UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934( NO FEE REQUIRED)
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD
Commission file number 1-5571
TANDY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock, par value $1 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of March 20, 1998, the aggregate market value of the voting stock held
by non-affiliates of the registrant was $4,936,316,996 based on the New York
Stock Exchange closing price.
As of March 20, 1998, there were 103,108,449 shares of the registrant's
Common Stock outstanding.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1998 Annual Meeting of Stockholders are
incorporated by reference into Part III.
The Index to Exhibits is on Sequential Page No. 61.
Total Pages 114.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Tandy Corporation, a Delaware corporation, was incorporated in 1967 ("Tandy"
or the "Company"). The Company engages in the retail sale of consumer
electronics including personal computers primarily in the United States. Sales
derived outside of the United States are not material. The Company's principal
retail operations include the RadioShack(R) and Computer City(R) store chains.
RadioShack.RadioShack is the Company's largest operating business unit.
At December 31, 1997, the RadioShack division operated 4,972 company-owned
stores located throughout the United States. These stores average
approximately 2,200 square feet in gross area and are located in major
malls, strip centers and individual store fronts. RadioShack had, on the
same date, a network of 1,934 dealer/franchise stores. These stores
provide RadioShack products to smaller communities. The dealers are
generally engaged in other retail operations and augment their sales with
RadioShack products. This network included 59 international dealers at
December 31, 1997. RadioShack plans to expand its company-owned store base
to exceed 5,000 locations by the end of 1998.
The company-owned RadioShack stores carry a broad assortment of
primarily private label electronic parts and accessories, audio/video
equipment, digital satellite systems, personal computers and related
products and cellular, PCS and conventional telephones, as well as
specialized products such as scanners, electronic toys and hard-to-find
batteries. Personal computers and related products, which account for
approximately 10% of RadioShack's sales, primarily target family users
seeking computers for home, and small business use. RadioShack also
provides consumers access to third party services such as cellular phone,
PCS, direct satellite programming and pager service. RadioShack is also
focusing on becoming "America's Telephone Store" through its
"store-within-a-store" concept where customers have access to wireless and
residential telephones and related telephony products and services. See
"Net Sales and Operating Revenues" in Item 7 "Management's Discussion and
Analysis of Results of Operations and Financial Condition" for a
discussion of RadioShack's telecommunications alliance.
On February 25, 1998, the Company, through its RadioShack division,
signed an exclusive multi-year retail sales and service agreement with
Compaq Computer Corporation ("Compaq"). Under the agreement, Compaq will
replace IBM as the sole supplier of computers sold through all of
RadioShack's company-owned stores and those RadioShack's dealer/franchise
outlets which elect to participate.
Computer City. The Company owns 80.1% of the outstanding common stock
of Computer City, Inc. ("CCI" or "Computer City"). See "New Computer City
Strategy" below for a discussion of the Company's strategy concerning
Computer City. As of December 31, 1997, there were 96 Computer City stores
open, including seven in Canada. Operating primarily as a supercenter
format, the average store size is approximately 21,050 square feet in
gross area. CCI management plans to open 15-20 new stores in 1998.
Computer City offers thousands of products in its merchandising
assortment, including personal computer hardware and software and related
products and accessories from vendors such as IBM, Compaq, Canon,
Hewlett-Packard, Epson, Sony, Toshiba, Microsoft, Intuit, Western Digital
and US Robotics. To complement its hardware and software sales and provide
a total solution to the customer, Computer City also offers services such
as classroom and on-site training for widely-used software applications.
Additionally, service centers are located within each of the 89 Computer
City stores in the U.S. and offer such services as repair, maintenance,
custom configuration, diagnostic testing, computer upgrades and other
technical services on all major brands of computers and related products.
In addition to its strong retail presence, Computer City also sells
directly to corporate, government and education customers through a sales
force of national account managers located at each store.
Incredible Universe. In December 1996, the Company announced its intent
to exit the Incredible Universe business. All Incredible Universe stores
were closed or sold in 1997. See "Provision for Business Restructuring" in
Item 7 "Management's Discussion and Analysis of Results of Operations
and Financial Condition" for further discussion.
Supporting the retail operations is an extensive infrastructure that
includes:
A&A International, Inc. ("A&A") - This wholly-owned subsidiary of the
Company serves the wide-ranging international import/export, sourcing,
evaluation, logistics and quality control needs of the Company. A&A also
provides services for outside customers, primarily InterTAN, Inc.
("InterTAN"). Most of A&A's activity for InterTAN involves sourcing of
goods from manufacturers in Asia. See "Relations with InterTAN" in Item 7
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" for more discussion.
Tandy Service Centers - The Company maintains a service and support
network to service the consumer electronics and personal computer retail
industry in the U.S. At December 31, 1997, there were 52 Tandy Service
Centers in the U.S. which repair name-brand and private label products
sold through the Company's retail distribution channels. These centers
are also the primary support for The Repair Shop at RadioShack program.
The Company is a vendor-authorized service provider for such leading
manufacturers as Compaq, Sony, Panasonic, Hitachi, Hewlett-Packard,
RCA/Thomson and Nokia, among others, and also performs repairs for
third-party service centers and extended service plan providers under
national service agreements.
Regional Distribution Centers - The 13 distribution centers operated by
the Company ship over one million cartons each month to the Company's
retail outlets. Twelve of the 13 distribution centers primarily support
RadioShack retail outlets and one cross docking distribution facility
supports both the Computer City and RadioShack store chains.
Tandy Information Services ("TIS") - TIS collects information from the
retail stores nationwide and updates large databases with sales and other
information. These databases are sophisticated marketing tools benefiting
every phase of the Company's operations. TIS also processes inventory,
accounting, payroll, telecommunications and other operating information
for all of the Company's operations. In addition, specialized information
is tracked for the Company's distribution and corporate activities.
Tandy Credit Services - In March 1995, the Company completed the sale,
at net book value, of its private label consumer credit card portfolio to
Hurley State Bank, a subsidiary of SPS Transaction Services, Inc., a
majority-owned subsidiary of Dean Witter, Discover and Company ("SPS").
The Company still makes available revolving credit payment terms to
RadioShack and Computer City consumers through private label credit card
programs provided by SPS. In addition, Tandy Credit Services extends
credit terms to qualified corporate, government and education customers,
generally pursuant to 30-day payment terms. The Company also has a
third-party leasing program pursuant to which the Company refers corporate
customers desiring financing to an independent leasing company that
purchases the specified equipment and leases it directly to these
customers.
Tandy Transportation, Inc. - A large fleet of tractors and trailers
transports merchandise from manufacturers or ports of entry to the
Company's regional distribution centers and local distribution facilities
and also delivers to the Company's retail outlets.
Tandy Customer Support - Using state-of-the-art telephone and data
networks, Tandy Customer Support responds to more than five million calls
annually for answers to technical questions, customer service inquiries,
and direct sales for RadioShack's catalog operations and "hard to find"
products offered through its RadioShack Unlimited program.
Consumer Electronics Manufacturing - The Company operates nine
manufacturing facilities in the United States and one overseas
manufacturing operation in China, which is a joint venture. These ten
manufacturing facilities cover a total of 1,332,000 square feet and
employed approximately 3,100 workers and professionals as of December 31,
1997. The Company manufactures a variety of products for use in its
consumer electronics retailing operations. These products include audio,
video, telephony, antennas, wire and cable products and a wide variety of
"hard to find" parts for consumer electronic products. Most of the
Company's manufacturing output is sold through the RadioShack store
chain.
SEASONALITY
As is the case with other retail businesses, the Company's net sales and
other revenues are greater during the Christmas season than during other periods
of the year. There is a corresponding pre-seasonal inventory build-up requiring
working capital associated with the anticipated increased sales volume. See Note
27 of the "Notes to Consolidated Financial Statements" for quarterly data.
PATENTS AND TRADEMARKS
Tandy owns or is licensed to use many trademarks related to its business in
the United States and in foreign countries. Radio Shack, RadioShack, Computer
City, and Optimus are some of the registered marks most widely used by the
Company. Tandy believes that the RadioShack and Computer City names and marks
are well-recognized by consumers, and that these names and marks are associated
with high-quality service providers. The Company's manufactured products are
sold primarily under the RadioShack and Optimus trademarks which are registered
in the U.S. and many foreign countries. The Company believes that the loss of
the RadioShack and Computer City names or marks would be material to its
business, but does not believe that the loss of any other trademarks would be
material.
Tandy also owns various patents relating to retail and support functions and
various products which Tandy has previously designed and continues to
manufacture.
SUPPLIERS
The Company obtains merchandise from a large number of suppliers from various
parts of the world. Alternative sources of supply exist for most merchandise and
raw materials purchased by the Company. As the Company's product line is
diverse, the Company would not expect a lack of availability of any single
product or raw material to have a material impact on its operations. Management
does not believe that the loss of any one supplier would have a material impact
on its operations.
BACKLOG ORDERS
The Company has no material backlog of orders for the products it sells.
COMPETITION
The consumer electronics retail business remains highly competitive, driven
by technology and product cycles, as well as the overall state of the economy.
In the consumer electronics retailing business, competitive factors include
price, product quality, product features, consumer services, manufacturing and
distribution capability and brand reputation. The Company competes in the sale
of its products and services with department stores, mail order houses, discount
stores, general merchants and gift stores which sell comparable products
manufactured by others. Competitors range in size from local drug and hardware
stores to large chains and department stores. Computer store chains and
franchise groups, as well as independent computer stores and several major
retailers, compete with the Company in the retail personal computer marketplace.
Consumer electronics and computer mail-order companies also compete with the
Company as do a number of competitors via on-line commerce on the Internet. The
products which compete with those sold by the Company are manufactured by
numerous domestic and foreign manufacturers. Many of these products carry
nationally recognized brand names or private labels and are sold in markets
common to the Company. Some of the Company's competitors have financial
resources equal to or greater than the Company's resources.
Management believes that many factors are important to its competitive
position, including price, quality, service and the broad selection of
electronic products, computers and computer related products carried at
conveniently located retail outlets. The Company's utilization of trained
personnel and its ability to use national and local advertising media are
important to the Company's ability to compete in the consumer electronics
marketplace. Management of the Company believes it is a strong competitor with
respect to each of the factors referenced above. Given the highly competitive
nature of the consumer electronics retail business, no assurance can be given
that the Company will continue to compete successfully with respect to each of
the factors referenced above. Also, the Company would be adversely affected if
its competitors were to offer their products at significantly lower prices,
introduce innovative or technologically superior products not yet available to
the Company or if the Company were unable to obtain products in a timely manner
for an extended period of time.
The Company focuses on two types of store formats to address the marketplace.
Each of the Company's retailing formats uses a distinct path to the marketplace,
based on its unique customer appeal, marketing strengths and margin structure:
RadioShack: RadioShack stores offer the shopping convenience of
approximately 6,900 company-owned and dealer stores which offer primarily
private label high-quality products, unique selection, repair services,
knowledgeable personnel, convenient credit options and excellent customer
service, including its "service-oriented" approach. RadioShack has formed
strategic relationships with key vendors in computers (IBM in 1997 and
Compaq beginning in 1998), direct-to-home satellite (RCA, PrimeStar,
DirecTV, and USSB), telecommunications (Sprint) and wireless
communications (Sprint PCS) to augment the strong position that it has
historically maintained in core product categories such as batteries,
communications equipment, telephones, antennas and electronic components,
and parts and accessories.
Computer City: Computer City stores offer over 4,000 different name
brand items, competitive prices and excellent customer service on
personal computer hardware and software as well as accessories, printers
and peripherals. This subsidiary operated 96 stores at December 31, 1997,
which average approximately 21,050 square feet. Although retail sales are
the largest component of Computer City's business, its stores also
fulfill other functions including direct sales to corporate, government
and education customers as well as software training and technical
services.
See "Supplemental Financial Data by Business Unit" in Item 7 "Management's
Discussion and Analysis of Results of Operations and Financial Condition" for
net sales and operating revenues and operating profit (loss) by quarter for 1997
for RadioShack and Computer City.
EMPLOYEES
As of December 31, 1997, the Company had approximately 44,000 employees. That
number includes approximately 6,500 temporary retail employees which were hired
for the Christmas selling season. None of the Company's employees are covered by
collective bargaining agreements nor are they members of labor unions.
Management of the Company considers its relationship with its employees to be
good.
ITEM 2. PROPERTIES.
Information on the Company's properties is in "Management's Discussion and
Analysis of Results of Operations and Financial Condition" and the financial
statements included in this Form 10-K and is incorporated herein by reference.
The following items are discussed further on the referenced pages:
Page
Retail Outlets......................... 11
Property, Plant and Equipment.......... 46
Leases................................. 49
The Company leases, rather than owns, most of its retail facilities.
RadioShack and Computer City stores are located primarily in major shopping
malls, stand-alone buildings or shopping centers owned by other entities, except
that the land and building of one Computer City store is owned by the Company.
The Company owns most of the property on which its executive offices are located
in downtown Fort Worth, Texas, all distribution centers, except for three which
are leased, and most of its manufacturing facilities and land located throughout
the United States. A&A International, Inc., the Company's import/export
subsidiary, leases eight administrative offices in the Asia Pacific region.
Existing warehouse and office facilities are deemed adequate to meet the
Company's needs in the foreseeable future.
ITEM 3. 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 December 31, 1997. While certain of these matters involve
substantial amounts, and although occasional adverse settlements or resolutions
may occur and negatively impact earnings in the year of settlement, it is the
opinion of management that their ultimate resolution will not have a materially
adverse effect on Tandy's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1997.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART III).
