UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD
Commission file number 1-5571
TANDY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 One Tandy Center, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(817) 390-3700
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. ____
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
--- ---
As of March 21, 1995, the aggregate market value of the
voting stock held by non-affiliates of the registrant was
$2,877,348,049 based on the New York Stock Exchange closing
price.
As of March 21, 1995, there were 66,190,497 shares of the
registrant's Common Stock outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1995 Annual Meeting
of Stockholders are incorporated by reference into Part III.
The Index to Exhibits is on Sequential Page No. 56.
Total Pages 71.
<PAGE>
(This page intentionally left blank.)
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Tandy Corporation, a Delaware corporation, was
incorporated in 1967 ("Tandy" or the"Company"). The Company
engages in the retail sale of consumer electronics including
personal computers primarily in the United States. The
Company's retail operations include the Radio Shack(R),
McDuff Electronics(R), The Edge in Electronics(R), Computer
City(R) and Incredible Universe(R) store chains as well as
some new test concepts. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition"
found in Item 7 for a discussion of divisional sales data.
Radio Shack. Radio Shack is the Company's largest
operating division. At December 31, 1994, Radio Shack
had 4,598 company-owned stores located throughout the
United States. These stores average approximately 2,350
square feet in area and are located in major malls, strip
centers and individual store fronts, primarily in
metropolitan markets. To provide service to smaller
communities, Radio Shack had on the same date a network
of 2,005 dealer/franchise stores. The dealers are
generally engaged in other retail operations and augment
their sales with Radio Shack products. This network
includes 67 international dealers at December 31, 1994.
The 4,598 company-owned stores carry a broad assortment
of electronic parts and accessories, audio/video
equipment, personal computers, cellular and conventional
telephones as well as specialized products such as
scanners, electronic toys and hard to find batteries.
The personal computers, which account for approximately
12% of Radio Shack's sales, primarily target entry level
users seeking computers for home, individual and small
business use. The Company plans to open 100 company-
owned Radio Shack stores each year for the next five
years. Many of these new stores will be in major markets
such as Chicago, New York, Atlanta and Los Angeles.
Radio Shack is also focusing on Alternative Channels of
Distribution ("ACD"), which are geared to enhance its
"service oriented" approach. A few ACDs include The
Repair Shop at Radio Shack(SM), Radio Shack Gift
Express(SM), and direct delivery service.
Computer City. As of December 31, 1994, the Company
had 69 Computer City(R) stores open, four of which were
in Europe and three in Canada. The Computer City chain
operates as a supercenter format featuring many name
brand computers, software and related products, including
U.S. Logic, IBM, Apple, Sony, Lotus, Borland, Microsoft,
Packard-Bell, Compaq, AST and Hewlett-Packard. The
sixty-one Computer City Supercenters average about 23,000
square feet and carry more than 5,000 products. At
December 31, 1994, there were eight Computer City
Express(SM) stores which are approximately 10,000 square
feet and serve smaller markets. The Company plans to
open 20 to 30 additional stores in 1995, which includes 6
to 10 Computer City Express stores.
Incredible Universe. At December 31, 1994, Tandy
operated nine Incredible Universe(R) stores. These
stores are approximately 184,000 square feet and offer a
broad selection of consumer electronics and appliances.
The Company opened its ninth store in Auburn, Washington
late in 1994. In 1995 the Company plans to open stores
in Denver, Indianapolis, New York Metro, Houston, San
Diego, Salt Lake City and greater Washington, D.C.,
markets. In addition, one more Incredible Universe store
may open in 1995.
Tandy Name Brand Retail Group. At December 31, 1994,
the Tandy Name Brand Retail Group ("Tandy Name Brand")
was comprised of VideoConcepts(R), McDuff Electronics and
Appliance(R) Supercenters and The Edge in Electronics(R)
retail outlets. This group then operated a total of 306
stores which sold name brand televisions, audio
equipment, personal computers and other electronic
products and appliances.
Tandy Name Brand operated three distinctly different
types of store formats -- mall stores, boutique stores
and supercenters. The 219 mall stores averaged 3,100
square feet in size while the 71 supercenters, which are
located in stand-alone or strip center locations,
averaged 12,300 square feet. The Edge in Electronics
began operating in 1990. These electronic boutique
stores are designed for mall customers interested in
fashionable personal and portable name brand electronics.
As of December 31, 1994, these 16 stores were located in
major malls and averaged approximately 1,100 square feet.
On December 30, 1994, the Company adopted a business
restructuring plan to close or convert 233 stores which
included VideoConcept and McDuff Electronics mall stores
and a few McDuff Electronics and Appliance Supercenters.
The stores will be closed during the first quarter of
1995. Of the 233 stores, 33 sites will be converted to
Radio Shack or Computer City Express stores. On January
3, 1995, the Company also announced that Tandy Name Brand
will be dissolved and the continuing stores will become
part of a new Specialty Retail Group of the Radio Shack
division. This group will be comprised of McDuff
Electronics and Appliance Supercenters, The Edge in
Electronics, Famous Brand Electronics Warehouse and
Audio, Video and Computers retail outlets. See
"Management's Discussion and Analysis of Results of
Operations and Financial Condition" found in Item 7 and
Note 4 of the Notes to Consolidated Financial Statements
for more information on the plan.
The Company closed 110 Tandy Name Brand stores in the
first quarter of 1993. See "Management's Discussion
and Analysis of Results of Operations and Financial
Condition" found in Item 7 and Note 4 of the Notes to
Consolidated Financial Statements for more information.
Supporting the retail operations is an extensive
infrastructure that includes:
A&A International, Inc. - This wholly-owned subsidiary
of the Company serves the wide-ranging international
import/export, sourcing, evaluation, logistics and
quality control needs of the Company. InterTAN Inc.
("InterTAN") is the largest outside customer of the
Company. Most of A&A's activity for InterTAN involves
sourcing of goods from manufacturers in the Far East.
For more discussion on InterTAN see Note 22 of the Notes
to Consolidated Financial Statements.
Tandy Service Centers - The Company maintains a large
service and support network in the consumer electronics
retail industry. These centers repair name brand and
private label products sold through all of the Company's
retail distribution channels. These centers are also the
primary support for the Repair Shop at Radio Shack
program. There are 128 service centers throughout the
nation and Canada and over one million parts are stocked
in the Tandy Service division.
Regional Distribution Centers - The 15 distribution
centers ship over one million cartons each month to the
Company's retail outlets. This group also supports the
Radio Shack Gift Express service.
Tandy Information Services - TIS collects information
from the retail stores nationwide and updates a large
database with sales and other information. This database
is a sophisticated marketing tool benefiting every phase
of the Company's operations. TIS also processes
inventory, accounting, payroll, telecommunications and
other operating information for all of the Company's
operations. In addition, specialized information is
tracked for the Company's distribution and corporate
activities.
Tandy Credit Corporation - This operation, a wholly
owned subsidiary of the Company, has helped to support
sales of the Company's retail operations and provided the
retail divisions with additional marketing flexibility
through the utilization of credit promotions. This group
has in the past maintained and managed Tandy's various
private label credit cards.
In December 1994, the Company sold the Computer City
and Incredible Universe credit card portfolios to SPS
Transaction Services, Inc.("SPS"), a majority-owned
subsidiary of Dean Witter, Discover & Co. In January
1995, the Company signed an agreement with SPS to sell
Tandy Credit and the Radio Shack and McDuff private label
credit card portfolios. The sale of Tandy Credit and the
sale of the Radio Shack and McDuff portfolios is
contingent upon and subject to regulatory, rating agency
and other approvals. This transaction is expected to
close during the first half of 1995. See "Management's
Discussion and Analysis of Results of Operations and
Financial Condition" found in Item 7 and Note 3 of
the Notes to Consolidated Financial Statements for more
information.
Tandy National Bank (the "Bank"), a limited purpose
nationally chartered credit card bank, was established on
May 11, 1994. The Bank, a wholly-owned subsidiary of
Tandy Corporation, was created to operate the private
label consumer credit card programs for Tandy. All new
accounts approved after May 12, 1994 were originated and
owned by the Bank. After the Company's sale of all
the private label credit card portfolios, the Bank will
cease operations.
Tandy Transportation, Inc. - A large fleet of tractors
and trailers transports much of the merchandise from the
ports of entry to the Company's regional distribution
centers and local distribution facilities for delivery to
the Company's retail outlets.
Consumer Electronics Manufacturing - The Company also
engages in the manufacturing business with nine
manufacturing facilities in the United States and two
overseas manufacturing operations in China and Taiwan.
The China operation is a joint venture. These 11
manufacturing facilities cover a total of 1,472,000
square feet and employ approximately 4,000 workers and
professionals as of December 31, 1994. The Company
manufactures a variety of products for use in its
consumer electronics retailing operations. The products
include audio, video, telephony, antennas, wire and cable
products and a wide variety of hard to find parts for
consumer electronic products. Most of the Company's
manufacturing output is sold through the Radio Shack
store chain. The Taiwan manufacturing plant will be
closed in the first half of 1995 and its products will be
manufactured by the China operations.
DISCONTINUED OPERATIONS
On June 25, 1993, the Board of Directors of Tandy adopted
a formal plan of divestiture under which it would sell its
computer manufacturing and marketing businesses, the
O'Sullivan Industries, Inc.("O'Sullivan") ready-to-assemble
furniture manufacturing and related marketing business, the
Memtek Products division and the Lika printed circuit board
business. See "Discontinued Operations" in Management's
Discussion and Analysis of Results of Operations and
Financial Condition for further discussion.
The Company closed the sale of the computer manufacturing
and marketing businesses to AST Research, Inc. ("AST") on
July 13, 1993, and the sale of Memtek Products manufacturing
and marketing operations on December 16, 1993 to Hanny
Magnetics (B.V.I.) Limited, a British Virgin Islands
corporation, including the license agreement with Memorex
Telex, N.V. for the use of the Memorex trademark on licensed
consumer electronics products. On February 2, 1994, the
Company sold all the common stock of O'Sullivan Industries
Holdings, Inc., the parent company of O'Sullivan, to the
public at $22 per share. On October 11, 1994, Tandy sold the
assets used in its Lika(R) printed circuit board division to
Viktron Limited Partnership, an Illinois limited partnership.
The proceeds from the sale and liquidation of assets
approximated $16,380,000 which included $7,754,000 in cash,
proceeds from liquidation of retained assets of $5,594,000
and secured promissory notes for $3,032,000.
In connection with the computer manufacturing sale, the
Memtek Products sale and the Lika sale, the Company agreed to
retain certain liabilities primarily relating to warranty
obligations on products sold prior to the sale. Management
believes that accrued reserves, as reflected on its December
31, 1994 balance sheet, are adequate to cover estimated
future warranty obligations for the products.
SEASONALITY
As is the case with other retail businesses, the Company's
net sales and other revenues are greater during the Christmas
season than during other periods of the year. There is a
corresponding pre-seasonal inventory build-up requiring
working capital associated with the anticipated increased
sales volume. For additional information, see Note 23 of the
Notes to Consolidated Financial Statements.
PATENTS AND TRADEMARKS
Tandy owns or is licensed to use many trademarks related
to its business in the United States and in foreign
countries. Radio Shack, Computer City, Incredible Universe,
McDuff Electronics, VideoConcepts, Realistic, Tandy and
Optimus are some of the registered marks most widely used by
the Company. Tandy believes that the Radio Shack, Computer
City and Incredible Universe names and marks are
well-recognized and associated with a high-quality service
provider by consumers. The Company's products are sold
primarily under the Radio Shack, Optimus, Tandy, Computer
City and Realistic trademarks which are registered in the
U.S. and many foreign countries. The Company believes that
the loss of the Radio Shack name or mark would be material to
its business, but does not believe that the loss of any one
trademark registration would be material.
Tandy also owns various patents relating to retail and
support functions and various products which Tandy has
previously designed and manufactures.
SUPPLIERS
The Company obtains merchandise from a large number of
suppliers from various parts of the world. Alternative
sources of supply exist for most merchandise and raw
materials purchased by the Company. As the Company's product
line is diverse, the Company would not expect a lack of
availability of any single product or raw material to have a
material impact on its operations.
BACKLOG ORDERS
The Company has no material backlog of orders for the
products it sells.
COMPETITION
The consumer electronics retail business is highly
competitive. The Company competes in the sale of its
products and services with department stores, mail order
houses, discount stores, general merchants, home appliance
stores and gift stores which sell comparable products
manufactured by others. Competitors range in size from local
drug and hardware stores to large chains and department
stores. Computer store chains and franchise groups as well
as independent computer stores and several major retailers
compete with the Company in the retail personal computer
marketplace. Consumer electronic and computer mail-order
companies also compete with the Company. The products which
compete with those sold by the Company are manufactured by
numerous domestic and foreign manufacturers. Many of these
products carry nationally recognized brand names or private
labels and are sold in markets common to the Company. Some
of the Company's competitors have financial resources equal
to or greater than the Company's resources.
Management believes that among the factors that are
important to its competitive position are price, quality,
service and the broad selection of electronic products and
computers carried at conveniently located retail outlets.
The Company's utilization of trained personnel and its
ability to use national and local advertising media are
important to the Company's ability to compete in the consumer
electronics marketplace. Management of the Company believes
it is a strong competitor with respect to each of the factors
referenced above. Given the highly competitive nature of the
consumer electronics retail business, no assurance can be
given that the Company will continue to compete successfully
with respect to each of the factors referenced above. Also,
the Company would be adversely affected if its competitors
were to offer their products at significantly lower prices,
introduce innovative or technologically superior products not
yet available to the Company or if the Company were unable to
obtain products in a timely manner for an extended period of
time.
The Company focuses on various types of store formats to
address the marketplace. Each of the Company's retailing
formats uses a distinct but complementary path to the
marketplace, based on its unique customer appeal, marketing
strengths and margin structure.
Radio Shack. Radio Shack(R) stores offer the shopping
convenience of approximately 6,600 dealers and
company-owned stores, high-quality private label
products, unique selection, knowledgeable personnel
and excellent customer service. Radio Shack has
strong sales in approximately 3,200 different items in
such consumer-demand product categories as speakers,
batteries, communications equipment, tape decks,
antennas, electronic components and accessories.
Computer City. Computer City(R) stores offer
approximately 5,000 different name-brand items,
competitive prices and excellent customer service on
computers, computer software and accessories. While
the SuperCenters are approximately 23,000 square feet,
Computer City Express stores average 10,000 square
feet and serve smaller markets and also supplement
SuperCenters in larger markets.
Incredible Universe. A new concept in the retailing of
name brand consumer electronics and appliances, these
stores are approximately 184,000 square feet in size
and carry over 85,000 different stock-keeping units
which provide the customer with a "universe" of
choices.
Tandy Name Brand. In the past the Company has sold name
brand consumer electronics and appliances through
Tandy Name Brand which included three distinctly
different types of store formats. The Tandy Name
Brand group will be dissolved and continuing stores
will be integrated into the Radio Shack division as
the Specialty Retail Group.
The Company has faced intense competition in its consumer
electronics retailing businesses. Competition is driven by
technology and product cycles, as well as the economy. In
the consumer electronics retailing business, competitive
factors include price, product quality, product features,
consumer services, manufacturing and distribution capability
and brand reputation.
RESEARCH AND DEVELOPMENT
Research and development expenditures are not significant.
EMPLOYEES
As of December 31, 1994, the Company had approximately
45,800 employees, excluding approximately 1,700 full time
employees associated with the Tandy Name Brand, Tandy Credit
Division and Service Contract group which the Company has
announced it will close or sell. The number includes
approximately 4,000 temporary retail employees remaining from
the Christmas selling season. Management of the Company
considers the relationship between the Company and its
employees to be good. It does not anticipate any work
stoppage due to labor difficulties.
ITEM 2. PROPERTIES.
Information on the Company's properties is in
"Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the financial
statements included in this Form 10-K and is incorporated
herein by reference. The following items are discussed
further on the referenced pages:
Page
Retail Outlets ...................... 14
Property, Plant and Equipment ....... 40
Leases .............................. 43
The Company leases rather than owns most of its retail
facilities. However, the buildings of three of the
Incredible Universe stores are owned rather than leased. The
Radio Shack, Tandy Name Brand and Computer City stores are
located primarily in major shopping malls, stand-alone
buildings or shopping centers owned by other companies. The
Company owns most of the property on which its executive
offices are located in Fort Worth, Texas as well as five
distribution facilities and most of its manufacturing
facilities and land located throughout the United States.
Existing warehouse and office facilities are deemed adequate
to meet the Company's needs in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in a consolidated action titled
"O'Sullivan Industries Holdings, Inc. Securities Litigation",
which was commenced in 1994 and is currently pending before
the United States District Court for the Western District of
Missouri. The plaintiffs seek damages in an unspecified
amount alleging that O'Sullivan's initial public offering
prospectus, certain press releases and other materials
contained material misrepresentations and omissions. They
have also named O'Sullivan, O'Sullivan's officers and
directors, and the underwriters as defendants. Tandy
believes that the lawsuit is totally without merit and is
defending itself vigorously. It further believes that even
though an adverse resolution of the litigation may have a
negative impact on its results of operations in the year of
resolution, resolution will not have a material adverse
effect on its financial condition or liquidity.
Tandy has various claims, lawsuits, disputes with third
parties, investigations and pending actions involving
allegations of negligence, product defects, discrimination,
infringement of intellectual property rights, securities
matters, tax deficiencies, violations of permits or licenses,
and breach of contract and other matters against the Company
and its subsidiaries incident to the operation of its
business. The liability, if any, associated with these
matters was not determinable at December 31, 1994. While
certain of these matters involve substantial amounts, and
although occasional adverse settlements or resolutions may
occur and negatively impact earnings in the year of
settlement, it is the opinion of management that their
ultimate resolution will not have a materially adverse effect
on Tandy's financial position.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART
III).
The following is a list of Tandy Corporation's executive
officers, their ages, positions and length of service with
the Company as of March 30, 1995.
Position
(Date Elected Years with
Name to Current Position) Age Company
---- -------------------- --- ----------
John V. Roach Chairman of the Board, 56 27
Chief Executive Officer
and President (July 1982)
William C.
Bousquette Executive Vice President 58 4 (1)
(January 1994-January 22,
1995)
Dwain H.
Hughes Senior Vice President and 47 15 (2)
Chief Financial Officer
(January 1995)
Robert M.
McClure Senior Vice President - 59 22 (3)
Tandy Retail Services
(January 1994)
Herschel C.
Winn Senior Vice President 63 26
and Secretary
(November 1979)
Mark W.
Barfield Vice President - Tax 37 7 (4)
(May 1994)
Lou Ann
Blaylock Vice President - 56 24 (5)
Corporate Relations
(January 1993)
Frederick W.
Padden Vice President - Law 62 4 (6)
and Assistant Secretary
(January 1994)
Ronald L.
Parrish Vice President - 52 8
Corporate Development
(April 1987)
Richard L.
Ramsey Vice President and 49 28
Controller (January 1986)
Leonard H.
Roberts President of Radio Shack 46 1 (7)
(July 1993)
There are no family relationships among the executive
officers listed and there are no arrangements or
understandings pursuant to which any of them were appointed
as executive officers. All executive officers of Tandy
Corporation are elected by the Board of Directors annually to
serve for the ensuing year, or until their successors are
elected. All of the executive officers listed above have
served the Company in various capacities over the past five
years, except for Messrs. Bousquette, Padden and Roberts.
(1) Mr. Bousquette served as Executive Vice President and
Chief Financial Officer of the Company from November
1990 to January 1993 and from January 1994 to December
1994. He served as Executive Vice President only from
January 1, 1995 to January 22, 1995 when he resigned as
an employee of the Company. He served as Chief
Executive Officer of TE Electronics Inc. from January
1993 to January 22, 1995. Prior to joining Tandy, he
served as Executive Vice President and Chief Financial
Officer of Emerson Electric Company from March 1984
until November 1990.
(2) Mr. Hughes was elected Senior Vice President and Chief
Financial Officer of the Company effective January 1,
1995. Mr. Hughes served as Vice President and Treasurer
of the Company from June 1991 until December 1994. From
June 1989 until June 1991, Mr. Hughes was Assistant
Treasurer of the Company.
(3) Mr. McClure served as President of the Tandy Electronics
Division from August 1987 until January 1993 when he was
elected as Chief Operating Officer and President of TE
Electronics Inc. On January 1, 1994, Mr. McClure was
named Senior Vice President - Tandy Retail Services.
(4) Mr. Barfield served as Director of Federal and
International Taxes from April 1991 through May 1994
when he was named Vice President - Tax. From January
1988 through April 1991 he was the Federal Income Tax
Manager for the Company.
(5) Mrs. Blaylock was Director of Corporate Relations from
January 1986 until she was named Vice President -
Corporate Relations in January 1993.
(6) Mr. Padden has been the Vice President - Law of the
Company since January 1994 and has been Vice President
and Secretary of TE Electronics Inc. since January 1993.
From January 1991 to January 1993 he was the Deputy
General Counsel - Intellectual Property for Tandy
Corporation. Prior to joining Tandy he was a General
Attorney at AT&T-Bell Laboratories from 1984 to January
1991.
(7) Mr. Roberts became President of the Radio Shack Division
on July 7, 1993. Prior to joining Tandy he served as
the Chairman and Chief Executive Officer of Shoney's,
Inc. from 1990 to 1993.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
MARKET FOR COMMON STOCK
The Company's common stock is listed on the New York Stock
Exchange and trades under the symbol "TAN". The following
table presents the high and low sale prices for the Company's
common stock for each quarter of the two years ended December
31, 1994.
Dividends
Quarter Ended: High Low Close Declared
------- ------ ------- ---------
December 31, 1994 $50 5/8 $41 $50 1/8 $.18
September 30,1994 43 7/8 33 3/8 43 .15
June 30, 1994 38 5/8 30 3/4 34 1/2 .15
March 31, 1994 49 7/8 35 1/4 36 1/4 .15
December 31, 1993 50 3/4 35 3/8 49 1/2 .15
September 30,1993 37 3/8 28 1/8 36 7/8 .15
June 30, 1993 32 3/8 28 3/8 30 .15
March 31, 1993 32 1/8 24 5/8 29 5/8 .15
HOLDERS OF RECORD
At March 21, 1995 there were 33,672 holders of record of
the Company's common stock.
