UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ------ to -------
Commission File No. 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
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
---
The number of shares outstanding of the issuer's Common Stock, $1 par value, on
October 31, 1996, was 58,277,755.
Index to Exhibits is on Sequential Page No. 17. Total pages 22.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- ---------------------------
(In thousands, except per share amounts) 1996 1995 1996 1995
- ----------------------------------------
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales and operating revenues $ 1,434,898 $ 1,339,930 $ 4,234,690 $ 3,751,599
Cost of products sold 950,638 861,393 2,784,767 2,380,714
----------- ----------- ------------ ------------
Gross profit 484,260 478,537 1,449,923 1,370,885
----------- ----------- ------------ ------------
Expenses:
Selling, general and administrative 414,871 381,947 1,230,316 1,120,783
Depreciation and amortization 27,408 22,600 79,722 67,055
Provision for restructuring cost - - 25,500 -
Impairment of long-lived assets - - 26,033 -
Interest income ( 2,578) (5,872) (10,051) (37,704)
Interest expense 9,047 6,853 25,064 22,703
----------- ----------- ------------ ------------
448,748 405,528 1,376,584 1,172,837
----------- ----------- ------------ ------------
Income before income taxes 35,512 73,009 73,339 198,048
Provision for income taxes 13,190 28,108 27,238 76,248
----------- ----------- ------------ ------------
Net income 22,322 44,901 46,101 121,800
Preferred dividends 1,599 1,633 4,775 4,931
----------- ----------- ------------ ------------
Net income available to common
shareholders $ 20,723 $ 43,268 $ 41,326 $ 116,869
=========== =========== ============ ============
Net income available per average common
and common equivalent share $ 0.35 $ 0.66 $ 0.68 $ 1.75
=========== =========== ============ ============
Average common and common
equivalent shares outstanding 59,650 65,719 60,673 66,693
=========== =========== ============ ============
Dividends declared per common share $ 0.20 $ 0.18 $ 0.60 $ 0.54
=========== =========== ============ ============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
<CAPTION>
September 30, December 31, September 30,
(In thousands, except share amounts) 1996 1995 1995
- ------------------------------------ ------------- ------------- ------------
<S> <C> <C> <C>
Assets
Current assets:
Cash and short-term investments $ 124,956 $ 143,498 $ 102,534
Accounts and notes receivable, less
allowance for doubtful accounts 206,017 320,588 372,312
Inventories, at lower of cost or market 1,671,034 1,511,984 1,763,308
Other current assets 88,473 72,175 86,018
------------ ----------- ----------
Total current assets 2,090,480 2,048,245 2,324,172
Property, plant and equipment, at cost,
less accumulated depreciation 619,984 577,720 570,259
Other assets, net of accumulated amortization 82,192 96,098 63,564
------------ ----------- ----------
$ 2,792,656 $ 2,722,063 $2,957,995
============ =========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities of
long-term debt $ 441,570 $ 189,861 $ 360,115
Accounts payable 438,813 365,131 515,593
Accrued expenses 247,609 321,939 234,298
Income taxes payable 55,672 82,978 36,640
------------ ----------- ----------
Total current liabilities 1,183,664 959,909 1,146,646
------------ ----------- ----------
Long-term debt and capital leases, excluding current
maturities 109,071 140,813 138,175
Other non-current liabilities 20,055 20,006 20,243
------------ ----------- ----------
Total other liabilities 129,126 160,819 158,418
------------ ----------- ----------
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 100,000 100,000 100,000
Common stock, $1 par value, 250,000,000 shares authorized
with 85,645,000 shares issued 85,645 85,645 85,645
Additional paid-in-capital 105,212 102,819 98,758
Retained earnings 2,339,170 2,332,120 2,255,350
Foreign currency translation effects (3,248) (1,094) (564)
Common stock in treasury, at cost, 26,717,000,
23,918,000 and 21,107,000 shares, respectively (1,093,168) (963,301) (829,409)
Unearned deferred compensation related to TESOP (48,865) (54,854) (56,849)
Unrealized loss on securities available for sale, net of
taxes (4,880) - -
----------- ----------- -----------
Total stockholders' equity 1,479,866 1,601,335 1,652,931
Commitments and contingent liabilities
------------ ----------- -----------
$ 2,792,656 $ 2,722,063 $ 2,957,995
============ =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
(In thousands) 1996 1995
------------- ------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 46,101 $ 121,800
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 79,722 67,055
Provision for credit losses and bad debts 1,113 11,343
Impairment of long-lived assets 26,033 -
Provision for restructuring reserve 25,500 -
Other items 3,623 4,490
Changes in operating assets and liabilities:
Sale of credit card portfolios - 342,822
Receivables 30,664 143,005
Inventories (162,012) (274,466)
Other current assets 818 (8,816)
Accounts payable, accrued expenses and
income taxes (47,546) (123,030)
----------- -----------
Net cash provided by operating activities 4,016 284,203
----------- -----------
Investing activities:
Additions to property, plant and equipment (135,459) (174,166)
Proceeds from sale of property, plant and
equipment 2,340 17,672
Payments received on AST note 60,000 6,720
Other investing activities (3,218) 1,450
----------- ------------
Net cash used by investing activities (76,337) (148,324)
----------- ------------
Financing activities:
Purchase of treasury stock (162,635) (355,924)
Sale of treasury stock to employee stock
purchase program 30,468 34,486
Proceeds from exercise of stock options 6,951 17,982
Dividends paid, net of taxes (39,771) (50,315)
Changes in short-term borrowings, net 234,084 168,600
Additions to long-term borrowings 3,290 2,298
Repayments of long-term borrowings (18,608) (56,105)
----------- -----------
Net cash provided (used) by financing
activities 53,779 (238,978)
----------- -----------
Decrease in cash and short-term investments (18,542) (103,099)
Cash and short-term investments, beginning
of period 143,498 205,633
----------- -----------
Cash and short-term investments, end of
perod $ 124,956 $ 102,534
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1996. For further information, refer
to the consolidated financial statements and management's discussion and
analysis of results of operations and financial condition included in Tandy
Corporation's ("Tandy" or the "Company") Form 10-K for the year ended December
31, 1995.
