Radio Shack Fun Facts $RSH

• The Shack turns over inventory about 4.3 times per year. There's about $180,000 of inventory (cords and widgets?) per store. By comparison, Best Buy turns over inventory close to 8 times per year.
• Best Buy sales are $300k/employee, Shack sales are $125k/employee. 
• So, Shack takes almost twice as long and 2.4x as many employees to sell a dollar of inventory.
• The Shack's gross margin is 34% versus Best Buy's 23%. However, Best Buy's SG&A is 20 cents per dollar of revenue and RSH's is 41 cents. 
• I think these are both terrible businesses, by the way, that will be made extinct by Amazon, Walmart, and Target. However, Best Buy has no net debt and positive EBITDA. Best Buy will give a eulogy at the RSH funeral.
• "hhgregg", a smaller Eastern retailer with less sales than the Shack is profitable (tiny margins) and turns its inventory 8x per year, with a gross margin of 29% that is almost as good as the Shack.
• $10 million daily sales for RSH corp is only about $2,500 per store! You can probably be in the store manager hall of fame by selling $25,000 of product over a 3 day weekend. In other words, these stores are doing about $900k a year revenue. "Hhgregg" has sales per store of almost $11 million.
• The Shack had a billion dollar market cap at the beginning of 2012! They paid 25 cents in dividends that year! They should have raised cash. Why is a company with no viable business model using debt financing?
• "This proposed store closure program is expected to preserve liquidity by avoiding operating losses and generating cash by liquidating inventory in those stores. This will be partially offset by lease termination payments and liquidation costs."

Breakdown of Radio Shack SG&A Expense $RSH

SG&A total is 41% of revenue. That is 17% compensation, 7.3% rent, 5% advertising, and 11% "other".

CFO power move: completely stop advertising (when was the last time anyone saw an RSH ad??) and spend the $176 million (or whatever is budgeted for 2014) on buying back debt at 40 cents on the dollar!

Radio Shack Business Segments: "Mobility" and "Retail" $RSH

Mobility:   The mobility platform includes postpaid and prepaid wireless handsets, commissions, residual income, prepaid wireless airtime, e-readers, and tablet devices. Our wireless accessories and tablet accessories, which were previously included in our signature platform, are now also included in this platform.

Retail:   Our retail platform includes our remaining consumer electronics product categories and related accessories; batteries and power products; and technical products. This platform now also consists of products that were previously included in our signature and consumer electronics platforms, except wireless accessories and tablet accessories, which are now included in the mobility platform.

And how they are doing:

Sales in our mobility platform (which includes postpaid and prepaid wireless handsets, commissions and residual income, prepaid wireless airtime, e-readers, tablet devices, wireless accessories, and tablet accessories) decreased 11.3% in 2013. This decrease in sales was primarily driven by decreased sales in our postpaid wireless business, which were partially offset by increased sales in our prepaid wireless business. Comparable store sales in this platform decreased 9.0% in 2013.

Sales in our retail platform (which includes our remaining consumer electronics product categories and related accessories; batteries and power products; and technical products) decreased 9.4% in 2013. This sales decrease was primarily driven by decreased sales of laptop computers, batteries, internet telephone devices, home entertainment accessories, digital music players, headphones, and GPS devices. These sales decreases were partially offset by increased sales of portable speakers and sales of Apple Lightning compatible cables and adaptors. Comparable store sales in this platform decreased 8.5% in 2013.

"Even CEO Can't Figure Out How RadioShack Still In Business" $RSH

This Onion article will be seven years old next week!:

One of Day's theories about RadioShack's continued solvency involves wedding DJs, emergency cord replacement, and off-brand wireless telephones. Another theory entails countless RadioShack gift cards that sit unredeemed in their recipients' wallets. Day has even conjectured that the store is "still coasting on" an enormous fortune made from remote-control toy cars in the mid-1970s.

Have any correspondents been to a Shack recently? Thoughts, observations?