DIVIDENDS
The Board of Directors periodically reviews the Company's
dividend policy. On December 16, 1994, the Board of
Directors approved a quarterly dividend of $0.18 per common
share, which represents a 20% increase over the prior
quarterly payment of $0.15 per share.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
TANDY CORPORATION AND SUBSIDIARIES
<CAPTIONS>
(Dollars and shares in Year Ended Six Months Ended(1)
thousands, except per December 31, December 31, Year Ended June 30,
---------------------- ---------------------- ------------------------------------
share amounts) 1994 1993 1992 1991 1992 1991 1990
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Net sales and
operating revenues $4,943,679 $4,102,551 $2,161,149 $2,031,763 $3,649,284 $3,573,699 $3,648,946
========== ========== ========== ========== ========== ========== ==========
Income before income
taxes, discontinued
operations and cumulative
effect of change in
accounting principle $ 359,540 $ 311,155 $ 102,917 $ 201,856 $ 330,498 $ 343,277 $ 445,048
Provision for income taxes 135,205 115,523 35,236 73,153 119,785 123,342 167,926
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from
continuing operations 224,335 195,632 67,681 128,703 210,713 219,935 277,122
Income (loss) from
discontinued operations -- (111,797) (63,875) (8,060) (26,866) (13,872) 13,225
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of change in
accounting principle 224,335 83,835 3,806 120,643 183,847 206,063 290,347
Cumulative effect on prior
years of change in
accounting principle(2) -- 13,014 -- -- -- (10,619) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income $ 224,335 $ 96,849 $ 3,806 $ 120,643 $ 183,847 $ 195,444 $ 290,347
========== ========== ========== ========== ========== ========== ==========
Net income available per
average common and
common equivalent share:
Income from
continuing operations $ 2.91 $ 2.50 $ 0.87 $ 1.61 $ 2.61 $ 2.75 $ 3.38
Income (loss) from
discontinued operations -- (1.48) (0.85) (0.10) (0.34) (0.17) 0.16
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before cumulative
effect of change in
accounting principle 2.91 1.02 0.02 1.51 2.27 2.58 3.54
Cumulative effect on prior
years of change in
accounting principle -- 0.17 -- -- -- (0.14) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income available per
average common and
common equivalent share(3) $ 2.91 $ 1.19 $ 0.02 $ 1.51 $ 2.27 $ 2.44 $ 3.54
========== ========== ========== ========== ========== ========== ==========
Average common and
common equivalent
shares outstanding (3) 74,874 75,543 74,918 78,149 78,788 78,258 81,943
Dividends declared per
common share $ 0.63 $ 0.60 $ 0.30 $ 0.30 $ 0.60 $ 0.60 $ 0.60
Ratio of earnings to fixed
charges (4) 4.56 3.89 2.83 N/A 3.95 3.55 4.77
</TABLE>
<PAGE>
<TABLE>
SELECTED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
TANDY CORPORATION AND SUBSIDIARIES
<CAPTIONS>
(Dollars and shares in Year Ended Six Months Ended(1)
thousands, except per December 31, December 31, Year Ended June 30,
---------------------- ------------ ------------------------------------
share amounts) 1994 1993 1992 1992 1991 1990
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year-End Financial Position
Inventories $1,504,324 $1,276,302 $1,472,365 $1,391,295 $1,301,854 $1,452,065
Total assets (5) $3,243,774 $3,219,099 $3,381,428 $3,165,164 $3,078,145 $3,239,980
Working capital $1,350,110 $1,128,343 $1,478,041 $1,556,435 $1,550,848 $1,312,517
Current ratio 2.12 to 1 2.09 to 1 2.39 to 1 2.99 to 1 3.18 to 1 2.12 to 1
Capital structure:
Current debt $ 229,135 $ 387,953 $ 385,706 $ 231,097 $ 179,818 $ 695,871
Long-term debt $ 153,318 $ 186,638 $ 322,778 $ 357,525 $ 427,867 $ 252,540
Total debt $ 382,453 $ 574,591 $ 708,484 $ 588,622 $ 607,685 $ 948,411
Total debt, net of cash
and short-term
investments $ 176,820 $ 361,356 $ 595,858 $ 482,168 $ 421,392 $ 813,214
Stockholders' equity (5) $1,850,211 $1,950,750 $1,888,351 $1,930,740 $1,846,762 $1,723,496
Total capitalization (5) $2,232,664 $2,525,341 $2,596,835 $2,519,362 $2,454,447 $2,671,907
Long-term debt as a % of
total capitalization 6.9% 7.4% 12.4% 14.2% 17.4% 9.5%
Total debt as a % of total
capitalization 17.1% 22.8% 27.3% 23.4% 24.8% 35.5%
Stockholders' equity per
common share (6) $ 26.02 $ 25.46 $ 24.95 $ 25.57 $ 23.48 $ 21.78
Financial Ratios
Return on average
stockholders' equity (4) 11.8% 10.2% 3.5% 11.2% 12.3% 15.8%
Percent of sales:
Income before income taxes,
discontinued operations and
cumulative effect of change
in accounting principle 7.3% 7.6% 4.8% 9.0% 9.6% 12.2%
Income from continuing
operations 4.6% 4.8% 3.2% 5.7% 6.2% 7.6%
<FN>
(1) The Company changed its fiscal year-end from June 30 to December 31 effective with the six-month transition period ended
December 31, 1992.
(2) See Note 2 of the Notes to Consolidated Financial Statements for a discussion of the 1993 change in accounting principle.
The change in fiscal 1991 reflected the Company's change in accounting for extended service contracts to comply with FASB
Technical Bulletin 90-1.
(3) Per share amounts and the weighted average number of shares outstanding for the year ended December 31, 1993, the
six-month period ended December 31, 1992 and for the fiscal year ended June 30, 1992, have been retroactively restated to
reflect the PERCS conversion into approximately 11,816,000 common shares in lieu of the prior year assumption of
12,457,000 shares which was based on the December 31, 1993 common stock price.
(4) Computed using income from continuing operations.
(5) Includes investment in discontinued operations.
(6) At December 31, 1994, December 31, 1993, December 31, 1992 and June 30, 1992, computed giving effect to the pending Series
C PERCS conversion into approximately 11,816,000 shares of common stock.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
Tandy Corporation ("Tandy" or the "Company") changed its
fiscal year end from June 30 to December 31 effective
December 31, 1992.
The following Management's Discussion and Analysis of
Results of Operations and Financial Condition compares the
year ended December 31, 1994 with the years ended December
31, 1993 and June 30, 1992. Although the years ended
December 31, 1993 and June 30, 1992 end at different times of
the year, management believes that the seasonality of the
retail business relating to Christmas is so significant that
it would distort trends and related percentage comparisons to
sales for the readers if a full year's results were compared
to the six-month transition period ended December 31, 1992.
Information for the six months ended December 31, 1992 is
included in the tables herein for informational purposes
only. Significant events occurring during such period are
described in the respective sections below.
<TABLE>
NET SALES AND OPERATING REVENUES
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Radio Shack $2,853,985 $2,712,973 $1,475,968 $2,761,050
Tandy Name Brand 440,365 486,258 349,133 586,436
Incredible Universe 381,682 136,119 34,249 --
Computer City 1,184,152 626,222 187,745 94,231
---------- ---------- ---------- ----------
4,860,184 3,961,572 2,047,095 3,441,717
Import/Export and Other Sales 83,495 140,979 114,054 207,567
---------- ---------- ---------- ----------
$4,943,679 $4,102,551 $2,161,149 $3,649,284
========== ========== ========== ==========
</TABLE>
For the year ended December 31, 1994, Tandy's sales
increased 21% to $4,943,679,000 from $4,102,551,000 for the
year ended December 31, 1993. The increase in sales was
primarily attributable to the addition of six Incredible
Universe(R) and 29 Computer City(R) stores during 1994. A
net increase of 45 company-owned Radio Shack(R) stores also
contributed to the sales increase. Partially offsetting
these upward trends in sales was an overall decline in sales
for Tandy Name Brand. This decline can be partially
attributed to the fact that 110 McDuff(R) and
VideoConcepts(R) stores were closed during February 1993.
See "Provision for Business Restructuring" below for further
discussion of Tandy Name Brand.
Tandy posted a 5% same store sales increase with all
divisions showing same store increases during the year.
Radio Shack and Computer City achieved same store sales
increases of 5% while the Tandy Name Brand group was only up
slightly. Radio Shack same store sales increases continue to
be attributable to its focus on its core business (i.e.
consumer electronics, cellular telephones, parts and
accessories) which have higher margins versus personal
computers which have smaller margins. Incredible Universe,
with three old stores, experienced a 20% comparable stores
sales gain during calendar 1994. Same store sales increases
reflect growing demand for consumer electronics amid a strong
economy.
During 1994, Tandy and InterTAN Inc. ("InterTAN") entered
into a new import/export agreement under which Tandy's A&A
operations would act as InterTAN's agent in importing
consumer electronics from the Far East. Commencing in March
1994, only the purchasing agent commission and sales made by
Tandy manufacturing plants to InterTAN were recorded as
sales. InterTAN purchases from third parties through A&A are
no longer recorded as sales, reflecting the arrangement under
the new merchandise agreement; however, commission income is
reported as operating revenue. Accordingly, reported sales
by Tandy to InterTAN in 1994, reflected in Import/Export and
Other Sales, were considerably lower than in 1993, however,
the earned income relating thereto was not materially
different. See the discussion in the "InterTAN Update" found
below.
For the year ended December 31, 1993, overall sales grew
12% to $4,102,551,000 as compared to $3,649,284,000 for the
fiscal year ended June 30, 1992. This increase was primarily
due to the opening of three Incredible Universe stores and
the expansion of the Computer City store chain. Computer
City sales increases were the result of 25 additional stores
since June 30, 1992 and comparable store sales gains at old
stores in excess of 30% for the year ended December 31, 1993.
Tandy Name Brand experienced a sales decrease in calendar
1993 as compared to the June 1992 fiscal year. This decrease
was primarily a result of the closing of 110 McDuff and
VideoConcepts stores in February 1993. This decline was
offset by the addition of three Incredible Universe stores.
The first two Incredible Universe stores were opened in the
fall of 1992, and the third was added in the fall of 1993.
Shipments to InterTAN decreased for calendar year 1993 as
compared to the fiscal year ended June 30, 1992. On a
comparable store basis, Radio Shack's sales increased
slightly during the year ended December 31, 1993, as compared
to the fiscal year ended June 30, 1992. A moderate increase
in sales of Radio Shack's core business was offset by a
decline in sales of personal computers through the Radio
Shack division.
The decrease in Radio Shack's computer business reflects
the impact of sharply lower pricing in response to
competitive pressures in the marketplace. The changing
dynamics of the personal computer business had a significant
impact on Radio Shack's performance during 1993 and fiscal
1992, and to a lesser extent in 1994. A combination of
shifts in competitive retail distribution to superstores and
telemarketing combined with rapidly declining prices has
taken the computer category from approximately 17.0% of Radio
Shack's sales with a gross profit of approximately 29.0% in
the year ended June 30, 1992, to approximately 12.0% of sales
and a gross profit of approximately 13.7% for the year ended
December 31, 1994. Radio Shack's extensive assortment of
electronic parts, accessories and specialty items
differentiates it from other consumer electronics retailers
in the marketplace. The table below shows the breakdown by
major category of Radio Shack sales.
<TABLE>
RADIO SHACK SALES TO CUSTOMERS
<CAPTIONS>
Percent of Total Sales
-------------------------------------------------------------
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
Class of Products 1994 1993 1992 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer electronics 45.4% 44.6% 46.1% 43.9%
Electronic parts, accessories
and specialty equipment 36.0 36.1 35.4 34.4
Personal computers, peripherals,
software and accessories 12.0 14.2 14.3 17.0
Other 6.6 5.1 4.2 4.7
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
====== ====== ====== ======
</TABLE>
<TABLE>
RETAIL OUTLETS
<CAPTIONS>
Average
Store
Size Dec.31, Dec.31, Dec.31, June 30,
(Sq. Ft.) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Radio Shack
Company-owned 2,350 4,598 4,553 4,558 4,553
Dealer/Franchise N.A. 2,005 2,002 2,122 2,203
----- ----- ----- -----
6,603 6,555 6,680 6,756
----- ----- ----- -----
Tandy Name Brand
McDuff Supercenters(1) 12,300 71 75 150 151
McDuff/VideoConcepts Mall Stores(1) 3,100 219 231 266 266
The Edge in Electronics 1,100 16 16 16 16
Computer City 22,800 69 40 20 15
Incredible Universe 184,000 9 3 2 --
----- ----- ----- -----
384 365 454 448
----- ----- ----- -----
Total Stores 6,987 6,920 7,134 7,204
===== ===== ===== =====
<FN>
(1) In the first quarter of 1995, 151 VideoConcepts, 30 McDuff mall stores and 19 McDuff Supercenters will be closed.
In addition, 33 other mall stores or Supercenters will be converted into Radio Shack or Computer City Express(SM) stores.
See "Provision for Business Restructuring".
</TABLE>
GROSS PROFIT
Gross profit as a percent of sales declined in 1994 to
39.0% from the 1993 level of 41.9%. This decrease reflects
the continued expansion of Tandy's lower gross margin retail
formats. During calendar year 1994, Computer City and
Incredible Universe represented 31.7% of total sales and
operating revenues compared to 18.6% of the 1993 total.
Offsetting the mix of business shift within Tandy are the
increasing gross margins in Radio Shack in calendar 1994,
which continue to benefit from a lower percentage of sales
related to low margin computer equipment and a higher
percentage associated with the sale of higher gross margin
categories including parts, accessories and consumer
electronics. Management anticipates that Tandy's
consolidated gross profit percentage will continue to decline
as the effects of the Computer City and Incredible Universe
expansions are increasingly reflected in the gross profit
mix.
Gross profit as a percent of sales and operating revenues
for the year ended December 31, 1993 was 41.9% as compared to
43.5% for the six months ended December 31, 1992, and 47.2%
for the fiscal year ended June 30, 1992. The decline, in
part, reflects the faster growth of new high-volume formats
such as Computer City and Incredible Universe which have
inherently lower gross margins than Radio Shack stores.
Combined Computer City and Incredible Universe sales
contributed 18.6%, 8.9% and 2.6% to consolidated sales in the
year ended December 31, 1993, the six months ended December
31, 1992 and the year ended June 30, 1992, respectively.
Competitive pressures in name brand electronics retailing
decreased Tandy Name Brand's gross margins in each of the
periods ended December 31, 1993 and 1992 and June 30, 1992.
Additionally, gross margins were impacted in the Tandy Name
Brand units by the increasing percentage of sales related to
the lower margin computer category.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") as a
percent of sales and operating revenues for the year ended
December 31, 1994 declined from the year ended December 31,
1993, as well as from the year ended June 30, 1992 and from
the six months ended December 31, 1992. The accompanying
table summarizes the breakdown of various components of SG&A
and their related percentage of sales and operating revenues.
The lower SG&A percentage reflects the lower costs, relative
to net sales and operating revenues, of the Company's newer
retail formats, as well as the operating costs achieved
through cost reduction programs.
Specific items impacting year-to-year comparisons are: (1)
for the year ended December 31, 1993, foreign currency
transactions include a $1,796,000 realized loss on the sale
of the cellular joint ventures; (2) other expenses in
calendar 1993 are net of a gain of $6,047,000 on the sale of
the cellular joint ventures, and (3) in fiscal year 1992, the
sale of a Japanese subsidiary, the assets of which were
primarily real estate, resulted in the recording of a gain of
$12,093,000 in other SG&A and a foreign currency gain of
$6,894,000. The Company's exposure to foreign currency
fluctuations has decreased significantly with the divestiture
of the European marketing operations.
Although payroll and commissions expense has increased in
dollars, this cost has decreased as a percent of sales and
operating revenues in the year ended December 31, 1994 as
compared to the year ended December 31, 1993 and the fiscal
year ended June 30, 1992. This is due to the increase in
Computer City and Incredible Universe sales as a percentage
of total sales and operating revenues from 2.6% in fiscal
1992 to 31.7% in 1994; these divisions have an inherently
lower salary structure when compared to Radio Shack. In
addition, Computer City payroll expense as a percent of
Computer City sales has decreased from 1993 to 1994, while
that of the other retail divisions has remained approximately
the same from year to year.
Advertising costs have decreased as a percent of sales and
operating revenues in the year ended December 31, 1994 as
compared to the year ended December 31, 1993 and the fiscal
year ended June 30, 1992. Management has focused its efforts
on more efficient advertising methods for Radio Shack
utilizing the Company's database of customer activity to
reduce costs while maintaining market awareness. Advertising
costs increased in dollars compared to the prior year as new
Computer City and Incredible Universe stores opened and Radio
Shack shifted its marketing program to electronic media. The
Company currently spends approximately 30% of its advertising
funds for television and radio commercials, compared to 20%
in previous years. Radio Shack's advertising spots have been
shifted from sports-related events to prime-time shows in
order to reach a broader audience.
Rent expense has increased slightly in dollars but
decreased as a percent of sales during the year ended
December 31, 1994 as compared to the year ended December 31,
1993. The increase in rent expense is due a net increase of
45 Radio Shack stores and the addition of 29 Computer City
stores and six Incredible Universe stores. Incredible
Universe and Computer City formats typically have lower rent,
as a percent of sales, than Tandy overall. As a percent of
sales, rent decreased from fiscal 1992 in comparison with
that for the year ended December 31, 1993 resulting in part
from Computer City's lower rent to sales ratio.
Other SG&A costs have increased over that of the prior
year due to several factors, including an increase in
discount fees paid to third party bank cards because of both
increased sales in the Computer City and Incredible Universe
formats and an increase in credit card sales as a percent of
sales. Further, Radio Shack merchandise repair expenses
increases of $8,261,000 primarily reflected an increase in
extended service plan sales. The change in other SG&A also
reflects the $6,047,000 gain noted above on the 1993 sale of
the Company's interests in two cellular telephone
manufacturing joint ventures and an increase in legal and
attorney fees of $4,671,000 in 1994.
The Company's credit operations have been successful in
supporting sales of the retail operations. Private label
credit cards represented 35% of credit sales for the year
ended December 31, 1994, 34% for the year ended December 31,
1993, 36% for the six months ended December 31, 1992 and 43%
in fiscal 1992. This decline in the percentage from 1992
results from increased sales through the Computer City and
Incredible Universe stores which have a lower percentage of
private label credit card usage. Expenses associated with
the credit card operations, which are included in SG&A
expense, have decreased as a percent of sales due to a
decrease in credit losses reflecting a stronger economy. As
discussed more fully in Note 3 of the Notes to Consolidated
Financial Statements, the Company has sold its Computer City
and Incredible Universe private label credit card portfolios
and expects in the first half of 1995 to sell its Radio Shack
and McDuff private label credit card portfolios. Once
completed, the Company will no longer incur bad debt expense
or servicing costs associated with its private label credit
cards. In 1995, the Company will begin to receive a fee from
the unrelated third party financer of its private label
credit card portfolio balance for the generation of normal
interest bearing accounts, and will pay a fee for the
generation of special purpose promotional accounts, such as
"zero percent interest for twelve months" programs. See Note
3 of the Notes to Consolidated Financial Statements for
further discussion of the Company's pending disposition of
its credit operations.
<TABLE>
SUMMARY OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
----------------------------------------------------------------------------------
1994 1993 1992 1992
% of % of % of % of
Sales & Sales & Sales & Sales &
(In thousands) Dollars Revenues Dollars Revenues Dollars Revenues Dollars Revenues
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Payroll and commissions $ 627,307 12.7% $ 554,728 13.5% $ 288,057 13.3% $ 534,779 14.7%
Advertising 224,212 4.5% 205,831 5.0% 150,374 7.0% 239,352 6.6%
Rent 212,422 4.3% 202,401 4.9% 105,328 4.9% 204,673 5.6%
Other taxes 89,488 1.8% 79,508 1.9% 38,198 1.8% 73,701 2.0%
Utilities and telephone 67,398 1.4% 62,437 1.5% 31,197 1.4% 61,468 1.7%
Insurance 51,090 1.0% 45,373 1.1% 26,301 1.2% 44,427 1.2%
Stock purchase
and savings plans 21,031 0.4% 17,562 0.4% 7,749 0.3% 15,396 0.4%
Foreign currency
transactions gains (1,495) -- (762) -- (3,065) -0.1% (10,642) -0.3%
Other 184,392 3.8% 131,684 3.3% 78,845 3.6% 119,893 3.3%
---------- ----- ---------- ----- ---------- ----- ---------- -----
Subtotal 1,475,845 29.9% 1,298,762 31.6% 722,984 33.4% 1,283,047 35.2%
Credit operations 56,828 1.1% 55,914 1.4% 38,815 1.8% 59,073 1.6%
---------- ----- ---------- ----- ---------- ----- ---------- -----
$1,532,673 31.0% $1,354,676 33.0% $ 761,799 35.2% $1,342,120 36.8%
========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense as a percent of
sales and operating revenues decreased slightly in the year
ended December 31, 1994 as compared with the year ended
December 31, 1993 and the fiscal year ended June 30, 1992.
The dollar amount of depreciation and amortization expense
for the year ended December 31, 1994 increased 6% over the
dollar amount for the year ended December 31, 1993 and 14%
over that for the year ended June 30, 1992. The increase is
due to additional capital expenditures related to the six
Incredible Universe stores added in 1994, and the addition of
29 Computer City stores this year. Three Incredible Universe
stores and 25 Computer City stores were added from June 30,
1992 to December 31, 1993, thereby increasing depreciation
and amortization from fiscal 1992 to calendar 1993.
NET INTEREST (INCOME)/EXPENSE
Net interest income was $48,565,000 for the year ended
December 31, 1994, $25,831,000 for the year ended December
31, 1993 and $24,245,000 for the fiscal year ended June 30,
1992. Interest income in all three years is primarily
attributable to the Company's credit card operations;
however, in fiscal 1994 the Company also received interest
income from the IRS reflecting the settlement of outstanding
tax issues of approximately $9,582,000, and interest income
earned on notes receivable from AST Research Inc. and
InterTAN which approximated $5,724,000 and $8,280,000,
respectively. Increased short-term investments resulted from
proceeds received from the divestiture of discontinued
manufacturing and marketing operations, as well as from cash
provided by operating activities. Interest income as it
relates to the AST Research Inc. and InterTAN notes
receivable is expected to continue in fiscal 1995. See
further discussion on notes receivable in the "InterTAN
Update" and "Discontinued Operations" sections of
Management's Discussion and Analysis below.
Interest income from credit operations was $46,868,000 for
the year ended December 31, 1994, $57,401,000 for the year
ended December 31, 1993 and $62,307,000 for the fiscal year
ended June 30, 1992. Interest income from the credit card
company has decreased in the last three years as a result of
increased use of certain special sales promotions and
marketing initiatives, some of which provide for no interest
charges for specified initial periods. The decline in
average credit card receivables results from increased
payments from credit customers reflecting the overall
improvement in the economy and a desire by consumers to shift
debt to lower interest rate instruments. Due to the December
1994 sale of the Computer City and Incredible Universe credit
card portfolios, the Company will no longer include any
interest income from these portfolios. Since the sale, at
net book value, of the Radio Shack and McDuff portfolios is
contingent upon and subject to regulatory and rating agency
approvals, the Company will continue to include interest
income from these portfolios until final approval is received
and the sale is completed. This sale is expected to close in
the first half of 1995.
The decrease in interest expense for the year ended
December 31, 1994 as compared to the years ended December 31,
1993 and June 30, 1992 is due to the decrease of total debt
and lower U.S. interest rates. Short-term debt has decreased
41% and long-term debt has decreased 18% from December 31,
1993 due to the repayment of debt such as subordinated
debentures, medium-term notes and commercial paper. The
Company expects overall interest expense to increase in 1995
as compared to interest expense in 1994. As the Company
receives cash proceeds from the sale of its credit
operations, it will apply a significant portion of such
proceeds to the repayment of short-term debt, for store
expansion and to fund its 12,500,000 share repurchase
program, of which approximately 5,000,000 shares had been
repurchased as of December 31, 1994.
PROVISION FOR BUSINESS RESTRUCTURING
In December 1994, the Company adopted a business
restructuring plan to close or convert 233 of the 306 Tandy
Name Brand stores. Closed stores will include 151
VideoConcepts, 30 McDuff mall stores and 19 McDuff
Supercenters. Thirty-three other mall stores or McDuff
Supercenters will be converted to Radio Shack or Computer
City Express stores. It is anticipated that a majority of
these planned closures will be completed by the end of the
first quarter of 1995. Approximately 57 McDuff Supercenters
and 16 The Edge in Electronics stores will remain open and
will become part of the Specialty Retail Group of Radio
Shack. A pre-tax charge of $89,071,000 was taken in the
fourth quarter of fiscal 1994 related to the closing and
conversion of these stores. The components of the
restructuring charge and an analysis of the amounts charged
against the reserve are outlined in a table in Note 4 of the
Notes to Consolidated Financial Statements.
The lease obligations, termination benefits and conversion
of 33 stores will require cash outlays, most of which are
expected to be made during 1995. The cash outlays will be
financed by operating cash flows. Management anticipates
that pre-tax operating losses during the period of store
closures will approximate $6,000,000 to $8,000,000
(unaudited).
Sales and operating revenues associated with the closing
of Tandy Name Brand stores were approximately $261,990,000
(unaudited) and $271,914,000 (unaudited) for calendar years
1994 and 1993, respectively, and operating losses
approximated $18,125,000 (unaudited) and $15,342,000
(unaudited) for calendar 1994 and 1993, respectively. During
the fiscal year ended June 30, 1992, sales and operating
revenues and operating losses from the closing stores were
approximately $254,531,000 (unaudited) and $10,169,000
(unaudited), respectively. The results of the closing stores
for the six months ended December 31, 1992 are not presented
because, due to the seasonal nature of the stores'
operations, such results would not be comparable to any of
the twelve-month results for the other periods presented. In
conjunction with this restructuring, 1,425 (unaudited)
employees will be terminated, most of which are store
employees and managers. As of December 31, 1994, no
employees had been terminated and, accordingly, no
termination benefits had been paid.