NOTE 2-UNREALIZED LOSS ON AST SECURITIES
On July 12, 1996, the Company received $60,000,000 in cash and $30,000,000 in
AST Research Inc. ("AST") common stock as final payment of a $90,000,000 note
payable from AST to the Company. The 4,498,594 shares of AST common stock Tandy
owns represent approximately 7.8% of the outstanding common stock of AST. This
common stock was issued to Tandy as partial payment of AST's obligation under a
promissory note dated July 12, 1993. This note was payable to the Company
pursuant to the terms of the Agreement for Purchase and Sale of Assets dated
June 30, 1993.
The AST common stock is available for sale and, therefore, is subject to mark to
market adjustments for each reporting period based upon its current market
value. Based on the common stock price of $5.00 at September 30, 1996, the
market value of AST common stock approximated $22,500,000. Pursuant to the
Financial Accounting Standards Board (the "FASB") Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the Company recorded an unrealized loss of $4,880,000, net
of taxes as a decrease in stockholders' equity, at September 30, 1996. As of
November 5, 1996, the current market price of AST common stock was $4.625 per
share.
Depending on a variety of factors, including market conditions and prices, the
Company might dispose of some or all of its shares of AST common stock. The
disposition of the shares of common stock may be effected from time to time in
one or more transactions. In connection with its ownership of the common stock,
the Company may from time to time, at its sole discretion, engage in hedging
transactions with broker/dealers or other financial institutions. A charge will
be recognized against income upon a subsequent sale if the market price is below
the original cost basis or if the Company determines that a decline in the
market value of AST common stock is other than temporary.
NOTE 3-RESTRUCTURING CHARGES
On May 21, 1996, the Company announced a restructuring plan for its Incredible
Universe division which included an overhead reduction plan, the closing of two
stores and costs for the abandonment of certain real estate sites held for new
store development. A streamlining of the division's overhead costs included the
elimination of approximately 20 non-selling positions per store, reorganization
of some central unit functions, and a significant change in advertising
strategy. The two stores located in Potomac Mills, Virginia and Charlotte, North
Carolina were closed in the second quarter of 1996 due to inadequate sales
volumes. The Company incurred a pre-tax charge of approximately $25,500,000
which relates primarily to future lease obligations, disposition of fixed
assets, certain termination costs associated with employees as well as inventory
markdowns associated with liquidation sales. The components of this
restructuring charge and an analysis of the amounts charged against the reserve
are outlined in the following table:
<PAGE>
<TABLE>
<CAPTION>
Charges
Original Through Balance
(In thousands) Reserve 9/30/96 9/30/96
- -------------- ------------ ---------- -----------
<S> <C> <C> <C>
Real estate obligations $ 10,750 $ (1,822) $ 8,928
Disposal of fixed assets 8,000 (4,691) 3,309
Inventory impairment 2,574 (2,574) -
Termination benefits 2,500 (2,500) -
Other 1,676 (1,676) -
------------ ---------- ----------
Total $ 25,500 $ (13,263) $ 12,237
============ ========== ==========
</TABLE>
The Company will continue to monitor the operating results of this division and
will take appropriate action if the division's results of operations do not
materially improve. These actions may include a further restructuring including
store closures, further streamlining of personnel, alliances with non-related
retailers to increase traffic in the stores and further changes in advertising
strategies and employee compensation. There can be no assurance that the actions
taken to date will be successful. In the normal course of business, management
reviews the performance of all stores to identify underachievers and determines
whether possible closure thereof is appropriate. Any material number of store
closures or relocations would be accompanied by charges related to such
activity.
NOTE 4-IMPAIRMENT OF ASSETS
In March 1995, the FASB issued Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("FAS 121"), which is effective for fiscal years
beginning after December 15, 1995. Effective January 1, 1996, the Company
adopted FAS 121 which requires that long-lived assets (primarily property, plant
and equipment and goodwill) held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the net
book value of the asset may not be recoverable. An impairment loss is recognized
if the sum of the expected future cash flows (undiscounted and before interest)
from the use of the asset is less than the net book value of the asset. The
amount of the impairment loss will be measured as the difference between the net
book value of the assets and the estimated fair value of the related assets.
Upon adoption in the first quarter of 1996, the Company recorded an initial
pre-tax impairment loss of approximately $26,033,000 to conform with this
statement, primarily as a result of grouping assets at their lowest level of
cash flows to determine impairment as required by this statement. This charge
provided for the writedown of certain intangibles, adjustment to market
valuation of foreign real estate and the revaluation of selected retail fixed
assets. Whenever events or changes in circumstances occur, the Company will
review long-lived assets for impairment pursuant to FAS 121.
NOTE 5-RELATIONS WITH INTERTAN
As of September 30, 1996 and 1995, respectively, the Company's Consolidated
Balance Sheet reflects notes and other receivables due from InterTAN, Inc.
("InterTAN") as summarized below:
Balance at September 30,
------------------------
(In thousands) 1996 1995
- -------------- ------------ -------------
Gross amount of notes $ 27,831 $ 44,903
Discount 9,249 13,195
------------ -------------
Net amount of notes $ 18,582 $ 31,708
============ =============
Current portion of notes $ 4,646 $ 14,432
Non-current portion of notes 13,936 17,276
Other current receivables 5,212 2,966
------------ -------------
$ 23,794 $ 34,674
============ =============
The notes were purchased at a discount from InterTAN's banking syndicate by
Trans World Electronics, Inc. ("Trans World"), a wholly-owned subsidiary of
Tandy. InterTAN is contractually obligated to pay the gross amount of the notes
to Trans World.
