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 ( NO FEE REQUIRED)
For the fiscal year ended December 31, 1996
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 18, 1997, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $2,741,632,397 based on the New York
Stock Exchange closing price.
As of March 18, 1997, there were 56,166,586 shares of the registrant's
Common Stock outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders are
incorporated by reference into Part III.
The Index to Exhibits is on Sequential Page No. 55.
Total Pages 106.
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 continuing principal retail operations include the RadioShack(R) and
Computer City(R) store chains. The Company adopted a plan to exit the Incredible
Universe and McDuff retail business in December 1996. See Recent Developments
below for a discussion of this plan. See Item 7 "Management's Discussion and
Analysis of Results of Operations and Financial Condition" for a discussion of
divisional sales data.
Recent Developments. On May 21, 1996, Tandy announced a restructuring
program for its Incredible Universe division which included an overhead
reduction plan, the closing of two stores and costs associated with the
cancellation of certain real estate sites held for new store development.
On December 10, 1996, Tandy announced that the remaining 53 McDuff
stores, previously included in the Specialty Retail Group of RadioShack,
would be discontinued.
On December 30, 1996, the Company announced its plan to exit the
Incredible Universe business. The Company has reached an agreement for the
sale of six Incredible Universe stores to Fry's Electronics and contracts
with certain affiliates for the sale of the real estate of those stores.
The Company plans for the remainder of the stores (11) to be sold or to be
used for other real estate purposes. In addition, the Company announced on
December 30, 1996 the adoption of a plan to close 21 Computer City stores.
RadioShack. RadioShack is the Company's largest operating division. At
December 31, 1996, the RadioShack division operated 4,942 (inclusive of 53
McDuff stores included in the closure plan) company-owned stores, located
throughout the United States. These stores average approximately 2,450
square feet in area and are located in major malls, strip centers and
individual store fronts. To provide RadioShack products to smaller
communities, RadioShack had on the same date a network of 1,927
dealer/franchise stores. The dealers are generally engaged in other retail
operations and augment their sales with RadioShack products. This network
included 77 international dealers at December 31, 1996.
The company-owned RadioShack stores carry a broad assortment of
primarily private label electronic parts and accessories, audio/video
equipment, digital satellite systems, personal computers and cellular and
conventional telephones, as well as specialized products such as scanners,
electronic toys and hard to find batteries. Personal computers, which
account for approximately 11.0% of the RadioShack division's sales,
primarily target progressive family users seeking computers for home, and
small business use. RadioShack also provides access to third party
services such as cellular phone, PCS, direct satellite programming, and
pager service. RadioShack plans to expand its company-owned store base to
5,000 locations by the year 2000. RadioShack is also focusing on becoming
"America's Telephone Store". See "Net Sales and Operating Revenues" in
Item 7 for a discussion of a recent RadioShack telecommunications
alliance.
On December 30, 1994, the Company adopted a business restructuring plan
to close or convert 233 stores which included VideoConcepts(R) stores,
McDuff Electronics(R) mall stores and a small number of McDuff Electronics
and Appliance Supercenters.The stores were closed during the first quarter
of 1995. On January 3, 1995, the Company announced that the Tandy Name
Brand Retail Group would be dissolved and the 73 continuing stores would
become part of the Tandy Specialty Retail Group. Effective with the
December 1996 announcement of the closure of the remaining McDuff stores,
the Specialty Retail Group was discontinued. See Item 7 "Management's
Discussion and Analysis of Results of Operations and Financial Condition"
and Note 3 of the "Notes to Consolidated Financial Statements" for more
information on the plan.
Computer City. As of December 31, 1996, the Company had 113 (inclusive
of 21 stores included in the closure plan) Computer City stores open,
including five in Europe and seven in Canada. The Computer City chain
operates primarily as a supercenter format featuring many name brand
computers, software and related products, including IBM, Apple, Sony,
Lotus, Microsoft, Compaq, AST and Hewlett-Packard. The remaining 81
Computer City SuperCenters average about 21,150 square feet and carry
approximately 4,400 products. Additionally, 11 Computer City Express
stores serve the smaller markets and average 12,300 square feet. The
Company plans to open approximately 5 additional stores in 1997.
Incredible Universe. At December 31, 1996, Tandy and its subsidiaries
operated 17 Incredible Universe stores. As noted in Recent Developments
above, operations in this chain, in all material aspects, will cease in
1997. See Item 7 "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and Note 3 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. A&A also provides
services for outside customers, primarily InterTAN Inc. ("InterTAN"). 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 24
of the "Notes to Consolidated Financial Statements".
Tandy Service Centers - The Company maintains a large service and support
network to service 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 RadioShack program. At December 31, 1996,
there were 121 service centers in the U.S. and Canada; however, the
Company plans to close fourteen of these centers as part of the December
1996 Incredible Universe and Computer City store closure plan. The Tandy
Service division stocks over one million parts.
Regional Distribution Centers - The 12 distribution centers operated by
the Company ship over one million cartons each month to the Company's
retail outlets. Eleven of the 12 distribution centers primarily support
RadioShack retail outlets and one cross docking distribution facility
supports primarily Computer City and will support Incredible Universe as
needed for the remainder of 1997.
Tandy Information Services ("TIS") - TIS collects information from the
retail stores nationwide and updates large databases with sales and other
information. These databases are sophisticated marketing tools 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 - 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. Effective March 30, 1995, the Company also completed the
sale of the RadioShack and Tandy Name Brand private label credit card
accounts and substantially all related accounts receivable to SPS. As part
of the completed sales transaction, Tandy Credit Corporation (which
supported Company sales through utilization of credit promotions) was
merged into Hurley Receivables Corporation, a wholly-owned subsidiary of
SPS, and no longer exists. See Item 7 "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and Note 6 of
the "Notes to Consolidated Financial Statements" for more information.
Tandy Transportation, Inc. - A large fleet of tractors and trailers
transports merchandise from manufacturers or ports of entry to the
Company's regional distribution centers and local distribution facilities
and also delivers to the Company's retail outlets.
Consumer Electronics Manufacturing - Although the Company sold most of
its manufacturing operations in 1993 and 1994, the Company still operates
nine manufacturing facilities in the United States and one overseas
manufacturing operation in China, which is a joint venture. These ten
manufacturing facilities cover a total of 1,324,000 square feet and
employed approximately 2,520 workers and professionals as of December 31,
1996. The Company manufactures a variety of products for use in its
consumer electronics retailing operations. These 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 RadioShack store
chain.
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 25 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, RadioShack, Computer
City, Incredible Universe, and Optimus are some of the registered marks most
widely used by the Company. Tandy believes that the RadioShack and Computer City
names and marks are well-recognized by consumers, and that these names and marks
are associated with high-quality service providers. The Company's products are
sold primarily under the RadioShack, and Optimus trademarks which are registered
in the U.S. and many foreign countries. The Company believes that the loss of
the RadioShack name or mark would be material to its business, but does not
believe that the loss of any other trademarks would be material.
Tandy also owns various patents relating to retail and support functions and
various products which Tandy has previously designed and continues to
manufacture.
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. During
1996, the Company sold IBM computer products which accounted for approximately
17.5% of total computer hardware product sales within the Company. Management
does not believe that the loss of this one supplier would 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 electronics 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 many factors 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 two types of store formats to address the marketplace.
Each of the Company's retailing formats uses a distinct path to the marketplace,
based on its unique customer appeal, marketing strengths and margin structure.
RadioShack. RadioShack stores offer the shopping convenience of
approximately 6,900 (inclusive of 53 McDuff stores included in the
closure plan) company-owned and dealer stores, primarily private
label high-quality products, unique selection, knowledgeable
personnel and excellent customer service, including its
"service-oriented" approach. RadioShack has formed strategic
relationships with key vendors in computers (IBM), home security
(ADT), direct-to-home satellite (RCA, PrimeStar, DirecTV, and USSB),
telecommunications (Sprint) and wireless communications (Sprint PCS)
to augment the strong position that it has historically maintained
in core product categories such as batteries, communications
equipment, telephones, antennas and electronic components, and parts
and accessories.
Computer City. Computer City stores offer approximately 4,400 different
name brand items, competitive prices and excellent customer service
on computers, computer software and accessories. This division
operates 92 stores (net of the 21 stores included in the December
1996 closure plan). Computer City operates two different size
formats, Computer City SuperCenters (81 units) and Computer City
Express (11 units). While the SuperCenters average approximately
21,150 square feet, Computer City Express stores average 12,300
square feet, serve smaller markets and also supplement SuperCenters
in larger markets.
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, 1996, the Company had approximately 48,400 employees. That
number includes approximately 8,500 temporary retail employees which were hired
for the Christmas selling season as well as 3,500 employees whose positions will
be eliminated due to the December 1996 store closure plan. 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......................... 15
Property, Plant and Equipment.......... 42
Leases................................. 44
The Company leases rather than owns most of its retail facilities. However,
the buildings of six Incredible Universe stores are owned rather than leased. As
discussed in Item 7 "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and Note 3 of the "Notes to the Consolidated
Financial Statements", Tandy has announced plans to exit the Incredible Universe
business. As a result of these plans, it is anticipated that the six Incredible
Universe buildings will be sold during 1997. The land and building of one
Computer City store is owned by the Company. The RadioShack 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, and all
distribution centers, except for three which are leased. The Company owns 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.
A consolidated action titled O'Sullivan Industries Holdings, Inc. Securities
Litigation, which involved the Company and was commenced in 1994 before the
United States District Court for the Western District of Missouri. The Court, on
July 2, 1996, approved the settlement of this litigation and entered a Final
Judgment thereby resolving this entire litigation. The Company had previously
reserved for the financial impact of the settlement and, therefore, the
settlement has not had a material adverse effect on its results of operations or
financial condition.
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, 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, 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.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART III). The following is
a list of the Company's executive officers during 1996 and their ages, positions
and length of service with the Company as of March 27, 1997.
Position
(Date Elected Years with
Name to Current Position) Age Company
John V. Roach Chairman of the Board 58 29
and Chief Executive Officer
(July 1982)
Leonard H. Roberts President of Tandy Corporation 48 3 (1)
(January 1996)
and President of RadioShack
(July 1993)
Robert M. McClure Senior Vice President - 61 24 (2)
Tandy Retail Services
(January 1994)
Herschel C. Winn Senior Vice President and 65 28
Secretary (November 1979)
Dwain H. Hughes Senior Vice President and 49 17 (3)
Chief Financial Officer
(January 1995)
Mark W. Barfield Vice President - Tax 39 9 (4)
(May 1994)
Lou Ann Blaylock Vice President - 58 26 (5)
Corporate Relations
(January 1993)
Loren K. Jensen Vice President and Treasurer 36 1 (6)
(May 1995)
Martin O. Moad Vice President-Investor
Relations 40 11 (7)
(December 1996)
Frederick W. Padden Vice President - Law 64 6 (8)
and Assistant Secretary
(January 1994)
Ronald L. Parrish Vice President - 54 10
Corporate Development
(April 1987)
Richard L. Ramsey Vice President and 51 30
Controller (January 1986)
<PAGE>
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. Roberts, Jensen, and Moad.
(1) Mr. Roberts was elected President of Tandy Corporation effective
January 1, 1996. He has been President of the RadioShack division since
July 7, 1993. Prior to joining Tandy he served as the Chairman and Chief
Executive Officer of Shoney's, Inc. from 1990 to 1993.
(2) 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.
(3) 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.
(4) Mr.Barfield served as Director of Federal and International Taxes
from April 1991 through May 1994 when he was named Vice President - Tax.
(5) Ms. Blaylock was Director of Corporate Relations from January 1986
until she was named Vice President - Corporate Relations in January 1993.
(6) Mr. Jensen became Vice President and Treasurer on May 18, 1995. Prior
to joining Tandy, he served as Senior Vice President of Texas Commerce
Bank where he was employed for almost 10 years.
(7) Mr. Moad was elected Vice President - Investor Relations effective
December 1996. Mr. Moad served as Director of Investor Relations from
February 1993 until December 1996. Prior to February 1993, he was Vice
President - Controller of InterTAN, Inc., a spin-off of Tandy Corporation
in 1987.
(8) 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.
<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, as reported in the composite
transactions quotations of consolidated trading for issues on the New York Stock
Exchange, for each quarter of the two years ended December 31, 1996.
Dividends
Quarter Ended: High Low Close Declared
December 31, 1996 $47 1/4 $37 1/8 $44 $.20
September 30,1996 47 3/8 38 1/4 40 3/8 .20
June 30, 1996 59 1/8 44 3/4 47 3/8 .20
March 31, 1996 48 1/4 34 1/8 46 1/4 .20
December 31, 1995 61 1/2 36 1/2 41 1/2 20
September 30,1995 64 3/8 50 7/8 60 3/4 .18
June 30, 1995 53 45 5/8 51 7/8 .18
March 31, 1995 52 3/8 44 47 3/4 .18
HOLDERS OF RECORD
At March 18, 1997 there were 26,974 holders of record of the Company's common
stock.
DIVIDENDS
The Board of Directors periodically reviews the Company's dividend policy.
The quarterly dividend rate is currently $0.20 per common share.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
SELECTED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
TANDY CORPORATION AND SUBSIDIARIES
<CAPTION>
Year
Six Months Ended (1) Ended
Dollars and shares in Year Ended December 31, December 31, June 30,
millions, except per ------------------------------------------------ -------------------- -------------
share amounts and ratios) 1996 1995 1994 1993 1992 1991 1992
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Net sales and
operating revenues $ 6,285.5 $ 5,839.1 $ 4,943.7 $ 4,102.6 $ 2,161.1 $ 2,031.8 $ 3,649.3
========== ========== ========== ========== ========== ========== ==========
Income(loss) before
income taxes, dis-
continued operations
and cumulative
effect of change in
accounting principle $ (145.6) $ 343.2 $ 359.5 $ 311.1 $ 102.9 $ 201.9 $ 330.5
Provision (benefit)
for taxes (54.0) 131.3 135.2 115.5 35.2 73.2 119.8
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from
continuing
operations (91.6) 211.9 224.3 195.6 67.7 128.7 210.7
Loss from discontinued
operations (2) -- -- -- (111.8) (63.9) (8.1) (26.9)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of
change in accounting
principle (91.6) 211.9 224.3 83.8 3.8 120.6 183.8
Cumulative effect of
change in accounting
principle (3) -- -- -- 13.0 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)(4) $ (91.6) $ 211.9 $ 224.3 $ 96.8 $ 3.8 $ 120.6 $ 183.8
========== ========== ========== ========== ========== ========== ==========
Net income (loss) available per average common and common equivalent share:
Income (loss) from
continuing
operations $ (1.64) $ 3.12 $ 2.91 $ 2.50 $ 0.87 $ 1.61 $ 2.61
Loss from
discontinued
operations (2) -- -- -- (1.48) (0.85) (0.10) (0.34)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of
change in accounting
principle (1.64) 3.12 2.91 1.02 0.02 1.51 2.27
Cumulative effect of
change in accounting
principle (3) -- -- -- 0.17 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)
available per
average common and
common equivalent
share (4) $ (1.64) $ 3.12 $ 2.91 $ 1.19 $ 0.02 $ 1.51 $ 2.27
========== ========== ========== ========== ========== ========== ==========
Average common and
common equivalent
shares outstanding 59.8 65.9 74.9 75.5 74.9 78.1 78.8
Dividends declared per
common share $ 0.80 $ 0.74 $ 0.63 $ 0.60 $ 0.30 $ 0.30 $ 0.60
Ratio of earnings to
fixed charges (5) N/A(6) 4.22 4.56 3.89 2.83 N/A 3.95
Note: Footnotes for (1), (2), (3), (4) and (5)see next page.
</TABLE>
<PAGE>
<TABLE>
SELECTED SUPPLEMENTAL FINANCIAL DATA(UNAUDITED)Continued
TANDY CORPORATION AND SUBSIDIARIES
<CAPTION>
Six Months Year
Ended (1) Ended
(Dollars and shares in Year Ended December 31, December 31, June 30
millions, except per ------------------------------------------------- ----------- ----------
share amounts and ratios) 1996 1995 1994 1993 1992 1992
- - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year End Financial Position
Inventories $ 1,420.5 $ 1,512.0 $ 1,504.3 $ 1,276.3 $ 1,472.4 $ 1,391.3
Total Assets (7) $ 2,583.4 $ 2,722.1 $ 3,243.8 $ 3,219.1 $ 3,381.4 $ 3,165.2
Working capital $ 746.3 $ 1,088.3 $ 1,350.1 $ 1,128.3 $ 1,478.0 $ 1,556.4
Current ratio 1.63 to 1 2.13 to 1 2.12 to 1 2.09 to 1 2.39 to 1 2.99 to 1
Capital structure:
Current debt (8) $ 258.0 $ 189.9 $ 229.1 $ 388.0 $ 385.7 $ 231.1
Long-term debt(8) $ 104.3 $ 140.8 $ 153.3 $ 186.6 $ 322.8 $ 357.5
Total debt $ 362.3 $ 330.7 $ 382.4 $ 574.6 $ 708.5 $ 588.6
Total debt, net of cash
and cash equivalents $ 240.8 $ 187.2 $ 176.8 $ 361.4 $ 595.9 $ 482.2
Stockholders' equity (7) $ 1,264.8 $ 1,601.3 $ 1,850.2 $ 1,950.8 $ 1,888.3 $ 1,930.7
Total capitalization $ 1,627.1 $ 1,932.0 $ 2,232.6 $ 2,525.4 $ 2,596.8 $ 2,519.3
Long-term debt as a % of
total capitalization 6.4% 7.3% 6.9% 7.4% 12.4% 14.2%
Total debt as a % of
total capitalization 22.3% 17.1% 17.1% 22.8% 27.3% 23.4%
Stockholders' equity per
common share (9) $ 21.49 $ 25.44 $ 26.02 $ 25.46 $ 24.95 $ 25.57
Financial Ratios
Return on average
stockholders' equity (5) N/A(4) 12.3% 11.8% 10.2% 3.5% 11.2%
Percent of sales:
Income (loss) before
income taxes, discontinued
operations & cumulative
effect of change in
accounting principle (4) (2.3)% 5.9% 7.3% 7.6% 4.8% 9.0%
Income (loss) from
continuing operations(4) (1.5)% 3.6% 4.5% 4.8% 3.2% 5.7%
(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) During 1993, the Company discontinued and disposed of its computer
manufacturing business, O'Sullivan Industries Inc., Memtek's Product
Division and the Lika printed circuit board business.