The Company adopted a plan resulting in business
restructuring charges during the six months ended December
31, 1992 designed to improve the Company's competitiveness
and future profitability. The pre-tax charge of $48,000,000
related primarily to the closing of 110 of the then 432 Tandy
Name Brand stores, mainly McDuff Supercenters in major market
areas and, to a lesser extent, the elimination of certain
product lines. Some product lines were reduced or eliminated
after consideration of competitive factors and market trends.
These stores were closed in the first quarter of 1993.
GAIN ON SALE OF CREDIT OPERATIONS AND EXTENDED SERVICE
CONTRACTS
In December 1994 the Company entered into an agreement
with SPS Transaction Services, Inc., a majority-owned
subsidiary of Dean Witter, Discover & Company ("SPS") to sell
its Computer City and Incredible Universe private label
credit card portfolios without recourse. As a result of the
agreement, in which Tandy received cash of $85,764,000 and
will receive a deferred payment of $179,777,000, the Company
recognized a gain of $35,708,000 in the accompanying
Consolidated Statements of Income. The deferred payment
amount does not bear interest. Principal will be paid
monthly with the total principal amount of $179,777,000 due
over a twelve month period. The Company has discounted the
deferred payment by $3,477,000 to yield approximately 5% over
the twelve month payout period. As a result, the discounted
deferred payment amount of $176,300,000 is classified as
current in the accompanying Consolidated Balance Sheet at
December 31, 1994. The Company also signed a letter of
intent to sell its Radio Shack and McDuff private label
credit card portfolios at net book value and without recourse
to SPS in 1995, including the rights to the securitized
accounts (see Note 6 of the Notes to Consolidated Financial
Statements). The agreement for the sale of McDuff and Radio
Shack portfolios was completed in January 1995, subject only
to regulatory and rating agency approval which should be
forthcoming in the first half of 1995. Tandy anticipates
receiving approximately $290,000,000 (unaudited) cash and a
deferred payment approximating $80,000,000 (unaudited), on
terms similar to the deferred payment arrangement mentioned
above.
Tandy National Bank (the "Bank"), a limited purpose
nationally chartered credit card bank, was established on May
11, 1994. The Bank, a wholly-owned subsidiary of Tandy, was
created to operate the consumer credit card programs for
Tandy. All new accounts approved after May 12, 1994 were
originated and owned by the Bank. After the Company's sale
of the private label credit card portfolios, the Bank will
cease operations.
Effective December 1994, the Company transferred all of
its existing obligations with respect to extended service
contracts in force at December 31, 1994, with the exception
of certain contracts aggregating approximately $7,734,000, to
an unrelated third party. The unrelated third party
contractually assumed all of the Company's legal obligations
and risk of future loss pursuant to the extended service
contracts in exchange for $75,059,000, of which $70,702,000
was paid in December 1994 and $4,357,000 was paid in February
1995. As a result, the Company has recognized a gain of
$55,729,000 associated with this transaction in its
accompanying Consolidated Statements of Income. The Company
will continue to provide repair services to customers who
tender products pursuant to the extended service contracts on
a non-exclusive basis. The unrelated third party will pay
the Company competitive market rates for repairs on products
tendered pursuant to the extended service contracts.
The Company will continue to sell extended service
contracts on behalf of the unrelated third party and will
receive a commission upon the sale. The commission will be
recognized as commission income at the time of sale.
PROVISION FOR INCOME TAXES
The effective tax rate for the year ended December 31,
1994 was 37.6% and was 37.1% for the year ended December 31,
1993. The higher effective tax rates for these two years as
compared to 36.2% for the year ended June 30, 1992 reflects
the impact of the increase of the federal tax rate to 35%
from 34% which was effective January 1, 1993. The effective
tax rate for the six-month period ended December 31, 1992 was
34.2%. This lower effective rate reflects the successful
resolution of certain IRS examinations during the period.
The IRS Dallas field office is reviewing the Company's
1987-1989 tax returns. The review in Dallas could lead to
referral to the IRS National office. The resolution of this
matter could result in additional taxes and interest to the
Company related to the spin-off of InterTAN and raises
questions about the private letter rulings issued by the IRS
regarding the spin-off and certain other tax matters.
Although aggregate additional taxes involved in these
transactions could potentially range from $0 to $46 million,
based on the advice of the Company's independent tax
advisors, the Company believes it would prevail if any tax
litigation had to be instituted. Any ultimate tax assessment
would also include interest. In any event, the Company
believes the ultimate resolution would have no material
impact on the Company's financial condition.
Financial Accounting Standard No. 109, "Accounting for
Income Taxes", which the Company adopted January 1, 1993, is
discussed in Note 12 of the Notes to Consolidated Financial
Statements.
DISCONTINUED OPERATIONS
On June 25, 1993, the Board of Directors of Tandy adopted
a formal plan of divestiture under which the Company would
sell its computer manufacturing and marketing businesses, the
O'Sullivan Industries, Inc. ("O'Sullivan") ready-to-assemble
furniture manufacturing and related marketing business, the
Memtek Products division and the Lika printed circuit board
business.
Computer Manufacturing. The Company closed the sale of
the computer manufacturing and marketing businesses to AST
Research, Inc. ("AST") on July 13, 1993. In accordance
with the terms of the definitive agreement between Tandy
and AST, Tandy received $15,000,000 upon closing of the
sale. The balance of the purchase price of $90,000,000
is payable by a promissory note. The principal amount of
this promissory note is payable by July 12, 1996; interest
is accrued and paid annually. The interest rate on the
promissory note is currently 4.94% per annum and is
adjusted annually, not to exceed 5% per annum. The terms
of the promissory note stipulate that the outstanding
principal balance may be paid at maturity at AST's option
in cash or the common stock of AST. However, at Tandy's
option not more than 50% of the initial principal balance
may be paid in common stock of AST. The promissory note
is supported by a standby letter of credit in the amount
of the lesser of $100,000,000 or 70% of the outstanding
principal amount of the promissory note. At December 31,
1994, the standby letter of credit approximated
$67,704,000.
In October 1993, the Company sold its computer
marketing operations in France to AST, together with
certain other multimedia assets and additional Swedish
inventory, in return for an increase in the principal
amount of the promissory note described above to
$96,700,000. The Company has discounted this note by
$2,000,000 and the discount will be recognized as interest
using the effective interest rate method over the life of
the note.
Memtek Products. On November 10, 1993, the Company
executed a definitive agreement with Hanny Magnetics
(B.V.I.) Limited, a British Virgin Islands corporation
("Hanny"), to purchase certain assets of the Company's
Memtek Products operations, including the license
agreement with Memorex Telex, N.V. for the use of the
Memorex trademark on licensed consumer electronics
products. This sale closed on December 16, 1993. Hanny
is a subsidiary of Hanny Magnetics (Holdings) Limited, a
Bermuda corporation, listed on the Hong Kong Stock
Exchange. Proceeds from this sale aggregated $69,602,000.
The $7,102,000 receivable which remained at December 31,
1993 was paid in 1994.
O'Sullivan Industries. On January 27, 1994 the Company
announced that it had reached an agreement with the
underwriters to sell all the common stock of O'Sullivan
Industries Holdings, Inc., the parent company of
O'Sullivan, to the public at $22 per share. The net
proceeds realized by Tandy in the initial public offering,
together with a $40,000,000 cash dividend from O'Sullivan,
approximated $350,000,000. The initial public offering
closed on February 2, 1994.
Tandy has recognized income of approximately
$4,399,000, net of tax, during the year ended December 31,
1994, pursuant to a Tax Sharing and Tax Benefit
Reimbursement Agreement between Tandy and O'Sullivan under
which Tandy receives payments from O'Sullivan
approximating the federal tax benefit that O'Sullivan
realizes from the increased tax basis of its assets
resulting from the initial public offering. The higher
tax basis increases O'Sullivan's tax deductions and,
accordingly, reduces income taxes payable by O'Sullivan.
These payments will be made over a 15-year time period and
are contingent upon O'Sullivan's taxable income each year.
The Company is recognizing these payments as additional
sale proceeds and gain in the year in which the payments
become due and payable to the Company pursuant to the Tax
Sharing and Tax Benefit Reimbursement Agreement. The
additional gain is recorded as a reduction of SG&A expense
in the accompanying Consolidated Statements of Income.
Lika. On October 11, 1994, Tandy sold the assets used
in its Lika(R) printed circuit board division to Viktron
Limited Partnership, an Illinois limited partnership. The
proceeds from the sale and liquidation of assets
approximated $16,380,000 which included $7,754,000 in
cash, proceeds from liquidation of retained assets of
$5,594,000 and secured promissory notes for $3,032,000.
In connection with the computer manufacturing sale, the
Memtek Products sale and the Lika sale, the Company agreed to
retain certain liabilities primarily relating to warranty
obligations on products sold prior to the sale. Management
believes that accrued reserves, as reflected on its December
31, 1994 balance sheet, are adequate to cover estimated
future warranty obligations for the products.
<TABLE>
CASH FLOW AND LIQUIDITY
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating activities $ 268,938 $ 322,294 $ 13,680 $ 146,782
Investing activities 239,085 (52,149) (90,171) (102,190)
Financing activities (515,625) (169,536) 82,663 (124,431)
</TABLE>
Tandy's cash flow and liquidity, in management's opinion,
remains strong. During the year ended December 31, 1994,
cash provided by operations was $268,938,000 as compared to
$322,294,000 for the year ended December 31, 1993. The
decreased cash flow from operations was due partially to the
financing of receivables and inventories related to the
expansion of Computer City and Incredible Universe store
chains. The increase of $261,071,000 in cash used to fund
accounts receivable was due primarily to the increase in
Tandy Credit receivables related to increased retail sales by
Computer City and Incredible Universe and the use of certain
special sales promotions and marketing initiatives, some of
which provide for no interest charges for specified initial
periods. Inventory required $156,129,000 more cash in 1994
than in 1993. The increase in inventory during 1994 related
to new store openings and increases in average inventory to
ensure in-stock positions throughout the Christmas selling
season. Partially offsetting the cash used to finance
receivables and inventory were the sale of the Computer City
and Incredible Universe private label credit card portfolios
which provided cash of $85,764,000 as well as increases in
accounts payable, accrued expenses and income taxes which
provided $184,017,000 more cash in 1994 than in 1993. The
1994 increase in accounts payable, accrued expenses and
income taxes is net of the cash expended, approximating
$70,702,000, associated with the transfer of the legal
obligation and risk of loss for existing extended service
contracts to an unrelated third party.
During the year ended December 31, 1993, cash provided by
operations was $322,294,000 as compared to $146,782,000 for
the fiscal year ended June 30, 1992. The increased cash flow
from operations in calendar 1993 compared to fiscal year
ended June 30, 1992 was due partially to receivables which
provided $30,133,000 in cash in 1993 but used $121,719,000 in
1992. The decline in accounts receivable in 1993 versus 1992
was due to the liquidation of receivables related to the
divested operations and lower consumer receivables related to
the Company's private label credit card portfolio. The
latter reason reflects consumers' desires to liquidate debt
with higher interest rates and the overall improved economy.
Inventory required less cash in calendar 1993 than in fiscal
1992.
Investing activities involved capital expenditures
primarily for retail expansion totaling $180,559,000 for the
year ended December 31, 1994, $129,287,000 for the year ended
December 31, 1993, and $127,495,000 for the year ended June
30, 1992. Proceeds from the sale of property, plant and
equipment in 1994 resulted primarily from a sale-leaseback
transaction involving certain Incredible Universe stores
which netted the Company $52,719,000 in cash. Proceeds
received from the sale of divested operations totaled
$359,004,000 and $111,988,000 during the years ended December
31, 1994 and 1993, respectively. See "Discontinued
Operations". Investing activities in 1993 also included
$31,663,000 for the purchase of InterTAN's bank debt and the
extension and funding of a working capital line of credit.
See "InterTAN Update" for further information. Future store
expansions and refurbishments and other capital expenditures
are expected to approximate $180,000,000 to $200,000,000 per
year over the next two years and will be funded primarily
from available cash, cash flow from operations and proceeds
from the sale of the private label credit card portfolios.
Purchases of treasury stock used cash of $275,415,000,
$27,650,000 and $527,773,000 in 1994, 1993 and fiscal 1992,
respectively. Increases in treasury stock purchases in 1994
related primarily to the share repurchase program. See
"Capital Structure and Financial Condition" for further
discussion. Financing activities in fiscal 1992 included the
February 1992 sale of $2.14 Depositary Shares of the
Company's Series C Preferred Equity Redemption Convertible
Stock ("PERCS") for $429,982,000 and the subsequent purchase
of common stock with such proceeds. Sales of treasury stock
to the Company's Stock Purchase Program generated cash of
$41,579,000, $42,067,000 and $49,590,000 in 1994, 1993, and
fiscal 1992, respectively. Dividends paid, net of tax, in
1994, 1993 and fiscal 1992 amounted to $74,512,000,
$74,873,000 and $56,132,000, respectively. The increase in
dividends since fiscal 1992 is mainly the result of dividends
paid on the PERCS which were issued in fiscal 1992. As a
result of the Company calling its PERCS in March 1995, the
Company will eliminate its dividend payment to the PERCS of
approximately $32,000,000. However, it will pay upon
conversion a dividend to the PERCS shareholders of
approximately $4,815,000. Preferred stock dividends are
expected to exceed $11,000,000 in 1995. The Company plans to
fund the preferred stock and common stock dividends with
available cash and cash flow from operations, as well as from
the proceeds from the sale of its credit card portfolios.
In 1994 and 1993, the Company decreased short-term
borrowings by $110,393,000 and $46,885,000, respectively, and
increased short-term borrowings by $57,533,000 in fiscal
1992. The consistent reduction in short-term borrowings has
been funded primarily by proceeds from the sale of divested
operations and cash provided by operations. The Company's
primary source of short-term debt, for which borrowings and
repayments have been presented net in the Consolidated
Statements of Cash Flows, consists of short-term seasonal
bank debt and commercial paper. The commercial paper matures
within ninety days as does the short-term seasonal bank debt.
Following are the current credit ratings for Tandy
Corporation, which are investment grade:
Standard
Category Moody's and Poor's
-------- ------- ----------
Medium Term Notes Baa2 A-
ESOP Senior Notes Baa2 A-
Commercial Paper P-2 A-2
CAPITAL STRUCTURE AND FINANCIAL CONDITION
The Company's balance sheet and financial condition
continue to be strong. The Company's available borrowing
facilities as of December 31, 1994 are detailed in Note 9 of
the Notes to Consolidated Financial Statements.
In the fiscal year ended June 30, 1992, the Company issued
150,000 PERCS shares and used the proceeds of this offering
to purchase $430,000,000 of the Company's common stock for
treasury. The PERCS are discussed further in Note 18 of the
Notes to Consolidated Financial Statements. On January 23,
1995, Tandy announced that it had exercised its right to call
the issued and outstanding PERCS for conversion on March 10,
1995 prior to the mandatory conversion date of April 15,
1995. To complete the redemption, the Company will issue
from treasury stock approximately 11,816,000 shares of Tandy
Corporation common stock.
On August 1, 1994, the Company announced that its Board of
Directors authorized management to purchase up to 7,500,000
shares of its common stock in addition to shares required for
employee plans. On December 30, 1994, the Board of Directors
authorized management to increase the share repurchase
program to 12,500,000 shares. Purchases will be made from
time to time in the open market, and it is expected that
funding of the program will come from existing cash,
short-term debt and proceeds from the sale of the credit card
portfolios. At December 31, 1994, approximately 5,000,000
shares had been repurchased under this program.
The Company's issue of 10% subordinated debentures due
June 30, 1994 was called by the Company on February 23, 1994
for redemption on April 1, 1994. The redemption was at 100%
of face value or $32,431,000.
The revolving credit backup facilities to Tandy's
commercial paper program were renewed in May 1994. These
facilities are to be used only if maturing commercial paper
cannot be repaid due to an inability to sell new commercial
paper. This agreement is composed of two facilities--one for
$200,000,000 expiring May 1995 and another $200,000,000
facility expiring in May 1997. Annual commitment fees for
the facilities are 2/25 of 1% per annum and 1/8 of 1% per
annum, respectively, whether used or unused.
In fiscal 1991, the Company filed a shelf registration for
$500,000,000, of which $400,000,000 was designated for
medium-term notes, and Tandy Credit Corporation increased its
medium-term note program by $200,000,000. During fiscal
1991, short-term debt was refinanced by the issuance of
$155,500,000 in medium-term notes. Tandy's medium-term notes
outstanding at December 31, 1994 totaled $73,044,000 compared
to $125,479,000 at December 31, 1993.
The total debt-to-capitalization ratio was 17.1%, 22.8%,
27.3% and 23.4% at December 31, 1994, December 31, 1993,
December 31, 1992 and June 30, 1992, respectively. This
debt-to-capitalization ratio should improve further in fiscal
1995 due to the cash proceeds from the sales of the credit
operations being used to retire debt, fund the repurchase of
outstanding common shares into treasury shares and for other
purposes.
Management believes that the Company's present borrowing
capacity is greater than the established credit lines and
long-term debt in place. Management also believes that the
Company's cash flow from operations, cash and short-term
investments and its available borrowing facilities are more
than adequate to fund planned store expansion and to meet
debt service and dividend requirements and to fund its share
repurchase program.
INFLATION
Inflation has not significantly impacted the Company over
the past three years. Management does not expect inflation
to have a significant impact on operations in the foreseeable
future unless global situations substantially affect the
world economy.
NEW ACCOUNTING STANDARDS
The American Institute of Certified Public Accountants
issued Statement of Position 93-7, "Reporting on Advertising
Costs," in December 1993. The statement generally requires
all advertising costs to be expensed in the period in which
the costs are incurred or the first time the advertising
takes place, and is effective for years beginning after June
15, 1994. The statement is not anticipated to have any
material effect on the results of operations or financial
condition of the Company.
SALE OF JOINT VENTURE INTEREST
During the quarter ended September 30, 1993, the Company
entered into definitive agreements with Nokia Corporation
("Nokia") to sell the Company's interests in two cellular
telephone manufacturing joint ventures with Nokia, TMC
Company Ltd. located in Masan, Korea, and TNC Company located
in Fort Worth, Texas. Pursuant to the terms of the
definitive agreements, the Company received an aggregate of
approximately $31,700,000 for its interests in these joint
ventures. The Company also entered into a three-year
Preferred Supplier Agreement pursuant to which it has agreed
to purchase from Nokia substantially all of Radio Shack's
requirements for cellular telephones at prevailing
competitive market prices at the time of the purchase. These
operations were not part of the overall divestment plan
adopted in June 1993 by the Company's Board of Directors;
therefore, the gain on the sale and their results of
operations were not included in discontinued operations.
INTERTAN UPDATE
InterTAN, the former foreign retail operations of Tandy,
was spun off to Tandy stockholders as a tax-free dividend in
fiscal 1987. Under the merchandise purchase terms of the
original distribution agreement, InterTAN could purchase on
payment terms products sold or secured by Tandy. A&A
International ("A&A"), a subsidiary of Tandy, was the
exclusive purchasing agent for products originating in the
Far East for InterTAN.
On July 16, 1993 InterTAN had an account payable to Tandy
of approximately $17,000,000, of which $7,600,000 was in
default. InterTAN's outstanding purchase orders for
merchandise placed under the distribution agreement with
Tandy, but not yet shipped, totaled approximately
$44,000,000. Because InterTAN had defaulted, on July 16
Tandy terminated the merchandise purchase terms of the
distribution agreement and the license agreements. Tandy
offered InterTAN interim license agreements which expired
July 22, 1993, unless extended. The agreements were extended
on July 23, 1993.
On July 30, 1993 Trans World Electronics, Inc. ("Trans
World"), a subsidiary of Tandy, reached agreement with
InterTAN's banking syndicate to buy approximately $42,000,000
of InterTAN's debt at a negotiated, discounted price. The
closing of this purchase occurred on August 5, 1993, at which
time Tandy resumed limited shipments to InterTAN and granted
a series of short-term, interim licenses pending the
execution of new license and merchandise agreements. The
debt purchased from the banks has been restructured into a
seven-year note with interest of 8.64% due semiannually
beginning February 25, 1994 and semiannual principal payments
beginning February 25, 1995 (the "Series A" note). Trans
World provided approximately $10,000,000 in working capital
and trade credit to InterTAN. Interest on the working
capital loan (the "Series B" note) of 8.11% is due
semiannually beginning February 25, 1994 with the principal
due in full on August 25, 1996. Trans World also has
received warrants with a five-year term exercisable for
approximately 1,450,000 shares of InterTAN common stock at an
exercise price of $6.618 per share. As required by an
agreement with Tandy, InterTAN has registered the warrants
under the Securities Act of 1933. At December 31, 1994,
InterTAN's common stock price, as quoted in the Wall Street
-----------
Journal, was $8.125 per share. The fair market value of the
-------
warrants at December 31, 1994 approximates $2,500,000.
In addition to the bank debt purchased by Trans World and
the working capital loan, InterTAN's obligations to Trans
World included two additional notes for approximately
$23,665,000 (the "Series C" note) and $24,037,000 (the
"Series D" note) with interest rates of 7.5% and 8%,
respectively. The notes represented the restructuring of
InterTAN accounts payable for merchandise already shipped and
required monthly interest payments. All principal and
interest on the Series C note was paid in full by December
31, 1993. The Series D note was paid in full during the
first quarter of 1994. All of Tandy's debt from InterTAN is
secured by a first priority lien on substantially all of
InterTAN's assets in Canada and the U.K.
A new merchandise agreement was reached with InterTAN in
October 1993 which requires future purchase orders to be
backed by letters of credit posted by InterTAN. New license
agreements provide for a future royalty to Tandy. InterTAN
had obligations for purchase orders outstanding for
merchandise ordered by A&A for InterTAN but not yet shipped
totaling approximately $24,705,000 at December 31, 1994.
InterTAN has increased its bank revolving credit facility
with the new banking syndicate to Canadian $60,000,000 (U.S.
$42,774,000 equivalent at December 31, 1994). In the case of
InterTAN's default on the bank credit line, Tandy will, at
the option of InterTAN's new banking syndicate, purchase
InterTAN's inventory and related accounts receivable at 50%
of their net book value, up to the amount of outstanding bank
loans, but not to exceed Canadian $60,000,000. In that
event, Tandy could foreclose on its first priority lien on
InterTAN's assets in Canada and the U.K. If Tandy fails to
purchase the inventory and related accounts receivable of
InterTAN from the banking syndicate, the syndicate upon
notice to Tandy and expiration of time, can foreclose upon
InterTAN's assets in Canada and the U.K. ahead of Tandy. The
inventory repurchase agreement between InterTAN's banking
syndicate and Tandy has been amended and restated to reflect
the foregoing.
As of December 31, 1994 InterTAN owed Tandy an aggregate
of $39,965,000, net of discount. The current portion of the
obligation approximates $8,707,000 and the non-current
portion approximates $31,258,000. In 1994 Tandy recognized
$3,855,000 in accretion of discount on the note receivable
from InterTAN which resulted from the purchase of the bank
debt at a discounted price. Accretion of this discount is
based on the effective interest rate method. Tandy
recognized sales to and commission income from InterTAN of
approximately $19,764,000 and interest income of $8,280,000
during fiscal 1994. During the year ended December 31, 1993,
Tandy recognized approximately $93,315,000 of sales to
InterTAN and interest income of $3,085,000. Tandy's sales to
InterTAN totaled $90,130,000 during the six months ended
December 31, 1992 and $171,126,000 during fiscal 1992.
A&A will continue as the exclusive purchasing agent for
InterTAN in the Far East on a commission basis. Commencing
in March 1994, only the purchasing agent commission and sales
by Tandy manufacturing plants to InterTAN were recorded as
sales and operating revenues. InterTAN purchases from third
parties through A&A are no longer recorded as sales,
reflecting the arrangement under the new merchandise
agreement. Accordingly, sales by Tandy to InterTAN in 1994
are considerably lower than in prior years, however, the
earned income relating thereto was not materially different.
Through February 1995 InterTAN has met all of its payment
obligations to Tandy. In addition, its operations have
improved in fiscal 1995 as evidenced by its published net
income for the six months ended December 31, 1994
approximating $17,704,000 or $1.11 per fully diluted share as
opposed to net income of $4,567,000 or $0.49 per fully
diluted share for the same period in the prior year. As a
result, nothing has come to the attention of management which
would indicate that InterTAN would not be able to continue to
meet its payment obligations pursuant to the debt agreements
with Tandy.
