Thursday, September 11, 2014

Some Notes on Radio Shack Financial Statements $RSH

Looking at the balance sheet for this quarter, I notice that accounts payable fell from $242mm to $153 million, with accrued expenses staying the same. Inventory was down substantially, yet almost all the benefit of inventory liquidation went to reducing accounts payable. So I guess that's trade credit going away - vendors demanding cash for product.

Book value is now negative for the first time.

They spent $28 million in capex the first half of the year - could have bought back quite a lot of unsecured debt for that. It shows you (and I guess we've known for a long time) that they aren't going to try to carefully steward the resources.

I guess management decided they needed to try to demonstrate that Radio Shack business model can be fixed with judicious applications of remodel capex. It would be funny if they target their remaining advertising dollars to the areas where they have remodeled stores?

Speaking of trade credit, here's a sell side analyst comment on that topic:

"[T]o avoid bankruptcy, or even to orchestrate some sort of prepackaged bankruptcy,Radio Shack needs support from lenders, vendors, shareholders, and landlords. Before this can happen, the company needs to show stabilization, at a time that product cycles are going against it and the economy continues to challenge its core customer. We worry that in its current financial position, the company will struggle to get key product this holiday. For example, we struggle to see a scenario where RadioShack will get iPhone6... [U]ltimately, we believe that it will be tough to get inventory this holiday, as vendors are skittish about getting paid."

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