<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO _____
Commission File Number 1-11566
COMPUSA INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2261497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14951 NORTH DALLAS PARKWAY, DALLAS, TEXAS 75240
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (972) 982-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The registrant had 91,326,450 shares of common stock, $.01 per share par
value, outstanding as of October 30, 1997.
- --------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets at September 27, 1997 (unaudited)
and June 28, 1997................................................. 3
Consolidated Income Statements for the thirteen weeks
ended September 27, 1997 and September 28, 1996 (unaudited)....... 4
Consolidated Statements of Cash Flows for the thirteen weeks
ended September 27, 1997 and September 28, 1996 (unaudited)....... 5
Notes to Consolidated Financial Statements (unaudited)................. 6
Separate financial statements relating to the Company's subsidiaries are
omitted since all of them are wholly owned and have each guaranteed the
Company's 9 1/2% Senior Subordinated Notes due 2000 on a full, unconditional,
and joint and several basis and the Company does not consider such separate
financial statements to be material to investors.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.......................................... 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.................................................. 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 15
SIGNATURES.................................................................. 16
EXHIBITS.................................................................... 17
2
<PAGE>
COMPUSA INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares)
<TABLE>
<CAPTION>
SEPTEMBER 27, JUNE 28,
1997 1997
------------ ----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 294,894 $ 209,929
Accounts receivable, net of allowance for doubtful
accounts of $2,919 and $2,883 at September 27, 1997 and
June 28, 1997, respectively.............................. 218,622 214,568
Merchandise inventories................................... 631,279 501,426
Prepaid expenses and other................................ 19,479 18,521
---------- ----------
Total current assets.................................. 1,164,274 944,444
Property and equipment, net.................................. 181,582 170,801
Other assets................................................. 9,754 9,347
---------- ----------
$1,355,610 $1,124,592
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 676,349 $ 483,548
Accrued liabilities....................................... 109,334 93,794
Current portion of capital lease obligations.............. 2,826 3,139
---------- ----------
Total current liabilities............................. 788,509 580,481
Capital lease obligations.................................... 2,187 2,458
Senior Subordinated Notes.................................... 110,000 110,000
Deferred income taxes........................................ 2,233 3,686
Commitments and contingencies................................ -- --
Stockholders' equity:
Preferred stock, $.01 per share par value, 10,000 shares
authorized, none issued.................................. -- --
Common stock, $.01 per share par value; 200,000,000
shares authorized, with 92,169,959 shares issued at
September 27, 1997 and 91,763,372 shares issued at June
28, 1997................................................. 922 918
Paid-in capital........................................... 264,159 262,908
Retained earnings......................................... 189,961 166,502
---------- ----------
455,042 430,328
Less: Treasury stock, at cost, 316,627 shares at September
27, 1997 and June 28, 1997.................................. (2,361) (2,361)
---------- ----------
Total stockholders' equity 452,681 427,967
---------- ----------
$1,355,610 $1,124,592
========== ==========
</TABLE>
See accompanying notes.
3
<PAGE>
COMPUSA INC.
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
Net sales........................................ $ 1,191,812 $ 990,530
Cost of sales and occupancy costs................ 1,016,213 853,610
------------- -------------
Gross profit.................................. 175,599 136,920
Operating expenses............................... 109,249 90,494
Pre-opening expenses............................. 1,452 897
General and administrative expenses.............. 25,615 21,085
------------- -------------
Operating income.............................. 39,283 24,444
Other expense (income):
Interest expense................................ 3,055 3,045
Other income, net............................... (1,918) (2,253)
------------- -------------
1,137 792
------------- -------------
Income before income taxes....................... 38,146 23,652
Income tax expense............................... 14,687 9,106
------------- -------------
Net income....................................... $ 23,459 $ 14,546
============= =============
Income per common and common
equivalent share................................ $ 0.25 $ 0.15
============= =============
Weighted average common and
common equivalent shares........................ 95,514 94,540
============= =============
</TABLE>
See accompanying notes.