(3) The change in 1993 reflected the Company's change in accounting for income
taxes to comply with FAS 109.
(4) Excluding $230.3 million (net of taxes) in restructuring and other charges
in 1996, net income would have been $138.7 million, net income available per
common and common equivalent share would have been $2.21, return on average
stockholders' equity would have been 8.9%, income (loss) before income taxes
as a percent of sales would have been 3.5%, and income (loss) from
continuing operations would have been 2.2%.
(5) Computed using income from continuing operations.
(6) Pre-tax earnings were not sufficient to cover fixed charges during 1996 by
approximately $145.6 million. Excluding $230.3 million (net of taxes) in
restructuring and other charges, the ratio of earnings to fixed charges
would have been 2.57.
(7) Includes investment in discontinued operations through December 31, 1993.
(8) Includes capital leases and TESOP indebtedness.
(9) December 31, 1994, 1993 and 1992 and June 30, 1992 computed giving effect
to the Series C PERCS conversion into approximately 11,816,000 shares of
common stock.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Tandy Corporation ("Tandy" or "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(R) telecommunications alliance.
In arriving at the charges related to the restructuring plan, management was
required to make certain estimates, including but not limited to estimates about
expected proceeds from inventory sales in closed units, real estate valuations,
timing of closed store dispositions, and an assumption that Fry's Electronics,
Inc. and its affiliates would complete the purchase of six Incredible
Universe(R) stores pursuant to the purchase and sale agreements. Management made
these estimates based on the best information available at the time and believes
that these estimates were accurate at the time they were made. However,
unexpected delays in liquidation and closing of asset sales, among other
factors, could result in the charges and reserves previously estimated to be
inadequate, and future charges would be required.
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 and phrases. These uncertainties include, but are not
limited to, economic conditions including consumer installment debt levels and
interest rate fluctuations, shifts in consumer electronic product cycles,
technological advances or a lack thereof, 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
Year Ended
December 31,
------------------------------------------------
(In millions) 1996 1995 1994
- - ------------- ------------ ------------ ------------
RadioShack $ 3,237.0 $ 3,219.3 $ 3,022.8
Incredible Universe 908.5 742.0 381.7
Computer City 2,064.0 1,763.9 1,184.2
------------ ------------ ------------
6,209.5 5,725.2 4,588.7
Tandy Name Brand (closed) - 28.1 271.5
Other Sales 76.0 85.8 83.5
------------ ------------- ------------
$ 6,285.5 $ 5,839.1 $ 4,943.7
============ ============= ============
Consolidated net sales and operating revenues increased 7.6% to $6.285
billion in 1996 from $5.839 billion in 1995. The increase is primarily
attributable to two factors: (1) the addition of 111 RadioShack stores (net of
closures) and 14 Computer City(R) stores during 1996 and (2) the incremental
addition of a full year's revenue related to stores opened during 1995 whose
total 1995 revenue reflected a partial year. Tandy announced a store closure
plan in December 1996 and accordingly, 1997 consolidated revenues are not
expected to match levels obtained in 1996. Excluding the announced store
closures, consolidated sales for 1996 would have approximated $4.882 billion.
See Note 3 of "Notes to the Consolidated Financial Statements" for additional
information.
For the year ended December 31, 1996, the Company showed a 2.3% comparable
store sales decline, which was the result of all divisions experiencing
comparable sales declines during the year. Although the RadioShack division same
store sales declined less than 1%, Incredible Universe was down 4.2% and
Computer City was down 4.9%. These declines are indicative of the heightened
level of competition within the industry and lower consumer demand which
negatively impacted the consumer electronics industry as a whole. This lower
demand was primarily attributed to higher consumer debt levels and the lack of
new products with significant technological advances.
RadioShack sales for 1996 increased less than 1% to $3.237 billion from
$3.219 billion. The McDuff store closures, which are included in RadioShack
sales, totaled $135.8 million in 1996. Excluding McDuff, RadioShack sales
increased 2.8%. Consumer electronics, while remaining the single largest product
category of RadioShack's sales mix, declined slightly to 44.8% of sales from
46.1% in 1995 and 45.4% in 1994 principally due to declines in audio and video
and personal electronic sales including portable radio and cassette product,
VCRs, and camcorders. Parts and accessory sales, including batteries, rose to
34.1% of RadioShack business from 32.9% in 1995. The average 1996 selling price
on desktop computers and notebook computers rose 32.9% and 18.5%, respectively
over the 1995 average selling price. Although computer sales have increased as a
percentage of total sales, system units sold have declined. Repair income and
cellular commissions experienced a slight decline in 1996 to 10.1% of sales from
10.4% in 1995, which was up from 6.6% in 1994. The 1996 decline in cellular
commissions is partially attributable to the changes in the California market,
which experienced increased consumer demand in 1995 due to enactment of certain
laws at that time. RadioShack plans to expand its company-owned store base to
5,000 locations by the year 2000. In addition, through a new dealership program
entitled "RadioShack Select", the Company plans to award up to 1,000 new
dealerships over the next five years.
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 (collectively, "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(SM) pre-paid phone cards and phone equipment.
RadioShack will also be the exclusive retailer of Sprint(R) branded
"residential" telephones. Sprint-branded PCS products and services were
available in 240 stores at the end of 1996. Sprint telecommunication services
are expected to be available in approximately 4,000 stores by late 1997.
RADIOSHACK SALES TO CUSTOMERS
Percent of Total Sales
Year Ended
December 31,
Class of Products 1996 1995 1994
- - ---------------------------------------------- --------------- --------------
Consumer electronics 44.8% 46.1% 45.4%
Electronic parts, accessories
and specialty equipment 34.1 32.9 36.0
Personal computers, peripherals,
software and accessories 11.0 10.6 12.0
Repair services, cellular
commissions and other 10.1 10.4 6.6
------------- --------------- --------------
100.0% 100.0% 100.0%
============= =============== ==============
Computer City sales in 1996 increased 17.0% to $2.064 billion from $1.764
billion in 1995. Revenues for 1995 increased 49% over 1994 revenues of $1.184
billion. These increases are the result of the chain's growth from 40 stores as
of January 1, 1994 to a total of 113 stores as of December 31, 1996. Although
the Company announced the closing of 21 Computer City stores in December 1996,
revenues in this division are not expected to change significantly, due in part
to stores opened in 1996 that were only opened a partial year, incremental
revenue from the anticipated addition of approximately five new stores as well
as Computer City`s increased focus on a more experienced target customer group.
The 21 closing Computer City stores generated revenues of $359.1 million in
1996. See discussion under Provision for Business Restructuring for certain
actions management is taking to improve sales and operating results for this
division.
Incredible Universe sales increased 22.4% to $908.5 million from $742.0
million in 1995. Revenues for 1995 increased 94.4% over 1994 revenues of $381.7
million. These increases are the result of the chain's growth from three stores
as of January 1, 1994 to a total of 17 stores as of December 31, 1996. Revenues
for 1997 will be materially reduced from 1996 levels due to the closure of this
division in 1997. Revenues will be eliminated entirely after 1997 (see Note 3 of
the "Notes to Consolidated Financial Statements").
For the year ended December 31, 1995, the Company's consolidated sales and
operating revenues increased 18.1% to $5.839 billion from $4.944 billion in
1994. The increase in sales is primarily attributable to the addition of 160
RadioShack stores (net of closures), eight Incredible Universe stores and 30
Computer City stores during 1995. Due to the closure of 233 Tandy Name Brand
Retail Group ("Tandy Name Brand") stores during the first quarter of 1995, sales
for that division decreased from $271.5 million in 1994 to $28.1 million in
1995. This division is now closed and sales of the remaining Tandy Name Brand
stores are included in the RadioShack total for each period presented in the
"Net Sales and Operating Revenues" table. See Note 3 of the "Notes to
Consolidated Financial Statements" for more information.
RETAIL OUTLETS
Average
Store
Size Dec. 31, Dec. 31, Dec. 31,
(Sq. Ft.) 1996 1995 1994
- - --------------------------------------------------------------------------------
RadioShack
Company Owned 2,450 4,942 (1) 4,831 4,598
Dealer/Franchise N/A 1,927 2,005 2,005
-------- -------- -------- --------
6,869 6,836 6,603
Computer City 21,150 113 (2) 99 69
Incredible Universe 184,000 17 (3) 17 9
Tandy Name Brand Retail Group
McDuff Supercenters -- -- 71
McDuff/VideoConcepts Mall Stores -- -- 219
The Edge in Electronics -- -- 16
-------- -------- -------
6,999 6,952 6,987
======== ======== =======
(1) Includes 53 McDuff stores that are part of the store closure plan announced
in December 1996.
(2 ) Includes 21 stores that are part of the store closure plan announced in
December 1996.
(3) Incredible Universe division will cease operations in 1997.
GROSS PROFIT
Gross profit as a percentage of sales declined from 35.5% in 1995 to 32.2%
in 1996. The Company's gross profit margin for 1996 was adversely affected by
approximately $91.4 million of lower of cost or market inventory writedowns and
related costs primarily associated with the restructuring announced in December
1996. Excluding these charges, the gross profit margin would have been 33.6% for
1996. The decrease in gross profit margin from 35.5% to 33.6% (as adjusted)
reflects the continued effect of Tandy's lower gross margin retail formats.
During calendar year 1996, Computer City and Incredible Universe represented
47.3% of net sales and operating revenues as compared to 42.9% of the 1995 net
sales and operating revenues. Continuing Computer City stores would have
approximated 34.9% of 1996 sales after giving effect to the 1996 store closure
plan. Accordingly, management anticipates that Tandy's consolidated gross profit
percentage will increase slightly for the year ended December 31, 1997, due
primarily to the 1997 closure of the Incredible Universe division, which
historically operated at lower gross margins than consolidated Tandy
Corporation. Furthermore, gross profit margin for calendar year 1996, excluding
stores in the closure plan and the 1996 fourth quarter lower of cost or market
inventory impairment, would have approximated 38.8%. See Provision for Business
Restructuring below.
During 1996, RadioShack's gross margin was up slightly when compared to 1995
due to the relative stability of product mix as a percentage of overall sales
from 1995 to 1996. No significant change is expected in RadioShack's gross
margin for 1997. Excluding lower of cost or market writedowns associated with
store closures, Computer City's gross margin decreased slightly in 1996 due to
competitive forces which continue to exist in the computer retail industry and
the lack of introduction in 1996 of new products with significant technological
advances. Incredible Universe's gross margin percentage decreased 2.2 percentage
points from 1995 due to an increase in the relative percentage of lower margin
computer sales and price competition in the consumer electronics industry.
Gross profit as a percentage of sales declined from 39.0% in 1994 to 35.5%
in 1995. This decrease reflected the continued expansion of Tandy's lower gross
margin retail formats. During calendar year 1995, Computer City and Incredible
Universe represented 42.9% of net sales and operating revenues compared to 31.7%
of the 1994 total. During 1995, RadioShack's gross margin decreased when
compared to 1994 due to the rapid growth of cellular phone and digital satellite
system sales. Computer City's gross margin remained relatively flat in 1995 when
compared to 1994. Competitive forces continued to be a major factor in keeping
margins flat in 1995. Incredible Universe's gross margins decreased slightly in
1995 compared to 1994 reflecting the fact that personal computers and related
equipment, which inherently have lower margins, contributed a larger portion to
the overall sales mix in 1995 versus 1994.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") as a percentage of
sales and operating revenues for the year ended December 31, 1996 declined from
the years ended December 31, 1995 and 1994. 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 Computer City and
Incredible Universe, which operate at lower relative costs than consolidated
Tandy Corporation. Accordingly, management anticipates that Tandy's SG&A as a
percentage of sales and operating revenues will increase slightly for the year
ended December 31, 1997, as Computer City and Incredible Universe begin to
decrease in their combined proportion of overall Tandy Corporation business.
Excluding those stores in the 1996 store closure plan, SG&A as a percentage of
sales would have approximated 29.7% versus 28.0% for the year ended December 31,
1996. See Provision for Business Restructuring below.
Payroll and commissions expense increased slightly in 1996 as a percentage of
net sales and operating revenues to 12.1% from 12.0% in 1995, down from 12.7% in
1994. The 1996 and 1995 decrease as a percentage of sales from 1994 is due to
the increase in combined Computer City and Incredible Universe sales as a
percentage of net sales and operating revenues from 31.7% in 1994 to 42.9% in
1995 and to 47.3% in 1996. These divisions have an inherently lower salary
structure when compared to the total company. As of December 31, 1996, the
Company had approximately 48,400 employees. The preceding number includes
approximately 8,500 temporary retail employees who were hired for the Christmas
selling season. See Provision for Business Restructuring below for anticipated
work force reductions related to the Company's restructuring programs.
Advertising costs for 1996 have decreased as a percentage of sales due to
nonrecurring 1995 promotional expenses relating to the grand opening of 30
Computer City stores and eight Incredible Universe stores during 1995.
Additionally, RadioShack's 1996 advertising expense as a percentage of sales
remained consistent with 1995.
Rent expense increased slightly as a percentage of sales to 3.8% in 1996 from
3.7% in 1995, down from 4.3% in 1994. The decrease from 1994 to 1996 as a
percentage of sales directly relates to the closing of 233 Tandy Name Brand
stores in the first quarter of 1995 and the increase in the number of Computer
City and Incredible Universe stores, which have lower rent expense as a
percentage of sales than the Company as a whole.
The expenses of the credit operations have significantly declined as a
result of the sale of the private label credit card portfolios which was
completed by March 31, 1995. The sale of the credit card portfolio balance in
1994 has significantly reduced the bad debt provision during 1995 as compared to
prior years. In addition, servicing costs associated with the portfolio have
also been eliminated with the sale. These factors were the primary contributors
to the decrease in the expenses of the credit operations from 1994 to 1995.
Offsetting these reductions is decreased interest income (see discussion below)
resulting from the credit card portfolio sale. Commencing in 1995, the Company
receives fees from an unrelated third party financier of its private label
credit card portfolio balance for the generation of normal interest-bearing
accounts, and pays a fee for the generation of special purpose promotional
accounts, such as "zero interest for twelve months." These fees are classified
as credit card fees in the accompanying SG&A table and are the primary reason
for the increase in this category in 1995 versus 1994. Credit card fees expense
also includes fees associated with third party bank credit cards.
Other SG&A expenses, which include repair, maintenance, travel, and other
miscellaneous expenses, have in total remained relatively consistent between
3.1% - 3.0% of sales during 1996, 1995, and 1994.
SUMMARY OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended
December 31,
----------------------------------------------------
1996 1995 1994
% of % of % of
Sales & Sales & Sales &
(In millions) Dollars Revenues Dollars Revenues Dollars Revenues
- - --------------------------------------------------------------------------------
Payroll and commissions $ 758.2 12.1% $ 698.9 12.0% $ 627.3 12.7%
Advertising 254.6 4.1 257.3 4.4 224.2 4.5
Rent 239.8 3.8 217.6 3.7 212.4 4.3
Other taxes 107.9 1.7 96.7 1.7 89.5 1.8
Utilities and telephone 77.0 1.2 71.3 1.2 67.4 1.4
Insurance 53.3 0.8 48.3 0.8 51.1 1.0
Stock purchase
and savings plans 18.5 0.3 19.7 0.3 21.0 0.4
Credit card operations -- -- 6.3 0.1 56.8 1.1
Credit card fees 57.2 0.9 52.7 0.9 28.5 0.6
Other 194.6 3.1 177.7 3.0 154.5 3.1
------- ------- -------- ------- -------- -------
$1,761.1 28.0% $1,646.5 28.2% $1,532.7 31.0%
======== ======= ======== ======= ======== =======
NET INTEREST INCOME (EXPENSE)
Year Ended
December 31,
(In millions) 1996 1995 1994
- - ------------- ----------- ----------- -----------
Interest income:
Credit card operations $ -- $ 18.5 $ 46.9
InterTAN notes receivable,
including accretion of discount 6.7 8.3 8.3
AST note receivable,
including accretion of discount 2.6 4.9 5.7
IRS settlements 0.3 6.2 9.6
Other interest income 3.4 4.4 8.1
-------- -------- --------
Total interest income 13.0 42.3 78.6
Interest expense (36.4) (33.7) (30.0)
-------- -------- --------
Net interest income (expense) $ (23.4) $ 8.6 $ 48.6
======== ======== ========
Net interest expense was $23.4 million for 1996 versus net interest income of
$8.6 million and $48.6 million for 1995 and 1994, respectively. The reversal to
a net interest expense position in 1996 is primarily attributable to the sale of
the Company's private label credit card portfolios in the fourth quarter of 1994
and the first quarter of 1995.