<PAGE>
The following income components were generated from operations relative to
InterTAN:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
(In thousands) 1996 1995 1996 1995
- -------------- ----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sales and commission income $ 2,811 $ 3,751 $ 6,418 $ 8,216
=========== ============ ========== ============
Interest income $ 613 $ 1,083 $ 2,310 $ 3,111
Accretion of discount 949 996 2,912 3,147
----------- ------------ ---------- ------------
$ 1,562 $ 2,079 5,222 6,258
=========== ============ ========== ============
Royalty income $ 518 $ 250 $ 1,052 $ 250
=========== ============ ========== ============
</TABLE>
Through October 1996, InterTAN has met all of its financial obligations to
Tandy. Accordingly, management believes that InterTAN should be able to continue
to meet its payment obligations pursuant to its debt agreements with Trans
World. See the Company's Annual Report on Form 10-K for the year ended December
31, 1995 for further information.
Canadian tax authorities are reviewing InterTAN's Canadian subsidiary's 1987-93
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 present, nothing has come to the attention of the Company which
would lead them to believe that the ultimate resolution of this review would
impair InterTAN's ability to meet its obligations to Tandy.
NOTE 6-SHARE REPURCHASE PROGRAM
On October 21, 1996, the Company announced that its Board of Directors had
authorized the purchase of an additional 5,000,000 common shares through the
Company's existing share repurchase program which was initially authorized in
December 1995. This share increase brings the total authorization to 10,000,000
shares of which approximately 2.9 million shares have been repurchased during
the first nine months of 1996. During the quarter ended September 30, 1996,
approximately 1.1 million shares were repurchased under the December 1995 board
authorization. Purchases will be made from time to time in the open market, and
it is expected that funding of the program will come from operating cash flow
and existing borrowing facilities.
NOTE 7-CONTINGENCY
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, breach of contract
and other matters against the Company and its subsidiaries incident to the
operations of its business. The liability, if any, associated with these matters
was not determinable at September 30, 1996. 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 8-HEDGING AND DERIVATIVE ACTIVITY
The Company enters into interest rate swap agreements to manage its interest
rate exposure by effectively trading floating interest rates for fixed interest
rates. As the Company has used the swaps to hedge certain obligations with
floating rates, the difference between the floating and fixed interest rate
amounts, based on these swap agreements, is recorded as income or expense.
Through September 30, 1996, the Company has entered into five swaps with regard
to notional amounts totaling $90,000,000. The swap agreements all expire during
the third quarter of 1999. Prior to 1995 the Company was not a party to any
interest rate swaps. The Board of Directors has authorized management to enter
into interest rate swaps up to notional amounts not exceeding $250,000,000. At
September 30, 1996, the Company would have to pay approximately $3,471,000 to
terminate the interest rate swaps in place. This amount was obtained from the
counterparties and represents the fair value of the swap agreements; the amount
is not recognized in the consolidated financial statements. The Company has no
intention of terminating the interest rate swap agreements at this time. At
September 30, 1996, the weighted average interest rate of the floating rate
obligations being hedged was 6.2%, and the weighted average interest rate of the
fixed rate obligations imposed by the swap agreements was 7.7%. The interest
rate swap agreements have been entered into with major financial institutions
which are expected to fully perform under the terms of the swap agreements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Factors That May Affect Future Results
The Company participates in a highly competitive industry that is characterized
by aggressive pricing practices in an attempt to gain market share. In
developing strategies to achieve continued increases in sales and operating
profits, the Company anticipates customer demand in managing its product
transitions, inventory levels, and distribution cycles. Due to rapid
technological advances affecting consumer electronic product cycles, the
Company's operating results could be adversely affected should the Company be
unable to anticipate product cycle and/or customer demand accurately. The
Company's ability to achieve targeted sales and earnings levels depends upon a
number of competitive and market factors and, accordingly, are subject to risk.
The regulatory and trade environment in which the Company operates is subject to
risk and uncertainty. Unfavorable tariffs affecting electronic products imported
from Asia as a result of a change in U.S. trade agreements or trade imbalances
could affect the Company. In addition, as a result of the Telecommunications Act
of 1996, the deregulated telecommunications market in the future is expected to
present both opportunities and increased competition to the telecommunication
industry's historical role of providing telecommunication equipment and service
to consumers. Also see "Net Sales and Operating Revenues" for a discussion of a
recent RadioShack telecommunications alliance.
With the exception of historical information, the matters discussed herein
contain forward-looking statements that involve risks and uncertainties and
are indicated by words such as "anticipates", "expects", "believes", "plans",
"could" and similar words or phrases. These uncertainties include, but are no
limited to, economic conditions including consumer installment debt levels
and interest rate fluctuations, shifts in consumer electronic product cycles,
consumer demand for products and services, competitive products and pricing,
availability of products, inventory risks due to shifts in market demand, the
regulatory and trade environment and other risks indicated in filings by the
Company with the Securities and Exchange Commission.
Net Sales and Operating Revenues
Net sales and operating revenues for the periods ended September 30 were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, % Increase September 30, % Increase
------------------------- -------------------------
(In thousands) 1996 1995 (Decrease) 1996 1995 (Decrease)
- -------------- ----------- ----------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Radio Shack $ 733,041 $ 724,090 1.2% $ 2,123,742 $ 2,068,044 2.7
Incredible Universe 198,372 163,931 21.0 612,765 430,014 42.5
Computer City 482,291 430,475 12.0 1,441,986 1,161,116 24.2
----------- ----------- ----------- -----------
1,413,704 1,318,496 7.2 4,178,493 3,659,174 14.2
Tandy Name Brand (closed) - (136) NM - 27,995 NM
Other sales 21,194 21,570 (1.7) 56,197 64,430 (12.8)
----------- ----------- ----------- -----------
$ 1,434,898 $ 1,339,930 7.1% $ 4,234,690 $ 3,751,599 12.9%
=========== =========== =========== ===========
NM - not meaningful
</TABLE>
Continuing retail operations generated 7.2% and 14.2% sales gains for the three
and nine-month periods ended September 30, 1996. Tandy Corporation's overall
comparable store sales for U.S. and Canadian operations decreased 4.5% for the
quarter and 1.0% for the nine-month period.
