10-Q 1 c289-20141101x10q.htm 10-Q RSH_20141101_Q3

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

 

(Mark One)

[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended November 1, 2014

or

[  ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number: 1-5571

________________________

Picture 3

 

 

 

RADIOSHACK CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

75-1047710

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

 

Mail Stop CF3-201, 300 RadioShack Circle, Fort Worth, Texas

76102

(Address of principal executive offices)

(Zip Code)

 

(Registrant's telephone number, including area code) (817) 415-3011

 

________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes X No __

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes X No __

Indicate by check mark if the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

Large accelerated filer [ ]

Accelerated filer [ X ]

Non-accelerated filer [ ]

Smaller reporting company [ ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes __ No X

The number of shares outstanding of the issuer's Common Stock, $1 par value, on November 30, 2014, was 100,702,386 (excluding 1,427,489 shares of restricted stock that were outstanding on such date)

 

1


 

 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

   

3

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

35

Item 4.

 

Controls and Procedures

 

35

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

Item 1A.

 

Risk Factors

 

35

Item 6.

 

Exhibits

 

37

 

 

Signatures

 

38

 

 

Index to Exhibits

 

39

 

 

 

 

 

 

 

 

2


 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RADIOSHACK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

13 Weeks Ended

 

Three Months Ended

 

39 Weeks Ended

 

Nine Months Ended

   

 

November 1,

 

October 31,

 

November 1,

 

October 31,

(In millions, except per share amounts)

 

2014

 

2013

 

2014

 

2013

Net sales and operating revenues

 

$

650.2 

 

 

$

775.4 

 

 

$

2,060.7 

 

 

$

2,485.2 

 

Cost of products sold (includes depreciation amounts of $1.9 million,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$2.3 million, $6.8 million, and $6.7 million, respectively)

 

 

436.0 

 

 

 

534.2 

 

 

 

1,340.2 

 

 

 

1,601.6 

 

Gross profit

 

 

214.2 

 

 

 

241.2 

 

 

 

720.5 

 

 

 

883.6 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

313.8 

 

 

 

352.8 

 

 

 

973.3 

 

 

 

1,020.9 

 

Depreciation and amortization

 

 

11.9 

 

 

 

14.6 

 

 

 

37.7 

 

 

 

46.1 

 

Impairment of long-lived assets and goodwill

 

 

2.6 

 

 

 

2.4 

 

 

 

24.0 

 

 

 

6.6 

 

Total operating expenses

 

 

328.3 

 

 

 

369.8 

 

 

 

1,035.0 

 

 

 

1,073.6 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

 

(114.1)

 

 

 

(128.6)

 

 

 

(314.5)

 

 

 

(190.0)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

0.2 

 

 

 

0.2 

 

 

 

1.2 

 

 

 

0.9 

 

Interest expense

 

 

(18.4)

 

 

 

(10.2)

 

 

 

(51.9)

 

 

 

(38.9)

 

Other loss (See Note 4)

 

 

(28.1)

 

 

 

 —

 

 

 

(28.1)

 

 

 

(0.3)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

 

 

(160.4)

 

 

 

(138.6)

 

 

 

(393.3)

 

 

 

(228.3)

 

Income tax expense (benefit)

 

 

0.7 

 

 

 

(2.7)

 

 

 

3.5 

 

 

 

(17.7)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

 

(161.1)

 

 

 

(135.9)

 

 

 

(396.8)

 

 

 

(210.6)

 

Discontinued operations, net of income taxes

 

 

 —

 

 

 

 —

 

 

 

 —

 

 

 

(5.5)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(161.1)

 

 

$

(135.9)

 

 

$

(396.8)

 

 

$

(216.1)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share from continuing operations

 

$

(1.58)

 

 

$

(1.35)

 

 

$

(3.89)

 

 

$

(2.09)

 

Loss per share from discontinued operations

 

 

 —

 

 

 

--

 

 

 

 —

 

 

 

(0.05)

 

Net loss per share

 

$

(1.58)

 

 

$

(1.35)

 

 

$

(3.89)

 

 

$

(2.14)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

102.0 

 

 

 

101.1 

 

 

 

101.9 

 

 

 

100.8 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss

 

$

(161.3)

 

 

$

(136.6)

 

 

$

(396.5)

 

 

$

(216.5)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

RADIOSHACK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 1,

 

February 1,

 

December 31,

(In millions, except share amounts)

 

2014

 

2014

 

2013

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

43.3 

 

 

$

109.6 

 

 

$

179.8 

 

Accounts and notes receivable, net

 

 

152.0 

 

 

 

154.1 

 

 

 

211.9 

 

Inventories

 

 

666.4 

 

 

 

807.8 

 

 

 

802.3 

 

Other current assets

 

 

100.2 

 

 

 

80.1 

 

 

 

139.0 

 

Total current assets

 

 

961.9 

 

 

 

1,151.6 

 

 

 

1,333.0 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

164.5 

 

 

 

186.3 

 

 

 

187.2 

 

Other assets, net

 

 

73.9 

 

 

 

72.7 

 

