- --------------------------------------------------------------------------------
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, 1998
OR
- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____.
Commission File Number: 1-5571
------------------------
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) 415-3700
------------------------
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, 1998 was 101,274,961.
Index to Exhibits is on Sequential Page No. 17. Total pages 28.
- --------------------------------------------------------------------------------
<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) 1998 1997
- -------------------------------------- -------- --------
Net sales and operating revenues $1,258.3 $1,291.7
Cost of products sold 784.0 840.1
-------- --------
Gross profit 474.3 451.6
-------- --------
Expenses/(income):
Selling, general and administrative 379.6 379.5
Depreciation and amortization 25.8 23.6
Interest income (1.7) (2.2)
Interest expense 10.3 9.0
-------- --------
414.0 409.9
-------- --------
Income before income taxes 60.3 41.7
Provision for income taxes 23.2 16.1
-------- --------
Net income 37.1 25.6
Preferred dividends 1.5 1.6
-------- --------
Net income available to common shareholders $ 35.6 $ 24.0
======== ========
Net income available per common share:
Basic $ 0.35 $ 0.22
======== ========
Diluted $ 0.34 $ 0.21
======== ========
Shares used computing earnings per common share:
Basic 101.8 111.8
======== ========
Diluted 106.8 116.4
======== ========
Dividends declared per common share $ 0.10 $ 0.10
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
March 31, December 31, March 31,
1998 1997 1997
(In millions, except for share amounts) (Unaudited) (Unaudited)
- -------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 77.9 $ 105.9 $ 101.5
Accounts and notes receivable, less allowance for
doubtful accounts 223.1 251.3 180.3
Inventories, at lower of cost or market 1,182.1 1,205.2 1,282.4
Other current assets 142.2 153.1 173.9
-------- -------- --------
Total current assets 1,625.3 1,715.5 1,738.1
Property, plant and equipment, at cost, less
accumulated depreciation 523.9 521.9 542.5
Other assets, net of accumulated amortization 83.3 80.1 105.1
-------- -------- --------
$2,232.5 $2,317.5 $2,385.7
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities
of long-term debt $ 266.5 $ 299.5 $ 403.0
Accounts payable 287.7 325.2 316.7
Accrued expenses 238.5 273.1 291.6
Income taxes payable 63.9 78.6 76.9
-------- -------- --------
Total current liabilities 856.6 976.4 1,088.2
-------- -------- --------
Long-term debt, excluding current maturities 277.1 236.1 104.2
Other non-current liabilities 49.8 46.4 22.2
-------- -------- --------
Total other liabilities 326.9 282.5 126.4
-------- -------- --------
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, 80,000 shares outstanding 100.0 100.0 100.0
Common stock, $1 par value, 250,000,000 shares
authorized with 138,332,000, 138,332,000 and
85,645,000 shares issued, respectively 138.3 138.3 85.6
Additional paid-in capital 26.7 19.2 106.3
Retained earnings 1,701.9 1,676.3 2,202.4
Common stock in treasury, at cost, 36,812,000,
36,023,000 and 30,712,000 shares, respectively (881.6) (836.1) (1,273.7)
Unearned deferred compensation related to TESOP (34.8) (37.4) (44.9)
Accumulated other comprehensive income (1.5) (1.7) (4.6)
-------- -------- --------
Total stockholders' equity 1,049.0 1,058.6 1,171.1
Commitments and contingent liabilities
-------- -------- --------
$2,232.5 $2,317.5 $2,385.7
======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
(In millions) 1998 1997
----------- -------- --------
Cash flows from operating activities:
Net income $ 37.1 $ 25.6
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 25.8 23.8
Provision for credit losses and bad debts 1.6 0.9
Other items 5.0 0.2
Changes in operating assets and liabilities:
Receivables 28.0 31.3
Inventories 23.1 128.2
Other current assets 5.7 1.4
Accounts payable, accrued expenses and income taxes (86.9) (223.1)
-------- --------
Net cash provided (used) by operating activities 39.4 (11.7)
-------- --------
Investing activities:
Additions to property, plant and equipment (28.2) (22.7)
Proceeds from sale of property, plant and equipment 2.5 0.6
Other investing activities -- (2.3)
-------- --------
Net cash used by investing activities (25.7) (24.4)
-------- --------
Financing activities:
Purchase of treasury stock (59.0) (129.9)
Sales of treasury stock to employee stock
purchase program 12.5 12.5
Proceeds from exercise of stock options 8.5 2.4
Dividends paid, net of taxes (11.5) (12.5)
Changes in short-term borrowings, net (36.6) 143.7
Additions to long-term borrowings 44.8 --
Repayments of long-term borrowings (0.4) (0.1)
-------- --------
Net cash (used) provided by financing activities (41.7) 16.1
-------- --------
Decrease in cash and cash equivalents (28.0) (20.0)
Cash and cash equivalents, beginning of period 105.9 121.5
-------- --------
Cash and cash equivalents, end of period $ 77.9 $ 101.5
======== ========
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, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. 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") 1997 Annual Report on Form 10-K for the
year ended December 31, 1997.
NOTE 2 - STOCK SPLIT
On August 21, 1997, the Company's Board of Directors declared a two-for-one
split of Tandy common stock for stockholders of record at the close of business
on August 29, 1997, payable on September 22, 1997. This resulted in the issuance
of 52.7 million shares of common stock along with a corresponding decrease of
$52.7 million in additional paid-in capital. All references to the number of
shares of common stock issued or outstanding, per share prices, and income per
common share amounts in the consolidated financial statements, the accompanying
notes and management's discussion and analysis have been adjusted to reflect the
split on a retroactive basis.
