UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ---
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-5571
TANDY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Throckmorton Street, Suite 1800, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 390-3700
1800 One Tandy Center, Fort Worth, Texas 76102
(Former address)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares outstanding of the issuer's Common Stock, $1 par value, on
April 30, 1997 was 54,289,857.
Index to Exhibits is on Sequential Page No. 13. Total pages 18.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
Three Months Ended
March 31,
(In millions, except per share amounts) 1997 1996
- - -------------------------------------- ------------ ------------
Net sales and operating revenues $ 1,291.7 $ 1,447.0
Cost of products sold 840.1 955.3
------------ ------------
Gross profit 451.6 491.7
------------ ------------
Expenses:
Selling, general and administrative 379.5 413.9
Depreciation and amortization 23.6 25.4
Impairment of long-lived assets -- 26.0
------------ ------------
403.1 465.3
------------ ------------
Income before interest and income taxes 48.5 26.4
Interest income 2.2 3.8
Interest expense (9.0) (7.1)
Net interest expense ------------ ------------
(6.8) (3.3)
Income before income taxes 41.7 23.1
Provision for income taxes 16.1 8.6
------------ ------------
Net income 25.6 14.5
Preferred dividends 1.6 1.6
------------ ------------
Net income available to common
shareholders $ 24.0 $ 12.9
============ ============
Net income available per average
common and common equivalent share $ 0.43 $ 0.21
============ ============
Average common and common
equivalent shares outstanding 56.3 61.4
============= ============
Dividends declared per common share $ 0.20 $ 0.20
============= ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31, December 31, March 31,
(In millions) 1997 1996 1996
- - ------------- ---------- ---------- ----------
Assets
Current assets:
Cash and short-term investments $ 101.5 $ 121.5 $ 105.4
Accounts and notes receivable, less
allowance for doubtful accounts 180.3 227.2 279.5
Inventories, at lower of cost or market 1,282.4 1,420.5 1,558.9
Other current assets 173.9 170.6 67.8
---------- ---------- ----------
Total current assets 1,738.1 1,939.8 2,011.6
Property, plant and equipment, at cost,
less accumulated depreciation 542.5 545.6 589.2
Other assets, net of accumulated
amortization 105.1 98.0 84.7
---------- ---------- ----------
$ 2,385.7 $ 2,583.4 $ 2,685.5
========== ========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current
maturities of long-term debt $ 390.3 $ 245.3 $ 219.1
Current portion of capital lease
obligations 0.4 0.4 0.4
Current portion of TESOP guarantee 12.3 12.3 9.8
Accounts payable 316.7 404.9 436.4
Accrued expenses 291.6 425.3 228.6
Income taxes payable 76.9 105.3 66.6
---------- ---------- ----------
Total current liabilities 1,088.2 1,193.5 960.9
---------- ---------- ----------
Long-term debt, excluding current
maturities 35.1 35.1 63.7
Capital lease obligations, excluding
current maturities 29.2 29.3 28.3
Guarantee of TESOP indebtedness 39.9 39.9 48.7
Other non-current liabilities 22.2 20.8 19.7
---------- ---------- ----------
Total other liabilities 126.4 125.1 160.4
---------- ---------- ----------
Stockholders' Equity
Preferred stock, no par value,
1.0 million shares authorized
Series A junior participating, 0.1
million shares authorized and none issued -- -- --
Series B convertible, 0.1 million shares
authorized and issued 100.0 100.0 100.0
Common stock, $1 par value, 250.0 million
shares authorized with 85.6 million shares
issued 85.6 85.6 85.6
Additional paid-in capital 106.3 105.3 102.6
Retained earnings 2,202.4 2,188.9 2,333.3
Foreign currency translation effects (2.7) (1.0) (1.9)
Common stock in treasury, at cost,
30.7 million, 28.4 million and 24.8
million shares, respectively (1,273.7) (1,164.5) (1,002.5)
Unearned deferred compensation
related to TESOP (44.9) (46.9) (52.9)
Unrealized loss on securities
available for sale (1.9) (2.6) --
---------- ---------- ----------
Total stockholders' equity 1,171.1 1,264.8 1,564.2
Commitments and contingent liabilities
---------- ---------- ----------
$ 2,385.7 $ 2,583.4 $ 2,685.5
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
