Mike New man Mike New man Mike New man Mike New man Mike New man - - PowerPoint PPT Presentation

SVP & Chief Financial Officer SVP & Chief Financial Officer

Mike New man Mike New man Mike New man Mike New man Mike New man Mike New man Mike New man Mike New man

4Q 2002 Sales 4Q 2002 Sales

• Comparable Store Sales +2%
• Total Sales (-1%)
• Areas of Strength
• Portable Computing
• Computer Accessories
• Photography
• DVD Players
• Select Toys & Giftables (e.g. Zip Zap Micro RC Cars, Environizer)
• Areas of Weakness
• Sprint PCS Handset Unit Sales
• Most Radio Control Toys
• Direct-to-Home Satellite TV
• Desktop Computers
• Comparable Store Sales +2%
• Total Sales (-1%)
• Areas of Strength
• Portable Computing
• Computer Accessories
• Photography
• DVD Players
• Select Toys & Giftables (e.g. Zip Zap Micro RC Cars, Environizer)
• Areas of Weakness
• Sprint PCS Handset Unit Sales
• Most Radio Control Toys
• Direct-to-Home Satellite TV
• Desktop Computers

Long-Term Financial Model 2003 – 2005 Long-Term Financial Model 2003 – 2005

Base Case Sales 2% to 3% GM Rate 70 to 80 bps/yr SG&A Growth 1% to 2% Operating Income Growth 10% to 12% EPS Growth 13% to 15% Base Case Sales 2% to 3% GM Rate 70 to 80 bps/yr SG&A Growth 1% to 2% Operating Income Growth 10% to 12% EPS Growth 13% to 15%

2003 E.P.S. Goal Predicated In Part Upon Vendor Initiatives and Stock Buyback 2003 E.P.S. Goal Predicated In Part Upon Vendor Initiatives and Stock Buyback

$1.40 $1.44 $1.48 $1.52 $1.56 $1.60 $1.64 $1.68 2002 EPS 2003 EPS Base Sales +2% Price/Mkdwns Vendor Inflation Buyback $1.40 $1.44 $1.48 $1.52 $1.56 $1.60 $1.64 $1.68 2002 EPS 2003 EPS Base Sales +2% Price/Mkdwns Vendor Inflation Buyback 0.10 0.08 (0.07) 0.07 0.03

13% - 15% E.P.S. Growth 13% - 15% E.P.S. Growth

Long-Term Financial Model 2003 - 2005 Long-Term Financial Model 2003 - 2005

Stretch Case Sales 2% to 3% 4% to 5% GM Rate 70 to 80 bps/yr 90 to 100 bps/yr SG&A Growth 1% to 2% 2% to 3% Operating Income Growth 10% to 12% 22% to 24% EPS Growth 13% to 15% 25% to 30% Stretch Case Sales 2% to 3% 4% to 5% GM Rate 70 to 80 bps/yr 90 to 100 bps/yr SG&A Growth 1% to 2% 2% to 3% Operating Income Growth 10% to 12% 22% to 24% EPS Growth 13% to 15% 25% to 30%

2003 E.P.S. Stretch Goal Predicated In Larger Part Upon Initiatives Other Than Sales 2003 E.P.S. Stretch Goal Predicated In Larger Part Upon Initiatives Other Than Sales

$1.40 $1.45 $1.50 $1.55 $1.60 $1.65 $1.70 $1.75 $1.80 2002 EPS 2003 EPS Base Sales +4% Price/Markdowns Vendor Inflation SG&A Lev. Buyback $1.40 $1.45 $1.50 $1.55 $1.60 $1.65 $1.70 $1.75 $1.80 2002 EPS 2003 EPS Base Sales +4% Price/Markdowns Vendor Inflation SG&A Lev. Buyback

0.15 0.05 0.12 (0.07) 0.03 0.10

25% E.P.S. Growth 25% E.P.S. Growth

How We Define Our Business How We Define Our Business

RadioShack Retail Sales Composition RadioShack Retail Sales Composition

Wireless Communications 33% Wired Comm 9% Radio Comm 3% Computer 10% Home Entertainment 18%