NOTE 3 - EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("FAS 128"). FAS 128
established new 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 were exercised, converted, or resulted in
the issuance of common stock that would have then shared in the earnings of the
entity. EPS data for the three months ended March 31, 1997 presented herein has
been restated to conform with the provisions of this statement. The following
schedule is a reconciliation of the numerator and denominator used in the basic
and diluted EPS calculations for the three months ended March 31, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
---------------------------------- ----------------------------------
(Dollars and shares in millions, Income Shares Per Share Income Shares Per Share
except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 37.1 $ 25.6
Less: Preferred stock dividends (1.5) (1.6)
-------- --------
Basic EPS
Net income available to common
shareholders 35.6 101.8 $ 0.35 24.0 111.8 $ 0.22
======== ========
Effect of dilutive securities:
Plus dividends on Series B
preferred stock 1.5 1.6
Additional contribution required
for TESOP if preferred stock
had been converted (1.0) 3.5 (1.0) 3.6
Stock options 1.5 1.0
-------- -------- -------- --------
Diluted EPS
Net income available to common
shareholders plus assumed
conversions $ 36.1 106.8 $ 0.34 $ 24.6 116.4 $ 0.21
======== ======== ======== ======== ======== ========
</TABLE>
NOTE 4 - COMPUTER CITY STRATEGY
On June 26, 1997, the Company organized a new subsidiary, Computer City,
Inc. ("CCI" or "Computer City"), and thereafter conveyed to it certain related
assets and liabilities of the Company's Computer City division. On July 17,
1997, Eureka Venture Partners III LLP, a Texas limited liability partnership
("Eureka") entered into a Stock Purchase Agreement with the Company (the "Stock
Purchase Agreement") to acquire 19.9% of the outstanding common stock of CCI for
a total purchase price of $24.9 million, payable in cash (1% of the purchase
price) and a note (99% of the purchase price) issued by Eureka. The note is
secured only by the common shares of CCI held by Eureka. Accordingly, this
transaction has not been recognized as a sale for accounting purposes and Tandy
continues to consolidate 100% of CCI's results of operations. The note bears
interest at 8% per annum and is payable on or before July 17, 2002. Eureka, on
July 17, 1997, also acquired a warrant to purchase an additional 20.1% of the
outstanding common stock of CCI for $31.4 million payable in cash (at least 10%
of the purchase price) and a note (not more than 90% of the purchase price)
issued by Eureka. This warrant is exercisable upon either the attainment of
certain financial performance goals by CCI or upon the date CCI is established
as an independent entity as defined pursuant to the Stock Purchase Agreement.
Eureka has the option to require the Company to repurchase all shares owned
by Eureka and the warrant, in the event that it is exercisable but unexercised,
upon payment of certain amounts as provided in the Stock Purchase Agreement, if
certain financial performance goals are met by CCI and the CCI Board of
Directors does not approve the establishment of CCI as an independent entity by
means of one or more transactions. Additionally, prior to CCI being established
as an independent entity, the Company has the right to reacquire all of the
shares of CCI owned by Eureka and the warrant, in the event that it is
exercisable but unexercised, upon payment of certain amounts, as determined by
defined formulas pursuant to the Stock Purchase Agreement.
See Note 7 for Computer City's net sales and operating revenues and
operating profit (loss) for the first quarters of the current and prior years.
NOTE 5 - RESTRUCTURING RESERVES
In 1996, Tandy initiated certain restructuring programs affecting its
Incredible Universe and Computer City stores and its remaining McDuff store
operations. These restructuring programs were undertaken as a result of the
highly competitive environment in the electronics industry. See the Company's
1997 Annual Report for a discussion of the 1996 restructuring reserve
transactions.
The McDuff and Computer City stores affected by the 1996 restructuring plan
were all closed by the end of the first quarter of 1997. At March 31, 1998,
three Incredible Universe locations remained. The lease on one of these
locations was terminated in April 1998 and another was sold in May 1998. Based
on negotiations currently in process, management anticipates that the last
Incredible Universe location will be disposed of in the near future. However,
there can be no assurance that the final planned disposal will occur.
Net 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:
Three Months Ended March 31,
----------------------------
(In millions) 1998 1997
- ------------- -------- --------
Net sales and operating revenues $ 0.1 $128.7
Operating loss -- (14.7)
Although no additional material provisions are expected in 1998 relating to
the 1996 restructuring, unexpected delays in the final disposition of the
remaining property and leases, among other factors, could result in additional
charges.
The following schedule is an analysis of the amounts charged against the
reserve during the three months ended March 31, 1998. Real estate obligations
shown below primarily represent estimated amounts to be incurred in terminating
remaining leases.
Charges
Balance Additional 1/1/98 - Balance
(In millions) 12/31/97 Reserves 3/31/98 3/31/98
- ------------ -------- -------- -------- --------
Real estate obligations 27.0 -- (5.2) $ 21.8
Other 1.6 -- (0.1) 1.5
-------- -------- -------- --------
28.6 -- (5.3) $ 23.3
======== ======== ======== ========
<PAGE>
NOTE 6 - COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS 130").
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. Comprehensive income for the three months ended March 31, 1998 and 1997
was $37.2 million and $24.4 million, respectively.
NOTE 7 - SEGMENT DISCLOSURES
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). The table below summarizes net sales and
operating revenues, operating profit and assets for the Company's reportable
segments. Consolidated operating profit is reconciled to the Company's income
before income taxes.
Three Months Ended March 31,
----------------------------
(In millions) 1998 1997
- ------------- -------- --------
Net sales and operating revenues:
RadioShack $ 778.5 $ 688.2
Computer City 479.7 474.8
Closed units - restructuring 0.1 128.7
-------- --------
$1,258.3 $1,291.7
======== ========
Operating profit:
RadioShack $ 84.7 $ 62.4
Computer City (9.8) 3.5
Closed units - restructuring -- (14.7)
Corporate administration and other (6.0) (2.7)
-------- --------
68.9 48.5
Interest income 1.7 2.2
Interest expense (10.3) (9.0)
-------- --------
Income before income taxes $ 60.3 $ 41.7
======== ========
Assets:
RadioShack $1,315.9 $1,214.8
Computer City 493.5 550.3
Closed units - restructuring -- 28.8
Corporate administration and other 423.1 591.8
-------- --------
$2,232.5 $2,385.7
======== ========
<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
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 personal computer and 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 including, without
limitation, real estate market fluctuations, interest rate fluctuations,
dependence on manufacturers' product development and changes in tax rules and
regulations applicable to the Company.
The regulatory and trade environment in which the Company operates is
subject to risk and uncertainty. As a large importer of consumer electronic
products from Asia, unfavorable trade imbalances or the failure of Congress to
approve a "Most Favored Nations" status to The People's Republic of China could
negatively affect the Company. As a result of the Telecommunications Act of
1996, the deregulated telecommunications market will continue to present both
opportunities and increased competition for the provision of telecommunication
equipment and service to consumers.
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.
Segment Reporting Disclosures
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). All references to RadioShack and Computer City
in management's discussion and analysis refer to the Company's reportable
segments, unless otherwise noted.
The RadioShack segment includes the RadioShack retail division and its
related retail support operations. The Computer City segment includes Computer
City, Inc. ("CCI" or "Computer City"), which is comprised of the North American
operations, and, in the prior year information, the five Computer City Europe
stores sold by the Company in the fourth quarter of 1997. The closed units
segment includes all Tandy stores and non-retail units which were part of the
store closure plan announced in December 1996. The corporate administration
segment includes corporate units which serve all areas of the Company and, also,
income (expense) which is not allocated to the RadioShack and Computer City
segments.