Interest income from the credit card operations decreased in 1995 and 1996
due to the sale of the Company's credit card portfolios. As a result of the sale
of the Computer City and Incredible Universe credit card portfolios in 1994 and
the RadioShack and McDuff credit card portfolios in 1995, the Company will no
longer earn interest income from these portfolios. Interest income for 1995
includes the amount of interest received prior to the sale of the RadioShack and
McDuff portfolios. Interest income relating to the InterTAN, Inc. ("InterTAN")
notes will continue in 1997 but at a reduced level as principal payments are
received. In addition, the AST Research, Inc. ("AST") note was repaid in 1996
and, accordingly, the Company will no longer receive interest income from this
source. Other interest income relates primarily to cash equivalents of the
Company and was higher in 1994 than in 1995 and 1996 due to increased cash
equivalents resulting from proceeds received from the 1993 divestiture of
discontinued manufacturing and marketing operations. The Company has entered
into contracts with Fry's Electronics, Inc. of Palo Alto, California for the
sale of the assets of six Incredible Universe stores and contracts with certain
affiliates for the sale of the real estate of those stores. Upon successful
completion of the anticipated closings, the Company will hold multiple notes
receivable approximating $100 million with varying maturities ranging from one
to five years and varying interest rates ranging from 5.91% to 6.7%. Interest
income of approximately $3.3 million relating to these notes is anticipated to
be recognized in 1997, contingent upon the transactions closing. Based on the
above, interest income is expected to decline slightly in 1997.
Interest expense has grown since 1994 as a result of the Company's increased
usage of short-term borrowing facilities including seasonal bank credit lines
and commercial paper facilities, as excess funds from the 1993 manufacturing and
marketing operations divestiture and 1994/1995 sale of credit operations have
been fully utilized. The use of these facilities was significantly higher during
the years ended December 31, 1996, and 1995, as the Company retired long-term
debt, funded store expansion and executed a share repurchase program. Net
interest expense is expected to increase in 1997 as the Company continues to
fund a portion of its share repurchase program through existing borrowing
facilities.
PROVISION FOR BUSINESS RESTRUCTURING
Tandy has initiated certain restructuring programs affecting its retail
operations. These restructuring programs were undertaken as a result of the
highly competitive environment in the electronics industry. Management
anticipates these changes will strengthen its business by reducing costs.
1994 Restructuring: In December 1994, the Company adopted a business
restructuring plan to close or convert 233 of the 306 Tandy Name Brand stores.
At March 31, 1995, all 233 stores had been closed or converted. The remaining
stores became part of the Tandy Specialty Retail Group of RadioShack. A pre-tax
charge of $89.1 million 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 3 of the "Notes to Consolidated Financial
Statements".
1996 Restructurings: The Company recorded a pre-tax charge of $25.5 million
during the second quarter of 1996 related to an Incredible Universe
restructuring program announced on May 21, 1996. The charge related primarily to
future lease obligations, disposition of fixed assets, and certain termination
costs associated with employees. The components of the restructuring charge and
an analysis of the amounts charged against the reserve are outlined in a table
in Note 3 of the "Notes to Consolidated Financial Statements". This program
included an overhead reduction plan, the closing of two stores and costs
associated with the cancellation of certain real estate sites held for new store
development. A streamlining of the division's overhead costs included the
elimination of approximately 20 nonselling 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 also recorded a pre-tax restructuring charge of $136.6 million in
the fourth quarter of 1996 related to additional restructuring programs. These
programs include the closure of the remaining 53 McDuff stores, exiting the
Incredible Universe business (consisting of 17 stores), and closure of 21
Computer City stores. Computer City will strive to reposition its focus on
target customers who are the experienced users, small office/home office group,
and corporate accounts. Along with the target customer group focus, Computer
City will work toward a more productive, higher margin mix of business in areas
such as services, software and peripherals. The Company will continue to closely
monitor the operating results of this division. Management believes that its
current restructuring strategy will improve this division's operations; however,
there can be no assurance that it will be successful.
The fourth quarter 1996 restructuring charges related primarily to lease
obligations, real estate costs, employee termination expenses, and contract
cancellation costs. The components of the restructuring charge and an analysis
of the reserve are outlined in a table in Note 3 of the "Notes to Consolidated
Financial Statements". Implementation of the restructuring programs will result
in the elimination of approximately 3,500 employee positions. Management expects
the restructuring plan and cash expenditures relating to the programs to be
completed by December 31, 1997 in all material respects. Cash expenditures are
anticipated to be funded through cash flow from operations and existing
borrowing facilities. The cumulative 1996 restructuring and store closure
programs resulted in significant impairments related to long-lived assets
totaling $112.8 million (see discussion below) and lower of cost or market
impairments totaling $91.4 million recognized within cost of sales (see Gross
Profit discussion above).
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 was 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 will be 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 generally be measured as the difference between the net book value of the
assets and the estimated fair value of the related assets.
Upon adoption of FAS 121 in the first quarter of 1996, the Company recognized
an initial non-cash impairment loss of approximately $26.0 million 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. Fair
value was principally determined based upon estimated future discounted cash
flows (before interest) related to each group of assets. The Company also
recorded a non-cash impairment of $8.0 million in the restructuring charge in
May 1996.
The Company recognized an additional non-cash impairment charge of $86.8
million in the fourth quarter of 1996 primarily related to the disposal of
certain long-lived assets pursuant to its restructuring plan (see Note 3 of the
"Notes to Consolidated Financial Statements"). These assets principally relate
to the Incredible Universe, Computer City and remaining McDuff stores that are
part of the store closure plan and certain foreign real estate. Fair value was
principally determined by quoted market prices. Management expects the plan of
disposal to be accomplished in all material respects by approximately December
31, 1997. The net book value of the long-lived assets to be disposed of at
December 31, 1996 approximated $68.2 million. See Note 3 of the "Notes to
Consolidated Financial Statements" for the 1996 operating results of the stores
included in the store closure plan.
UNREALIZED LOSS ON AST SECURITIES
On July 12, 1996, the Company received $60.0 million in cash and $30.0
million in AST common stock as final payment of a $90.0 million note payable
from AST to the Company. The 4,498,594 shares of AST common stock Tandy received
represented approximately 7.8% of the outstanding common stock of AST at the
time of receipt. The Company's cost basis approximated $6.67 per share.
On January 30, 1997, Samsung Electronics Co., Ltd. ("Samsung") proposed to
purchase the remaining outstanding shares of AST common stock it does not own
(Samsung owned approximately 46% as of December 31, 1996) for cash consideration
of $5.10 per share. As a result, the Company considers the decline from its
original cost basis of $6.67 per share and Samsung's offer price of $5.10 per
share to be "other than temporary" and, accordingly, has assigned a new cost
basis to the stock of $5.10 per share. The recognition of this reduction in cost
basis was recorded as an unrealized loss of approximately $7.0 million which is
reflected as an increase to selling, general and administrative expense in the
accompanying 1996 Consolidated Statements of Income. Upon consummation of
Samsung's proposal at the offer price of $5.10 per share, the "unrealized loss"
would effectively become "realized".
Consummation of Samsung's proposed acquisition of AST is subject to several
conditions, including approval of the transaction by the independent directors,
negotiation and execution of a mutually satisfactory merger agreement, and
receipt of all required United States and Korean governmental approvals.
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,
Tandy received cash of $85.8 million and received a deferred payment of $179.8
million. The Company recognized a gain of $35.7 million in the accompanying 1994
Consolidated Statements of Income. The total principal amount of $179.8 million
was paid in full during 1995.
On March 30, 1995, the Company completed the sale, at net book value, of the
RadioShack and Tandy Name Brand private label credit card accounts and
substantially all related accounts receivable to Hurley State Bank, a subsidiary
of SPS. As a result of the transaction, Tandy received $342.8 million in cash
and a deferred payment amount of $49.4 million which has been paid in full.
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 $7.7
million, 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 $75.0 million. As a result,
the Company recognized a gain of $55.7 million associated with this transaction
in its accompanying 1994 Consolidated Statements of Income. The Company
continues to provide repair services to customers who tender products pursuant
to the extended service contracts on a non-exclusive basis. The unrelated third
party pays the Company competitive market rates for repairs on products tendered
pursuant to the extended service contracts.
PROVISION FOR INCOME TAXES
The effective tax benefit rate that resulted from the Company's net loss
position was 37.1% for the year ended December 31, 1996, and the effective
provision rate was 38.3% for the year ended December 31, 1995, and 37.6% for the
year ended December 31, 1994. The effective tax rate for 1996 changed from 1995
due primarily to foreign income taxes which were incurred on foreign income in
1996 despite the overall loss incurred by the Company.
The IRS Dallas office had previously referred certain issues in the Company's
1987 tax return to the IRS National Office. The issues involved the private
letter rulings issued by the IRS in connection with the spin-off of InterTAN and
certain other tax matters. On June 20, 1996, the IRS notified the Company that
it would no longer challenge the private letter ruling issued in connection with
the InterTAN spin-off. In December of 1996, the IRS Dallas Appeals Office
notified the Company that it is no longer pursuing the remaining matters
associated with the separation of InterTAN from the Company.
TAX SHARING AND TAX BENEFIT REIMBURSEMENT AGREEMENT
On February 2, 1994, O'Sullivan Industries ("O'Sullivan"), a former
subsidiary of Tandy Corporation, completed an initial public offering. Tandy has
recognized income of approximately $0.2 million, $1.3 million and $4.4 million,
net of tax, during the years ended December 31, 1996, 1995 and 1994,
respectively, pursuant to a Tax Sharing and Tax Benefit Reimbursement Agreement
(the "Agreement") between Tandy and O'Sullivan. Under the Agreement, 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 Agreement. The additional gain is
recorded as a reduction of SG&A expense in the accompanying Consolidated
Statements of Income.
CASH FLOW AND LIQUIDITY
Year Ended
December 31,
------------------------------------------------
(In millions) 1996 1995 1994
- - ------------- -------------- -------------- ------------
Operating activities $ 307.5 $ 673.0 $ 268.9
Investing activities (112.9) (180.3) 236.6
Financing activities (216.6) (554.8) (513.1)
Tandy's cash flow and liquidity, in management's opinion, remains strong.
During the year ended December 31, 1996, cash provided by operations was $307.5
million as compared to $673.0 million for the year ended December 31, 1995 and
$268.9 million for the year ended December 31, 1994.
The increased cash flow from operations for 1995 as compared to both 1996 and
1994 was the result of nonrecurring cash flows generated in 1995 primarily
related to the cash received from the sale of the credit card portfolios, which
approximated $342.8 million, and collection of the deferred payment amount from
SPS of $179.8 million.
Inventory for RadioShack and related support operations decreased
approximately $30.0 million in 1996, while during the same period, Computer City
and Incredible Universe inventories (prior to restructuring reserves) increased
approximately $30.1 million. These year-to-year inventory fluctuations offset
one another, resulting in no material net cash effect for the year. It is not
anticipated that additional stores in 1997 will materially impact inventory
levels. Other working capital components generated $49.2 million of positive
cash flow to operations in 1996. In 1995, inventory required less cash than in
1994 due to the liquidation of the closing Tandy Name Brand stores and a net
reduction in Computer City inventory which was partially offset by increases in
inventory to support Incredible Universe and RadioShack store expansion. Current
liability reductions in 1995 surpassed comparable 1994 amounts by $376.2
million.
Investing activities involved capital expenditures primarily for retail
expansion, upgrading information systems and headquarter building renovations
totaling $174.8 million for the year ended December 31, 1996, $226.5 million for
the year ended December 31, 1995, and $180.5 million for the year ended December
31, 1994. Proceeds from the sale of property, plant and equipment in 1995 and
1994 resulted primarily from sale-leaseback transactions which netted the
Company $37.6 million and $52.7 million, respectively, in cash. The cash portion
of payments on the note receivable from AST amounted to $6.7 million in 1995 and
$60.0 million in 1996. Proceeds received from the sale of divested manufacturing
and marketing operations totaled $359.0 million during the year ended December
31, 1994. Tandy's 1997 capital expenditures are expected to approximate $125.0 -
$135.0 million which consist primarily of future store expansions and
refurbishments, as well as other capital expenditures such as updated
information systems. These expenditures will be funded primarily from cash flow
from operations.
Purchases of treasury stock required cash of $232.9 million, $502.2 million,
and $275.4 million in 1996, 1995 and 1994, respectively. Sales of treasury stock
to the Tandy Stock Plan generated cash of $39.4 million, $44.6 million and $41.6
million in 1996, 1995 and 1994, respectively. Dividends paid, net of tax, in
1996, 1995 and 1994 amounted to $52.5 million, $63.0 million and $74.5 million,
respectively. As a result of the Company calling for the redemption of its $2.14
Depositary Shares of the Company's Series C Preferred Equity Redemption
Convertible Stock ("PERCS") in March 1995, the Company eliminated its annual
dividend payment to the PERCS shareholders of approximately $32.0 million. The
Company plans to fund common and Series B (Tandy Employees Stock Ownership Plan,
"TESOP") preferred stock dividends with available cash and cash flow from
operations.
At December 31, 1996, the Company increased short-term borrowings by $40.9
million. Short-term debt reductions of $1.8 million and $110.4 million were made
in 1995 and 1994, respectively. Reductions in short-term borrowings for 1994
were 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, which have maturities of less than 90 days.
Repayments of long-term borrowings during 1996 primarily consist of $12.9
million of medium-term notes and $10.4 million of TESOP debt and $3.6 million in
capital lease reductions.
Following are the current credit ratings for Tandy, which are generally
considered investment grade:
Standard Duff &
Category Moody's and Poor's Phelps
- - -------- ------- ---------- ------
Medium-Term Notes Baa2 A- A-
ESOP Senior Notes Baa2 A- N/A
Commercial Paper P-2 A-2 D-1-
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, 1996 are
detailed in Note 12 of the "Notes to Consolidated Financial Statements".
On March 3, 1997, the Company announced that its Board of Directors
authorized management to purchase an additional 5 million shares of its common
stock through the Company's existing share repurchase program which was
initially authorized in December 1995 and subsequently increased in October
1996. The share increase brings the total authorization to 15 million shares of
which 4,582,200 shares had been purchased as of December 31, 1996. These
purchases are in addition to the 12.5 million share repurchase program which
began in August 1994 and concluded in December 1995 as well as the shares
required for employee plans which are purchased throughout the year. 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 bank
facilities.
The revolving credit backup facilities to Tandy's commercial paper program
were renewed during the second quarter of 1996. This agreement is composed of
two facilities -- one for $200.0 million expiring June 1997 and another $300.0
million facility expiring in June 2001. Annual commitment fees for the
facilities are 0.07% per annum and 0.10% per annum, respectively, whether used
or unused.
Tandy's medium-term notes outstanding under a 1991 shelf registration at
December 31, 1996 totaled $54.5 million compared to $67.1 million at December
31, 1995.
The total debt-to-capitalization ratio was 22.3% at December 31, 1996 and
17.1% at both December 31, 1995 and 1994. This debt-to-capitalization ratio
could increase as Tandy continues to repurchase shares under the existing
authorization and fund capital expenditures.
Tandy anticipates receiving a net positive cash effect from the restructuring
activities. Primary positive contributors to this cash effect are the
liquidation of closed store inventory and other related assets and the tax
benefit created by the restructuring and FAS 121 charges. Primary cash
expenditures related to the charge are expected to aggregate approximately
$138.0 million and primarily relate to lease buyout payments and real estate
disposal expenses. The Company expects to receive a major portion of this
positive cash effect prior to December 31, 1997 (see Note 3 of the "Notes to
Consolidated Financial Statements").
The Company announced on March 3, 1997 that the Board of Directors had
authorized the filing of a $300.0 million Debt Registration Statement with the
Securities and Exchange Commission. Funding under the Registration Statement
will take the form of senior unsecured notes and medium-term notes and will be
used to refinance existing short-term indebtedness and for general corporate
purposes. The filing and funding of this debt registration is subject to future
market conditions and unforeseen events.
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 cash equivalents
and its available borrowing facilities are more than adequate to fund planned
store expansion, to meet debt service and dividend requirements and to fund its
share repurchase program. If filed and funded, the issuance of longer term debt
under the new shelf registration should improve the Company's balance between
short-term and long-term debt.
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.
INTERTAN UPDATE
Summarized in the tables below are the notes and other receivables due from
InterTAN at December 31, 1996 and 1995 as well as the income components
generated from operations relative to InterTAN for each of the three years ended
December 31, 1996, 1995 and 1994. The estimated fair market value of the note
receivable approximates $28.4 million at December 31, 1996. The Company
purchased the notes at a discount and InterTAN has an obligation to pay the
gross amount of the notes.
Balance at December 31,
--------------------------
(In millions) 1996 1995
- - ------------- -------- --------
Gross amount of notes $ 27.8 $ 44.9
Discount (8.3) (12.2)
-------- --------
Net amount of notes $ 19.5 $ 32.7
======== ========
Current portion of notes $ 4.9 $ 14.6
Non-current portion of notes 14.6 18.1
Other current receivables 4.6 6.7
-------- --------
$ 24.1 $ 39.4
======== ========
Year Ended December 31,
-----------------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- -------- --------
Sales and commission income $ 8.5 $ 10.9 $ 19.8
Interest income 2.9 4.1 4.4
Accretion of discount 3.8 4.2 3.9
Royalty income 2.0 0.8 --
-------- -------- --------
Total income $ 17.2 $ 20.0 $ 28.1
======== ======== ========
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, a subsidiary of Tandy,
was the exclusive purchasing agent for products originating in the Far East for
InterTAN.
In August 1993, Trans World Electronics, Inc. ("Trans World"), a subsidiary
of Tandy, reached an agreement with InterTAN's banking syndicate to buy
approximately $42.0 million of InterTAN's debt at a negotiated, discounted
price. The debt purchased from the banks was 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 $10.0 million in working capital and trade
credit to InterTAN. Interest on the working capital loan (the "Series B" note)
of 8.11% was due semiannually beginning February 25, 1994 and the note was paid
in full in 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. The fair market value of these warrants was
approximately $1.0 million at December 31, 1996. As required by an agreement
with Tandy, InterTAN has registered the warrants under the Securities Act of
1933. At December 31, 1996, InterTAN's common stock price was $4.88 per share.
At February 19, 1997, InterTAN's common stock price was $4.25 per share.
