Radio Shack 2013 Annual Report Download - page 62

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Fair Value of Financial Instruments
Financial instruments not measured at fair value on a
recurring basis include cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities,
and long-term debt. With the exception of long-term debt,
the financial statement carrying amounts of these items
approximate their fair values due to their short-term nature.
Estimated fair values for our 2013 Convertible Notes and
our 2019 Notes were determined using recent trading
activity and/or bid-ask spreads and are classified as Level 2
in the FASB’s fair value hierarchy. Estimated fair values of
our secured term loans approximated their carrying values
due to the recentness of these borrowings and are
classified as Level 3.
Basis of Fair Value Measurements
Quoted Prices Significant
in Active Other Significant
Markets for Observable Unobservable
Carrying Fair Value Identical Items Inputs Inputs
(In millions) Amount
of Liabilities (Level 1) (Level 2) (Level 3)
As of December 31, 2013
2019 Notes $ 323.3 $ 197.9 -- $
197.9
--
Secured term loans $ 289.4 $ 289.4 --
--
$ 289.4
Other $ 1.4 $ 1.4 --
--
$ 1.4
As of December 31, 2012
2013 Convertible Notes $ 278.7 $ 265.9 -- $
265.9
--
2019 Notes $ 323.0 $ 198.3 -- $
198.3
--
Secured term loans $ 175.0 $ 175.0 --
--
$ 175.0
Other $ 1.0 $ 1.0 --
--
$ 1.0
NOTE 13 – COMMITMENTS AND
CONTINGENCIES
Lease Commitments: We lease, rather than own, all of our
retail facilities. Some of these leases are subject to renewal
options and provide for the payment of taxes, insurance
and maintenance. Our retail locations comprise the largest
portion of our leased facilities. These locations are primarily
in strip centers, major shopping malls and shopping centers
owned by other companies. Some leases are based on a
minimum rental plus a percentage of the store's sales in
excess of a stipulated base figure (contingent rent). Certain
leases contain escalation clauses. We also lease a
distribution center in Mexico, our corporate headquarters,
and automobiles.
Future minimum rent commitments at December 31, 2013,
under non-cancelable operating leases (net of immaterial
amounts of sublease rent income), are included in the
following table.
Operating
(In millions)
Leases
2014 $ 200.4
2015 151.6
2016 101.9
2017 63.2
2018 33.6
2019 and thereafter 38.2
Total minimum lease payments $ 588.9
Rent Expense:
(In millions) 2013 2012 2011
Minimum rents $ 219.2 $ 220.6
$
224.3
Occupancy cost 28.2 29.1 35.3
Contingency rents 3.4 4.2 4.1
Total rent expense $ 250.8
$
253.9
$
263.7
Purchase Obligations: We had purchase obligations of
$260.5 million at December 31, 2013, which include product
commitments and marketing agreements. Of this amount,
$255.2 million related to 2013.
Loss Contingencies: FASB Accounting Standards
Codification Topic 450 - Contingencies (“ASC 450”)
governs our disclosure and recognition of loss
contingencies, including pending claims, lawsuits, disputes
with third parties, investigations and other actions that are
incidental to the operation of our business. ASC 450 uses
the following defined terms to describe the likelihood of a
future loss: probable – the future event or events are likely
to occur, remote – the chance of the future event or events
is slight, and reasonably possible – the chance of the future
event or events occurring is more than remote but less than
likely. ASC 450 also contains certain requirements with
respect to how we accrue for and disclose information
concerning our loss contingencies. We accrue for a loss
contingency when we conclude that the likelihood of a loss
is probable and the amount of the loss can be reasonably
estimated. When the reasonable estimate of the loss is
within a range of amounts, and no amount in the range
constitutes a better estimate than any other amount, we
accrue for the amount at the low end of the range. We
adjust our accruals from time to time as we receive
additional information, but the loss we incur may be
significantly greater than or less than the amount we have
accrued. We disclose loss contingencies if there is at least
a reasonable possibility that a loss has been incurred. No
accrual or disclosure is required for losses that are remote.
Brookler v. RadioShack Corporation: On April 6, 2004,
plaintiffs filed a putative class action in Los Angeles
Superior Court, Brookler v. RadioShack Corporation,
claiming that we violated California's wage and hour laws