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) 1998 1997 (Decrease)
- ------------- -------- -------- ---------
RadioShack $ 778.5 $ 688.2 13.1%
Computer City 479.7 474.8 1.0
-------- --------
Retail segments 1,258.2 1,163.0 8.2
Closed units - restructuring 0.1 128.7 (99.9)
-------- --------
$1,258.3 $1,291.7 (2.6)%
======== ========
Retail segments generated an 8.2% sales gain for the three month period
ended March 31, 1998. The Company's overall comparable store sales for U.S. and
Canadian retail operations increased 6.6% over the first quarter of 1997.
RadioShack's overall sales increased 13.1% during the first quarter of 1998,
while comparable retail store sales increased 11.2%, compared to the first
quarter of 1997. Sales increases were particularly strong in the
telecommunications and personal computer categories. Sales of all
telecommunications products were up more than 25% during this quarter, compared
to the quarter ended March 31, 1997. Sales of cellular telephones represented
approximately two-thirds of total wireless revenue for this three month period.
In addition, approximately 3,500 company-owned stores were selling PCS hardware
and services at March 31, 1998, compared to 1,300 stores at March 31, 1997.
Sales of residential telephone products increased approximately 25% over the
first quarter of 1997, driven by increased assortments and the introduction of
the Sprint Store at RadioShack in September 1997.
Computer sales were up over 25% in dollars and up over 85% in number of
units, due to aggressive pricing strategies put into place as RadioShack
transitioned from IBM to Compaq branded computer products. Of RadioShack's major
product categories, only the audio/video category had a slight sales decrease
for the quarter ended March 31, 1998.
Overall sales for the Computer City segment increased 1.0% during the first
quarter of 1998. However, excluding the five Computer City Europe stores sold in
the fourth quarter of 1997, Computer City's overall sales increased 6.1% over
the prior year first quarter, primarily due to the opening of eight new stores
since March 31, 1997. Retail merchandise sales accounted for the majority of the
overall sales increase for the quarter, with increased sales in the software,
printers, and accessory and supplies categories. Sales in the computer CPU
category, however, decreased in both dollars and as a percent of sales, compared
to the prior year first quarter, as the average CPU price decreased. Comparable
U.S. and Canadian store sales were flat for the quarter, compared to the three
months ended March 31, 1997. Computer City plans to open approximately five
additional stores in the second quarter.
RETAIL OUTLETS
March 31, December 31, March 31, December 31,
1998 1997 1997 1996
- --------------------------------------------------------------------------------
RadioShack
Company-Owned 4,978 4,972 4,875 4,942(1)
Dealer/Franchise 1,946 1,934 1,919 1,927
-------- -------- -------- --------
6,924 6,906 6,794 6,869
Computer City 96 96 93 113(2)
Incredible Universe (3) -- -- 6 17
-------- -------- -------- --------
Total Number of Retail Outlets 7,020 7,002 6,893 6,999
======== ======== ======== ========
(1)Includes 53 McDuff stores that were part of the store closure plan announced
in December 1996.
(2)Includes 21 stores that were part of the store closure plan announced in
December 1996.
(3)Incredible Universe division ceased operations in 1997.
Gross Profit
Gross profit for the Company as a percent of net sales and operating
revenues was 37.7% during the three months ended March 31, 1998, compared to
35.0% during the corresponding 1997 period. This increase in the gross profit
percentage is the result of the closing of Incredible Universe and other units
pursuant to the 1996 restructuring; these units operated at lower gross margins
than Tandy as a whole. Closed units accounted for 10.0% of Tandy's consolidated
sales during the three months ended March 31, 1997. Excluding closed units, the
gross profit percent of sales for the first quarter of 1997 would have
approximated 37.4%.
RadioShack's gross margin decreased approximately 1.0 percentage point in
the first quarter of 1998, compared to the first quarter of 1997. This decrease
was due to increases in computer and telecommunications products sales, both of
which have lower gross margins than the overall RadioShack average. RadioShack
also experienced a large increase during the quarter in the sale of prepaid
wireless airtime, which has a significantly lower gross margin than RadioShack's
core categories. All other major RadioShack categories had increases in gross
margin dollars.
Computer City's gross profit as a percent of sales decreased 0.3 percentage
points for the three months ended March 31, 1998, compared to the 1997 quarter,
although gross profit increased in dollars during this time period. The
increased utilization of mail in rebates contributed to gross profit decreases
in both dollars and as a percent of sales in the computer, peripherals and
software categories. In addition, gross profits for technical services were down
in both dollars and as a percent of sales for the quarter, compared to the three
months ended March 31, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expense as a percent of net
sales and operating revenues for the first quarter of 1998 was 30.2%, compared
to 29.4% during the first quarter of 1997. This 0.8 percentage point increase is
primarily the result of the closing of Incredible Universe and other units
pursuant to the 1996 restructuring; these units had a lower SG&A expense level
than Tandy as a whole. Closed units accounted for 10.0% of Tandy's consolidated
sales during the three months ended March 31, 1997. Excluding closed units,
Tandy's SG&A expense as a percent of sales would have been 30.0% for the quarter
ended March 31, 1997. The Company's SG&A expense as a percent of sales was also
affected by a 2.2 percentage point increase in Computer City's SG&A percentage
from transitional costs and duplication of overhead expenses, as CCI continues
to build the infrastructure necessary to move toward independence from Tandy.
Consolidated Company advertising and rent expenses were down in both dollars and
as a percent of sales, while payroll expenses were slightly up for the quarter
ended March 31, 1998.
RadioShack's SG&A expense as percent of sales decreased 2.9 percentage
points when compared to the first 1997 quarter, due in part to lower advertising
costs. In addition, significant increases in comparable stores sales contributed
to the decrease in RadioShack's SG&A expense as a percent of sales. Computer
City's higher SG&A expense as a percent of sales this quarter is primarily
attributable to higher payroll costs associated with the new infrastructure
expenses described above and, also, to higher advertising costs.
Provision for Business Restructuring
In 1996, Tandy initiated certain restructuring programs affecting its
Incredible Universe and Computer City stores and its remaining McDuff store
operations. These restructuring programs were undertaken as a result of the
highly competitive environment in the electronics industry. See the Company's
1997 Annual Report for a discussion of the 1996 restructuring reserve
transactions.
The McDuff and Computer City stores affected by the 1996 restructuring plan
were all closed by the end of the first quarter of 1997. At March 31, 1998,
three Incredible Universe locations remained. The lease on one of these
locations was terminated in April 1998 and another was sold in May 1998. Based
on negotiations currently in process, management anticipates that the last
Incredible Universe location will be disposed of in the near future. However,
there can be no assurance that the final planned disposal will occur.
