The nightmare of RadioShack Corp. ( RSH - Analyst Report ) persists as the company continues with its disappointing performance. The company’s third-quarter 2012 financial results were well below the Zacks Consensus Estimates. RadioShack has achieved its target of securing $175 million worth of new financing at a blended interest rate of approximately 9%. This fund will be used to refinance half of its convertible bonds worth $375 billion, which will mature in August 2013.

GAAP net loss from continuing operation, in the third quarter of 2012, was $47.1 million or a loss of 47 cents per share compared to a net income of $0.3 million or 0 cent per share in the year-ago quarter. Quarterly earnings per share of a loss of 33 cents were nowhere near the Zacks Consensus Estimate of a loss of 17 cents. Quarterly net revenue was $1000.2 million, down 3.06% year over year and well below the Zacks Consensus Estimate of $1040 million.

Quarterly gross profit was $359.9 million compared with $441.9 million in the prior-year quarter. Gross margin was 36% in the reported quarter compared with 42.8% in the prior-year quarter. This was mainly due to unfavorable sales mix toward lower margin smartphones coupled with decline in post paid units sold.

Quarterly Selling, General, and Administrative expenses were $384.6 million compared with $411.4 million in the year-ago quarter. Operating loss in the third quarter of 2012 was $58.8 million compared to an operating income of $10.6 million in the year-ago quarter. The Comparable store sales for the company-operated stores and kiosks (stores and kiosks opened at least a year) were down 1.6% in the reported quarter. This is a key retail performance indicator measuring growth from the existing sales locations.

During the first nine months of 2012, RadioShack generated $32.4 million of cash from operations compared with $263 million in the year-ago period. Free cash flow (cash flow from operations less capital expenditures) in the first nine months of 2012 was a negative $12.1 million compared to a positive $200.1 million in the prior-year period.

At the end of the third quarter of 2012, RadioShack had $546.1 million of cash & cash equivalent compared with $591.7 million at the end of 2011. Total debt, at the end of the previous quarter was $749.2 million compared with $670.6 million at the end of 2011. At the end of the third quarter of 2012, debt-to-capitalization ratio was 0.42 compared with 0.47 at the end of 2011.

Segment wise Results

U.S. RadioShack Company-operated store segment, which is the prime contributor of total revenue, was down 3.8% year over year to $814.4 million. Operating income was $62.1 million, down 35.0% year over year.

Other segment revenue remained flat year over year to $185.8 million. Operating loss was $15.4 million compared to an operating income of $0.9 million in the prior-year quarter.

Earlier, RadioShack suspended its dividend payment program to reduce total debt, which in turn, will minimize its debt-to-equity ratio. However, the company faces stiff competition from rival Best Buy Co. Inc. ( BBY - Analyst Report ) and stores operated by mobile phone carriers.

Recommendation

We currently maintain a long-term Underperform recommendation on RadioShack. However, it holds a short-term Zacks#3 Rank (Hold) on the stock.