Canadian tax authorities are reviewing InterTAN's Canadian
subsidiary's 1987-89 tax returns. The Company cannot
determine whether the ultimate resolution of that review will
have an effect on InterTAN's ability to meet its obligations
to Tandy, but at the present, the Company believes that the
ultimate resolution of this review will not impair InterTAN's
ability to meet its obligations to Tandy.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to Consolidated Financial Statements is found on
page 27. The Company's Financial Statements and Notes to
Consolidated Financial Statements follow the index.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Tandy will file a definitive proxy statement with the
Securities and Exchange Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K
pursuant to Regulation 14A. The information called for by
this Item with respect to directors has been omitted pursuant
to General Instruction G(3). This information is
incorporated by reference from the Proxy Statement for the
1995 Annual Meeting. For information relating to the
Executive Officers of the Company, see Part I of this report.
The Section 16(A) reporting information is incorporated by
reference from the Proxy Statement for the 1995 Annual
Meeting.
ITEM 11. EXECUTIVE COMPENSATION
Tandy will file a definitive proxy statement with the
Securities and Exchange Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K
pursuant to Regulation 14A. The information called for by
this Item with respect to executive compensation has been
omitted pursuant to General Instruction G(3). This
information is incorporated by reference from the Proxy
Statement for the 1995 Annual Meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Tandy will file a definitive proxy statement with the
Securities and Exchange Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K
pursuant to Regulation 14A. The information called for by
this Item with respect to security ownership of certain
beneficial owners and management has been omitted pursuant to
General Instruction G(3). This information is incorporated
by reference from the Proxy Statement for the 1995 Annual
Meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Tandy will file a definitive proxy statement with the
Securities and Exchange Commission not later than 120 days
after the end of the fiscal year covered by this Form 10-K
pursuant to Regulation 14A. The information called for by
this Item with respect to certain relationships and
transactions with management and others has been omitted
pursuant to General Instruction G(3). This information is
incorporated by reference from the Proxy Statement for the
1995 Annual Meeting.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.
(a) Documents filed as part of this report.
1. Financial Statements
The financial statements filed as a part of this report
are listed in the "Index to Consolidated Financial
Statements" on page 27. The index and statements are
incorporated herein by reference.
3. Exhibits required by Item 601 of Regulation S-K
A list of the exhibits required by Item 601 of Regulation
S-K and filed as part of this report is set forth in the
Index to Exhibits on page 56, which immediately precedes such
exhibits.
Certain instruments defining the rights of holders of
long-term debt of the Company and its consolidated
subsidiaries are not filed as exhibits to this report because
the total amount of securities authorized thereunder does not
exceed ten percent of the total assets of the Company on a
consolidated basis. The Company hereby agrees to furnish the
Securities and Exchange Commission copies of such instruments
upon request.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the three months
ended December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Tandy Corporation has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TANDY CORPORATION
March 30, 1995 /s/ John V. Roach
-------------------------------
John V. Roach
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Tandy Corporation has duly
caused this report to be signed on its behalf by the
following persons in the capacities indicated on this 30th
day of March, 1995.
Signature Title
/s/ John V. Roach Chairman of the Board, Chief
-------------------------- Executive Officer and President
John V. Roach (Chief Executive Officer)
/s/ Dwain H. Hughes Senior Vice President and Chief
-------------------------- Financial Officer
Dwain H. Hughes (Principal Financial Officer)
/s/ Richard L. Ramsey Vice President and Controller
--------------------------
Richard L. Ramsey (Principal Accounting Officer)
/s/ James I. Cash, Jr. Director
--------------------------
James I. Cash, Jr.
/s/ Lewis F. Kornfeld, Jr. Director
--------------------------
Lewis F. Kornfeld, Jr.
/s/ Jack L. Messman Director
--------------------------
Jack L. Messman
/s/ William G. Morton Director
--------------------------
William G. Morton
-------------------------- Director
Thomas G. Plaskett
/s/ William T. Smith Director
--------------------------
William T. Smith
/s/ Alfred J. Stein Director
--------------------------
Alfred J. Stein
/s/ William E. Tucker Director
--------------------------
William E. Tucker
/s/ Jesse L. Upchurch Director
--------------------------
Jesse L. Upchurch
/s/ John A. Wilson Director
--------------------------
John A. Wilson
<PAGE>
TANDY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountant .................... 28
Consolidated Statements of Income for each of
the two years ended December 31, 1994, the
six months ended December 31, 1992 and the
year ended June 30, 1992 .......................... 29
Consolidated Balance Sheets at December 31, 1994
and December 31, 1993 ............................. 30
Consolidated Statements of Cash Flows for each
of the two years ended December 31, 1994, the
six months ended December 31, 1992 and the year
ended June 30, 1992 ............................... 31
Consolidated Statements of Stockholders' Equity
for each of the two years ended December 31, 1994,
the six months ended December 31, 1992 and the year
ended June 30, 1992 ............................... 32-33
Notes to Consolidated Financial Statements .......... 34-55
Separate financial statements of Tandy Corporation have
been omitted because Tandy is primarily an operating company
and the amount of restricted net assets of consolidated and
unconsolidated subsidiaries and Tandy's equity in
undistributed earnings of 50% or less-owned companies
accounted for by the equity method are not significant. All
subsidiaries of Tandy Corporation are included in the
consolidated financial statements. Financial statements of
50% or less-owned companies have been omitted because they do
not, considered individually or in the aggregate, constitute
a significant subsidiary.
The financial statement schedules should be read in
conjunction with the consolidated financial statements. All
other schedules have been omitted because they are not
applicable, not required or the information is included in
the consolidated financial statements or notes thereto.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Tandy Corporation
In our opinion, the consolidated financial statements listed
in the accompanying index on page 27 present fairly, in all
material respects, the financial position of Tandy
Corporation and its subsidiaries (the "Company") at December
31, 1994 and 1993, and the results of their operations and
their cash flows for each of the two years in the period
ended December 31, 1994, the six months ended December 31,
1992, and for the year ended June 30, 1992 in conformity with
generally accepted accounting principles. These financial
statements are the responsibility of the Company's
management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 2 to the consolidated financial
statements, the Company changed its method of accounting for
income taxes in 1993.
/s/ Price Waterhouse LLP
--------------------------
PRICE WATERHOUSE LLP
Fort Worth, Texas
February 22, 1995
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Tandy Corporation and Subsidiaries
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
1994 1993 1992 1992
----------------------------------------- -------------------- --------------------
(In thousands, except % of % of % of % of
per share amounts) Dollars Revenues Dollars Revenues Dollars Revenues Dollars Revenues
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales and operating revenues $4,943,679 100.0% $4,102,551 100.0% $2,161,149 100.0% $3,649,284 100.0%
Cost of products sold 3,017,615 61.0% 2,382,607 58.1% 1,221,231 56.5% 1,926,390 52.8%
---------- ---------- ---------- ----------
Gross profit 1,926,064 39.0% 1,719,944 41.9% 939,918 43.5% 1,722,894 47.2%
Expenses:
Selling, general and administrative 1,532,673 31.0% 1,354,676 33.0% 761,799 35.2% 1,342,120 36.8%
Depreciation and amortization 84,782 1.7% 79,944 1.9% 39,960 1.9% 74,521 2.0%
Interest income (78,612) -1.6% (65,538) -1.6% (33,290) -1.5% (67,399) -1.8%
Interest expense 30,047 0.6% 39,707 1.0% 20,532 0.9% 43,154 1.2%
Provision for restructuring costs 89,071 1.8% -- 48,000 2.2% --
Gain from sale of credit accounts
and extended service contracts (91,437) -1.8% -- -- --
---------- ---------- ---------- ----------
1,566,524 31.7% 1,408,789 34.3% 837,001 38.7% 1,392,396 38.2%
---------- ---------- ---------- ----------
Income before income taxes,
discontinued operations and
cumulative effect of change
in accounting principle 359,540 7.3% 311,155 7.6% 102,917 4.8% 330,498 9.0%
Provision for income taxes 135,205 2.7% 115,523 2.8% 35,236 1.6% 119,785 3.3%
---------- ---------- ---------- ----------
Income from continuing operations 224,335 4.6% 195,632 4.8% 67,681 3.2% 210,713 5.7%
---------- ---------- ---------- ----------
Loss from discontinued operations:
Operating loss, net of tax -- (57,619) -1.4% (63,875) -3.0% (26,866) -0.7%
Loss on disposal, net of tax -- (54,178) -1.3% -- --
---------- ---------- ---------- ----------
-- (111,797) -2.7% (63,875) -3.0% (26,866) -0.7%
---------- ---------- ---------- ----------
Income before cumulative effect
of change in accounting principle 224,335 4.6% 83,835 2.1% 3,806 0.2% 183,847 5.0%
Cumulative effect on prior years of
change in accounting principle -- 13,014 0.3% -- --
---------- ---------- ---------- ----------
Net income 224,335 4.6% 96,849 2.4% 3,806 0.2% 183,847 5.0%
Preferred dividends 6,777 0.1% 7,136 0.2% 2,419 0.1% 4,911 0.1%
---------- ---------- ---------- ----------
Net income available to
common shareholders $ 217,558 4.5% $ 89,713 2.2% $ 1,387 0.1% $ 178,936 4.9%
========== ========== ========== ==========
Net income available per
average common and
common equivalent share:
Income from continuing operations $ 2.91 $ 2.50 $ 0.87 $ 2.61
Loss from discontinued operations -- (1.48) (0.85) (0.34)
---------- ---------- ---------- ----------
Income before cumulative effect
of change in accounting principle 2.91 1.02 0.02 2.27
Cumulative effect on prior years of
change in accounting principle -- 0.17 -- --
---------- ---------- ---------- ----------
Net income available per
average common and
common equivalent share $ 2.91 $ 1.19 $ 0.02 $ 2.27
========== ========== ========== ==========
Average common and common
equivalent shares outstanding 74,874 75,543 74,918 78,788
========== ========== ========== ==========
Dividends declared per common share $ 0.63 $ 0.60 $ 0.30 $ 0.60
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Tandy Corporation and Subsidiaries
<CAPTIONS>
December 31,
(In thousands) 1994 1993
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and short-term investments $ 205,633 $ 213,235
Accounts and notes receivable, less allowance for doubtful accounts 769,101 582,443
Inventories, at lower of cost or market 1,504,324 1,276,302
Other current assets 77,202 88,005
----------- -----------
Total current assets 2,556,260 2,159,985
Property, plant and equipment, at cost, less accumulated depreciation 504,587 463,738
Investment in discontinued operations -- 405,664
Other assets, net of accumulated amortization 182,927 189,712
----------- -----------
$ 3,243,774 $ 3,219,099
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities of long-term debt $ 229,135 $ 387,953
Accounts payable 582,194 279,942
Income taxes payable 18,026 14,690
Accrued expenses 376,795 349,057
----------- -----------
Total current liabilities 1,206,150 1,031,642
----------- -----------
Long-term debt and capital leases, excluding current maturities 153,318 186,638
Other non-current liabilities 34,095 50,069
----------- -----------
Total other liabilities 187,413 236,707
----------- -----------
Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares authorized
Series A junior participating, 100,000 shares authorized and none issued -- --
Series B convertible, 100,000 shares authorized and issued 100,000 100,000
Series C PERCS, 150,000 shares authorized and issued 429,982 429,982
Common stock, $1 par value, 250,000,000 shares authorized
with 85,645,000 shares issued 85,645 85,645
Additional paid-in-capital 93,357 85,752
Retained earnings 2,176,971 2,028,041
Foreign currency translation effects (1,799) 1,003
Stock held in treasury, at cost 27,388,000 and 21,689,000
common shares, respectively (971,611) (707,331)
Unearned deferred compensation related to TESOP (62,334) (72,342)
----------- -----------
Total stockholders' equity 1,850,211 1,950,750
Commitments and contingent liabilities
----------- -----------
$ 3,243,774 $ 3,219,099
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Tandy Corporation and Subsidiaries
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 224,335 $ 96,849 $ 3,806 $ 183,847
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss reserve on disposal of discontinued operations -- 54,178 -- --
Provision for restructuring cost 89,071 -- 87,500 --
Gain on sale of extended service contracts (55,729) -- -- --
Gain on sale of credit card portfolios (35,708) -- -- --
Cumulative effect on prior years of change in
accounting principle -- (13,014) -- --
Depreciation and amortization 84,782 98,571 53,502 103,281
Deferred income taxes and other items 68,257 11,552 (29,097) 9,302
Provision for credit losses and bad debts 49,344 57,491 41,483 67,388
Gain on sale of subsidiary, assets of which were
primarily real estate -- -- -- (18,987)
Changes in operating assets and liabilities:
Sale of credit card portfolios 85,764 -- -- --
Receivables (230,938) 30,133 (107,295) (121,719)
Inventories (220,094) (63,965) (81,069) (89,441)
Other current assets (8,504) 16,158 (11,882) (2,955)
Accounts payable, accrued expenses and income taxes 218,358 34,341 56,732 16,066
--------- --------- --------- ---------
Net cash provided by operating activities 268,938 322,294 13,680 146,782
--------- --------- --------- ---------
Investing activities:
Additions to property, plant and equipment (180,559) (129,287) (69,661) (127,495)
Proceeds from sale of property, plant and equipment 56,437 3,011 790 2,002
Proceeds from sale of divested operations 359,004 111,988 -- --
Proceeds from sale of subsidiary, assets of
which were primarily real estate -- -- -- 20,293
Purchase of InterTAN bank debt and restructuring
of working capital loans -- (31,663) -- --
Other investing activities 4,203 (6,198) (21,300) 3,010
--------- --------- --------- ---------
Net cash provided (used) by investing activities 239,085 (52,149) (90,171) (102,190)
--------- --------- --------- ---------
Financing activities:
Purchases of treasury stock (275,415) (27,650) (24,595) (527,773)
Sales of treasury stock to employee stock purchase program 41,579 42,067 25,412 49,590
Issuance of Series C PERCS -- -- -- 429,982
Dividends paid, net of taxes (74,512) (74,873) (37,443) (56,132)
Changes in short-term borrowings, net (110,393) (46,885) 186,917 57,533
Additions to long-term borrowings 28,936 -- 1,043 21,071
Repayment of long-term borrowings (125,820) (62,195) (68,671) (98,702)
--------- --------- --------- ---------
Net cash provided (used) by financing activities (515,625) (169,536) 82,663 (124,431)
--------- --------- --------- ---------
Increase (decrease) in cash and short-term investments (7,602) 100,609 6,172 (79,839)
Cash and short-term investments at the beginning of the year 213,235 112,626 106,454 186,293
--------- --------- --------- ---------
Cash and short-term investments at the end of the year $ 205,633 $ 213,235 $ 112,626 $ 106,454
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Tandy Corporation and Subsidiaries
<CAPTIONS>
Preferred Common Stock
-----------------------------
(In thousands) Stock Shares Dollars
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at June 30, 1991 $ 100,000 85,645 $ 85,645
Purchase of treasury stock -- -- --
Tender offer for common stock -- -- --
Foreign currency translation adjustments, net of taxes -- -- --
Sale of treasury stock to SPP -- -- --
Exercise of stock options -- -- --
Issuance of 150,000 shares of Series C PERCS 429,982 -- --
Series B convertible stock dividends, net of taxes of $2,530,000 -- -- --
TESOP deferred compensation earned -- -- --
Series C PERCS dividends -- -- --
Common stock dividends declared -- -- --
Net income -- -- --
----------- ----------- -----------
Balance at June 30, 1992 529,982 85,645 85,645
Purchase of treasury stock -- -- --
Foreign currency translation adjustments, net of taxes -- -- --
Sale of treasury stock to SPP -- -- --
Exercise of stock options -- -- --
Series B convertible stock dividends, net of taxes of $1,246,000 -- -- --
TESOP deferred compensation earned -- -- --
Series C PERCS dividends -- -- --
Common stock dividends declared -- -- --
Net income -- -- --
----------- ----------- -----------
Balance at December 31, 1992 529,982 85,645 85,645
Purchase of treasury stock -- -- --
Foreign currency translation adjustments, net of taxes -- -- --
Sale of treasury stock to SPP -- -- --
Exercise of stock options -- -- --
Series B convertible stock dividends, net of taxes of $2,497,000 -- -- --
TESOP deferred compensation earned -- -- --
Series C PERCS dividends -- -- --
Repurchase of preferred stock -- -- --
Common stock dividends declared -- -- --
Net income -- -- --
----------- ----------- -----------
Balance at December 31, 1993 529,982 85,645 85,645
Purchase of treasury stock -- -- --
Foreign currency translation adjustments, net of taxes -- -- --
Sale of treasury stock to SPP -- -- --
Exercise of stock options -- -- --
Series B convertible stock dividends, net of taxes of $2,372,000 -- -- --
TESOP deferred compensation earned -- -- --
Series C PERCS dividends -- -- --
Repurchase of preferred stock -- -- --
Common stock dividends declared -- -- --
Net income -- -- --
----------- ----------- -----------
Balance at December 31, 1994 $ 529,982 85,645 $ 85,645
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTIONS>
Foreign
Additional Currency Unearned
Treasury Stock Paid-In Retained Translation Deferred
------------------------------
Shares Dollars Capital Earnings Effects Compensation Total
------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
(7,250) $ (267,153) $ 105,650 $ 1,917,851 $ (1,198) $ (94,033) $ 1,846,762
(3,521) (96,348) -- -- -- -- (96,348)
(13,500) (433,575) -- -- -- -- (433,575)
-- -- -- -- 3,477 -- 3,477
1,795 62,256 (12,666) -- -- -- 49,590
20 688 -- -- -- -- 688
-- -- -- -- -- -- 429,982
-- -- -- (4,911) -- -- (4,911)
-- -- -- -- -- 8,233 8,233
-- -- -- (12,573) -- -- (12,573)
-- -- -- (44,432) -- -- (44,432)
-- -- -- 183,847 -- -- 183,847
----------- ----------- ----------- ----------- ----------- ----------- -----------
(22,456) (734,132) 92,984 2,039,782 2,279 (85,800) 1,930,740
(959) (25,000) -- -- -- -- (25,000)
-- -- -- -- (13,335) -- (13,335)
987 31,982 (6,570) -- -- -- 25,412
9 289 -- -- -- -- 289
-- -- -- (2,419) -- -- (2,419)
-- -- -- -- -- 3,853 3,853
-- -- -- (16,050) -- -- (16,050)
-- -- -- (18,945) -- -- (18,945)
-- -- -- 3,806 -- -- 3,806
----------- ----------- ----------- ----------- ----------- ----------- -----------
(22,419) (726,861) 86,414 2,006,174 (11,056) (81,947) 1,888,351
(763) (24,749) -- -- -- -- (24,749)
-- -- -- -- 12,059 -- 12,059
1,311 42,292 (225) -- -- -- 42,067
182 5,882 (437) -- -- -- 5,445
-- -- -- (4,638) -- -- (4,638)
-- -- -- -- -- 9,605 9,605
-- -- -- (32,100) -- -- (32,100)
-- (3,895) -- -- -- -- (3,895)
-- -- -- (38,244) -- -- (38,244)
-- -- -- 96,849 -- -- 96,849
----------- ----------- ----------- ----------- ----------- ----------- -----------
(21,689) (707,331) 85,752 2,028,041 1,003 (72,342) 1,950,750
(6,798) (296,419) -- -- -- -- (296,419)
-- -- -- -- (2,802) -- (2,802)
1,023 33,958 7,621 -- -- -- 41,579
76 2,481 (16) -- -- -- 2,465
-- -- -- (4,405) -- -- (4,405)
-- -- -- -- -- 10,008 10,008
-- -- -- (32,100) -- -- (32,100)
-- (4,300) -- -- -- -- (4,300)
-- -- -- (38,900) -- -- (38,900)
-- -- -- 224,335 -- -- 224,335
----------- ----------- ----------- ----------- ----------- ----------- -----------
(27,388) $ (971,611) $ 93,357 $ 2,176,971 $ (1,799) $ (62,334) $ 1,850,211
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tandy Corporation and Subsidiaries
NOTE 1-DESCRIPTION OF BUSINESS
Tandy Corporation ("Tandy" or the "Company") is engaged in
consumer electronics retailing including the retail sale of
personal computers. Radio Shack is the largest of Tandy's
retail store systems with company-owned stores and
dealer/franchise outlets. Tandy also operates the Computer
City and Incredible Universe store chains. Tandy Name Brand
includes McDuff Electronics mall stores and Supercenters,
VideoConcepts mall stores and The Edge in Electronics
boutique stores. On December 30, 1994, the Company adopted a
formal plan to close 233 Tandy Name Brand stores, and as a
result of the closings, the Tandy Name Brand Retail Group
will be dissolved in 1995. The remaining 73 Tandy Name Brand
stores will be transferred to the Radio Shack division.
Additionally, Tandy continues to operate certain related
retail support groups and consumer electronics manufacturing
businesses.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of Tandy and its wholly owned
subsidiaries including its credit and insurance
subsidiaries. Investments in 20% to 50% owned companies are
accounted for on the equity method. The manufacturing and
marketing operatins included in the divestment plan have
been accounted for as discontinued operations. See Note 21
for further information relating to discontinued operations.
Significant intercompany transactions are eliminated in
consolidation.
CHANGE IN FISCAL YEAR: On January 10, 1993, the Board of
Directors authorized the fiscal year of Tandy to be changed
from June 30 to December 31 and as of December 31, 1992 this
change was made. The fiscal periods of certain foreign
operations end one month earlier than the Company's year end
to facilitate their inclusion in the consolidated financial
statements.
FOREIGN CURRENCY TRANSLATION: In accordance with the
Financial Accounting Standards Board (the "FASB") Statement
No. 52, "Foreign Currency Translation," balance sheet
accounts of the Company's foreign operations are translated
from foreign currencies into U.S. dollars at year end or
historical rates while income and expenses are translated at
the weighted average sales exchange rates for the year.
Translation gains or losses related to net assets located
outside the United States are shown as a separate component
of stockholders' equity. Losses aggregating $19,803,000, net
of tax, relating to discontinued operations were transferred
from equity and charged to loss on disposal of discontinued
operations during 1993. Gains and losses resulting from
foreign currency transactions (transactions denominated in a
currency other than the entity's functional currency) are
included in net income. Such foreign currency transaction
gains approximated $1,495,000 for the year ended December 31,
1994, $762,000 for the year ended December 31, 1993,
$3,065,000 for the six months ended December 31, 1992 and
$10,642,000 for the year ended June 30, 1992.
CHANGE IN ACCOUNTING PRINCIPLE-PROVISION FOR INCOME TAXES:
In January 1993, the Company adopted Statement of Financial
Accounting Standard ("FAS") No. 109, "Accounting for Income
Taxes" ("FAS 109") and applied the provisions prospectively.
The adoption of FAS 109 changes the Company's method of
accounting for income taxes from the deferred method ("APB
11") to an asset and liability approach. Previously, the
Company deferred the past tax effects of timing differences
between financial reporting and taxable income. The asset
and liability approach requires the recognition of deferred
tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
The adjustments to the January 1, 1993 balance sheet to
adopt FAS 109 totaled $13,014,000. Approximately $9,786,000
of this adjustment related to continuing operations and the
remaining $3,228,000 was from discontinued operations. The
aggregate amount of $13,014,000 is refleted in the
accompanying 1993 Consolidated Statements of Income as the
cumulative effect of change in accounting principle. It
primarily represents the impact of adjusting deferred taxes
to reflect the then current tax rate of 34% as opposed to the
higher tax rates that were in effect when the deferred taxes
originated. See Note 12 for further discussion of income
taxes.
EXTENDED SERVICE CONTRACTS: Tandy's retail operations
offer extended service contracts on products sold. These
contracts generally provide extended service coverage for
period of 12 to 48 months. Contracts sold prior to January
1, 1995 were offered directly by the Company, and thus the
Company was the responsible party. The Company accounts for
such contracts in accordance with FASB Technical Bulletin No.
90-1, "Accounting for Separately Priced Extended Warranty and
Product Maintenance Contracts" which requires that revenues
from sales of extended service contracts be recognized
ratably over the lives of the contracts. Costs directly
related to sales of such contracts are deferred and charged
to expense proportionately as the revenues are recognized. A
loss is recognized on extended service contracts if the sum
of the expected costs of providing services under the
contracts exceeds related unearned revenue.