Subject to certain conditions described below, 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. The Company was also granted a mortgage by
InterTAN on certain real property in Australia in 1996.
A merchandise agreement was reached with InterTAN in October 1993, as
subsequently amended, which requires a percentage of future purchase orders to
be backed by letters of credit posted by InterTAN. New license agreements, as
amended, provide a royalty payable to Tandy, which began in the September 1995
quarter. InterTAN had obligations for purchase orders outstanding for
merchandise ordered by A&A for InterTAN but not yet shipped totaling
approximately $23.2 million at December 31, 1996.
InterTAN increased its bank revolving credit facility with its new banking
syndicate to Canadian $60.0 million (U.S. $43.8 million equivalent at December
31, 1996) in 1994. At December 31, 1996, InterTAN had borrowed $2.6 million
under this facility. In the event 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
$60.0 million. 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.
A&A will continue as the exclusive purchasing agent for InterTAN in the Far
East on a commission basis.
Through February 1997, InterTAN has met all of its payment obligations to
Tandy. Reported income before taxes for the six months ended December 31, 1996
approximated $10.0 million compared to $13.2 million for the six months ended
December 31, 1995. 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
1987-93 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to Consolidated Financial Statements is found on page 28. 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 1997 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 1997 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 1997 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 1997
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 1997 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 28. 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 55, 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.
1) On December 30, 1996, the Company announced its plan to exit the
Incredible Universe and its agreements to sell multiple Incredible Universe
locations. The Form 8-K was filed on January 14, 1997.
2) On January 15, 1997 Jesse L. Upchurch resigned as a director of Tandy
Corporation. The Form 8-K was filed on January 22, 1997.
<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 27, 1997 /s/John V. Roach
---------------------------
John V. Roach
Chairman of the Board and
Chief Executive Officer
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 27th day of
March, 1997.
Signature Title
/s/John V. Roach Chairman of the Board, Director and
- - ------------------------
John V. Roach Chief Executive Officer (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 /s/Thomas G. Plaskett Director
- - ------------------------ -----------------------
James I. Cash, Jr. Thomas G. Plaskett
/s/Lewis F. Kornfeld, Jr. Director /s/William E. Tucker Director
- - ------------------------ -----------------------
Lewis F. Kornfeld, Jr. William E. Tucker
/s/Jack L. Messman Director /s/ Alfred J. Stein Director
- - ------------------------ -----------------------
Jack L. Messman Alfred J. Stein
/s/William G. Morton Director /s/ John A. Wilson Director
- - ------------------------ -----------------------
William G. Morton John A. Wilson
/s/Leonard H. Roberts Director
- - ------------------------
Leonard H. Roberts
<PAGE>
TANDY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants............................... 29
Consolidated Statements of Income for each of the three
years ended December 31, 1996................................. 30
Consolidated Balance Sheets at December 31, 1996
and December 31, 1995......................................... 31
Consolidated Statements of Cash Flows for each of the three
years ended December 31, 1996................................. 32
Consolidated Statements of Stockholders' Equity for
the three years ended December 31, 1996....................... 33-34
Notes to Consolidated Financial Statements...................... 35-54
All schedules have been omitted because they are not applicable, not required
or the information is included in the consolidated financial statements or notes
thereto.
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.
<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 28 present fairly, in all material respects, the financial
position of Tandy Corporation and its subsidiaries (the "Company") at December
31, 1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 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.
/s/ Price Waterhouse LLP
- - -----------------------------
PRICE WATERHOUSE LLP
Fort Worth, Texas
February 19, 1997 except for Note 11
as to which the date is March 3, 1997
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Tandy Corporation and Subsidiaries
<CAPTION>
Year Ended
December 31,
-----------------------------------------------------------------
1996 1995 1994
% of % of % of
(In millions, except per share amounts) Dollars Revenues Dollars Revenues Dollars Revenues
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and operating revenues $ 6,285.5 100.0% $ 5,839.1 100.0% $ 4,943.7 100.0%
Cost of products sold 4,263.1 67.8 3,764.9 64.5 3,017.6 61.0
---------- ---------- ----------
Gross profit 2,022.4 32.2 2,074.2 35.5 1,926.1 39.0
---------- ---------- ----------
Expenses/(income):
Selling, general and administrative 1,761.1 28.0 1,646.5 28.2 1,532.7 31.0
Depreciation and amortization 108.6 1.7 92.0 1.6 84.8 1.7
Interest income (13.0) (0.2) (42.3) (0.7) (78.6) (1.6)
Interest expense 36.4 0.6 33.7 0.6 30.0 0.6
Provision for restructuring costs 162.1 2.6 1.1 -- 89.1 1.8
Impairment of long-lived assets 112.8 1.8 -- -- -- --
Gain from sale of credit accounts
and extended service contracts -- -- -- -- (91.4) (1.8)
---------- ---------- ----------
2,168.0 34.5 1,731.0 29.6 1,566.6 31.7
---------- ---------- ----------
Income (loss) before income taxes (145.6) (2.3) 343.2 5.9 359.5 7.3
Provision (benefit) for income taxes (54.0) (0.9) 131.3 2.2 135.2 2.7
---------- ---------- ----------
Net Income (loss) (91.6) (1.5) 211.9 3.6 224.3 4.5
Preferred dividends 6.3 0.1 6.5 0.1 6.7 0.1
---------- ---------- ----------
Net income (loss)available to common
shareholders $ (97.9) (1.6)% $ 205.4 3.5% $ 217.6 4.4%
========== ========== ==========
Net income (loss) available per average
common and common equivalent share $ (1.64) $ 3.12 $ 2.91
========== ========== ==========
Average common and common
equivalent shares outstanding 59.8 65.9 74.9
========== ========== ==========
Dividends declared per common share $ 0.80 $ 0.74 $ 0.63
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Tandy Corporation and Subsidiaries
<CAPTION>
December 31,
(In millions) 1996 1995
- - ------------------------------------------------------------------------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 121.5 $ 143.5
Accounts and notes receivable, less
allowance for doubtful accounts 227.2 320.6
Inventories, at lower of cost or market 1,420.5 1,512.0
Other current assets 170.6 72.2
---------- ----------
Total current assets 1,939.8 2,048.3
---------- ----------
Property, plant and equipment, at cost,
less accumulated depreciation 545.6 577.7
Other assets, net of accumulated amortization 98.0 96.1
---------- ----------
$ 2,583.4 $ 2,722.1
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities
of long-term debt $ 245.3 $ 179.1
Current portion of capital lease obligations 0.4 0.4
Current portion of TESOP guarantee 12.3 10.4
Accounts payable 404.9 365.1
Accrued expenses 425.3 322.0
Income taxes payable 105.3 83.0
---------- ----------
Total current liabilities 1,193.5 960.0
---------- ----------
Long-term debt, excluding current maturities 35.1 63.7
Capital lease obligations 29.3 28.4
Guarantee of TESOP indebtedness 39.9 48.7
Other non-current liabilities 20.8 20.0
---------- ----------
Total other liabilities 125.1 160.8
---------- ----------
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 (TESOP), 100,000 shares authorized
and issued, 83,785 shares outstanding 100.0 100.0
Common stock, $1 par value, 250,000,000 shares authorized
with 85,645,000 shares issued 85.6 85.6
Additional paid-in capital 105.3 102.8
Retained earnings 2,188.9 2,332.1
Foreign currency translation effects (1.0) (1.1)
Common stock in treasury, at cost, 28,417,000
and 23,918,000 shares, respectively (1,164.5) (963.3)
Unearned deferred compensation related to TESOP (46.9) (54.8)
Unrealized loss on securities available for sale (2.6) --
---------- ----------
Total stockholders' equity 1,264.8 1,601.3
Commitments and contingent liabilities
---------- ----------
$ 2,583.4 $ 2,722.1
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Tandy Corporation and Subsidiaries
<CAPTION>
Year Ended
December 31,
(In millions) 1996 1995 1994
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (91.6) $ 211.9 $ 224.3
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Impairment of long-lived assets 112.8 -- --
Provision for restructuring cost and other charges 253.5 1.1 89.1
Gain on sale of extended service contracts -- -- (55.7)
Gain on sale of credit card portfolios -- -- (35.7)
Depreciation and amortization 108.6 92.0 84.8
Deferred income taxes and other items (127.8) 20.1 68.2
Provision for credit losses and bad debts 2.8 15.7 49.3
Changes in operating assets and liabilities:
Sale of credit card portfolios -- 342.8 85.8
Receivables 8.0 167.4 (230.9)
Inventories (0.1) (23.3) (220.1)
Other current assets 3.2 3.2 (8.5)
Accounts payable, accrued expenses and income
taxes 38.1 (157.9) 218.3
-------- -------- --------
Net cash provided by operating activities 307.5 673.0 268.9
-------- -------- --------
Investing activities:
Additions to property, plant and equipment (174.8) (226.5) (180.5)
Proceeds from sale of property, plant and
equipment 2.8 42.0 56.4
Proceeds from sale of divested operations -- -- 359.0
Payment on AST note 60.0 6.7 --
Other investing activities (0.9) (2.5) 1.7
-------- -------- --------
Net cash (used) provided by investing activities (112.9) (180.3) 236.6
-------- -------- --------
Financing activities:
Purchase of treasury stock (232.9) (502.2) (275.4)
Sale of treasury stock to employee stock
purchase program 39.4 44.6 41.6
Proceeds from exercise of stock options 7.4 18.2 2.5
Dividends paid, net of taxes (52.5) (63.0) (74.5)
Changes in short-term borrowings, net 40.9 (1.8) (110.4)
Additions to long-term borrowings 8.0 10.3 28.9
Repayments of long-term borrowings (26.9) (60.9) (125.8)
-------- -------- --------
Net cash used by financing activities (216.6) (554.8) (513.1)
-------- -------- --------
Decrease in cash and cash equivalents (22.0) (62.1) (7.6)
Cash and cash equivalents, at the beginning of the
year 143.5 205.6 213.2
-------- -------- --------
Cash and cash equivalents, at the end of the year $ 121.5 $ 143.5 $ 205.6
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Tandy Corporation and Subsidiaries
Preferred Common Stock
(In millions) Stock Shares Dollars
- - --------------------------------------------------------------------------------
Balance at December 31, 1993 $ 530.0 85.6 $ 85.6
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 530.0 85.6 85.6
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 $2,288,000 -- -- --
TESOP deferred compensation earned -- -- --
Series C PERCS dividends -- -- --
Repurchase of preferred stock -- -- --
Common stock dividends declared -- -- --
Redemption of PERCS (430.0) -- --
Net income -- -- --
-------- -------- --------
Balance at December 31, 1995 100.0 85.6 85.6
Purchase of treasury stock -- -- --
Foreign currency translation
adjustments, net of taxes -- -- --
Sale of treasury stock to SPP -- -- --
Exercise of stock options -- -- --
Restricted stock awards -- -- --
Series B convertible stock dividends,
net of taxes of $2,212,000 -- -- --
TESOP deferred compensation earned -- -- --
Repurchase of preferred stock -- -- --
Unrealized loss on AST stock, net of tax -- -- --
Common stock dividends declared -- -- --
Net loss -- -- --
-------- -------- --------
Balance at December 31, 1996 $ 100.0 85.6 $ 85.6
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Foreign
Treasury Stock Additional Currency Unearned Unrealized
- - --------------- Paid In Retained Translation Deferred Loss on
Shares Dollars Capital Earnings Effects Compensation Securities Total
- - --------------------------------------------------------------------------------
(21.7) $(707.3) $ 85.7 $2,028.0 $ 1.0 $ (72.3) $ -- $1,950.7
(6.7) (296.4) -- -- -- -- -- (296.4)
-- -- -- -- (2.8) -- -- (2.8)
1.0 33.9 7.6 -- -- -- -- 41.5
-- 2.5 -- -- -- -- -- 2.5
-- -- -- (4.4) -- -- -- (4.4)
-- -- -- -- -- 10.0 -- 10.0
-- -- -- (32.0) -- -- -- (32.0)
-- (4.3) -- -- -- -- -- (4.3)
-- -- -- (38.9) -- -- -- (38.9)
-- -- -- 224.3 -- -- -- 224.3
- - --------------------------------------------------------------------------------
(27.4) (971.6) 93.3 2,177.0 (1.8) (62.3) -- 1,850.2
(9.7) (473.0) -- -- -- -- -- (473.0)
-- -- -- -- 0.7 -- -- 0.7
0.9 33.8 10.8 -- -- -- -- 44.6
0.5 18.1 2.0 -- -- -- -- 20.1
-- -- -- (4.2) -- -- -- (4.2)
-- -- -- -- -- 7.5 -- 7.5
-- -- -- (4.8) -- -- -- (4.8)
-- (3.9) -- -- -- -- -- (3.9)
-- -- -- (47.8) -- -- -- (47.8)
11.8 433.3 (3.3) -- -- -- -- --
-- -- -- 211.9 -- -- -- 211.9
- - --------------------------------------------------------------------------------
(23.9) (963.3) 102.8 2,332.1 (1.1) (54.8) -- 1,601.3
(5.7) (245.9) -- -- -- -- -- (245.9)
-- -- -- -- 0.1 -- -- 0.1
0.9 36.6 2.8 -- -- -- -- 39.4
0.3 10.7 (0.3) -- -- -- -- 10.4
-- 1.1 -- -- -- -- -- 1.1
-- -- -- (4.1) -- -- -- (4.1)
-- -- -- -- -- 7.9 -- 7.9
-- (3.7) -- -- -- -- -- (3.7)
-- -- -- -- -- -- (2.6) (2.6)
-- -- -- (47.5) -- -- -- (47.5)
-- -- -- (91.6) -- -- -- (91.6)
- - --------------------------------------------------------------------------------
(28.4) $(1,164.5) $105.3 $2,188.9 $(1.0) $(46.9) $(2.6) $1,264.8
================================================================================
<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.
RadioShack is the largest of Tandy's retail store systems with company-owned
stores and dealer/franchise outlets. RadioShack's sales and operating revenues
are primarily related to private label consumer electronics, brand name personal
computers, wireless communication products and services, and direct to home
satellite systems. Tandy also operates the Computer City(R) store chain.
Computer City sales relate to personal computers, printers, peripheral equipment
and software. Incredible Universe sales relate primarily to brand name
appliances and consumer electronics including personal computers and related
software. Additionally, Tandy continues to operate certain related retail
support groups and consumer electronics manufacturing businesses.
In December 1996, the Company announced its plan to exit the Incredible
Universe business as well as certain other stores (See Note 3).
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Tandy and its wholly owned subsidiaries. Investments in 20% to
50% owned companies are accounted for on the equity method. 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.
Significant intercompany transactions are eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION: In accordance with the Financial Accounting
Standards Board (the "FASB") Statement of Financial Accounting Standards 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. 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 $1.0 million for each of the years ended December
31, 1996, 1995 and 1994 and have been included as a reduction to selling,
general and administrative expense in the accompanying Consolidated Statements
of Income.
EXTENDED SERVICE CONTRACTS: Tandy's retail operations offer extended service
contracts on products sold. These contracts generally provide extended service
coverage for periods of 12 to 48 months. During 1996 and 1995, the Company sold
extended service contracts on behalf of an unrelated third party and, to a much
lesser extent, sold its own extended service contracts. Contracts sold prior to
January 1, 1995 were offered directly by the Company. The Company accounts for
sales of its own 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. Commission revenue for the unrelated third
party extended service contracts is recognized at the time of sale.
As described in Note 6, the Company transferred all obligations with respect
to contracts in force at December 31, 1994 to an unrelated party, except certain
contracts aggregating approximately $7.7 million.
CASH AND CASH EQUIVALENTS: Cash on hand in stores, deposits in banks and all
highly liquid investments with a remaining maturity of three months or less at
the time of purchase are considered cash and cash equivalents. Cash equivalents
are carried at cost, which approximates market value.
MARKETABLE SECURITIES: The Company has an investment in AST common stock at
December 31, 1996 (See Note 5). This investment is classified as an other
current asset in the accompanying Consolidated Balance Sheet. Pursuant to
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("FAS 115"), this investment is
categorized as "available for sale". In accordance with FAS 115, securities
classified as "available for sale" are marked to market based upon market value
fluctuations. Resulting adjustments, net of deferred taxes, are reported as a
component of stockholders' equity until realized. Declines in fair value that
are considered to be other than temporary are recognized in earnings and
establish a new cost basis for the security. Realized gains and losses are also
included in earnings and are determined on the specific identification method.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: 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.
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 leases is included in
depreciation and amortization in the Consolidated Statements of Income.
IMPAIRMENT OF ASSETS: In March 1995, 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"). 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 or to be disposed of, 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 will be 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 generally be measured as the difference between the net book value of the
assets and the estimated fair value of the related assets.
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.
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 due primarily to the short-term
nature of their maturities.
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 December 31, 1996, the Company had
entered into five swaps with regard to notional amounts totaling $90.0 million.
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 $250.0 million. At December 31, 1996 and 1995, the Company
would have had to pay approximately $3.8 million and $7.0 million, respectively,
to terminate the interest rate swaps in place. This amount was obtained from the
counterparties and represents the fair value of the swap agreements. At December
31, 1996, the Company recognized a termination charge equal to the estimated
amount the Company would be required to pay to terminate the swaps of $3.8
million due to the early termination of the underlying lease obligations (See
Note 3). Effective January 1, 1997, the Company has redesignated the interest
rate swaps as a hedge against its floating rate debt. These swaps are not held
for trading purposes. At December 31, 1996, the weighted average interest rate
of the floating rate debt 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.