 

 

71.0 

 

Total assets

 

$

1,200.3 

 

 

$

1,410.6 

 

 

$

1,591.2 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ (Deficit) Equity

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Current maturities of long-term debt

 

$

0.1 

 

 

$

1.1 

 

 

$

1.1 

 

Accounts payable

 

 

158.1 

 

 

 

234.7 

 

 

 

376.4 

 

Accrued expenses and other current liabilities

 

 

204.1 

 

 

 

206.4 

 

 

 

207.1 

 

Total current liabilities

 

 

362.3 

 

 

 

442.2 

 

 

 

584.6 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, excluding current maturities

 

 

841.4 

 

 

 

613.0 

 

 

 

613.0 

 

Other non-current liabilities

 

 

183.3 

 

 

 

186.7 

 

 

 

187.2 

 

Total liabilities

 

 

1,387.0 

 

 

 

1,241.9 

 

 

 

1,384.8 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (See Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ (deficit) equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, no par value, 1,000,000 shares authorized:

 

 

 

 

 

 

 

 

 

 

 

 

Series A junior participating, 300,000 shares designated and none issued

 

 

 —

 

 

 

 —

 

 

 

 —

 

Common stock, $1 par value, 650,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

 

146,033,000 shares issued

 

 

146.0 

 

 

 

146.0 

 

 

 

146.0 

 

Additional paid-in capital

 

 

159.6 

 

 

 

122.9 

 

 

 

123.6 

 

Retained earnings

 

 

520.6 

 

 

 

923.0 

 

 

 

960.6 

 

Treasury stock, at cost; 45,338,000, 45,686,000,

 

 

 

 

 

 

 

 

 

 

 

 

and 45,735,000 shares, respectively

 

 

(1,006.4)

 

 

 

(1,016.4)

 

 

 

(1,017.7)

 

Accumulated other comprehensive loss

 

 

(6.5)

 

 

 

(6.8)

 

 

 

(6.1)

 

Total stockholders’ (deficit) equity

 

 

(186.7)

 

 

 

168.7 

 

 

 

206.4 

 

Total liabilities and stockholders’ (deficit) equity

 

$

1,200.3 

 

 

$

1,410.6 

 

 

$

1,591.2 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

RADIOSHACK CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

39 Weeks Ended

 

Nine Months Ended

   

 

November 1,

 

October 31,

(In millions)

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(396.8)

 

 

$

(216.1)

 

Adjustments to reconcile net loss to net cash

 

 

 

 

 

 

 

 

(used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

44.5 

 

 

 

53.6 

 

Deferred income taxes

 

 

 —

 

 

 

0.9 

 

Amortization of discounts on long-term debt

 

 

2.8 

 

 

 

6.0 

 

Impairment of long-lived assets and goodwill

 

 

24.0 

 

 

 

6.6 

 

Stock-based compensation

 

 

5.2 

 

 

 

6.2 

 

Provision for credit losses and bad debts

 

 

0.8 

 

 

 

0.1 

 

Write-off of debt issuance costs and debt discount

 

 

25.4 

 

 

 

 —

 

Other non-cash items

 

 

8.2 

 

 

 

3.4 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts and notes receivable

 

 

2.0 

 

 

 

185.2 

 

Inventories

 

 

140.9 

 

 

 

184.8 

 

Other current assets

 

 

(13.2)

 

 

 

(16.9)

 

Accounts payable

 

 

(93.6)

 

 

 

54.9 

 

Accrued expenses and other

 

 

0.7 

 

 

 

(0.8)

 

Income taxes

 

 

(0.4)

 

 

 

(0.3)

 

Net change in liability for unrecognized tax benefits and accrued interest

 

 

2.5 

 

 

 

(16.1)

 

Other

 

 

4.1 

 

 

 

(1.6)

 

Net cash (used in) provided by operating activities

 

 

(242.9)

 

 

 

249.9 

 

   

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Additions to property, plant and equipment

 

 

(39.8)

 

 

 

(32.6)

 

Proceeds from sale of property, plant and equipment

 

 

 —

 

 

 

6.4 

 

Changes in restricted cash

 

 

3.0 

 

 

 

25.2 

 

Other investing activities

 

 

0.1 

 

 

 

 —

 

Net cash used in investing activities

 

 

(36.7)

 

 

 

(1.0)

 

   

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

650.5 

 

 

 

 —

 

Repayments of long-term debt

 

 

(420.7)

 

 

 

(286.9)

 

Payments of debt issuance costs

 

 

(33.8)

 

 

 

(0.8)

 

Changes in cash overdrafts

 

 

17.3 

 

 

 

(67.8)

 

Net cash provided by (used in) financing activities

 

 

213.3 

 

 

 

(355.5)

 

   

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(66.3)

 

 

 

(106.6)

 

Cash and cash equivalents, beginning of period

 

 

109.6 

 

 

 

403.2 

 

Cash and cash equivalents, end of period

 

$

43.3 

 

 

$

296.6 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


 