As described in Note 3, the Company transferred all
obligations with respect to contracts in force at December
31, 1994 to an unrelated party, except certain contracts
aggregating approximately $7,734,000. The Company will sell
extended service contracts offered by the unrelated third
party subsequent to 1994. The Company will receive a
commission from the unrelated third party upon sale of each
contract. The commissions will be recognized as income in
the period in which the contracts are sold.
CASH AND SHORT-TERM INVESTMENTS: Cash on hand in stores,
deposits in banks and short-term investments with original
maturities of three months or less are considered cash and
cash equivalents. Short-term investments are carried at
cost, which approximates market value.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:
CREDIT OPERATIONS-The customer receivables of the credit
operations are classified as current assets, including
amounts which are contractually due after one year. This is
consitent with retail industry practices.
Finance charges, late charges and returned check fees
arising from the Company's private label credit cards are
recognized when earned as interest income. The Company's
policy is to write off accounts when they become 180 days
past due or whenever deemed uncollectible by management,
whichever is sooner. Collection efforts continue subsequent
to write-off.
The Company is charged a fee by an outside accounts
receivable processing service for establishing new accounts.
These initial direct costs are capitalized and amortized on a
straight-line basis over a period of 84 months, the estimated
life over which the account will be used by a customer.
These costs are shown in the accompanying Consolidated
Balance Sheets as a part of the related accounts receivable.
Amortization of these loan origination costs are included as
a reduction of interest income in the accompanying
Consolidated Statements of Income. Costs to process accounts
on an ongoing basis are expensed as incurred.
As described in Note 3, the Company's Computer City and
Incredible Universe private label credit card portfolios were
sold in December 1994, and a letter of intent was signed to
sell Tandy Credit and the Company's Radio Shack and McDuff
private label credit card portfolios in the first half of
1995, subject to regulatory and rating agency approval.
Commencing in 1995, sales made pursuant to Computer City and
Incredible Universe private label credit card programs, as
well as sales made pursuant to the Radio Shack private label
credit card program made subsequent to the finalization of
its sales agreement, will be financed by an unrelated third
party.
OTHER CUSTOMER RECEIVABLES-An allowance for doubtful
accounts is provided when accounts are determined to be
uncollectible.
Concentrations of credit risk with respect to customer
receivables are limited due to the large number of customers
comprising the Company's customer base and their location in
many different geographic areas of the country; however, see
Note 8 for a discussion of a concentration of credit risk of
long-term receivables. The fair value of total receivables,
recorded at approximately $898,027,000 on the Consolidated
Balance Sheet at December 31, 1994, is approximately
$912,000,000.
INVENTORIES: Inventories are stated at the lower of cost
(principally based on average cost) or market value and are
comprised primarily of finished goods.
PROPERTY, PLANT AND EQUIPMENT: For financial reporting
purposes, depreciation and amortization are primarily
calculated using the straight-line method, which amortizes
the cost of the assets over their estimated useful lives.
The ranges of estimated useful lives are:
_____________________________________________________________
Buildings ....................... 10-40 years
Buildings under capital lease ... over the life of the lease
Equipment ....................... 2-15 years
Leasehold improvements .......... primarily, the shorter of
the life of the improvements or the
term of the related lease and certain renewal periods
_____________________________________________________________
When depreciable assets are sold or retired, the related
cost and accumulated depreciation are removed from the
accounts. Any gains or losses are included in selling,
general and administrative expenses. Major additions and
betterments are capitalized. Maintenance and repairs which
do not materially improve or extend the lives of the
respective assets are charged to operating expenses as
incurred. Amortization of buildings under capital lease is
included in depreciation and amortization in the Consolidated
Statements of Income.
AMORTIZATION OF EXCESS PURCHASE PRICE OVER NET TANGIBLE
ASSETS OF BUSINESSES ACQUIRED: The excess purchase
price is generally amortized over a 40-year period using the
straight-line method and the net balance is classified as a
non-current asset. The Company periodically reviews goodwill
to assess recoverability, and impairments would be recognized
in operating results if a permanent diminution in value were
to occur.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of
financial instruments is determined by reference to various
market data and other valuation techniques as appropriate.
Unless otherwise disclosed, the fair values of financial
instruments approximate their recorded values.
HEDGING AND DERIVATIVE ACTIVITY: The Company has not
historically utilized derivatives to manage foreign currency
risks and exposure except for an immaterial amount of foreign
exchange forward contracts used to hedge a portion of its
foreign purchases. As of December 31, 1994, the Company had
no outstanding purchase orders for which a foreign exchange
contract was used as a hedge. The few contracts that were
used did not involve leverage and did not have other high
risk characteristics. Moody's has assigned a counterparty
rating to Tandy Corporation of Baa2. This rating is an
opinion of the financial capacity of Tandy to honor its
senior obligations under financial contracts. Financial
contracts entered into by Tandy include the limited use of
foreign currency forwards to hedge foreign exchange risk
arising from the purchase of inventory.
In conjunction with sale-leaseback transactions of
Incredible Universe properties, the Company from time to time
may enter into interest rate swaps to lock in a fixed rate
that Company management believes is beneficial in the
long-term. Through March 10, 1995, the Company entered into
five swaps whereby it traded floating rates for fixed rates
ranging from 7.185% to 7.875%. These swaps related to
notional amounts of approximately $90,000,000; the Board of
Directors has authorized management to enter into such swaps
up to notional amounts not exceeding $250,000,000. During
1994, 1993, the six months ended December 31, 1992 and the
year ended June 30, 1992, the Company was not a party to any
interest rate swaps.
REVENUES: Retail sales are recorded on the accrual basis.
Credit service charges are recorded monthly on the basis of
customer account balances.
STORE PRE-OPENING COSTS: Direct incremental expenses
associated with the openings of new Computer City and
Incredible Universe stores, comprised primarily of payroll
and payroll-related costs, are deferred and amortized over a
twelve-month period from the date of the store opening.
Deferred store pre-opening expenses for Computer City and
Incredible Universe approximated $4,538,000 and $1,845,000 at
December 31, 1994 and 1993, respectively.
NET INCOME PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE:
Net income per average common and common equivalent share is
computed by dividing net income less the Series B convertible
stock dividends by the weighted average common and common
equivalent shares outstanding during the period. As the
Preferred Equity Redemption Convertible Preferred Stock
("PERCS") mandatorily convert into common stock, they are
considered outstanding common stock and the dividends are not
deducted from net income for purposes of calculating net
income per average common and common equivalent share. On
January 23, 1995, the Company announced that the PERCS would
be converted on March 10, 1995. To complete the conversion,
the Company will issue approximately 11,816,000 shares of
Tandy Corporation common stock out of treasury stock.
Current year weighted average share calculations include
approximately 11,816,000 common shares relating to the PERCS.
Per share amounts and the weighted average number of shares
outstanding for the year ended December 31, 1993, the
six-month period ended December 31, 1992 and for the fiscal
year ended June 30, 1992, have been retroactively restated to
reflect the PERCS conversion into approximately 11,816,000
common shares in lieu of the prior year assumption of
12,457,000 shares which was based on the December 31, 1993
common stock price.
Earnings available per common and common equivalent share
amounts initially reported by the Company for the year ended
December 31, 1993, the six months ended December 31, 1992 and
the fiscal year ended June 30, 1992 were $2.48, $0.84 and
$2.58 for income from continuing operations, respectively,
and $1.18, $0.02 and $2.24 for net income, respectively.
Fully diluted earnings available per common and common
equivalent share are not presented since dilution is less
than 3%.
The Series B convertible stock dividends were $6,777,000
for the year ended December 31, 1994, $7,136,000 for the year
ended December 31, 1993, $2,419,000, net of tax, for the six
months ended December 31, 1992 and $4,911,000, net of tax, in
fiscal 1992. The taxes netted against these amounts for the
six months ended December 31, 1992 and in fiscal 1992 were
$1,246,000 and $2,530,000, respectively. Upon adoption of
FAS 109 as of January 1, 1993 and in accordance with EITF
92-3, preferred dividends utilized in the earnings per share
calculation can no longer be reduced for associated tax
benefits paid on unallocated preferred stock held by an
employee stock ownership plan. Dividends on the PERCS, which
were issued in February 1992, were $32,100,000 for each of
the two years ended December 31, 1994, $16,050,000 for the
six months ended December 31, 1992 and $12,573,000 for the
year ended June 30, 1992.
Earnings available per common and common equivalent share
for each period presented, assuming the PERCS converted to
common stock under the "if converted" method and only if
dilutive, would have been presented as in the table which
follows.
<TABLE>
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary EPS, as adjusted:
Income from continuing operations $ 2.94 $ 2.45 $ 0.78 $ 2.59
Loss from discontinued operations -- (1.75) (1.01) (0.36)
Cumulative effect on prior years of
change in accounting principle -- 0.20 -- --
---------- ---------- ---------- ----------
Net income available per average
common and common equivalent share $ 2.94 $ 0.90 $ (0.23) $ 2.23
========== ========== ========== ==========
</TABLE>
TREASURY STOCK REPURCHASE PROGRAM: On August 1, 1994, the
Company announced that its Board of Directors authorized
management to purchase up to 7,500,000 shares of its common
stock in addition to shares required for employee plans. On
December 30, 1994, the Board of Directors authorized
management to increase the share repurchase program to
12,500,000 shares. Purchases will be made from time to time
in the open market, and it is expected that funding of the
program will come from existing cash, short-term debt and
proceeds from the sale of the credit card portfolios. At
December 31, 1994, approximately 5,000,000 shares had been
repurchased under this program.
NEW ACCOUNTING STANDARDS: The American Institute of
Certified Public Accountants issued Statement of Position
93-7, "Reporting on Advertising Costs," in December 1993.
The statement generally requires all advertising costs to be
expensed in the period in which the costs are incurred or the
first time the advertising takes place, and is effective for
years beginning after June 15, 1994. The statement is not
anticipated to have any material effect on the results of
operations or financial condition of the Company.
NOTE 3-GAIN ON SALE OF CREDIT OPERATIONS AND EXTENDED SERVICE
CONTRACTS
In December 1994 the Company entered into an agreement
with SPS Transaction Services, Inc., a majority-owned
subsidiary of Dean Witter, Discover & Company ("SPS") to sell
its Computer City and Incredible Universe private label
credit card portfolios without recourse. As a result of the
agreement, in which Tandy received cash of $85,764,000 and
will receive a deferred payment of $179,777,000, the Company
recognized a gain of $35,708,000 in the accompanying
Consolidated Statements of Income. The deferred payment
amount does not bear interest. Principal will be paid
monthly with the total principal amount of $179,777,000 due
over a twelve month period. The Company has discounted the
deferred payment by $3,477,000 to yield approximately 5% over
the twelve month payout period. As a result, the discounted
deferred payment amount of $176,300,000 is classified as
current in the accompanying Consolidated Balance Sheet at
December 31, 1994. The Company also signed a letter of
intent to sell its Radio Shack and McDuff private label
credit card portfolios at net book value and without recourse
to SPS in 1995 including the rights to the securitized
accounts (see Note 6). The agreement for the sale of McDuff
and Radio Shack portfolios was completed in January 1995,
subject only to regulatory and rating agency approvals which
should be forthcoming in the first half of 1995. Tandy
anticipates receiving approximately $290,000,000 (unaudited)
cash and a deferred payment approximating $80,000,000
(unaudited), on terms similar to the deferred payment
arrangement mentioned above.
Effective December 1994, the Company transferred all of
its existing obligations with respect to extended service
contracts in force at December 31, 1994, with the exception
of certain contracts aggregating approximately $7,734,000, to
an unrelated third party. The unrelated third party
contractually assumed all of the Company's legal obligations
and risk of future loss pursuant to the extended service
contracts in exchange for $75,059,000, of which $70,702,000
was paid in December 1994 and $4,357,000 was paid in February
1995. As a result, the Company has recognized a gain of
$55,729,000 associated with this transaction in its
accompanying Consolidated Statements of Income. The Company
will continue to provide repair services to customers who
tender products pursuant to the extended service contracts on
a non-exclusive basis. The unrelated third party will pay
the Company competitive market rates for repairs on products
tendered pursuant to the extended service contracts.
The Company will continue to sell extended service
contracts on behalf of the unrelated third party and will
receive a commission upon the sale. The commission will be
recognized as commission income at the time of sale.
NOTE 4-RESTRUCTURING CHARGES
In December 1994, the Company adopted a business
restructuring plan to close or convert 233 of the 306 Tandy
Name Brand stores. Closed stores will include 151
VideoConcepts, 30 McDuff mall stores and 19 McDuff
Supercenters. Thirty-three other mall stores or McDuff
Supercenters will be converted to Radio Shack or Computer
City Express stores. It is anticipated that a majority of
these stores will be closed by the end of the first quarter
of 1995. Approximately 57 McDuff Supercenters and 16 The
Edge in Electronics stores will remain open and will become
part of the Specialty Retail Group of Radio Shack. A pre-tax
charge of $89,071,000 was taken in the fourth quarter of
fiscal 1994 related to the closing and conversion of these
stores. The components of the restructuring charge and an
analysis of the amounts charged against the reserve are
outlined in the following table:
(In thousands)
--------------
Lease obligations $46,682
Impairment of fixed assets 17,991
Inventory impairment 16,600
Goodwill impairment 4,222
Termination benefits 1,218
Other 2,358
-------
Total restructuring reserve charge 89,071
Costs charged against the reserve:
Goodwill (4,222)
Lease payments (1,466)
-------
Ending reserve $83,383
=======
The lease obligations, termination benefits and conversion
of 33 stores will require cash outlays, most of which are
expected to be made during 1995. The cash outlays will be
financed by operating cash flows. Management anticipates
that pre-tax operating losses during the period of store
closures will approximate $6,000,000 to $8,000,000
(unaudited).
Sales and operating revenues associated with the closing
of Tandy Name Brand stores were approximately $261,990,000
(unaudited) and $271,914,000 (unaudited) for calendar years
1994 and 1993, respectively, and operating losses
approximated $18,125,000 (unaudited) and $15,342,000
(unaudited) for calendar 1994 and 1993, respectively. During
the fiscal year ended June 30, 1992, sales and operating
revenues and operating losses from the closing stores were
approximately $254,531,000 (unaudited) and $10,169,000
(unaudited), respectively. The results of the closing stores
for the six months ended December 31, 1992 are not presented
because, due to the seasonal nature of the stores'
operations, such results would not be comparable to any of
the twelve-month results for the other periods presented. In
conjunction with this restructuring, 1,425 (unaudited)
employees will be terminated, most of which are store
employees and managers. As of December 31, 1994, no
employees had been terminated and, accordingly, no
termination benefits had been paid.
The Company adopted a plan resulting in business
restructuring charges during the six months ended December
31, 1992 designed to improve the Company's competitiveness
and future profitability. The pre-tax charge of $48,000,000
related primarily to the closing of 110 of the then 432 Tandy
Name Brand stores, mainly McDuff Supercenters in major market
areas and, to a lesser extent, the elimination of certain
product lines. Some product lines were reduced or eliminated
after consideration of competitive factors and market trends.
These stores were closed in the first quarter of 1993.
Additional restructuring charges of $39,500,000, related to
discontinued operations, were recognized in the six months
ending December 31, 1992 and primarily related to the
write-off of goodwill, the rationalization of certain product
lines and the closure of certain operations. This
restructuring charge is included in the operating loss from
discontinued operations.
NOTE 5-SHORT-TERM INVESTMENTS
The weighted average interest rate was 5.2% at December
31, 1994 for short-term investments totaling $80,373,000.
The weighted average interest rate was 3.2% at December 31,
1993 for short-term investments totaling $153,839,000.
NOTE 6-ACCOUNTS AND NOTES RECEIVABLE
<TABLE>
Accounts and Notes Receivable
<CAPTIONS>
December 31,
(In thousands) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Gross customer receivable balances of credit operations $ 705,691 $ 797,550
Less securitized customer receivables (300,990) (350,000)
---------- ----------
Customer receivable balances of credit operations 404,701 447,550
Plus initial direct costs, net of amortization of
$6,736,000 and $5,302,000, respectively 10,649 9,202
---------- ----------
Net customer receivable balances of credit operations 415,350 456,752
Deferred payment due on sale of credit operations,
net of discount of $3,477,000 176,300 --
---------- ----------
Net receivables related to credit operations 591,650 456,752
Trade accounts receivable 134,161 114,143
Receivable and current portion of notes due from InterTAN 8,707 11,650
Other receivables 55,957 22,238
Less allowance for doubtful accounts (21,374) (22,340)
---------- ----------
$ 769,101 $ 582,443
========== ==========
</TABLE>
<TABLE>
Allowance for Doubtful Accounts
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at the beginning of the year $ 22,340 $ 21,945 $ 17,203 $ 16,359
Provision for credit losses and bad debt included in
selling, general and administrative expense 49,344 55,043 38,735 62,509
Reserve allocated to securitized receivables 1,748 (1,203) (2,033) (1,136)
Reserve on credit accounts sold (6,387) -- -- --
Uncollected receivables written off, net of recoveries (45,671) (53,445) (31,960) (60,529)
--------- --------- --------- ---------
Balance at the end of the year related to
continuing operations 21,374 22,340 21,945 17,203
Balance at the end of the year related to
discontinued operations -- -- 8,849 8,208
--------- --------- --------- ---------
Balance at the end of the year $ 21,374 $ 22,340 $ 30,794 $ 25,411
========= ========= ========= =========
</TABLE>
Effective May 1, 1991, the Company transferred
$573,500,000 of its customer receivables to a trust which, in
turn, on June 18, 1991, sold $350,000,000 of certificates
representing undivided interests in the trust in a public
offering. At December 31, 1994 and 1993, $300,990,000 and
$350,000,000, respectively, of the certificates were
outstanding and, accordingly, were not reflected in the
Company's accounts receivable balances. The fair value of
the certificates at December 31, 1994 was approximately
$301,652,000. At December 31, 1994, the balance of the
receivables in the trust approximated $534,129,000. The
Company owns the remaining undivided interest in the trust
not represented by the certificates and will continue to
service the receivables for the trust until the sale of Tandy
Credit to SPS is completed. The Company has no plans to
issue additional series of certificates as the Trust is
included in the sale of Tandy's remaining private label
credit card portfolio balances to SPS in 1995. For further
discussion of the sale of the private label credit card
portfolios, see Note 3.
Cash flows generated from the receivables in the trust are
dedicated to the payment of interest on the certificates
which have an annual fixed interest rate of 8.25%, absorption
of defaulted accounts in the trust and payment of servicing
fees to the Company with any remaining cash flows remitted to
the Company. In the event that such excess cash flows are
not sufficient to absorb defaulted accounts, the Company is
contingently liable up to a maximum amount of $136,100,000.
Customer receivable balances of credit operations are
classified as current assets in accordance with industry
practice. The Company's private label credit card accounts
involve revolving rather than installment payments and many
customers pay off their balances sooner than the contractual
term. The repayment terms of the Company's private label
credit cards are as follows: Radio Shack and McDuff customers
must pay each month a minimum of 1/33 of any balance greater
than $1,000, and Incredible Universe and Computer City
customers must pay each month a minimum of 1/25 of any
balance greater than $1,000. For any balances less than
$1,000, the minimum monthly payment ranges between $15 and
$35 for each customer account.
Interest income related to the Company's credit card
operations totaled $46,868,000 for the year ended December
31, 1994, $57,401,000 for the year ended December 31, 1993,
$31,308,000 for the six months ended December 31, 1992 and
$62,307,000 for the year ended June 30, 1992. In 1994 the
Company received interest income from the IRS reflecting the
settlement of outstanding tax issues of approximately
$9,582,000, as well as interest income earned on notes
receivable from AST Research Inc. ("AST") and InterTAN Inc.
("InterTAN") approximating $5,724,000 and $8,280,000,
respectively.
<TABLE>
NOTE 7-PROPERTY, PLANT AND EQUIPMENT
<CAPTIONS>
December 31,
(In thousands) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 22,670 $ 32,346
Buildings 155,334 174,126
Buildings under capital lease 23,873 --
Furniture, fixtures and equipment 430,006 394,242
Leasehold improvements 345,812 314,424
--------- ---------
977,695 915,138
Less accumulated depreciation 473,108 451,400
--------- ---------
$ 504,587 $ 463,738
========= =========
</TABLE>
NOTE 8-OTHER ASSETS
Other assets include the excess purchase price over net
tangible assets of businesses acquired of $13,747,000 at
December 31, 1994 and $18,207,000 at December 31, 1993.
These amounts are net of accumulated amortization of
$5,035,000, and $4,485,000, respectively. The balance of
other assets at December 31, 1994 also includes long-term
receivables relating to InterTAN , AST and Lika of
$128,926,000, net of discount of $16,796,000. The balance at
December 31, 1993 includes long-term receivables relating to
InterTAN and AST of $126,384,000, net of discount of
$22,198,000. See Notes 21 and 22 for a further description
of the terms of the AST and InterTAN notes receivable.
NOTE 9-INDEBTEDNESS AND BORROWING FACILITIES
Borrowings payable within one year are summarized in the
accompanying short-term debt table on page 42. The
short-term debt caption includes primarily domestic seasonal
borrowings. The current portion of long-term debt at
December 31, 1994 includes $45,000,000 of senior notes and
$6,208,000 of medium-term notes and other loans. The current
portion of long-term debt at December 31, 1993 includes
$52,497,000 of medium-term notes and $30,204,000 of bank debt
and other loans. The short-term debt at December 31, 1993
also included $31,739,000 of 10% subordinated debentures due
June 30, 1994. These subordinated debentures were called by
the Company on February 23, 1994 for redemption on April 1,
1994. The redemption was at a price equal to 100% of face
value of the subordinated debentures for a total of
$32,431,000.
Tandy's short-term credit facilities, including revolving
credit lines, are summarized in the accompanying short-term
borrowing facilities table found on page 43. The method used
to compute averages in the short-term borrowing facilities
table is based on a daily weighted average computation which
takes into consideration the time period such debt was
outstanding as well as the amount outstanding. The Company's
primary source of short-term debt, for which borrowings and
repayments have been presented net in the Consolidated
Statements of Cash Flows, consists of short-term seasonal
bank debt and commercial paper. The commercial paper matures
within ninety days as does the short-term seasonal bank debt.
A commercial paper program was established during fiscal
1991 for Tandy and was renewed in May 1994. The Company has
$400,000,000 in committed facilities in place for the
commercial paper program. These facilities are to be used
only if maturing commercial paper cannot be repaid due to an
inability to sell new paper. This agreement is composed of
two facilities--one for $200,000,000 expiring in May 1995 and
another facility for $200,000,000 expiring in May 1997.
Annual commitment fees for the facilities are 2/25 of 1% per
annum and 1/8 of 1% per annum, respectively, whether used or
unused. The commercial paper facilities limit the amount of
commercial paper that may be outstanding to a maximum of
$400,000,000. At December 31, 1994, there were no amounts
outstanding under the facilities.
Long-term debt, net of current maturities, at December 31,
1994 and December 31, 1993 totaled $153,318,000 and
$186,638,000, respectively. Included in long-term debt at
December 31, 1993 is $45,000,000 of 8.69% senior notes due
January 15, 1995. These senior notes had been outstanding
since February 7, 1990.
Tandy completed a $500,000,000 shelf registration in
January 1991 of which $400,000,000 was designated for
medium-term notes. Tandy Credit's $400,000,000 shelf
registration was amended in October 1990 to add a
$200,000,000 Series B medium-term note program. At December
31, 1994 available borrowing capacity under Tandy's and Tandy
Credit's medium-term note programs aggregated $429,200,000.
Medium-term notes outstanding at December 31, 1994 totaled
$73,044,000 compared to $125,479,000 at December 31, 1993.
The weighted average coupon rates of medium-term notes
outstanding at December 31, 1994 and 1993 were 8.5% and 8.7%,
respectively. The $6,000,000 of Tandy Credit's medium-term
notes maturing in May and August of 1995 were paid in full in
February 1995. Tandy Corporation's medium-term notes mature
as follows:
(In thousands)
-------------------------------------------------
Second quarter, 1996 .................... $ 1,500
Third quarter, 1996 ..................... 11,200
Second quarter, 1997 .................... 28,500
Second quarter, 1998 .................... 20,000
Third quarter, 1998 ..................... 5,000
Fourth quarter, 1999 .................... 1,000
-------------------------------------------------
The Company established an employee stock ownership trust
in June 1990. Further information on the trust and its
related indebtedness, which is guaranteed by the Company, is
detailed in the discussion of the Tandy Employees Stock
Ownership Plan in Note 14.