-------------------------
(In millions) 1997 1996
- - ------------ ---------- ----------
Cash flows from operating activities:
Net income $ 25.6 $ 14.5
Adjustments to reconcile net income to
net cash (used) provided by operating
activities:
Impairment of long-lived assets -- 26.0
Depreciation and amortization 23.8 25.4
Provision for credit losses and bad debts 0.9 0.3
Other items 0.2 (0.1)
Changes in operating assets and liabilities:
Receivables 31.3 44.3
Inventories 128.2 (46.9)
Other current assets 1.4 (2.4)
Accounts payable, accrued expenses
(including restructuring
reserves) and income taxes (223.1) (37.5)
---------- ----------
Net cash (used) provided by operating
activities (11.7) 23.6
---------- ----------
Investing activities:
Additions to property, plant and equipment (22.7) (44.6)
Proceeds from sale of property, plant and
equipment 0.6 0.9
Other investing activities (2.3) (2.9)
---------- ----------
Net cash used by investing activities (24.4) (46.6)
---------- ----------
Financing activities:
Purchase of treasury stock (129.9) (57.2)
Sale of treasury stock to employee
stock purchase program 12.5 15.0
Proceeds from exercise of stock options 2.4 1.7
Dividends paid, net of taxes (12.5) (13.5)
Changes in short-term borrowings, net 143.7 39.6
Repayments of long-term borrowings (0.1) (0.7)
---------- ----------
Net cash provided (used) by financing
activities 16.1 (15.1)
---------- ----------
Decrease in cash and short-term
investments (20.0) (38.1)
Cash and short-term investments, beginning
of period 121.5 143.5
---------- ----------
Cash and short-term investments, end of period $ 101.5 $ 105.4
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and management's discussion and
analysis of results of operations and financial condition included in Tandy
Corporation's ("Tandy" or the "Company") 1996 Annual Report on Form 10-K for the
year ended December 31, 1996.
NOTE 2-EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 128, Earnings per Share ("FAS 128"), which is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Effective December 31, 1997, the Company will
adopt FAS 128, which establishes standards for computing and presenting earnings
per share ("EPS"). The statement requires dual presentation of basic and diluted
EPS on the face of the income statement for entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation, to the numerator and denominator of the diluted EPS
computation. Basic EPS excludes the effect of potentially dilutive securities
while diluted EPS reflects the potential dilution that would have occurred if
securities or other contracts to issue common stock had been exercised,
converted, or resulted in the issuance of common stock that would have then
shared in the earnings of the entity.
The pro-forma EPS amounts shown below have been calculated assuming the Company
had already adopted the provisions of this statement:
Three Months Ended March 31,
----------------------------
1997 1996
----------- -----------
Basic EPS $ 0.43 $ 0.21
=========== ===========
Diluted EPS $ 0.42 $ 0.21
=========== ===========
NOTE 3-SHARE REPURCHASE PROGRAM
On March 3, 1997, the Company announced that its Board of Directors authorized
management to purchase an additional five 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
approximately 6.7 million shares had been purchased as of March 31, 1997.
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. During the quarter ended March 31, 1997, the Company repurchased
approximately 2.1 million shares under the program.
NOTE 4-RESTRUCTURING RESERVES
In December 1996, the Company initiated certain restructuring programs and
announced its plan to exit the Incredible Universe and McDuff businesses and the
closure of 21 Computer City stores. During the first quarter of 1997, the assets
of one Incredible Universe location was sold. As of March 31, 1997, all
remaining Incredible Universe locations were closed except for six locations
(the assets of one of the six was sold in April 1997). All 53 McDuff stores and
21 selected Computer City stores were closed as of March 31, 1997.
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 third parties would
complete the purchase of certain 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 being inadequate, and future charges may be
required.