Radio Shack comparable store sales for the three and nine-month periods resulted
in a decrease of 0.7% and an increase of 0.9%, respectively. Although computer
and digital satellite system sales were strong during the quarter, their levels,
as well as cellular phone sales levels, did not reach sales potential due to
product availability. In addition, audio and video third quarter sales were down
in line with industry trends. Advertising will be heightened to emphasize the
new line of IBM Aptiva(R) computers, cellular phones and satellite systems in
the ensuing quarter. On September 10, 1996, the Company, through the RadioShack
division, entered into a telecommunications alliance with Sprint Communications
Company, L.P., Sprint United Management Company ("Sprint"), and Sprint Spectrum
L.P. ("Spectrum"). This alliance will allow consumers to purchase a full range
of Sprint-branded telecommunication services and products through participating
RadioShack retail stores. Under the agreement, Sprint, Spectrum and RadioShack
will create and advertise a "store-within-a-store" concept. Customers will have
access, where available, to a full service communications information center
that will offer Spectrum personal communications services ("PCS"), Sprint long
distance, local and wireless phone service, Internet access and paging, as well
as Spree pre-paid phone cards and phone equipment. RadioShack will also be the
exclusive retailer of Sprint-branded "residential" telephones. Sprint-branded
PCS products and services are expected to be available in about 300 RadioShack
stores in approximately 15 cities by the end of 1996, with the full line of
Sprint products and services expected to be available in 4,500 additional stores
by October 1997.
U.S. and Canadian Computer City comparable retail store sales decreased by 11.2%
and 3.2% for the three and nine-month periods ended September 30, 1996.
Comparable store sales for the third quarter of this year were impacted by the
highly publicized Windows(R) 95 introduction in the third quarter of 1995.
Current quarter demand for peripherals, software, and accessories was unable to
match levels attained during the corresponding Windows(R) 95 dominated quarter
last year. In addition, sales of non-IBM compatible computers and related items
were significantly lower in the current year when compared to the prior year.
Corporate and institutional sales initiatives will continue in the fourth
quarter supported by an Electronic Data Systems (EDS(R)) alliance system
integration, which management anticipates will improve the ability to place and
track corporate orders on a more timely basis. Aggressive marketing campaigns
and vendor supported in-store demonstrations will focus on building fourth
quarter retail sales. Also see "Change in Operating Management" below for a
discussion of the resignation of the president of Computer City.
Same-store sales results for the quarter and nine months at Incredible Universe
decreased 3.2% and 4.5%, respectively. Televisions, computers, and appliances
were among the strongest sales categories during the third quarter.
Disappointing industry-wide audio and video sales during the quarter contributed
to the same store sales decreases. Expansion of computer product lines,
peripherals and emphasis on the newly introduced "It's Worth the Drive.
Guaranteed" SM marketing campaign are designed to encourage sales during the
fourth quarter. Also see "Restructuring Charges" below for a further discussion
of material changes being implemented at Incredible Universe to improve its
results of operations.
In the normal course of business, management reviews the performance of all
stores to identify underachievers and determines whether possible closure
thereof is appropriate. Any material number of store closures or relocations
would be accompanied by charges related to such activity.
<TABLE>
RETAIL OUTLETS
- --------------
<CAPTION>
September 30, June 30, March 31, December 31, September 30,
1996 1996 1996 1995 1995
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RadioShack
Company owned 4,901 4,869 4,840 4,831 4,787
Dealer/Franchise 1,945 1,950 1,954 2,005 2,017
Computer City 109 103 101 99 86
Incredible Universe 17 16 18 17 14
--------- --------- ---------- ---------- -----------
Total Number of Outlets 6,972 6,938 6,913 6,952 6,904
========= ========= ========== ========== ===========
It is anticipated that during calendar 1996 RadioShack will open, net of
closings, approximately 110 company-owned stores. Computer City plans to
open 14 stores in 1996. Expansion of Computer City stores within
Incredible Universe is not anticipated. Incredible Universe closed two
stores in May 1996 and opened two new stores in 1996, resulting in no
net increase in the number of stores for 1996. Projections for 1997
include approximately 75 new RadioShack stores, 5-10 new Computer City
stores, and no new Incredible Universe stores.
</TABLE>
Gross Profit
Gross profit as a percent of net sales was 33.7% during the three months ended
September 30, 1996, as compared to 35.7% during the corresponding 1995 period.
For the nine months ended September 30, 1996 and 1995, the gross profit
percentages were 34.2% and 36.5%, respectively. This trend toward lower gross
margins is expected to continue as the lower operating margin divisions,
Computer City and Incredible Universe, continue to grow in proportion to
total sales. In the third quarter of 1996, Computer City and Incredible Universe
accounted for approximately 47.4% of consolidated sales, compared to 44.4% in
the third quarter of 1995. For the nine months ended September 30, 1996 and
1995, Computer City and Incredible Universe accounted for approximately 48.5%
and 42.4% of consolidated sales, respectively. RadioShack's gross margin
decreased 0.5% for the quarter and generated a minimal increase of 0.1% for the
nine-month period ending September 30, 1996, in comparison with the respective
prior year periods. The quarterly decline was due to the well received IBM
Aptiva computer back-to-school promotion and to the DSS direct-to-home satellite
dish business, both of which carry lower margins than RadioShack core
categories. Computer City's gross margin declined 0.6 and gained 0.3 percentage
points as compared to the third quarter and nine-month period of 1995,
respectively. The quarterly decline is attributable to the industry's
competitive environment and reduced margins on discontinued products. Gross
margin at Incredible Universe increased 0.1 and decreased 0.9 percentage points
in the third quarter and nine-month period, respectively. Due to an increase in
the relative percentage of lower margin computer sales, gross profit for the
nine months ended September 30, 1996 has declined.