RADIOSHACK CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION

In November 2013, our Board of Directors approved a change in our fiscal year end from December 31 to the Saturday nearest January 31 of each year. The change, which aligns our reporting cycle with the National Retail Federation 4-5-4 fiscal calendar and is expected to provide for more consistent quarter-to-quarter comparisons, is effective for our 2015 fiscal year. Our 2015 fiscal year began on February 2, 2014, and will end January 31, 2015, resulting in a transition period, that began January 1, 2014, and ended February 1, 2014, our 2014 fiscal year. This Form 10-Q includes the unaudited results for the 13 weeks and 39 weeks ended November 1, 2014, and the three and nine months ended October 31, 2013. Prior period information has been recast to the month end dates that most closely align with the new fiscal calendar. The prior period financial statements have not been recast on a 4-5-4 calendar basis because it was impractical.

Throughout this report, the terms “our,” “we,” “us,” “Company,” and “RadioShack” refer to RadioShack Corporation, including its subsidiaries. We prepared the accompanying unaudited condensed consolidated financial statements, which include the accounts of RadioShack and all majority-owned domestic and foreign subsidiaries, in accordance with the rules of the Securities and Exchange Commission. Accordingly, we did not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments of a normal recurring nature considered necessary for a fair statement are included. However, our operating results for the 13 weeks and 39 weeks ended November 1, 2014, and the three and nine months ended October 31, 2013, do not necessarily indicate the results you might expect for the full year. For further information, refer to our consolidated financial statements and management's discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2013. We have reclassified certain prior period amounts to conform to the current period presentation.

LIQUIDITY

We have experienced losses for the past two years that continued to accelerate into the third quarter of fiscal 2015, primarily attributed to a prolonged downturn in our business. Our ability to generate cash from operations depends in large part on the level of demand for our products and services. We continue to face an uncertain business environment and a number of fundamental challenges in our mobility business due to lack of availability of new devices launched during the period, aggressive price competition and intense wireless carrier marketing activities. Our retail business also faces the challenge of revamping our product assortment to anticipate and meet our customers’ needs and wants to produce profitable operating margins. We believe these challenging market conditions will continue into fiscal year 2016.

Given our negative cash flows from operations and our expected cash needs for the next twelve months and over the longer term as discussed in Note 4 – “Restructuring and Impairment,” we entered into definitive agreements to provide additional near-term liquidity and serve as a first step in our efforts to effect our recapitalization.  We continue tightly managing our cash and monitoring our liquidity position and have implemented a number of initiatives to conserve our liquidity position.

As part of the anticipated next phase of the recapitalization plan, we continue to explore alternatives and have engaged in discussions with our existing and potential new lenders in an effort to create a long-term solution. If we do not improve our cash flow from operations and refinance our existing debt, we may not have enough cash and working capital to continue to fund our operations beyond the near term, which raises substantial doubt about our ability to continue as a going concern.

To date, we have closed 175 underperforming stores since the beginning of the current fiscal year. We may close additional underperforming stores and take other measures to reduce our cost structure. The actual number of store closures could vary considerably depending on the specific restructuring alternative implemented. Our ability to close stores is limited by covenants contained in our debt agreements, and prior efforts to obtain consents from our lenders to close greater numbers of stores have been unsuccessful.

There can be no assurance that our efforts to further restructure our debt or operations will be successful. Even if successful, our restructuring efforts could have materially adverse effects on our business and on the market price of our securities. If our restructuring efforts are not successful, or cannot be completed in a timely manner, or if we are unable to improve our  liquidity or if we fail to meet certain conditions of the recapitalization plan described in Note 4 – “Restructuring and Impairment,” we may be required to seek to implement in-court bankruptcy proceedings, which could result in a default on our debt with our lenders and/or the liquidation of the Company and the loss of your investment in the Company.

As of November 1, 2014, we had $43.3 million in cash and cash equivalents. Additionally, we had availability under our 2018 Credit Facility of $19.3 million as of November 1, 2014. This resulted in a total liquidity position of $62.6 million at November 1, 2014.  

6


 

On December 1, 2014, the Company received a notice of default and acceleration asserting that events of default have occurred and are continuing under the SCP Credit Agreement (defined below). The Company disagrees with the assertions contained in the notice of default that any event of default has occurred. See Note 12 – “Subsequent Events” for further discussion.

NOTE 2 – NEW ACCOUNTING STANDARDS

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under ASU 2014-08, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. Additionally, ASU 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations. ASU 2014-08 is effective for fiscal and interim periods beginning on or after December 15, 2014. We are currently evaluating the impact of the adoption of ASU 2014-08.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides guidance that companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date will be the first quarter of fiscal year 2018 using one of two retrospective application methods. We have not determined the potential effects on the consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-12.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The new standard will be effective for all entities in the first annual period ending after December 15, 2016. Earlier adoption is permitted. We are currently evaluating the impact of the adoption of ASU 2014-15.

NOTE 3 – DISCONTINUED OPERATIONS

We account for closed retail locations as discontinued operations when the cash flows of a retail location have been eliminated from our ongoing operations and we do not have any significant continuing involvement in its operations. In reaching the determination as to whether the cash flows of a retail location have been eliminated from our ongoing operations, we consider whether it is likely that customers will migrate to our other retail locations in the same geographic market.