Sales and operating revenues and operating losses of the stores closed pursuant
to the restructuring plans are shown below for the three months ended March 31
(unaudited):
(In millions) 1997 1996
- - ------------------------------------------------------------
Sales and operating revenue $ 127.7 $ 348.1
Operating loss $ (14.7) $ (25.8)
Pre-tax restructuring and other charges for 1996 totaled $366.3 million,
categorized as follows on the 1996 Consolidated Statements of Income:
(In millions)
----------
Impairment of long-lived assets (1) $ 112.8
Lower of cost or market inventory impairment 91.4
Other restructuring 162.1 (2)
----------
1996 pre-tax restructuring and other charges $ 366.3
==========
(1) Reflects the adoption of 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") and the related restructuring charges.
(2) The remaining reserve at December 31, 1996 related to these charges was
$137.7 million.
Following is an analysis of the amounts charged against the reserve during the
quarter ended March 31, 1997:
Charges
Balance 1/1/97 - Balance
(In millions) 12/31/96 3/31/97 3/31/97
- - ----------------------------------------------------------------------
Lease obligations $ 93.5 $ (31.1) $ 62.4
Contract termination costs 13.2 (9.9) 3.3
Termination benefits 4.6 (1.5) 3.1
Other 26.4 (8.2) 18.2
Total ---------- ---------- ----------
$ 137.7 $ (50.7) $ 87.0
========== ========== ==========
NOTE 5-SUPPLEMENTAL CASH FLOW INFORMATION
Cash flows from operating activities included cash payments as follows:
Three Months Ended March 31,
----------------------------
(In millions) 1997 1996
- - --------------------------------------------------------
Interest paid $ 7.5 $ 6.9
Income taxes paid $ 44.2 $ 23.6
In March 1997, the Company received notes approximating $15.1 million as a
partial payment on the sale of Incredible Universe assets.
<PAGE>
ITEM 2. 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.
In addition, see Restructuring Reserves for other factors that could affect
earnings.
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.
With the exception of historical information, the matters discussed herein
contain forward-looking statements (within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended) 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,
construction schedules being met, competitive products and pricing, availability
of products, inventory risks due to shifts in market demand, the regulatory and
trade environment, maintenance of strategic alliances, and other risks indicated
in filings by the Company with the Securities and Exchange Commission.
Net Sales and Operating Revenues
Net sales and operating revenues for the periods ended March 31 were:
Three Months Ended
March 31,
----------------------- % Increase
(In millions) 1997 1996 (Decrease)
- - ------------- ---------- ---------- ----------
RadioShack $ 674.0 $ 672.6 (1) 0.2%
Computer City 471.0 409.0 (1) 15.2
---------- ----------
Total continuing retail 1,145.0 1,081.6 5.9
Total closing retail 127.7 348.1 (63.3)
Other sales 19.0 17.3 9.8
---------- ----------
$ 1,291.7 $ 1,447.0 (10.7)%
========== ==========
(1) Adjusted to exclude closed units associated with the 1996 restructuring
plan.
Continuing retail operations generated a 5.9% sales gain for the three-month
period ended March 31, 1997. Tandy Corporation's overall comparable store sales
for U.S. and Canadian retail operations were flat for the quarter. Sales
comparisons between 1997 and 1996 were unfavorably impacted by two additional
sales days in the prior year first quarter which are attributable to leap year
and the timing of the Easter holiday (Tandy's retail stores are closed Easter
Sunday which was observed in March this year and in April during 1996).
RadioShack's overall continuing sales increased 0.2% during the first quarter
and comparable store sales were down 1.7%. Sales of audio and video products
were down in part due to industry trends. Offsetting these declines were 1997
first quarter increases in wireless product sales including cellular phones and
Personal Communication Services ("PCS"), as well as increases in direct-to-home
satellite systems. In addition, parts and accessories sales increased
approximately 3.0% during the first quarter of 1997. Approximately 1,300 stores
were selling PCS hardware and services at the end of the first quarter and that
number is expected to increase to approximately 2,500 stores by the end of the
third quarter of this year.