In order to maintain or increase its market share, the Company must continue to
price its products competitively and from time to time may use various incentive
programs to increase sales. Some of these strategies lower the average sales
price per unit and may cause declines in gross margin beyond the historical
and/or anticipated levels.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses as a percent of sales and
operating revenues increased 0.4 percentage points in comparison with the third
quarter of 1995 and declined 0.8 percentage points in comparison with the nine
months ended September 30, 1995. The increase in SG&A as a percent of sales
during the third quarter of 1996 is due primarily to the quarter's softer sales
volumes. The Company previously implemented cost reduction programs to adjust
its operating expenses to lower levels. Major expense categories, including
advertising and payroll, while showing a net dollar gain, were lower as a
percent of sales for the first nine months in 1996 as compared with the same
prior year period. As a result of Computer City and Incredible Universe
expansion into new markets and increased promotional activity in RadioShack,
consolidated advertising costs increased $15,962,000, or 10.7%, during the nine
months ended September 30, 1996. Payroll expenses increased $53,295,000, or
11.0%, during the nine-month period in 1996, in comparison with the prior year
period, because of the Company's retail store expansions. As a result of the
Company selling the private label credit card portfolios at the end of the first
quarter in 1995, bad debt expense decreased significantly in the first nine
months of 1996 as compared to that of the prior year. The Company expects SG&A
expenses as a percent of sales to continue to have a marginal decline as
Computer City and Incredible Universe, which operate at lower relative costs
than consolidated Tandy Corporation, continue to grow in proportion to total
sales.
Restructuring Charges
On May 21, 1996, the Company announced a restructuring plan for its Incredible
Universe division which included an overhead reduction plan, the closing of two
stores and costs for the abandonment of certain real estate sites held for new
store development. A streamlining of the division's overhead costs included the
elimination of approximately 20 non-selling positions per store, reorganization
of some central unit functions, and a significant change in advertising
strategy. The two stores located in Potomac Mills, Virginia and Charlotte, North
Carolina were closed in the second quarter of 1996 due to inadequate sales
volumes. The Company incurred a pre-tax charge of approximately $25,500,000
which relates primarily to future lease obligations, disposition of fixed
assets, certain termination costs associated with employees as well as inventory
markdowns associated with liquidation sales. The components of this
restructuring charge and an analysis of the amounts charged against the reserve
are outlined in the following table:
Charges
Original Through Balance
(In thousands) Reserve 9/30/96 9/30/96
- -------------- ------------ ---------- ----------
Real estate obligations $ 10,750 $ (1,822) $ 8,928
Disposal of fixed assets 8,000 (4,691) 3,309
Inventory impairment 2,574 (2,574) -
Termination benefits 2,500 (2,500) -
Other 1,676 (1,676) -
------------ ---------- ----------
Total $ 25,500 $ (13,263) $ 12,237
============ ========== ==========
The Company will continue to monitor the operating results of this division and
will take appropriate action if the division's results of operations do not
materially improve. These actions may include a further restructuring including
store closures, further streamlining of personnel, alliances with non-related
retailers to increase traffic in the stores and further changes in advertising
strategies and employee compensation. There can be no assurance that the actions
taken to date will be successful. In the normal course of business, management
reviews the performance of all stores to identify underachievers and determines
whether possible closure thereof is appropriate. Any material number of store
closures or relocations would be accompanied by charges related to such
activity.
<PAGE>
Impairment of Assets
In March 1995, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121"), which is effective for fiscal years beginning after December 15,
1995. Effective January 1, 1996, the Company adopted FAS 121 which requires that
long-lived assets (primarily property, plant and equipment and goodwill) held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the net book value of the asset may not be
recoverable. An impairment loss is recognized if the sum of the expected future
cash flows (undiscounted and before interest) from the use of the asset is less
than the net book value of the asset. The amount of the impairment loss will be
measured as the difference between the net book value of the assets and the
estimated fair value of the related assets.
Upon adoption in the first quarter of 1996, the Company recorded an initial
pre-tax impairment loss of approximately $26,033,000 to conform with this
statement, primarily as a result of grouping assets at their lowest level of
cash flows to determine impairment as required by this statement. This charge
provided for the writedown of certain intangibles, adjustment to market
valuation of foreign real estate and the revaluation of selected retail fixed
assets. Whenever events or changes in circumstances occur, the Company will
review long-lived assets for impairment pursuant to FAS 121.
Accounting for Stock-Based Compensation
In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which is effective for fiscal years beginning after
December 15, 1995. Effective January 1, 1996, the Company adopted FAS 123 which
establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock option compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting as prescribed by Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Entities electing
to remain with the accounting in APB 25 must make pro forma disclosures of net
income and earnings per share as if the fair value based method of accounting
defined in FAS 123 had been applied. The Company will continue to account for
stock-based employee compensation plans under the intrinsic method pursuant to
APB 25 and will make the disclosures in its footnotes as required by FAS 123.
Stock options issued for stock-based employee compensation plans in the third
quarter of 1996 were not material.
Net Interest Income
Interest income for the quarter ended September 30, 1996 decreased $3,294,000
from $5,872,000 in the third quarter of 1996. Interest income for the nine
months ended September 30, 1996 decreased $27,653,000 from $37,704,000 in the
comparable prior year period. These decreases are primarily due to the sale of
the Company's credit card portfolios in the first quarter of 1995 and increased
utilization of cash for the ongoing share repurchase program and capital
expenditures related to new stores. Interest expense increased $2,194,000 for
the quarter ended September 30, 1996, in comparison with the same prior year
period because of increased average short-term borrowing levels.