4
<PAGE>
COMPUSA INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
Cash flows provided by operating activities:
Net income................................................................ $ 23,459 $ 14,546
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization....................................... 10,706 8,134
Changes in assets and liabilities:
Increase in accounts receivable................................... (4,054) (5,577)
Increase in merchandise inventories............................... (129,853) (165,448)
Increase in prepaid expenses and other assets..................... (3,014) (3,929)
Increase in accounts payable and accrued liabilities.............. 208,286 228,724
----------- -----------
Net cash provided by operating activities....................... 105,530 76,450
Cash flows provided by (used in) investing activities:
Capital expenditures...................................................... (21,155) (18,009)
Other..................................................................... 14 13
----------- -----------
Net cash used in investing activities........................... (21,141) (17,996)
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock.................................... 1,255 1,545
Payments under capital lease obligations.................................. (679) (1,487)
----------- -----------
Net cash provided by financing activities....................... 576 58
----------- -----------
Net increase in cash and cash equivalents................................... 84,965 58,512
Cash and cash equivalents at beginning of period............................ 209,929 207,614
----------- -----------
Cash and cash equivalents at end of period.................................. $ 294,894 $ 266,126
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of CompUSA Inc. and
its wholly owned subsidiaries (collectively, the "Company"). All significant
intercompany accounts and transactions have been eliminated. In the opinion of
management, the accompanying unaudited consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results of operations, and cash flows of
the Company for the applicable interim periods. The results of operations for
these periods are not necessarily comparable to, or indicative of, results of
any other interim period or for the fiscal year as a whole.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
interim financial statements. Therefore, these financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the fiscal
year ended June 28, 1997.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets, liabilities, revenues, and expenses and the disclosure of
gain and loss contingencies at the date of the consolidated financial
statements. Actual results could differ from those estimates.
2. EQUITY
Income per common and common equivalent share is computed using the weighted
average number of shares of common stock and common stock equivalents
outstanding during each period. If dilutive, the effects of stock options,
treated as common stock equivalents, are calculated using the treasury stock
method.
On November 6, 1996, the Company's Board of Directors declared a two-for-one
stock split effected in the form of a stock dividend to stockholders of record
on November 18, 1996, payable on December 2, 1996. Stock options and all other
agreements payable in the Company's common stock (the "Common Stock") were
amended to reflect the split. Amounts equal to the par value of shares issued
in connection with the stock split have been transferred from additional paid-in
capital to the common stock account. All references to the number of shares
(except for shares authorized) and income per common and common equivalent share
amounts for the thirteen weeks ended September 26, 1996, have been adjusted on a
retroactive basis to reflect the stock split.
6
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
In September 1997, the Company's Board of Directors authorized the purchase of
up to $60 million of Common Stock. As of October 28, 1997, the Company had
purchased 620,000 shares of Common Stock, to be held as treasury stock, at a
weighted average price of $34.65 per share, excluding transaction costs.
In December 1995, the Company's Board of Directors authorized the purchase of
up to $30 million of Common Stock. On December 22, 1995, the Company purchased
472,400 shares of Common Stock, to be held as treasury stock, at a weighted
average price of $7.44 per share, excluding transaction costs. On May 24, 1996,
the Company's Board of Directors rescinded the December 1995 authorization to
purchase Common Stock.
3. COMMITMENTS AND CONTINGENCIES
The Company is a defendant from time to time in lawsuits incidental to its
business. Based on currently available information, the Company believes that
resolution of all known contingencies would not have a material adverse impact
on the Company's financial statements. However, there can be no assurances that
future costs would not be material to results of operations of the Company for a
particular future period. In addition, the Company's estimates of future costs
are subject to change as circumstances change and additional information becomes
available during the course of litigation.
7
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
4. SUBSIDIARY GUARANTEES
The Company's 9 1/2% Senior Subordinated Notes due 2000 (the "Senior
Subordinated Notes") are guaranteed on a full, unconditional, and joint and
several basis by all of the Company's direct and indirect subsidiaries, each of
which is wholly owned. The combined summarized information of these subsidiaries
is as follows:
<TABLE>
<CAPTION>
AS OF AND FOR THE
THIRTEEN WEEKS ENDED
---------------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- --------------
(in thousands)
<S> <C> <C>
Intercompany receivables..................................... $ 12 $ --
Other current assets......................................... 449,229 404,803
Noncurrent assets............................................ 156,454 104,478
Intercompany payables........................................ 58,052 51,756
Other current liabilities.................................... 189,720 119,483
Long-term debt and liabilities............................... 2,161 3,319
Net sales.................................................... 822,357 709,422
Intercompany revenues........................................ 46,417 41,519
Costs and expenses........................................... 796,760 698,403
Intercompany expenses........................................ 30,925 29,048
Net income................................................... 25,270 14,446
</TABLE>
In the preparation of the Company's consolidated financial statements, all
intercompany accounts were eliminated. There are no restrictions that limit the
ability of the Company's subsidiaries to declare and pay dividends to the
Company.
5. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
(in thousands)
<S> <C> <C>
Cash paid during the periods for:
Interest $ 152 $ 206
Income taxes 1,597 1,934
Investing activities not affecting cash are as follows:
Additions to property and equipment under capital leases $ 95 $ --
</TABLE>
8
<PAGE>
COMPUSA INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
6. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share," which the Company is required to adopt in
the second quarter ending December 27, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new standard, the Company will be
required to disclose both "basic" and "diluted" earnings per share. The
dilutive effect of stock options and other common stock equivalents is excluded
from the calculation of basic earnings per share but is included in the
calculation of diluted earnings per share using the treasury stock method.
Basic and diluted earnings per share calculated in accordance with the
provisions of SFAS 128 are as follows:
<TABLE>
<CAPTION> THIRTEEN WEEKS ENDED
-----------------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
Basic earnings per share................................................. $ 0.26 $ 0.16
Diluted earnings per share............................................... 0.25 0.15
</TABLE>
7. CREDIT AGREEMENT
Effective December 30, 1996, the Company entered into a new, three-year
unsecured revolving credit agreement (the "Credit Agreement") with a consortium
of fourteen banks that provides for borrowings and letters of credit up to a
maximum of $150 million with letters of credit not to exceed $75 million in the
aggregate. The funds available under the Credit Agreement may be used for any
corporate purpose, including purchasing or redeeming the Senior Subordinated
Notes in part or in full. At September 27, 1997, the Company had approximately
$149 million available for future borrowings after reduction for outstanding
letters of credit.
Borrowings under the Credit Agreement bear interest, at the Company's option,
at either a prime rate (8.5% per annum as of September 27, 1997) or a rate based
on the London Interbank Offering Rate (LIBOR) ranging from 5.7% to 5.8% as of
September 27, 1997, plus a specified margin, currently 0.75%. The Company also
pays certain commitment and agent fees. The Company has the annual option to
extend the Credit Agreement for an additional year with the banks' approval.
The Credit Agreement requires the maintenance of certain financial ratios and
a minimum tangible net worth. The Credit Agreement, as amended, also imposes
limitations on mergers and consolidations and prohibits the purchase of Common
Stock in excess of $130 million and the payment of dividends (other than stock
dividends). The Credit Agreement allows the Company to securitize up to
$100 million of certain assets. The indebtedness under the Credit Agreement is
guaranteed on a full, unconditional, and joint and several basis by all
subsidiaries of the Company.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS
This Quarterly Report on Form 10-Q contains forward-looking statements about
the business, financial condition, and prospects of the Company. The actual
results of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties, including
without limitation changes in product demand, the availability of products,
changes in competition, the ability of the Company to open new stores in
accordance with its plans, economic conditions, real estate market fluctuations,
interest rate fluctuations, dependence on manufacturers' product development,
various inventory risks due to changes in market conditions, changes in tax and
other governmental rules and regulations applicable to the Company, and other
risks indicated in the Company's filings with the Securities and Exchange
Commission. The Company's recent entry into the build-to-order market with its
CompUSA PC/TM/ brand personal computers involves significant additional risks,
including, without limitation, failure to achieve customer acceptance of the new
products and substantial dependence on third parties for product quality and
reliability and timely fulfillment of customer orders. All of the foregoing
risks and uncertainties are beyond the ability of the Company to control, and in
many cases, the Company cannot predict the risks and uncertainties that could
cause its actual results to differ materially from those indicated by the
forward-looking statements. When used in this Quarterly Report on Form 10-Q,
the words "believes," "estimates," "plans," "expects," "anticipates," and
similar expressions as they relate to the Company or its management are intended
to identify forward-looking statements.
GENERAL
All references herein to "fiscal 1998" relate to the fifty-two weeks ending
June 27, 1998, and references to "fiscal 1997" relate to the fifty-two weeks
ended June 28, 1997. In addition, all references herein to "first quarter of
fiscal 1998" relate to the thirteen weeks ended September 27, 1997, and all
references to "first quarter of fiscal 1997" relate to the thirteen weeks ended
September 28, 1996.
The following table sets forth certain operating data for the Company:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- ------------
<S> <C> <C>
Stores open at end of period...................... 134 108
Stores opened during the period................... 5 3
Stores relocated during the period................ 1 --
Average net sales per gross square foot (1)(3).... $ 317 $ 321
Comparable store sales increase (2)(3)............ 6.1% 7.2%
</TABLE>
______________________
(1) Calculated using net sales divided by gross square footage of stores open at
the end of the period, weighted by the number of months open during the
period.
(2) Comparable store sales are net sales for stores open the same number of
months in both the indicated and previous period, including stores that were
relocated or expanded during either period.
