Radio Shack 2013 Annual Report Download - page 22

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discontinued operations in the Consolidated Statements of
Income for all periods presented.
Capital Transactions
During 2013 we took a number of actions regarding our
liquidity:
• We repaid $286.9 million remaining aggregate
principal amount of our 2013 convertible notes
• In December we borrowed $300 million in secured
term loans and repaid $175 million of debt
• Also in December we closed on a new $535 million
asset-based revolving credit facility that matures in
December 2018 (“2018 Credit Facility”) to replace
our previous $450 million asset-based revolving
credit facility
Liquidity Outlook
As of December 31, 2013, we had $179.8 million in cash
and cash equivalents, compared with $535.7 million at
December 31, 2012. Additionally, we had a credit facility of
$535 million with availability of $374.5 million as of
December 31, 2013. This resulted in a total liquidity position
of $554.3 million at December 31, 2013.
We experienced losses of $400.2 million and $139.4 million
in 2013 and 2012. In 2013 our net cash provided by
operating activities was $35.8 million compared to net cash
used in operating activities of $43.0 million in 2012.
We currently use our 2018 Credit Facility to provide letters
of credit to a limited number of vendors. Based on our
forecast for 2014, we anticipate that we will continue to use
part of our availability under the credit facility for letters of
credit and other corporate purposes.
As we execute the strategic turnaround plan and move
through 2014, we will be tightly managing our cash and
monitoring our liquidity position. We have implemented a
number of initiatives to conserve our liquidity position
including activities such as reducing our capital
expenditures, reducing discretionary spending and selling
surplus property. Many of the aspects of the plan involve
management’s judgments and estimates that include
factors that could be beyond our control and actual results
could differ from our estimates. These and other factors
could cause the strategic turnaround plan and the proposed
store closure program to be unsuccessful which could have
a material adverse effect on our operating results, financial
condition and liquidity.
Store Closure Program: On March 4, 2014, along with our
fourth quarter earnings release, we announced that we
intend to close up to 1,100 underperforming stores. This
program was driven by a comprehensive review of the
existing store base and selection of stores based upon
historical and projected financial performance, lease
termination costs, and impact to the market and nearby
stores. This proposed store closure program is expected to
preserve liquidity by avoiding operating losses and
generating cash by liquidating inventory in those stores.
This will be partially offset by lease termination payments
and liquidation costs. This program resulted in a non-cash
impairment charge of fixed assets in these stores of $11.2
million and an inventory write down of $10.1 million,
reflected in the 2013 financial statements. The proposed
store closure program is subject to the consent of the
lenders under our 2018 Credit Agreement and 2018 Term
Loan. If we are unsuccessful in obtaining consent, we
believe that we have sufficient liquidity to meet our
obligations through 2014.
We have considered the impact of our financial projections
on our liquidity analysis and have evaluated the
appropriateness of the key assumptions in our forecast
such as sales, gross profit and SG&A expenses. We have
analyzed our cash requirements, including our inventory
position, other working capital changes, capital
expenditures and borrowing availability under our credit
facility. Based upon these evaluations and analyses, we
expect that our anticipated sources of liquidity will be
sufficient to meet our obligations through 2014.
If our results fall below our expectations, we may use the
liquidity provided by the availability on our credit facility or
take additional actions that would be outside the ordinary
course of business. Other actions could include: raising
additional capital by issuing debt or equity, further reducing
our capital expenditures, reducing inventory levels, closing
additional stores, reducing our employee headcount, or
selling one or more subsidiaries.
For further discussion of our liquidity, please see “Liquidity
and Capital Resources” later in this MD&A.
RESULTS OF OPERATIONS
2013 COMPARED WITH 2012
Net Sales and Operating Revenues
Consolidated net sales and operating revenues are as
follows:
Year Ended December 31,
(In millions) 2013
2012 2011
U.S. RadioShack
company-operated stores
$
3,094.9 $ 3,456.5 $ 3,663.3
Other 339.4
374.8 368.8
Consolidated net sales
and operating revenues
$
3,434.3 $ 3,831.3 $ 4,032.1
Consolidated net sales and
operating revenues
decrease (10.4)%
(5.0)% (4.0)%
Comparable store sales (1)
decrease (8.8)%
(4.5)% (3.2)%
1
(1) Comparable store sales include the sales of U.S. and Mexico
RadioShack company-operated stores with more than 12 full months of
recorded sales.
Product Platform Consolidation
To reflect more closely how we manage our merchandise
and product assortment, we have consolidated our product
platform reporting structure into two platforms: mobility and
retail.