Computer City's overall continuing store sales increased 15.2% during the first
quarter and U.S. and Canadian comparable store sales increased 0.6%. The overall
sales increase is primarily attributable to 1997 revenues generated by 13 new
stores that have opened since the first quarter of 1996. Same store sales growth
in services and software was partially offset by declines in sales of non-MS-DOS
compatible computers and related items.
RETAIL OUTLETS
March 31, December 31, March 31, December 31,
1997 1996 1996 1995
- - --------------------------------------------------------------------------------
RadioShack
Company owned (1) 4,875 4,942 4,840 4,831
Dealer/Franchise 1,919 1,927 1,954 2,005
Computer City (1) 93 113 101 99
Incredible Universe (1) 6 17 18 17
-------- -------- -------- --------
Total Number of Retail
Outlets (1) 6,893 6,999 6,913 6,952
======== ======== ======== ========
(1) Prior periods include stores closed under the December 1996 store closure
plan.
Gross Profit
Gross profit as a percent of net sales and operating revenues was 35.0% during
the three months ended March 31, 1997 as compared to 34.0% during the
corresponding 1996 period. This increase in gross profit is a result of the
reduction in sales of Tandy's lower gross margin retail formats, Computer City
and Incredible Universe, as compared to total revenues. In the first quarter of
1997, Computer City and Incredible Universe accounted for approximately 46.3% of
consolidated sales, compared to 49.8% in the first quarter of 1996. RadioShack's
gross margin decreased less than 1%. Computer City's gross margin for the first
quarter of 1997 remained flat in comparison to the first quarter of 1996.
Excluding Incredible Universe, the gross profit percent of sales for the first
quarter of 1997 would have approximated 37.5%. As the reduction of lower margin
sales continues in relation to total sales, management anticipates gross profit
will increase slightly for the year ended December 31, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses as a percent of sales and
operating revenues for the first quarter of 1997 were 29.4% as compared to 28.6%
during the first quarter of 1996. This 0.8 percentage point increase is
primarily a result of the reduction in sales of Computer City and Incredible
Universe, as compared to total revenues. In the first quarter of 1997, Computer
City and Incredible Universe accounted for approximately 46.3% of consolidated
sales, compared to 49.8% in the first quarter of 1996. Rent and payroll costs
were down in dollars; however, their resulting percent of sales increased over
the first quarter of 1996. This was due to the lower combined sales of Computer
City and Incredible Universe during the first quarter of 1997. Excluding
Incredible Universe, SG&A as a percent of sales would have approximated 30.0%
for the quarter ended March 31, 1997. The Company expects SG&A expenses as a
percent of sales to increase slightly over the remainder of the fiscal year as
Computer City and Incredible Universe, which operate at lower relative costs
than consolidated Tandy Corporation, continue to decline in their combined
proportion of the Company's total business.
Restructuring Reserves
In December 1996, the Company initiated certain restructuring programs and
announced its plan to exit the Incredible Universe and McDuff businesses and the
closure of 21 Computer City stores. During the first quarter of 1997, the assets
of one Incredible Universe location was sold. As of March 31, 1997, all
remaining Incredible Universe locations were closed except for six locations
(the assets of one of the six was sold in April 1997). All 53 McDuff stores and
21 selected Computer City stores were closed as of March 31, 1997.
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 third
parties would complete the purchase of certain 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 being inadequate, and future
charges would be required.
Computer City's strategy is 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 is working toward a
more productive, higher margin mix of business in areas such as services,
software and peripherals. The Company continues 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.
Net Interest Expense
Net interest expense for the quarter ending March 31, 1997 was $6.8 million, an
increase of $3.5 million from $3.3 million in the first quarter of 1996. This
net increase in expense is the result of two factors. First, the Company has
increased its utilization of short-term borrowing facilities for the ongoing
share repurchase program and secondly, principal reductions in interest bearing
notes receivable have resulted in a decline in interest income. Interest expense
is expected to continue to increase as short-term debt is refinanced under the
anticipated long-term debt funding, and debt funding for share repurchases
continues (see Cash Flow and Financial Condition).