We ceased operating all of our Target Mobile centers prior to March 31, 2013. See Note 1 – “Description of Business – Discontinued Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2013, for further information.

Net sales and operating revenues related to these discontinued operations were zero for the 13 weeks and 39 weeks ended November 1, 2014,  compared with zero and $46.6 million for the three and nine months ended October 31, 2013.  The income (loss) before income taxes for these discontinued operations was zero for the 13 weeks and 39 weeks ended November 1, 2014, compared with losses of zero and $5.2 million for the three and nine months ended October 31, 2013.

NOTE 4 – RESTRUCTURING AND IMPAIRMENT

As announced on October 3, 2014, we entered into definitive agreements to provide additional near-term liquidity and serve as a first step in efforts to effect a recapitalization of our business. A summary of the material terms of these agreements is included below.

Loan Sale Agreement. We, together with certain of our subsidiaries designated as credit parties, entered into the Loan Sale Agreement (the “Loan Sale Agreement”) with General Electric Capital Corporation (“GE Capital”), certain other entities party

7


 

thereto (together with GE Capital, collectively, the “Sellers”), General Retail Holding L.P. (“GRH”) and General Retail Funding LLC (“GR Funding” and, together with GRH, the “Purchasers”) and, solely with respect to Section 7(h) of the Loan Sale Agreement, Standard General Master Fund L.P. and certain of its affiliates. The Purchasers are affiliates of Standard General L.P. (“Standard General”). Pursuant to the Loan Sale Agreement, each Seller sold to the Purchasers all of such Seller’s interest in the loans, commitments and other financial accommodations to or for our benefit, as evidenced by the 2018 Credit Agreement (defined below), together with the instruments, documents and agreements delivered in connection with the 2018 Credit Agreement. However, under the Loan Sale Agreement, we released the Sellers from specified liabilities and agreed to indemnify the Sellers for specified matters as described in Section 7 of the Loan Sale Agreement.

First Amendment to 2018 Credit Agreement. We, together with certain of our subsidiaries designated as credit parties, entered into the First Amendment to Credit Agreement dated as of October 3, 2014, (the “First Amendment”) with the lenders party thereto and Cantor Fitzgerald Securities (“Cantor”), in its capacity as the successor to GE Capital as the administrative agent for the lenders (the “ABL Agent”). The First Amendment amends the Credit Agreement dated as of December 10, 2013 (as amended by the First Amendment, the “2018 Credit Agreement”) among the Company, certain of our subsidiaries that are designated as credit parties, the lenders party thereto and the ABL Agent.

The First Amendment subdivided the revolving credit commitments under the 2018 Credit Agreement into (1) a facility of an aggregate principal amount of up to $275.0 million of outstanding revolving loans to be converted into term loans, (2) a facility available solely for letters of credit in an aggregate principal amount of up to $120.0 million, and (3) a facility available solely for revolving loans in an aggregate principal amount of up to $140.0 million, in each case on the terms and subject to the conditions set forth therein.

The First Amendment includes an agreement among the parties to release the discretionary borrowing base reserves under the 2018 Credit Agreement, and restore the methods used to calculate the borrowing base to those used in December 2013, in each case until the earlier of an event of default or March 15, 2015. After such time, the lenders may impose discretionary reserves and change the method of calculating the borrowing base. These changes increased the amount of borrowing availability as of October 3, 2014, by approximately $142.3 million, which was immediately accessed by us.

In addition to subdividing the facilities described above, the First Amendment also amended the 2018 Credit Agreement to permit the letter of credit lenders under the 2018 Credit Agreement to convert funded obligations owed to them into shares of a new series of our preferred stock as described below under the “Recapitalization and Investment Agreement.” The First Amendment also adds an additional event of default under the 2018 Credit Agreement that would result if certain steps under the Recapitalization Agreement are not completed on or before March 15, 2015. These steps include (1) entry into an amendment to, or a replacement contract for, our current contract with a third party supplier described below under the “Recapitalization and Investment Agreement,” (2) completion of the Rights Offering described below, and (3) taking the necessary actions to ensure that our board of directors is reconstituted as contemplated by the Recapitalization Agreement described below.

The First Amendment also includes certain other amendments that will become effective upon (1) a refinancing of the Credit Agreement, dated as of December 10, 2013 (the “SCP Credit Agreement”), among the Company, certain of our subsidiaries, the lenders party thereto (the “SCP Lenders”), and Salus Capital Partners, LLC (“Salus”) as agent for the SCP Lenders (“the “SCP Agent”) or (2) an amendment to the SCP Credit Agreement that incorporates these same amendments. The additional amendments to the 2018 Credit Agreement include (1) eliminating the prohibition against sale/leaseback transactions, (2) permitting the sale of inventory and other assets outside of the ordinary course of business in connection with store closings, (3) permitting the sale of distribution centers, and (4) allowing us to amend wireless carrier contracts without the consent of the ABL Agent.