The following is a list of the Company's executive officers and their ages,
positions and length of service with the Company as of February 28, 1998.
Position
(Date Elected Years with
Name to Current Position) Age Company
- ---- -------------------- --- -------
John V. Roach Chairman of the Board 59 30
and Chief Executive Officer
(July 1982)
Leonard H. Roberts President of Tandy Corporation 49 4 (1)
(January 1996)
and President of RadioShack
(July 1993)
Robert M. McClure Senior Vice President 62 25 (2)
(January 1994)
Dwain H. Hughes Senior Vice President and 50 18 (3)
Chief Financial Officer
(January 1995)
Mark C. Hill Vice President, Corporate 46 1 (4)
Secretary and General Counsel
(July 1997)
Mark W. Barfield Vice President - Tax 40 10 (5)
(May 1994)
Lou Ann Blaylock Vice President - 59 27 (6)
Corporate Relations
(January 1993)
Loren K. Jensen Vice President and Treasurer 37 2 (7)
(May 1995)
Martin O. Moad Vice President-Investor Relations 41 12 (8)
(December 1996)
Ronald L. Parrish Vice President - 55 11
Corporate Development
(April 1987)
Richard L. Ramsey Vice President and 52 31
Controller
(January 1986)
<PAGE>
There are no family relationships among the executive officers listed and
there are no arrangements or understandings pursuant to which any of them were
appointed as executive officers. All executive officers of Tandy Corporation are
elected by the Board of Directors annually to serve for the ensuing year, or
until their successors are elected. All of the executive officers listed above
have served the Company in various capacities over the past five years, except
for Messrs. Roberts, Hill and Jensen.
(1) Mr. Roberts was elected President of Tandy Corporation effective January 1,
1996. He has been President of the RadioShack division since July 7, 1993.
Prior to joining Tandy he served as the Chairman and Chief Executive
Officer of Shoney's, Inc. from 1990 to 1993.
(2) Mr. McClure served as President of the Tandy Electronics division from
August 1987 until January 1993 when he was elected as Chief Operating
Officer and President of TE Electronics Inc. On January 1, 1994, Mr.
McClure was named Senior Vice President - Tandy Corporation.
(3) Mr. Hughes was elected Senior Vice President and Chief Financial Officer of
the Company effective January 1, 1995. Mr. Hughes served as Vice President
and Treasurer of the Company from June 1991 until December 1994.
(4) Mr. Hill became Vice President, Corporate Secretary and General Counsel on
July 24, 1997. Prior to joining Tandy, he was a partner with the law firm
of Haynes and Boone LLP where he practiced law for 13 years.
(5) Mr. Barfield served as Director of Federal and International Taxes from
April 1991 through May 1994 when he was named Vice President - Tax.
(6) Ms. Blaylock was Director of Corporate Relations from January 1986 until
she was named Vice President - Corporate Relations in January 1993.
(7) Mr. Jensen became Vice President and Treasurer on May 18, 1995. Prior to
joining Tandy, he served as Senior Vice President of Texas Commerce Bank
where he was employed for almost 10 years.
(8) Mr. Moad was elected Vice President - Investor Relations effective December
1996. Mr. Moad served as Director of Investor Relations from February 1993
until December 1996. Prior to February 1993, he was Vice President -
Controller of InterTAN, Inc., a spin-off of Tandy Corporation in 1987.
<PAGE>
PART II
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK (Restated for two-for-one stock split payable
September 22, 1997)
The Company's common stock is listed on the New York Stock Exchange and
trades under the symbol "TAN". The following table presents the high and low
trading prices for the Company's common stock, as reported in the composite
transactions quotations of consolidated trading for issues on the New York Stock
Exchange, for each quarter of the two years ended December 31, 1997.
Dividends
Quarter Ended High Low Declared
------------- ---- --- --------
December 31, 1997 $ 46 $ 33 5/16 $ 0.10
September 30,1997 34 25/32 26 5/16 0.10
June 30, 1997 28 7/8 24 3/8 0.10
March 31, 1997 26 7/8 20 5/16 0.10
December 31, 1996 23 5/8 18 9/16 0.10
September 30,1996 23 11/16 19 1/8 0.10
June 30, 1996 29 9/16 22 3/8 0.10
March 31, 1996 24 1/8 17 1/16 0.10
HOLDERS OF RECORD
At March 20, 1998 there were 26,548 holders of record of the Company's
common stock.
DIVIDENDS
The Board of Directors reviews the Company's dividend policy annually. The
quarterly dividend rate is currently $0.10 per common share.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
SELECTED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED)
TANDY CORPORATION AND SUBSIDIARIES
<CAPTION>
(Dollars and shares in millions, Year Ended December 31,
------------------------------------------------------
except per share amounts and ratios) 1997 1996 1995 1994 1993
===========================================================================================
<S> <C> <C> <C> <C> <C>
Operations
Net sales and operating revenues $5,372.2 $6,285.5 $5,839.1 $4,943.7 $4,102.6
======== ======== ======== ======== ========
Income (loss) before income taxes,
discontinued operations and
cumulative effect of change in
accounting principle $ 303.9 $ (145.6) $ 343.2 $ 359.5 $ 311.1
Provision (benefit) for taxes 117.0 ( 54.0) 131.3 135.2 115.5
-------- -------- -------- -------- --------
Income (loss) from continuing 186.9 (91.6) 211.9 224.3 195.6
operations
Loss from discontinued operations
(1) -- -- -- -- (111.8)
-------- -------- -------- -------- --------
Income (loss) before cumulative
effect of change in accounting
principle 186.9 (91.6) 211.9 224.3 83.8
Cumulative effect of change in
accounting principle (2) -- -- -- -- 13.0
-------- -------- -------- -------- --------
Net income (loss) (3) $ 186.9 $ (91.6) $ 211.9 $ 224.3 $ 96.8
======== ======== ======== ======== ========
Net income (loss) available per
common share: (3) (4)
Basic $ 1.69 $ (0.82) $ 1.62 $ 1.46 $ 0.59
Diluted $ 1.63 $ (0.82) $ 1.58 $ 1.43 $ 0.59
Shares used in computing earnings
per common share: (4)
Basic 107.2 119.7 126.5 149.2 150.8
Diluted 112.2 119.7 131.4 153.9 150.8
Dividends declared per common
share (4) $ 0.40 $ 0.40 $ 0.37 $ 0.32 $ 0.30
Ratio of earnings to fixed
charges (5) 3.52 N/A (6) 4.22 4.56 3.89
</TABLE>
<PAGE>
<TABLE>
SELECTED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) Continued
TANDY CORPORATION AND SUBSIDIARIES
<CAPTION>
(Dollars and shares in Year Ended December 31,
millions, except per -------------------------------------------------------------
share amounts and ratios) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year End Financial
Position
Inventories $ 1,205.2 $ 1,420.5 $ 1,512.0 $ 1,504.3 $ 1,276.3
Total assets (7) $ 2,317.5 $ 2,583.4 $ 2,722.1 $ 3,243.8 $ 3,219.1
Working capital $ 739.1 $ 746.3 $ 1,088.3 $ 1,350.1 $ 1,128.3
Current ratio 1.76 to 1 1.63 to 1 2.13 to 1 2.12 to 1 2.09 to 1
Capital structure:
Current debt (8) 299.5 $ 258.0 $ 189.9 $ 229.1 $ 388.0
Long-term debt (8) 236.1 $ 104.3 $ 140.8 $ 153.3 $ 186.6
Total debt 535.6 $ 362.3 $ 330.7 $ 382.4 $ 574.6
Total debt, net of cash
and cash equivalents 429.7 $ 240.8 $ 187.2 $ 176.8 $ 361.4
Stockholders' equity (7) 1,058.6 $ 1,264.8 $ 1,601.3 $ 1,850.2 $ 1,950.8
Total capitalization 1,594.2 $ 1,627.1 $ 1,932.0 $ 2,232.6 $ 2,525.4
Long-term debt as a % of
total capitalization 14.8% 6.4% 7.3% 6.9% 7.4%
Total debt as a % of
total capitalization 33.6% 22.3% 17.1% 17.1% 22.8%
Stockholders' equity per
common share (9) $ 9.96 $ 10.74 $ 12.72 $ 13.01 $ 12.73
Financial Ratios
Return on average
stockholders' equity (5) 16.1% N/A (3) 12.3% 11.8% 10.2%
Percent of sales:
Income (loss) before
income taxes, discontinued
operations & cumulative
effect of change in
accounting principle (3) 5.7% (2.3)% 5.9% 7.3% 7.6%
Income (loss) from
continuing operations (3) 3.5% (1.5)% 3.6% 4.5% 4.8%
(1) During 1993, the Company discontinued and disposed of its computer
manufacturing business, O'Sullivan Industries Inc., Memtek's Product
Division and the Lika printed circuit board business.
(2) The change in 1993 reflected the Company's change in accounting for income
taxes to comply with FAS 109.
(3) Excluding $230.3 million (net of taxes)in restructuring and other charges in
1996, net income would have been $138.7 million, net income available per
share would have been $1.11 (basic) and $1.09 (diluted), return on average
stockholders' equity would have been 8.9%, return on average total assets
would have been 5.2%, income before income taxes as a percent of sales
would have been 3.5%, and income from continuing operations as a percent of
sales would have been 2.2%.
(4) Prior periods have been adjusted to reflect adoption of FAS No. 128,
"Earnings Per Share" and the two-for-one stock split which was payable on
September 22, 1997.
(5) Computed using income from continuing operations.
(6) Pre-tax earnings were not sufficient to cover fixed charges during 1996 by
approximately $145.6 million. Excluding $230.3 million (net of taxes) in
restructuring and other charges, the ratio of earnings to fixed charges
would have been 2.57.
(7) Includes investment in discontinued operations for the year ended December
31, 1993.
(8) Includes capital leases and TESOP indebtedness.
(9) Years ended December 31, 1994 and 1993 computed giving effect to the Series
C PERCS conversion into approximately 23.6 million shares of common stock.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Tandy Corporation ("Tandy" or "Company") participates in a highly competitive
industry that is characterized by aggressive pricing practices. In 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, the
Company's ability to open new stores in accordance with its plans, 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 (see "Net Sales and Operating Revenues" for a
discussion of RadioShack's telecommunications alliance).
With the exception of historical information, the matters discussed herein
contain forward-looking statements that involve risks and uncertainties and are
indicated by words such as "anticipates", "expects", "believes", "plans",
"could", and similar words 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.
STOCK SPLIT
On August 21, 1997, the Company's Board of Directors declared a two-for-one
split of Tandy common stock, payable on September 22, 1997. All references to
the number of shares of common stock issued or outstanding, per share prices,
cash dividends and income per common share amounts in Management's Discussion
and Analysis of Results of Operations and Financial Condition have been adjusted
to reflect the split on a retroactive basis.
RETAIL OUTLETS
Average
Store Size Dec. 31, Dec. 31, Dec. 31,
(Sq. Ft.) 1997 1996 1995
- -----------------------------------------------------------------------------
RadioShack
Company-Owned 2,200 4,972 4,942(1) 4,831(1)
Dealer/Franchise N/A 1,934 1,927 2,005
-------- -------- --------
6,906 6,869 6,836
Computer City 21,050 96 113(2) 99(2)
Incredible Universe (3) 184,000 -- 17 17
-------- -------- --------
7,002 6,999 6,952
======== ======== ========
(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.
<PAGE>
<TABLE>
Space Owned and Leased
<CAPTION>
Approximate Square Footage
at December 31,
-------------------------------------------------------------------
1997 1996 (1)
-------------------------------- -------------------------------
(In thousands) Owned Leased Total Owned Leased Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Retail
RadioShack -- 11,655 11,655 -- 12,076 12,076
Incredible Universe -- -- -- 503 1,425 1,928
Computer City(2) 15 1,990 2,005 26 2,523 2,549
Other 162 -- 162 160 -- 160
-------- -------- -------- -------- -------- --------
177 13,645 13,822 689 16,024 16,713
Manufacturing 532 201 733 536 205 741
Warehouse and office 3,644 1,271 4,915 4,087 2,585 6,672
-------- -------- -------- -------- -------- --------
4,353 15,117 19,470 5,312 18,814 24,126
======== ======== ======== ======== ======== ========
(1) The 1996 table above includes square footage on all stores at December 31,
1996. Excluding stores covered by the December 1996 store closure plan,
total square footage would have approximated 19.4 million square feet versus
24.1 million square feet at December 31, 1996.
(2) Computer City capital leases are included in leased square footage.
</TABLE>
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED WITH FISCAL 1996
- -------------------------------------
NET SALES AND OPERATING REVENUES
Year Ended
December 31,
-------------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
RadioShack $3,215.7 $3,101.1(1) $3,044.1(1)
Computer City(3) 1,903.7 1,721.6(2) 1,402.8(2)
-------- -------- --------
Total continuing retail 5,119.4 4,822.7 4,446.9
Closed units - restructuring 164.6 1,403.4 1,318.0
Other sales(4) 88.2 59.4 74.2
-------- -------- --------
$5,372.2 $6,285.5 $5,839.1
======== ======== ========
(1) Adjusted to exclude units associated with the 1996 restructuring plan
(including Tandy Name Brand and Famous Brand Electronics).
(2) Adjusted to exclude units associated with the 1996 restructuring plan.
(3) Includes service centers directly related to Computer City previously
included in other sales.
(4) Other sales relate to outside sales made by the Company's retail support
operations.
Consolidated net sales and operating revenues decreased 14.5% to $5,372.2
million in 1997 from $6,285.5 million in 1996, attributable to Tandy's store
closure plan announced in December 1996. For the year ended December 31, 1997,
the Company showed a 2.0% comparable store sales increase.