Provision for Income Taxes
Provision for income taxes for each quarterly period is based on the estimate of
the annual effective tax rate for the fiscal year as evaluated at the end of
each quarter. The effective tax rates for the first quarters of 1997 and 1996
were 38.5% and 37.1%, respectively. The 1996 tax rate was lower primarily due to
the favorable resolution of a foreign tax issue.
Cash Flow and Financial Condition
Cash flow used by operating activities approximated $11.7 million in the
three-month period ended March 31, 1997 as compared to cash provided by
operating activities of $23.6 million in the prior year. This change relates
primarily to shifts among working capital components, mainly current liabilities
including charges associated with the restructuring reserve which were partially
offset by increases from the liquidation of inventories associated with closed
stores.
Investing activities for the quarter ended March 31, 1997 involved capital
expenditures totaling $22.7 million primarily for retail expansion and upgrading
information systems. Management anticipates that capital expenditure
requirements will approximate $100.0 million to $115.0 million for the remainder
of 1997, primarily to support RadioShack retail expansion and refurbishments and
other capital expenditures including updating additional information systems.
Cash provided by financing activities for the three-month period ended March 31,
1997 includes the addition of $143.7 million of short-term debt which was
primarily utilized for the repurchase of $129.9 million of common stock. The
Company believes that its cash flow from operations, cash on hand and
availability under its existing debt facilities are adequate to fund the planned
expansion of its store formats and share repurchase program. In addition, most
of the Company's new stores are leased rather than owned.
Cash and short-term investments at March 31, 1997 were $101.5 million as
compared to $121.5 million at December 31, 1996 and $105.4 million at March 31,
1996. Total debt as a percentage of total capitalization was 30.2% at March 31,
1997, compared to 22.3% at December 31, 1996 and 19.1% at March 31, 1996.
Long-term debt as a percentage of total capitalization was 6.2% at March 31,
1997 compared to 6.4% at December 31, 1996 and 7.3% at March 31, 1996. The
debt-to-capitalization ratios could increase as Tandy continues to repurchase
shares under the existing authorization and fund new store fixtures and other
capital expenditures.
On March 3, 1997, the Company announced that its Board of Directors authorized
management to purchase an additional five 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
approximately 6.7 million shares had been purchased as of March 31, 1997.
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. During the quarter ended March 31, 1997, the Company repurchased
approximately 2.1 million shares under the program.
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 ("S.E.C."). Funding under the Registration
Statement will take the form of unsecured notes and medium-term notes and will
be used to refinance existing short-term indebtedness and for general corporate
purposes. The Company expects to file a shelf registration with the S.E.C. in
May 1997.
Inventory
Total inventories at March 31, 1997 decreased $138.1 million or 9.7% over
December 31, 1996 and $276.5 million or 17.7% over the March 31, 1996 level.
These decreases in total inventory levels were primarily attributable to
reductions at RadioShack and stores associated with the 1996 restructuring
actions. Inventory is primarily comprised of finished goods.
Changes in Stockholders' Equity
Outstanding
(In millions) Common Shares Dollars
- - ------------- ------------- ----------
Balance at December 31, 1996 57.2 $ 1,264.8
Foreign currency translation adjustments,
net of deferred taxes -- (1.7)
Sale of treasury stock to employee plans 0.3 12.5
Purchase of treasury stock (2.7) (123.0)
Exercise of stock options 0.1 2.9
Repurchase of preferred stock -- (0.7)
Preferred stock dividends, net of tax -- (1.0)
TESOP deferred compensation earned -- 2.0
Common stock dividends -- (11.0)
Unrealized loss on AST stock, net of tax -- 0.7
Net income -- 25.6
---------- -----------
Balance at March 31, 1997 54.9 $ 1,171.1
========== ===========
Unrealized Loss on AST Securities
As of March 31, 1997, the Company held 4,413,594 shares of AST Research, Inc.
