RadioShack Corporation (



Q2 2011 Earnings Conference Call

July 26, 2011 8:30 AM EST


Molly Salky – VP, IR

Jim Gooch – President and CEO


Michael Lasser – UBS

Dan Wewer – Raymond James

Gary Balter – Credit Suisse

Scott Ciccarelli – RBC

Matthew Fassler – Goldman Sachs

Gregory Melich – ISI

Michael Corelli – Barry Vogel & Associates

Jeremy Brunelli – Consumer Edge Research

Chris Horvers – JP Morgan

Mike Baker – Deutsche Bank

Alan Rifkin – Barclays Capital

Carla Casella – JP Morgan

Brad Wakes [ph] – Coretta Capital [ph]

Emily Shanks – Barclays Capital

Brad Thomas – KeyBanc Capital Markets



Good day, ladies and gentlemen, and welcome to the second quarter 2011 RadioShack Corporation’s earnings conference call.

My name is Katina and I’ll be your coordinator for today.

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At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today’s call, Ms. Molly Salky, Vice President, Investor Relations. Please proceed.

Molly Salky

Good morning, everyone, and welcome to the RadioShack second quarter 2011 investor conference call and webcast. We’re pleased to provide the midyear update on our results and outlook.

With me on the call today is Jim Gooch, President and Chief Executive Officer. Before I pass the call to Jim, I’d like to take care of a few housekeeping items. We issued two announcements this morning. First was our release announcing a new agreement with Verizon Wireless to offer wireless services in our US company operated stores beginning September 15


. The other was our earnings release for the second quarter. We also filed our 10-Q with the SEC this morning. These announcements and the 10-Q filing along with the replay of this webcast are available on our IR site.

One note regarding our financial reporting; we completed the transfer of our remaining Sam’s Club kiosk to Sam’s during the quarter. With this transition, we’ve reclassified the Sam’s kiosk to discontinued operation. We also reclassified the Target Mobile operations into the Other category within our segment report. The Other segment now includes the results of our T-Mobile centers, sales to independent dealers, our dotcom site, our Mexico operation and other outside sales. Historical financial statements and comp store sales restated for the exchanges are available on our IR site and in our 8-K filing today.

Finally, let me recap the one-time charges in the quarter. First, a $3 million pretax, $1.9 million after-tax or $0.02 per share noncash inventory evaluation charge related to T-Mo inventory. This was reflected in cost of goods sold. The second was an $8.7 million pretax, $5.8 million after-tax or $0.05 per share related to the closure of our manufacturing plant in China. The $8.7 million breaks down as $1.2 million to cost of goods sold, $7.1 million to SG&A, and $0.4 million to depreciation. You will find a detailed reconciliation at these charges in our earnings release.

Now, I want to remind everyone that we may make forward-looking statements on the call today, either in our prepared remarks or in the associated Q&A session. These statements are based on beliefs and expectations, and are subjected to certain risks and uncertainties that may cause actual results to differ materially. These risks are detailed at our various filings with the SEC such as our most recent Forms 10-K and 10-Q, as well as our news releases and other communications. The company does not undertake to update or revise any forward-looking statements which speak only as of the time they are made.

Following our prepared remarks today, we’ve allowed ample time to address any questions that you may have. Please limit yourself to one question and one follow-up, so that we can get to everyone’s question during the call. Do feel free to re-queue to ask additional question.

With that, let me turn the call over to Jim Gooch.

Jim Gooch

Thank you, Molly, and good morning, everybody, and thank you for joining our midyear call. I think as all of you could see from our release today, we have a lot to talk about. There is a lot going on in our business and I’ll walk you through some of those details, and we have some very excitement news to share with you regarding the new agreement that Molly mentioned with Verizon.

I think as I told you on our February call, we expected the first half of the year to be challenging, and it was. We knew we’d face some serious comparison challenges, especially in the second quarter including the continued impact of the T-Mobile breech, we had to shift in the handset launches of both the EVO and the iPhone, and the timing of many of our initiatives which we believe will have more of an impact in the second half.

However, in addition to all of these challenges that we knew we had going in, another issue which negatively impacted our performance in the quarter was a change in the Sprint upgrade policy. This created a one-time short-term drop in our Sprint postpaid business, and I’ll go into some of that detail in a moment. What I will say is, is that while our mobility business was clearly challenged in the quarter, I characterize these issues as temporary, as transitional, and they’ve either been resolved or they’re in the process of being resolved today.

So, with that, what I’d like to today is, I’ll run through our performance in the quarter, I’ll spend some time discussing our new agreement with Verizon, and then I’ll briefly update you on some initiatives and where we see opportunities for the rest of this year.

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