RadioShack
- ----------
RadioShack's overall sales for 1997 increased 3.7% to $3,215.7 million from
$3,101.1 million in 1996, adjusted for stores closed under the 1996 store
closure plan, due to positive same store sales gains and the opening of 108 new
stores, net of RadioShack store closures. RadioShack's comparable store sales
increase was 1.9% for the year ended December 31, 1997, driven primarily by
increased sales of wireless communication and telephone products (see below).
<PAGE>
The accompanying table summarizes RadioShack's sales breakdown by class of
products and their related percentage to total RadioShack sales:
Percent of RadioShack Sales
Year Ended
December 31,
-----------------------------------------
Class of Products 1997 1996 1995
- ----------------- -------- -------- --------
Electronic parts, accessories
and specialty equipment 30.4% 30.9% 30.1%
Communications 27.5 24.4 24.5
Audio/Video 16.8 18.0 18.1
Personal electronics and seasonal 11.6 12.4 13.1
Personal computers, peripherals,
software and accessories 10.5 11.8 11.5
Repair services, extended service
contracts and other 3.2 2.5 2.7
-------- -------- --------
100.0% 100.0% 100.0%
======== ======== ========
Electronic parts, accessories and specialty equipment, the largest product
category of RadioShack's sales mix, remained relatively consistent in 1997 when
compared with the prior two years.
The communications category increased to 27.5% of sales from 24.4% and
24.5% in fiscal years 1996 and 1995, respectively. This category, which includes
wireless communications such as cellular and PCS telephones as well as
residential telephones, answering machines, pagers and other related telephony
products, benefited from the successful rollout of the Sprint Store at
RadioShack in September 1997. This program was initiated in September 1996 when
the Company, through its RadioShack division, entered into a telecommunications
alliance with Sprint Communications Company L.P., Sprint United Management
Company (collectively, "Sprint"), and Sprint PCS. Through a
"store-within-a-store" concept located in approximately 6,500 company-owned and
RadioShack dealer outlets, customers have access to a full service
communications information center that offers, where available, Sprint long
distance, local and wireless phone service, Internet access and paging, as well
as SpreeSM pre-paid phone cards and phone equipment. RadioShack is also the
exclusive retailer of Sprint(R) branded residential telephones. The
communications category is expected to continue to increase as a percentage of
RadioShack's total sales in 1998.
Sales of audio and video products declined to 16.8% of sales in 1997 from
18.0% and 18.1% in fiscal years 1996 and 1995, respectively, due to lower
consumer demand for these products and the heightened level of competition
within the industry. Offsetting the decline in audio and video sales was a 7.0%
increase in 1997 of "direct-to-home" system sales, despite a substantially
reduced average selling price of digital satellite systems ("DSS").
Personal electronics and seasonal products decreased to 11.6% of sales in
1997 from 12.4% and 13.1% in 1996 and 1995, respectively, due primarily to an
overall shift in the product mix to communications; management expects this
trend to continue in fiscal year 1998. The decreases since 1995 are also due to
sales declines in products such as portable radios, boomboxes and cassette
products, which are indicative of lower general consumer demand for these
products.
Personal computer sales decreased as a percentage of total sales despite an
overall unit gain for 1997. The average 1997 selling price on desktop and
notebook computers fell 17.8% and 7.7%, respectively, from the 1996 annual
average selling price. On January 28, 1998, the Company announced that
RadioShack had signed a letter of intent for a multi-year retail sales and
service agreement with Compaq Computer Corporation ("Compaq"). A definitive
agreement was signed with Compaq on February 25, 1998. Under this agreement,
Compaq will replace IBM as the sole supplier of personal computers sold through
RadioShack retail outlets. Compaq computers will be marketed via a
"store-within-a-store" concept similar to the Sprint Store at RadioShack. Most
company-owned stores and many of the RadioShack dealer/franchise outlets should
be retrofitted by the end of the third quarter of 1998.
The repair services, extended service contracts and other category increased
in 1997 due to an increase in residual income received from RadioShack's third
party providers of communication and direct-to-home products, as well as an
increase in income from prepaid cellular air time. RadioShack earns residual
income on sales of Sprint long distance services, sales of direct-to-home
programming and sales of many wireless products. Additionally, RadioShack earns
commissions from cellular carriers for activating customers with cellular
service.
Computer City
- -------------
Computer City, Inc.'s ("CCI or "Computer City") overall sales in 1997
increased 10.6% to $1,903.7 million from $1,721.6 million in 1996, adjusted for
the 21 stores closed pursuant to the 1996 store closure plan. Computer City's
comparable store sales increased 2.2% for the year ended December 31, 1997. The
overall sales increase was primarily attributable to positive same store sales
plus revenues generated by 14 new stores opened in 1996.
In stores open at least one year, sales of personal computers were up
slightly in 1997 due to a significant increase in direct sales to corporate,
education and government customers. This increase was offset by the decrease in
the annual average selling price of retail desktop computers, which fell
approximately 15.0% from the 1996 annual average selling price. To a lesser
extent, a decrease in sales of non-DOS machines in 1997 also impacted the
personal computers sales increase. Computer City is in the process of rolling
out a "build-to-order" program, which allows retail and corporate customers to
order a custom-configured personal computer and have it shipped directly to
their home or office within a few days.
Product categories which experienced sales and unit increases in 1997
included scanners, which benefited from both lower selling prices and new
technology, as well as notebook computers which experienced a large increase in
both sales dollars and unit sales. Sales of software, accessories and supplies
also experienced positive sales growth in 1997 as Computer City continued its
focus on sales to experienced users.
In stores open at least one year, sales of extended service plans increased
approximately 24.0% over the prior year, attributable to Computer City's focus
on this area in 1997. CCI management plans to continue its focus in 1998 on
sales of services, including extended service plans, software training and
technical support.
GROSS PROFIT
Gross profit for the Company was $2,014.3 million, or 37.5% of net sales
and operating revenues, in fiscal 1997, compared with $2,022.4 million, or
32.2%, in fiscal year 1996. This increase in gross profit as a percentage of net
sales and operating revenues was primarily due to RadioShack accounting for
59.9% of the Company's total sales and operating revenues in fiscal year 1997,
compared to 49.3% in fiscal year 1996, which occurred as a result of the closure
of the Incredible Universe stores in early 1997 and, to a lesser extent, the
closure of 21 Computer City stores at December 31, 1996. Excluding stores in the
1996 closure plan and excluding the 1996 fourth quarter lower of cost or market
inventory impairment, the slight decline in the Company's gross profit margin
from 38.8% in 1996 to 38.4% in 1997 resulted primarily from the fact that
RadioShack's 1997 percentage sales increase was less than Computer City's
percentage sales increase. Computer City has an inherently lower gross margin
than RadioShack.
RadioShack's gross profit as a percentage of total net sales and operating
revenue increased slightly for the year ended December 31, 1997 versus 1996, due
to a positive shift within RadioShack's product offerings to increased cellular
and telecommunication sales, as a percent of sales, and was further enhanced by
decreased sales of lower margin personal computers (see table on "Class of
Products" above).
Computer City's gross profit for continuing stores as a percent of net sales
and operating revenues increased 0.9 percentage points in 1997 when compared to
fiscal year 1996 due to improvement in inventory management, increased sales of
higher margin accessories and software and an increase in the ratio of service
revenues to total revenues. Service revenues typically have a higher gross
margin than merchandise sales. CCI management will continue its focus in these
areas in 1998.
<TABLE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A")
The accompanying table below summarizes the breakdown of various components
of the Company's consolidated SG&A and their related percentage of sales and
operating revenues.
<CAPTION>
Year Ended
December 31,
---------------------------------------------------------------------
1997 1996 1995
% of % of % of
Sales & Sales & Sales &
(In millions) Dollars Revenues Dollars Revenues Dollars Revenues
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Payroll and commissions $ 734.1 13.7% $ 758.2 12.1% $ 698.9 12.0%
Advertising 195.4 3.6 254.6 4.1 257.3 4.4
Rent 222.6 4.1 239.8 3.8 217.6 3.7
Other taxes 102.0 1.9 107.9 1.7 96.7 1.7
Utilities and telephone 72.2 1.3 77.0 1.2 71.3 1.2
Insurance 50.5 0.9 53.3 0.8 48.3 0.8
Stock purchase
and savings plans 17.8 0.3 18.5 0.3 19.7 0.3
Credit card operations -- -- -- -- 6.3 0.1
Credit card fees 43.1 0.8 57.2 0.9 52.7 0.9
Other 142.6 2.8 194.6 3.1 177.7 3.0
---------------------------------------------------------------------
$1,580.3 29.4% $1,761.1 28.0% $1,646.5 28.2%
=====================================================================
</TABLE>
The Company's SG&A expenses as a percent of net sales and operating revenues
increased for the year ended December 31, 1997 to 29.4% from 28.0% for the year
ended December 31, 1996. The higher SG&A percentage is due primarily to
RadioShack which became a larger percentage of Tandy's consolidated operations
during 1997 (see "Gross Profit" above). RadioShack operates at higher relative
SG&A levels than consolidated Tandy Corporation. Excluding those stores in the
1996 store closure plan, SG&A as a percentage of sales would have approximated
29.5% for the year ended December 31, 1997. See "Provision for Business
Restructuring" below.
Although payroll and commissions expense for 1997 decreased in dollars in
comparison with 1996, this cost increased as a percentage of sales and operating
revenues from 12.1% in 1996 to 13.7% in 1997, due to the increase in RadioShack
sales as a percentage of total sales and operating revenues described above.
RadioShack has inherently higher salary expense as a ratio of percent to
sales and operating revenues when compared to the total Company. RadioShack
payroll expense increased in dollars and as a percentage of RadioShack sales in
1997 from 1996 due to increased staffing at the store level. This dollar
increase is expected to continue in 1998; however, payroll expense as a
percentage of sales is expected to remain consistent with 1997. Computer City
payroll expense as a percentage of Computer City sales increased from 1996 to
1997 due to the addition of new stores, added headcount in the direct sales area
and a realignment of support staff from Tandy Corporation to Computer City.
Advertising expense decreased, both in dollars and as a percentage of sales
and operating revenues, in the year ended December 31, 1997 as compared to the
year ended December 31, 1996. This decrease over the prior year is primarily the
result of reductions in Incredible Universe advertising in 1997 due to stores
closed pursuant to the 1996 restructuring plan. Computer City had a substantial
increase in vendor participation in its advertising campaigns in 1997 compared
to 1996. Somewhat offsetting these decreases was a slight dollar increase in
advertising expense at RadioShack to promote the Sprint "store-within-a-store"
concept, which was launched in September 1997. RadioShack advertising expense as
a percentage of sales in 1997 remained constant with 1996. In 1998, advertising
dollars are expected to be comparable to 1997, with the exception of the
expenses associated with the prior year Sprint marketing launch.
Rent expense increased as a percentage of sales to 4.1% in 1997 from 3.8% in
1996. This increase is related to a decrease in the number of Computer City and
Incredible Universe stores which have lower rent expense as a percentage of
sales than the Company as a whole. Rent expense in dollars decreased in 1997
from 1996 due to Incredible Universe and Computer City store closures pursuant
to the 1996 restructuring plan. Rent expense for RadioShack remained consistent
with the prior year in dollars and decreased slightly as a percentage of sales.
Rent expense in dollars for RadioShack and Computer City is expected to increase
in 1998 due to new store openings.
Fees paid for promotional accounts such as "zero interest for six months",
which are classified as credit card fees in the accompanying SG&A table,
decreased as a result of the closure of the Incredible Universe stores and
decreased usage by RadioShack during 1997. Credit card fees expense also
includes fees associated with third party bank credit cards.
Other SG&A expenses, which include repair, maintenance, travel and returned
checks, as well as other miscellaneous expenses and other income, decreased both
as a percentage of net sales and operating revenues and in dollars when compared
to fiscal year ended December 31, 1996. Increases in other income were primarily
attributable to the receipt of $9.0 million, pre-tax, of income from O'Sullivan
Industries (see "Tax Sharing and Tax Benefit Reimbursement Agreement" below) and
non-recurring gains of $4.7 million recorded on repayment of the note receivable
from InterTAN, Inc. ("InterTAN") (see "Relations with InterTAN" below) and $3.0
million on sale of certain assets. These increases were offset by additional
restructuring expense of the $11.6 million related to store closings pursuant to
the 1996 store closure plan.
NET INTEREST INCOME (EXPENSE)
The accompanying table below summarizes the breakdown of interest income and
interest expense:
Year Ended
December 31,
--------------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- -------
Interest income:
Credit card operations $ -- $ -- $ 18.5
InterTAN notes receivable,
including accretion of discount 5.4 6.7 8.3
AST note receivable,
including accretion of discount -- 2.6 4.9
Fry's Electronics notes receivable 3.3 -- --
IRS settlements 1.0 0.3 6.2
Other interest income 3.5 3.4 4.4
-------- -------- --------
Total interest income 13.2 13.0 42.3
Interest expense (46.1) (36.4) (33.7)
-------- -------- ---------
Net interest income (expense) $ (32.9) $ (23.4) $ 8.6
======== ======== =========
Net interest expense was $32.9 million for 1997 versus $23.4 million in 1996.
Interest expense increased in 1997 as the Company continued purchasing treasury
stock (see "Capital Structure and Financial Condition" below) and continued to
fund store expansion. Interest expense also increased during 1997 when the
Company refinanced existing short-term indebtedness (average maturity of 90 days
or less) by issuing $150.0 million of ten-year unsecured notes, resulting in a
moderately higher interest rate when compared to the short-term financing used
in 1996.