("AST") common stock which was received in July 1996 as a partial payment on a
note payable from AST. The AST common stock is available for sale and,
therefore, is subject to mark to market adjustments for each reporting period
based upon its current market value. Pursuant to the Financial Accounting
Standards Board (the "FASB") Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities", the
Company recorded an unrealized loss of $1.9 million, net of taxes, in
stockholders' equity at March 31, 1997, based on a March 31, 1997 market price
of $4.75 per share. As of May 7, 1997, the market price of AST common stock was
$5.28 per share. On April 15, 1997, AST and Samsung Electronics Co. Ltd.
("Samsung") jointly announced the signing of a definitive merger agreement under
which Samsung commenced a tender offer at a price of $5.40 per share in cash.
Consummation of the tender offer is subject to certain terms and conditions,
including the approval of various U.S. and foreign government officials and
agencies. If the tender offer is consummated, the Company will receive proceeds
of approximately $23.8 million.
InterTAN Inc. Update
Notes and other receivables due from InterTAN Inc. ("InterTAN") at March 31,
1997 and 1996 approximated $27.5 million and $43.9 million, respectively.
Revenues generated from operations relating to InterTAN for the periods ended
March 31, 1997 and 1996 totaled $3.8 million and $4.0 million, respectively.
Through April 1997, InterTAN has met all of its financial obligations to Tandy.
Accordingly, management believes that InterTAN should continue to meet its
payment obligations pursuant to these debt agreements. See the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 for further
information.
Canadian tax authorities are reviewing InterTAN's Canadian subsidiary's 1987-93
tax returns. The Company cannot determine whether the ultimate resolution of
that review will have an effect on InterTAN's ability to meet its obligations to
Tandy, but at present, nothing has come to the attention of the Company which
would lead it to believe that the ultimate resolution of this review would
impair InterTAN's ability to meet its obligations to Tandy.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Tandy has various claims, lawsuits, disputes with third parties, investigations
and pending actions involving allegations of negligence, product defects,
discrimination, infringement of intellectual property rights, 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 March 31, 1997. While certain of these matters involve
substantial amounts, and although occasional adverse settlements or resolutions
might occur and negatively impact earnings in the year of settlement, it is the
opinion of management that their ultimate resolution will not have a materially
adverse effect on Tandy's financial position.
ITEM 5. OTHER INFORMATION.
The mailing address of the Company's principal executive offices has changed to
100 Throckmorton Street, Suite 1800, Fort Worth, Texas 76102.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Required by Item 601 of Regulation S-K.
A list of the exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Index to Exhibits on
page 13, which immediately precedes such exhibits.
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 the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tandy Corporation
(Registrant)
Date: May 14, 1997 By /s/ Richard L. Ramsey
---------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: May 14, 1997 /s/ Dwain H. Hughes
-----------------------------
Dwain H. Hughes
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
TANDY CORPORATION
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page No.
2a Agreement for Purchase and Sale of Assets dated as of June 30,
1993 between AST Research, Inc., as Purchaser and Tandy
Corporation, TE Electronics Inc., and GRiD Systems Corporation,
as Sellers (without exhibits) (filed as Exhibit 2 to Tandy's July
13, 1993 Form 8-K filed on July 27, 1993, Accession No.
0000096289-93-000004 and incorporated herein by reference).
2b Amended and Restated Stock Exchange Agreement dated February 1,
1994 by and among O'Sullivan Industries Holdings, Inc., and TE
Electronics Inc. (filed as Exhibit 2b to Tandy's Form 10-K filed
on March 30, 1994, Accession No. 0000096289-94-000029 and
incorporated herein by reference).
2c U.S. Purchase Agreement dated January 26, 1994 by and
among O'Sullivan Industries Holdings, Inc., TE Electronics Inc.
and the U.S. Underwriters which included Merrill Lynch & Co.,
Wheat First Butcher & Singer, The Chicago Dearborn Company and
Rauscher Pierce Refsnes, Inc. (filed as Exhibit 2c to Tandy's
Form 10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein by reference).
2d International Purchase Agreement dated January 26, 1994 by and
among O'Sullivan Industries Holdings, Inc., TE Electronics Inc.
and the U.S. Underwriters which included Merrill Lynch
International Limited and UBS Limited (filed as Exhibit 2d to
Tandy's Form 10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein by reference).