(3) Net sales for purposes of the above calculations are comprised of net sales
generated from the Company's stores and Training Supercenter Plus/SM/
locations, as well as of the Company's national accounts group, but exclude
mail order sales.
10
<PAGE>
The Company believes the opening of additional Computer Superstores/SM/ in
existing markets has resulted in some reductions in the rate of comparable store
sales growth. CompUSA has opened additional stores in existing markets largely
to increase market penetration and to provide customers with more convenience
and better service. The Company plans to continue its strategy of opening
additional Computer Superstores in existing markets. The resulting diversion of
sales from existing stores may adversely affect the Company's comparable store
sales. However, the Company believes that this strategy should increase its
awareness with local consumers, enhance its competitive position in such
markets, and create efficiencies in advertising and management, and therefore is
in the Company's long-term best interest.
RESULTS OF OPERATIONS
As a result of the expansion of the Company's store base, period-to-period
comparisons of financial results may not be meaningful and the results of
operations for historical periods may not be indicative of the results to be
expected in future periods. In addition, the Company expects that its quarterly
results of operations will fluctuate depending on the timing of the opening of,
and the amount of net sales contributed by, new stores and the timing of costs
associated with the selection, leasing, construction, and opening of new stores,
as well as seasonal factors, product introductions, and changes in product mix.
See "-Quarterly Data and Seasonality." The following table sets forth certain
items expressed as a percentage of net sales for the periods indicated:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 28, 1996
------------------ ------------------
<S> <C> <C>
Net sales.................................. 100.0% 100.0%
Cost of sales and occupancy costs.......... 85.3 86.2
-------------- ---------------
Gross profit............................... 14.7 13.8
Operating expenses......................... 9.2 9.1
Pre-opening expenses....................... 0.1 0.1
General and administrative expenses........ 2.1 2.1
-------------- ---------------
Operating income........................... 3.3 2.5
Interest expense and other income, net..... 0.1 0.1
-------------- ---------------
Income before income taxes................. 3.2 2.4
Income tax expense......................... 1.2 0.9
-------------- ---------------
Net income................................. 2.0% 1.5%
============== ===============
</TABLE>
FIRST QUARTER ENDED SEPTEMBER 27, 1997, COMPARED WITH THE FIRST QUARTER ENDED
SEPTEMBER 28, 1996
Net sales for the first quarter of fiscal 1998 increased 20.3% to $1.19
billion from $991 million for the first quarter of fiscal 1997. The increase in
net sales was primarily due to the additional sales volume attributable to the
new stores opened subsequent to the first quarter of fiscal 1997 and an increase
in comparable store sales of 6.1%. The Company believes the increase in
comparable store sales was primarily due to the maturation of the Company's
store base, increased customer demand, and increased growth in the Company's
service businesses.
11
<PAGE>
Gross profit was $176 million, or 14.7% of net sales, in the first quarter of
fiscal 1998, compared with $137 million, or 13.8% of net sales, in the first
quarter of fiscal 1997. The increase in gross profit as a percentage of net
sales was primarily due to higher product margin, an improvement in controllable
costs such as inventory shrinkage and freight, and an increase in the ratio of
service revenues to total revenues. Service revenues typically have higher
gross margins than merchandise sales. The foregoing factors were partially
offset by an increase in occupancy costs related to 26 Computer Superstores
opened since the end of the first quarter of fiscal 1997.
Operating expenses were $109.2 million, or 9.2% of net sales, in the first
quarter of fiscal 1998, compared with $90.5 million, or 9.1% of net sales, in
the first quarter of fiscal 1997. In the first quarter of fiscal 1998, net
advertising expense decreased as a percentage of net sales and other operating
expenses increased as a percentage of net sales. The decrease in net
advertising expense as a percentage of net sales resulted primarily from
increased vendor participation. The increase in operating expenses as a
percentage of net sales is due partially to the increase in both new store net
sales and in the ratio of service revenues to total revenues. These increases
in new store net sales and in the ratio of service revenues to total revenues
had the effect of increasing operating expenses as a percentage of net sales
because of the following factors: (1) operating expenses in general, and store
personnel expenses in particular, typically constitute a higher percentage of
net sales for less mature stores because of the lower sales volumes generated by
less mature stores and (2) operating expenses are generally higher for service
revenues than for merchandise sales.
Pre-opening expenses consist primarily of personnel expenses incurred prior to
a store's opening and promotional costs associated with the opening. The
Company's policy is to expense all pre-opening expenses in the month of the
store's grand opening. In the first quarter of fiscal 1998, the Company
incurred $1.5 million in pre-opening expenses in connection with the opening of
five stores and the relocation of one store, compared with $897,000 in pre-
opening expenses incurred in the first quarter of fiscal 1997 in connection with
the opening of three stores.