Interest income relating to the InterTAN notes decreased in 1997 as InterTAN
made the scheduled principal payments on the note balances. The remaining note
was repaid in December 1997 and, as such, the Company will no longer receive
interest income from InterTAN in 1998 (see "Relations with InterTAN" below). In
addition, the AST Research, Inc. ("AST") note was repaid in 1996 and,
accordingly, the Company no longer received interest income from this source in
1997 (see "AST Securities" below). Interest income relating to the Fry's
Electronics, Inc. and its affiliates ("Fry's") notes receivables resulted from
the 1997 sale of assets and real estate of six Incredible Universe stores. At
December 31, 1997, the Company held multiple notes receivable from Fry's of
approximately $75.3 million with varying maturities ranging from one to five
years and varying interest rates ranging from approximately 5.9% to 6.7%. The
Company expects interest income related to the Fry's notes to increase slightly
during 1998 (see "Provision for Business Restructuring" below).
Net interest expense is not expected to change materially during 1998, based
on the existing interest rate environment.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of 38.5% for
fiscal year 1997, compared to an effective tax benefit of 37.1% for the
comparable period in fiscal year 1996. The fiscal 1997 effective tax rate
differed from the fiscal 1996 effective tax rate primarily because the fiscal
1996 tax rate included foreign income taxes which were incurred on foreign
income despite the overall loss incurred by the Company.
FISCAL 1996 COMPARED WITH FISCAL 1995
- -------------------------------------
NET SALES AND OPERATING REVENUES
Consolidated net sales and operating revenues increased 7.6% to $6,285.5
million in 1996 from $5,839.1 million in 1995. The increase was primarily
attributable to two factors: (1) the addition of 111 RadioShack stores (net of
closures) and 14 Computer City stores during 1996 and (2) the incremental
addition of a full year's revenue related to stores opened during 1995 whose
total 1995 revenue reflected a partial year.
For the year ended December 31, 1996, the Company showed a 2.3% comparable
store sales decline, which was the result of all divisions experiencing
comparable sales declines during the year. Although RadioShack same store sales
declined less than 1%, Incredible Universe was down 4.2% and Computer City was
down 4.9%. These declines were indicative of the heightened level of competition
within the industry and lower consumer demand which negatively impacted the
consumer electronics industry as a whole. This lower demand was primarily
attributed to higher consumer debt levels and the lack of new products with
significant technological advances.
RadioShack
- ----------
RadioShack sales for 1996 increased less than 2.0% to $3,101.1 million from
$3,044.1 million, adjusted for stores in the 1996 store closure plan. Electronic
parts, accessories and specialty equipment, including batteries, remained the
single largest product category of RadioShack's sales mix, increasing to 30.9%
of sales from 30.1% in 1995. Communications and audio/video sales dollars
increased slightly in 1996, while the percentage of total sales for each of
these categories remained relatively consistent with 1995. The personal
electronics and seasonal product category, which includes portable radio and
cassette products, declined as a percentage of sales from 1996 to 1995,
principally due to lower consumer demand and heightened competition in the
industry.
The average 1996 selling price on desktop computers and notebook computers
rose 32.9% and 18.5%, respectively, over the 1995 average selling price,
contributing to the increase in the personal computer category as a percent of
total sales from 1995 to 1996. This increase in selling price, however, was
offset by a decline in system units sold. Repair income experienced a slight
decline in 1996, contributing to the slight decrease in the repair services,
extended service contracts and other category as a percent of total sales from
1995 to 1996.
Computer City
- -------------
Computer City sales in 1996 increased 22.7% to $1,721.6 million from $1,402.8
million in 1995, adjusted for the stores closed under the 1996 store closure
plan. This increase was the result of opening 30 new Computer City stores in
1995. The 21 closed Computer City stores announced in the Company's store
closure plan in December 1996 generated revenues of $359.1 million in 1996 and
$376.4 million in 1995.
Incredible Universe
- -------------------
Incredible Universe sales increased 22.4% to $908.5 million in 1996 from
$742.0 million in 1995. This increase was the result of opening eight new stores
in fiscal year 1995.
GROSS PROFIT
Gross profit for the Company as a percentage of sales declined from 35.5% in
1995 to 32.2% in 1996. The Company's gross profit margin for 1996 was adversely
affected by approximately $91.4 million of lower of cost or market inventory
writedowns and related costs primarily associated with the restructuring
announced in December 1996. Excluding these charges, the gross profit margin
would have been 33.6% for 1996. The decrease in gross profit margin from 35.5%
to 33.6% (as adjusted) reflected the effect of Tandy's lower gross margin retail
formats. During calendar year 1996, Computer City and Incredible Universe
represented 47.6% of net sales and operating revenues as compared to 43.2% of
the 1995 net sales and operating revenues. Continuing Computer City sales would
have approximated 35.3% of 1996 total sales, after giving effect to the 1996
store closure plan. Furthermore, the Company's gross profit margin for calendar
year 1996, excluding stores in the closure plan and the 1996 fourth quarter
lower of cost or market inventory impairment, would have approximated 38.8%. See
"Provision for Business Restructuring" below.
During 1996, RadioShack's gross margin was up slightly when compared to 1995
due to the relative stability of product mix as a percentage of overall sales
from 1995 to 1996. Excluding lower of cost or market writedowns associated with
store closures, Computer City's gross margin decreased slightly in 1996 due to
competitive forces which existed in the computer retail industry and the lack of
introduction in 1996 of new products with significant technological advances.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company's SG&A, as a percentage of sales and operating revenues for the
year ended December 31, 1996, declined to 28.0% from 28.2% for the year ended
December 31, 1995. The lower SG&A percentage reflected the lower costs, relative
to net sales and operating revenues, of Computer City and Incredible Universe,
which operate at lower relative costs than consolidated Tandy Corporation.
Excluding those stores in the 1996 store closure plan, SG&A as a percentage of
sales would have approximated 29.7% versus 28.0% for the year ended December 31,
1996. See "Provision for Business Restructuring" below.
Payroll and commissions expense remained relatively consistent as a
percentage of net sales and operating revenues between 12.1% in 1996 and 12.0%
in 1995. As of December 31, 1996, the Company had approximately 48,400
employees, which included approximately 8,500 temporary retail employees who
were hired for the Christmas selling season.
Advertising costs for 1996 decreased as a percentage of net sales and
operating revenue to 4.1% from 4.4% due to nonrecurring 1995 promotional
expenses relating to the grand opening of 30 Computer City stores and eight
Incredible Universe stores during 1995. RadioShack's 1996 advertising expense as
a percentage of sales remained consistent with 1995.
Rent expense increased slightly as a percentage of sales to 3.8% in 1996 from
3.7% in 1995 due to the increase in the number of Computer City and Incredible
Universe stores over the prior year.
The 1996 expenses of the credit operations were eliminated in 1996 as a
result of the sale of the private label credit card portfolios. The sale of the
portfolio also impacted interest income (see discussion below). Commencing in
1995, the Company receives fees from an unrelated third party financier of its
private label credit card portfolio balance for the generation of normal
interest-bearing accounts, and pays a fee for the generation of special purpose
promotional accounts, such as "zero interest for six months". Incredible
Universe and Computer City utilized these promotions frequently in fiscal 1996
and the fees are classified as credit card fees in the accompanying SG&A table
above.
Other SG&A expenses, which include repair, maintenance, travel, and other
miscellaneous expenses had, in total, remained relatively consistent between
3.1% and 3.0% of sales during 1996 and 1995.
NET INTEREST INCOME (EXPENSE)
Net interest expense was $23.4 million for 1996 versus net interest income of
$8.6 million for 1995. The reversal to a net interest expense position in 1996
was primarily attributable to the sale of the Company's private label credit
card portfolios to a third party in the fourth quarter of 1994 and the first
quarter of 1995 (see "Sale of Credit Operations" below for further information).
Interest expense grew from 1995 to 1996 as a result of the Company's
increased usage of short-term borrowing facilities, including seasonal bank
credit lines and commercial paper facilities, as excess funds from the 1995 sale
of credit operations were fully utilized. The use of these facilities was higher
during 1996 as the Company continued to retire long-term debt, fund store
expansion and execute the share repurchase program.
Interest income relating to the InterTAN notes and the AST note decreased in
1996 as scheduled principal payments were received by the Company. Other
interest income relates primarily to cash equivalents of the Company and was
higher in 1995 than in 1996 due to increased cash equivalents resulting from the
sale of the credit card portfolios.
PROVISION FOR INCOME TAXES
The effective tax benefit rate that resulted from the Company's net loss
position was 37.1% for the year ended December 31, 1996, compared to the
effective tax rate of 38.3% for the year ended December 31, 1995. The effective
tax rate for 1996 changed from 1995 due primarily to foreign income taxes which
were incurred on foreign income in 1996 despite the overall loss incurred by the
Company.
NEW COMPUTER CITY STRATEGY
On June 26, 1997, the Company organized a new subsidiary, CCI, 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 8.0% per annum and is payable on or
before July 17, 2002. Pursuant to the terms of the Stock Purchase Agreement,
Eureka and its principals provided a new senior management team for CCI. This
new management team consists of Nathan Morton, CCI Chief Executive Officer and
Co-Chairman, Avery More, CCI Vice Chairman, and Robert Boutin, CCI Chief
Financial Officer, all of whom are principals of Eureka. John V. Roach, the
Chairman and Chief Executive Officer of the Company, serves as the other
Co-Chairman of CCI and as its President. 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.
In connection with the creation of CCI, the Company assigned to CCI, and
CCI assumed, the Company's obligations under a $125.0 million subordinated note
payable bearing 8.0% interest. The note is due in July 2002 to Trans World
Electronics, Inc., a wholly-owned subsidiary of Tandy. This subordinated note
represents certain liabilities of the Company allocable to its Computer City
division that were assumed by CCI. Computer City currently has a $150.0 million
bank line of credit of which $30.0 million is outstanding at December 31, 1997.
This line of credit is fully guaranteed by Tandy through December 31, 1998 (see
Note 14 of the "Notes to Consolidated Financial Statements"). CCI will use the
line of credit primarily for internal working capital requirements. In January
1998, CCI also began working with two investment banks to raise additional
equity as a part of a strategy for CCI to reach independent status. There can be
no assurance, however, that any such independence will occur.
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.
Sales and operating revenues, operating losses, and restructuring and other
charges (before interest and taxes) for CCI for each of the three years ended
December 31 are presented below:
1997 1996 1995
-------- -------- --------
Sales and operating revenues $1,903.7 $2,080.5 $1,779.2
Operating loss (14.9) (47.2) (20.3)
Restructuring and other charges -- (54.2) --
As described more fully in "Provision for Business Restructuring" below,
during the fourth quarter of 1996 Tandy elected to close 21 unprofitable stores.
CCI recognized a pre-tax restructuring charge aggregating $14.8 million
associated with these closings. The charges related primarily to lease
obligations and employee termination expenses. CCI also recognized impairment
charges pursuant to 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") aggregating $18.7 million during 1996 and lower of
cost or market impairments aggregating approximately $20.7 million related to
inventory liquidated at the affected stores. Additionally, the new management
team at CCI has taken and will continue to take certain actions to increase
revenues and achieve profitability. These actions include increasing service
revenues which typically have a higher gross margin than merchandise sales,
increasing direct sales to corporations, government and education customers,
creating a build-to-order program which allows customers to order
custom-configured personal computers, and developing the ability to purchase
products on-line via the Internet. Management of CCI and Tandy believe that
these actions will 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, management
may be required to close additional stores, sell certain assets or take other
measures deemed necessary to achieve improved operating performance.
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. The components of
the restructuring charge and an analysis of the reserves are outlined in a table
in Note 4 of the "Notes to Consolidated Financial Statements".
The Company recorded a pre-tax charge of $25.5 million during the second
quarter of 1996 related to an Incredible Universe restructuring program
announced in May 1996. The charge related primarily to future lease obligations,
disposition of fixed assets, and certain termination costs associated with
employees. This program included an overhead reduction plan, the closing of two
stores in the second quarter of 1996 due to inadequate sales volumes and
non-recoverable costs incurred with certain real estate sites held for new store
development. The Company also recorded a pre-tax restructuring charge of $136.6
million in the fourth quarter of 1996 related to the closing of the remaining 53
McDuff stores, exiting the Incredible Universe business (consisting of 17
remaining open stores), and the closure of 21 unprofitable Computer City stores.
The fourth quarter charges related primarily to lease obligations, real estate
costs, employee termination expenses and contract cancellation costs. In
association with the 1996 restructurings, the Company also recognized an
impairment charge of $112.8 million pursuant to FAS 121 (see discussion below)
and lower of cost or market impairments aggregating approximately $91.4 million
primarily related to inventory that was liquidated at the affected stores.
Inventory impairment charges were recognized in the Consolidated Statements of
Income as an increase in cost of sales in 1996 (see "Gross Profit" discussion
above).
In January 1997, the Company closed the respective 53 McDuff and 21 Computer
City stores. The sale of the real estate of six Incredible Universe stores and
related fixed assets and inventory to Fry's was concluded in July 1997 for
approximately $21.5 million in cash and $97.4 million in notes receivable with
no material gain or loss recognized upon the sale. At December 31, 1997, the
notes receivable balance was $75.3 million. The interest rates on the notes
range from approximately 5.9% to 6.7% with maturity dates ranging from one year
to five years. The sales of seven additional Incredible Universe locations were
completed during July and August 1997 for $81.2 million in cash, notes
receivable and marketable securities, the securities having been subsequently
sold for cash. Again, no material gain or loss was recognized upon the sale of
the assets. The note receivable approximated $0.9 million at December 31, 1997.