2e Acquisition Agreement dated January 18, 1995 between Hurley State
Bank, as purchaser and Tandy Credit Corporation as seller
(without exhibits) (filed as Exhibit (c) to Tandy's January 18,
1995 Form 8-K filed on February 2, 1995, Accession No.
0000096289-95-000008 and incorporated herein by reference).
2e(i) Amendment No. 1 to Acquisition Agreement dated January 18, 1995
between Tandy Credit Corporation, Tandy National Bank and Hurley
State Bank (filed as Exhibit 2 to Tandy's March 30, 1995 Form
8-K filed on April 12, 1995, Accession No. 00096289-95-
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 Stock
dated February 13, 1992 (filed as Exhibit 4A to Tandy's 1993 Form
S-8 for the Tandy Corporation Incentive Stock Plan, Reg. No.
33-51603, filed on November 12, 1993, Accession No. 0000096289-
93-000017 and incorporated herein by reference).
3b Tandy Corporation Bylaws, restated as of January 1, 1996 (filed
as Exhibit 3B to Tandy's Form 10-K filed on March 28, 1996,
Accession No. 0000096289-96-000004 and incorporated herein by
reference).
4a Amended and restated Rights Agreement with the First National
Bank of Boston dated June 22, 1990 for Preferred Share Purchase
Rights (filed as Exhibit 4b to Tandy's Form 10-K filed on March
30, 1994, Accession No. 0000096289-94-000029 and incorporated
herein by reference).
4b Revolving Credit Agreement between Tandy Corporation and Texas
Commerce Bank, individually and as Agent for sixteen other banks,
dated as of May 27, 1994 (without exhibits) (filed as Exhibit 4c
to Tandy's Form 10Q filed on August 15, 1994, Accession No.
0000096289-94-000039 and incorporated herein by reference).
4c First Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for sixteen other
banks, dated as of May 26, 1995 (Facility A) (filed as Exhibit 4c
to Tandy's Form 10-K filed on March 28, 1996, Accession No.
0000096289-96-000004 and incorporated herein by reference).
4d First Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for sixteen other
banks, dated as of May 26, 1995 (Facility B) (filed as Exhibit 4d
to Tandy's Form 10-K filed on March 28, 1996, Accession No.
0000096289-96-000004 and incorporated herein by reference).
4e Second Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for sixteen other
banks, dated as of May 24, 1996 (Facility A) (filed as Exhibit 4e
to Tandy's Form 10-Q filed on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
4f Second Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen banks,
dated as of June 28, 1996 (Facility B) (filed as Exhibit 4f to
Tandy's Form 10-Q filed on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
4g Third Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen banks,
dated as of June 28, 1996 (Facility A) (filed as Exhibit 4g to
Tandy's Form 10-Q on August 14, 1996, Accession No.
0000096289-96-000010 and incorporated herein by reference).
4h Fourth Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen banks,
dated as of February 18, 1997 (Facility A) (filed as Exhibit 4h
to Tandy's Form 10-K filed on March 27, 1997, Accession No.
0000096289-97-000006 and incorporated herein by reference).
4i Third Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen banks,
dated as of February 18, 1997 (Facility B) (filed as Exhibit 4i
to Tandy's Form 10-K filed on March 27, 1997, Accession No.
0000096289-97-000006 and incorporated herein by reference).
10a* Salary Continuation Plan for Executive Employees of Tandy
Corporation and Subsidiaries including amendment dated June 14,
1984 with respect to participation by certain executive
employees, as restated October 4, 1990 (filed as Exhibit 10a to
Tandy's Form 10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein by reference).
10b* Form of Executive Pay Plan Letters (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 17
12 Statement of Computation of Ratios of Earnings to Fixed
Charges 18
27 Financial Data Schedule
- - -----------------------
* Each of these exhibits is a "management contract or compensatory
plan, contract, or arrangement".
