RadioShack Corp RSH
Q4 2011 Earnings Call Transcript

Operator: Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2011 RadioShack Corporation Earnings Conference Call. My name is Fab, and I'll be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. As a reminder this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today Molly Salky, Vice President, Investor Relations. Please proceed.

Molly R. Salky - SVP, IR: Good morning, everyone and welcome to the RadioShack fourth quarter and full year 2011 investor conference call and webcast. With me on the call today are Jim Gooch, President and Chief Executive Officer; and Dorvin Lively, our Executive Vice President, Chief Financial Officer and Chief Administrative Officer.

We filed our 10-K with the SEC earlier today. Our earnings release and the 10-K filing along with the replay of this webcast are available on our IR site. Also note that we've provided a reconciliation of GAAP versus non-GAAP financial measures on Page 9 of our earnings announcement.

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 would include words like expect, beliefs, anticipate or words with similar meaning that are based on our beliefs and expectations and are subject to certain risks and uncertainties that may cause actual results to differ materially from our forward-looking statements about those results. These risks are detailed in our various filings with the SEC, such as our most recent Form 10-K, 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 have allowed ample time to address any questions that you may have. Please limit yourself to one question and one follow-up so that we may get to everyone's question during the call. Feel free to re-queue if you have additional questions.

With that, let me turn the call over to Jim Gooch, RadioShack's President and CEO.

James F. Gooch - President and CEO: Thank you, Molly and good morning, everybody. Thank you for joining our call today. We knew that the fourth quarter was going to be challenging unfortunately the results were below our expectations. Let me drill through a few of the factors that impacted us during the quarter.

First, Sprint's underperformance, Sprint's changes in their customer and credit models continue to impact our mobility sales and gross profits in the quarter. We've discussed in prior quarters, Sprint's customer model changes beginning in the second quarter. This continued to impact us in the third, but we expected an improvement in trend going into the fourth quarter, in fact, the trend worsened as tightening of the credit model, combined with their earlier upgrade change to further deteriorate our trend.

Second, several factors negatively impacted our mobility platform gross margin rate; our higher mix of lower margin smartphones, that was the most significant; the expansion of iPhone into three carriers combined with the launch of iPhone 4S, resulted in a dramatic increase in the mix of iPhone sales. This helped to drive our positive comp store sales, but negatively impacted our margin mix.