Recapitalization and Investment Agreement. We also entered into a Recapitalization and Investment Agreement (as amended, the “Recapitalization Agreement”) with GRH. The Recapitalization Agreement provides for, among other things:

·

The distribution by us to our stockholders of transferrable rights to subscribe to purchase an aggregate of 150,000 shares of our preferred stock (“Preferred Stock”), at a price of $800.00 per share of Preferred Stock, during a specified period of time (the “Rights Offering”). The Preferred Stock offered pursuant to the Rights Offering will be convertible in the aggregate into 300 million shares of our common stock (“Common Stock”). The purchase price payable for Preferred Stock upon the exercise of the rights equates to $0.40 per share of Common Stock. The stockholders will have the option to purchase their pro rata portion of Preferred Stock offered in the Rights Offering. Subject to the satisfaction of the conditions set forth in the Rights Agreement, the Rights Offering is currently expected to be completed in the first quarter of 2015.

·

The issuance by us to GRH of 150,000 shares of Preferred Stock, which will be convertible into 300 million shares of Common Stock, in exchange for (1) the cancellation of the outstanding letter of credit reimbursement obligations to the extent we contemporaneously reduce or terminate the commitments of GRH to issue (or cause to be issued) letters of credit under the 2018 Credit Agreement and (2) our rights to receive all amounts withdrawn by GRH from its cash collateral account upon any reduction or termination by us of the commitments of GRH to issue (or cause to be

8


 

issued) letters of credit under the terms of the 2018 Credit Agreement. This purchase, which will be completed concurrently with the completion of the Rights Offering, is referred to as the “Sponsor Conversion.”

·

The issuance by us to GRH of an additional 50,000 shares of Preferred Stock, which will be convertible into 100 million shares of Common Stock, concurrently with the completion of the Rights Offering and the Sponsor Conversion is in consideration of GRH having arranged the transactions described above.

·

The 50,000 shares of Preferred Stock issuable to GRH described above is subject to reduction in certain circumstances as provided in an amendment to the Recapitalization Agreement, dated November 26, 2014.  However, the total number of shares of Preferred Stock issuable by us in connection with the transactions described above would not be subject to reduction.

The percentage of equity securities that GRH and other investors will own as a result of this transaction will depend upon the level of participation, if any, in the Rights Offering. Depending upon such participation level, existing stockholders and their transferees (including affiliates of Standard General with respect to their existing holdings) will own between 20% and 50% of the Common Stock on an as-converted basis.

The terms of the Preferred Stock will be provided in a certificate of designation to be filed by us with the Secretary of State of the State of Delaware. Material terms of the Preferred Stock are set forth in the term sheet (“Preferred Stock Term Sheet”), which is incorporated herein by reference to Exhibit 2.1 to our Form 8-K filed on October 7, 2014. Subject to certain limitations as described in the Preferred Stock Term Sheet, (1) the holders of Preferred Stock will vote together with the holders of Common Stock (on an as-converted basis) on all matters and (2) each share of Preferred Stock will be convertible into 2,000 shares of Common Stock. If the Preferred Stock is not converted into Common Stock prior to the 90th day following the issuance of the Preferred Stock, the holders of Preferred Stock will be entitled to dividends accruing at 10% per annum, which rate will increase to 20% six months after initial issuance. The Preferred Stock dividends will be payable in-kind until the date that is 18 months after initial issuance. As more fully described in the Preferred Stock Term Sheet, the conversion and voting rights of any person or group acquiring equity securities in the transaction would be limited to 34.9% of the total voting power of our voting stock so long as greater voting power would accelerate our debt.

Immediately following the completion of the Rights Offering and the Sponsor Conversion, our board of directors will be reconstituted to consist of our CEO, two independent directors reasonably acceptable to us and GRH and four individuals nominated by GRH (of which at least two must satisfy the New York Stock Exchange listing requirements for director independence). We and GRH will also enter into an Investor Rights Agreement providing for the director designation rights and for customary registration rights.

GRH’s obligation to complete the Sponsor Conversion is subject to (1) the entry into an amendment to, or a replacement contract for, our current contract with a third party supplier (which expires by its terms on December 31, 2014) on terms that are equivalent or more favorable, taken as a whole, to us than the terms of the existing contract, (2) us having at least $100 million of available cash and borrowing capacity at January 15, 2015, and (3) our management developing, reasonably and in good faith, an operating plan and budget for fiscal year 2016 that is accepted by our board of directors and contemplates earnings (excluding specified cash and non-cash charges) before interest, taxes, depreciation and amortization of at least $75.4 million, as well as other customary closing conditions. There is no assurance that these closing conditions will be met.

 

For example, we have not amended, or replaced, our current contract with a third-party supplier (which expires by its terms on December 31, 2014) on terms that are equivalent or more favorable, taken as a whole, to us than the terms of the existing contract.  Additionally, if our results do not improve, we will not have at least $100 million of available cash and borrowing capacity at January 15, 2015. We also may not be able to develop, reasonably and in good faith, an operating plan and budget for fiscal year 2016 that would be accepted by our board of directors and contemplates earnings (excluding specified cash and non-cash charges) before interest, taxes, depreciation and amortization of at least $75.4 million. Further, it is a condition that no default or event of default shall have occurred and be continuing under our 2018 Credit Agreement, the SCP Credit Agreement or our 2019 Notes.