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, 1996, the Company had no outstanding purchase orders for which a
foreign exchange contract was used as a hedge. 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.
REVENUES: Retail sales are recorded on the accrual basis.
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 $0.9
million, $6.8 million, and $4.5 million at December 31, 1996, 1995 and 1994,
respectively.
INCOME TAXES: Income taxes are accounted for using the asset and liability
method pursuant to Statement of Financial Accounting Standards, "Accounting for
Income Taxes" ("FAS 109"). Deferred taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable to future years to differences between the financial statement and
carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes for a change in tax rates is recognized in income in
the period that includes the enactment date. In addition, FAS 109 requires the
recognition of future tax benefits to the extent that realization of such
benefits are more likely than not.
NET INCOME PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE: Net income (loss)
per average common and common equivalent share is computed by dividing net
income (loss) less the Series B convertible stock dividends (before tax benefit)
by the weighted average common and common equivalent shares outstanding during
the period (common equivalent shares were not included in 1996 due to the
Company's loss position). During 1995, the Preferred Equity Redemption
Convertible Stock ("PERCS") mandatorily converted into common stock. As a
result, they were considered outstanding common stock and the dividends have not
been deducted from net income for purposes of calculating net income per average
common and common equivalent share. Per share amounts and the weighted average
number of shares outstanding for the years ended December 31, 1995 and 1994
reflect the PERCS conversion into approximately 11.8 million common shares.
Fully diluted earnings available per common and common equivalent share are
not presented since dilution is either less than 3% or the effect would be
anti-dilutive.
ADVERTISING COSTS: All advertising costs of the Company are expensed the
first time the advertising takes place. Advertising expense was $254.6 million,
$257.3 million, and $224.2 million for the years ended December 31, 1996, 1995
and 1994, respectively.
CAPITALIZED SOFTWARE COSTS: The Company capitalizes qualifying costs relating
to developing or obtaining internal-use software. Capitalization of costs begins
after the conceptual formulation stage has been completed. Capitalized costs are
amortized over the estimated useful life of the software, which ranges between
three and five years. Capitalized costs at December 31, 1996 and 1995 totaled
$23.5 million and $3.5 million, net of accumulated amortization of $2.4 million
and $1.5 million, respectively. Amounts related to 1994 were not significant.
PERVASIVENESS OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results could
differ from those estimates.
RECLASSIFICATION: Certain amounts in prior years have been reclassified to
conform to current year presentation.
NOTE 3-RESTRUCTURING CHARGES
Tandy has initiated certain restructuring programs affecting its retail
operations. These restructuring programs were undertaken as a result of the
highly competitive environment in the electronics industry. Management
anticipates these changes will strengthen its business by reducing costs.
1994 Restructuring: In December 1994, the Company adopted a business
restructuring plan to close or convert 233 of the 306 Tandy Name Brand stores.
At March 31, 1995, all 233 stores had been closed or converted. The remaining
stores became part of the Tandy Specialty Retail Group of RadioShack. A pre-tax
charge of $89.1 million 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 included in the accompanying table below.
1996 Restructurings: The Company recorded a pre-tax charge of $25.5 million
during the second quarter of 1996 related to an Incredible Universe
restructuring program announced on May 21, 1996. The charge related primarily to
future lease obligations, disposition of fixed assets, and certain termination
costs associated with employees. The components of the restructuring charge and
an analysis of the amounts charged against the reserve are included in the
accompanying table below. This program included an overhead reduction plan, the
closing of two stores and costs associated with the cancellation of certain real
estate sites held for new store development. A streamlining of the division's
overhead costs included the elimination of approximately 20 nonselling 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 also recorded a pre-tax restructuring charge of $136.6 million in
the fourth quarter of 1996 related to the closing of the remaining 53 McDuff
stores, exiting the Incredible Universe business (consisting of 17 stores), and
closure of 21 Computer City stores. Computer City will strive to reposition its
focus on target customers who are the experienced users, small office/home
office group, and corporate accounts. Along with the target customer group
focus, Computer City will work toward a more productive, higher margin mix of
business in areas such as services, software and peripherals. The Company will
continue to closely monitor the operating results of this division. Management
believes that its current restructuring strategy will improve this division's
operations; however, there can be no assurance that it will be successful.
The fourth quarter charges related primarily to lease obligations, real
estate costs, employee termination expenses, and contract cancellation costs.
The components of the restructuring charge and an analysis of the reserve are
noted below. Implementation of these two programs will result in the elimination
of approximately 3,500 employee positions. The Company has entered into
contracts with Fry's Electronics, Inc. and certain affiliates for the sale of
assets and real estate of six Incredible Universe stores. Those contracts are to
be consummated over a period of approximately six months. The closing of the
first store is expected to be completed in March 1997. See discussion of the
Fry's Electronics, Inc. transactions below. Management expects the restructuring
plan and cash expenditures relating thereto to be completed and paid by December
31, 1997 in all material respects.
In association with the 1996 restructurings, the Company also recognized an
impairment charge of $112.8 million pursuant to FAS 121 (See Note 4) and lower
of cost or market impairments aggregating approximately $91.4 million primarily
related to inventory that will be liquidated at the affected stores. Inventory
impairment charges have been recognized as an increase in cost of sales in the
accompanying Consolidated Statements of Income.
Certain costs associated with the operation of the stores during the
liquidation period will be incurred in 1997. As a result, management expects
these stores to operate at a loss during the liquidation period, which should be
completed in all material respects by June 30, 1997.
The transactions with Fry's Electronics, Inc. include the sale of inventories
and non-inventory assets for six Incredible Universe stores and the sale of real
estate to affiliates of Fry's Electronics, Inc. Under the contracts, the six
closings are projected to begin in March and are projected to be completed by
June 30, 1997. The purchase of the real estate of the six stores will include
cash payments of $25.0 million, in aggregate, and notes totaling $40.0 million.
These notes mature in four years at an interest rate of 6.57%, payable
quarterly. One year notes bearing an interest rate of 5.91% will be given by
Fry's Electronics, Inc. to purchase existing inventories at each store at
amounts based upon values at the closing date for each transaction. Principal is
due in equal quarterly payments along with accrued interest. Five year notes
totaling $5.0 million will be given by Fry's Electronics, Inc. to purchase
non-inventory assets. Principal is due in equal annual installments. These notes
bear an interest rate of 6.70%, payable quarterly. If either Tandy or Fry's
Electronics, Inc. breaches its obligations in any material respect, the
non-breaching party will have the option to cancel the transactions and demand
liquidated damages of $10.0 million. The notes are secured by the purchased
assets.
In arriving at the charges related to the restructuring plan, management was
required to make certain estimates, including but not limited to estimates about
expected proceeds from inventory sales in closed units, real estate valuations,
timing of closed store dispositions, and an assumption that Fry's Electronics,
Inc. and its affiliates would complete the purchase of six Incredible Universe
stores pursuant to the purchase and sale agreements. Management made these
estimates based on the best information available at the time and believes that
these estimates were accurate at the time they were made. However, unexpected
delays in liquidation and closing of asset sales among other factors could
result in the charges and reserves previously estimated to be inadequate, and
future charges would be required.
Sales and operating revenues and operating losses of the stores closed
pursuant to the restructuring plans are shown below for each year ended December
31 (unaudited):
(In millions) 1996 1995 1994
- - ------------- ---- ---- ----
Sales and operating revenue $ 1,403.4 $ 1,318.0 $ 1,101.6
Operating loss (114.4) (62.3) (40.1)
The components of the combined restructuring charges and an analysis of the
amounts charged against the reserve are outlined in the following table:
1994 RESTRUCTURING
1994 Charges Charges
Original Through Balance 1/1/95- Balance
(In millions) Reserve 12/31/94 12/31/94 12/31/95 12/31/95
-------- -------- -------- -------- --------
Lease obligations $ 46.7 $ (1.5) $ 45.2 $ (33.0) $ 12.2
Impairment of fixed
assets 18.0 -- 18.0 (18.0) --
Inventory impairment 16.6 -- 16.6 (16.6) --
Goodwill impairment 4.2 (4.2) -- -- --
Termination benefits 1.2 -- 1.2 (1.2) --
Other 2.4 -- 2.4 (2.4) --
-------- -------- -------- ------- -------
Total $ 89.1 $ (5.7) $ 83.4 $ (71.2) $ 12.2
======== ======== ======== ======= =======
1996 RESTRUCTURINGS
Balance Charges
Forward Additional 1/1/96- Balance
(In millions) 12/31/95 Reserves 12/31/96 12/31/96
- - ------------- -------- -------- -------- --------
Lease obligations $ 12.2 $ 96.8 $ (15.5) $ 93.5
Impairment of fixed
assets -- 8.0 (8.0) --
Termination benefits -- 7.1 (2.5) 4.6
Contract termination costs -- 13.2 -- 13.2
Other -- 37.0 (10.6) 26.4
-------- -------- -------- --------
Total $ 12.2 $ 162.1 $ (36.6) $ 137.7
======== ======== ======== ========
NOTE 4 - IMPAIRMENT OF LONG-LIVED ASSETS
Upon adoption of FAS 121 in the first quarter of 1996, the Company recognized
an initial non-cash impairment loss of approximately $26.0 million to conform
with this statement, primarily as a result of grouping long-lived assets at
their lowest level of cash flows to determine impairment as required by this
statement. Fair value was principally determined based upon estimated future
discounted cash flows (before interest) related to each group of assets. The
Company also recorded a non-cash impairment of $8.0 million, which was included
in the restructuring charge in May 1996.
The Company recognized an additional non-cash impairment charge of $86.8
million in the fourth quarter of 1996 primarily related to the disposal of
certain long-lived assets pursuant to its restructuring plan (See Note 3). These
assets principally relate to the Incredible Universe, Computer City and McDuff
stores that are part of the store closure plan, and certain foreign real estate.
Fair value was principally determined by quoted market prices. Management
expects the plan of disposal to be accomplished by December 31, 1997. The net
book value of the assets to be disposed of at December 31, 1996 approximated
$68.2 million. See Note 3 for the 1996 operating results of the stores being
closed.
NOTE 5-UNREALIZED LOSS ON AST SECURITIES
On July 12, 1996, the Company received $60.0 million in cash and $30.0
million in AST common stock as final payment of a $90.0 million note payable
from AST to the Company. The 4,498,594 shares of AST common stock Tandy received
represented approximately 7.8% of the outstanding common stock of AST at the
time of receipt. The Company's original cost basis approximated $6.67 per share.
During the fourth quarter of 1996, the Company sold 85,000 shares of the
acquired stock for proceeds aggregating $0.5 million. Based upon AST's closing
market price at December 31, 1996 of $4.1875 per share, the Company has an
unrealized loss of approximately $11.0 million on the remaining shares of AST
common stock. On January 30, 1997, Samsung Electronics Co., Ltd. ("Samsung")
proposed to purchase the remaining outstanding shares of AST common stock it
does not own (Samsung owns approximately 46% as of December 31, 1996) for cash
consideration of $5.10 per share. As a result, the Company considers the decline
from its original cost basis of $6.67 per share and Samsung's offer price of
$5.10 per share to be other than temporary and has recognized an unrealized loss
of $7.0 million as an increase to selling, general and administrative expense in
its accompanying 1996 Consolidated Statements of Income. The remaining pre-tax
unrealized loss of $4.0 million as of December 31, 1996 has been recognized as a
$2.6 million, net of tax, reduction of stockholders' equity. As of February 19,
1997, the Company holds 4,413,594 shares of AST common stock and the market
price was $4.625 per share.
Consummation of Samsung's proposed acquisition of AST is subject to several
conditions, including approval of the transaction by the independent directors,
negotiation and execution of a mutually satisfactory merger agreement, and
receipt of all required United States and Korean governmental approvals. If the
merger is completed at the offered price of $5.10 per share, Tandy Corporation
would ultimately reverse the unrealized loss in stockholders' equity.
NOTE 6-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, Tandy received
cash of $85.8 million and received a deferred payment of $179.8 million. The
Company recognized a gain of $35.7 million in the accompanying 1994 Consolidated
Statements of Income. The deferred payment amount did not bear interest. The
total principal amount of $179.8 million was paid in full during 1995. The
Company discounted the deferred payment by $3.5 million to yield interest income
of approximately 5.0% over the twelve month payout period.
On March 30, 1995, the Company completed the sale, at net book value, of the
RadioShack and Tandy Name Brand private label credit card accounts and
substantially all related accounts receivable to Hurley State Bank, a subsidiary
of SPS. As a result of the transaction, Tandy received $342.8 million in cash
and a deferred payment amount of $49.4 million. The deferred payment did not
bear interest. The remaining December 1995 discounted deferred payment balance
of $2.1 million was paid in full during 1996.
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 $7.7
million, 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 $75.0 million. As a result,
the Company recognized a gain of $55.7 million associated with this transaction
in its accompanying 1994 Consolidated Statements of Income. The Company
continues to provide repair services to customers who tender products pursuant
to the extended service contracts on a non-exclusive basis. The unrelated third
party pays the Company competitive market rates for repairs on products tendered
pursuant to the extended service contracts.
NOTE 7-CASH EQUIVALENTS
The weighted average interest rates were 5.7% and 4.8% at December 31, 1996
and 1995, respectively, for cash equivalents totaling $25.4 million and $20.8
million, respectively.
NOTE 8-ACCOUNTS AND NOTES RECEIVABLE
Accounts and Notes Receivable
December 31,
-----------------------
(In millions) 1996 1995
- - ------------- -------- --------
Customer receivable balances of
credit operations $ -- $ 21.3
Deferred payment due on sale of
credit operations, net of discount -- 2.1
-------- --------
Net receivables related to credit
operations -- 23.4
Trade accounts receivable 211.0 167.1
Receivable and current portion of
notes due from InterTAN 9.5 21.3
AST note -- 89.8
Other receivables 14.6 24.8
Less allowance for doubtful accounts (7.9) (5.8)
-------- --------
$ 227.2 $ 320.6
======== ========
Allowance for Doubtful Accounts
Year Ended
December 31,
----------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- -------- --------
Balance at the beginning of
the year $ 5.8 $ 21.4 $ 22.3
Provision for credit losses and bad debt
included in selling, general and
administrative expense 2.8 15.7 49.3
Reserve allocated to securitized
receivables -- -- 1.8
Reserve on credit accounts sold -- (18.8) (6.3)
Uncollected receivables written off,
net of recoveries (0.7) (12.5) (45.7)
-------- -------- --------
Balance at the end of the year $ 7.9 $ 5.8 $ 21.4
======== ======== ========
Interest income related to the Company's credit card operations totaled $18.5
million and $46.9 million for the years ended December 31, 1995 and 1994,
respectively. During 1996, 1995, and 1994, the Company recorded interest income
earned totaling $2.6 million, $4.9 million and $5.7 million, respectively,
including accretion of discount, on a note receivable from AST which was paid in
full during the third quarter of 1996. The Company also recorded interest income
earned of approximately $6.7 million in 1996 and $8.3 million in 1995 and 1994,
including accretion of discount, on notes receivable from InterTAN.
NOTE 9-OTHER CURRENT ASSETS
The December 31, 1996 balance of other current assets includes $99.2 million
of deferred income taxes principally relating to the Company's current year
restructuring plan and charges related thereto (See Notes 3, 4, 5, and 15).
NOTE 10-PROPERTY, PLANT AND EQUIPMENT
December 31,
---------------------------
(In millions) 1996 1995
- - ------------- -------- --------
Land $ 18.8 $ 18.9
Buildings 209.3 181.4
Buildings under capital lease 34.4 29.9
Furniture, fixtures and equipment 402.0 475.7
Leasehold improvements 369.8 361.0
-------- --------
1,034.3 1,066.9
Less accumulated depreciation
and amortization of capital leases 488.7 489.2
-------- --------
$ 545.6 $ 577.7
======== ========
NOTE 11-TREASURY STOCK REPURCHASE PROGRAM
On March 3, 1997, the Company announced that its Board of Directors
authorized management to purchase an additional 5 million shares of its common
stock through the Company's existing share repurchase program which was
initially authorized in December 1995 and subsequently increased in October
1996. The share increase brings the total authorization to 15 million shares of
which 4,582,200 shares had been purchased as of December 31, 1996. These
purchases are in addition to the 12.5 million share repurchase program which
began in August 1994 and concluded in December 1995 as well as the shares
required for employee plans which are purchased throughout the year. Purchases
will be made from time to time in the open market.
NOTE 12-INDEBTEDNESS AND BORROWING FACILITIES
Tandy's short-term credit facilities, including revolving credit lines, are
summarized in the accompanying short-term borrowing facilities table below. 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 90 days, as does the short-term seasonal bank debt.
The Company has an active commercial paper program. Committed facilities
totaling $500.0 million are in place as backup for the commercial paper program.
This agreement is composed of two facilities: one for $200.0 million expiring in
June 1997 and another facility for $300.0 million expiring in June 2001. Annual
commitment fees for the facilities are 0.07% per annum and 0.10% 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 $500.0
million. At December 31, 1996, there was $59.9 million of commercial paper
outstanding backed up by these facilities.
Medium-term notes outstanding at December 31, 1996 totaled $54.5 million
compared to $67.1 million at December 31, 1995. The weighted average coupon
rates of medium-term notes outstanding at December 31, 1996 and 1995 were 8.5%
and 8.4%, respectively.
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 Fund in
Note 17.
Long-term borrowings and capital lease obligations outstanding at December
31, 1996 mature as follows:
(In millions)
- - -----------------------------------------------------------
1997.................................................. 41.4
1998.................................................. 37.9
1999.................................................. 11.9
2000.................................................. 10.7
2001.................................................. 9.2
2002 and thereafter................................... 34.6
-----
Total.................................................145.7
=====
- - -----------------------------------------------------------
The fair value of the Company's long-term debt of $116.0 million (including
current portion, but excluding capital leases) is approximately $119.4 million
at December 31, 1996.