General and administrative expenses of $25.6 million, or 2.1% of net sales, in
the first quarter of fiscal 1998, remained relatively constant as a percentage
of net sales compared with $21.1 million, or 2.1 % of net sales, in the first
quarter of fiscal 1997.
Interest expense and other income, net, of $1.1 million, or 0.1% of net sales,
in the first quarter of fiscal 1998 remained relatively constant as a percentage
of net sales compared with $792,000, or 0.1% of net sales, in the first quarter
of fiscal 1997. See "-Liquidity and Capital Resources."
The Company's effective tax rate was 38.5% for both the first quarter of
fiscal 1998 and the first quarter of fiscal 1997.
As a result of the above, net income for the first quarter of fiscal 1998 was
$23.5 million, or $.25 per share, compared with net income of $14.5 million, or
$.15 per share, for the first quarter of fiscal 1997.
12
<PAGE>
QUARTERLY DATA AND SEASONALITY
The Company expects that its quarterly results of operations will fluctuate
depending on the timing of the opening of, and the amount of net sales
contributed by, new stores and the timing of costs associated with the
selection, leasing, construction, and opening of new stores, as well as seasonal
factors, product introductions, and changes in product mix.
Based upon its past operating history, the Company believes that its business
is seasonal. Excluding the effects of new store openings, net sales and
earnings are generally lower during the first and fourth fiscal quarters than in
the second and third fiscal quarters.
LIQUIDITY AND CAPITAL RESOURCES
At September 27, 1997, total assets were $1.36 billion, $1.16 billion of which
were current assets, including $295 million of cash and cash equivalents. Net
cash provided by operating activities for the first quarter of fiscal 1998 was
$106 million which was primarily attributable to the net income for the quarter
and an increase in the ratio of accounts payable to inventory.
Approximately three-fourths of the Company's net sales during the first
quarter of both fiscal 1998 and fiscal 1997 were sales for which the Company
received payment at the time of sale either in cash, by check, or by third-party
credit card. The remaining net sales were primarily sales for which the Company
provided credit terms to corporate, government, and education customers.
Merchandise inventories increased to $631 million at September 27, 1997 from
$501 million at June 28, 1997. The increase in merchandise inventories is
primarily attributable to inventories at the five Computer Superstores opened in
the first quarter of fiscal 1998, higher inventories held by the Company's
configuration center, as well as inventories received in anticipation of
seasonal promotional sales to be held in the second quarter of fiscal 1998.
Capital expenditures during the first quarter of fiscal 1998 were $21.2
million, of which $3.4 million were for fiscal 1998 new stores and $3.0 million
were for existing stores, compared with $18.0 million of capital expenditures
during the first quarter of fiscal 1997, of which $6.3 million were for fiscal
1997 new stores and $4.0 million were for existing stores. In addition to the
capital expenditures incurred in connection with new stores, the Company also
incurred capital expenditures in the first quarter of fiscal 1998 and fiscal
1997 related to improvements made in information systems and additions to
property and equipment at the Company's corporate facilities. Excluding the
effects of new store openings, the Company's greatest short-term capital
requirements occur during the second fiscal quarter to support a higher level of
sales in that quarter. During fiscal 1998, the Company plans to open
approximately 30 to 40 new Computer Superstores and anticipates total capital
expenditures of approximately $110 to $120 million. The Company believes its
available cash and cash equivalents and vendor and bank financing are sufficient
to satisfy its short-term capital requirements.
The Company has an unsecured $150 million credit agreement (the "Credit
Agreement") with a consortium of banks that expires in December 1999. The
Credit Agreement requires the maintenance of certain financial ratios and a
minimum tangible net worth and restricts, among other things, the Company's
ability to incur additional indebtedness. However, the Credit Agreement allows
the Company to securitize up to $100 million of certain assets. See Note 7 of
Notes to Consolidated Financial Statements. At September 27, 1997, the Company
had approximately $149 million available for future borrowings after reduction
for outstanding letters of credit. The Company also finances certain fixture
and equipment acquisitions through equipment lessors. Lease financing is
available from numerous sources and the Company evaluates equipment leasing as a
supplemental source of financing on a continuing basis.
13
<PAGE>
The Company believes that its available cash and cash equivalents, funds
generated by operations, currently available vendor and floor plan financing,
lease financing, and funds available under the Credit Agreement should be
sufficient to finance its continuing operations and expansion plans through the
end of fiscal 1998 and to make all required payments of interest on the Senior
Subordinated Notes. The level of future expansion will be contingent upon the
availability of additional capital.