Provision for Income Taxes
Provision for income taxes for each quarterly period is based on the estimate of
the annual effective tax rate for the fiscal year as evaluated at the end of
each quarter. The effective tax rates for the third quarters of 1996 and 1995
were 37.1% and 38.5%, respectively. The decrease is due primarily to the
favorable resolution of a foreign tax issue.
Earnings Per 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. During 1995, the Preferred Equity Redemption Convertible Stock(R)
("PERCS(R)") mandatorily converted into common stock. As a result, they were
considered outstanding common stock and the dividends were not deducted from net
income for purposes of calculating net income per average common and common
equivalent share. The prior year-to-date weighted average share calculations
included approximately 11,816,000 common shares relating to the conversion of
the PERCS into common stock on March 10, 1995. Fully diluted earnings available
per common and common equivalent share are not presented since dilution is less
than 3%.
Cash Flow and Financial Condition
Cash flow from operating activities decreased in the nine-month period ended
September 30, 1996, as compared with the same period of the prior year. This
decrease primarily related to the sale of the credit card portfolios in 1995
which was partially offset by a net decrease in the amount of cash utilized
through September 30, 1996, as compared to September 30, 1995 for working
capital purposes.
Cash used by investing activities for the nine-month period ended September 30,
1996 includes property, plant and equipment additions for new and remodeled
RadioShack(SM) stores and the Company's expansion of its Computer City(R) and
Incredible Universe(R) store formats, as well as expenditures for upgrading
information systems and headquarter building renovations. Management
anticipates that capital expenditure requirements will approximate $25,000,000
to $40,000,000 for the remainder of 1996, primarily to support retail expansion
and additional information systems upgrades.
On July 12, 1996, the Company received $60,000,000 in cash and $30,000,000 in
AST Research Inc. ("AST") common stock as final payment of a $90,000,000 note
payable from AST to the Company. The 4,498,594 shares of AST common stock Tandy
owns represent approximately 7.8% of the outstanding common stock of AST. This
common stock was issued to Tandy as partial payment of AST's obligation under a
promissory note dated July 12, 1993. This note was payable to the Company
pursuant to the terms of the Agreement for Purchase and Sale of Assets dated
June 30, 1993.
The AST common stock is available for sale and, therefore, is subject to mark to
market adjustments for each reporting period based upon its current market
value. Based on the common stock price of $5.00 at September 30, 1996, the
market value of AST common stock approximated $22,500,000. Pursuant to the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities", the
Company recorded an unrealized loss of $4,880,000, net of taxes as a decrease in
stockholders' equity, at September 30, 1996. As of November 5, 1996, the current
market price of AST common stock was $4.625 per share.
Depending on a variety of factors, including market conditions and prices, the
Company might dispose of some or all of its shares of AST common stock. The
disposition of the shares of common stock may be effected from time to time in
one or more transactions. In connection with its ownership of the common stock,
the Company may from time to time, at its sole discretion, engage in hedging
transactions with broker/dealers or other financial institutions. A charge will
be recognized against income upon a subsequent sale if the market price is below
the original cost basis or if the Company determines that a decline in the
market value of AST common stock is other than temporary.
Cash used for financing activities for the nine-month period ended September 30,
1996 includes continued repurchases of common stock under the December 1995
share repurchase program and repayments of long-term debt obligations primarily
consisting of $12,700,000 of medium term notes and $5,497,000 of TESOP debt.
Repayments of long-term borrowings through September 30, 1995 included the
$45,000,000 of 8.69% senior notes and medium-term notes totaling $6,000,000.
Short-term borrowings during the first nine months of fiscal year 1996 exceeded
levels obtained in the same period last year primarily due to the excess cash
received in fiscal year 1995 upon the sale of the credit card portfolio. The
Company believes that its cash flow from operations, cash on hand and
availability under its existing debt facilities are adequate to fund the planned
expansion of its store formats and share repurchase program. In addition, most
of the Company's new store expenditures are being funded through operating and
capital leases.
Cash and short-term investments at September 30, 1996 were $124,956,000 as
compared to $143,498,000 at December 31, 1995, and $102,534,000 at September 30,
1995. Total debt as a percentage of total capitalization was 27.1% at September
30, 1996, compared to 17.1% at December 31, 1995, and 23.2% at September 30,
1995. The increase in the total debt ratios results primarily from the Company's
share repurchase program described below and inventory additions in preparation
for the upcoming Christmas selling season.
On October 21, 1996, the Company announced that its Board of Directors had
authorized the purchase of an additional 5,000,000 shares through the Company's
existing share repurchase program which was initially authorized in December
1995. The share increase brings the total authorization to 10,000,000 shares of
which approximately 2.9 million shares have been repurchased during the first
nine months of 1996. During the quarter ended September 30, 1996, approximately
1.1 million shares were repurchased under the December 1995 board
authorization. Purchases will be made from time to time in the open market,
and it is expected that funding of the program will come from operating cash
flow and existing borrowing facilities.
<PAGE>
Inventory
Compared to September 30, 1995, total inventories at September 30, 1996 have
decreased $92,274,000 or 5.2%. The decrease in total inventory levels is
comprised of an overall reduction in RadioShack inventory as a result of an
inventory reduction program, which was partially offset by increases in Computer
City and Incredible Universe new store inventory additions. Inventory levels
have increased 10.5% from amounts at December 31, 1995, primarily due to
seasonal fluctuations and additional store openings. Inventory is primarily
comprised of finished goods.
<TABLE>
Changes in Stockholders' Equity
<CAPTION>
Outstanding
(In thousands) Common Shares Dollars
- -------------- ---------------- -------------
<S> <C> <C>
Balance at December 31, 1995 61,727 $ 1,601,335
Foreign currency translation adjustments, net of
deferred taxes - (2,154)
Sale of treasury stock to employee plans 698 30,468
Purchase of treasury stock (3,740) (164,344)
Exercise of stock options 214 8,185
Director stock payments 2 108
Restricted stock awards 27 1,099
Repurchase of preferred stock - (2,990)
Preferred stock dividends, net of tax - (3,104)
TESOP deferred compensation earned - 5,989
Unrealized loss on AST stock, net of tax - (4,880)
Common stock dividends - (35,947)
Net income - 46,101
---------- -------------
Balance at September 30, 1996 58,928 $ 1,479,866
========== =============
</TABLE>
InterTAN Update
As of September 30, 1996 and 1995, respectively, the Company's Consolidated
Balance Sheet reflects notes and other receivables due from InterTAN, Inc.
