C12-4 (Let's recall what we learned in Chapter 2 LO2-5) (Let's review Long-term debt ratio in Chapter 6) 1/31/2017 1/30/2016 Total Assets 6,908 6,910 [1] Presented below is information from Toys"R"Us Inc., Form 10-K for the fiscal years ending 1/31/2017. 35 points (3.5 points each) Use the following key points to answer why Toy'sRUs' financial situation in 2017 & 2016. Long-term debt 4,642 4,612 Shareholder's Euqity (Deficit) (1,292) (1,265) [2] Total Debt 8,200 8,175 [3] Operating earnings 460 Interest expense 378 [4] (429) Net income (loss) Cash from operations (1) Cash from investing activities (210) Cash from financing activities Interest paid 81 (385) Carrying value of debt 4,761 4,685 [8] (457) (29) (124) [5] 238 [6] (210) (27) (393) [7] [1] LT debt & Asset ratio [2] Equity is deficit [3] total debt portion of LT & ST [4] operating earngin vs interest exp [5] net income [6] cash flow [7] interest paid [8] carring value vs fair value of debt [9] refinance's interest rate [10] all restriction Fair value of debt 4,560 4,107 Debt maturities Year +1 Year +2 Year +3 Year +4 Year +5 After Year +5 119 496 1,215 1,668 659 1,316 1,280 1,095 1,363 156 4,850 183 4,773 2017 NOTE2: SHORT-TERM BORROWINGS AND LONG-TERM DEBT On 8/16/2016, we completed the offering to exchange the outstanding 10.375% senior notes due 2017 (the "2017 Notes") and 7.375 % senior notes due 2018 (the "2018 Notes" and, together with the 2017 Notes, the "Senior Notes") for new 12.000% senior secured notes due 2021 (the Taj Notes") issued by the Taj Note Issuers (as defined below) and, in the case of the 2017 Notes, $110 million in cash. An additional $34 million of Taj Notes were Issued in concurrent private placements, of which $26 million were issued for cash, with the remainder issued as payment to certain noteholders in connection with the Exchange offers (as defined below) [9] On 8/16/2016, the Taj Note Issuers issued $142 million in additional Taj Notes in a private placement, of which a portion of the proceeds was used to redeem the remaining 2017 Notes. As a resulte of these transactions, all of the 2017 Notes, in an aggregate principal amount of $450 million, and $192 million of the 2018 Notes were exchanged or redeemed, with $208 million in principal of the 2018 Notes still outstanding. The aggregate principal amount of Taj Notes issued was $583 million. As of 1/28/2017, we had total indebtedness of $4.8 billion, of which $3.4 billion was secured indebtedness. Toy's "R"Us, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred their own indebtedness. Our credit facilities, loan agreements and indentures contain customary covenants that, amoung other thins restrict our ability to: -incur certain additional indebtedness -transfer money between the Parent Cmpany and our various subsidiaries - Pay dividends on, repuchase or make distributions with respect to our or our subsidiaries' capital stock or make other restricted payments - Issue stock of subsidiaries - make certain investments, loans or advances - transfer and sell certain assets -create or permit liens on assets - consolicate, merge, sell or othewise dispose of all or substantially all of our assets - enter into certain transactions with our affiliates; and - amend certain documents The amount of total net assets that were subject to such restrictions was $59 million as of 1/28/2017. [10] Our agreements also contain various and customary events of default with respect to the indebtedness, including without limiatation, the failure to pay interest or principal when the same is due under the agreements, cross default...etc. (skipped) (please refer to the text book)