The lease was terminated on another location during the fourth quarter of 1997,
leaving five locations remaining at December 31, 1997.
As of March 18, 1998, signed agreements existed to sell the building and
leasehold improvements on two other Incredible Universe locations and to
sublease the land at one of these locations, subject to obtaining final
approvals and permits. Management anticipates that the three remaining
Incredible Universe locations will be sold, subleased or the leases terminated
with the lessors by the third quarter of 1998, based on signed letters of intent
obtained by the Company and/or negotiations currently in process; however, there
can be no assurance that such planned disposals or lease terminations will
occur.
Sales and operating revenues and operating losses of the stores closed
pursuant to the restructuring plans are shown below for each year ended December
31 (unaudited):
(In millions) 1997 1996 1995
------------- -------- -------- --------
Sales and operating revenues $ 164.6 $1,403.4 $1,318.0
Operating loss (1) (30.1) (114.4) (62.3)
(1) The operating loss for 1997 excludes a reserve estimate recorded in the
fourth quarter of 1997 of an additional $11.6 million relating to store
closings pursuant to the 1996 store closure plan. The $11.6 million
provision is included in selling, general and administrative expense in the
accompanying 1997 Consolidated Statements of Income.
Although no significant additional provisions are expected in 1998 relating
to the 1996 restructuring, unexpected delays in the closing of real estate
sales, among other factors, may result in additional charges. Management does
not anticipate any significant revenue or operating loss in 1998 from stores
closed pursuant to the 1996 restructuring plan.
IMPAIRMENT OF LONG-LIVED ASSETS
Upon adoption of FAS 121 in the first quarter of 1996, the Company recognized
an initial non-cash impairment loss of approximately $26.0 million to conform
with this statement, primarily as a result of grouping long-lived assets at
their lowest level of cash flows to determine impairment as required by this
statement. Fair value was principally determined based upon estimated future
discounted cash flows (before interest) related to each group of assets.
The Company recognized an additional non-cash impairment charge of $86.8
million in the fourth quarter of 1996 primarily related to the disposal of
certain long-lived assets pursuant to its restructuring plan (see Note 6 of the
"Notes to Consolidated Financial Statements"). These assets principally related
to the Incredible Universe, Computer City and McDuff stores that were part of
the store closure plan, and certain foreign real estate. Fair value was
principally determined by quoted market prices.
AST SECURITIES
On July 12, 1996, the Company received $60.0 million in cash and $30.0
million in AST common stock as final payment of a $90.0 million note payable
from AST to the Company. The Company's original cost basis approximated $6.67
per share.
During the fourth quarter of 1996, the Company recognized a pre-tax loss of
$7.0 million on the stock because the decline in the price was determined to be
other than temporary. The $7.0 million loss was charged to selling, general and
administrative expenses in the accompanying 1996 Consolidated Statements of
Income.
During August 1997, the Company sold the remaining 4,413,594 shares of AST
common stock under a tender offer from Samsung for total proceeds of $23.8
million. A gain of $1.3 million was recognized on the sale which has been
included as a reduction to SG&A expense in the accompanying 1997 Consolidated
Statements of Income.
SUPPLEMENTAL FINANCIAL DATA BY BUSINESS UNIT
Summarized in the table below are the unaudited net sales and operating
revenues and operating profit (loss) for the Company's business units for each
quarter and for the fiscal year ended December 31, 1997:
Three Months Ended
----------------------------------------- Year Ended
(In millions) March 31 June 30 Sept. 30 Dec. 31 Dec.31,1997
- --------------------------------------------------------------------------------
Net sales and operating
revenues
RadioShack(1) $ 688.2 $ 698.5 $ 760.7 $1,156.5 $3,303.9
Computer City 474.8 416.3 462.1 550.5 1,903.7
Closed units -
restructuring 128.7 31.2 4.7 -- 164.6
-------- -------- -------- -------- --------
Total $1,291.7 $1,146.0 $1,227.5 $1,707.0 $5,372.2
======== ======== ======== ======== ========
Operating profit (loss)
RadioShack(1) $ 62.4 $ 81.7 $ 79.9 $ 174.4 $ 398.4
Computer City 3.5 (9.5) (8.9) -- (14.9)
Closed units -
restructuring (14.7) (10.8) (4.3) (0.3) (30.1)
Corporate administration
and other (2.7) (7.3) 0.7 (7.3) (16.6)
-------- -------- -------- -------- --------
Total $ 48.5 $ 54.1 $ 67.4 $ 166.8 $ 336.8
======== ======== ======== ======== ========
(1) RadioShack includes outside sales and operating revenues of related support
operations.
NEW PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("FAS
130") and Financial Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information" ("FAS 131"), which are effective for
fiscal years beginning after December 15, 1997. The Company will adopt FAS 130
and FAS 131 in the first quarter of 1998. Also, the American Institute of
Certified Public Accountants issued Statement of Position 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"), which is effective for fiscal years beginning after December 15, 1998.
The Company's current policy falls within the guidelines of SOP 98-1.
SALE OF CREDIT OPERATIONS
In December 1994, the Company sold its Computer City and Incredible Universe
private label credit card portfolios to SPS Transaction Services, Inc., a
majority-owned subsidiary of Dean Witter, Discover and Company ("SPS"). As a
result of the transaction, Tandy received cash of $85.8 million at the time of
the sale, and a deferred payment of $179.8 million during 1995. The Company
discounted the deferred payment by 5.0% to yield interest income of
approximately $3.5 million over the twelve month payout period.
On March 30, 1995, the Company completed the sale, at net book value, of the
RadioShack and Tandy Name Brand private label credit card accounts and
substantially all related accounts receivable to Hurley State Bank, a subsidiary
of SPS. As a result of the transaction, Tandy received $342.8 million in cash
and a deferred payment of $49.4 million. All of the deferred payment was
received in 1995, except for $2.1 million, which was received in 1996.
TAX SHARING AND TAX BENEFIT REIMBURSEMENT AGREEMENT
Pursuant to the Company's Tax Sharing and Tax Benefit Reimbursement Agreement
(the "Agreement") with O'Sullivan Industries ("O'Sullivan"), a former subsidiary
of Tandy, the Company receives payments from O'Sullivan approximating the
federal tax benefit that O'Sullivan realizes from the increased tax basis of its
assets resulting from the initial public offering completed in February 1994.
The higher tax basis increases O'Sullivan's tax deductions and, accordingly,
reduces income taxes payable by O'Sullivan. For the years ended December 31,
1997, 1996 and 1995, the Company recognized income of $5.8 million, $0.2 million
and $1.3 million, net of tax, respectively, under this Agreement. These payments
will continue to be made over a 15-year time period and are contingent upon
O'Sullivan's level of earnings from year to year. The income is recorded as a
reduction of selling, general and administrative expenses in the accompanying
Consolidated Statements of Income.
CASH FLOW AND LIQUIDITY
Year Ended
December 31,
--------------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Operating activities $ 320.3 $ 307.5 $ 673.0
Investing activities (63.9) (112.9) (180.3)
Financing activities (272.0) (216.6) (554.8)
Tandy's cash flow and liquidity, in management's opinion, remains strong.
During the year ended December 31, 1997, cash provided by operations was $320.3
million as compared to $307.5 million for the year ended December 31, 1996 and
$673.0 million for the year ended December 31, 1995.
Cash flow from operations before working capital changes increased to
approximately $392.7 million in 1997 from $258.3 million in 1996 due to improved
operating performance. Working capital components used $72.4 million in cash
flow from operations in 1997, due primarily to a decrease in other current
liabilities of $209.6 million, related, for the most part, to resulting
expenditures associated with the restructuring activity. Substantially
offsetting the decreased cash flow from expenditures related to restructuring
was a decrease in inventory, which generated $163.8 million in cash flow in
1997, of which $106.0 million related to the liquidation of inventory at closed
Incredible Universe stores. Additionally, Computer City inventory decreased over
the prior year due to better inventory management and, to a lesser extent,
inventory liquidations at closed Computer City stores. RadioShack inventory
increased $37.7 million compared to 1996 due primarily to increased telephony
inventory--both PCS and residential hardware.
In 1996, working capital components generated $49.2 million of positive cash
flow to operations, with current liabilities generating $38.1 million of this
increase. In 1996, inventory for RadioShack and related support operations
decreased approximately $30.0 million, while during the same period, Computer
City and Incredible Universe inventories (prior to restructuring reserves)
increased approximately $30.1 million. These year-to-year inventory fluctuations
offset one another, resulting in no material net cash effect for 1996. The
increased cash flow from operations for 1995 compared to 1996 was the result of
nonrecurring cash flows generated in 1995 related to the cash received from the
sale of the credit card portfolios, which approximated $342.8 million, and
collection of the deferred payment amount from SPS of $179.8 million.
Investing activities used $63.9 million in cash flow in 1997 compared to
$112.9 million in 1996 and $180.3 million in 1995, primarily attributable to
reduced capital expenditures. Capital expenditures approximated $118.4 million
in 1997 as compared to $174.8 million and $226.5 million in 1996 and 1995,
respectively. Capital expenditures for 1997 were used primarily for retail
expansion and upgrading information systems. Capital expenditures for 1996 and
1995 were used primarily for retail expansion, upgrading information systems and
headquarter building renovations. Management anticipates that capital
expenditure requirements for 1998 will approximate $100.0 to $110.0 million,
excluding Computer City, and will consist primarily of RadioShack future store
expansions and refurbishments, reconfiguration of selected distribution centers
and updated information systems as well as other miscellaneous capital
expenditures. These expenditures will be funded primarily from cash flow from
operations. CCI management anticipates capital expenditure requirements for 1998
to approximate $50.0 to $60.0 million, related primarily to information systems,
new store openings and store remodels.
Investing activities also included cash proceeds of $12.7 million from the
sale of plant, property and equipment related to the sale of various corporate
assets. Proceeds from the sale of property, plant and equipment in 1995 resulted
primarily from sale-leaseback transactions which netted the Company $37.6
million in cash. In August 1997, the Company sold its remaining 4,413,594 shares
of AST common stock for approximately $23.8 million. The stock had been received
in 1996 as a partial payment on a note receivable from AST. The cash portion of
payments on the AST note receivable amounted to $60.0 million in 1996 and $6.7
million in 1995. In December 1997, the Company received $20.9 million from
InterTAN as final repayment on its note receivable (see "Relations with
InterTAN" below).
Cash used by financing activities was $272.0 million in 1997, compared to
$216.6 million and $554.8 million in 1995. Purchases of treasury stock required
cash of $425.6 million, $232.9 million and $502.2 million in 1997, 1996 and
1995, respectively. See "Capital Structure and Financial Condition" below for
further information on the Company's stock repurchase program. Sales of treasury
stock to the Tandy Stock Plan generated cash of $35.2 million, $39.4 million and
$44.6 million in 1997, 1996 and 1995, respectively. Dividends paid, net of tax,
in 1997, 1996 and 1995 amounted to $48.2 million, $52.5 million and $63.0
million, respectively. As a result of the Company calling for the redemption of
its $2.14 Depositary Shares of the Company's Series C Preferred Equity
Redemption Convertible Stock ("PERCS") in March 1995, the Company eliminated its
annual dividend payment to the PERCS shareholders of approximately $32.0
million. The Company plans to fund common and Series B (Tandy Employees Stock
Ownership Plan, "TESOP") preferred stock dividends with available cash and cash
flow from operations.
In 1997, the Company increased its short-term debt over the prior year by
$43.6 million, net of the reduction due to utilization of $150.0 million
long-term debt to retire short-term debt. The Company's additional short-term
debt in 1997 was used for general working capital requirements, capital
expenditures, the share repurchase program and the repayment of $28.5 million of
current maturities on outstanding medium-term notes. The Company's primary
source of short-term debt, for which borrowings and repayments have been
presented net in the Consolidated Statements of Cash Flows, consists of
short-term seasonal bank debt and commercial paper, which have maturities of
less than 90 days. The Company increased its long-term debt by $149.8 million in
1997, primarily through the issuance of $150.0 million of long-term debt under
the Company's $300.0 million Debt Shelf Registration Statement (see "Capital
Structure and Financial Condition" below). Proceeds from this offering were used
to refinance existing short-term indebtedness. Repayments of long-term
borrowings during 1997 primarily consisted of the repayment of $28.5 million of
medium-term notes.
Following are the current credit ratings for Tandy, which are generally
considered investment grade:
Standard Duff &
Category Moody's and Poor's Phelps
-------- ------- ---------- ------
Medium-Term Notes Baa2 A- A-
ESOP Senior Notes Baa2 A- N/A
Commercial Paper P-2 A-2 D-1
CAPITAL STRUCTURE AND FINANCIAL CONDITION
The Company's balance sheet and financial condition continue to be strong.
The Company's available borrowing facilities as of December 31, 1997 are
detailed in Note 14 of the "Notes to Consolidated Financial Statements".
On March 3, 1997, the Company announced that its Board of Directors
authorized management to purchase an additional 10.0 million shares, as adjusted
to reflect the two-for-one split, 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 and was undertaken as
a result of management's view of the economic value of the Company's stock. The
share increase for 1997 brings the total authorization to 30.0 million shares of
which 21.0 million shares totaling $529.2 million had been purchased as of
December 31, 1997. Approximately 11.9 million shares were repurchased in 1997
for $333.1 million. These purchases are in addition to the shares required for
employee plans which are purchased throughout the year. Purchases will continue
to be made in 1998 in the open market, but possibly to a lesser extent than in
1997, and it is expected that funding of the program will come from excess free
cash flow.