 

The Recapitalization Agreement also contains representations, warranties and covenants, including covenants providing for the establishment of a six-person transaction committee to consist of three members designated by GRH, our CEO, our CFO and one other representative appointed by us. The transaction committee oversees and coordinates discussions regarding the recapitalization transactions and the implementation of an interim operating plan for us, but does not have authority to bind us or oversee our business.

The Recapitalization Agreement also contains restrictions on our ability to initiate, solicit or encourage any inquiries or the making of any proposal or offer that would be a competing proposal to the transactions contemplated by the Recapitalization Agreement, as well as our ability to enter into discussions, negotiations or agreements regarding such a competing proposal.

9


 

Under the Recapitalization Agreement, we are obligated to enter into a merger agreement with a newly formed, wholly owned subsidiary of our company and seek stockholder approval of the merger promptly after the consummation of the Rights Offering. Our certificate of incorporation, as the surviving corporation in the merger, would provide for an increased number of authorized shares of Common Stock that is at least sufficient to allow for conversion of all of the shares of Preferred Stock and for a decrease in the Common Stock par value to $0.01 per share.

The Recapitalization Agreement contains customary termination provisions and may be terminated by either party if the consummation of the Rights Offering and the Sponsor Conversion do not occur on or before March 15, 2015.

We incurred financing fees of $39.6 million in connection with these transactions. $36.9 million of these costs were capitalized and will be amortized over the remaining term of the agreements. $2.7 million in costs were expensed during the period. In addition, unamortized costs of $24.1 million and $1.3 million in debt discount relating to the 2018 Credit Agreement were written off during the period which resulted in a total expense of $28.1 million included in other loss within our Condensed Consolidated Statements of Comprehensive Income

The Sponsor Conversion and other direct issuances of Preferred Stock pursuant to the Recapitalization Agreement contain conversion features and are freestanding equity-linked instruments. We performed analyses on the conversion features which met the criteria under Accounting Standards Codification Topic 815 “Derivatives and Hedging” for equity classification. Therefore, we recorded these conversion features as components of debt and equity at their relative fair values. The Rights Offering has similar characteristics as a non-cash dividend and has been recorded at fair value as a component of shareholder’s equity.

Impairment. As discussed in Note 1 – “Basis of Presentation – Liquidity,” we have experienced losses for the past two years that continued into the third quarter of fiscal 2015, primarily attributed to a prolonged downturn in our business, which continues to impact our overall liquidity. Also, on July 24, 2014,  we were notified by the New York Stock Exchange (“NYSE”) that the average closing price of our common stock had fallen below $1.00 per share over a period of 30 consecutive trading days, which is the minimum average share price for continued listing on the NYSE. See Note 9 – “Commitments and Contingencies” for further discussion. Together, we believed these circumstances were triggering events and required an evaluation of our long-lived assets during the second quarter. 

During the second quarter, we evaluated our goodwill balance, with the goodwill assigned to our Mexican subsidiary being the primary component.

In step 1 of the two-step impairment test, we compared the carrying amount, including assigned goodwill, to the fair value of our Mexican subsidiary. We estimated fair value by equally weighting the results from the income approach and market approach. The significant assumptions employed in determining fair value included, but were not limited to, projected financial information, growth rates, terminal value, discount rates, and multiples from publicly traded companies that are comparable to our Mexican subsidiary. Due to the less than anticipated operating results of the U.S. operations, we prepared a multi-year projection based upon updated assumptions, which included a reduction in the Mexican subsidiary’s planned expansion. The result of these assumptions was a significant reduction in sales and gross profits in our multi-year projection which was the primary factor determining that the fair value of our Mexican subsidiary was less than the carrying amount. As a result, step 2 of the two-step impairment test was required in order to measure the amount of goodwill impairment, if any.

In step 2, the fair value measured in step 1 of our Mexican subsidiary was allocated to its assets and liabilities to determine the implied fair value of the goodwill, if any. We calculated the implied fair value of our Mexican subsidiary’s goodwill to be zero compared to its carrying value of $12.3 million, resulting in an impairment charge of $12.3 million. The impairment charges were recorded in the 13 weeks ended August 2, 2014, as impairment of long-lived assets and goodwill within our Condensed Consolidated Statements of Comprehensive Income. 