Accessories, Batteries, Tech 17% P/E, Seasonal, Portable Audio 9% Service Plans, Repair 1%

Based on 3Q02 YTD Sales Red Type = Gross Margin % Mid-High 40s Mid-High 40s Mid-High 40s High 20s Low-Mid 40s High 60s – Low 70s Low 50s High 80s

Credible 2003 Sales Case: Credible Improvements, Favorable Anniversaries in H/E and Computer Credible 2003 Sales Case: Credible Improvements, Favorable Anniversaries in H/E and Computer

Nov YTD Base Case Dept ’02 Sales ’03-’05 Wireless 11% 3% – 4% Wired (-2%) (-2%) – 0% Radio (-11%) (-3%) – 0% Computer (-8%) 10% – 12% Home Ent. (-26%) 0% – 2% Accs/Bat/Tech 4% 3% Toys/Port Aud/P-E (-10%) 1% – 2% TOTAL (-5%) 2% Nov YTD Base Case Dept ’02 Sales ’03-’05 Wireless 11% 3% – 4% Wired (-2%) (-2%) – 0% Radio (-11%) (-3%) – 0% Computer (-8%) 10% – 12% Home Ent. (-26%) 0% – 2% Accs/Bat/Tech 4% 3% Toys/Port Aud/P-E (-10%) 1% – 2% TOTAL (-5%) 2%

RadioShack Retail Sales Composition RadioShack Retail Sales Composition

Wireless Communications 33% Wired Comm 9% Radio Comm 3% Computer 10% Home Entertainment 18%

Accessories, Batteries, Tech 17% P/E, Seasonal, Portable Audio 9% Service Plans, Repair 1%

Based on 3Q02 YTD Sales

Breakdown of Wireless Communication Breakdown of Wireless Communication

Handsets Handsets Airtime, Services Airtime, Services Wireless Access Wireless Access Wireless Comm 33% Wireless Comm 33%

Based on 3Q02 YTD Sales

Healthy Wireless Dept Sales Growth

Less Reliant on Handsets

Healthy Wireless Dept Sales Growth

Less Reliant on Handsets

• Assumes Handset Growth

Low-Mid Singles

• Assumes 10% Growth in

Accessories

• Assumes Handset Growth

Low-Mid Singles

• Assumes 10% Growth in

Accessories

2001 2004

3-Year CAGR of Dept Low to Mid-Single %

Handsets Accessories

Airtime, Services

Handsets Accessories Airtime, Services

RadioShack Retail Sales Composition RadioShack Retail Sales Composition

Wireless Communications 33% Wired Comm 9% Radio Comm 3% Computer 10% Home Entertainment 18%

Accessories, Batteries, Tech 17% P/E, Seasonal, Portable Audio 9% Service Plans, Repair 1%

Based on 3Q02 YTD Sales

Breakdown of Home Entertainment Breakdown of Home Entertainment

Home Entertainment 18% Home Entertainment 18% Home Entertainment Accessories Home Entertainment Accessories DTH DTH Home Video Home Video Other Other

Based on 3Q02 YTD Sales

Mixing Up Home Entertainment to Drive Profit

Strong Accessory Growth; Less Dependent on DTH

Mixing Up Home Entertainment to Drive Profit

Strong Accessory Growth; Less Dependent on DTH

• Material Mix Shift in Favor of

Accessories, Up Mid-Single %

• Home Video Share Gain to Smaller

Extent

• DTH Down Single-Digit %, Due to

DISH Lower Sales Ring

• Material Mix Shift in Favor of

Accessories, Up Mid-Single %

• Home Video Share Gain to Smaller

Extent

• DTH Down Single-Digit %, Due to

DISH Lower Sales Ring

2001 2004

3-Year CAGR of Dept Flat to Low-Single %

Direct to Home Accessories Other

Home Video

Direct to Home Accessories Other

Home Video

RadioShack Retail Sales Composition RadioShack Retail Sales Composition

Wireless Communications 33% Wired Comm 9% Radio Comm 3% Computer 10% Home Entertainment 18%