INFLATION
While inflation has not had, and the Company does not expect it to have, a
material impact upon operating results, there can be no assurances that the
Company's business will not be affected by inflation in the future.
14
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
Note 3 of the Notes to Consolidated Financial Statements in Part I, Item 1 is
incorporated herein by reference as if fully restated herein. Note 3 contains
forward-looking statements that are subject to the risks and uncertainties
discussed in Item 2 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Cautionary Statement Regarding Risks and
Uncertainties That May Affect Future Results."
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
3.1 Restated and Amended Certificate of Incorporation. (1)
3.2 Restated and Amended Bylaws. (2)
10 First Amendment to Amended and Restated Credit Agreement dated as of
September 15, 1997, among the Company, certain lenders and
NationsBank of Texas, N.A., as administrative lender. (3)
11 Computation of Income per Common and Common Equivalent Share. (3)
27 Financial Data Schedule. (4)
(b) Reports on Form 8-K.
None.
________________
(1) Previously filed as an exhibit to the Company's Registration Statement No.
1-11566 on Form 8-A/A filed December 6, 1996, as amended and incorporated
herein by reference.
(2) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 26, 1994 and incorporated herein
by reference.
(3) Filed herewith.
(4) Included with EDGAR version only.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CompUSA Inc.
Date: November 7, 1997 By: /s/ JAMES E. SKINNER
---------------------------------------------
James E. Skinner
Executive Vice President, Chief
Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)
16
<PAGE>
EXHIBIT 10
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "First
Amendment"), dated as of September 15, 1997, is entered into among CompUSA Inc.,
a Delaware corporation ("Borrower"), the banks listed on the signature pages
hereof (collectively, the "Lenders"), and NationsBank of Texas, N.A., as
Administrative Lender (in said capacity, the "Administrative Lender").
BACKGROUND
----------
A. Borrower, Lenders and Administrative Lender heretofore entered into that
certain Amended and Restated Credit Agreement, dated as of December 30, 1996
(the "Credit Agreement"; the terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
B. Borrower, Lenders and Administrative Lender desire to make an amendment
to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrower, Lenders
and Administrative Lender covenant and agree as follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
------------------------------
(a) Section 7.6 of the Credit Agreement is hereby amended to read as
follows:
"Section 7.6 Restricted Payments. The Borrower shall not, and shall
-------------------
not permit any Subsidiary to, directly or indirectly declare, pay or make
any Restricted Payments; provided, however, (a) any Subsidiary may declare
and pay Dividends to the Borrower or another Subsidiary, (b) the Borrower
may make loans to directors, officers and employees of Borrower and its
Subsidiaries during any Fiscal Year (calculated net of loan repayments),
together with the Guaranty of Indebtedness of directors, officers and
employees permitted pursuant to Section 7.5 hereof during such Fiscal Year,
-----------
in an aggregate amount not to exceed $1,000,000, (c) the Borrower may
prepay the Senior Subordinated Notes in part or in full, and (d) the
Borrower may make Treasury Stock Purchases of its shares of capital stock
for an aggregate consideration not to exceed $130,000,000; provided,
further, however, the Borrower shall not pay or make any such Restricted
Payment set forth in clause (b), (c) or (d) above unless there shall exist
no Default prior to or after giving effect to any such proposed Restricted
Payment."
<PAGE>
(b) The Compliance Certificate is hereby amended to be in the form of
Exhibit C attached to this First Amendment.
- ---------
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
--------------------------------------------------------
execution and delivery hereof, Borrower represents and warrants that, as of the
date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit Agreement
and the other Loan Documents are true and correct on and as of the date hereof
as made on and as of such date;
(b) no event has occurred and is continuing which constitutes a Default;
(c) Borrower has full power and authority to execute and deliver this First
Amendment and the Credit Agreement, as amended hereby, and this First Amendment
and the Credit Agreement, as amended hereby, constitute the legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable debtor relief laws
and by general principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law) and except as rights to indemnity may be
limited by federal or state securities laws; and
(d) no authorization, approval consent, or other action by, notice to, or
filing with, any governmental authority or other Person, is required for the
execution, delivery or performance by Borrower of this First Amendment or the
acknowledgement of this First Amendment by any Guarantor.
3. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be effective
---------------------------
as of September 15, 1997, subject to the following:
(a) Administrative Lender shall have received counterparts of this First
Amendment executed by Determining Lenders;
(b) Administrative Lender shall have received counterparts of this First
Amendment executed by Borrower and acknowledged by each Guarantor; and
(c) Administrative Lender shall have received, in form and substance
satisfactory to Administrative Lender and its counsel, such other documents,
certificates and instruments as Administrative Lender shall require.
