addition,
any payments for the account of any SPV shall be paid to its Designating
Lender as agent for such SPV. Any payments made by Company to the
Designating Lender with respect to the Note shall be credited to the Note
and such credits shall be binding on the SPV, whether or not the SPV
actually receives any such payment from the Designating Lender.
(c) Each party hereto hereby agrees that no SPV shall be liable for any
indemnity or payment under this Agreement for which a Lender would otherwise
be liable. In furtherance of the foregoing, each party hereto hereby agrees
(which agreements shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of
all outstanding commercial paper or other senior indebtedness of any SPV, it
will not institute against, or join any other person in instituting against,
such SPV any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under the laws of the United States or any State
thereof as a result of any action taken or omitted to be taken by such SPV
in connection with this Agreement.
(d) In addition, notwithstanding anything to the contrary contained in this
Section 9.16 or otherwise in this Agreement, any SPV may (i) at any time and
without paying any processing fee therefor, assign or participate all or a
portion of its interest in any Loans to the Designating Lender or to any
financial institutions providing liquidity and/or credit support to or for
the account of such SPV to support the funding or maintenance of Loans and
(ii) disclose on a confidential basis, under confidentiality terms approved
by Company and Agent, any non-public information relating to its Loans to
any rating agency or provider of any surety, guarantee or credit or
liquidity enhancements to such SPV. This Section 9.16 may not be amended
without the written consent of any Designating Lender affected thereby.
(e) Designating Lender shall respond timely to all requests under the
Agreement that require approval, consent or other action by Lenders, so that
Company, the Agent and the other Lenders shall experience no delay with
respect to any such request as a result of the designation of any SPV.
(f) If a financial institution providing liquidity and/or credit support to
a SPV receives an assignment or participation, under subsection (i) of
section 9.16(d) the financial institution shall be bound by the provisions
of this Section 9.16 with respect to Company's, the Agent's and the other
Lender's rights to deal with the Designating Lender with respect to this
Agreement and all Loans made under the Designating Lender's Commitment and
in no event will the financial institution receive greater rights than those
held by the SPV.
(q) The Commitment of (i) Huntington is the amount beside Huntington's name on
the signature pages hereof and (ii) each Lender other than Huntington is hereby
amended or reaffirmed to be the amount indicated beside each such Lender's name
on the signature pages thereof.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its execution
and delivery hereof, the Company represents and warrants that, as of the date
hereof and after giving effect to the amendments contemplated by the foregoing
Section 1:
(a) the representations and warranties contained in the Credit Agreement and the
other Loan Documents are true and correct on and as of the date hereof as made
on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default or an
Event of Default;
(c) the Company has full power and authority to execute and deliver this Third
Amendment, the Note payable to the order of Huntington (the "Huntington Note"),
and the Credit Agreement, as amended hereby, the Huntington Note and this Third
Amendment constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms, except as enforceability
may be limited by applicable debtor relief laws and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law) and except as rights to indemnity may be limited by federal or state
securities laws;
(d) neither the execution, delivery and performance of this Third Amendment, the
Huntington Note or the Credit Agreement, as amended hereby, nor the consummation
of any transactions contemplated herein or therein, will conflict with any law,
rule or regulation, the articles of incorporation or bylaws of the Company, or
any indenture, agreement or other instrument to which the Company or any of its
property is subject; and
(e) no authorization, approval, consent, or other action by, notice to, or
filing with, any governmental authority or other Person, is required for the
execution, delivery or performance by the Company of this Third Amendment or the
Huntington Note.
3. CONDITIONS OF EFFECTIVENESS. This Third Amendment shall be effective as of
June 21, 2001 (including the amendment of the Applicable Fee Percentage and the
Applicable Margin set forth in Section 1 of this Third Amendment), subject to
the following:
(a) the Agent shall have received counterparts of this Third Amendment executed
by each of the Lenders;
(b) the Agent shall have received counterparts of this Third Amendment executed
by the Company;
(c) the Agent shall have received a certified resolution of the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Third Amendment and the Huntington Note;
(d) the Agent shall have received an opinion of counsel to the Company, in form
and substance satisfactory to the Agent, with respect to the matters set forth
in Sections 2(c), (d) and (e) of this Third Amendment;
(e) the Borrower shall have paid the legal fees and expenses of the Agent's
legal counsel;
(f) SunTrust shall have received payment in full of all amounts due and owing to
it under the Credit Agreement; and
(g) the Agent shall have received, in form and substance satisfactory to the
Agent and its counsel, such other documents, certificates and instruments as the
Agent shall require.
4. SUNTRUST. Upon satisfaction of the conditions set forth in Section 3 of this
Third Amendment, SunTrust shall (a) not be a Lender under the Credit Agreement
and shall no longer have any rights or obligations with respect thereto, except
for those which expressly survive termination of the Credit Agreement or
termination of any Commitments thereunder and (b) mark its Note "PAID IN FULL"
and return its Note to the Company.
5. PURCHASE BY LENDERS. Simultaneously with the satisfaction of conditions of
effectiveness set forth in Section 3 hereof, each Lender shall purchase or sell
(as the case may be), without recourse, an amount of Loans outstanding such that
after giving effect to this Third Amendment, the amount of each Lender's
Commitment under the Credit Agreement which has been utilized shall be pro rata
among the Lenders in the proportions that their respective Commitments bear to
the Total Commitments. The parties hereto agree that the provisions of Section
9.3 of the Credit Agreement shall not be applicable to Huntington pursuant to
this Third Amendment.
