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True Value net margin drops in Q2

BY Dan Berthiaume

Chicago – True Value Company posted a quarterly net margin of $23.2 million, down 2.5% compared to $23.8 million the prior year period in the second quarter of fiscal 2014. Revenue was $429.5 million, an increase of 4.5% from $411.2 million for the same period a year ago.

Same-store sales rose 4.2%. True Value Company’s expanded farm, ranch, automotive and pet product assortments, plus seasonal and plumbing categories, drove the majority of sales increases.

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Twitter proves skeptics wrong

BY CSA STAFF

Twitter posted solid growth in user metrics for its second quarter, including strength in mobile, which allowed the social media platform to exceed sales and profit forecasts.

Twitter said it had 271 million monthly active users during the quarter ended June 30, an increase of 24% compared to the prior year. Roughly 78% of those users were on mobile devices, a 29% increase from the prior year.

"Our strong financial and operating results for the second quarter show the continued momentum of our business," said Twitter CEO Dick Costolo. "We remain focused on driving increased user growth and engagement, and by developing new product experiences, like the one we built around the World Cup, we believe we can extend Twitter’s appeal to an even broader audience."

Revenues during the quarter increased 124% to $312 million from $139 million. The surge in sales did not help the company’s bottom line as Twitter report a net loss of $144 million compared to $42 million the prior year. However, on an adjusted basis, Twitter said it earned $14.6 million compared to a prior year loss of $16.3 million.

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Moody’s: RadioShack may run out of cash

BY Dan Berthiaume

Fort Worth, Texas – Financial woes continue for RadioShack, which was recently notified it is in danger of being delisted by the New York Stock Exchange. According to a new report from Moody’s Investor Service, RadioShack is likely to run out cash by the end of October 2015.

Although RadioShack has no debt maturities coming due in the next year, the company’s cash balance at the end of its fiscal first quarter 2014 was $62 million, compared to $180 million at the end of calendar year 2013. Moody’s expects RadioShack to rely increasingly on its unrestricted cash balances as operating losses will likely continue for the rest of the year and free cash flow remains negative during the next 12 months.

Unless RadioShack can orchestrate a successful turnaround in 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 will fall 7.4% in 2014, leading to RadioShack burning approximately $401 million of cash in fiscal 2014 (ending Feb. 1, 2015). Under this scenario, barring any infusion of additional cash, the company will run out of liquidity at the end of third quarter fiscal 2015 in 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, earnings before interest, taxes, depreciation and amortization (EBITDA) remains negative through fiscal 2015.

RadioShack had planned to close about 1,100 stores in the U.S. 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. Moody’s rates RadioShack Caa2, with a negative outlook.

"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," said Mickey Chadha, a Moody’s VP 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."

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