Long-term borrowings outstanding at December 31, 1994
mature as follows:
(In thousands)
-------------------------------------------------
1995 .................................... $61,683
1996 .................................... 23,076
1997 .................................... 41,399
1998 .................................... 37,948
1999 .................................... 12,015
2000 and thereafter ..................... 38,880
-------------------------------------------------
The fair value of the Company's long-term debt of
$191,763,000 (including current portion, but excluding
capital leases) is approximately $194,098,000 at December 31,
1994.
<TABLE>
Short-Term Debt
<CAPTIONS>
December 31,
------------------------------
(In thousands) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Short-term bank debt $ 78,677 $ 90,612
Current portion of long-term debt 51,208 82,701
Commercial paper, less unamortized discount 88,775 172,851
---------- ----------
218,660 346,164
Current portion of capital lease obligations 675 --
Current portion of guarantee of TESOP indebtedness 9,800 10,050
10% subordinated debentures due 1994, less
unamortized discount of $692,000, at December 31, 1993 -- 31,739
---------- ----------
Total short-term debt $ 229,135 $ 387,953
========== ==========
</TABLE>
<TABLE>
Long-Term Debt
<CAPTIONS>
December 31,
------------------------------
(In thousands) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes payable with interest rates at December 31, 1994
ranging from 5.1% to 8.69% $ 54,726 $ 84,930
Medium-term notes payable with interest rates at
December 31, 1994 ranging from 7.25% to 9.67% 73,044 125,479
---------- ----------
127,770 210,409
Less portion due within one year included in
current notes payable (51,208) (82,701)
---------- ----------
76,562 127,708
---------- ----------
Capital lease obligations 23,238 --
Less current portion (675) --
---------- ----------
22,563 --
---------- ----------
Guarantee of TESOP indebtedness 63,993 68,980
Less current portion (9,800) (10,050)
---------- ----------
54,193 58,930
---------- ----------
Total long-term debt $ 153,318 $ 186,638
========== ==========
</TABLE>
<TABLE>
Short-Term Borrowing Facilities
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic seasonal bank credit lines and
bank money market lines:
Lines available at period end $ 1,025,000 $ 1,050,000 $ 1,255,000 $ 1,398,000
Loans outstanding at period end $ 77,300 $ 90,000 $ 240,500 $ 15,000
Compensating balance requirements None None None None
Weighted average interest rate at period end 6.4% 3.6% 3.6% 4.0%
Weighted average of loans outstanding
during period $ 16,358 $ 168,901 $ 75,454 $ 20,394
Highest month-end borrowings $ 88,800 $ 253,200 $ 255,000 $ 50,350
Weighted average interest rate during period 5.2% 3.6% 3.6% 5.1%
Short-term foreign credit lines:
Lines available at period end $ 149,084 $ 143,685 $ 186,841 $ 340,704
Loans outstanding at period end $ 1,377 $ 612 $ 21,257 $ 13,774
Compensating balance requirements None None None None
Weighted average interest rate at period end 7.4% 6.7% 9.1% 11.1%
Weighted average of loans outstanding
during period $ 3,563 $ 1,956 $ 22,590 $ 42,638
Highest month-end borrowings $ 5,192 $ 4,382 $ 29,260 $ 61,637
Weighted average interest rate during period 5.5% 4.0% 9.7% 13.9%
Letters of credit and banker's acceptance lines
of credit:
Lines available at period end $ 475,000 $ 526,000 $ 442,785 $ 410,000
Acceptances outstanding at period end None None None None
Compensating balance requirements None None None None
Letters of credit open against outstanding
purchase orders at period end $ 91,645 $ 124,701 $ 128,798 $ 232,791
Commercial paper credit facilities:
Commercial paper outstanding at period end $ 88,775 $ 172,851 $ 63,879 $ 109,295
Weighted average interest rate at period end 6.2% 3.5% 3.8% 3.8%
Weighted average of commercial paper
outstanding during period $ 37,878 $ 174,494 $ 112,000 $ 80,601
Highest month-end borrowings $ 177,100 $ 295,500 $ 312,250 $ 201,900
Weighted average interest rate during period 4.8% 3.5% 3.5% 5.0%
</TABLE>
NOTE 10-LEASES
Tandy leases rather than owns most of its facilities. The
Radio Shack stores comprise the largest portion of Tandy's
leased facilities. The Radio Shack, Tandy Name Brand and
Computer City stores are located primarily in major shopping
malls, shopping centers or freestanding facilities owned by
other companies. The Company owns three of the nine
Incredible Universe buildings. The store leases are
generally based on a minimum rental plus a percentage of the
store's sales in excess of a stipulated base figure. Tandy
also leases distribution centers and office space. In 1994,
under a sale and leaseback agreement with an unrelated third
party, the Company sold certain Incredible Universe stores
for approximately $52,719,000 and leased the properties back
under a lease agreement which matures on September 9, 1999.
The transaction produced a gain of approximately $1,664,000
which was deferred and is being amortized over the life of
the lease periods. The Company does not have any continuing
involvement under the sale-leaseback transaction. The future
minimum lease payments are included in the table below.
Future minimum rent commitments at December 31, 1994 for
all long-term noncancelable leases (net of immaterial amounts
of sublease rent income) are included in the following table.
(In thousands) Operating Leases Capital Leases
-------------------------------------------------------------
1995 .................... $147,803 $ 4,051
1996 .................... 141,224 4,051
1997 .................... 124,564 4,089
1998 .................... 107,232 4,195
1999 .................... 88,641 4,422
2000 and thereafter ..... 336,975 43,325
-------
Total minimum lease payments 64,133
Less: Amount representing interest (40,895)
-------
Present value of net minimum lease payments $23,238
=======
<TABLE>
Rent Expense
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Minimum rents $ 210,443 $ 200,183 $ 102,986 $ 201,794
Contingent rents 2,947 2,644 2,456 3,938
Sublease rent income (968) (426) (114) (1,059)
----------- ----------- ----------- -----------
Total rent expense $ 212,422 $ 202,401 $ 105,328 $ 204,673
=========== =========== =========== ===========
</TABLE>
<TABLE>
Space Owned and Leased (Unaudited)
<CAPTIONS>
Approximate Square Footage
at December 31,
1994 1993
----------------------------------- -----------------------------------
(In thousands) Owned Leased Total Owned Leased Total
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail
Radio Shack -- 10,806 10,806 -- 10,767 10,767
Computer City -- 1,567 1,567 -- 940 940
Incredible Universe 300 609 909 300 -- 300
Tandy Name Brand -- 1,509 1,509 -- 1,649 1,649
Other 269 -- 269 275 -- 275
----- ------ ------ ----- ------ ------
569 14,491 15,060 575 13,356 13,931
Manufacturing 641 212 853 641 212 853
Warehouse and office 3,357 2,310 5,667 3,384 1,957 5,341
----- ------ ------ ----- ------ ------
4,567 17,013 21,580 4,600 15,525 20,125
===== ====== ====== ===== ====== ======
</TABLE>
<TABLE>
NOTE 11-ACCRUED EXPENSES
<CAPTIONS>
December 31,
(In thousands) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Payroll and bonuses $ 68,974 $ 57,600
Sales and payroll taxes 58,168 44,790
Insurance 52,394 48,609
Deferred service contract income 7,734 102,223
Rent 25,203 22,093
Advertising 38,301 25,546
Interest expense 5,914 7,358
Restructuring reserve 83,383 6,790
Other 36,724 34,048
---------- ----------
$ 376,795 $ 349,057
========== ==========
</TABLE>
NOTE 12-INCOME TAXES
The components of the provision for income taxes and a
reconciliation of the U.S. statutory tax rate to the
Company's effective income tax rate are given in the
accompanying tables.
<TABLE>
Income Tax Expense
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- -----------
(In thousands) 1994 1993 1992 1992
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Current
Federal $ 109,325 $ 109,543 $ 63,869 $ 118,552
State 8,949 8,543 1,482 4,822
Foreign 3,292 1,781 1,003 3,530
----------- ----------- ----------- -----------
121,566 119,867 66,354 126,904
----------- ----------- ----------- -----------
Deferred
Federal 12,127 (4,344) (31,123) (5,619)
Foreign 1,512 -- 5 (1,500)
----------- ----------- ----------- -----------
13,639 (4,344) (31,118) (7,119)
----------- ----------- ----------- -----------
Total income tax expense $ 135,205 $ 115,523 $ 35,236 $ 119,785
=========== =========== =========== ===========
</TABLE>
<TABLE>
Statutory vs. Effective Tax Rate
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Components of pretax income from continuing operations:
United States $ 357,325 $ 298,506 $ 97,874 $ 325,584
Foreign 2,215 12,649 5,043 4,914
----------- ----------- ----------- -----------
Income before income taxes 359,540 311,155 102,917 330,498
Statutory tax rate x 35% x 35% x 34% x 34%
----------- ----------- ----------- -----------
Federal income tax at statutory rate 125,839 108,904 34,992 112,369
State income taxes, less federal income
tax benefit 5,817 5,553 978 3,183
Other, net 3,549 1,066 (734) 4,233
----------- ----------- ----------- -----------
Total income tax expense $ 135,205 $ 115,523 $ 35,236 $ 119,785
=========== =========== =========== ===========
Effective tax rate 37.60% 37.13% 34.24% 36.24%
=========== =========== =========== ===========
</TABLE>
The IRS Dallas field office is reviewing the Company's
1987-1989 tax returns. The review in Dallas could lead to
referral to the IRS National office. The resolution of this
matter could result in additional taxes and interest to the
Company related to the spin-off of InterTAN and raises
questions about the private letter rulings issued by the IRS
regarding the spin-off and certain other tax matters.
Although aggregate additional taxes involved in these
transactions could potentially range from $0 to $46 million,
based on the advice of the Company's independent tax
advisors, the Company believes it would prevail if any tax
litigation had to be instituted. Any ultimate tax assessment
would also include interest. In any event the Company
believes the ultimate resolution would have no material
impact on the Company's financial condition.
In January 1993, the Company adopted FAS No. 109. The
adoption of FAS 109 changes the Company's method of
accounting for income taxes from the deferred method ("APB
11") to an asset and liability approach. Previously, the
Company deferred the past tax effects of timing differences
between financial reporting and taxable income. The asset
and liability approach requires the recognition of deferred
tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities.
The adjustments to the January 1, 1993 balance sheet to
adopt FAS 109 totaled $13,014,000. Approximately $9,786,000
of this adjustment related to continuing operations and the
remaining $3,228,000 was from discontinued operations. The
aggregate amount of $13,014,000 was reflected in 1993 net
income as the cumulative effect of change in accounting
principle. It primarily represents the impact of adjusting
deferred taxes to reflect the then current tax rate of 34% as
opposed to the higher tax rates that were in effect when the
deferred taxes originated. The Company subsequently
increased its U.S. deferred tax asset in 1993 as a result of
legislation enacted during 1993 which increased the corporate
tax rate from 34% to 35%. Deferred tax assets and
liabilities as of December 31, 1994 and December 31, 1993
were comprised of the following:
<TABLE>
Deferred Tax Assets
-------------------
<CAPTIONS>
December 31,
(In thousands) 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C>
Bad debt reserve $ 13,268 $ 14,268
Intercompany profit elimination 4,849 6,654
Deferred service contract income 3,333 41,290
Restructuring reserves 24,680 3,362
Insurance reserves 8,484 5,607
Loss carryforwards and carrybacks -- 7,231
Foreign tax credits 4,396 4,396
Other 4,564 --
---------- ----------
63,574 82,808
Valuation allowance (4,396) (4,396)
---------- ----------
Total deferred tax assets 59,178 78,412
---------- ----------
Deferred Tax Liabilities
------------------------
Inventory adjustments, net 6,963 8,445
Depreciation and amortization 5,886 8,322
Credit card origination costs 4,410 3,221
Deferred taxes on foreign operations 7,783 4,275
Other -- 4,269
---------- ----------
Total deferred tax liabilities 25,042 28,532
---------- ----------
Net Deferred Tax Assets $ 34,136 $ 49,880
========== ==========
</TABLE>
NOTE 13-STOCK PURCHASE AND SAVINGS PLANS
Stock purchase and savings plans are offered by Tandy
Corporation to its employees. These plans are designed to
provide employees with a consistent investment program which
provides for their retirement and an opportunity to
participate in the Company's growth.
TANDY CORPORATION STOCK PURCHASE PROGRAM ("SPP"). The SPP is
available to most employees who have been employed at least
six months. Participants may contribute 1% to 10% of annual
compensation. The Company matches 40%, 60% or 80% of the
employee's contribution depending on the length of the
employee's participation in the SPP. Tandy's contributions
to the SPP were $16,881,000 and $18,955,000 for the calendar
years ended December 31, 1994 and 1993, respectively, and
$8,756,000 for the six months ended December 31, 1992. For
fiscal 1992 the Company's contributions were $20,253,000.
TANDY EMPLOYEES DEFERRED SALARY AND INVESTMENT PLAN ("DIP").
An eligible employee electing to participate in the DIP may
defer 5% of annual compensation, subject to certain
limitations established by the Tax Reform Act of 1986. The
Company pays this amount into the plan as a deferred salary
contribution for the account of the employee. The employee's
5% contribution is considered deferred compensation and is
not taxed to the employee as long as it remains in the plan.
Beginning October 1990, the Company began making
contributions to the newly formed employee stock ownership
plan described in Note 14 in lieu of the matching
contributions to the DIP. To participate in the employee
stock ownership plan, employees must continue to make
deferred salary contributions to the DIP. In June 1992, the
Company received a determination letter ruling that the DIP
is a qualified 401(k) plan. An administrative committee
appointed by the Board of Directors invests the DIP's assets
primarily in Tandy securities.
NOTE 14-TANDY EMPLOYEES STOCK OWNERSHIP PLAN ("TESOP")
As a continuation of the Company's programs to encourage
employee ownership of Tandy stock, the Company formed the
TESOP on June 28, 1990. On July 31, 1990, the TESOP trustee
borrowed $100,000,000 at an interest rate of 9.34% with
varying semi-annual principal payments through June 30, 2000.
On December 15, 1994, the TESOP entered into an agreement
with an unrelated third party to refinance a portion of the
TESOP's indebtedness by borrowing $5,063,000 at an interest
rate of 8.76% to retire a portion of the original
$100,000,000 indebtedness. The maturity date of this
borrowing is December 30, 2000. The TESOP plans to borrow an
additional $11,630,000 over the next five years. The final
maturity on the additional borrowings is projected to be
December 30, 2002. Dividend payments and contributions from
Tandy will be used to repay the indebtedness. Because Tandy
has guaranteed the repayment of these notes, the indebtedness
of the TESOP is recognized as a long-term obligation in the
accompanying consolidated balance sheet. An offsetting
charge has been made in the stockholders' equity section of
the accompanying consolidated balance sheet to reflect
unearned compensation related to the TESOP.
The TESOP trustee used the proceeds from the issuance of
the 1990 notes to purchase 100,000 shares of Series B TESOP
Convertible Preferred Stock (the "TESOP Preferred Stock")
from Tandy at a price of $1,000 per share. Each share of
such stock is convertible into 21.768 shares of Tandy common
stock. The annual cumulative dividend on TESOP Preferred
Stock is $75.00 per share, payable semi-annually. This
series of stock has certain liquidation preferences and may
be redeemed by Tandy after July 1, 1994 at specified
premiums.
During the term of the TESOP, the TESOP Preferred Stock
will be allocated to the participants annually based on the
total debt service made on the indebtedness. In 1994 the
TESOP was amended to provide for quarterly withdrawals by
participants and an annual allocation of TESOP Preferred
Stock to participants. The first annual allocation will
occur on March 31, 1995. The allocations of preferred stock
to the individual participants' accounts are determined
according to the terms of the TESOP. As vested participants
withdraw from the TESOP, payments are made in cash or Tandy
common stock. The preferred stock has a face value of $1,000
per share and the Company is obligated to redeem the
preferred stock at the higher of the appraised value or
$1,000 per share in the event of a participant's withdrawal.
The Company has the option to redeem the preferred stock in
either cash or common stock. Forfeited shares are returned
to the TESOP and allocated to the accounts of other
participants. In June 1992 the Company received a
determination letter ruling from the IRS that the TESOP was a
qualified employee stock ownership plan.
In fiscal 1991 Tandy recorded, as a component of
stockholders' equity, $100,000,000 of unearned compensation
to reflect the value of the TESOP Preferred Stock sold to the
TESOP. As shares of the TESOP Preferred Stock are allocated
to the TESOP participants, compensation expense is recorded
and unearned compensation is reduced. Interest expense on
the TESOP notes is also recognized as a cost of the TESOP.
The compensation component of the TESOP expense is reduced by
the amount of dividends accrued on the TESOP Preferred Stock
with any dividends in excess of the compensation expense
reflected as a reduction of interest expense. During the
year ended December 31, 1994, the compensation and interest
costs related to the TESOP before the reduction for the
allocation of dividends were $10,008,000 and $6,202,000,
respectively. The compensation and interest costs related to
the TESOP before the reduction for the allocation of
dividends were $9,605,000 and $7,195,000, respectively,
during the year ended December 31, 1993. During the six
months ended December 31, 1992, the compensation and interest
costs related to the TESOP before the reduction for the
allocation of dividends were $4,266,000 and $3,969,000,
respectively. Such amounts for fiscal 1992 were $8,233,000
and $8,526,000, respectively. Contributions from Tandy to
the TESOP for the years ended December 31, 1994 and 1993
totaled $11,189,000 and $17,895,000, respectively, including
the $6,777,000 and $7,135,000 of dividends paid on the TESOP
Preferred Stock. Contributions for the six months ended
December 31, 1992 and the year ended June 30, 1992 totaled
$9,269,000 and $16,926,000, respectively, including the
$3,665,000 and $7,441,000 of dividends paid on the TESOP
Preferred Stock.
At September 30, 1994, 31,020 shares of TESOP Preferred
Stock had been released and allocated to participants'
accounts in the TESOP (including 10,288 shares which had been
withdrawn by participants). At December 31, 1994, 8,142
shares of TESOP Preferred Stock were released for allocation
to participants at March 31, 1995. At December 31, 1994,
60,838 shares of TESOP Preferred Stock were available for
later release and allocation to participants over the
remaining life of the TESOP.
Under the terms of Tandy's guarantee of the notes, Tandy
is obligated to make semiannual contributions to the TESOP to
enable it to pay principal and interest on the debt
securities. Tandy has fully and unconditionally guaranteed
the TESOP's payment obligations, whether at maturity, upon
redemption, upon declaration of acceleration or otherwise.
The holders of the notes have no recourse against the assets
of the TESOP except in the event that the TESOP defaults on
payments due and then only to the extent that the TESOP holds
cash payments made by Tandy to the TESOP to enable it to meet
its obligations under the notes and any earnings attributable
to such contributions. No amounts were in default as of
December 31, 1994. The TESOP fiscal year ends on March 31.
At March 31, 1994, the TESOP held as assets $95,786,000 of
TESOP Preferred Stock and $4,186,000 of receivables and had
liabilities comprised of the remaining principal on the notes
of $68,980,000 and accrued interest payable on the notes of
$1,611,000, resulting in net assets of $29,381,000.
NOTE 15-STOCK OPTIONS AND PERFORMANCE AWARDS
1985 Stock Option Plan ("SOP")
------------------------------
Under the 1985 SOP, as amended, options to acquire up to
2,000,000 fully registered shares of Tandy's common stock may
be granted to officers and key management employees of the
Company. The Organization and Compensation Committee (the
"Committee") has sole discretion in determining whether to
grant options, who shall receive them, the number of options
granted to any individual and whether an option will be an
incentive stock option or a nonstatutory stock option. The
term of incentive stock options may not exceed 10 years and
the term of nonstatutory stock options may not exceed a term
of 10 years plus one month. No option may be exercised
within one year of the date of grant and then may be
exercised in specified installments only after stated
intervals of time.
The maximum amount that may be exercised at the expiration
of each of the first through fifth anniversaries of the
nonstatutory stock options is 20%. On each of the first
three anniversaries of the date of grant of the incentive
stock options, one-third of each individual's options become
exercisable. Upon termination of employment, the optionee
must exercise all currently vested options by the earlier of
the option expiration date(s) or three months from the date
of termination of employment or forfeit such options, except
that upon retirement at age 55 or older the three months is
extended to 12 months in the case of nonstatutory stock
options only. Notwithstanding the grant of options initially
exercisable in installments, upon the termination of
employment as a result of death or total disability of an
optionee, all options then held shall for a period of 12
months, subject to earlier termination at the fixed
expiration date, become immediately exercisable without
regard to dates at which the installments are exercisable.
Upon the retirement of an optionee at age 55 or older, the
Committee may in its discretion accelerate the dates at which
remaining installments of options may be exercised to the
date of retirement. In the event of a change in control, all
outstanding options become immediately exercisable for the
full number of shares subject to options. The option price
is determined by the Committee at the time the option is
granted, but the option price will not be less than 100% of
the fair market value of the stock on the date of grant.
Since the option prices have been fixed at the market price
on the date of grant, no compensation has been charged
against earnings by the Company. Authorized and unissued
shares or treasury stock may be issued to participants when
options are exercised.
The SOP provides for adjustments to be made to options
outstanding under the plan in order to prevent dilution of
options upon the occurrence of a number of events, including
the distribution of shares of a subsidiary of the Company to
its stockholders.
Under the SOP there were 1,290,974 vested options which
could have been exercised for a total price of $44,460,052 at
December 31, 1994. Shares available for additional grants
under the SOP were 242,626 at December 31, 1994.
1993 Incentive Stock Plan ("ISP")
---------------------------------
During March 1993, the Board adopted the ISP, as amended.
The ISP is administered by the Committee. A total of
3,000,000 shares of the Company's common stock were reserved
for issuance under the ISP and have been registered with the
Securities and Exchange Commission.
The ISP permits the grant of incentive stock options
("ISOs"), nonstatutory stock options (options which are not
ISOs) ("NSOs"), stock appreciation rights ("SARs"),
restricted stock, performance units or performance shares.
Grants of options under the ISP shall be for terms
specified by the Committee, except that the term shall not
exceed 10 years (5 years if granted to a 10% or more
stockholder of the Company's common stock). Subject to the
discretion of the Committee, options become exercisable in
such installments and at such times as specified in the
option agreements, payments for shares issuable upon exercise
of an option may be made in cash, common stock, or a
combination of both. The amount payable upon exercise of a
SAR may be made at the discretion of the Committee either in
cash or common stock or in a combination of cash and common
stock. Provisions of the ISP generally provide that in the
event of a change in control all options become immediately
and fully exercisable and all restrictions on restricted
stock lapse.
As part of the ISP, each non-employee director of the
Company receives a grant of NSOs for 3,000 shares of the
Company's common stock on the first business day of September
of each year ("Director Options"). Director Options have an
exercise price of 100% of the fair market value of the
Company's common stock on the trading day prior to the date
of grant, vest as to one-third of the shares annually on the
first three anniversary dates of the date of grant and expire
10 years after the date of grant. The first grant of the
Director Options was made on September 1, 1993.
The exercise price of an option (other than a Director
Option) is determined by the Committee, provided that the
exercise price shall not be less than 100% of the fair market
value of a share of the Company's common stock on the date of
grant.
At December 31, 1994 there were 122,290 vested options
which could have been exercised for a total exercise price of
$4,584,645 and 2,258,200 shares available for additional
grants under the ISP. The ISP shall terminate on the tenth
anniversary of the day preceding the date of its adoption by
the Board and no option or award shall be granted under the
ISP thereafter.
Stock option activity from June 30, 1991 through December
31, 1994, including GRiD options, is summarized in the
accompanying chart.