4. GUARANTOR ACKNOWLEDGEMENT. By signing below, each of the Guarantors
-------------------------
(i) acknowledges, consents and agrees to the execution and delivery of this
First Amendment, (ii) acknowledges and agrees that its obligations in respect of
its Subsidiary Guaranty are not released, diminished, waived, modified, impaired
or affected in any manner
- 2 -
<PAGE>
by this First Amendment or any of the provisions contemplated herein, (iii)
ratifies and confirms its obligations under its Subsidiary Guaranty, and (iv)
acknowledges and agrees that it has no claims or offsets against, or defenses or
counterclaims to, its Subsidiary Guaranty.
5. REFERENCE TO THE CREDIT AGREEMENT.
---------------------------------
(a) Upon the effectiveness of this First Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", or words of like import shall
mean and be a reference to the Credit Agreement, as amended by this First
Amendment.
(b) The Credit Agreement, as amended by this First Amendment, and all other
Loan Documents shall remain in full force and effect and are hereby ratified and
confirmed.
6. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand all costs
-------------------------
and expenses of each Lender in connection with the preparation, reproduction,
execution and delivery of this First Amendment and the other instruments and
documents to be delivered hereunder (including the reasonable fees and out-of-
pocket expenses of counsel for each Lender with respect thereto and with respect
to advising each Lender as to its rights and responsibilities under the Credit
Agreement, as amended by this First Amendment).
7. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in
-------------------------
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be an
original and all of which taken together shall constitute but one and the same
instrument.
8. GOVERNING LAW: BINDING EFFECT. This First Amendment shall be
------------------------------
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon Borrower and each Lender and their respective successors
and assigns.
9. HEADINGS. Section headings in this First Amendment are included
--------
herein for convenience of reference only and shall not constitute a part of this
First Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
----------------
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
==========================================
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
==========================================
- 3 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as the date first above written.
CompUSA Inc.
By: Robert Gary
-------------------------
Name: Robert Gary
-------------------
Title: VP Finance
------------------
- 4 -
<PAGE>
NATIONSBANK OF TEXAS, N.A., as Administrative
Lender and as a Lender
By: Sharon M. Ellis
--------------------------
Name: Sharon M. Ellis
---------------------
Title: Vice President
--------------------
- 5 -
<PAGE>
BANK ONE, TEXAS, N.A.
By: R Rogers
------------------------
Name: R Rogers
-------------------
Title: VP
------------------
- 6 -
<PAGE>
THE BANK OF NEW YORK
By: Charlotte Sohn
------------------------
Name: Charlotte Sohn
-------------------
Title: Vice President
------------------
- 7 -
<PAGE>
THE BANK OF NOVA SCOTIA
By: F.C.H. Ashby
-------------------------------------
Name: F.C.H. Ashby
-------------------------------
Title: Senior Manager Loan Operations
-------------------------------
- 8 -
<PAGE>
CREDIT SUISSE FIRST BOSTON (formerly
Credit Suisse)
By: Robert N. Finnery
-----------------------------
Name: Robert N. Finnery
------------------------
Title: Managing Director
-----------------------
By: J. Scott Karro
------------------------------
Name: J.Scott Karro
-------------------------
Title: Associate
------------------------
- 9 -
<PAGE>
FLEET NATIONAL BANK
By: Thomas J. Bullard
-----------------------------
Name: Thomas J. Bullard
------------------------
Title: Vice President
-----------------------
- 10 -
<PAGE>
THE FUJI BANK, LIMITED - HOUSTON AGENCY
By: Nate Ellis
------------------------------
Name: Nate Ellis
--------------------------
Title: Vice President & Manager
-------------------------
- 11 -
<PAGE>
HIBERNIA NATIONAL BANK
By: Christopher B. Pitre
---------------------------------
Name: Christopher B. Pitre
----------------------------
Title: Assistant Vice President
---------------------------
- 12 -
<PAGE>
MELLON BANK, N.A.
By: Marc T. Kennedy
---------------------------
Name: Marc T. Kennedy
----------------------
Title: AVP
---------------------
- 13 -
<PAGE>
THE SAKURA BANK, LIMITED
By: Yoshikazu Nagura
----------------------------
Name: Yoshikazu Nagura
-----------------------
Title: Vice President
----------------------
- 14 -
<PAGE>
THE SUMITOMO BANK, LIMITED
By: Harumitsu Seki
------------------------------
Name: Harumitsu Seki
-------------------------
Title: General Manager
------------------------
- 15 -
<PAGE>
UMB BANK, N.A.