Net 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:
Three Months Ended March 31,
----------------------------
(In millions) 1998 1997
- ------------- -------- --------
Net sales and operating revenues $ 0.1 $ 128.7
Operating loss -- (14.7)
Although no additional material provisions are expected in 1998 relating to
the 1996 restructuring, unexpected delays in the final disposition of the
remaining property and leases, among other factors, could result in additional
charges.
The following schedule is an analysis of the amounts charged against the
reserve during the three months ended March 31, 1998. Real estate obligations
shown below primarily represent estimated amounts to be incurred in terminating
remaining leases.
Charges
Balance Additional 1/1/98- Balance
(In millions) 12/31/97 Reserves 3/31/98 3/31/98
- ------------ -------- -------- -------- --------
Real estate obligations 27.0 -- (5.2) $ 21.8
Other 1.6 -- (0.1) 1.5
-------- -------- -------- --------
28.6 -- (5.3) $ 23.3
======== ======== ======== ========
Net Interest Expense
Net interest expense for the quarter ended March 31, 1998 was $8.6 million,
an increase of $1.8 million from $6.8 million in the first quarter of 1997. This
net increase in expense is the result of several factors. First, the Company's
average debt outstanding for the quarter ended March 31, 1998 was approximately
$42.1 million higher than the average debt outstanding for the quarter ended
March 31, 1997. Secondly, the Company has refinanced a portion of its short-term
indebtedness by issuing $199.0 million of medium and long-term unsecured notes
since March 31, 1997. These longer term notes bear slightly higher interest
rates than the short-term financing used by the Company during the three months
ended March 31, 1997. Also, principal reductions in interest-bearing notes
receivable have resulted in a decline in interest income. Net interest expense
is expected to increase moderately during 1998.
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 rate was 38.5% for the first quarters
of both 1998 and 1997.
Restricted Stock Awards
The Company granted, under the 1993 Incentive Stock Plan on February 1,
1997, an aggregate of approximately 2,041,200 restricted stock awards of 400
shares each to 4,907 RadioShack store managers and 800 shares each to 98
Computer City store managers. The restricted stock awards had a weighted average
fair value of $22.59 per share when granted. Vesting of the restricted stock
occurs at the earlier of the following: (1) if managers are employed as a store
manager or higher position by the Company after February 1, 1999 and the Company
common stock closes at $33 13/16 or more for 20 consecutive trading days, 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. Compensation expense, equal to the fair
market value of the shares upon vesting, will be recognized when it becomes
probable that the performance criteria will be met or upon actual vesting. As of
March 31, 1998, there were 1,470,600 stock awards outstanding and eligible for
ultimate vesting pursuant to this restricted stock award.
Computer City Strategy
On June 26, 1997, the Company organized a new subsidiary, Computer City,
Inc. ("CCI" or "Computer City"), and thereafter conveyed to it certain related
assets and liabilities of the Company's Computer City division. On July 17,
1997, Eureka Venture Partners III LLP, a Texas limited liability partnership
("Eureka") entered into a Stock Purchase Agreement with the Company (the "Stock
Purchase Agreement") to acquire 19.9% of the outstanding common stock of CCI for
a total purchase price of $24.9 million, payable in cash (1% of the purchase
price) and a note (99% of the purchase price) issued by Eureka. The note is
secured only by the common shares of CCI held by Eureka. Accordingly, this
transaction has not been recognized as a sale for accounting purposes and Tandy
continues to consolidate 100% of CCI's results of operations. The note bears
interest at 8% per annum and is payable on or before July 17, 2002. Eureka, on
July 17, 1997, also acquired a warrant to purchase an additional 20.1% of the
outstanding common stock of CCI for $31.4 million payable in cash (at least 10%
of the purchase price) and a note (not more than 90% of the purchase price)
issued by Eureka. This warrant is exercisable upon either the attainment of
certain financial performance goals by CCI or upon the date CCI is established
as an independent entity as defined pursuant to the Stock Purchase Agreement.
Eureka has the option to require the Company to repurchase all shares owned
by Eureka and the warrant, in the event that it is exercisable but unexercised,
upon payment of certain amounts as provided in the Stock Purchase Agreement, if
certain financial performance goals are met by CCI and the CCI Board of
Directors does not approve the establishment of CCI as an independent entity by
means of one or more transactions. Additionally, prior to CCI being established
as an independent entity, the Company has the right to reacquire all of the
shares of CCI owned by Eureka and the warrant, in the event that it is
exercisable but unexercised, upon payment of certain amounts, as determined by
defined formulas pursuant to the Stock Purchase Agreement.
As of May 8, 1998, CCI is working with investment banks to raise private
investments of approximately $50 million. Capital raised as a result of this
process would be used primarily for capital expenditures. CCI and the investment
banks are in the process of meeting with potential investors. There can be no
assurance, however, that CCI will be able to raise any such capital or that
independent status will occur.
See Segment Data by Business Unit for Computer City's net sales and
operating revenues and operating profit (loss) for the first quarters of the
current and prior years. The new management team at CCI has taken and will
continue to take certain actions planned to increase revenues and achieve
profitability. These plans include increasing service revenues which typically
have a higher gross margin than merchandise sales, increasing direct sales to
corporations, government and education customers, and creating a build-to-order
program which allows customers to order custom-configured personal computers.
Management of CCI believes that these actions could result in improved operating
performance; however, there can be no assurance that increased sales and
profitability will be achieved. Should these actions fail to increase sales and
achieve operating profit, CCI management may be required to close additional
stores, sell certain assets or take other measures deemed necessary to achieve
improved operating performance.
Cash Flow and Financial Condition
Cash flow provided by operating activities approximated $39.4 million in the
three month period ended March 31, 1998, compared to cash used by operating
activities of $11.7 million in the prior year first quarter. This change relates
primarily to shifts among working capital components. Inventory cash flows were
generated during the first quarter of 1998 by a RadioShack inventory decrease of
$53.5 million, which was partially offset by a $30.4 million increase in
Computer City inventory. In the first quarter of 1997, inventory generated
$128.2 million in cash flows, primarily from the liquidation of closed store
inventories. Decreases in accounts payable and accrued expenses in the three
months ended March 31, 1998, accounted for $74.7 million of the $86.9 million
decrease in operating cash flows, while decreases in these accounts and the
restructuring reserve were responsible for a $223.1 million decrease in
operating cash flows for the three months ended March 31, 1997.
Investing activities for the quarter ended March 31, 1998 included capital
expenditures totaling $28.2 million, primarily for retail expansion, upgrade of
information systems and Computer City infrastructure enhancements. Management
anticipates that capital expenditure requirements, excluding Computer City, will
approximate $75.0 to $85.0 million for the remainder of 1998, primarily to
support RadioShack future store expansions and refurbishments and to update
additional information systems. CCI's first quarter capital expenditures
included a store telephone upgrade, retail expansion and remodels, and
information system enhancements. CCI management anticipates that capital
expenditure requirements for the remainder of 1998 will approximate $45.0 to
$55.0 million, related primarily to information systems, new store openings and
store remodels. The CCI capital expenditures are planned to be primarily funded
by existing bank lines or new capital.