Borrowings payable within one year are summarized in the accompanying
short-term debt table below. The short-term debt caption includes primarily
domestic seasonal borrowings.
Short-Term Debt
December 31,
---------------------------
(In millions) 1996 1995
- - ------------- -------- --------
Short-term bank debt and
other short-term debt $ 156.7 $ 64.9
Current portion of long-term debt 28.7 12.9
Commercial paper, less unamortized
discount 59.9 101.3
-------- --------
245.3 179.1
Current portion of capitalized
lease obligations 0.4 0.4
Current portion of guarantee of
TESOP indebtedness 12.3 10.4
-------- --------
Total short-term debt $ 258.0 $ 189.9
======== ========
Long-Term Debt
December 31,
---------------------------
(In millions) 1996 1995
- - ------------- -------- --------
Notes payable with interest rates at
December 31, 1996 ranging from 4.64%
to 6.625% $ 9.3 $ 9.5
Medium-term notes payable, net of issuance cost, with interest rates at December
31, 1996 ranging
from 7.25% to 8.63% 54.5 67.1
-------- --------
63.8 76.6
Less portion due within one year
included in current notes payable (28.7) (12.9)
-------- --------
35.1 63.7
-------- --------
Capital lease obligations 29.7 28.8
Less current portion (0.4) (0.4)
-------- --------
29.3 28.4
-------- --------
Guarantee of TESOP indebtedness
(See Note 17) 52.2 59.1
Less current portion (12.3) (10.4)
-------- --------
39.9 48.7
-------- --------
Total long-term debt $ 104.3 $ 140.8
======== ========
Short-Term Borrowing Facilities
Year Ended December 31,
-------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- -------- --------
Domestic seasonal bank credit lines and bank money market lines:
Lines available at period end $ 987.0 $ 940.0 $1,025.0
Loans outstanding at period end $ 147.2 $ 64.9 $ 77.3
Weighted average interest rate at
period end 5.9% 6.0% 6.4%
Weighted average of loans outstanding
during period $ 91.8 $ 107.0 $ 16.4
Weighted average interest rate during
period 5.6% 6.2% 5.2%
Short-term foreign credit lines:
Lines available at period end $ 157.6 $ 139.1 $ 149.1
Loans outstanding at period end None None $ 1.4
Weighted average interest rate at
period end N/A N/A 7.4%
Weighted average of loans outstanding
during period N/A $ 0.3 $ 3.6
Weighted average interest rate during
period N/A 3.8% 5.5%
Letters of credit and banker's acceptance lines of credit:
Lines available at period end $ 230.3 $ 417.5 $ 475.0
Acceptances outstanding at period end None None None
Letters of credit open against outstanding
purchase orders at period end $ 33.9 $ 79.9 $ 91.6
Commercial paper credit facilities:
Commercial paper outstanding at period end $ 59.9 $ 101.3 $ 88.8
Weighted average interest rate at period
end 5.8% 6.0% 6.2%
Weighted average of commercial paper
outstanding during period $ 210.2 $ 198.1 $ 37.9
Weighted average interest rate during
period 5.7% 6.2% 4.8%
NOTE 13-LEASES AND COMMITMENTS
Tandy leases rather than owns most of its facilities. The RadioShack stores
comprise the largest portion of Tandy's leased facilities. The RadioShack and
Computer City stores are located primarily in major shopping malls, shopping
centers or freestanding facilities owned by other companies. 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.
Future minimum rent commitments (exclusive of stores included in the 1996
store closure plan) at December 31, 1996 for all long-term noncancelable leases
(net of immaterial amounts of sublease rent income) are included in the
following table.
(In millions) Operating Leases Capital Leases
- - --------------------------------------------------------------------------
1997................................ $158.8 $ 6.6
1998................................ 147.4 6.7
1999................................ 123.2 6.8
2000................................ 98.9 7.1
2001................................ 73.4 7.2
2002 and thereafter................. 220.0 58.8
--------
Total minimum lease payments............................ 93.2
Less: Amount representing interest...................... (63.5)
--------
Present value of net minimum lease payments............. $ 29.7
========
Future minimum rent commitments in the table above exclude future rent
obligations associated with stores to be closed pursuant to the restructuring
plan. Estimated payments to settle future rent obligations associated with these
stores have been accrued in the restructuring reserve (See Note 3).
Rent Expense
Year Ended December 31,
--------------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- -------- --------
Minimum rents $ 238.9 $ 216.6 $ 210.4
Contingent rents 2.8 2.9 2.9
Sublease rent income (1.9) (1.9) (0.9)
-------- -------- --------
Total rent expense $ 239.8 $ 217.6 $ 212.4
======== ======== ========
Space Owned and Leased (Unaudited)
Approximate Square Footage
at December 31,
1996 1995
--------------------------- -------------------------------
(In thousands) Owned Leased Total Owned Leased Total
- - --------------------------------------------------------------------------------
Retail
RadioShack -- 12,076 12,076 -- 11,836 11,836
Incredible Universe 503 1,425 1,928 503 1,221 1,724
Computer City 26 2,523 2,549 26 2,089 2,115
Other 160 -- 160 269 -- 269
-------- -------- -------- -------- -------- --------
689 16,024 16,713 798 15,146 15,944
Manufacturing 536 205 741 536 209 745
Warehouse and office 4,087 2,585 6,672 4,089 2,430 6,519
-------- -------- -------- -------- -------- --------
5,312 18,814 24,126 5,423 17,785 23,208
======== ======== ======== ======== ======== ========
The 1996 table above includes square footage on all stores at December 31,
1996; excluding stores covered by the December 1996 store closure plan, total
square footage would have approximated 19.4 million square feet at December 31,
1996.
NOTE 14-ACCRUED EXPENSES
December 31,
--------------------------
(In millions) 1996 1995
- - ------------- -------- --------
Payroll and bonuses $ 55.8 $ 69.7
Sales and payroll taxes 53.4 52.5
Insurance 65.6 59.1
Deferred service contract income 11.6 9.1
Rent 27.5 25.4
Advertising 30.7 52.7
Restructuring reserve 137.7 12.2
Other 43.0 41.3
-------- --------
$ 425.3 $ 322.0
======== ========
NOTE 15-INCOME TAXES
The components of the provision (benefit) 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.
Income Tax Expense (Benefit)
Year Ended December 31,
-------------------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- -------- --------
Current
Federal $ 79.7 $ 105.1 $ 109.3
State 5.3 11.4 9.0
Foreign 2.5 3.1 3.3
-------- -------- --------
87.5 119.6 121.6
-------- -------- --------
Deferred
Federal (131.8) 11.7 12.1
State (9.7) -- --
Foreign -- -- 1.5
-------- -------- --------
(141.5) 11.7 13.6
-------- -------- --------
Provision (benefit) for
income taxes $ ( 54.0) $ 131.3 $ 135.2
======== ======== ========
Statutory vs. Effective Tax Rate
Year Ended December 31,
-------------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- -------- --------
Components of pre-tax income(loss) from continuing operations:
United States $ (148.6) $ 341.2 $ 357.3
Foreign 3.0 2.0 2.2
-------- -------- --------
Income (loss) before income taxes (145.6) 343.2 359.5
Statutory tax rate x 35% x 35% x 35%
-------- -------- --------
Federal income tax expense (benefit)
at statutory rate (51.0) 120.1 125.8
State income taxes, less federal
income tax effect (2.8) 7.4 5.8
Other, net (0.2) 3.8 3.6
======== ======== ========
Total income tax expense (benefit) $ (54.0) $ 131.3 $ 135.2
======== ======== ========
Effective tax rate 37.1% 38.3% 37.6%
======== ======== ========
The effective tax rate for 1996 changed from 1995 due primarily to foreign
income taxes which were incurred on foreign income despite the overall loss
incurred by the Company.
The IRS Dallas Office had previously referred certain issues in the Company's
1987 tax return to the IRS National Office. The issues involved the private
letter rulings issued by the IRS in connection with the spin-off of InterTAN and
certain other tax matters. On June 20, 1996, the IRS notified the Company that
it would no longer challenge the private letter ruling issued in connection with
the InterTAN spin-off. In December of 1996, the IRS Dallas Appeals Office
notified the Company that it is no longer pursuing the remaining matters
associated with the separation of InterTAN from the Company.
Deferred tax assets and liabilities as of December 31, 1996 and December 31,1995
were comprised of the following:
December 31,
--------------------------
(In millions) 1996 1995
- - ------------- -------- --------
Deferred Tax Assets
Bad debt reserverve $ 3.6 $ 2.4
Intercompany profit elimination 4.0 6.1
Deferred service contract income 4.3 3.8
Restructuring reserves 51.9 5.2
Inventory impairment 32.0 --
Long-lived asset impairment 30.4 --
Insurance reserves 17.6 13.7
Depreciation and amortization 7.2 2.0
Rental agreements 5.2 --
Foreign tax credits -- 4.4
Other 16.3 --
-------- --------
172.5 37.6
Valuation allowance -- (4.4)
-------- --------
Total deferred tax assets 172.5 33.2
-------- --------
Deferred Tax Liabilities
Inventory adjustments, net 5.0 4.3
Deferred taxes on foreign operations 2.8 4.2
Other -- 2.7
-------- --------
Total deferred tax liabilities 7.8 11.2
-------- --------
Net Deferred Tax Assets $ 164.7 $ 22.0
======== ========
The Net Deferred Tax Asset is
classified as follows:
Other current assets (liabilities) $ 99.2 $ (16.3)
Other assets 65.5 38.3
-------- --------
Net Deferred Tax Asset $ 164.7 $ 22.0
======== ========
The Company generated a pre-tax book loss of $145.6 million in 1996. Many of
the restructuring charges included in the 1996 pre-tax loss will not be
deductible for federal income tax purposes until 1997. Since the Company is
expected to generate pre-tax income in 1997 and future years, management has
concluded that the Company should realize the full benefit of its U.S. deferred
tax assets related to future deductible items. If for some reason the Company
does not generate sufficient pre-tax income in 1997 to fully offset
restructuring charges recognized in 1997 for tax purposes, such amount may also
be realized by carrying back the deductions to offset taxable income generated
in 1995 and 1994. Accordingly, a valuation allowance is not required for the
$164.7 million of deferred tax assets in excess of deferred tax liabilities.
NOTE 16-TANDY STOCK PLAN
Eligible U.S. employees may contribute 1% to 7% (1% to 10% for U.S. eligible
employees, prior to January 1, 1996) of annual compensation to purchase Company
common stock at fair market value. The Company matches 40%, 60% or 80% of the
employee's contribution depending on the length of the employee's participation
in the Tandy Stock Plan. Tandy's contributions to the Stock Plan were $14.5
million, $18.0 million and $16.9 million for the years ended December 31, 1996,
1995 and 1994, respectively.
NOTE 17-TANDY FUND
The Tandy Fund ("Plan") is a defined contribution plan covering employees of
Tandy Corporation who have completed one year of service of not less than 1,000
hours per year. Effective January 1, 1996, the Tandy Employees Stock Ownership
Plan ("TESOP"), a leveraged employee stock ownership plan was amended and merged
with the Tandy Employees Deferred Salary and Investment Plan ("DIP"), and
renamed the Tandy Fund. Other changes made to the Tandy Fund provide that it be
an individual account plan with multiple, participant-directed investment
options which are intended to comply with Internal Revenue Code Section 404(c).
Prior to January 1, 1996, participants' contributions were invested in
Company common stock only. Effective January 1, 1996, as a result of the
amendment and restatement of the Plan, participants were provided with the
option to direct their contributions in various investment options.
Prior to January 1, 1996, a participant was able to defer 5% of his gross
salary which was paid into the DIP via direct salary reductions. Effective
January 1, 1996, as a result of the restatement and amendment of the Plan,
participants are now allowed to defer (in increments of 1%) a minimum of 1% of
gross salary and wages up to a maximum of 8%. Contributions per participant are
limited to certain annual maximums as set forth by the Internal Revenue Code.
For periods prior to January 1, 1996, Company contributions were made to the
TESOP. Subsequent to January 1, 1996, Company contributions will be made
directly to the Tandy Fund through the TESOP portion of the Plan. Participants
become fully vested in Company contributions upon the earlier to occur of five
years of service with the Company or three years of participation in the Plan.
For the Plan year ending March 31, 1997, the Company has designated that the
total payments made to the Plan by the Company (including contributions and
dividends on Series B TESOP Convertible Preferred Stock, the "TESOP Preferred
Stock") will not be less than the amount which (when combined with the dividend
on the TESOP Preferred Stock) is necessary for the payment of principal and
interest on the Plan notes.
TESOP PORTION OF THE TANDY FUND: On July 31, 1990, prior to its merger into
the Tandy Fund, the trustee of the TESOP now the Tandy Fund (collectively the
"Tandy Fund"), borrowed $100.0 million at an interest rate of 9.34% with varying
semiannual principal payments through June 30, 2000. The Tandy Fund trustee used
the proceeds from the issuance of the 1990 notes to purchase 100,000 shares of
TESOP Preferred Stock from Tandy at a price of $1,000 per share. In December
1994, the Tandy Fund entered into an agreement with an unrelated third party to
refinance a portion of the Tandy Fund's indebtedness by borrowing $5.1 million
at 8.76%. Pursuant to that agreement, in December 1996 and December 1995, the
Tandy Fund borrowed an additional $3.5 million at 7.01% and $4.3 million at
6.47%, respectively. The 1996, 1995 and 1994 additional indebtedness matures in
December of 2001, 2001, and 2000, respectively. Dividend payments and
contributions from Tandy will be used to repay the indebtedness. Each share of
such stock is convertible into 21.768 shares of Tandy common stock. The annual
cumulative dividends on TESOP Preferred Stock is $75.00 per share, payable
semi-annually. Because Tandy has guaranteed the repayment of these notes, the
indebtedness of the Tandy Fund is recognized as a long-term obligation in the
accompanying Consolidated Balance Sheets. An offsetting charge has been made in
the stockholders' equity section of the accompanying Consolidated Balance Sheets
to reflect unearned compensation related to the Tandy Fund.
Compensation and interest costs related to the Tandy Fund before the
reduction for the allocation of dividends are presented below for each year
ended December 31:
(In millions) 1996 1995 1994
------------- -------- -------- --------
Compensation $ 8.0 $ 7.5 $ 10.0
Interest 5.1 5.7 6.2
During the term of the TESOP notes, the TESOP Preferred Stock will be
allocated to the participants annually based on the total debt service made on
the indebtedness.
As shares of the TESOP Preferred Stock are allocated to the Tandy Fund
participants, compensation expense is recorded and unearned compensation is
reduced. Interest expense on the TESOP notes is also recognized as a cost of the
Tandy Fund. The compensation component of the Tandy Fund 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.
Contributions from Tandy to the Tandy Fund for the years ended December 31,
1996, 1995 and 1994 totaled $11.4 million, $11.2 million, and $11.2 million,
respectively, including dividends paid on the TESOP Preferred Stock of $6.3
million, $6.5 million, and $6.7 million.
At December 31, 1996, 47,233 shares of TESOP Preferred Stock had been
released and allocated to participants' accounts in the Tandy Fund (including
16,215 shares which had been withdrawn by participants). At December 31, 1996,
8,005 shares of TESOP Preferred Stock were released for allocation to
participants on the March 31, 1997 annual allocation date. At December 31, 1996,
44,762 shares of TESOP Preferred Stock were available for later release and
allocation to participants over the remaining life of the TESOP notes.
This series of stock has certain liquidation preferences and may be redeemed
by Tandy after July 1, 1994, at specified premiums.
NOTE 18-STOCK OPTIONS AND PERFORMANCE AWARDS
The Company applies Accounting Principles Board ("APB"), Opinion No. 25 and
related interpretations in accounting for its stock option plans, which are
described below. Historically, the exercise price of options has been equal to
or greater than fair market value at the date of grant. Accordingly, no
compensation cost has been recognized for its stock option plans. No performance
awards have been granted under the plans described below.
Tandy Corporation 1985 Stock Option Plan ("1985 SOP"): Under the 1985 SOP, as
amended, options to acquire up to 2.0 million 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 the granting of options. Generally, the term of incentive stock
options may not exceed 10 years, and vest ratably over three years. Nonstatutory
stock options may not exceed a term of 10 years plus one month and vest ratably
over five years. The options cannot have an exercise price less than 100% of
fair market value on date of grant.
In the event of a change in control, all outstanding options become
immediately exercisable for the full number of shares subject to options. 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.
Under the 1985 SOP there were 798,130 and 978,204 vested options which could
have been exercised for a total price of $27.7 million, and $33.6 million at
December 31, 1996 and 1995, respectively. In accordance with the 1985 SOP, no
shares shall be granted after November 13, 1995.
Tandy Corporation 1993 Incentive Stock Plan ("1993 ISP"): In March 1993, the
Board adopted the 1993 ISP, which was approved by shareholders in October 1993.
A total of 3 million shares of the Company's common stock was reserved for
issuance under the 1993 ISP. In May 1995, the shareholders approved an amendment
to the 1993 ISP to provide for an initial option grant of 5,000 shares to each
non-employee director, to increase the annual September option grant from 3,000
to 4,000 shares and to provide for payment of director retainer fees all or
one-half in Company common stock.
The 1993 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 1993 ISP shall be for terms specified by the
Committee, except that the term shall not exceed 10 years. Provisions of the
1993 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 1993 ISP, the shareholders approved an amendment in May 1995,
whereby each non-employee director of the Company receives a grant of NSOs for
4,000 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.