("InterTAN") as summarized below:
Balance at September 30,
-------------------------
(In thousands) 1996 1995
- -------------- ---------- ----------
Gross amount of notes $ 27,831 $ 44,903
Discount 9,249 13,195
--------- ----------
Net amount of notes $ 18,582 $ 31,708
========= ==========
Current portion of notes $ 4,646 $ 14,432
Non-current portion of notes 13,936 17,276
Other current receivables 5,212 2,966
--------- ----------
$ 23,794 $ 34,674
========= ==========
The notes were purchased at a discount from InterTAN's banking syndicate by
Trans World Electronics, Inc. ("Trans World"), a wholly-owned subsidiary of
Tandy. InterTAN is contractually obligated to pay the gross amount of the notes
to Trans World.
<PAGE>
The following income components were generated from operations relative to
InterTAN:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ----------------------------
(In thousands) 1996 1995 1996 1995
- -------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Sales and commission income $ 2,811 $ 3,751 $ 6,418 $ 8,216
=========== =========== ========== ==========
Interest income $ 613 $ 1,083 $ 2,310 $ 3,111
Accretion of discount 949 996 2,912 3,147
----------- ----------- ---------- ----------
$ 1,562 $ 2,079 $ 5,222 $ 6,258
=========== =========== ========== ==========
Royalty income $ 518 $ 250 $ 1,052 $ 250
=========== =========== ========== ==========
</TABLE>
Through October 1996, InterTAN has met all of its financial obligations to
Tandy. Accordingly, management believes that InterTAN should be able to continue
to meet its payment obligations pursuant to its debt agreements with Trans
World. See the Company's Annual Report on Form 10-K for the year ended December
31, 1995, for further information.
Canadian tax authorities are reviewing InterTAN's Canadian subsidiary's 1987-93
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 present, nothing has come to the attention of the Company which
would lead it to believe that the ultimate resolution of this review would
impair InterTAN's ability to meet its obligations to Tandy.
Change in Operating Management
The Company reported on October 28, 1996, that Matt Howard resigned as President
of Computer City for personal and family reasons. John V. Roach, Chairman and
CEO of Tandy Corporation, will serve as acting President of Computer City.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
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 September 30, 1996. While certain of these
matters involve substantial amounts, and although occasional adverse settlements
or resolutions might 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) 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 17, which immediately precedes such exhibits.
b) Reports on Form 8-K.
1) On August 12, 1996, the Company reported the receipt of an August
6, 1996 letter from Ms. Donna Ecton advising the Company of her
resignation as a member of the Board of Directors of Tandy
Corporation for personal reasons. The Form 8-K was filed on
August 12, 1996.
2) On September 11, 1996, the Company announced an alliance with
Sprint, Sprint Spectrum, and RadioShack that will permit
RadioShack to sell Sprint-branded communications services and
products through its retail network. The Form 8-K was filed on
September 18, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tandy Corporation
(Registrant)
Date: November 11, 1996 By /s/ Richard L. Ramsey
---------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: November 11, 1996 /s/ Dwain H. Hughes
-----------------------------
Dwain H. Hughes
Senior Vice President and
Chief Financial Officer
Principal Financial Officer)
<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).
2e(i) Amendment No. 1 to Acquisition Agreement dated January 18,1995,
between Tandy Credit Corporation, Tandy National Bank and Hurley
State Bank (filed as Exhibit 2 to Tandy's March 30,1995 Form 8-K
filed on April 12, 1995, Accession No. 0000096289-95-000012 and
incorporated herein by reference).
2f Agreement Plan of Merger dated March 30, 1995, by and among Tandy
Corporation, Tandy Credit Corporation, Hurley State Bank and
Hurley Receivables Corporation (filed as Exhibit 3 to Tandy's
March 30, 1995 Form 8-K filed on April 12, 1995, Accession No.
0000096289-95-000012 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).
<PAGE>
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 January 1, 1996 (filed
as Exhibit 3b to Tandy's Form 10-K filed on March 28, 1996,
Accession No. 0000096289-96-000004 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 First Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for sixteen other
banks, dated as of May 26, 1995 (Facility A) (filed as Exhibit 4c
to Tandy's Form 10-K filed on March 28, 1996, Accession No.
0000096289-96-000004 and incorporated herein by reference).
4d First Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for sixteen other
banks, dated as of May 26, 1995 (Facility B) (filed as Exhibit 4d
to Tandy's Form 10-K filed on March 28, 1996, Accession No.
0000096289-96-000004 and incorporated herein by reference).
4e Second Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for sixteen other
banks, dated as of May 24, 1996 (Facility A) (filed as Exhibit 4e
to Tandy's Form 10-Q filed on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
4f Second Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen banks,
dated as of June 28, 1996 (Facility B) (filed as Exhibit 4f to
Tandy's Form 10-Q filed on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
4g Third Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen banks,
dated as of June 28, 1996 (Facility A) (filed as Exhibit 4g to
Tandy's Form 10-Q filed on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
<PAGE>
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 (filed as Exhibit 10b to
Tandy's Form 10-K filed on March 28, 1996, Accession No.
0000096289-96-000004 and incorporated herein by reference).
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 May 18,
1995 (filed as Exhibit 10j to Tandy's Form 10-Q filed on August
14, 1995, Accession No. 0000096289-95-000016 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* First Restated Trust Agreement Tandy Employees Supplemental
Stock Program through Amendment No. IV dated January 1, 1996
(filed as Exhibit 4d to Tandy's Form 10-K filed on March 28,
1996, Accession No. 0000096289-96-000004 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-Q filed on
August 14, 1995, Accession No. 0000096289-95-000016 and
incorporated herein by reference).