Cash used by financing activities for the three month period ended March 31,
1998 includes the addition of $44.8 million of long-term debt, which is
offset by a decrease in short-term debt of $36.6 million and purchases of
treasury stock of $59.0 million. 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 cash equivalents at March 31, 1998 were $77.9 million, compared to
$105.9 million at December 31, 1997 and $101.5 million at March 31, 1997. Total
debt as a percentage of total capitalization was 34.1% at March 31, 1998,
compared to 33.6% at December 31, 1997 and 30.2% at March 31, 1997. Long-term
debt as a percentage of total capitalization was 17.4% at March 31, 1998,
compared to 14.8% at December 31, 1997 and 6.2% at March 31, 1997.
The Company's credit facility totals $500 million, $200 million of which is
a one-year facility maturing June 1998, with the remaining $300 million in a
five-year facility maturing June 2001. The Company expects to extend the
maturity date of the one-year facility to June 1999. The revolving credit
facility is used as a backup for the commercial paper program and may also be
utilized for general corporate purposes.
On March 3, 1997, the Company announced that its Board of Directors had
authorized management to purchase up to 10.0 million additional shares of its
common stock through the Company's existing share repurchase program. The share
repurchase program was initially authorized in December 1995 and increased in
October 1996. The share increase brings the total authorization to 30.0 million
shares of which approximately 22.0 million shares, totaling $568.9 million, had
been purchased as of March 31, 1998. During the quarter ended March 31, 1998,
the Company repurchased approximately 1.0 million shares for $39.7 million under
the program. These purchases are in addition to the shares required for employee
plans, which are purchased throughout the year.
On March 3, 1997, the Company's Board of Directors authorized the filing of
a $300.0 million Debt Shelf Registration Statement (the "Registration
Statement') with the Securities and Exchange Commission ("S.E.C."). On August
19, 1997, the Company issued $150.0 million of 10 year unsecured senior notes
under the Registration Statement, which was effective August 6, 1997. The
interest rate on the notes is 6.95% per annum with interest payable on September
1 and March 1 of each year, commencing on March 1, 1998. The notes are due
September 1, 2007.
In December 1997, the Company issued $4.0 million in medium-term notes under
the remaining $150.0 million of the Registration Statement. An additional $45.0
million in medium-term notes were issued in January 1998. Tandy's medium and
long-term notes outstanding at March 31, 1998 under the 1991 and 1997 shelf
registrations totaled $225.0 million compared to $54.5 million at March 31,
1997.
Inventory
Total inventories at March 31, 1998 decreased $23.1 million or 1.9%,
compared to December 31, 1997, and $100.3 million or 7.8%, compared to the March
31, 1997 level. These decreases in total inventory levels since the first
quarter of 1997 are primarily attributable to reductions from 1996 restructuring
actions, offset by RadioShack inventory increases from store expansions and
increased telephony inventory. The decrease in inventory since year end is
partially due to a $53.5 million reduction at RadioShack because of strong sales
overall and the liquidation of computer inventory during the first quarter. This
decrease is partially offset by a $30.4 million increase in inventory since
December 31, 1997 at Computer City due to a seasonal buildup following increased
sales at year end. Inventory is primarily comprised of finished goods.
Changes in Stockholders' Equity
Outstanding
(In millions) Common Shares Dollars
- ------------ ------------- -------------
Balance at December 31, 1997 102.3 $ 1,058.6
Foreign currency translation adjustments,
net of deferred taxes -- 0.3
Sale of treasury stock to Tandy Stock Plan 0.3 12.5
Purchase of treasury stock (1.6) (62.7)
Exercise of stock options and grant of
stock awards 0.5 12.9
Repurchase of preferred stock -- (0.7)
Preferred stock dividends, net of tax -- (1.0)
TESOP deferred compensation earned -- 2.5
Common stock dividends declared -- (10.5)
Net income -- 37.1
-------- --------
Balance at March 31, 1998 101.5 $1,049.0
======== ========
Segment Data by Business Unit
Effective January 1, 1998, the Company adopted FAS 131. The table below
summarizes net sales and operating revenues, operating profit and assets for the
Company's reportable segments. Consolidated operating profit is reconciled to
the Company's income before income taxes.
Three Months Ended March 31,
----------------------------
(In millions) 1998 1997
- ------------- -------- --------
Net sales and operating revenues:
RadioShack $ 778.5 $ 688.2
Computer City 479.7 474.8
Closed units - restructuring 0.1 128.7
-------- --------
$1,258.3 $1,291.7
======== ========
Operating profit:
RadioShack $ 84.7 $ 62.4
Computer City (9.8) 3.5
Closed units - restructuring -- (14.7)
Corporate administration and other (6.0) (2.7)
-------- --------
68.9 48.5
Interest income 1.7 2.2
Interest expense (10.3) (9.0)
-------- --------
Income before income taxes $ 60.3 $ 41.7
======== ========
Assets:
RadioShack $1,315.9 $1,214.8
Computer City 493.5 550.3
Closed units - restructuring -- 28.8
Corporate administration and other 423.1 591.8
-------- --------
$2,232.5 $2,385.7
======== ========
See Segment Reporting Disclosures above for discussion of components for
each reportable segment. The Company's accounting policy treatment is consistent
among reportable segments.
<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, 1998. 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 and its
telephone number have changed to 100 Throckmorton Street, Suite 1800, Fort
Worth, Texas 76102 and (817) 415-3700, respectively.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Required by Item 601 of Regulation S-K.
A list of the exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Index to Exhibits on
page 17, which immediately precedes such exhibits.
b) Reports on Form 8-K.
1) On January 28, 1998, the Company announced that its RadioShack
division and Compaq Computer Corporation had signed a Letter of
Intent to sell Compaq computer products through RadioShack retail
sites. The Form 8-K was filed on February 2, 1998.
2) On April 6, 1998, the Company announced that John V. Roach,
Chairman and Chief Executive Officer, would step down as Chief
Executive Officer at the end of 1998. The Form 8-K was filed on
April 7, 1998.
<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 13, 1998 By /s/ Richard L. Ramsey
------------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: May 13, 1998 /s/ Dwain H. Hughes
------------------------------
Dwain H. Hughes
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
TANDY CORPORATION
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page No.
