Radio Shack 2004 Annual Report Download - page 46

There were no significant impairments for the year ended
December 31, 2004.
NOTE 7 Indebtedness and Borrowing Facilities
Short-Term Debt, Including Current Maturities
of Long-Term Debt
December 31,
(In millions) 2004 2003
Short-term debt $22.7 $36.8
Financing obligation 32.3 –
Current portion of long-term debt –39.5
Current portion of capital lease obligations 0.6 0.2
Fair value of interest rate swaps –0.9
Total short-term debt, including
current maturities of long-term debt $55.6 $77.4
Long-Term Debt, Excluding Current Maturities
December 31,
(In millions) 2004 2003
Ten-year 7 3/8% note payable due in 2011 $350.0 $350.0
Ten-year 6.95% note payable due in 2007 150.0 150.0
Medium-term notes payable with an
interest rate at December 31, 2004,
of 6.42% due in 2008 5.0 44.5
Financing obligation 32.3 32.3
Notes payable with interest rates
at December 31, 2004, ranging from
1.6% to 2.9% due from 2006 to 2014 6.1 6.1
Capital lease obligations 0.6 0.3
Unamortized debt issuance costs (4.7) (5.8)
Fair value of interest rate swaps 0.5 4.5
539.8 581.9
Less current portion of:
Notes payable –39.5
Financing obligation 32.3 –
Fair value of interest rate swaps –0.9
Capital lease obligations 0.6 0.2
32.9 40.6
Total long-term debt,
excluding current maturities $506.9 $541.3
Long-term borrowings and financing obligation outstanding
at December 31, 2004, mature as follows:
Long-Term Capital Financing
(In millions) Borrowings Lease Obligation Total
2005 $ – $0.6 $ 32.3 $ 32.9
2006 5.1 – – 5.1
2007 150.0 – – 150.0
2008 5.0 – – 5.0
2009 –– – –
2010 and thereafter 351.0 – – 351.0
Total $ 511.1 $0.6 $ 32.3 $544.0
The fair value of our long-term debt of $544.0 million and
$583.2 million at December 31, 2004 and 2003, respectively,
(including current portion, but excluding capital leases) was
approximately $629.7 million and $656.7 million, respectively.
The fair values were computed using interest rates which were
in effect at the balance sheet dates for similar debt instruments.
Our senior unsecured debt primarily consists of two
issuances of 10-year long-term notes and an issuance of
medium-term notes.
Long-Term Notes: We have a $300.0 million debt shelf regis-
tration statement which became effective in August 1997. In
August 1997, we issued $150.0 million of 10-year unsecured
long-term notes under this shelf registration. The interest rate
on the notes is 6.95% per annum with interest payable on
September 1 and March 1 of each year. These notes are due
September 1, 2007.
On May 11, 2001, we issued $350.0 million of 10-year 7 3/8%
notes in a private offering to initial purchasers who in turn
offered the notes to qualified institutional buyers under SEC
Rule 144A. The annual interest rate on the notes is 7.375%
per annum with interest payable on November 15 and May 15
of each year. The notes mature on May 15, 2011. In August
2001, under the terms of an exchange offering filed with the
SEC, we exchanged substantially all of these notes for a simi-
lar amount of publicly registered notes. Because no additional
debt was issued in the exchange offering, the net effect of
this exchange was that no additional debt was issued, and
substantially all of the notes were registered with the SEC.
During the third quarter of 2001, we entered into an interest
rate swap agreement with underlying notional amount of
$110.5 million with a maturity in 2007. In June and August
2003, we entered into interest rate swap agreements with
underlying notional amounts of debt of $100.0 million and
$50.0 million, respectively, and both with maturities in May
2011. These swaps effectively convert a portion of our long-
term fixed rate debt to a variable rate. We entered into these
agreements to balance our fixed versus floating rate debt port-
folio to continue to take advantage of lower short-term interest
rates. Under these agreements, we have contracted to pay a
variable rate of LIBOR plus a markup and to receive a fixed
rate of 6.95% for the swap entered into in 2001 and 7.375%
for the swaps entered into in 2003. We have designated these
agreements as fair value hedging instruments. We recorded an
amount in other assets, net, of $5.4 million and $4.5 million
(their fair value) at December 31, 2004 and 2003, respectively,
for the swap agreements and adjusted the fair value of the
related debt by the same amount. Fair value was computed
based on the market’s current anticipation of quarterly LIBOR
rate levels from the present until the swaps’ maturity.
Notes to Consolidated Financial Statements
RadioShack Corporation and Subsidiaries
44 AR2004