Restructuring.  As part of the anticipated next phase of the restructuring plan, we may begin a program to close a number of underperforming stores and other measures to make reductions in our cost structure. However, the actual number of store closures could vary considerably depending on the specific restructuring alternative implemented. The store closure program would require consent from our lenders. There is no assurance the restructuring plan will be achieved and other alternatives could result in materially higher restructuring costs. Estimated store closure costs of $6.9 million ($5.7 million and $1.2 million, respectively for the second and third quarters) related to the impairment of store leasehold improvements and fixtures have been recorded as impairment of long-lived assets and goodwill within our Condensed Consolidated Statements of Comprehensive Income. "  

Estimated employee severance costs of $8.2 million relate to the elimination of full-time and part-time positions, primarily related to the corporate office, stores, store support, field management and consolidation of facilities in China. These costs are included as selling, general and administrative expenses within our Condensed Consolidated Statements of Comprehensive Income. Inventory reserves of $8.4 million ($2.7 million and $5.7 million, respectively for the second and third quarters) are based on the estimated liquidation value of the inventory on hand during the liquidation phase of the restructuring plan. These expenses have been recorded as cost of products sold within our Condensed Consolidated Statements of Comprehensive

10


 

Income. In addition to these expenses, we estimate future lease termination costs upon exiting stores to be in the range of $15 million to $25 million.

NOTE 5 – INDEBTEDNESS AND BORROWING FACILITIES 

Debt consists of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

November 1,

 

February 1,

 

December 31,

(In millions)

 

2014

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 Credit Facility

 

$

233.9 

 

 

$

--

 

 

$

--

 

Credit facility term loan due in December 2018

 

 

50.0 

 

 

 

50.0 

 

 

 

50.0 

 

Term loan due in December 2018

 

 

250.0 

 

 

 

250.0 

 

 

 

250.0 

 

6.75% unsecured notes due in May 2019

 

 

325.0 

 

 

 

325.0 

 

 

 

325.0 

 

Other

 

 

0.2 

 

 

 

1.2 

 

 

 

1.4 

 

 

 

 

859.1 

 

 

 

626.2 

 

 

 

626.4 

 

Unamortized debt discounts

 

 

(17.6)

 

 

 

(12.1)

 

 

 

(12.3)

 

 

 

 

841.5 

 

 

 

614.1 

 

 

 

614.1 

 

Less current portion of:

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

0.1 

 

 

 

1.1 

 

 

 

1.1 

 

Total long-term debt

 

$

841.4 

 

 

$

613.0 

 

 

$

613.0 

 

 

 

 

See Note 4 – “Restructuring and Impairment” for further discussion of the restructuring of our debt.

 

 

NOTE 6 – NET LOSS PER SHARE

Basic net loss per share is computed based on the weighted average number of common shares outstanding for each period presented. Diluted net loss per share reflects the potential dilution that would have occurred if securities or other contracts to issue common stock were exercised, converted, or resulted in the issuance of common stock that would have then shared in our earnings.

The following table reconciles the numerator and denominator used in the basic and diluted net loss per share calculations for the periods presented:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

13 Weeks Ended

 

Three Months Ended

 

39 Weeks Ended

 

Nine Months Ended

   

 

November 1,

 

October 31,

 

November 1,

 

October 31,

(In millions)

 

2014

 

2013

 

2014

 

2013

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(161.1)

 

 

$

(135.9)

 

 

$

(396.8)

 

 

$

(210.6)

 

Discontinued operations, net of taxes

 

 

 —

 

 

 

 —

 

 

 

 —

 

 

 

(5.5)

 

Net loss

 

$

(161.1)

 

 

$

(135.9)

 

 

$

(396.8)

 

 

$

(216.1)

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding

 

 

102.0 

 

 

 

101.1 

 

 

 

101.9 

 

 

 

100.8 

 

Dilutive effect of stock-based awards

 

 

 —

 

 

 

 —

 

 

 

 —

 

 

 

 —

 

Weighted-average shares for diluted net loss per share

 

 

102.0 

 

 

 

101.1 

 

 

 

101.9 

 

 

 

100.8 

 

 

 

 

 

11


 

The following table includes common stock equivalents that were not included in the calculation of diluted net loss per share for the periods presented. These securities could be dilutive in future periods.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

13 Weeks Ended

 

Three Months Ended

 

39 Weeks Ended

 

Nine Months Ended

   

 

November 1,

 

October 31,

 

November 1,

 

October 31,

(In millions)

 

2014

 

2013

 

2014

 

2013

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Employee stock options (1) (2)

 

 

7.0 

 

 

 

7.6 

 

 

 

7.0 

 

 

 

7.6 

 

Warrants to purchase common stock (3)

 

 

 —

 

 

 

15.8 

 

 

 

 —

 

 

 

15.8 

 

 

 

 

(1)

Certain employee stock options were excluded from weighted-average shares for diluted net loss per share because the exercise prices exceeded the average market price of our common stock during the period and the effect of their inclusion would be antidilutive. For both the 13 weeks and 39 weeks ended November 1, 2014,  7.0 million employee stock options were excluded for this reason, compared with 4.2 million for both the three and nine months ended October 31, 2013

(2)

Certain employee stock options were excluded from weighted-average shares for diluted net loss per share because the effect of their inclusion would reduce our net loss per share and would be antidilutive. For the 13 weeks and 39 weeks ended November 1, 2014, no employee stock options were excluded from these periods for this reason. For the three and nine months ended October 31, 2013,  3.4 million employee stock options were excluded from these periods for this reason. 