Under the 1993 ISP, there were 569,430 and 274,788 vested options which could
have been exercised for a total exercise price of $25.1 million and $10.8
million at December 31, 1996 and 1995. In addition, at December 31, 1996 and
1995 there were 1,387,439 and 1,741,226 shares available for additional grants
under the 1993 ISP, respectively. The 1993 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 1993 ISP thereafter.
The Company granted, as of February 1, 1997, under the 1993 ISP an aggregate
of approximately 1,020,600 restricted stock awards of 200 shares each to
approximately 4,907 RadioShack store managers and 400 shares each to 98 Computer
City store managers. These shares vest on February 1, 2002, or earlier if
certain events occur. The benefits are: (1) if managers are employed as a store
manager or higher position by the Company after February 1, 1999 and the Company
common stock for 20 consecutive trading days closes at $67 5/8 or more, the
stock will vest at that time, and otherwise, (2) the shares will vest on
February 1, 2002 if the managers are employed as store managers or a higher
position of the Company, at that time. The Company, as of February 1, 1997, also
granted an aggregate of approximately 185,250 stock options of 750 shares each
to RadioShack district sales managers, 1,500 shares each to RadioShack regional
sales managers, and 1,000 shares each to Computer City sales managers. The
exercise price of the options are equal to the fair market value at the date of
the grant. Compensation expense, equal to the number of shares that ultimately
vests at fair market value at the vesting date, will be recognized when the
shares vest. Accordingly, earnings per share will not be affected until the
shares vest.
On January 2, 1996, the Committee awarded a total of 26,500 shares of
restricted stock to the five highly compensated executive officers named in the
proxy statement. These shares vest ratably over three years. Compensation
expense will be recognized ratably over the vesting period.
Pro forma information regarding net income and earnings per share is required
by Statement of Financial Accounting Standards No. 123 "Accounting for
Stockbased Compensation" ("FAS 123"), and has been determined as if the Company
had accounted for its employee stock options under the fair value method of that
statement. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: expected dividend
yield of 2.0% and 1.3%, expected volatility of 27.9% and 27.3%, risk free
interest rates of 6.7% and 6.1%, and expected lives of seven years each.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period. The Company's pro forma
information follows:
(in millions,
except per share amounts) 1996 1995
- - --------------------------- ---------------------- -----------------------
As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- ---------
Income (loss) available
to common shareholders $ (97.9) $ (101.6) $ 205.4 $ 203.2
Income (loss) per common
share $ (1.64) $ (1.70) $ 3.12 $ 3.09
The effects of applying FAS No. 123 in this pro forma disclosure are not
indicative of future amounts as the pro forma amounts above do not include the
impact of stock option awards granted prior to 1995 and additional awards are
anticipated in future years.
A summary of stock option transactions under both of the Company's stock
option plans and information about fixed-price stock options follows:
Summary of Stock Option Transactions
(Share amounts in
thousands) 1996 1995 1994
- - ----------------- ------------------ ------------------ ---------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- -------- -------- -------- ------- -------
Outstanding at beginning
of year 2,199 $ 41.03 2,176 $ 36.17 1,964 $ 34.52
Grants 454 41.92 522 55.27 398 43.80
Exercised (268) 35.05 (493) 34.45 (76) 32.60
Forfeited (101) 53.95 (6) 41.64 (110) 37.08
------- ------- -------
Outstanding at end of
year 2,284 41.34 2,199 41.03 2,176 36.17
======= ======= =======
Exercisable at end of
year 1,368 $ 38.39 1,253 $ 35.48 1,447 $ 34.48
======= ======= =======
Weighted-average fair
value of options
granted during the
year $ 14.99 $ 20.50 --
======= =======
Fixed Price Stock Options
Options Outstanding Options Exercisable
----------------------------------- -----------------------
Weighted-
Average Weighted- Weighted-
Shares Remaining Average Shares Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Life Price at 12/31/96 Price
- - --------------- ----------- ----------- -------- ----------- ----------
$24.25 - 31.13 429 5.05 yrs $ 28.09 411 $ 28.00
32.63 - 39.16 322 5.25 yrs 36.89 286 36.86
40.19 - 46.13 1,055 6.90 yrs 41.84 510 42.39
47.00 - 51.63 63 8.33 yrs 48.43 25 48.58
55.50 - 62.63 415 8.80 yrs 56.13 136 56.13
------- -------
24.25 - 62.63 2,284 6.71 yrs 41.34 1,368 38.39
======= =======
NOTE 19-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 rights, as amended, 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 $0.05 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 20-TERMINATION PROTECTION PLANS
In August 1990 and in May 1995, the Board of Directors of the Company
approved termination protection plans and amendments to various other benefit
plans described in Notes 16 and 17. 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 effect accrued
benefits or decrease the rate of the Company's contribution to the plans.
NOTE 21-ISSUANCE OF SERIES C PERCS AND TENDER OFFER
In February 1992, the Company issued 15.0 million 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
represented ownership of 1/100th of a share of Series C PERCS. The annual
dividend for each depositary share was $2.14 (based on the annual dividend rate
for each Series C PERCS of $214.00).
Tandy announced on January 23, 1995 that it had exercised its right to call
all the issued and outstanding Series C PERCS for conversion on March 10, 1995,
prior to its mandatory conversion date of April 15, 1995. For each Series C
PERCS depositary share redeemed, 0.787757 Tandy common shares were issued for an
aggregate of approximately 11,816,000 shares. In addition, each Series C PERCS
depositary share received a dividend in cash of $0.321 representing the accrued
dividend from January 16, 1995 through the redemption date of March 10, 1995.
NOTE 22-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:
Year ended December 31,
--------------------------------------
(In millions) 1996 1995 1994
- - ------------- -------- --------- --------
Interest paid $ 37.8 $ 34.8 $ 31.4
Income taxes paid $ 60.7 $ 68.4 $ 84.5
Capital lease obligations of $4.4 million and $6.0 million were recorded
during the years ended December 31, 1996 and 1995, respectively, for the lease
of certain retail stores. In July 1996, the Company received AST stock valued at
$30.0 million as partial payment of a note receivable (See Note 5).
NOTE 23-LITIGATION
A consolidated action titled O'Sullivan Industries Holdings, Inc. Securities
Litigation, which involved the Company and was commenced in 1994 before the
United States District Court for the Western District of Missouri has been
settled. The Court, on July 2, 1996, approved the settlement of this litigation
and entered a Final Judgment thereby resolving this entire litigation. The
Company had previously reserved for the financial impact of the settlement and,
therefore, the settlement has not had a material adverse effect on its results
of operations or financial condition.
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, 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, 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 24-RELATIONS WITH INTERTAN
Summarized in the tables below are the notes and other receivables due from
InterTAN at December 31, 1996 and 1995 as well as the income components
generated from operations relative to InterTAN for each of the three years ended
December 31, 1996, 1995 and 1994. The estimated fair market value of the note
receivable approximates $28.4 million at December 31, 1996. The Company
purchased the notes at a discount and InterTAN has an obligation to pay the
gross amount of the notes.
Balance at December 31,
---------------------------
(In millions) 1996 1995
- - ------------- ---------- ----------
Gross amount of notes $ 27.8 $ 44.9
Discount (8.3) (12.2)
---------- ----------
Net amount of notes $19.5 $ 32.7
========== ==========
Current portion of notes $ 4.9 $ 14.6
Non-current portion of notes 14.6 18.1
Other current receivables 4.6 6.7
---------- ----------
$ 24.1 $ 39.4
========== ==========
Year Ended December 31,
-----------------------------------------
(In millions) 1996 1995 1994
- - ------------- ---------- ---------- ----------
Sales and commission income $ 8.5 $ 10.9 $ 19.8
Interest income 2.9 4.1 4.4
Accretion of discount 3.8 4.2 3.9
Royalty income 2.0 0.8 --
---------- ---------- ----------
Total income $ 17.2 $ 20.0 $ 28.1
========== ========== ==========
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, a subsidiary of Tandy,
was the exclusive purchasing agent for products originating in the Far East for
InterTAN.
In August 1993, Trans World Electronics, Inc. ("Trans World"), a subsidiary
of Tandy, reached an agreement with InterTAN's banking syndicate to buy
approximately $42.0 million of InterTAN's debt at a negotiated, discounted
price. The debt purchased from the banks was 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 $10.0 million in working capital and trade
credit to InterTAN. Interest on the working capital loan (the "Series B" note)
of 8.11% was due semiannually beginning February 25, 1994 and the note was paid
in full in 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. The fair market value of these warrants was
approximately $1.0 million at December 31, 1996. As required by an agreement
with Tandy, InterTAN has registered the warrants under the Securities Act of
1933. At December 31, 1996, InterTAN's common stock price was $4.88 per share.
At February 19, 1997, InterTAN's common stock price was $4.25 per share.
Subject to certain conditions described below, 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. The Company was also granted a mortgage by
InterTAN on certain real property in Australia in 1996.
A merchandise agreement was reached with InterTAN in October 1993, as
subsequently amended, which requires a percentage of future purchase orders to
be backed by letters of credit posted by InterTAN. New license agreements, as
amended, provide a royalty payable to Tandy, which began in the September 1995
quarter. InterTAN had obligations for purchase orders outstanding for
merchandise ordered by A&A for InterTAN but not yet shipped totaling
approximately $23.2 million at December 31, 1996.
InterTAN increased its bank revolving credit facility with its new banking
syndicate to Canadian $60.0 million (U.S. $43.8 million equivalent at December
31, 1996) in 1994. At December 31, 1996, InterTAN had borrowed $2.6 million
under this facility. In the event 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
$60.0 million. 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.
A&A will continue as the exclusive purchasing agent for InterTAN in the Far
East on a commission basis.
Through February 1997, InterTAN has met all of its payment obligations to
Tandy. Reported income before taxes for the six months ended December 31, 1996
approximated $10.0 million compared to $13.2 million for the six months ended
December 31, 1995. 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
1987-93 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.
NOTE 25-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, 1996, the Company recognized a FAS 121
charge and a restructuring charge of $86.8 million and $136.6 million,
respectively. In addition, gross profit for the fourth quarter of 1996 was
impacted by a lower of cost or market inventory impairment of $91.4 million,
largely attributable to the restructuring plan associated with inventory
liquidations for closed stores (see Note 3).
QUARTERLY DATA (Unaudited)
Three Months Ended
(In millions, except -----------------------------------------------
per share amounts) March 31 June 30 Sept. 30 Dec. 31
- - --------------------------------------------------------------------------------
Year ended December 31, 1996:
Net sales and operating revenues $1,447.0 $1,352.9 $1,434.9 $2,050.7
Gross profit $ 491.7 $ 474.0 $ 484.2 $ 572.5
Net income (loss) $ 14.5 $ 9.3 $ 22.3 $ (137.7)
Net income(loss)available per
average common and common
equivalent share $ 0.21 $ 0.13 $ 0.35 $ (2.39)
Dividends declared per common
share $ 0.20 $ 0.20 $ 0.20 $ 0.20
Average common and common
equivalent shares outstanding 61.4 61.0 59.7 58.2
Year ended December 31, 1995:
Net sales and operating revenues $ 1,226.6 $1,185.1 $1,339.9 $2,087.5
Gross Profit $ 446.6 $ 445.8 $ 478.5 $ 703.3
Net Income $ 38.9 $ 37.9 $ 44.9 $ 90.2
Net income available per average
common and common equivalent
share $ 0.55 $ 0.55 $ 0.66 $ 1.39
Dividends declared per common
share $ 0.18 $ 0.18 $ 0.18 $ 0.20
Average common and common
equivalent shares outstanding 68.2 66.2 65.7 63.7
<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).
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
Stockdated 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 on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
4h Fourth Amendment to the Revolving Credit Agreement (59)
between Tandy Corporation and Texas Commerce Bank as
Agent for eighteen banks, dated as of February 18, 1997
(Facility A).
4i Third Amendment to the Revolving Credit Agreement (81)
between Tandy Corporation and Texas Commerce
Bank as Agent for eighteen banks, dated as of
February 18, 1997 (Facility B).
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).
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 103
12 Statement of Computation of Ratios of Earnings to
Fixed Charges 104
21 Subsidiaries 105
23 Consent of Independent Accountants 106
27 Financial Data Schedule
- - -----------------------
* Each of these exhibits is a "management contract or compensatory
plan, contract, or arrangement".
<PAGE>
EXHIBIT 4h
FOURTH AMENDMENT
TO
REVOLVING CREDIT AGREEMENT (FACILITY A)
THIS FOURTH AMENDMENT TO REVOLVING CREDIT AGREEMENT (FACILITY A) (this
"Amendment") dated as of February 18, 1997 is among TANDY CORPORATION, a
Delaware corporation (the "Company"), the banks and other financial institutions
listed on the signature pages under the heading Banks (collectively, the
"Banks"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as agent (in such
capacity, the "Agent") for the Banks.
PRELIMINARY STATEMENT
(a) The Company, certain of the Banks, BARCLAYS BANK PLC ("Barclays"),
THE CHASE MANHATTAN BANK, formerly The Chase Manhattan Bank, N.A. ("Chase"), and
the Agent entered into a Revolving Credit Agreement (Facility A) (the "Original
Credit Agreement") dated as of May 27, 1994.
(b) The Company, certain of the Banks, Barclays, Chase and the Agent
entered into the Agreement and First Amendment To Revolving Credit Agreement
(Facility A) (the "First Amendment") dated as of May 26, 1995 modifying the
Original Credit Agreement by inter alia adding CITICORP USA, INC. ("Citicorp"),
and COMMERZBANK AKTIENGELLSCHAFT, ATLANTA AGENCY ("Commerzbank"), as Banks under
the Credit Agreement and retiring Barclays as a Bank thereunder.
(c) The Company, certain of the Banks, Chase and the Agent entered into
the Second Amendment to Revolving Credit Agreement (Facility A) (the "Second
Amendment") dated as of May 24, 1996 modifying the Original Credit Agreement, as
amended by the First Amendment.
(d) The Company, the Banks, Chase and the Agent entered into a Third
Amendment to Revolving Credit Agreement (Facility A) (the "Third Amendment")
dated as of June 28, 1996 modifying the Original Credit Agreement as amended by
the First Amendment and the Second Amendment (the Original Credit Agreement as
amended by the First Amendment, the Second Amendment and the Third Amendment
being the "Credit Agreement") by inter alia adding UNION BANK OF SWITZERLAND and
THE SAKURA BANK, LIMITED, as Banks thereunder and retiring Chase as a Bank
thereunder.
(e) The Company has requested that the Banks amend the last paragraph of
Section 6.02 to exclude from the provisions thereof the sale and disposition of
assets related to the Company's Incredible Universe business.
(f) All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Company, the Banks and the Agent hereby
agree as follows:
SECTION 1. Amendment to Section 6.02 of the Credit Agreement. The last
paragraph of Section 6.02 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"For purposes of this Section 6.02 only, a sale, transfer,
conveyance, lease or other disposition of assets shall be deemed to be a
`substantial part' of the assets of the Company and its Subsidiaries
only if the value of such assets, when added to the value of all other
assets sold, transferred, conveyed, leased or otherwise disposed of by
the Company and its Subsidiaries (other than pursuant to clauses (u),
(v), (x) and (z) of this Section 6.02) during the same fiscal year,
exceeds 15% of the Company's consolidated total assets as of the end of
the immediately preceding fiscal year; provided, however, there shall be
excluded from such 15% for the fiscal year ending December 31, 1997, the
value of all assets related to the Company's Incredible Universe
business. As used in the preceding sentence, the term `value' shall
mean, with respect to any asset disposed of, the greater of such asset's
book or fair market value as of the date of disposition, with `book
value' being the value of such asset as would appear immediately prior
to such disposition on a balance sheet of the owner of such asset
prepared in accordance with generally accepted accounting principles.".
SECTION 2. Conditions to Effectiveness. This Amendment shall become
effective when, and only when, the following conditions have been
fulfilled:
(a) the Company and the Required Banks shall have executed
a counterpart of this Amendment; and
(b) the Agent shall have executed a counterpart of this Amendment
and shall have received counterparts of this Amendment executed by the Company
and the Required Banks.
SECTION 3. Representations and Warranties True; No Default or Event of
Default. The Company hereby represents and warrants to the Agent and the Banks
that after giving effect to the execution and delivery of this Amendment (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date and (b) no
Default or Event of Default has occurred and is continuing.
SECTION 4. Reference to the Credit Agreement and Effect on the Notes.
(a) Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement," "hereunder," "herein" or words of like
import shall mean and be a reference to the Credit Agreement, as amended and
affected hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes to "the Credit Agreement" shall mean and be a reference to the Credit
Agreement, as amended and affected hereby.
(c) The Credit Agreement and the Notes, as amended and affected hereby,
shall remain in full force and effect and are hereby ratified and confirmed.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAW AND SHALL BE BINDING UPON THE COMPANY, THE BANKS AND THE
AGENT AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
SECTION 6. Descriptive Headings. The section headings appearing in this
Amendment have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Amendment.
SECTION 7. FINAL AGREEMENT OF THE PARTIES. THE CREDIT AGREEMENT
(INCLUDING THE EXHIBITS AND SCHEDULE THERETO), AS AMENDED HEREBY, THE NOTES, THE
AGENT'S LETTER AND THE OTHER LOAN DOCUMENTS, CONSTITUTE A "LOAN AGREEMENT" AS
DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES RESPECTING THE SUBJECT MATTER
HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES RESPECTING THE SUBJECT MATTER HEREOF
AND THEREOF.
SECTION 8. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first stated herein, by their respective
officers thereunto duly authorized.