The revolving credit backup facility to Tandy's commercial paper program was
renewed during the second quarter of 1997. This facility is composed of two
agreements: a one-year facility for $200.0 million expiring June 1998 and a
five-year facility for $300.0 million expiring in June 2001. Annual commitment
fees for the facilities are 0.07% of the $200.0 million facility per annum and
0.10% of the $300.0 million facility per annum, respectively, whether used or
unused.
The total debt-to-capitalization ratio was 33.6% at December 31, 1997, 22.3%
at December 31, 1996 and 17.1% at December 31, 1995. This increase in the
debt-to-capitalization ratio in 1997 and 1996 results primarily from Tandy's
share repurchase program.
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."). The Company filed the
Registration Statement with the S.E.C. in May 1997, which was declared effective
on August 6, 1997. On August 19, 1997, the Company issued $150.0 million of 10
year unsecured notes under the Registration Statement. 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. The
proceeds were used to refinance existing short-term indebtedness.
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 of medium-term notes were issued in January 1998. Tandy's medium-term
notes outstanding at December 31, 1997 under the current and previous shelf
registrations totaled $30.0 million compared to $54.5 million at December 31,
1996. The interest rates at December 31, 1997 for the outstanding $30.0 million
in medium-term notes ranged from 6.31% to 8.63%, with the weighted average
coupon rates being 8.2% and 8.5% at December 31, 1997 and 1996, respectively.
Management believes that the Company's present borrowing capacity is greater
than the established credit lines and long-term debt in place. Management also
believes that the Company's cash flow from operations, cash and cash equivalents
and its available borrowing facilities are more than adequate to fund planned
store expansion, to meet debt service and dividend requirements and to fund its
share repurchase program.
INFLATION
Inflation has not significantly impacted the Company over the past three
years. Management does not expect inflation to have a significant impact on
operations in the foreseeable future unless global situations substantially
affect the world economy.
RELATIONS WITH INTERTAN
InterTAN, the former foreign retail operations of Tandy, was spun off to
Tandy stockholders as a tax-free dividend in fiscal 1987. Summarized in the
tables below are the notes and other receivables due from InterTAN at December
31, 1997 and 1996, as well as the income components generated from operations
relative to InterTAN for each of the three years ended December 31, 1997, 1996
and 1995.
December 31,
------------------------
(In millions) 1997 1996
- ------------- -------- --------
Gross amount of notes $ -- $ 27.8
Discount -- (8.3)
-------- --------
Net amount of notes $ -- $ 19.5
======== ========
Current portion of notes $ -- $ 4.9
Non-current portion of notes -- 14.6
Other current receivables 3.1 4.6
-------- --------
$ 3.1 $ 24.1
======== ========
Year Ended December 31,
--------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Sales and commission income $ 8.4 $ 8.5 $ 10.9
Interest income 2.0 2.9 4.1
Accretion of discount 3.4 3.8 4.2
Royalty income 3.3 2.0 0.8
-------- -------- --------
Total income $ 17.1 $ 17.2 $ 20.0
======== ======== ========
In August 1993, Trans World Electronics, Inc. ("Trans World"), a subsidiary
of Tandy, reached an agreement with InterTAN's banking syndicate to buy
approximately $42.0 million of InterTAN's debt at a negotiated, discounted
price. The debt purchased from the banks was restructured into a seven-year note
with interest of 8.64% (the "Series A" note). Trans World also provided
approximately $10.0 million in working capital and trade credit to InterTAN.
Interest on the working capital loan (the "Series B" note) of 8.11% was due
semiannually beginning February 25, 1994 until the note was paid in full in
1996. On December 30, 1997, InterTAN repaid the gross amount of the "Series A"
note in full. In consideration for the extension of credit, Trans World had
received five-year warrants exercisable for approximately 1,450,000 shares of
InterTAN common stock. The warrants were returned to InterTAN in December 1997
upon repayment of the "Series A" note. Due to the repayment of the "Series A"
note in 1997, the Company will no longer receive interest income or have an
accretion of discount from InterTAN. The Company recognized a gain of $4.7
million upon retirement of the "Series A" note.
Under the terms of a merchandise agreement reached with InterTAN in October
1993, as amended, InterTAN may purchase, on payment terms, certain products sold
or secured by Tandy. A&A International, Inc. ("A&A"), a subsidiary of Tandy, is
and will continue to be the exclusive purchasing agent for products originating
in Asia for InterTAN. A&A receives commission income for this service. License
agreements, as amended, also provide a royalty payable to Tandy, which began in
the September 1995 quarter.
YEAR 2000
The Company's management recognizes the need to ensure its operations and
relationships with vendors and other third parties will not be adversely
impacted by software processing errors arising from calculations using the year
2000 and beyond ("Year 2000"). Like many companies, a significant number of
Tandy's computer applications and systems require modification over the next two
years in order to render these systems compliant with the Year 2000.
Tandy is using a combination of internal and external resources to assess and
make the needed changes to its many different information systems such as
mainframe applications and communications systems, among others. Since beginning
the project in 1995, the Company has modified, or is in the process of
modifying, over 50% of the specialized software programs used in the Company's
business. The remaining programs are expected to be modified and completed in
1998 and early 1999. Management anticipates total expenditures associated with
the Year 2000 internal modifications to range from $8.0 to $12.0 million over
the life of the project. As required by generally accepted accounting
principles, these costs are expensed as incurred.
Additionally, in the normal course of business, the Company has made capital
investments in certain third party software systems and applications purchased
to address the retail and operational needs of the business. These systems,
which include a new point-of-sale system and financial reporting system, among
others, have been certified as Year 2000 compliant by the vendors and will be
installed prior to 2000.
The Company has, and will continue to communicate with its suppliers,
financial institutions and others with which it does business to coordinate Year
2000 conversions. Progress reports on the Year 2000 project are presented
periodically to the Company's Board of Directors.
Although there can be no assurance that the Company will be able to complete
all of the modifications in the required time frame, or that the Company will be
able to identify all Year 2000 issues before problems manifest themselves; in
management's opinion, the Company is taking adequate action to address Year 2000
issues and does not expect the financial impact of being Year 2000 compliant to
be material to the Company's consolidated financial position, results of
operations or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to Consolidated Financial Statements is found on page 31. The
Company's Financial Statements and Notes to Consolidated Financial Statements
follow the index.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Tandy will file a definitive proxy statement with the Securities and Exchange
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to directors has been omitted pursuant to General Instruction
G(3). This information is incorporated by reference from the Proxy Statement for
the 1998 Annual Meeting. For information relating to the Executive Officers of
the Company, see Part I of this report. The Section 16(A) reporting information
is incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting.
ITEM 11. EXECUTIVE COMPENSATION.
Tandy will file a definitive proxy statement with the Securities and Exchange
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to executive compensation has been omitted pursuant to General
Instruction G(3). This information is incorporated by reference from the Proxy
Statement for the 1998 Annual Meeting.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Tandy will file a definitive proxy statement with the Securities and Exchange
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to security ownership of certain beneficial owners and
management has been omitted pursuant to General Instruction G(3). This
information is incorporated by reference from the Proxy Statement for the 1998
Annual Meeting.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Tandy will file a definitive proxy statement with the Securities and Exchange
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K pursuant to Regulation 14A. The information called for by this
Item with respect to certain relationships and transactions with management and
others has been omitted pursuant to General Instruction G(3). This information
is incorporated by reference from the Proxy Statement for the 1998 Annual
Meeting.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report.
1. Financial Statements
The financial statements filed as a part of this report are listed in the
"Index to Consolidated Financial Statements" on page 31. The index and
statements are incorporated herein by reference.
3. Exhibits required by Item 601 of Regulation S-K
A list of the exhibits required by Item 601 of Regulation S-K and filed as
part of this report is set forth in the Index to Exhibits on page 61, which
immediately precedes such exhibits.
Certain instruments defining the rights of holders of long-term debt of the
Company and its consolidated subsidiaries are not filed as exhibits to this
report because the total amount of securities authorized thereunder does not
exceed ten percent of the total assets of the Company on a consolidated basis.
The Company hereby agrees to furnish the Securities and Exchange Commission
copies of such instruments upon request.
(b) Reports on Form 8-K.
1. On November 4, 1997, the Company filed a Prospectus Supplement
authorizing up to $150.0 million in "Series B" Medium-Term Notes.
The Form 8-K with exhibits related to this Prospectus Supplement
filing was filed on November 4, 1997.
2. On January 28, 1998, the Company announced it had signed a letter
of intent with Compaq Computer Corporation for a multi-year retail
sales and service agreement. The Form 8-K was filed on January 30,
1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Tandy Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TANDY CORPORATION
March 26, 1998 /s/ John V. Roach
-----------------------------
John V. Roach
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Tandy Corporation has duly caused this report to be signed on its
behalf by the following persons in the capacities indicated on this 26th day of
March, 1998.
Signature Title
/s/ John V. Roach Chairman of the Board, Director and Chief Executive
- -------------------------- Officer
John V. Roach (Chief Executive Officer)
/s/ Dwain H. Hughes Senior Vice President and Chief Financial Officer
- --------------------------
Dwain H. Hughes (Principal Financial Officer)
/s/ Richard L. Ramsey Vice President and Controller
- --------------------------
Richard L. Ramsey (Principal Accounting Officer)
/s/ James I. Cash, Jr. Director /s/ Leonard H. Roberts Director
- -------------------------- ------------------------
James I. Cash, Jr. Leonard H. Roberts
/s/ Ronald E. Elmquist Director /s/ Thomas G. Plaskett Director
- -------------------------- ------------------------
Ronald E. Elmquist Thomas G. Plaskett
/s/ Lewis F. Kornfeld, Jr. Director /s/ William E. Tucker Director
- -------------------------- ------------------------
Lewis F. Kornfeld, Jr. William E. Tucker
/s/ Jack L. Messman Director /s/ Alfred J. Stein Director
- -------------------------- ------------------------
Jack L. Messman Alfred J. Stein
/s/ William G. Morton Director /s/ John A. Wilson Director
- -------------------------- ------------------------
William G. Morton John A. Wilson
<PAGE>
TANDY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Accountants............................... 32
Consolidated Statements of Income for each of the three
years ended December 31, 1997................................. 33
Consolidated Balance Sheets at December 31, 1997
and December 31, 1996......................................... 34
Consolidated Statements of Cash Flows for each of the three
years ended December 31, 1997................................. 35
Consolidated Statements of Stockholders' Equity for
the three years ended December 31, 1997....................... 36-37
Notes to Consolidated Financial Statements...................... 38-60
All schedules have been omitted because they are not applicable, not required
or the information is included in the consolidated financial statements or notes
thereto.