<PAGE>
TANDY CORPORATION EXHIBIT 11
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
March 31,
(In millions, except per share amounts) 1997 1996
- - --------------------------------------- ---------- ----------
Primary Earnings Per Share
Reconciliation of net income per statements
of income to amounts used in computation
of primary earnings per share:
Net income, as reported $ 25.6 $ 14.5
Less dividends on Series B preferred stock (1.6) (1.6)
---------- ----------
Net income available to common
shareholders for primary earnings per share $ 24.0 $ 12.9
========== ==========
Weighted average number of common shares
outstanding 55.9 61.1
Weighted average number of common shares
issuable under stock option plans, net
of assumed treasury stock repurchases
at average market prices 0.4 0.3
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 56.3 61.4
========== ==========
Net income available per average
common and common equivalent share $ 0.43 $ 0.21
========== ==========
Fully Diluted Earnings Per Share (a)
Reconciliation of net income per statements
of income to amounts used in computation of
fully diluted earnings per share:
Net income available to common shareholders $ 24.0 $ 12.9
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 1.6 (b)
Less additional contribution that would have
been required for the TESOP if Series B
preferred stock had been converted (1.0) (b)
---------- ----------
Net income available per common and
common equivalent share, as adjusted $ 24.6 $ 12.9
========== ==========
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 56.3 61.4
Adjusted to reflect assumed exercise of stock
options as of the beginning of the period 0.1 0.1
Adjustment to reflect assumed conversion of
Series B preferred stock to common stock as
of the beginning of the period 1.8 (b)
---------- ----------
Weighted average number of common and common
equivalent shares outstanding, as adjusted 58.2 61.5
========== ==========
Fully diluted net income available per average
common and common equivalent share $ 0.42 $ 0.21
========== ==========
(a) This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
(b) For the three months ended March 31, 1996, these items are anti-dilutive and
thus are omitted from the calculation.
<PAGE>
EXHIBIT 12
TANDY CORPORATION
STATEMENT OF COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
Three Months Ended
March 31,
-------------------------
(In millions, except ratios) 1997 1996
- - ---------------------------- ---------- ----------
Ratio of Earnings to Fixed Charges:
Net income $ 25.6 $ 14.5
Plus provision for income taxes 16.1 8.6
---------- ----------
Income before income taxes 41.7 23.1
---------- ----------
Fixed charges:
Interest expense and amortization of
debt discount 9.0 7.1
Amortization of issuance expense 0.1 0.1
Appropriate portion (33 1/3%) of rentals 19.3 19.9
---------- ----------
Total fixed charges 28.4 27.1
---------- ----------
Earnings before income taxes and
fixed charges $ 70.1 $ 50.2
========== ==========
Ratio of earnings to fixed charges 2.47 1.85
========== ==========
Ratio of Earnings to Fixed Charges and
Preferred Dividends:
Total fixed charges, as above $ 28.4 $ 27.1
Preferred dividends 1.6 1.6
--------- ----------
Total fixed charges and preferred dividends $ 30.0 $ 28.7
========= ==========
Earnings before income taxes, fixed
charges and preferred dividends $ 70.1 $ 50.2
========= ==========
Ratio of earnings to fixed charges and
preferred dividends 2.34 1.75
========= ==========
<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 first quarter report on Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Mar-31-1997
<CASH> 101,500
<SECURITIES> 21,000
<RECEIVABLES> 188,600
<ALLOWANCES> 8,300
<INVENTORY> 1,282,400
<CURRENT-ASSETS> 1,738,100
<PP&E> 1,050,600
<DEPRECIATION> 508,100
<TOTAL-ASSETS> 2,385,700
<CURRENT-LIABILITIES> 1,088,200
<BONDS> 104,200
0
100,000
<COMMON> 85,600
<OTHER-SE> 985,500
<TOTAL-LIABILITY-AND-EQUITY> 2,385,700
<SALES> 1,291,700
<TOTAL-REVENUES> 1,291,700
<CGS> 840,100
<TOTAL-COSTS> 840,100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,800
<INCOME-PRETAX> 41,700
<INCOME-TAX> (16,100)
<INCOME-CONTINUING> 25,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,600
<EPS-PRIMARY> .43
<EPS-DILUTED> .42
</TABLE>