Accessories, Batteries, Tech 17% P/E, Seasonal, Portable Audio 9% Service Plans, Repair 1%

Based on 3Q02 YTD Sales

Breakdown of Computer Department Breakdown of Computer Department

Computer 10% Computer 10%

Home Networking, Portable Computers, Photography Home Networking, Portable Computers, Photography Desktop Computers, Printers, Monitors Desktop Computers, Printers, Monitors

Accessories Accessories Other Other

Based on 3Q02 YTD Sales

Computer Dept To Look Vastly Different Computer Dept To Look Vastly Different

• Continuing Strong Double Digit % Growth
• f Home Networking, Portable

Computing, and Digital Photography

• Double-Digit Growth of

Other Accessories

• Continued Deceleration of

Desktops, 20% - 30%

• Continuing Strong Double Digit % Growth
• f Home Networking, Portable

Computing, and Digital Photography

• Double-Digit Growth of

Other Accessories

• Continued Deceleration of

Desktops, 20% - 30%

2001 2004

3-Year CAGR of Dept Double Digit %

Networking, Portable Computing, Digital Photography

Netw, Port Comp, Photo

Desktop Computers, Printers, Monitors

D e s k t

• p

s e t a l

Accessories Accessories Other Other

Leaning Into RadioShack’s Strength: Servicing Customers’ Routine Electronics Needs Leaning Into RadioShack’s Strength: Servicing Customers’ Routine Electronics Needs

‘02 Sales ’02 Sales (mil) Growth CAGR ’03-’05 Computer Accessories $150 40% Strong Dbl Digit % Home Ent Accessories $350 6% Mid-Single % Wireless Accessories $200 17% 10% Batteries $250 10% High-Single % $950 13% 8% - 10% ‘02 Sales ’02 Sales (mil) Growth CAGR ’03-’05 Computer Accessories $150 40% Strong Dbl Digit % Home Ent Accessories $350 6% Mid-Single % Wireless Accessories $200 17% 10% Batteries $250 10% High-Single % $950 13% 8% - 10%

Activities to Drive Sales, Profit

• In-Store Space Allocation
• Assortment
• Training
• Compensation

Activities to Drive Sales, Profit Activities to Drive Sales, Profit

• In

In-

• Store Space Allocation

Store Space Allocation

• Assortment

Assortment

• Training

Training

• Compensation

Compensation

Operating Efficiency Operating Efficiency

• Pricing
• Supply Chain – Vendors & Purchasing
• SG&A Management
• ROIC
• Cash Flow
• Pricing
• Supply Chain – Vendors & Purchasing
• SG&A Management
• ROIC
• Cash Flow

Pricing Initiatives Pricing Initiatives

• 2003 Targeted Benefits
• $10 Million (In 13% - 15% Base Case)
• $15 Million (In 25% Stretch Case)
• Markdowns
• $200 Million Annually
• Improved Management
• New Tools for Buyers
• DemandTec, Price Optimization Software
• 2003 Targeted Benefits
• $10 Million (In 13% - 15% Base Case)
• $15 Million (In 25% Stretch Case)
• Markdowns
• $200 Million Annually
• Improved Management
• New Tools for Buyers
• DemandTec, Price Optimization Software

Vendor, Purchasing Initiatives Vendor, Purchasing Initiatives

• 2003 Targeted Benefits
• $25-$30 Million (In 13% - 15% Base Case), 1% of COGS
• $45-$50 Million (In 25% Stretch Case), 2% of COGS
• Significant Progress Made in 2002 on Vendor

Costs

• Significant % of 2003 Base Target Realized &

Capitalized in Inventory

• 2003 Targeted Benefits
• $25-$30 Million (In 13% - 15% Base Case), 1% of COGS
• $45-$50 Million (In 25% Stretch Case), 2% of COGS
• Significant Progress Made in 2002 on Vendor

Costs

• Significant % of 2003 Base Target Realized &

Capitalized in Inventory

SG&A Initiatives SG&A Initiatives

• 2002 SG&A Dollars Approximately Flat vs. 2001
• 2001 Restructuring / Headcount Reductions
• Improved Cost Management
• 2002 SG&A at Upper 30s % of Sales
• Cost Team Formed
• Indirect Cost Opportunity of $20 Million
• Benchmarking of Functions and Processes vs.

