Fitch Ratings Affs 'A-' Rtgs on RadioShack; Rtg Outlook Stable.Business Editors CHICAGO--(BUSINESS WIRE)--Aug. 13, 2002 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 affirmed its ratings on RadioShack Corporation's (RSH (Remote SHell) A Unix command that enables a user to remotely log into a server on the network and pass commands to it. It is similar to the rlogin command, but provides passing of command line arguments to the command interpreter on the server at the same time. ) bank credit facility and medium-term notes Medium-term note (MTN) A corporate debt instrument that is continuously offered to investors over a period of time by an agent of the issuer. Investors can select from maturity bands of: 9 months to 1 year, more than 1 year to 18 months, more than 18 months to 2 years, etc. at 'A-' and the company's commercial paper rating at 'F2'. Approximately $654 million of debt is affected. The Rating Outlook is Stable. The ratings consider the company's productive retail store base and improving operating margins offset by a weakening retail environment and aggressive share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program. RadioShack continues to fine tune its operating strategy with an increased emphasis on its parts and batteries business. The company has realigned inventory in order to focus on higher margined faster selling products. The company has maintained a high cash balance ($529 million at the end of the second quarter) mitigating borrowing on its commercial paper facility. RSH's operating results for 2002 reflect a softer retail environment, partially offset by margin improvement due to tighter cost controls and improved inventory management. Same stores sales for the first half of 2002 ended June 30 were flat. The consumer electronics business has experienced softness due in part to a weaker economy, however, RSH's smaller stores and limited product line has enabled the company to focus on its higher margined parts and batteries business. Moreover, RSH's stores have minimal overhead in comparison to its big box competitors and are thus not as dependent upon high customer traffic to drive sales. Debt protection measures have weakened over the past 18 months due mainly to an increase in debt to fund working capital. Total adjusted debt/EBITDAR for the LTM LTM abbr. long-term memory ended 6/30/02 was 3.0 times (x) compared with 2.6x in FY 2000. And, EBITDAR/total interest plus rents was 3.1x compared to FY 2000's figure of 3.5x. Fitch notes that the rating assumes leverage will improve from current levels primarily from growth in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become ; thus, significant share repurchases via long-term borrowings are not anticipated. If the company moves forward with its 'Best To Shop' store update program, RadioShack will likely scale back share repurchases in order to fund increased capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . |
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