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Announcement:

Moody's: RadioShack liquidity may not be around long enough for turnaround

Global Credit Research - 29 Jul 2014

New York, July 29, 2014 -- RadioShack's deteriorating liquidity gives the company a limited window for executing a turnaround in sales and earnings, says Moody's Investors Service in the report "RadioShack Liquidity Runway May Not Be Long Enough for a Turnaround." Moody's says that liquidity is adequate for another year, with no debt maturities coming due, but that its base case scenario for RadioShack has the company running through its liquidity by the end of October 2015.

"The company's deteriorating liquidity profile and dismal earnings give very little cushion to RadioShack to execute its turnaround strategy over the next several quarters," says Mickey Chadha, a Moody's Vice President and Senior Analyst. "Absent a credible turnaround strategy to improve sales growth and increase earnings, RadioShack will be hard pressed to remain relevant in the increasingly competitive mobile phone and consumer electronics business."

Moody's rates RadioShack Caa2, with a negative outlook.

The company's cash balance at the end of its fiscal first-quarter 2014 (3 May 2014) was $62 million, versus $180 million at 31 December 2013. Moody's expects RadioShack to rely increasingly on its unrestricted cash balances as operating losses will likely to continue for the rest of the year and free cash flow remains negative over the next 12 months, further curtailing liquidity.

Unless RadioShack can orchestrate a successful turnaround over the next 12-18 months and improve customer traffic in its stores, Moody's says the company's liquidity will continue to deteriorate and it will start to lose vendor support.

Under Moody's base case scenario, sales fall 7.4% in 2014, leading to RadioShack burning approximately $401 million of cash in fiscal 2014 (ending 1 February 2015). Under this scenario, barring any infusion of additional cash, the company will run out of liquidity at the end of the third quarter of fiscal 2015 (ending October 2015).

Under a second, more optimistic scenario, with sales falling 4.6% in 2014, cash flow from operations will still not be sufficient to cover capital expenditures and will result in a cash burn of $267 million in 2014 and about $142 million in 2015. The company's liquidity will be around $338 million for fiscal 2014 and $196 million for fiscal 2015. Even in this optimistic scenario EBITDA remains negative through fiscal 2015.

The company had planned to close about 1,100 stores in the US as part of an attempt to improve profitability. However, the terms on which its lenders were willing to provide the consent for its store closure program were not acceptable to the company and it is therefore scaling back the closures.

For more information, Moody's research subscribers can access this report at

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_173372

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

***

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

Mickey Chadha
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Janice Ann Hofferber
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's: RadioShack liquidity may not be around long enough for turnaround
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