TANDY CORPORATION
By: /s/ Loren K. Jensen
-------------------------
Name: Loren K. Jensen
Title: Vice President-Treasurer
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as Agent
By: /s/ B. B. Wuthrich
-------------------------
Name: B. B. Wuthrich
Title: Vice President
Banks
BANK OF AMERICA ILLINOIS, as
successor to Bank of America
National Trust and Savings
Association
By: /s/ W. Thomas Barnett
--------------------------
Name: W. Thomas Barnett
Title: Vice President
Banks
THE BANK OF NEW YORK
By: /s/ Charlotte Sohn
-------------------------
Name: Charlotte Sohn
Title: Vice President
Banks
BANK ONE, TEXAS, N.A.
By: /s/ John D. Hudgens
-------------------------
Name: John D. Hudgens
Title: Vice President
Banks
BANK OF TOKYO- MITSUBISHI TRUST
COMPANY, SUCCESSOR BY MERGER TO THE
BANK OF TOKYO TRUST COMPANY
By: /s/ Jean K. Reilly
--------------------------
Name: Jean K. Reilly
Title: Vice President
Banks
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
--------------------------
Name: Robert Ivosevich
Title: Senior Vice President
Banks
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Bethann R. Halligan
---------------------------
Name: Bethann R. Halligan
Title: Division Executive
Banks
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Jane W. Workman
--------------------------
Name: Jane W. Workman
Title: Senior Vice President
Banks
MELLON BANK, N.A.
By: /s/ Marc T. Kennedy
-------------------------
Name: Marc T. Kennedy
Title: Assistant Vice President
Banks
NATIONAL WESTMINSTER BANK, Plc
By: /s/ Gregory Stoeckle
--------------------------
Name: Gregory Stoeckle
Title: Vice President
NATIONAL WESTMINSTER BANK, Plc
Nassau Branch
By: /s/ Gregory Stoeckle
--------------------------
Name: Gregory Stoeckle
Title: Vice President
Banks
NATIONSBANK OF TEXAS, N.A.
By: /s/ Dan Killian
-------------------------
Name: Dan Killian
Title: Vice President
Banks
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Louis P. Laville, III
------------------------------
Name: Louis P. Laville, III
Title: Vice President
Banks
THE SUMITOMO BANK, LIMITED
HOUSTON AGENCY
By: /s/ Harumitsu Seki
------------------------
Name: Harumitsu Seki
Title: General Manager
Banks
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ B. B. Wuthrich
-------------------------
Name: B. B. Wuthrich
Title: Vice President
Banks
TORONTO DOMINION (TEXAS), INC.
By: /s/ Darlene Riedel
------------------------
Name: Darlene Riedel
Title: Vice President
Banks
CITICORP USA, INC.
By: /s/ Robin F. Lenna
------------------------
Name: Robin F. Lenna
Title: Vice President
Banks
COMMERZBANK, AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By: /s/ Harry Yergey
-----------------------
Name: Harry Yergey
Title: Vice President
By: /s/ Eric Kagerer
----------------------
Name: Eric Kagerer
Title: Vice President
Banks
UNION BANK OF SWITZERLAND
By: /s/ Dieter Hoeppli
-------------------------
Name: Dieter Hoeppli
Title Vice President
By: /s/ Daniel R.Strickford
----------------------------
Name: Daniel R. Strickford
Title: Assistant Vice President
Banks
THE SAKURA BANK, LIMITED
By: /s/ Yasumasa Kikuchi
---------------------------
Name: Yasumasa Kikuchi
Title: Senior Vice President
<PAGE>
EXHIBIT 4i
THIRD AMENDMENT
TO
REVOLVING CREDIT AGREEMENT (FACILITY B)
THIS THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (FACILITY B) (this
"Amendment") dated as of February 18, 1997 is among TANDY CORPORATION, a
Delaware corporation (the "Company"), the banks and other financial institutions
listed on the signature pages under the heading Banks (collectively, the
"Banks"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as agent (in such
capacity, the "Agent") for the Banks.
PRELIMINARY STATEMENT
(a) The Company, certain of the Banks, BARCLAYS BANK PLC ("Barclays"),
THE CHASE MANHATTAN BANK, formerly The Chase Manhattan Bank, N.A. ("Chase"), and
the Agent entered into a Revolving Credit Agreement (Facility B) (the "Original
Credit Agreement") dated as of May 27, 1994.
(b) The Company, certain of the Banks, Barclays, Chase and the Agent
entered into the Agreement and First Amendment To Revolving Credit Agreement
(Facility B) (the "First Amendment") dated as of May 26, 1995 modifying the
Original Credit Agreement by inter alia adding CITICORP USA, INC. ("Citicorp"),
and COMMERZBANK AKTIENGELLSCHAFT, ATLANTA AGENCY ("Commerzbank"), as Banks under
the Credit Agreement and retiring Barclays as a Bank thereunder.
(c) The Company, certain of the Banks, Chase and the Agent entered into
an Agreement and Second Amendment to Revolving Credit Agreement (Facility B)
(the "Second Amendment") dated as of May 24, 1996 modifying the Original Credit
Agreement, as amended by the First Amendment (the Original Credit Agreement as
amended by the First Amendment and the Second Amendment being the "Credit
Agreement") by inter alia adding UNION BANK OF SWITZERLAND and THE SAKURA BANK,
LIMITED, as Banks thereunder and retiring Chase as a Bank thereunder.
(d) The Company has requested that the Banks amend the last paragraph of
Section 6.02 to exclude from the provisions thereof the sale and disposition of
assets related to the Company's Incredible Universe business.
(e) All capitalized terms defined in the Credit Agreement and not
otherwise defined herein shall have the same meanings herein as in the Credit
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, the Company, the Banks and the Agent hereby
agree as follows:
SECTION 1. Amendment to Section 6.02 of the Credit Agreement. The last
paragraph of Section 6.02 of the Credit Agreement is hereby amended in its
entirety to read as follows:
"For purposes of this Section 6.02 only, a sale, transfer,
conveyance, lease or other disposition of assets shall be deemed to be a
`substantial part' of the assets of the Company and its Subsidiaries
only if the value of such assets, when added to the value of all other
assets sold, transferred, conveyed, leased or otherwise disposed of by
the Company and its Subsidiaries (other than pursuant to clauses (u),
(v), (x) and (z) of this Section 6.02) during the same fiscal year,
exceeds 15% of the Company's consolidated total assets as of the end of
the immediately preceding fiscal year; provided, however, there shall be
excluded from such 15% for the fiscal year ending December 31, 1997, the
value of all assets related to the Company's Incredible Universe
business. As used in the preceding sentence, the term `value' shall
mean, with respect to any asset disposed of, the greater of such asset's
book or fair market value as of the date of disposition, with `book
value' being the value of such asset as would appear immediately prior
to such disposition on a balance sheet of the owner of such asset
prepared in accordance with generally accepted accounting principles.".
SECTION 2. Conditions to Effectiveness. This Amendment shall become
effective when, and only when, the following conditions have been
fulfilled:
(a) the Company and the Required Banks shall have executed a
counterpart of this Amendment; and
(b) the Agent shall have executed a counterpart of this Amendment
and shall have received counterparts of this Amendment executed by the Company
and the Required Banks.
SECTION 3. Representations and Warranties True; No Default or Event of
Default. The Company hereby represents and warrants to the Agent and the Banks
that after giving effect to the execution and delivery of this Amendment (a) the
representations and warranties set forth in the Credit Agreement are true and
correct on the date hereof as though made on and as of such date and (b) no
Default or Event of Default has occurred and is continuing.
SECTION 4. Reference to the Credit Agreement and Effect on the Notes.
(a) Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement," "hereunder," "herein" or words of like
import shall mean and be a reference to the Credit Agreement, as amended and
affected hereby.
(b) Upon the effectiveness of this Amendment, each reference in the
Notes to "the Credit Agreement" shall mean and be a reference to the Credit
Agreement, as amended and affected hereby.
(c) The Credit Agreement and the Notes, as amended and affected hereby,
shall remain in full force and effect and are hereby ratified and confirmed.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS AND
APPLICABLE FEDERAL LAW AND SHALL BE BINDING UPON THE COMPANY, THE BANKS AND THE
AGENT AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
SECTION 6. Descriptive Headings. The section headings appearing in this
Amendment have been inserted for convenience only and shall be given no
substantive meaning or significance whatever in construing the terms and
provisions of this Amendment.
SECTION 7. FINAL AGREEMENT OF THE PARTIES. THE CREDIT AGREEMENT
(INCLUDING THE EXHIBITS AND SCHEDULE THERETO), AS AMENDED HEREBY, THE NOTES, THE
AGENT'S LETTER AND THE OTHER LOAN DOCUMENTS, CONSTITUTE A "LOAN AGREEMENT" AS
DEFINED IN SECTION 26.02(a) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES RESPECTING THE SUBJECT MATTER
HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES RESPECTING THE SUBJECT MATTER HEREOF
AND THEREOF.
SECTION 8. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed effective as of the date first stated herein, by their respective
officers thereunto duly authorized.
TANDY CORPORATION
By: /s/ Loren K. Jensen
-------------------------
Name: Loren K. Jensen
Title: Vice President-Treasurer
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION, as Agent
By: /s/ B. B. Wuthrich
-------------------------
Name: B. B. Wuthrich
Title: Vice President
Banks
BANK OF AMERICA ILLINOIS, as
successor to Bank of America
National Trust and Savings
Association
By: /s/ W. Thomas Barnett
--------------------------
Name: W. Thomas Barnett
Title: Vice President
Banks
THE BANK OF NEW YORK
By: /s/ Charlotte Sohn
--------------------------
Name: Charlotte Sohn
Title: Vice President
Banks
BANK ONE, TEXAS, N.A.
By: /s/ John D. Hudgens
--------------------------
Name: John D. Hudgens
Title: Vice President
Banks
BANK OF TOKYO- MITSUBISHI TRUST
COMPANY, SUCCESSOR BY MERGER
TO THE BANK OF TOKYO TRUST COMPANY
By: /s/ Jean K. Reilly
-------------------------
Name: Jean K. Reilly
Title: Vice President
Banks
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
--------------------------
Name: Robert Ivosevich
Title: Senior Vice President
Banks
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Bethann R. Halligan
----------------------------
Name: Bethann R. Halligan
Title: Division Executive
Banks
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Jane W. Workman
---------------------------
Name: Jane W. Workman
Title: Senior Vice President
Banks
MELLON BANK, N.A.
By: /s/ Marc T. Kennedy
--------------------------
Name: Marc T. Kennedy
Title: Assistant Vice President
Banks
NATIONAL WESTMINSTER BANK, Plc
By: /s/ Gregory Stoeckle
---------------------------
Name: Gregory Stoeckle
Title: Vice President
NATIONAL WESTMINSTER BANK, Plc
Nassau Branch
By: /s/ Gregory Stoeckle
---------------------------
Name: Gregory Stoeckle
Title: Vice President
Banks
NATIONSBANK OF TEXAS, N.A.
By: /s/ Dan Killian
---------------------------
Name: Dan Killian
Title: Vice President
Banks
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ Louis P. Laville, III
------------------------------
Name: Louis P. Laville, III
Title: Vice President
Banks
THE SUMITOMO BANK, LIMITED
HOUSTON AGENCY
By: /s/ Harumitsu Seki
----------------------------
Name: Harumitsu Seki
Title: General Manager
Banks
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By: /s/ B. B. Wuthrich
-------------------------
Name: B. B. Wuthrich
Title: Vice President
Banks
TORONTO DOMINION (TEXAS), INC.
By: /s/ Darlene Riedel
-------------------------
Name: Darlene Riedel
Title: Vice President
Banks
CITICORP USA, INC.
By: /s/ Robin F. Lenna
--------------------------
Name: Robin F. Lenna
Title: Vice President
Banks
COMMERZBANK, AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By: /s/ Harry Yergey
------------------------
Name: Harry Yergey
Title: Vice President
By: /s/ Eric Kagerer
------------------------
Name: Eric Kagerer
Title: Vice President
Banks
UNION BANK OF SWITZERLAND
By: /s/ Dieter Hoeppli
-------------------------
Name: Dieter Hoeppli
Title Vice President
Banks
THE SAKURA BANK, LIMITED
By: /s/ Yasumasa Kikuchi
--------------------------
Name: Yasumasa Kikuchi
Title: Senior Vice President
<PAGE>
TANDY CORPORATION EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
Year Ended
December 31,
----------------------------------------
(In millions, except
per share amounts) 1996 1995 1994
-------------------------------------------------------------------------------
Primary Earnings Per Share
Reconciliation of net income (loss) per statements of income to amounts used in
computation of primary earnings per share:
Net income (loss), as reported $ (91.6) $ 211.9 $ 224.3
Less dividends on preferred stock:
Series B (6.3) (6.5) (6.7)
-------- -------- --------
Net income (loss) available to common
shareholders for primary earnings per
share $ (97.9) $ 205.4 $ 217.6
======== ======== ========
Weighted average number of common
shares outstanding 59.8 63.2 62.8
Weighted average number of $2.14
depositary shares,representing Series
C preferred stock, treated as common
stock due to mandatory conversion (b) -- 2.2 11.8
Weighted average number of common
shares issuable under stock option
plans, net of assumed treasury stock
repurchases at average market prices (c) .5 .3
-------- -------- --------
Weighted average number of common and
common equivalent shares outstanding 59.8 65.9 74.9
======== ======== ========
Net income (loss) available per average
common and common equivalent share $ (1.64) $ 3.12 $ 2.91
======== ======== ========
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 (loss) available to common
shareholders $ (97.9) $ 205.4 $ 217.6
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) 6.5 6.8
Less additional contribution that would have
been required for the TESOP if Series B
preferred stock had been converted (c) (3.7) (3.9)
-------- -------- --------
Net income (loss) available per common and
common equivalent share, as adjusted $ (97.9) $ 208.2 $ 220.5
======== ======== ========
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 59.8 65.9 74.9
Adjusted to reflect assumed exercise of stock
options as of the beginning of the period
(c) (c) .1
Adjustment to reflect assumed conversion of
Series B preferred stock to common stock as
of the beginning of the period (c) 1.9 2.0
-------- -------- --------
Weighted average number of common and
common equivalent shares outstanding,
as adjusted 59.8 67.8 77.0
======== ======== ========
Fully diluted net income (loss) available
per average common and common equivalent
share $ (1.64) $ 3.07 $ 2.86
======== ======== ========
(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% or is
anti-dilutive.
(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 years ended December 31, 1996 and 1995, these items are
antidilutive and thus are omitted from the calculation.
<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 (a)
<CAPTION>
Six Months Year
Ended (a) Ended
Year Ended December 31, December 31, June 30,
(In millions, except per ------------------------------------------- ------------ --------
share amounts) 1996 1995 1994 1993 1992 1992
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges:
Income (loss) from continuing
operations (91.6) 211.9 224.3 195.6 67.7 210.7
Plus provision (benefit)for
taxes (54.0) 131.3 135.2 115.5 35.2 119.8
-------- -------- -------- -------- -------- --------
Income (loss) before income
taxes (145.6) 343.2 359.5 311.1 102.9 330.5
-------- -------- -------- -------- -------- --------
Fixed charges:
Interest expense and
amortization of debt discount 36.4 33.7 30.0 39.7 20.5 43.1
Amortization of issuance
expense .2 .3 .3 .4 .6 .6
Appropriate portion (33 1/3%)
of rentals 80.0 72.5 70.8 67.5 35.1 68.2
-------- -------- -------- -------- -------- --------
Total fixed charges 116.6 106.5 101.1 107.6 56.2 111.9
-------- -------- -------- -------- -------- --------
Earnings before income taxes
and fixed charges $ (29.0) $ 449.7 $ 460.6 $ 418.7 $ 159.1 $ 442.4
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed
charges (b) 4.22 4.56 3.89 2.83 3.95
======== ======== ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges and Preferred
Dividends:
Total fixed charges, as above $ 116.6 $ 106.5 $ 101.1 $ 107.6 $ 56.2 $ 112.0
Preferred dividends 6.3 11.3 38.9 36.7 18.5 20.0
-------- -------- -------- -------- -------- --------
Total fixed charges and
preferred dividends $ 122.9 $ 117.8 $ 140.0 $ 144.3 $ 74.7 $ 132.0
======== ======== ======== ======== ======== ========
Earnings before income taxes
and fixed charges $ (29.0) $ 449.7 $ 460.6 $ 418.7 $ 159.1 $ 442.4
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed
charges and preferred
dividends (c) 3.82 3.29 2.90 2.13 3.35
======== ======== ======== ======== ======== ========
(a) 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.
(b) Earnings were not sufficient to cover fixed charges during 1996 by
approximately $145.6 million.
(c) Earnings were not sufficient to cover fixed charges and preferred dividends
during 1996 by approximately $151.9 million.
</TABLE>
<PAGE>
TANDY CORPORATION
EXHIBIT 21
SUBSIDIARIES
The largest subsidiaries of the Company are:
State of Incorporation
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 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 19, 1997,
appearing on page 29 in this Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Fort Worth, Texas
March 27, 1997
<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 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 121,500
<SECURITIES> 18,500
<RECEIVABLES> 235,100
<ALLOWANCES> 7,900
<INVENTORY> 1,420,500
<CURRENT-ASSETS> 1,939,800
<PP&E> 1,034,300
<DEPRECIATION> 488,700
<TOTAL-ASSETS> 2,583,400
<CURRENT-LIABILITIES> 1,193,500
<BONDS> 104,300
0
100,000
<COMMON> 85,600
<OTHER-SE> 1,079,200
<TOTAL-LIABILITY-AND-EQUITY> 2,583,400
<SALES> 6,285,500
<TOTAL-REVENUES> 6,285,500
<CGS> 4,263,100
<TOTAL-COSTS> 4,263,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,400
<INCOME-PRETAX> (145,600)
<INCOME-TAX> (54,000)
<INCOME-CONTINUING> (91,600)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91,600)
<EPS-PRIMARY> (1.64)
<EPS-DILUTED> (1.64)
</TABLE>