<TABLE>
Stock Option Activity
<CAPTIONS>
Aggregate
Number Option Price Exercised
(In thousands, except per share amounts) of Shares Per Share Value
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
June 30, 1991 ................................ 1,414 $5.94--$47.50 $ 49,651
Options granted .............................. 358 $24.25--$28.19 10,057
Options exercised ............................ (20) $5.94--$17.81 (119)
Options cancelled ............................ (45) $5.94--$47.50 (1,574)
----- --------
June 30, 1992 ................................ 1,707 $5.94--$47.50 58,015
Options granted .............................. 254 $30.38 7,716
Options exercised ............................ (9) $5.94 (52)
Options cancelled ............................ (12) $5.94--$47.50 (353)
----- --------
December 31, 1992 ............................ 1,940 $5.94--$47.50 65,326
Options granted .............................. 368 $30.00--$37.25 13,343
Options exercised ............................ (182) $5.94--$47.50 (5,341)
Options cancelled ............................ (162) $5.94--$47.50 (5,533)
----- --------
December 31, 1993 ............................ 1,964 $25.06--$46.13 67,795
Options granted .............................. 398 $37.00--$44.19 17,401
Options exercised ............................ (76) $25.06--$41.94 (2,465)
Options cancelled ............................ (110) $25.06--$46.13 (4,068)
----- --------
December 31, 1994 ............................ 2,176 $25.06--$45.88 $ 78,663
===== ========
</TABLE>
NOTE 16-PREFERRED SHARE PURCHASE RIGHTS
In August 1986 the Board of Directors adopted a
stockholder rights plan and declared a dividend of one right
for each outstanding share of Tandy common stock. The Board
amended the rights plan in June 1988 and amended and restated
the rights plan in June 1990. The rights, which will expire
on June 22, 2000, are currently represented by the common
stock certificates and when they become exercisable will
entitle holders to purchase one one-thousandth of a share of
Tandy Series A Junior Participating Preferred Stock for an
exercise price of $140 (subject to adjustment). The rights
will become exercisable and will trade separately from the
common stock only upon the date of public announcement that a
person, entity or group ("Person") has acquired 15% or more
of Tandy's outstanding common stock without the prior consent
or approval of the disinterested directors ("Acquiring
Person") or ten days after the commencement or public
announcement of a tender or exchange offer which would result
in any person becoming an Acquiring Person. In the event
that any person becomes an Acquiring Person, the rights will
be exercisable for 60 days thereafter for Tandy common stock
with a prior market value (as determined under the rights
plan) equal to twice the exercise price. In the event that,
after any person becomes an Acquiring Person, the Company
engages in certain mergers, consolidations, or sales of
assets representing 50% or more of its assets or earning
power with an Acquiring Person (or persons acting on behalf
of or in concert with an Acquiring Person) or in which all
holders of common stock are not treated alike, the rights
will be exercisable for common stock of the acquiring or
surviving company with a prior market value (as determined
under the rights plan) equal to twice the exercise price.
The rights will not be exercisable by any Acquiring Person.
The rights are redeemable at a price of $.05 per right prior
to any person becoming an Acquiring Person or, under certain
circumstances, after the expiration of the 60-day period
described above, but the rights may not be redeemed or the
rights plan amended for 180 days following a change in a
majority of the members of the Board (or if certain
agreements are entered into during such 180-day period).
NOTE 17-TERMINATION PROTECTION PLANS
In August 1990, the Board of Directors of the Company
approved termination protection plans and amendments to
various other benefit plans including the stock purchase
program and deferred salary and investment plan described in
Note 13. These plans provide for defined termination
benefits to be paid to eligible employees of the Company who
have been terminated, without cause, following a change in
control of the Company (as defined). In addition, for a
certain period of time following employee termination, the
Company, at its expense, must continue to provide on behalf
of the terminated employee certain employment benefits. In
general, during the twelve months following a change in
control, the Company may not terminate or change existing
employee benefit plans in any way which will affect accrued
benefits or decrease the rate of the Company's contribution
to the plans.
NOTE 18-ISSUANCE OF SERIES C PERCS AND TENDER OFFER
In February 1992, the Company issued 15,000,000 depositary
shares of Series C Conversion Preferred Stock ("Series C
PERCS") at $29.50 per depositary share (equivalent to
$2,950.00 for each Series C PERCS). Each of the depositary
shares represents ownership of 1/100th of a share of Series C
PERCS. The annual dividend for each depositary share is
$2.14 (based on the annual dividend rate for each Series C
PERCS of $214.00). On April 15, 1995, each of the depositary
shares will automatically convert into (i) one share of Tandy
common stock (equivalent to 100 shares for each Series C
PERCS) subject to adjustment in certain events and (ii) the
right to receive on such date an amount in cash equal to all
accrued and unpaid dividends thereon. The liquidation
preference for each depositary share is $29.50 (equivalent to
$2,950.00 for each Series C PERCS) plus any accrued and
unpaid dividends.
Tandy announced on January 23, 1995 that it had exercised
its right to call all the issued and outstanding PERCS for
conversion on March 10, 1995, prior to its mandatory
conversion date of April 15, 1995. For each PERCS depositary
share redeemed, 0.787757 Tandy common shares will be issued
for an aggregate of approximately 11,816,000 shares. In
addition, each PERCS depositary share will receive a dividend
in cash of $0.321 representing the accrued dividend from
January 16, 1995 through the redemption date of March 10,
1995.
NOTE 19-SUPPLEMENTAL CASH FLOW INFORMATION
The effects of changes in foreign exchange rates on cash
balances have not been material. Cash flows from operating
activities included cash payments as follows:
<TABLE>
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- ----------
(In thousands) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest paid $ 31,440 $ 47,223 $ 29,480 $ 59,214
Income taxes paid $ 84,516 $ 105,313 $ 62,466 $ 135,736
</TABLE>
A capital lease obligation of $23,873,000 was recorded
during the year for the lease of certain retail stores.
NOTE 20-LITIGATION
The Company is a defendant in a consolidated action
titled "O'Sullivan Industries Holdings, Inc. Securities
Litigation", which was commenced in 1994 and is currently
pending before the United States District Court for the
Western District of Missouri. The plaintiffs seek damages in
an unspecified amount alleging that O'Sullivan's initial
public offering prospectus, certain press releases and other
materials contained material misrepresentations and
omissions. They have also named O'Sullivan, O'Sullivan's
officers and directors, and the underwriters as defendants.
Tandy believes that the lawsuit is totally without merit and
is defending itself vigorously. It further believes that
even though an adverse resolution of the litigation may have
a negative impact on its results of operation in the year of
resolution, resolution will not have a material adverse
effect on its financial condition or liquidity.
Tandy has various claims, lawsuits, disputes with third
parties, investigations and pending actions involving
allegations of negligence, product defects, discrimination,
infringement of intellectual property rights, securities
matters, tax deficiencies, violations of permits or licenses,
and breach of contract and other matters against the Company
and its subsidiaries incident to the operation of its
business. The liability, if any, associated with these
matters was not determinable at December 31, 1994. While
certain of these matters involve substantial amounts, and
although occasional adverse settlements or resolutions may
occur and negatively impact earnings in the year of
settlement, it is the opinion of management that their
ultimate resolution will not have a materially adverse effect
on Tandy's financial position.
NOTE 21-DISCONTINUED OPERATIONS
On June 25, 1993, the Board of Directors of Tandy adopted
a formal plan of divestiture under which the Company would
sell its computer manufacturing and marketing businesses, the
O'Sullivan Industries, Inc. ("O'Sullivan") ready-to-assemble
furniture manufacturing and related marketing business, the
Memtek Products division and the Lika printed circuit board
business.
Computer Manufacturing. The Company closed the sale of
the computer manufacturing and marketing businesses to AST
Research, Inc. ("AST") on July 13, 1993. In accordance
with the terms of the definitive agreement between Tandy
and AST, Tandy received $15,000,000 upon closing of the
sale. The balance of the purchase price of $90,000,000 is
payable by a promissory note. The principal amount of
this promissory note is payable by July 12, 1996; interest
is accrued and paid annually. The interest rate on the
promissory note is currently 4.94% per annum and is
adjusted annually, not to exceed 5% per annum. The terms
of the promissory note stipulate that the outstanding
principal balance may be paid at maturity at AST's option
in cash or the common stock of AST. However, at Tandy's
option not more than 50% of the initial principal balance
may be paid in common stock of AST. The promissory note
is supported by a standby letter of credit in the amount
of the lesser of $100,000,000 or 70% of the outstanding
principal amount of the promissory note. At December 31,
1994, the standby letter of credit approximated
$67,704,000.
In October 1993, the Company sold its computer marketing
operations in France to AST, together with certain other
multimedia assets and additional Swedish inventory, in
return for an increase in the principal amount of the
promissory note described above to $96,700,000. The
Company has discounted this note by $2,000,000 and the
discount will be recognized as interest using the
effective interest rate method over the life of the note.
Memtek Products. On November 10, 1993, the Company
executed a definitive agreement with Hanny Magnetics
(B.V.I.) Limited, a British Virgin Islands corporation
("Hanny"), to purchase certain assets of the Company's
Memtek Products operations, including the license
agreement with Memorex Telex, N.V. for the use of the
Memorex trademark on licensed consumer electronics
products. This sale closed on December 16, 1993. Hanny
is a subsidiary of Hanny Magnetics (Holdings) Limited, a
Bermuda corporation, listed on the Hong Kong Stock
Exchange. Proceeds from this sale aggregated
$69,602,000. The $7,102,000 receivable which remained at
December 31, 1993 was paid in 1994.
O'Sullivan Industries. On January 27, 1994 the Company
announced that it had reached an agreement with the
underwriters to sell all the common stock of O'Sullivan
Industries Holdings, Inc., the parent company of
O'Sullivan, to the public at $22 per share. The net
proceeds realized by Tandy in the initial public offering,
together with a $40,000,000 cash dividend from O'Sullivan
Industries, Inc., approximated $350,000,000. The initial
public offering closed on February 2, 1994.
Tandy has recognized income of approximately $4,399,000,
net of tax, during the year ended December 31, 1994
pursuant to a Tax Sharing and Tax Benefit Reimbursement
Agreement between Tandy and O'Sullivan under which Tandy
receives payments from O'Sullivan approximating the
federal tax benefit that O'Sullivan realizes from the
increased tax basis of its assets resulting from the
initial public offering. The higher tax basis increases
O'Sullivan's tax deductions and, accordingly, reduces
income taxes payable by O'Sullivan. These payments will
be made over a 15-year time period and are contingent upon
O'Sullivan's taxable income each year. The Company is
recognizing these payments as additional sale proceeds and
gain in the year in which the payments become due and
payable to the Company pursuant to the Tax Sharing and Tax
Benefit Reimbursement Agreement. The additional gain is
recorded as a reduction of SG&A expense in the
accompanying Consolidated Statements of Income.
Lika. On October 11, 1994, Tandy sold the assets used
in its Lika(R) printed circuit board division to Viktron
Limited Partnership, an Illinois limited partnership. The
proceeds from the sale and liquidation of assets
approximated $16,380,000 which included $7,754,000 in
cash, proceeds from liquidation of retained assets of
$5,594,000 and secured promissory notes for $3,032,000.
In connection with the computer manufacturing sale, the
Memtek Products sale and the Lika sale, the Company agreed to
retain certain liabilities primarily relating to warranty
obligations on products sold prior to the sale. Management
believes that accrued reserves, as reflected on its December
31, 1994 balance sheet, are adequate to cover estimated
future warranty obligations for the products.
The losses from discontinued operations prior to the
measurement date are outlined in the table below.
<TABLE>
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
------------ ----------- -----------
(In thousands) 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and operating revenues $ 368,137 $ 500,861 $ 940,591
=========== =========== ===========
Loss from discontinued operations:
Operating loss before income tax $ (59,549) $ (72,665) $ (30,503)
Income tax benefit 1,930 8,790 3,637
----------- ----------- -----------
Operating loss (57,619) $ (63,875) $ (26,866)
----------- =========== ===========
Estimated loss on disposal (63,778)
Estimated operating loss during
phase out period (7,000)
Income tax benefit 16,600
-----------
Loss on disposal (54,178)
-----------
Total loss from discontinued $ (111,797)
===========
</TABLE>
A loss from the sale of the Company's computer
manufacturing operations to AST, inclusive of losses from
operations during the phase out period, was offset by gains
from the sale of Memtek Products, O'Sullivan and Lika, also
inclusive of results of operations during the phase out
period.
Interest expense of $4,608,000 allocated through the
measurement date of June 30, 1993 and $5,170,000 for the six
months ended December 31, 1992, has been allocated to
discontinued operations based on the percentage of the net
assets of discontinued operations to total net assets.
NOTE 22-RELATIONS WITH INTERTAN
InterTAN, the former foreign retail operations of Tandy,
was spun off to Tandy stockholders as a tax-free dividend in
fiscal 1987. Under the merchandise purchase terms of the
original distribution agreement, InterTAN could purchase on
payment terms products sold or secured by Tandy. A&A
International ("A&A"), a subsidiary of Tandy, was the
exclusive purchasing agent for products originating in the
Far East for InterTAN.
On July 16, 1993 InterTAN had an account payable to Tandy
of approximately $17,000,000 of which $7,600,000 was in
default. InterTAN's outstanding purchase orders for
merchandise placed under the distribution agreement with
Tandy, but not yet shipped, totaled approximately
$44,000,000. Because InterTAN had defaulted, on July 16
Tandy terminated the merchandise purchase terms of the
distribution agreement and the license agreements. Tandy
offered InterTAN interim license agreements which expired
July 22, 1993, unless extended. The agreements were extended
on July 23, 1993.
On July 30, 1993 Trans World Electronics, Inc. ("Trans
World"), a subsidiary of Tandy, reached agreement with
InterTAN's banking syndicate to buy approximately $42,000,000
of InterTAN's debt at a negotiated, discounted price. The
closing of this purchase occurred on August 5, 1993, at which
time Tandy resumed limited shipments to InterTAN and granted
a series of short-term, interim licenses pending the
execution of new license and merchandise agreements. The
debt purchased from the banks has been restructured into a
seven-year note with interest of 8.64% due semiannually
beginning February 25, 1994 and semiannual principal payments
beginning February 25, 1995 (the "Series A" note). Trans
World provided approximately $10,000,000 in working capital
and trade credit to InterTAN. Interest on the working
capital loan (the "Series B" note) of 8.11% is due
semiannually beginning February 25, 1994 with the principal
due in full on August 25, 1996. Trans World also has
received warrants with a five-year term exercisable for
approximately 1,450,000 shares of InterTAN common stock at an
exercise price of $6.618 per share. As required by an
agreement with Tandy, InterTAN has registered the warrants
under the Securities Act of 1933. At December 31, 1994,
InterTAN's common stock price, as quoted in the Wall Street
-----------
Journal, was $8.125 per share. The fair market value of
-------
these warrants at December 31, 1994 approximates $2,500,000.
In addition to the bank debt purchased by Trans World and
the working capital loan, InterTAN's obligations to Trans
World included two additional notes for approximately
$23,665,000 (the "Series C" note) and $24,037,000 (the
"Series D" note) with interest rates of 7.5% and 8%,
respectively. The notes represented the restructuring of
InterTAN accounts payable for merchandise already shipped and
required monthly interest payments. All principal and
interest on the Series C note was paid in full by December
31, 1993. The Series D note was paid in full during the
first quarter of 1994. All of Tandy's debt from InterTAN is
secured by a first priority lien on substantially all of
InterTAN's assets in Canada and the U.K.
A new merchandise agreement was reached with InterTAN in
October 1993 which requires future purchase orders to be
backed by letters of credit posted by InterTAN. New license
agreements provide for a future royalty to Tandy. InterTAN
had obligations for purchase orders outstanding for
merchandise ordered by A&A for InterTAN but not yet shipped
totaling approximately $24,705,000 at December 31, 1994.
InterTAN has increased its bank revolving credit facility
with its new banking syndicate to Canadian $60,000,000 (U.S.
$42,774,000 equivalent at December 31, 1994). In the case of
InterTAN's default on the bank credit line, Tandy will, at
the option of InterTAN's new banking syndicate, purchase
InterTAN's inventory and related accounts receivable at 50%
of their net book value, up to the amount of outstanding bank
loans, but not to exceed Canadian $60,000,000. In that
event, Tandy could foreclose on its first priority lien on
InterTAN's assets in Canada and the U.K. If Tandy fails to
purchase the inventory and related accounts receivable of
InterTAN from the banking syndicate, the syndicate upon
notice to Tandy and expiration of time, can foreclose upon
InterTAN's assets in Canada and the U.K. ahead of Tandy. The
inventory repurchase agreement between InterTAN's banking
syndicate and Tandy has been amended and restated to reflect
the foregoing.
As of December 31, 1994 InterTAN owed Tandy an aggregate
of $39,965,000, net of discount. The current portion of the
obligation approximates $8,707,000 and the non-current
portion approximates $31,258,000. In 1994 Tandy recognized
$3,855,000 in accretion of discount on the note receivable
from InterTAN which resulted from the purchase of the bank
debt at a discounted price. Accretion of this discount is
based on the effective interest rate method. Tandy
recognized sales to and commission income from InterTAN of
approximately $19,764,000 and interest income of $8,280,000
during fiscal 1994. During the year ended December 31, 1993,
Tandy recognized approximately $93,315,000 of sales to
InterTAN and interest income of $3,085,000. Tandy's sales to
InterTAN totaled $90,130,000 during the six months ended
December 31, 1992 and $171,126,000 during fiscal 1992.
A&A will continue as the exclusive purchasing agent for
InterTAN in the Far East on a commission basis. Commencing
in March 1994, only the purchasing agent commission and sales
by Tandy manufacturing plants to InterTAN were recorded as
sales and operating revenues. InterTAN purchases from third
parties through A&A are no longer recorded as sales,
reflecting the arrangement under the new merchandise
agreement. Accordingly, sales by Tandy to InterTAN in 1994
are considerably lower than in prior years; however, the
earned income relating thereto was not materially different.
Through February 1995 InterTAN has met all of its payment
obligations to Tandy. In addition, its operations have
improved in fiscal 1995 as evidenced by its published net
income for the six months ended December 31, 1994
approximating $17,704,000 or $1.11 per fully diluted share as
opposed to net income of $4,567,000 or $0.49 per fully
diluted share for the same period in the prior year. As a
result, nothing has come to the attention of management which
would indicate that InterTAN would not be able to continue to
meet its payment obligations pursuant to the debt agreements
with Tandy.
Canadian tax authorities are reviewing InterTAN's Canadian
subsidiary's 1987-89 tax returns. The Company cannot
determine whether the ultimate resolution of that review will
have an effect on InterTAN's ability to meet its obligations
to Tandy, but at the present, the Company believes that the
ultimate resolution of this review will not impair InterTAN's
ability to meet its obligations to Tandy.
NOTE 23-QUARTERLY DATA (UNAUDITED)
As the Company's operations are predominantly retail
oriented, its business is subject to seasonal fluctuations
with the December 31 quarter being the most significant in
terms of sales and profits because of the Christmas selling
season.
During the quarter ended December 31, 1994, the Company
recognized a restructuring charge of $89,071,000 for business
restructuring relating to the closing of certain retail
stores. The Company also recognized a gain of $91,437,000
relating to the sale of Computer City and Incredible Universe
private label credit card portfolios and the transfer of the
Company's legal obligations pursuant to extended service
contracts. See Notes 3 and 4 for further information.
During the quarter ended December 31, 1993, the Company
recognized a gain, net of tax, from discontinued operations
of approximately $15,822,000. This gain partially offset the
after-tax charge of $70,000,000 previously taken in the June
1993 quarter and reduced the loss on disposal of discontinued
operations to approximately $54,178,000. The gain resulted
from the better than anticipated sales price received for
O'Sullivan partially offset by additional foreign currency
translation losses and below plan operating results of the
divested companies during the divestment period, net of
related income tax adjustments. See Note 21 for further
information on discontinued operations.
During the quarter ended March 31, 1993, the Company
adopted FAS 109 which changed the Company's method of
accounting for income taxes from the deferred method to an
asset and liability approach. The adjustments to the January
1, 1993 balance sheet to adopt FAS 109 totaled $13,014,000.
This amount is reflected in 1993 net income as the cumulative
effect of a change in accounting principle. See Note 12 for
further information on Change in Accounting Principle -
Provision for Income Taxes.
As discussed in detail in Note 2, income per share amounts
and the weighted average of common and common equivalent
shares outstanding for all quarters commencing with the
quarter ending March 31, 1992 (quarter of issuance) through
September 30, 1994 have been retroactively restated to
reflect that the PERCS will convert into 11,816,000 shares of
common stock.
<TABLE>
QUARTERLY DATA (Unaudited)
<CAPTIONS>
Three Months Ended
-------------------------------------------------------------
(In thousands) March 31 June 30 Sept. 30 Dec. 31
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Net sales and operating revenues $ 992,135 $ 1,009,277 $ 1,119,155 $ 1,823,112
Gross profit 407,354 407,174 447,656 663,880
Net income 41,795 34,415 46,191 101,934
Net income available per average
common and common equivalent share $ 0.53 $ 0.44 $ 0.59 $ 1.37
Dividends declared per common share $ 0.15 $ 0.15 $ 0.15 $ 0.18
Average common and common
equivalent shares outstanding 75,802 75,417 75,023 73,262
Year ended December 31, 1993:
Net sales and operating revenues $ 864,712 $ 843,111 $ 939,897 $ 1,454,831
Gross profit 389,720 368,866 400,535 560,823
Income from continuing operations 40,673 31,741 42,559 80,659
Income (loss) from discontinued
operations, net of tax (18,542) (109,077) -- 15,822
Cumulative effect on prior years of
change in accounting principle 13,014 -- -- --
Net income (loss) 35,145 (77,336) 42,559 96,481
Net income (loss) available per average
common and common equivalent share:
Income from continuing operations $ 0.52 $ 0.40 $ 0.54 $ 1.04
Income (loss) from discontinued operations (0.25) (1.45) -- 0.21
Cumulative effect on prior years of
change in accounting principle 0.17 -- -- --
Net income (loss) available per average
common and common equivalent share 0.44 (1.05) 0.54 1.25
Dividends declared per common share $ 0.15 $ 0.15 $ 0.15 $ 0.15
Average common and common
equivalent shares outstanding 75,081 75,387 75,666 76,033
</TABLE>
<PAGE>
TANDY CORPORATION
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page No.
2a Agreement for Purchase and Sale of Assets
dated as of June 30, 1993 between AST
Research, Inc., as Purchaser and Tandy
Corporation, TE Electronics Inc., and GRiD
Systems Corporation, as Sellers (without
exhibits) (filed as Exhibit 2 to Tandy's
July 13, 1993 Form 8-K filed on July 27,
1993, Accession No. 0000096289-93-000004
and incorporated herein by reference).
2b Amended and Restated Stock Exchange
Agreement dated February 1, 1994 by and
among O'Sullivan Industries Holdings, Inc.,
and TE Electronics Inc. (filed as Exhibit
2b to Tandy's Form 10-K filed on March 30,
1994, Accession No. 0000096289-94-000029
and incorporated herein by reference).
2c U.S. Purchase Agreement dated January 26,
1994 by and among O'Sullivan Industries
Holdings, Inc., TE Electronics Inc. and
the U.S. Underwriters which included Merrill
Lynch & Co., Wheat First Butcher & Singer,
The Chicago Dearborn Company and Rauscher
Pierce Refsnes, Inc. (filed as Exhibit 2c
to Tandy's Form 10-K filed on March 30,
1994, Accession No. 0000096289-94-000029
and incorporated herein by reference).
2d International Purchase Agreement dated
January 26, 1994 by and among O'Sullivan
Industries Holdings, Inc., TE Electronics
Inc. and the U.S. Underwriters which included
Merrill Lynch International Limited and UBS
Limited (filed as Exhibit 2d to Tandy's
Form 10-K filed on March 30, 1994, Accession
No. 0000096289-94-000029 and incorporated
herein by reference).
2e Acquisition Agreement dated January 18, 1995
between Hurley State Bank, as purchaser and
Tandy Credit Corporation as seller (without
exhibits) (filed as Exhibit (c) to Tandy's
January 18, 1995 Form 8-K filed on February
2, 1995, Accession No. 0000096289-95-000008
and incorporated herein by reference).
3a(i) Restated Certificate of Incorporation of
Tandy dated December 10, 1982 (filed as
Exhibit 4A to Tandy's 1993 Form S-8 for
the Tandy Corporation Incentive Stock Plan,
Reg. No. 33-51603, filed on November 12,
1993, Accession No. 0000096289-93-000017
and incorporated herein by reference).