2a Agreement for Purchase and Sale of Assets dated as of June 30,
1993 between AST Research, Inc., as Purchaser and Tandy
Corporation, TE Electronics Inc., and GRiD Systems Corporation,
as Sellers (without exhibits) (filed as Exhibit 2 to Tandy's July
13, 1993 Form 8-K filed on July 27, 1993, Accession No.
0000096289-93-000004 and incorporated herein by reference).
2b Amended and Restated Stock Exchange Agreement dated February 1,
1994 by and among O'Sullivan Industries Holdings, Inc., and TE
Electronics Inc. (filed as Exhibit 2b to Tandy's Form 10-K filed
on March 30, 1994, Accession No. 0000096289-94-000029 and
incorporated herein by reference).
2c U.S. Purchase Agreement dated January 26, 1994 by and among
O'Sullivan Industries Holdings, Inc., TE Electronics Inc. and the
U.S. Underwriters which included Merrill Lynch & Co., Wheat First
Butcher & Singer, The Chicago Dearborn Company and Rauscher
Pierce Refsnes, Inc. (filed as Exhibit 2c to Tandy's Form 10-K
filed on March 30, 1994, Accession No. 0000096289-94-000029 and
incorporated herein by reference).
2d International Purchase Agreement dated January 26, 1994 by and
among O'Sullivan Industries Holdings, Inc., TE Electronics Inc.
and the U.S. Underwriters which included Merrill Lynch
International Limited and UBS Limited (filed as Exhibit 2d to
Tandy's Form 10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein by reference).
2e Acquisition Agreement dated January 18, 1995 between Hurley State
Bank, as purchaser and Tandy Credit Corporation as seller
(without exhibits) (filed as Exhibit (c) to Tandy's January 18,
1995 Form 8-K filed on February 2, 1995, Accession No.
0000096289-95-000008 and incorporated herein by reference).
2e(i) Amendment No. 1 to Acquisition Agreement dated January 18, 1995
between Tandy Credit Corporation, Tandy National Bank and Hurley
State Bank (filed as Exhibit 2 to Tandy's March 30, 1995 Form 8-K
filed on April 12, 1995, Accession No. 0000096289-95-000012 and
incorporated herein by reference).
2f Agreement Plan of Merger dated March 30, 1995 by and among Tandy
Corporation, Tandy Credit Corporation, Hurley State Bank and
Hurley Receivables Corporation (filed as Exhibit 3 to Tandy's
March 30, 1995 Form 8-K filed on April 12, 1995, Accession No.
0000096289-95-000012 and incorporated herein by reference).
2g Stock Purchase Agreement as of July 17, 1997 by and among Tandy
Corporation as Seller, EVP Colonial, Inc. as Company and Eureka
Venture Partners III LLP as Purchaser (without exhibits), (filed
as Exhibit 2g to Tandy's Form 10-Q filed on August 8, 1997,
Accession No. 0000096289-97-000023 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).
4j Fifth Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen other
banks, dated as of June 26, 1997 (Facility A), (filed as Exhibit
4j to Tandy's Form 10-Q filed on August 8, 1997, Accession No.
0000096289-97-000023 and incorporated herein by reference).
4k Fourth Amendment to the Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank as Agent for eighteen other
banks, dated as of June 26, 1997 (Facility B), (filed as Exhibit
4k to Tandy's Form 10-Q filed on August 8, 1997, Accession No.
0000096289-97-000023 and incorporated herein by reference).
4l Credit Agreement between Trans World Electronics, Inc. (a
wholly-owned subsidiary of the Company) and Texas Commerce Bank
individually and as agent for four other banks dated as of July
15, 1997 (without exhibits), (filed as Exhibit 4l to Tandy's Form
10-Q filed on August 8, 1997, Accession No. 0000096289-97-000023
and incorporated herein by reference).
4m Guaranty Agreement made by Tandy Corporation in favor of Texas
Commerce Bank as agent for the benefit of Texas Commerce Bank and
four other banks named therein, dated July 15, 1997, (filed as
Exhibit 4m to Tandy's Form 10-Q filed on August 8, 1997,
Accession No. 0000096289-97-000023 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).
10q* Tandy Corporation 1997 Incentive Stock Plan, (filed as Exhibit
10q to Tandy's Form 10-Q filed on August 8, 1997, Accession No.
0000096289-97-000023 and incorporated herein by reference).
10r* Management Agreement, dated July 17, 1997, by and among Eureka
Venture Partners, III LLP, EVP Colonial, Inc., Nathan Morton,
Avery More and Robert Boutin, (filed as Exhibit 10r to Tandy's
Form 10-Q filed on August 8, 1997, Accession No.
0000096289-97-000023 and incorporated herein by reference).
10s* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation, (filed as
Exhibit 10s to Tandy's Form 10-K filed on March 26, 1998,
Accession No. 0000096289-98-000017 and incorporated herein by
reference).
10t* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation, (filed as
Exhibit 10t to Tandy's Form 10-K filed on March 26, 1998,
Accession No. 0000096289-98-000017 and incorporated herein by
reference).
10u* Form of December 1997 Deferred Salary and Bonus Agreement (Stock
Investment) with selected Executive Employees of Tandy
Corporation, (filed as Exhibit 10u to Tandy's Form 10-K filed on
March 26, 1998, Accession No. 0000096289-98-000017 and
incorporated herein by reference).
10v* Form of December 1997 Salary and Bonus Agreement with selected
Executive Employees of Tandy Corporation, (filed as Exhibit 10v
to Tandy's Form 10-K filed on March 26, 1998, Accession No.
0000096289-98-000017 and incorporated herein by reference).
10w* Tandy Corporation Executive Deferred Compensation Plan, effective
April 1, 1998, (filed as Exhibit 10w to Tandy's Form 10-K filed
on March 26, 1998, Accession No. 0000096289-98-000017 and
incorporated herein by reference).
10x* Tandy Corporation Executive Deferred Stock Plan, effective April
1, 1998, (filed as Exhibit 10x to Tandy's Form 10-K filed on
March 26, 1998, Accession No. 0000096289-98-000017 and
incorporated herein by reference).
10y* Tandy Corporation Unfunded Deferred Compensation Plan for
Directors as amended and restated January 1, 1998, (filed as
Exhibit 10y to Tandy's Form 10-K filed on March 26, 1998,
Accession No. 0000096289-98-000017 and incorporated herein by
reference).
10z* Form of September 30, 1997 Deferred Compensation Agreement
between Tandy Corporation and John V. Roach. 22
10aa* Form of September 30, 1997 Deferred Compensation Agreement
between Tandy Corporation and Leonard H. Roberts. 25
11 Statement of Computation of Ratios of Earnings to Fixed
Charges. 27
27 Financial Data Schedule.
- -----------------------
* Each of these exhibits is a "management contract or compensatory plan,
contract, or arrangement".