<PAGE>
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 filed on August
14, 1995, Accession No. 0000096289-95-000016 to 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 28, 1996, Accession No.
0000096289-96-000004 and incorporated herein by reference).
11 Statement of Computation of Earnings per Share 21
12 Statement of Computation of Ratios of Earnings to
Fixed Charges 22
27 Financial Data Schedule
- -----------------------
* Each of these exhibits is a "management contract or compensatory
plan, contract, or arrangement".
<PAGE>
<TABLE>
TANDY CORPORATION EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
(In thousands, except per share amounts) 1996 1995 1996 1995
- ---------------------------------------- ---------- --------- --------- -----------
<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 $ 22,322 $ 44,901 $ 46,101 $ 121,800
Less dividends on preferred stock:
Series B (1,599) (1,633) (4,775) (4,931)
--------- --------- --------- ----------
Net income available to common
shareholders for primary earnings per share $ 20,723 $ 43,268 $ 41,326 $ 116,869
========= ========= ========= ==========
Weighted average number of common shares
outstanding 59,433 65,011 60,375 63,158
Weighted average number of $2.14 depositary shares,
representing Series C preferred stock, treated
as common stock due to mandatory conversion (b) - - - 2,987
Weighted average number of common shares issuable
under stock option plans, net of assumed
treasury stock repurchases at average market
prices 217 708 298 548
--------- --------- --------- ----------
Weighted average number of common and common
equivalent shares outstanding 59,650 65,719 60,673 66,693
========= ========= ========= ==========
Net income available per average
common and common equivalent share $ 0.35 $ 0.66 $ 0.68 $ 1.75
========= ========= ========= ==========
Fully Diluted Earnings Per Share (a)
Reconciliation of net income per statements of
income to amounts used in computation of fully diluted
earnings per share:
Net income available to common shareholders $ 20,723 $ 43,268 $ 41,326 $ 116,869
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 (c) 1,633 (c) 4,931
Less additional contribution that would have
been required for the TESOP if Series B preferred
stock had been converted (c) (938) (c) (2,808)
--------- --------- --------- ----------
Net income available per common and
common equivalent share, as adjusted $ 20,723 $ 43,963 $ 41,326 $ 118,992
========= ========= ========= ==========
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 59,650 65,719 60,673 66,693
Adjustment to reflect assumed exercise of stock
options as of the beginning of the period - 106 - 249
Adjustment to reflect assumed conversion of Series
B preferred stock to common stock as of the
beginning of the period (c) 1,895 (c) 1,915
--------- --------- ---------- ---------
Weighted average number of common and common
equivalent shares outstanding, as adjusted 59,650 67,720 60,673 68,857
======== ========= ========== =========
Fully diluted net income available per average
common and common equivalent share $ 0.35 $ 0.65 $ 0.68 $ 1.73
======== ======== ========== =========
(a) 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%.
(b) The amount in 1995 represents the pro rata portion of the Series C
preferred stock outstanding prior to their conversion, effective March 10,
1995.
(c) For the three and nine months ended September 30, 1996, these items are
anti-dilutive and thus, omitted from the calculation.
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 12
TANDY CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -------------------------
(In thousands, except ratios) 1996 1995 1996 1995
- ----------------------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Net income $ 22,322 $ 44,901 $ 46,101 $ 121,800
Plus provision for income taxes 13,190 28,108 27,238 76,248
----------- --------- --------- ----------
Income before income taxes 35,512 73,009 73,339 198,048
----------- --------- --------- ----------
Fixed charges:
Interest expense and amortization of
debt discount 9,047 6,853 25,064 22,703
Amortization of issuance expense 62 3 187 206
Appropriate portion (33 1/3%) of rentals 19,876 18,293 59,028 53,268
----------- --------- --------- ----------
Total fixed charges 28,985 25,149 84,279 76,177
----------- --------- --------- ----------
Earnings before income taxes and
fixed charges $ 64,497 $ 98,158 $ 157,618 $ 274,225
=========== ========= ========= =========
Ratio of earnings to fixed charges 2.23 3.90 1.87 3.60
=========== ========= ========= ==========
Ratio of Earnings to Fixed Charges and
Preferred Dividends:
Total fixed charges, as above $ 28,985 $ 25,149 $ 84,279 $ 76,177
Preferred dividends 1,599 1,633 4,775 9,755
---------- -------- --------- ----------
Total fixed charges and preferred dividends $ 30,584 $ 26,782 $ 89,054 $ 85,932
========== ======== ========= ==========
Earnings before income taxes, fixed
charges and preferred dividends $ 64,497 $ 98,158 $ 157,618 $ 274,225
========== ======== ========= ==========
Ratio of earnings to fixed charges and
preferred dividends 2.11 3.67 1.77 3.19
========== ======== ========= ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the consolidated balance sheets and consolidated statements of income
contained in Tandy Corporation's third quarter report on Form 10-Q
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 124,956
<SECURITIES> 25,120
<RECEIVABLES> 206,017
<ALLOWANCES> 0
<INVENTORY> 1,671,034
<CURRENT-ASSETS> 2,090,480
<PP&E> 619,984
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,792,656
<CURRENT-LIABILITIES> 1,183,664
<BONDS> 109,071
0
100,000
<COMMON> 85,645
<OTHER-SE> 1,294,221
<TOTAL-LIABILITY-AND-EQUITY> 2,792,656
<SALES> 4,234,690
<TOTAL-REVENUES> 4,234,690
<CGS> 2,784,767
<TOTAL-COSTS> 2,784,767
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,013
<INCOME-PRETAX> 73,339
<INCOME-TAX> 27,238
<INCOME-CONTINUING> 46,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,101
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
