Radio Shack 2012 Annual Report Download - page 31

29
had been made under the facility, and letters of credit
totaling $3.1 million had been issued, resulting in $390.6
million of availability for revolving borrowings under the
2016 Credit Facility. We believe that we will not meet the
consolidated fixed charge coverage ratio for at least the
next twelve months.
If at any time the outstanding revolving borrowings and
term loans under the 2016 Credit Facility exceed the sum of
the revolving borrowing base and the term loan borrowing
base, we will be required to repay an amount equal to such
excess. No payments (whether optional or mandatory) may
be made in respect of the principal amount of these term
loans unless all revolving borrowings have been repaid, any
outstanding letters of credit have been cash collateralized,
and all other commitments under the Restated 2016 Credit
Facility have been repaid or otherwise satisfied. The
revolving borrowing base and term loan borrowing base are
subject to customary reserves that may be implemented by
the administrative agent at its permitted discretion.
The Restated 2016 Credit Facility contains customary
affirmative and negative covenants and events of default
that are substantially consistent with those contained in the
Original 2016 Credit Facility. These covenants could,
among other things, restrict certain payments, including
dividends and share repurchases. We do not believe the
limitations contained in the credit facility will, in the
foreseeable future, adversely affect our ability to use the
credit facility and execute our business plan.
CASH REQUIREMENTS
Capital Expenditures: The nature of our capital
expenditures is comprised of a base level of investment
required to support our current operations and a
discretionary amount related to our strategic initiatives. The
base level of capital expenditures required to support our
operations ranges from $40 million to $50 million. The
remaining amount of anticipated capital expenditures
relates to strategic initiatives as reflected in our annual
plan. These capital expenditures are discretionary and,
therefore, may not be spent if we decide not to pursue one
or more of our strategic initiatives. We estimate that our
capital expenditures for 2013 will range from $70 million to
$90 million based on our operating performance during the
year. U.S. RadioShack company-operated store remodels
and relocations and information systems projects will
account for the majority of our anticipated 2013 capital
expenditures. Cash and cash equivalents and cash
generated from operating activities will be used to fund
future capital expenditure needs. Additionally, our 2016
Credit Facility could be utilized to fund capital expenditures.
Restricted Cash: Restricted cash totaled $26.5 million at
December 31, 2012, and is included in other current assets
in our Consolidated Balance Sheets. This cash is pledged
as collateral for a standby letter of credit issued to our
general liability insurance provider. We have the ability to
withdraw this cash at any time and instead provide a letter
of credit issued under our 2016 Credit Facility similar to the
letter of credit that was issued under our 2016 Credit
Facility at December 31, 2011. We have elected to pledge
this cash as collateral to reduce our costs associated with
our general liability insurance.
Seasonal Inventory Buildup: Typically, our annual cash
requirements for pre-seasonal inventory buildup from
August to November range between $150 million and $250
million. The funding required for this buildup will be
primarily from cash and cash equivalents and any cash
generated from operating activities. Additionally, our 2016
Credit Facility could be utilized to fund the inventory
buildup, if necessary.
Operating Leases: We use operating leases, primarily for
our retail locations and our corporate campus, to lower our
capital requirements.