6. HUNTINGTON REPRESENTATIONS. Huntington (a) represents and warrants that it is
legally authorized to enter into this Third Amendment and become a Lender under
the Credit Agreement; (b) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 5.5 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to become a Lender under the Credit Agreement; (c) agrees that it will,
independently and without reliance upon the Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (d) appoints and authorizes the Agent to take such action
as an agent on its behalf and to exercise such powers under the Credit Agreement
as are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; (e) agrees that it will perform in accordance
with their terms all the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Lender; and (f) agrees that it will keep
confidential all information with respect to the Company furnished to it by the
Company or the Assignor (other than information generally available to the
public or otherwise available to the Assignor on a non-confidential basis).
7. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Third Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", or words of like import
shall mean and be a reference to the Credit Agreement, as amended by this
Third Amendment.
(b) The Credit Agreement, as amended by this Third Amendment, and all other
Loan Documents shall remain in full force and effect and are hereby ratified
and confirmed.
8. COSTS, EXPENSES AND TAXES. The Company agrees to pay on demand all reasonable
costs and expenses of the Agent in connection with the preparation,
reproduction, execution and delivery of this Third Amendment and the other
instruments and documents to be delivered hereunder (including the reasonable
fees and out-of-pocket expenses of counsel for the Agent with respect thereto
and with respect to advising the Agent as to its rights and responsibilities
under the Credit Agreement, as amended by this Third Amendment).
9. EXECUTION IN COUNTERPARTS. This Third Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which when taken together shall constitute but one and the same
instrument.
10. GOVERNING LAW: BINDING EFFECT. This Third Amendment shall be governed by and
construed in accordance with the laws of the State of Texas (without regard to
principles of conflicts of law) and the United States of America, and shall be
binding upon the Company, the Syndication Agent, the Documentation Agent, the
Managing Agent, each Co-Agent, the Agent, and each Lender and their respective
successors and assigns.
11. HEADINGS. Section headings in this Third Amendment are included herein for
convenience of reference only and shall not constitute a part of this Third
Amendment for any other purpose.
12. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS THIRD AMENDMENT,
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment as the
date first above written.
RADIOSHACK CORPORATION
By: /s/
-----------------------------------------------
-----------------------------------------------
Martin Moad
Treasurer
BANK OF AMERICA, N.A., as Agent and as a Lender
Commitment: $32,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
CITIBANK, N.A., as Co-Syndication Agent and
as a Lender
Commitment: $31,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
FLEET NATIONAL BANK, as Co-Syndication Agent
and as a Lender
Commitment: $27,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
THE BANK OF NEW YORK, as a Documentation Agent
and as a Lender
Commitment: $27,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
FIRST UNION NATIONAL BANK, as a Documentation
Agent and as a Lender
Commitment: $27,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
NATIONAL CITY BANK
Commitment: $16,000,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
KBC BANK N.V., NEW YORK BRANCH
Commitment: $16,000,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
FIRSTAR BANK, N.A.
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
THE HUNTINGTON NATIONAL BANK
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
WELLS FARGO BANK, N.A.
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
FIFTH THIRD BANK
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
KEYBANK NATIONAL ASSOCIATION
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
BANCA NAZIONALE DEL LAVORO S.p.A.,
NEW YORK BRANCH
Commitment: $13,500,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
BANK ONE, N.A.
Commitment: $10,000,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
FIRST HAWAIIAN BANK
Commitment: $10,000,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
HIBERNIA NATIONAL BANK
Commitment: $7,000,000
By: /s/
-----------------------------------------------
Name:
-----------------------------------------------
Title:
ACKNOWLEDGED AND AGREED
FOR PURPOSES OF SECTION 4
HEREOF AND NOT AS A LENDER
SUNTRUST BANK
By: /s/
----------------------------------------
Name:
----------------------------------------
Title:
EXHIBIT 11
RADIOSHACK CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
(In millions, except ratios) 2001 2000 2001 2000
- ---------------------------- -------- -------- -------- --------
Ratio of Earnings to Fixed Charges:
Net income $ 41.2 $ 75.4 $ 87.7 $ 145.1
Plus provision for income taxes 25.3 46.2 53.8 88.9
-------- -------- -------- --------
Income before income taxes 66.5 121.6 141.5 234.0
-------- -------- -------- --------
Fixed charges:
Interest expense and amortization of debt discount 12.2 12.4 25.2 21.9
Amortization of issuance expense 0.0 0.3 0.2 0.5
Appropriate portion (33 1/3%) of rentals 18.7 17.7 37.5 35.3
-------- -------- -------- --------
Total fixed charges 30.9 30.4 62.9 57.7
-------- -------- -------- --------
Earnings before income taxes and fixed charges $ 97.4 $ 152.0 $ 204.4 $ 291.7
======== ======== ======== ========
Ratio of earnings to fixed charges 3.15 5.00 3.25 5.06
======== ======== ======== ========
Ratio of Earnings to Fixed Charges and Preferred
Dividends:
Total fixed charges, as above $ 30.9 $ 30.4 $ 62.9 $ 57.7
Preferred dividends 1.2 1.3 2.5 2.7
-------- -------- -------- --------
Total fixed charges and preferred dividends $ 32.1 $ 31.7 $ 65.4 $ 60.4
======== ======== ======== ========
Earnings before income taxes and fixed charges $ 97.4 $ 152.0 $ 204.4 $ 291.7
======== ======== ======== ========
Ratio of earnings to fixed charges and preferred
dividends 3.03 4.79 3.13 4.83
======== ======== ======== ========