Separate financial statements of Tandy Corporation have been omitted because
Tandy is primarily an operating company and the amount of restricted net assets
of consolidated and unconsolidated subsidiaries and Tandy's equity in
undistributed earnings of 50% or less-owned companies accounted for by the
equity method are not significant. All subsidiaries of Tandy Corporation are
included in the consolidated financial statements. Financial statements of 50%
or less-owned companies have been omitted because they do not, considered
individually or in the aggregate, constitute a significant subsidiary.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Tandy Corporation
In our opinion, the consolidated financial statements listed in the accompanying
index on page 31 present fairly, in all material respects, the financial
position of Tandy Corporation and its subsidiaries (the "Company") at December
31, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- -----------------------
PRICE WATERHOUSE LLP
Fort Worth, Texas
February 24, 1998
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Tandy Corporation and Subsidiaries
<CAPTION>
Year Ended
December 31,
-----------------------------------------------------------------
1997 1996 1995
(In millions, % of % of % of
except per share amounts) Dollars Revenues Dollars Revenues Dollars Revenues
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and operating revenues $5,372.2 100.0% $6,285.5 100.0% $5,839.1 100.0%
Cost of products sold 3,357.9 62.5 4,263.1 67.8 3,764.9 64.5
-------- -------- --------
Gross profit 2,014.3 37.5 2,022.4 32.2 2,074.2 35.5
-------- -------- --------
Expenses/(income):
Selling, general and administrative 1,580.3 29.4 1,761.1 28.0 1,646.5 28.2
Depreciation and amortization 97.2 1.8 108.6 1.7 92.0 1.6
Interest income (13.2) (0.2) (13.0) (0.2) (42.3) (0.7)
Interest expense 46.1 0.9 36.4 0.6 33.7 0.6
Provision for restructuring costs -- -- 162.1 2.6 1.1 --
Impairment of long-lived assets -- -- 112.8 1.8 -- --
-------- -------- --------
1,710.4 31.8 2,168.0 34.5 1,731.0 29.6
-------- -------- --------
Income (loss) before income taxes 303.9 5.7 (145.6) (2.3) 343.2 5.9
Provision (benefit) for income taxes 117.0 2.2 (54.0) (0.9) 131.3 2.2
-------- -------- --------
Net income (loss) 186.9 3.5 (91.6) (1.5) 211.9 3.6
Preferred dividends 6.1 0.1 6.3 0.1 6.5 0.1
-------- -------- --------
Net income (loss) available to
common shareholders $ 180.8 3.4% $ (97.9) (1.6%) $ 205.4 3.5%
======== ======== ========
Net income (loss) available per
common share:
Basic $ 1.69 $ (0.82) $ 1.62
======== ======== ========
Diluted $ 1.63 $ (0.82) $ 1.58
======== ======== ========
Shares used in computing earnings
per common share:
Basic 107.2 119.7 126.5
======== ======== ========
Diluted 112.2 119.7 131.4
======== ======== ========
Dividends declared per common share $ 0.40 $ 0.40 $ 0.37
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
Tandy Corporation and Subsidiaries
December 31,
-------------------------
(In millions, except for share amounts) 1997 1996
- ------------------------------------------------------------- --------
Assets
Current assets:
Cash and cash equivalents $ 105.9 $ 121.5
Accounts and notes receivable,
less allowance for doubtful accounts 251.3 227.2
Inventories, at lower of cost or market 1,205.2 1,420.5
Other current assets 153.1 170.6
-------- --------
Total current assets 1,715.5 1,939.8
-------- --------
Property, plant and equipment, at cost,
less accumulated depreciation 521.9 545.6
Other assets, net of accumulated amortization 80.1 98.0
-------- --------
$2,317.5 $2,583.4
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current
maturities of long-term debt $ 299.5 $ 258.0
Accounts payable 325.2 404.9
Accrued expenses 273.1 425.3
Income taxes payable 78.6 105.3
-------- --------
Total current liabilities 976.4 1,193.5
-------- --------
Long-term debt, excluding current
maturities 236.1 104.3
Other non-current liabilities 46.4 20.8
-------- --------
Total other liabilities 282.5 125.1
-------- --------
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, 79,869 shares 100.0 100.0
outstanding
Common stock, $1 par value, 250,000,000 shares
authorized with 138,332,000 shares issued at
December 31, 1997 and 85,645,000 shares issued
at December 31, 1996 138.3 85.6
Additional paid-in capital 19.2 105.3
Retained earnings 1,676.3 2,188.9
Foreign currency translation effects (1.7) (1.0)
Common stock in treasury, at cost, 36,023,000
and 28,417,000 shares, respectively (836.1) (1,164.5)
Unearned deferred compensation related to TESOP (37.4) (46.9)
Unrealized loss on securities available for sale,
net of taxes -- (2.6)
-------- --------
Total stockholders' equity 1,058.6 1,264.8
Commitments and contingent liabilities
-------- --------
$2,317.5 $2,583.4
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Tandy Corporation and Subsidiaries
<CAPTION>
Year Ended
December 31,
-------------------------------------
(In millions) 1997 1996 1995
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 186.9 $ (91.6) $ 211.9
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Impairment of long-lived assets -- 112.8 --
Provision for restructuring cost and other
charges -- 253.5 1.1
Depreciation and amortization 97.2 108.6 92.0
Deferred income taxes and other items 106.0 (127.8) 20.1
Provision for credit losses and bad debts 2.6 2.8 15.7
Changes in operating assets and liabilities:
Sale of credit card portfolios -- -- 342.8
Receivables (5.9) 8.0 167.4
Inventories 163.8 (0.1) (23.3)
Other current assets (20.7) 3.2 3.2
Accounts payable, accrued expenses and income
taxes (209.6) 38.1 (157.9)
-------- -------- --------
Net cash provided by operating activities 320.3 307.5 673.0
-------- -------- --------
Investing activities:
Additions to property, plant and equipment (118.4) (174.8) (226.5)
Proceeds from sale of property, plant and
equipment 12.7 2.8 42.0
Proceeds from sale of AST common stock 23.8 -- --
Payment received on AST note -- 60.0 6.7
Payment received on InterTAN note 20.9 -- --
Other investing activities (2.9) (0.9) (2.5)
-------- -------- --------
Net cash used by investing activities (63.9) (112.9) (180.3)
-------- -------- --------
Financing activities:
Purchases of treasury stock (425.6) (232.9) (502.2)
Sales of treasury stock to employee stock
purchase program 35.2 39.4 44.6
Proceeds from exercise of stock options 15.5 7.4 18.2
Dividends paid, net of taxes (48.2) (52.5) (63.0)
Changes in short-term borrowings, net 43.6 40.9 (1.8)
Additions to long-term borrowings 149.8 8.0 10.3
Repayments of long-term borrowings (42.3) (26.9) (60.9)
-------- -------- --------
Net cash used by financing activities (272.0) (216.6) (554.8)
-------- -------- --------
Decrease in cash and cash equivalents (15.6) (22.0) (62.1)
Cash and cash equivalents, at the beginning of the
year 121.5 143.5 205.6
-------- -------- --------
Cash and cash equivalents, at the end of the year $ 105.9 $ 121.5 $ 143.5
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Tandy Corporation and Subsidiaries
<CAPTION>
Common Stock Treasury Stock
Preferred ----------------- ------------------
(In millions) Stock Shares Dollars Shares Dollars
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 530.0 85.6 $ 85.6 (27.4) $ (971.6)
Purchase of treasury stock -- -- -- (9.7) (473.0)
Foreign currency translation adjustments,
net of taxes -- -- -- -- --
Sale of treasury stock to Stock Purchase
Program -- -- -- 0.9 33.8
Exercise of stock options -- -- -- 0.5 18.1
Series B convertible stock dividends,
net of taxes of $2.3 -- -- -- -- --
TESOP deferred compensation earned -- -- -- -- --
Series C PERCS dividends -- -- -- -- --
Repurchase of preferred stock -- -- -- -- (3.9)
Common stock dividends declared -- -- -- -- --
Redemption of PERCS (430.0) -- -- 11.8 433.3
Net income -- -- -- -- --
----------------------------------------------------------
Balance at December 31, 1995 $ 100.0 85.6 $ 85.6 (23.9) $ (963.3)
Purchase of treasury stock -- -- -- (5.7) (245.9)
Foreign currency translation adjustments,
net of taxes -- -- -- -- --
Sale of treasury stock to Tandy Stock Plan -- -- -- 0.9 36.6
Exercise of stock options and grant of
stock awards -- -- -- 0.3 11.8
Series B convertible stock dividends,
net of taxes of $2.2 -- -- -- -- --
TESOP deferred compensation earned -- -- -- -- --
Repurchase of preferred stock -- -- -- -- (3.7)
Unrealized loss on AST stock, net of tax -- -- -- -- --
Common stock dividends declared -- -- -- -- --
Net loss -- -- -- -- --
----------------------------------------------------------
Balance at December 31, 1996 $ 100.0 85.6 $ 85.6 (28.4) $(1,164.5)
Purchase of treasury stock -- -- -- (9.1) (412.1)
Foreign currency translation adjustments,
net of taxes -- -- -- -- --
Sale of treasury stock to Tandy Stock Plan -- -- -- 0.8 26.5
Exercise of stock options and grant of
stock awards -- -- -- 0.7 23.9
Series B convertible stock dividends,
net of taxes of $2.1 -- -- -- -- --
TESOP deferred compensation earned -- -- -- -- --
Repurchase of preferred stock -- -- -- -- (4.5)
Unrealized loss on AST stock, net of tax -- -- -- -- --
Common stock dividends declared -- -- -- -- --
Two-for-one common stock split -- 52.7 52.7 -- 694.6
Net income -- -- -- -- --
----------------------------------------------------------
Balance at December 31, 1997 $ 100.0 138.3 $ 138.3 (36.0) $ (836.1)
==========================================================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - continued
Tandy Corporation and Subsidiaries
<CAPTION>
Foreign
Additional Currency Unearned Unrealized
Paid in Retained Translation Deferred Loss on
(In millions) Capital Earnings Effects Compensation Securities Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 $ 93.3 $2,177.0 $ (1.8) $ (62.3) -- $1,850.2
Purchase of treasury stock -- -- -- -- -- (473.0)
Foreign currency translation adjustments,
net of taxes -- -- 0.7 -- -- 0.7
Sale of treasury stock to Stock Purchase
Program 10.8 -- -- -- -- 44.6
Exercise of stock options 2.0 -- -- -- -- 20.1
Series B convertible stock dividends,
net of taxes of $2.3 -- (4.2) -- -- -- (4.2)
TESOP deferred compensation earned -- -- -- 7.5 -- 7.5
Series C PERCS dividends -- (4.8) -- -- -- (4.8)
Repurchase of preferred stock -- -- -- -- -- (3.9)
Common stock dividends declared -- (47.8) -- -- -- (47.8)
Redemption of PERCS (3.3) -- -- -- -- --
Net income -- 211.9 -- -- -- 211.9
----------------------------------------------------------------------
Balance at December 31, 1995 $ 102.8 $2,332.1 $ (1.1) $ (54.8) -- $1,601.3
Purchase of treasury stock -- -- -- -- -- (245.9)
Foreign currency translation adjustments,
net of taxes -- -- 0.1 -- -- 0.1
Sale of treasury stock to Tandy Stock Plan 2.8 -- -- -- -- 39.4
Exercise of stock options and grant of
stock awards (0.3) -- -- -- -- 11.5
Series B convertible stock dividends,
net of taxes of $2.2 -- (4.1) -- -- -- (4.1)
TESOP deferred compensation earned -- -- -- 7.9 -- 7.9
Repurchase of preferred stock -- -- -- -- -- (3.7)
Unrealized loss on AST stock, net of tax -- -- -- -- (2.6) (2.6)
Common stock dividends declared -- (47.5) -- -- -- (47.5)
Net loss -- (91.6) -- -- -- (91.6)
----------------------------------------------------------------------
Balance at December 31, 1996 $ 105.3 $2,188.9 $ (1.0) $ (46.9) (2.6) $1,264.8
Purchase of treasury stock -- -- -- -- -- (412.1)
Foreign currency translation adjustments,
net of taxes -- -- (0.7) -- -- (0.7)
Sale of treasury stock to Tandy Stock Plan 8.7 -- -- -- -- 35.2
Exercise of stock options and grant of
stock awards 0.5 -- -- -- -- 24.4
Series B convertible stock dividends,
net of taxes of $2.1 -- (4.0) -- -- -- (4.0)
TESOP deferred compensation earned -- -- -- 9.5 -- 9.5
Repurchase of preferred stock -- -- -- -- -- (4.5)
Unrealized loss on AST stock, net of tax -- -- -- -- 2.6 2.6
Common stock dividends declared -- (43.2) -- -- -- (43.2)
Two-for-one common stock split (95.3) (652.3) -- -- -- (0.3)
Net income -- 186.9 -- -- -- 186.9
----------------------------------------------------------------------
Balance at December 31, 1997 $ 19.2 $1,676.3 $ (1.7) $ (37.4) -- $1,058.6
======================================================================
The accompanying notes are an integral part of these consolidated financial
statements
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tandy Corporation and Subsidiaries
NOTE 1 - DESCRIPTION OF BUSINESS
Tandy Corporation ("Tandy" or the "Company") is engaged in consumer
electronics retailing including the retail sale of personal computers.
RadioShack(R) is the largest of Tandy's retail store systems with company-owned
stores and dealer/franchise outlets. RadioShack's sales and operating revenues
are primarily related to private label consumer electronics, brand name personal
computers, wireless communication products and services, telephony and direct to
home satellite systems. Tandy also operates, through its subsidiary, Computer
City, Inc. ("CCI" or "Computer City") the Computer City(R) store chain. Computer
City sales relate to personal computer hardware and software, printers,
peripheral equipment and accessories through retail locations and direct sales
to corporate, government and education customers. Additionally, Tandy continues
to operate certain related retail support groups and consumer electronics
manufacturing businesses.
In December 1996, the Company announced its plan to exit the Incredible
Universe business as well as certain other stores (see Note 4).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Tandy and its majority owned subsidiaries. Investments in 20% to
50% owned companies are accounted for on the equity method. The fiscal periods
of certain foreign operations end one month earlier than the Company's year end
to facilitate their inclusion in the consolidated financial statements.
Significant intercompany transactions are eliminated in consolidation.
FOREIGN CURRENCY TRANSLATION: In accordance with the Financial Accounting
Standards Board (the "FASB") Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation," balance sheet accounts of the Company's foreign
operations are translated from foreign currencies into U.S. dollars at year end
or historical rates while income and expenses are translated at the weighted
average sales exchange rates for the year. Translation gains or losses related
to net assets located outside the United States are shown as a separate
component of stockholders' equity. Gains and losses resulting from foreign
currency transactions (transactions denominated in a currency other than the
entity's functional currency) are included in net income. Such foreign currency
transaction gains were not significant for each of the years ended December 31,
1997, 1996 and 1995.
EXTENDED SERVICE CONTRACTS: Tandy's retail operations offer extended service
contracts on products sold. These contracts generally provide extended service
coverage for periods of 12 to 48 months. During 1997, 1996 and 1995, the Company
sold extended service contracts on behalf of an unrelated third party and, to a
much lesser extent, sold its own extended service contracts. Contracts sold
prior to 1995 were offered directly by the Company. The Company accounts for
sales of its own contracts in accordance with FASB Technical Bulletin No. 90-1,
"Accounting for Separately Priced Extended Warranty and Product Maintenance
Contracts" which requires that revenues from sales of extended service contracts
be recognized ratably over the lives of the contracts. Costs directly related to
sales of such contracts are deferred and charged to expense proportionately as
the revenues are recognized. A loss is recognized on extended service contracts
if the sum of the expected costs of providing services under the contracts
exceeds related unearned revenue. Commission revenue for the unrelated third
party extended service contracts is recognized at the time of sale.
CASH AND CASH EQUIVALENTS: Cash on hand in stores, deposits in banks and all
highly liquid investments with a remaining maturity of three months or less at
the time of purchase are considered cash and cash equivalents. Cash equivalents
are carried at cost, which approximates market value.
MARKETABLE SECURITIES: The Company had an investment in AST common stock at
December 31, 1996 (see Note 7) which it sold on August 14, 1997. This investment
was classified as an other current asset in the accompanying Consolidated
Balance Sheet at December 31, 1996. Pursuant to Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("FAS 115"), this investment was categorized as "available
for sale". In accordance with FAS 115, securities classified as "available for
sale" are marked to market based upon market value fluctuations. Resulting
adjustments, net of deferred taxes, are reported as a component of stockholders'
equity until realized. Declines in fair value that are considered to be other
than temporary are recognized in earnings and establish a new cost basis for the
security. Realized gains and losses are also included in earnings and are
determined on the specific identification method.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: An allowance for
doubtful accounts is provided when accounts are determined to be uncollectible.