3a(ii) Certificate of Amendment of Certificate of
Incorporation of Tandy Corporation dated
November 13, 1986 (filed as Exhibit 4A to
Tandy's 1993 Form S-8 for the Tandy
Corporation Incentive Stock Plan, Reg. No.
33-51603, filed on November 12, 1993,
Accession No. 0000096289-93-000017 and
incorporated herein by reference).
3a(iii) Certificate of Amendment of Certificate
of Incorporation, amending and restating the
Certificate of Designation, Preferences and
Rights of Series A Junior Participating
Preferred Stock dated June 22, 1990 (filed
as Exhibit 4A to Tandy's 1993 Form S-8 for
the Tandy Corporation Incentive Stock Plan,
Reg. No. 33-51603, filed on November 12,
1993, Accession No. 0000096289-93-000017
and incorporated herein by reference).
3a(iv) Certificate of Designations of Series B
TESOP Convertible Preferred dated June 29,
1990 (filed as Exhibit 4A to Tandy's 1993
Form S-8 for the Tandy Corporation Incentive
Stock Plan, Reg. No. 33-51603, filed on
November 12, 1993, Accession No. 0000096289-
93-000017 and incorporated herein by reference).
3a(v) Certificate of Designation, Series C
Conversion Preferred Stock dated February 13,
1992 (filed as Exhibit 4A to Tandy's 1993
Form S-8 for the Tandy Corporation Incentive
Stock Plan, Reg. No. 33-51603, filed on
November 12, 1993, Accession No. 0000096289-
93-000017 and incorporated herein by reference).
3b Tandy Corporation Bylaws, restated as of
August 4, 1993 (filed as Exhibit 4B to Tandy's
Form S-8 for the Tandy Corporation Incentive
Stock Plan, Reg. No. 33-51603, filed on
November 12, 1993, Accession No. 0000096289-
93-000017 and incorporated herein by reference).
4a Amended and restated Rights Agreement with
the First National Bank of Boston dated
June 22, 1990 for Preferred Share Purchase
Rights (filed as Exhibit 4b to Tandy's
Form 10-K filed on March 30, 1994, Accession
No. 0000096289-94-000029 and incorporated
herein by reference).
4b Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank,
individually and as Agent for sixteen other
banks, dated as of May 27, 1994 (without
exhibits) (filed as Exhibit 4c to Tandy's
Form 10Q filed on August 15, 1994, Accession
No. 0000096289-94-000039 and incorporated
herein by reference).
4c Continuing Guaranty dated as of June 18,
1991 by Tandy Corporation in favor of
holders of indebtedness issued by Tandy
Credit Corporation that is or may be
publicly traded and is rated by at least
one nationally recognized rating agency
(filed as Exhibit 4e to Tandy's Form 10-K
filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated
herein by reference).
10a* Salary Continuation Plan for Executive
Employees of Tandy Corporation and
Subsidiaries including amendment dated
June 14, 1984 with respect to participation
by certain executive employees, as restated
October 4, 1990 (filed as Exhibit 10a to
Tandy's Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10b* Form of Executive Pay Plan Letters. 59
10c* Post Retirement Death Benefit Plan for
Selected Executive Employees of Tandy
Corporation and Subsidiaries as restated
June 10, 1991 (filed as Exhibit 10c to
Tandy's Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10d* Tandy Corporation Officers Deferred
Compensation Plan as restated July 10,
1992 (filed as Exhibit 10d to Tandy's
Form 10-K filed on March 30, 1994, Accession
No. 0000096289-94-000029 and incorporated
herein by reference).
10e* Special Compensation Plan No. 1 for Tandy
Corporation Executive Officers, adopted in
1993 (filed as Exhibit 10e to Tandy's Form
10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein
by reference).
10f* Special Compensation Plan No. 2 for Tandy
Corporation Executive Officers, adopted in
1993 (filed as Exhibit 10f to Tandy's Form
10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein
by reference).
10g* Special Compensation Plan for Directors of
Tandy Corporation dated November 13, 1986
(filed as Exhibit 10g to Tandy's Form 10-K
filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein
by reference).
10h* Director Fee Resolution (filed as Exhibit
10h to Tandy's Form 10-K filed on March 30,
1994, Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10i* Tandy Corporation 1985 Stock Option Plan as
restated effective August 1990 (filed as
Exhibit 10i to Tandy's Form 10-K filed on
March 30, 1994, Accession No. 0000096289-94-
000029 and incorporated herein by reference).
10j* Tandy Corporation 1993 Incentive Stock Plan
as restated October 14, 1993 (filed as
Exhibit 4B to Tandy's Form S-8 for Tandy
Corporation Incentive Stock Plan, Reg. No.
33-51603, filed on November 12, 1993,
Accession No. 0000096289-93-000017 and
incorporated herein by reference).
10k* Tandy Corporation Officers Life Insurance
Plan as amended and restated effective
August 22, 1990 (filed as Exhibit 10k to
Tandy's Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10l* Restated Trust Agreement Tandy Employees
Supplemental Stock Program through Amendment
No. III dated March 29, 1993 (filed as
Exhibit 10H to Tandy's Form 10-K/A-4 filed
on September 3, 1993, Accession No.
0000096289-93-000011 and incorporated
herein by reference).
10m* Forms of Termination Protection Agreements
for (i) Corporate Executives, (ii) Division
Executives, and (iii) Subsidiary Executives
(filed as Exhibit 10m to Tandy's Form 10-K
filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated
herein by reference).
10n* Tandy Corporation Termination Protection
Plans for Executive Employees of Tandy
Corporation and its Subsidiaries (i) the
Level I and (ii) Level II Plans (filed as
Exhibit 10n to Tandy's Form 10-K filed on
March 30, 1994, Accession No. 0000096289-94-
000029 and incorporated herein by reference).
10o* Forms of Bonus Guarantee Letter Agreements
with certain Executive Employees of Tandy
Corporation and its Subsidiaries (i) Formula,
(ii) Discretionary, and (iii) Pay Plan (filed
as Exhibit 10o to Tandy's Form 10-K filed
on March 30, 1994, Accession No. 0000096289-
94-000029 and incorporated herein by reference).
10p* Form of Indemnity Agreement with Directors,
Corporate Officers and two Division Officers
of Tandy Corporation (filed as Exhibit 10p
to Tandy's Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
11 Statement of Computation of Earnings per Share 67
12 Statement of Computation of Ratios of Earnings
to Fixed Charges 69
21 Subsidiaries 70
23 Consent of Independent Accountants 71
27 Financial Data Schedule
_______________________
* Each of these exhibits is a "management contract or
compensatory plan, contract, or arrangement".
<PAGE>
EXHIBIT 10b
January 1, 1995
TO:
FROM: Richard Ramsey
SUBJECT: Compensation Plan, Fiscal Year 1995
Your compensation plan for fiscal year 1995 is outlined
below.
I. FY 1995 Base Salary
-------
Your Base Salary for FY95 shall be $.
II. Your bonus for FY95 shall be determined by multiplying
the percent determined in the following TARGET INCENTIVE
GOALS times the FACTORS set forth below.
The bonus amounts payable are subject to limitations set
forth in Paragraph III and IV.
TARGET INCENTIVE GOALS:
1. INCOME
Each percentage point of positive change that the Tandy
Corporation and subsidiaries income from operations
(before income taxes) increases from the prior year.
2. Each percentage point of positive change that the
Tandy Services net income (Pre-Admin) increases from the
prior year. Tandy Services, for this calculation, will
include TE-US, TE-Asia, Tandy Services Consolidation
(P&L RS3-8200), Tandy Transportation, Consumer Mail and
Express Order Marketing (P&L RS2-2200).
Your factors to be used for each of the calculations
above are as follows:
1. Tandy Corporation income increase: $
2. Tandy Services Income increase: $
<PAGE>
Page 2
January 1, 1995
Compensation Plan, FY95
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target
--------------------------------------------------
Incentive Goal
--------------
Minimum Increase %
------------------
1. Tandy Corporation Income 3
2. Tandy Services Income 75
Bonus amounts earned from each of the factors which
exceed the minimum Increase above will be accumulated.
No bonus will be paid unless the accumulated bonus
exceeds 9% of your base salary.
Bonus will only be paid on each goal which exceeds the
----
Minimum Increase % set forth above.
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to
exceed $.
V. This compensation plan is not an employment contract,
but a method of calculating your total earnings. You
forfeit your rights to receive a bonus if you resign
before the end of the current fiscal year. If you are
terminated by the Company, you forfeit your rights to
receive a bonus except at the sole discretion of the
Company and in such amount as the Company might decide.
If you retire at age 55 or over, provided the Company
has given its consent to your early retirement, or die
before the end of the then current fiscal year, your
bonus for the current year-to-date will be calculated to
the nearest end of the month preceding or succeeding
such event, using the formula above and adjusting for
the partial year. The amount will be paid to you or the
legal representative of your estate.
VI. If at any time during your continued employment, your
responsibility, duties or title changes, this plan is
subject to revision or termination by the Company at the
time of the foregoing change.
<PAGE>
January 1, 1995
TO:
FROM: Richard Ramsey
SUBJECT: Compensation Plan, Fiscal Year 1995
Your compensation plan for fiscal year 1995 is outlined
below.
I. FY 1995 Base Salary
-------
Your Base Salary for FY95 shall be $.
II. Your bonus for FY95 shall be determined by multiplying
the percent determined in the following TARGET INCENTIVE
GOALS times the FACTORS set forth below.
The bonus amounts payable are subject to limitations set
forth in Paragraph III and IV.
TARGET INCENTIVE GOALS:
TANDY CORPORATION
-----------------
1. INCOME
Each percentage point of positive change that the Tandy
Corporation and subsidiaries income from operations
(before income taxes) increases from the prior year.
2. EARNINGS PER SHARE
Each percentage point of positive change that the Tandy
Corporation earnings per share increases from the prior
year.
3. STOCK PRICE
a. Each percentage point of positive change that the
Tandy Corporation stock price increases, based on the
average daily closing price for 1994 and 1995.
b. If Tandy's average daily closing stock price
outperforms the "Peer Group's" average daily closing
stock price, you will receive an additional bonus of $.
Percentages shall be calculated to two decimal points.
Your factors to be used for each of the calculations
above are as follows:
1. Income increase: $
2. Earnings per share increase: $
3. Stock price increase: $
<PAGE>
Page 2
January 1, 1995
Compensation Plan, FY95
REAL ESTATE
-----------
Additional bonus will be paid based on targets set forth
in Attachment 1.
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target
--------------------------------------------------
Incentive Goal
--------------
Minimum
-------
1. Income 3% Increase
2. Earnings per share 3% Increase
3. Stock price
a. Tandy Stock Increase 5% Increase
b. Peer Group N/A
4. Real Estate -
Net Store Openings 75 Stores Opened
Closed Store Buyouts 120 Store Buyouts
Bonus amounts earned from each of the factors which
exceed the minimum Increase above will be accumulated.
No bonus will be paid unless the accumulated bonus
exceeds 12% of your base salary.
Bonus will only be paid on each goal which exceeds the
----
Minimum Increase % set forth above.
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to
exceed $.
V. This compensation plan is not an employment contract,
but a method of calculating your total earnings. You
forfeit your rights to receive a bonus if you resign
before the end of the current fiscal year. If you are
terminated by the Company, you forfeit your rights to
receive a bonus except at the sole discretion of the
Company and in such amount as the Company might decide.
If you retire at age 55 or over, provided the Company
has given its consent to your early retirement, or die
before the end of the then current fiscal year, your
bonus for the current year-to-date will be calculated to
the nearest end of the month preceding or succeeding
such event, using the formula above and adjusting for
the partial year. The amount will be paid to you or the
legal representative of your estate.
VI. If at any time during your continued employment, your
responsibility, duties or title changes, this plan is
subject to revision or termination by the Company at the
time of the foregoing change.
<PAGE>
December 31, 1994
TO:
FROM: Richard Ramsey
SUBJECT: Compensation Plan, Fiscal Year 1995
Your compensation plan for fiscal year 1995, as approved
by the Organization and Compensation Committee of the
Board of Directors, is outlined below.
I. FY 1995 Base Salary
-------
Your Base Salary for FY95 shall be $
II. Your bonus for FY95 shall be determined by multiplying
the percent determined in the following TARGET INCENTIVE
GOALS times the FACTORS set forth below.
The bonus amounts payable are subject to limitations set
forth in Paragraph III and IV.
TARGET INCENTIVE GOALS:
1. INCOME
Each percentage point of positive change that the Tandy
Corporation and subsidiaries income from operations
(before income taxes) increases from the prior year.
2. EARNINGS PER SHARE
Each percentage point of positive change that the Tandy
Corporation earnings per share increases from the prior
year.
3. STOCK PRICE
a. Each percentage point of positive change that the
Tandy Corporation stock price increases, based on the
average daily closing price for 1994 and 1995.
b. If Tandy's average daily closing stock price
outperforms the "Peer Group's" average daily closing
stock price, you will receive an additional bonus of $.
Percentages shall be calculated to two decimal points.
Your factors to be used for each of the calculations
above are as follows:
1. Income increase: $
2. Earnings per share increase: $
3. Stock price increase: $
<PAGE>
Page 2
December 31, 1994
Compensation Plan, FY95
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target
--------------------------------------------------
Incentive Goal
--------------
Minimum Increase %
------------------
1. Income 3
2. Earnings per share 3
3. Stock price
a. Tandy Stock Increase 5
b. Peer Group N/A
Bonus amounts earned from each of the factors which
exceed the minimum Increase above will be accumulated.
No bonus will be paid unless the accumulated bonus
exceeds 12% of your base salary.
Bonus will only be paid on each goal which exceeds the
----
Minimum Increase % set forth above.
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to
exceed $.
V. This compensation plan is not an employment contract,
but a method of calculating your total earnings. You
forfeit your rights to receive a bonus if you resign
before the end of the current fiscal year. If you are
terminated by the Company, you forfeit your rights to
receive a bonus except at the sole discretion of the
Company and in such amount as the Company might decide.
If you retire at age 55 or over, provided the Company
has given its consent to your early retirement, or die
before the end of the then current fiscal year, your
bonus for the current year-to-date will be calculated to
the nearest end of the month preceding or succeeding
such event, using the formula above and adjusting for
the partial year. The amount will be paid to you or the
legal representative of your estate.
VI. If at any time during your continued employment, your
responsibility, duties or title changes, this plan is
subject to revision or termination by the Company at the
time of the foregoing change.
<PAGE>
January 1, 1995
TO:
FROM: Richard Ramsey
SUBJECT: Compensation Plan, Fiscal Year 1995
Your compensation plan for fiscal year 1995 is outlined
below.
I. FY 1995 Base Salary
-------
Your Base Salary for FY95 shall be $
II. Your bonus for FY95 shall be determined by multiplying
the percent determined in the following TARGET INCENTIVE
GOALS times the FACTORS set forth below.
The bonus amounts payable are subject to limitations set
forth in Paragraph III and IV.
TARGET INCENTIVE GOALS:
1. INCOME
Each percentage point of positive change that the Radio
Shack Division net income (before income taxes)
increases from the prior year.
2. SALES
Each percentage point of positive change that the Radio
Shack Division sales increase from the prior year.
3. GROSS PROFIT
Each percentage point of positive change that the Radio
Shack Division gross profit dollars increase from the
prior year.
Radio Shack results will be adjusted to reflect certain
Tandy Support Operations for 1994 and 1995.
Percentages shall be calculated to two decimal points.
Your factors to be used for each of the calculations
above are as follows:
1. Radio Shack income increase: $
2. Radio Shack sales increase: $
3. Radio Shack gross profit dollars increase: $
<PAGE>
Page 2
January 1, 1995
Compensation Plan, FY95
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target
--------------------------------------------------
Incentive Goal
--------------
Minimum Increase %
------------------
1. Income 2
2. Sales 1
3. Gross Profit 1
Bonus amounts earned from each of the factors which
exceed the minimum Increase above will be accumulated.
No bonus will be paid unless the accumulated bonus
exceeds 12% of your base salary.
Bonus will only be paid on each goal which exceeds the
----
Minimum Increase % set forth above.
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to
exceed $.
V. This compensation plan is not an employment contract,
but a method of calculating your total earnings. You
forfeit your rights to receive a bonus if you resign
before the end of the current fiscal year. If you are
terminated by the Company, you forfeit your rights to
receive a bonus except at the sole discretion of the
Company and in such amount as the Company might decide.
If you retire at age 55 or over, provided the Company
has given its consent to your early retirement, or die
before the end of the then current fiscal year, your
bonus for the current year-to-date will be calculated to
the nearest end of the month preceding or succeeding
such event, using the formula above and adjusting for
the partial year. The amount will be paid to you or the
legal representative of your estate.
VI. If at any time during your continued employment, your
responsibility, duties or title changes, this plan is
subject to revision or termination by the Company at the
time of the foregoing change.
<PAGE>
<TABLE>
TANDY CORPORATION EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<CAPTIONS>
Year Ended Six Months Ended Year Ended
December 31, December 31, June 30,
--------------------------- -------------- -----------
(In thousands, except per share amounts) 1994 1993 1992 1992
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Reconciliation of net income per statements of income to
amounts used in computation of primary earnings per share:
Net income, as reported $ 224,335 $ 96,849 $ 3,806 $ 183,847
Less dividends on preferred stock:
Series B, net of tax in 1992 (a) (6,777) (7,136) (2,419) (4,911)
----------- ----------- ----------- -----------
Net income available to common
shareholders for primary earnings per share $ 217,558 $ 89,713 $ 1,387 $ 178,936
=========== =========== =========== ===========
Weighted average number of common shares outstanding 62,769 63,582 63,072 74,631
Weighted average number of $2.14 depositary shares,
representing Series C preferred stock, treated as
common stock due to mandatory conversion (b) 11,816 11,816 11,816 4,100
Weighted average number of common shares issuable
under stock option plans, net of assumed treasury stock
repurchases at average market prices 289 145 30 57
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares outstanding 74,874 75,543 74,918 78,788
=========== =========== =========== ===========
Net income available per average
common and common equivalent share $ 2.91 $ 1.19 $ 0.02 $ 2.27
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE (c)
Reconciliation of net income per statements of income to
amounts used in computation of fully diluted earnings per share:
Net income available to common stockholders $ 217,558 $ 89,713 $ 1,387 $ 178,936
Adjustments for assumed conversion of Series B preferred
stock to common stock as of the beginning of the period:
Plus dividends on Series B preferred stock, net of tax (a) 6,777 (d) (d) 4,911
Less additional contribution that would have been required for
the TESOP if Series B preferred stock had been converted (3,874) (d) (d) (3,612)
----------- ----------- ----------- -----------
Net income available per common and
common equivalent share, as adjusted $ 220,461 $ 89,713 $ 1,387 $ 180,235
=========== =========== =========== ===========
Reconciliation of weighted average number of shares outstanding
to amount used in computation of fully diluted earnings per share:
Weighted average number of shares outstanding 74,874 75,543 74,918 78,788
Adjustments to reflect assumed exercise of stock
options as of the beginning of the period 95 223 35 35
Adjustment to reflect assumed conversion of
Series B preferred stock to common stock as
of the beginning of the period 1,990 (d) (d) 2,166
----------- ----------- ----------- -----------
Weighted average number of common and common
equivalent shares outstanding, as adjusted 76,959 75,766 74,953 80,989
=========== =========== =========== ===========
Fully diluted net income available per average
common and common equivalent share $ 2.86 $ 1.18 $ 0.02 $ 2.23
=========== =========== =========== ===========
<FN>
(a) Series B dividends for the years ended December 31, 1994 and 1993 are not net of income tax benefits associated with
unallocated shares in the TESOP in accordance with EITF Issue 92-3.
(b) Effect of mandatory conversion of Series C preferred stock for the year ended December 31, 1993, the six months ended
December 31, 1992 and the year ended June 30, 1992 have been restated to reflect the actual number of shares of common
stock into which the Series C PERCS will be converted on March 10, 1995.
(c) This calculation is submitted in accordance with Regulation S-K, Item 601(b)(11) although not required by footnote 2
to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
(d) For the year ended December 31, 1993 and the six months ended December 31, 1992 these items are antidilutive and thus
are omitted from the calculation.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION EXHIBIT 12
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS (1)
<CAPTIONS>
Year Ended Six Months Ended
December 31, December 31, Year Ended June 30,
----------------------- --------- --------------------------------------
(In thousands, except per share amounts) 1994 1993 1992 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Income from continuing operations $ 224,335 $ 195,632 $ 67,681 $ 210,713 $ 219,935 $ 277,122
Plus provision for income taxes 135,205 115,523 35,236 119,785 123,342 167,926
--------- --------- --------- --------- --------- ---------
Income before income taxes 359,540 311,155 102,917 330,498 343,277 445,048
--------- --------- --------- --------- --------- ---------
Fixed charges:
Interest expense and amortization
of debt discount 30,047 39,707 20,532 43,154 70,313 58,592
Amortization of issuance expense 261 409 591 563 400 325
Appropriate portion (33 1/3%) of rentals 70,800 67,467 35,109 68,224 63,980 59,123
--------- --------- --------- --------- --------- ---------
Total fixed charges 101,108 107,583 56,232 111,941 134,693 118,040
--------- --------- --------- --------- --------- ---------
Earnings before income taxes
and fixed charges $ 460,648 $ 418,738 $ 159,149 $ 442,439 $ 477,970 $ 563,088
========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges 4.56 3.89 2.83 3.95 3.55 4.77
========= ========= ========= ========= ========= =========
Ratio of Earnings to Fixed Charges
and Preferred Dividends:
Total fixed charges, as above 101,108 107,583 56,232 111,941 134,693 118,040
Preferred dividends 38,877 36,738 18,469 20,014 6,875 --
--------- --------- --------- --------- --------- ---------
Total fixed charges and preferred $ 139,985 $ 144,321 $ 74,701 $ 131,955 $ 141,568 $ 118,040
========= ========= ========= ========= ========= =========
Earnings before income taxes, fixed charges
and preferred dividends $ 460,648 $ 418,738 $ 159,149 $ 442,439 $ 477,970 $ 563,088
========= ========= ========= ========= ========= =========
Ratio of earnings to fixed charges
and preferred dividends 3.29 2.90 2.13 3.35 3.38 4.77
========= ========= ========= ========= ========= =========
<FN>
(1) The computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred
Dividends excludes results of operations from discontinued operations and fixed charges relating to these same
operations.
</TABLE>
<PAGE>
TANDY CORPORATION
EXHIBIT 21
SUBSIDIARIES
The largest subsidiaries of the Company are:
State of Incorporation
----------------------
Tandy Credit Corporation Delaware
Technology Properties, Inc. Delaware
Trans World Electronics, Inc. Texas
All of the subsidiaries of Tandy Corporation are included in
the Company's consolidated financial statements. All other
subsidiaries, considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
<PAGE>
TANDY CORPORATION
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-3 (Registration No. 33-37970) of Tandy Corporation
and Form S-3 (Registration No. 33-15624) of Tandy Credit
Corporation and to the incorporation by reference in the
Registration Statements on Form S-8 (Registration Nos.
33-23178, 33-41523, 33-51019, 33-51599 and 33-51603) of our
report dated February 22, 1995, appearing on page 28 in this
Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
------------------------
PRICE WATERHOUSE LLP
Fort Worth, Texas
March 30, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements and schedules contained in the Company's report on Form
10-K and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 205,633
<SECURITIES> 0
<RECEIVABLES> 790,475
<ALLOWANCES> 21,374
<INVENTORY> 1,504,324
<CURRENT-ASSETS> 2,556,260
<PP&E> 977,695
<DEPRECIATION> 473,108
<TOTAL-ASSETS> 3,243,774
<CURRENT-LIABILITIES> 1,206,150
<BONDS> 153,318
<COMMON> 85,645
429,982
100,000
<OTHER-SE> 1,234,584
<TOTAL-LIABILITY-AND-EQUITY> 3,243,774
<SALES> 4,943,679
<TOTAL-REVENUES> 4,943,679
<CGS> 3,017,615
<TOTAL-COSTS> 3,017,615
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (48,565)
<INCOME-PRETAX> 359,540
<INCOME-TAX> 135,205
<INCOME-CONTINUING> 224,335
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224,335
<EPS-PRIMARY> 2.91
<EPS-DILUTED> 2.91
</TABLE>
