Fitch Downgrades RadioShack's IDR to 'BB'; Outlook Negative.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded the following ratings for RadioShack Corporation (RadioShack): --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) to 'BB' from 'BB+'; --Bank credit facility to 'BB' from 'BB+'; --Senior unsecured notes to 'BB' from 'BB+'. The short-term IDR is affirmed at 'B'. Approximately $520 million of total debt is affected by these actions. The Rating Outlook is Negative. The downgrades reflect continued weakness in many of RadioShack's business segments, particularly wireless products and services, and concerns about revenue trends and the company's ability to produce sustainable profitability. The ratings also consider management's efforts to improve operational efficiency as well as the challenges of executing a turnaround in a highly competitive operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. . RadioShack has continued to report negative comparable store sales driven by weak operating trends across most of its business segments. In particular, the company's core wireless business, which represents about one-third of its total revenues, has struggled to attract customers to the Cingular network despite targeted marketing efforts. In spite of weak sales trends, management has implemented cost-cutting initiatives such as headcount reductions and better inventory management, which have resulted in improved operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring Costs - EBITDAR An indicator of a company's financial performance calculated as: = Revenue - Expenses (excluding tax, interest, depreciation, amortization, and restructuring costs) margin increased to 14.5% in the last 12 months (LTM LTM abbr. long-term memory ) ending March 31, 2007 from 13.5% in 2006, although it remains below the previous five-year levels which ranged between 16.4% to 19.9%. In addition, credit metrics remain weak with EBITDAR coverage of interest and rent of 1.9 times (x) and total adjusted debt/EBITDAR of 4.5x for the LTM period. While RadioShack's cost-cutting efforts have helped stabilize operating profits Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in the near term, management has not articulated a business strategy to address revenue growth, and Fitch remains concerned about RadioShack's long-term ability to stabilize and grow revenues and operating profits. As a result, Fitch expects the company's credit metrics to remain below their historical levels over the near to medium term. Of ongoing concern is the increasing competition in the consumer electronics and wireless businesses from national big-box retailers and discounters as well as wireless carriers and other new wireless distribution channels. These retailers offer a wide selection of consumer electronics and wireless products and, as they expand their store bases, are becoming increasingly convenient to customers. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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