External Best Practices

• Targeting 33% - 34% of Sales in 2005
• 2002 SG&A Dollars Approximately Flat vs. 2001
• 2001 Restructuring / Headcount Reductions
• Improved Cost Management
• 2002 SG&A at Upper 30s % of Sales
• Cost Team Formed
• Indirect Cost Opportunity of $20 Million
• Benchmarking of Functions and Processes vs.

External Best Practices

• Targeting 33% - 34% of Sales in 2005

New Store ROIC Improving New Store ROIC Improving

29% 13% 30% 14%

0% 10% 20% 30% 40%

ROIC ROIC (inc PV)

1Q01 1Q02

29% 13% 30% 14%

0% 10% 20% 30% 40%

ROIC ROIC (inc PV)

1Q01 1Q02

Based on Stores Open in 1Q00 Based on Stores Open in 1Q00

480 249 178 120 80 50 100 150 200 250 300 350 400 450 500 2Q01 2Q02 4Q02 Est 4Q03 Est 4Q04 Est

ROIC Improving ROIC Improving

Number of Stores with ROIC Less Than 10% Number of Stores with ROIC Less Than 10%

Cash Flow Detail

HQ Financing To Impact Cap Ex

Cash Flow Detail

HQ Financing To Impact Cap Ex

2002E 2003E 2004E

Net Income/ D&A/ Other Non Cash

410 440 470 A/R & Inventory 45 40 35 Cap Ex (110) (225) (230) Dividends (45) (40) (40) Total 300 215 235 2002E 2003E 2004E

Net Income/ D&A/ Other Non Cash

410 440 470 A/R & Inventory 45 40 35 Cap Ex (110) (225) (230) Dividends (45) (40) (40) Total 300 215 235

$593 $300 $215 $235

• $48

2000 2001 2002E 2003E 2004E

Free Cash Flow in Millions Free Cash Flow in Millions

How Our Business Compares How Our Business Compares

12 17 14 17

RSH S&P 500 S&P Retail S&P SPEC RETAIL

RadioShack Trading At Discount RadioShack Trading At Discount

Forward P/E (2003) Forward P/E (2003)

Source: Compustat, Thomson Financial, Dec 06, 2002

21% 13% 10% 14%

0% 4% 8% 12% 16% 20% 24%

RSH S&P 500 S&P Retail S&P SPEC RETAIL

RadioShack ROIC At Premium RadioShack ROIC At Premium

Return on Invested Capital Return on Invested Capital

Source: Compustat, Thomson Financial ROIC% = Net Operating Profit After Tax / (Total Debt+Shareholder Equity) * 100

Solid Projected Earnings Growth Solid Projected Earnings Growth

0% 4% 8% 12% 16% 20% RSH S&P 500 S&P RETAIL S&P SPEC RETAIL

2003 Estimate 5-YR Estimate

0% 4% 8% 12% 16% 20% RSH S&P 500 S&P RETAIL S&P SPEC RETAIL

2003 Estimate 5-YR Estimate

Source: RadioShack, Compustat, Thomson Financial

Financial Summary Financial Summary

Long-Term EPS Growth of 13% - 15% Focused on Right Things to Drive Sustainable Growth Strong Cash Flow Generation Reasonable Valuation Long-Term EPS Growth of 13% - 15% Focused on Right Things to Drive Sustainable Growth Strong Cash Flow Generation Reasonable Valuation