By: Charles J. Wolf
--------------------------------
Name: Charles J. Wolf
---------------------------
Title: Senior Vice President
--------------------------
- 16 -
<PAGE>
FIRST BANK NATIONAL ASSOCIATION
By: David Kopolow
-------------------------------
Name: David Kopolow
--------------------------
Title: Vice President
-------------------------
- 17 -
<PAGE>
WELLS FARGO BANK (TEXAS), N.A.
By: Mary Jo Hoch
-----------------------------
Name: Mary Jo Hoch
------------------------
Title: Vice President
-----------------------
- 18 -
<PAGE>
ACKNOWLEDGED AND AGREED:
COMPUSA HOLDINGS II INC.
By: Mark R. Walker
---------------------------
Name: Mark R. Walker
----------------------
Title: Sr. VP
---------------------
COMPUSA HOLDINGS I INC.
By: Mark R. Walker
---------------------------
Name: Mark R. Walker
----------------------
Title: Sr. VP
---------------------
PCs COMPLEAT, INC.
By: Mark R. Walker
---------------------------
Name: Mark R. Walker
----------------------
Title: Sr. VP
---------------------
COMPTEAM INC.
By: Mark R. Walker
---------------------------
Name: Mark R. Walker
----------------------
Title: Sr. VP
---------------------
- 19 -
<PAGE>
COMPUSA MANAGEMENT COMPANY
By: Robert Gary
---------------------------
Name: Robert Gary
----------------------
Title: VP Finance
---------------------
COMPUSA STORES L.P.
By: COMPUSA INC., its general partner
By: Robert Gary
----------------------
Name: Robert Gary
-----------------
Title: VP Finance
----------------
COMPUSA HOLDINGS COMPANY
By: Robert Gary
----------------------
Name: Robert Gary
-----------------
Title: VP Finance
----------------
- 20 -
<PAGE>
EXHIBIT 11
COMPUSA INC.
COMPUTATIONS OF
INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------------
SEPTEMBER 27, SEPTEMBER 28,
1997 1996
------------- -------------
<S> <C> <C>
Common shares outstanding at beginning of period...................... 91,447 89,836
Weighted average number of common shares issued during the period..... 212 258
Incremental shares related to assumed exercise of stock options....... 3,855 4,446
----------- ------------
Weighted common and common equivalent shares.......................... 95,514 94,540
=========== ============
Net income............................................................ $ 23,459 $ 14,546
=========== ============
Income per common and common equivalent share (1)..................... $ 0.25 $ 0.15
</TABLE>
________________________
(1) The computation of income per common share on a fully diluted basis does not
materially differ from the amounts calculated on a primary basis shown
above.
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS AS OF AND FOR THE THIRTEEN WEEKS ENDED
SEPTEMBER 27, 1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> JUN-27-1998 JUN-28-1997
<PERIOD-START> JUN-29-1997 JUN-30-1996
<PERIOD-END> SEP-27-1997 SEP-28-1996
<CASH> 294,894 266,126
<SECURITIES> 0 0
<RECEIVABLES> 221,541 155,277
<ALLOWANCES> (2,919) (1,591)
<INVENTORY> 631,279 564,289
<CURRENT-ASSETS> 1,164,274 1,003,066
<PP&E> 293,133 216,103
<DEPRECIATION> (111,551) (74,833)
<TOTAL-ASSETS> 1,355,610 1,152,665
<CURRENT-LIABILITIES> 788,509 692,363
<BONDS> 110,000 110,000
0 0
0 0
<COMMON> 922 908<F1>
<OTHER-SE> 451,759 341,088<F1>
<TOTAL-LIABILITY-AND-EQUITY> 1,355,610 1,152,665
<SALES> 1,191,812 990,530
<TOTAL-REVENUES> 1,191,812 990,530
<CGS> 1,016,213 853,610
<TOTAL-COSTS> 1,016,213 853,610
<OTHER-EXPENSES> 136,316 112,476
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,055 3,045
<INCOME-PRETAX> 38,146 23,652
<INCOME-TAX> 14,687 9,106
<INCOME-CONTINUING> 23,459 14,546
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 23,459 14,546
<EPS-PRIMARY> 0.25 0.15<F1>
<EPS-DILUTED> 0.25 0.15<F1>
<FN>
<F1>Information related to the Company's stockholders' equity as of September 28,
1996 and earnings per share for the thirteen weeks then ended has been restated
for a two-for-one stock split effected in the form of a stock dividend to
stockholders of record on November 18, 1996.
</FN>
</TABLE>