<PAGE>
Exhibit 10z
DEFERRED COMPENSATION AGREEMENT
BETWEEN
TANDY CORPORATION AND
-------------------------
THIS AGREEMENT made this 30th day of September, 1997, by and between Tandy
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware, with its principal place of business at Fort Worth, Tarrant
County, Texas ("Tandy") and ________________, a resident of the State of Texas
("Executive").
WITNESSETH:
THAT WHEREAS, Executive is the ___________________ of Tandy and receives certain
compensation from Tandy;
WHEREAS, Executive desires to defer the receipt of a portion of his
compensation; and
WHEREAS, Tandy agrees to defer the payment of a portion of certain compensation
of the Executive:
NOW, THEREFORE, in consideration of the premises and of the promises and
covenants hereinafter contained and for the purposes herein stated, the parties
hereto do hereby agree as follows:
Deferral of Compensation. Executive hereby agrees to defer the receipt of the
following cash compensation, subject to the terms and conditions of this
Agreement:
1. Executive's Biweekly Net Salary to be paid from October 1, 1997 through
December 31, 1997. "Biweekly Net Salary" shall mean the Executive's gross
biweekly salary less ________ for each biweekly payroll period.
2. Executive's Net Bonus (if any) to be paid at the end of January 1998. "Net
Bonus" shall mean the Executive's bonus which, if earned and due, would
otherwise be paid in January 1998 less ________.
Deferred Compensation Account.
1. Tandy shall establish a book reserve (the "Deferred Compensation Account").
2. Tandy shall credit to the Deferred Compensation Account:
a. On the Thursday following each pay period end, from the date hereof
through December 31, 1997, the applicable Biweekly Net Salary, plus
an amount equal to 12% of the applicable Biweekly Net Salary (the
"Salary Matching Contribution"); and
b. On the last day of January 1998, the Net Bonus, if any, plus an
amount equal to 12% of the Net Bonus (the "Bonus Matching
Contribution").
Investment of Deferred Compensation Account.
1. Tandy shall invest an amount of its assets equal to the value of the
Deferred Compensation Account in such mutual funds, stocks, bonds,
securities, or other investments as may be selected by the Executive in
his sole discretion. Notwithstanding the above, the Salary Matching
Contribution and the Bonus Matching Contribution shall remain invested in
Tandy common stock for the duration of this Agreement.
2. Any earnings, gains, or losses (realized or unrealized) associated with
the investment of such assets shall be credited to the Deferred
Compensation Account.
3. Executive agrees on behalf of himself and his beneficiary to assume all
risk in connection with any decrease in the value of the assets associated
with the Deferred Compensation Account.
4. Executive and his beneficiary shall have no property interest whatsoever
in any specific assets of Tandy.
Payment of Deferred Compensation.
1. Except as otherwise provided herein, Tandy shall pay to Executive in a
single sum the amount credited to the Deferred Compensation Account on
January 2, 2004.
Executive may, on or before December 31, 2002, elect, in writing, to
receive the amount credited to the Deferred Compensation Account in more
than one annual installment, provided that payment of benefits does not
begin prior to January 2, 2004. After Executive dies, any amount remaining
in the Deferred Compensation Account shall be paid in a single sum to his
beneficiary.
2. Any time prior to January 2, 2004, Executive may elect to receive in a
single sum 94% of the Deferred Compensation Account. Upon receipt of this
amount, Executive shall forfeit the remaining 6% of the Deferred
Compensation Account.
Beneficiary. The beneficiary under this Agreement shall be Executive's spouse.
If Executive's spouse predeceases Executive, then the beneficiary under this
Agreement shall be Executive's estate. Executive may change the beneficiary
under this Agreement by notifying Tandy's general counsel in writing.
Funding.
1. Nothing contained in this Agreement and no action taken pursuant to the
provisions of this Agreement shall create or be construed to create a
trust of any kind, or a fiduciary relationship between Tandy and
Executive, his beneficiary or any other person. Any funds which may be
invested under the provisions of this Agreement shall continue for all
purposes to be a part of the general assets of Tandy and no person other
than Tandy shall by virtue of the provisions of this Agreement have any
interest in such funds. To the extent that any person acquires a right to
receive payments from Tandy under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of Tandy.
2. Notwithstanding the above, Executive in his sole discretion may require
that Tandy create a grantor trust (commonly referred to as a rabbi trust).
If a grantor trust is created, Tandy shall deposit the assets earmarked
for the Deferred Compensation Account into the trust. The assets of the
grantor trust shall be subject solely to the bankruptcy or insolvency
creditors of Tandy.
Assignment or Alienation of Benefits. The right of Executive or any other person
to the payment of benefits under this Agreement shall not be assigned,
alienated, transferred, pledged or encumbered except by will or by the laws of
descent and distribution.
Miscellaneous.
1. Nothing contained herein shall be construed as conferring upon Executive
the right to continue in the employ of Tandy in any capacity.
2. Tandy shall have full power and authority to interpret, construe, and
administer this Agreement and Tandy's interpretations and construction
thereof, and actions thereunder, including any valuation of the Deferred
Compensation Account, or the amount or recipient of the payment to be made
therefrom, shall be binding and conclusive on all persons for all
purposes. No employee of Tandy or member of the board of directors of
Tandy shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Agreement
unless attributable to his own willful misconduct or lack of good faith.
3. This Agreement shall be binding upon and inure to the benefit of Tandy,
its successors and assigns, and Executive and his heirs, executors,
administrators, and legal representatives.
4. This Agreement shall be construed in accordance with and governed by the law
of the State of Texas.
IN WITNESS WHEREOF, Tandy has caused this Agreement to be executed by its duly
authorized officer and Executive has hereunto set his hand as of the date first
above written.
TANDY CORPORATION
_____________________________ By: _____________________________
Secretary
_________________________________
Executive
<PAGE>
Exhibit 10aa
DEFERRED COMPENSATION AGREEMENT
BETWEEN
TANDY CORPORATION AND
-------------------------
THIS AGREEMENT made this 30th day of September, 1997, by and between Tandy
Corporation, a corporation duly organized and existing under the laws of the
State of Delaware, with its principal place of business at Fort Worth, Tarrant
County, Texas ("Tandy") and _______________, a resident of the State of Texas
("Executive").
WITNESSETH:
THAT WHEREAS, Executive is ____________ of Tandy and receives certain
compensation from Tandy;
WHEREAS, Executive desires to defer the receipt of a portion of his
compensation; and
WHEREAS, Tandy agrees to defer the payment of a portion of certain compensation
of the Executive:
NOW, THEREFORE, in consideration of the premises and of the promises and
covenants hereinafter contained and for the purposes herein stated, the parties
hereto do hereby agree as follows:
Deferral of Compensation. Executive hereby agrees to defer the receipt of the
following cash compensation, subject to the terms and conditions of this
Agreement:
1. An amount equal to ___________ % of the Executive's bonus (if any) which,
if earned and due, would otherwise be paid in January 1998 (hereafter
called the "Deferred Bonus").