Conrad Industries 2013 Annual Report Highlights $CNRD

• In 2013, we achieved revenues of $303.3 million, net income of $28.6 million, EBITDA of $48.9 million and earnings per diluted share of $4.80. Vessel construction and repair and conversion hours and revenue were the highest in the Company’s history as was vessel construction gross profit. Net income and earnings per diluted share also exceeded all other years. Our new construction segment accounted for 74.1% of our total revenue and our repair and conversion segment accounted for 25.9% of our total revenue.
• For 2013, 35.2% of total revenue was Gulf of Mexico oil and gas industry (“energy”) related, 64.6% was other commercial and .2% was government. This compares to 16.2% energy, 76.1% other commercial and 7.7% government in 2012.
• Our backlog was $152.9 million at December 31, 2013 as compared to $120.7 million at December 31, 2012. At December 31, 2013, 67.0% of our vessel construction backlog was from other commercial contracts and 33.0% was from energy contracts. This compares to backlog at December 31, 2012 of 84.3% other commercial and 15.7% from energy contracts. Subsequent to year end, as of March 28, 2014, we had signed contracts totaling $67.3 million, which includes the sales of two stock barges that were in progress at December 31, 2013.
• During the past five years, we have made, in the aggregate, approximately $39.6 million of capital expenditures to add capacity and improve the efficiency of our shipyards. This includes $12.4 million in 2013, which was primarily capital additions at our five locations to increase capacity and operational efficiencies, and to replace leased equipment with Company owned equipment. The additions for 2013 also include plant improvements and machinery and equipment for our new Conrad Deepwater South facility in the amount of $1.9 million. We acquired our 50-acre Conrad Deepwater South facility in 2012 for $5.6 million, have developed the site for new construction activities and expect to deliver our first vessel in the first quarter of 2014. Our Board of Directors has approved a $9.3 million capital expenditure program for 2014.
• A significant portion of our recent backlog, approximately 34.9% at December 31, 2013 and 68.3% at December 31, 2012, has been related to the construction of tank barges for use by customers transporting petroleum products resulting from the use of horizontal drilling in conjunction with hydraulic fracturing, which has expanded the ability of producers to recover natural gas and oil from low-permeability geologic plays, particularly shale plays.
• During the past five years, we have made, in the aggregate, approximately $39.6 million of capital expenditures to add capacity and improve the efficiency of our shipyards.
• Selling, general and administrative expenses (“SG&A”) increased $694,000, or 10.8%, to $7.1 million (2.3% of revenue) for 2013, as compared to $6.4 million (2.7% of revenue) for 2012.
• Daniel T. Conrad has been a director of Conrad Industries since January 2014. Mr. D. Conrad was appointed to the Board of Directors to fill the vacancy created by the resignation of J. Parker Conrad and to serve as a Class III director with a term expiring at the 2016 annual meeting of stockholders. Mr. Conrad joined the company in 1997 and has held numerous positions including Facility Manager, Sales Manager, Business Relations Manager and currently is Senior Vice President of our Conrad Shipyard, Conrad Aluminum and Conrad Orange subsidiaries. From 1989 to 1996, Mr. Conrad served in various positions with Venture Transport, Inc., a specialized carrier in oilfield and energy equipment. Mr. Conrad is the son of John P. Conrad, Jr.
[3rd generation Conrad moving up in the company.]

At $40, the market capitalization is now $238 million. Let's say that $38 million of the cash on balance sheet is "excess" (which would leave a current ratio of 1.7x). That gives an enterprise value of $200 million.

The 2013 EBITDA was $49 million. The past five years' average EBITDA was $32 million. The past five years' average capex was $7.9 million, so the average (EBITDA-capex) was $24 million.

That means the EV/EBITDA(ttm) is 4x and the EV/EBITDA(5y) is 6.25x. The "free cash flow" multiple is 8x.

The results are fantastic, but priced in to a large degree - the stock is up more than 50% over the past year. It is not crazy cheap the way it used to be.  

Update on Genco Warrant Package For Existing Shareholders

From an 8-K filing today.

The Debtors’ financial advisor, Blackstone Advisory Partners LP (“Blackstone”), has estimated the post-confirmation enterprise value of the reorganized Debtors to be approximately $1.48 billion.  In developing this estimate, Blackstone considered, among other things, vessel appraisals and other valuation methodologies as well as the reorganized Debtors’ equity interests in Baltic Trading Limited and Jinhui Shipping & Transportation Limited and the $100 million of cash invested through the Rights Offering.  Given the approximately $250 million of debt projected to be on the balance sheet of the reorganized Debtors, the implied equity value of the Reorganized Debtors is approximately $1.23 billion.  The Reorganized Debtors will issue approximately 61.7 million primary shares of the common stock of reorganized Genco valued at $20.00 per share (prior to dilution) in order to satisfy claims pursuant to the Plan.

Under the Plan, holders of equity interests in Genco are entitled to receive warrants to purchase 6% of common stock of reorganized Genco (subject to dilution).  Such warrants, which are effective for a period of 7 years from the effective date of the Plan, are exercisable at a cash-less strike price of a total equity value of $1,295 million.  This strike prices equates to approximately $20.99 per share of reorganized Genco common stock.  The estimated value of such warrants is approximately $30 million to $36 million based on the Black-Scholes pricing model.  After accounting for such warrants, the implied share price of reorganized Genco common stock would range from approximately $19.42 to $19.52 before accounting for any subsequent dilution from the Management Incentive Program contemplated under the Plan.

The foregoing estimates of the post-confirmation equity value of the reorganized Debtors and the share price of reorganized Genco common stock are based on a number of assumptions, including no material adverse changes in the spot rate market, no further ship arrests, the continuing employment of the Debtors’ vessels, the continuing service revenue from Baltic Trading Limited and Maritime Equity Partners LLC, the completion of the Rights Offering, and the Plan becoming effective in accordance with the estimates, and other assumptions.

Their liquidation analysis says that, in a liquidation, the unsecured recovery would be very small.

"RadioShack Mired in Talks With Lenders Over Closings" $RSH

Must read article in WSJ about the latest developments at RSH:

"Some of the lenders are exploring whether as many as 2,000 stores should close, people familiar with the matter said, though others said that possibility hasn't become part of negotiations with the company. The company is set to keep the proceeds of any store-closing inventory liquidation, but it is possible the lenders could try to negotiate for part of the proceeds to pay down their loans, some of these people said."

Meanwhile, the bonds cry out to be exchanged for stock, which would be an excellent use of overpriced stock to save more than $20 million in cash interest cost. Counting the interest on the loans in addition to the bonds, the company is spending close to a third of its market cap on annual interest expense. Unsustainable.