(3)

These common stock equivalents were excluded because the exercise price ($35.88 per share for all periods) exceeded the average market price of our common stock during these periods and the effect of their inclusion would be antidilutive. The warrants expired in March 2014.

 

 

 

NOTE 7 – FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

Basis of Fair Value Measurements

   

 

 

 

Quoted Prices

 

Significant

 

 

   

 

 

 

in Active

 

Other

 

Significant

   

 

Fair Value

 

Markets for

 

Observable

 

Unobservable

   

 

of Assets

 

Identical Items

 

Inputs

 

Inputs

(In millions)

 

(Liabilities)

 

(Level 1)

 

(Level 2)

 

(Level 3)

   

 

 

 

 

 

 

 

 

 

 

 

 

13 Weeks Ended November 1, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held and used

 

$

0.8 

 

 

$

 —

 

 

$

 —

 

 

$

0.8 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period Ended February 1, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held and used

 

$

0.6 

 

 

$

 —

 

 

$

 —

 

 

$

0.6 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held and used

 

$

9.6 

 

 

$

 —

 

 

$

 —

 

 

$

9.6 

 

 

 

The FASB’s accounting guidance utilizes a fair value hierarchy that prioritizes the inputs to the valuation techniques used to measure fair value into three broad levels:

·

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities

·

Level 2: Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active

·

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions

U.S. RadioShack Company-Operated Stores: For the 13 weeks ended November 1, 2014, and for the period ended February 1, 2014, long-lived assets held and used in certain locations of our U.S. RadioShack company-operated stores segment with a total carrying value of $3.4 million and $1.1 million, were written down to their fair value of $0.8 million and $0.6 million, resulting in impairment charges of $2.6 million and $0.5 million, respectively.

The inputs used to calculate the fair value of these long-lived assets included the projected cash flows and a risk-adjusted rate of return that we estimated would be used by a market participant in valuing these assets. The projected cash flows for a particular store are based on average historical cash flows for that store and are projected through the remainder of its lease. The risk-adjusted rates of return used to discount these cash flows range from 15% to 20%.

 

12


 

Fair Value of Equity-Linked Instruments: As discussed in Note 4 – “Restructuring and Impairment”, the Recapitalization Agreement contains conversion features which are equity-linked instruments, and are recorded at fair value. Fair value on the conversion instruments are determined by using observable inputs such as indicated market prices and unobservable inputs such as conversion amounts, estimates of per share value, and probability of achieving the required conditions for mandatory conversion.

Carrying amounts and the related estimated fair values of equity-linked instruments are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

Basis of Fair Value Measurements

   

 

 

 

Quoted Prices

 

Significant

 

 

   

 

 

 

in Active

 

Other

 

Significant

   

 

Fair Value

 

Markets for

 

Observable

 

Unobservable

   

 

of Assets

 

Identical Items

 

Inputs

 

Inputs

(In millions)

 

(Liabilities)

 

(Level 1)

 

(Level 2)

 

(Level 3)

   

 

 

 

 

 

 

 

 

 

 

 

 

As of November 1, 2014

 

 

 

 

 

 

 

 

 

 

 

 

Equity-linked instruments

 

$

42.5 

 

 

$

 —

 

 

$

 —

 

 

$

42.5 

 

 

 

Fair Value of Financial Instruments: Financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, restricted cash, 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. The estimated fair values of our 6.75% unsecured notes due in 2019 (“2019 Notes”) as of November 1, 2014, February 1, 2014,  and December 31, 2013, our secured term loans as of August 2, 2014, and for our 2018 Credit Facility as of August 2, 2014, are determined using quoted market prices, when available. If quoted market prices are not available, the fair value is estimated using indicated market prices. The estimated fair values use both observable and unobservable inputs in a cash flow model. The unobservable inputs reflect assumptions regarding expected spreads and discount rates. Observable inputs consist of 1-month and 3-month LIBOR rates. At February 1, 2014,  and December 31, 2013, estimated fair values of our secured term loans approximate their carrying values due to the recentness of these borrowings.

Carrying amounts and the related estimated fair values of our long-term debt financial instruments are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

 

 

 

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 November 1, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 Credit Facility

 

$

233.9 

 

 

$

223.1 

 

 

$

 —

 

 

$

 —

 

 

$

223.1 

 

Secured term loans

 

$

283.8 

 

 

$

279.1 

 

 

$

 —

 

 

$

 —

 

 

$

279.1 

 

2019 Notes

 

$

323.6 

 

 

$

122.1 

 

 

$

 —

 

 

$

122.1 

 

 

$

 —

 

Other

 

$

0.2 

 

 

$

0.2 

 

 

$

 —

 

 

$

 —

 

 

$

0.2 

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of February 1, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Secured term loans

 

$

289.6 

 

 

$

289.5 

 

 

$

 —

 

 

$

 —

 

 

$

289.5 

 

2019 Notes

 

$

323.4 

 

 

$

195.0 

 

 

$

 —

 

 

$

195.0 

 

 

$

 —

 

Other