Deferred Compensation Account.
1. Tandy shall establish a book reserve (the "Deferred Compensation Account").
2. Tandy shall credit to the Deferred Compensation Account, on the last day
of January 1998, the Deferred Bonus (if any), plus an amount equal to 12%
of the Deferred Bonus (the "Matching Contribution").
Investment of Deferred Compensation Account.
1. Tandy shall invest an amount of its assets equal to the value of the
Deferred Compensation Account in such mutual funds, stocks, bonds,
securities, or other investments as may be selected by the Executive in
his sole discretion. Notwithstanding the above, the Matching Contribution
shall remain invested in Tandy common stock for the duration of this
Agreement.
2. Any earnings, gains, or losses (realized or unrealized) associated with
the investment of such assets shall be credited to the Deferred
Compensation Account.
3. Executive agrees on behalf of himself and his beneficiary to assume all
risk in connection with any decrease in the value of the assets associated
with the Deferred Compensation Account.
4. Executive and his beneficiary shall have no property interest whatsoever
in any specific assets of Tandy.
Payment of Deferred Compensation.
1. Except as otherwise provided herein, on January 2, 2003, Tandy shall pay
to Executive in a single sum the amount credited to the Deferred
Compensation Account on such day. Executive may, on or before December 31,
2001, elect, in writing, to receive the amount credited to the Deferred
Compensation Account in more than one annual installment, provided that
payment of benefits does not begin prior to January 2, 2003. After
Executive dies, any amount remaining in the Deferred Compensation Account
shall be distributed to his beneficiary.
2. Any time prior to January 2, 2003, Executive may elect to receive in a
single distribution 94% of the amount credited to the Deferred
Compensation Account. Upon receipt of this payment, Executive shall
forfeit the remaining 6% of the amount credited to the Deferred
Compensation Account.
Beneficiary. The beneficiary under this Agreement shall be Executive's spouse.
If Executive's spouse predeceases Executive, then the beneficiary under this
Agreement shall be Executive's estate.
Funding.
1. Nothing contained in this Agreement and no action taken pursuant to the
provisions of this Agreement shall create or be construed to create a
trust of any kind, or a fiduciary relationship between Tandy and
Executive, his beneficiary or any other person. Any funds which may be
invested under the provisions of this Agreement shall continue for all
purposes to be a part of the general assets of Tandy and no person other
than Tandy shall by virtue of the provisions of this Agreement have any
interest in such funds. To the extent that any person acquires a right to
receive payments from Tandy under this Agreement, such right shall be no
greater than the right of any unsecured general creditor of Tandy.
2. Notwithstanding the above, Executive in his sole discretion may require
that Tandy create a grantor trust (commonly referred to as a rabbi trust).
If a grantor trust is created, Tandy shall deposit the assets earmarked
for the Deferred Compensation Account into the trust. The assets of the
grantor trust shall be subject solely to the bankruptcy or insolvency
creditors of Tandy.
Assignment or Alienation of Benefits. The right of Executive or any other person
to the payment of benefits under this Agreement shall not be assigned,
alienated, transferred, pledged or encumbered except by will or by the laws of
descent and distribution.
Miscellaneous.
1. Nothing contained herein shall be construed as conferring upon Executive
the right to continue in the employ of Tandy in any capacity.
2. Tandy shall have full power and authority to interpret, construe, and
administer this Agreement and Tandy's interpretations and construction
thereof, and actions thereunder, including any valuation of the Deferred
Compensation Account, or the amount or recipient of the payment to be made
therefrom, shall be binding and conclusive on all persons for all
purposes. No employee of Tandy or member of the board of directors of
Tandy shall be liable to any person for any action taken or omitted in
connection with the interpretation and administration of this Agreement
unless attributable to his own willful misconduct or lack of good faith.
3. This Agreement shall be binding upon and inure to the benefit of Tandy,
its successors and assigns, and Executive and his heirs, executors,
administrators, and legal representatives.
4. This Agreement shall be construed in accordance with and governed by the law
of the State of Texas.
IN WITNESS WHEREOF, Tandy has caused this Agreement to be executed by its duly
authorized officer and Executive has hereunto set his hand as of the date first
above written.
TANDY CORPORATION
___________________________ By: ____________________________
Secretary
________________________________
Executive
<PAGE>
EXHIBIT 11
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) 1998 1997
- ---------------------------- -------- --------
Ratio of Earnings to Fixed Charges:
Net income $ 37.1 $ 25.6
Plus provision for income taxes 23.2 16.1
-------- --------
Income before income taxes 60.3 41.7
-------- --------
Fixed charges:
Interest expense and amortization of
debt discount 10.3 9.0
Amortization of issuance expense 0.2 0.1
Appropriate portion (33 1/3%) of rentals 18.5 19.3
-------- --------
Total fixed charges 29.0 28.4
-------- --------
Earnings before income taxes and
fixed charges $ 89.3 $ 70.1
======== ========
Ratio of earnings to fixed charges 3.08 2.47
======== ========
Ratio of Earnings to Fixed Charges and
Preferred Dividends:
Total fixed charges, as above $ 29.0 $ 28.4
Preferred dividends 1.5 1.6
-------- --------
Total fixed charges and preferred dividends $ 30.5 $ 30.0
======== ========
Earnings before income taxes, fixed
charges and preferred dividends $ 89.3 $ 70.1
======== ========
Ratio of earnings to fixed charges and
preferred dividends 2.93 2.34
======== ========
<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>
<CIK> 0000096289
<NAME> TANDY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-31-1998
<CASH> 77,900
<SECURITIES> 0
<RECEIVABLES> 233,300
<ALLOWANCES> 10,200
<INVENTORY> 1,182,100
<CURRENT-ASSETS> 1,625,300
<PP&E> 1,095,100
<DEPRECIATION> 571,200
<TOTAL-ASSETS> 2,232,500
<CURRENT-LIABILITIES> 856,600
<BONDS> 277,100
0
100,000
<COMMON> 138,300
<OTHER-SE> 810,700
<TOTAL-LIABILITY-AND-EQUITY> 2,232,500
<SALES> 1,258,300
<TOTAL-REVENUES> 1,258,300
<CGS> 784,000
<TOTAL-COSTS> 784,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,600
<INCOME-PRETAX> 60,300
<INCOME-TAX> 23,200
<INCOME-CONTINUING> 37,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,100
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
