Radio Shack 2003 Annual Report Download - page 46

RADIOSHACK 2003 Annual Report
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As a result of continued difficulties in the DTH business
and a refocus during the fourth quarter of 2002 on our
satellite installation strategy, together with a revised cash
flow projection for our overall installation business, we
determined that the remaining long-lived assets associated
with RSIS were impaired.We compared the carrying value
of these long-lived assets with their fair value and determined
that the remaining goodwill balance of $8.1 million was
impaired and we, therefore, recorded an impairment charge
of this amount in the accompanying 2002 Consolidated
Statement of Income. As of December 31, 2002, there was
no remaining goodwill balance on our balance sheet relat-
ing to RSIS. On September 10, 2003, we sold RSIS, resulting
in a loss of $1.8 million which was recorded in other income.
Our test concept with Blockbuster to introduce a RadioShack
“store-within-a-store”at Blockbuster locations in 2001 did
not provide sufficient cash flows to recover our investment
in fixtures and other fixed assets. An impairment loss of
$2.8 million was recorded for those assets in 2001 and is
included as a component of impairment of long-lived
assets in the accompanying 2001 Consolidated Statement
of Income.
Note 7 Indebtedness and Borrowing Facilities
SHORT-TERM DEBT
December 31,
(In millions) 2003 2002
Short-term debt $ 36.8 $16.0
Current portion of long-term debt 39.5 20.0
Fair value of interest rate swaps 0.9 —
Current portion of capital lease obligations 0.2 —
Total short-term debt $ 77.4 $36.0
LONG-TERM DEBT
December 31,
(In millions) 2003 2002
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 interest rates
at December 31, 2003, ranging from 6.42% to
7.35% due from 2004 to 2007 44.5 64.5
Financing obligation (see Note 4) 32.3 32.3
Notes payable with interest rates at
December 31, 2003, ranging from 2.6% to
2.8% due from 2006 to 2014 6.1 6.1
Capital lease obligations 0.3 —
Unamortized debt issuance costs (5.8) (7.0)
Fair value of interest rate swaps 4.5 15.4
581.9 611.3
Less current portion of:
Notes payable 39.5 20.0
Fair value of interest rate swaps 0.9 —
Capital lease obligations 0.2 —
40.6 20.0
Total long-term debt $541.3 $591.3
Long-term borrowings and financing obligation outstanding
at December 31, 2003, mature as follows:
Long-Term Capital Financing
(In millions) Borrowings Lease Obligation(1) Total
2004 $ 39.5 $ 0.2 $ — $ 39.7
2005 — 0.1 32.3 32.4
2006 5.1 — — 5.1
2007 150.0 — — 150.0
2008 5.0 — — 5.0
2009 and thereafter 351.0 — — 351.0
Total $550.6 $ 0.3 $32.3 $583.2
(1) See Note 4 for discussion of financing obligation.
The fair value of our long-term debt of $581.6 million and
$611.3 million at December 31, 2003 and 2002, respectively,
(including current portion, but excluding 2003 capital
leases) was approximately $656.7 million and $675.0 million,
respectively.The fair values were computed using interest
rates which were in effect at the balance sheet dates for
similar debt instruments.
On May 11, 2001, we issued $350.0 million of 10-year 7
3/8% notes in a private offering to initial purchasers who
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. Payment of interest on the notes com-
menced on November 15, 2001, and the notes mature on