Concentrations of credit risk with respect to customer receivables are
limited due to the large number of customers comprising the Company's customer
base and their location in many different geographic areas of the country.
INVENTORIES: Inventories are stated at the lower of cost (principally based
on average cost) or market value and are comprised primarily of finished goods.
PROPERTY, PLANT AND EQUIPMENT: Property and equipment are stated at cost. For
financial reporting purposes, depreciation and amortization are primarily
calculated using the straight-line method, which amortizes the cost of the
assets over their estimated useful lives. The ranges of estimated useful lives
are:
- -------------------------------------------------------------------------
Buildings...................................... 10-40 years
Buildings under capital lease..................over the life of the lease
Equipment...................................... 2-15 years
Leasehold improvements......................... primarily, the shorter of
the life of the improvements or the
term of the related lease and certain renewal periods
- -------------------------------------------------------------------------
When depreciable assets are sold or retired, the related cost and accumulated
depreciation are removed from the accounts. Any gains or losses are included in
selling, general and administrative expenses. Major additions and betterments
are capitalized. Maintenance and repairs which do not materially improve or
extend the lives of the respective assets are charged to operating expenses as
incurred. Amortization of buildings under capital leases is included in
depreciation and amortization in the Consolidated Statements of Income.
IMPAIRMENT OF LONG-LIVED ASSETS: Effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("FAS 121") which requires that long-lived assets (primarily property, plant and
equipment and goodwill) held and used by an entity or to be disposed of, be
reviewed for impairment whenever events or changes in circumstances indicate
that the net book value of the asset may not be recoverable. An impairment loss
will be recognized if the sum of the expected future cash flows (undiscounted
and before interest) from the use of the asset is less than the net book value
of the asset. The amount of the impairment loss will generally be measured as
the difference between the net book value of the assets and the estimated fair
value of the related assets. See Note 6 for further information.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of financial instruments
is determined by reference to various market data and other valuation techniques
as appropriate. Unless otherwise disclosed, the fair values of financial
instruments approximate their recorded values due primarily to the short-term
nature of their maturities or their varying interest rate.
HEDGING AND DERIVATIVE ACTIVITY: The Company entered into interest rate swap
agreements in the first quarter of 1995 to manage its interest rate exposure by
effectively trading floating interest rates for fixed interest rates. The
Company used the swaps to hedge certain obligations with floating rates; thus,
the difference between the floating and fixed interest rate amounts, based on
these swap agreements, was recorded as income or expense. Through December 31,
1996, the Company had entered into five swaps with regard to notional amounts
totaling $90.0 million. Prior to 1995, the Company was not a party to any
interest rate swaps. At December 31, 1996 and 1995, the Company would have had
to pay approximately $3.8 million and $7.0 million, respectively, to terminate
the interest rate swaps in place. These amounts were obtained from the
counterparties and represent the fair value of the swap agreements. At December
31, 1996, the Company recognized a termination charge equal to the estimated
amount the Company would be required to pay to terminate the swaps of $3.8
million due to the early termination of the underlying lease obligations (see
Note 4). These swaps were terminated in March 1997 at no material gain or loss.
The Company has not historically utilized derivatives to manage foreign
currency risks and exposure except for an immaterial amount of foreign exchange
forward contracts used to hedge a portion of its foreign purchases. As of
December 31, 1997, the Company had no outstanding purchase orders for which a
foreign exchange contract was used as a hedge. Moody's has assigned a
counterparty rating to Tandy Corporation of Baa2. This rating is an opinion of
the financial capacity of Tandy to honor its senior obligations under financial
contracts. Financial contracts entered into by Tandy include the limited use of
foreign currency forwards to hedge foreign exchange risk arising from the
purchase of inventory.
REVENUES: Retail sales are recorded on the accrual basis.
INCOME TAXES: Income taxes are accounted for using the asset and liability
method pursuant to Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("FAS 109"). Deferred taxes are recognized for the
tax consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
and carrying amounts and the tax bases of existing assets and liabilities. The
effect on deferred taxes for a change in tax rates is recognized in income in
the period that includes the enactment date. In addition, FAS 109 requires the
recognition of future tax benefits to the extent that realization of such
benefits are more likely than not.
EARNINGS PER SHARE: Effective December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("FAS
128"). FAS 128 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 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 year ended December 31, 1997 and all prior periods
presented herein have been restated to conform with the provisions of this
statement. The following is a reconciliation of the numerator and denominator
used in the basic and diluted EPS calculation:
<TABLE>
<CAPTION>
(Dollars and shares in 1997 1996 1995
millions, except per ---------------------------------- ---------------------------------- -----------------------------------
share amounts) Income Shares Per Share Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------- -------- ----------- ------------- -------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income $ 186.9 $ (91.6) $ 211.9
Less: Preferred
stock dividends (6.1) (6.3) (6.5)
-------- -------- --------
Basic EPS
Net income (loss)
available to
common
shareholders 180.8 107.2 $ 1.69 (97.9) 119.7 $ (0.82) 205.4 126.5 $ 1.62
======== ======== ========
Effect of dilutive
securities:
Plus dividends on
Series B
preferred stock 6.1 6.5
Additional
contribution
required for
TESOP if
preferred stock
had been converted (3.9) 3.5 (3.7) 3.8
Stock options 1.5 1.1
-------- -------- -------- --------
Diluted EPS
Net income (loss)
available to common
shareholders
plus assumed
conversions $ 183.0 112.2 $ 1.63 $ (97.9) 119.7 $ (0.82) $ 208.2 131.4 $ 1.58
======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
Options to purchase 0.7 million and 0.9 million shares of common stock in
1997 and 1995, respectively, were not included in the computation of diluted
earnings per common share because the option exercise price was greater than the
average market price of the common stock during the year. In 1996, 4.6 million
options to purchase common stock and an additional 3.6 million shares of Series
B preferred stock were not included in the computation of diluted earnings per
common share because the Company was in a loss position and their inclusion
would have been antidilutive.
STOCK-BASED COMPENSATION: The Company adopted, on a disclosure basis only,
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" in 1996. The Company continues to measure compensation costs under
Accounting Principles Board Opinion 25, "Accounting for Stock Issued to
Employees" and its related interpretations.
ADVERTISING COSTS: All advertising costs of the Company are expensed the
first time the advertising takes place. Advertising expense was $195.4 million,
$254.6 million, and $257.3 million for the years ended December 31, 1997, 1996
and 1995, respectively.
CAPITALIZED SOFTWARE COSTS: The Company capitalizes qualifying costs
relating to developing or obtaining internal-use software. Capitalization of
costs begins after the conceptual formulation stage has been completed.
Capitalized costs are amortized over the estimated useful life of the software,
which ranges between three and five years. Capitalized costs at December 31,
1997, 1996 and 1995 totaled $25.4 million, $23.5 million and $3.5 million, net
of accumulated amortization of $5.7 million, $2.4 million and $1.5 million,
respectively. In January 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). The SOP
becomes effective for all fiscal years beginning after December 15, 1998. The
Company's current policy falls within the guidelines of SOP 98-1.
PERVASIVENESS OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results could
differ from those estimates.
RECLASSIFICATION: Certain amounts in prior years have been reclassified to
conform to current year presentation.
NOTE 3 - 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. Treasury shares were not split;
however, an adjustment was made to the Company's stockholders' equity section of
the balance sheet to split the cost of treasury stock (in effect a cancellation
of treasury shares). 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 and the accompanying notes have been
adjusted to reflect the split on a retroactive basis. Previously awarded stock
options, restricted stock awards, and all other agreements payable in the
Company's common stock have been adjusted or amended to reflect the split.
Additionally, cash dividends which were $0.20 per share per quarter prior to the
two-for-one split have been adjusted to $0.10 per share per quarter to reflect
the two-for-one split.
NOTE 4 - 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. The components of
the restructuring charge and an analysis of the reserves are outlined in the
1996 Restructuring table below.
The Company recorded a pre-tax charge of $25.5 million during the second
quarter of 1996 related to an Incredible Universe restructuring program
announced in May 1996. The charge related primarily to future lease obligations,
disposition of fixed assets, and certain termination costs associated with
employees. This program included an overhead reduction plan, the closing of two
stores in the second quarter of 1996 due to inadequate sales volumes and
non-recoverable costs incurred with certain real estate sites held for new store
development. The Company also recorded a pre-tax restructuring charge of $136.6
million in the fourth quarter of 1996 related to the closing of the remaining 53
McDuff stores, exiting the Incredible Universe business (consisting of 17
remaining open stores), and the closure of 21 unprofitable Computer City stores.
The fourth quarter charges related primarily to lease obligations, real estate
costs, employee termination expenses and contract cancellation costs. In
association with the 1996 restructurings, the Company also recognized an
impairment charge of $112.8 million pursuant to FAS 121 (see Note 6) and lower
of cost or market impairments aggregating approximately $91.4 million primarily
related to inventory that was liquidated at the affected stores. Inventory
impairment charges were recognized in the Consolidated Statements of Income as
an increase in cost of sales in 1996.
In January 1997, the Company closed the respective 53 McDuff and 21 Computer
City stores. The sale of the real estate of six Incredible Universe stores and
related fixed assets and inventory to Fry's Electronics, Inc. and its affiliates
("Fry's") was concluded in July 1997 for approximately $21.5 million in cash and
$97.4 million in notes receivable with no material gain or loss recognized upon
the sale. At December 31, 1997, the notes receivable balance was $75.3 million.
The interest rates on the notes range from approximately 5.9% to 6.7% with
maturity dates ranging from one year to five years. The sales of seven
additional Incredible Universe locations were completed during July and August
1997 for $81.2 million in cash, notes receivable and marketable securities, the
securities having been subsequently sold for cash. Again, no material gain or
loss was recognized upon the sale of the assets. The note receivable
approximated $0.9 million at December 31, 1997. The lease was terminated on
another location during the fourth quarter of 1997, leaving five locations
remaining at December 31, 1997.
As of March 18, 1998, signed agreements existed to sell the building and
leasehold improvements on two other Incredible Universe locations and to
sublease the land at one of these locations, subject to obtaining final
approvals and permits. Management anticipates that the three remaining
Incredible Universe locations will be sold, subleased or the leases terminated
with the lessors by the third quarter of 1998, based on signed letters of intent
obtained by the Company and/or negotiations currently in process; however, there
can be no assurance that such planned disposals or lease terminations will
occur.
Sales and operating revenues and operating losses of the stores closed
pursuant to the restructuring plans are shown below for each year ended December
31 (unaudited):
(In millions) 1997 1996 1995
------------- -------- -------- --------
Sales and operating revenues $ 164.6 $1,403.4 $1,318.0
Operating loss (1) (30.1) (114.4) (62.3)
(1) The operating loss for 1997 excludes a reserve estimate recorded in the
fourth quarter of 1997 of an additional $11.6 million relating to store
closings pursuant to the 1996 store closure plan. The $11.6 million
provision is included in selling, general and administrative expense in the
accompanying 1997 Consolidated Statements of Income.
Although no significant additional provisions are expected in 1998 relating
to the 1996 restructuring, unexpected delays in the closing of real estate
sales, among other factors, may result in additional charges.
The components of the combined restructuring charges and an analysis of the
amounts charged against the reserve are outlined in the following table:
<TABLE>
1996 Restructuring
<CAPTION>
Charges Charges
Balance Additional 1/1/96- Balance Additional 1/1/97- Balance
(In millions) 12/31/95 Reserves 12/31/96 12/31/96 Reserves 12/31/97 12/31/97
- ------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate obligations $ 12.2 96.8 (15.5) 93.5 11.6 (78.1) $ 27.0
Disposal of fixed
assets -- 8.0 (8.0) -- -- -- --
Inventory impairment -- 2.5 (2.5) -- -- -- --
Termination benefits -- 7.1 (2.5) 4.6 -- (4.6) --
Contract termination
costs -- 13.2 -- 13.2 -- (13.2) --
Other -- 34.5 (8.1) 26.4 -- (24.8) 1.6
-------- -------- -------- -------- -------- -------- --------
$ 12.2 162.1 (36.6) 137.7 11.6 (120.7) $ 28.6
======== ======== ======== ======== ======== ======== ========
</TABLE>
NOTE 5 - NEW COMPUTER CITY STRATEGY
On June 26, 1997, the Company organized a new subsidiary, CCI, 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.
Sales and operating revenues, operating losses, and restructuring and other
charges (before interest and taxes) for CCI for each of the three years ended
December 31 are presented below:
1997 1996 1995
-------- -------- --------
Sales and operating revenues $1,903.7 $2,080.5 $1,779.2
Operating loss (14.9) (47.2) (20.3)
Restructuring and other charges -- (54.2) --
As described more fully in Note 4, during the fourth quarter of 1996 Tandy
elected to close 21 unprofitable stores. CCI recognized a pre-tax restructuring
charge aggregating $14.8 million associated with these closings. The charges
related primarily to lease obligations and employee termination expenses. CCI
also recognized impairment charges pursuant to FAS 121 aggregating $18.7 million
during 1996 and lower of cost or market impairments aggregating approximately
$20.7 million related to inventory liquidated at the affected stores.
Additionally, the new management team at CCI has taken and will continue to take
certain actions to increase revenues and achieve profitability. These actions
include increasing service revenues which typically have a higher gross margin
than merchandise sales, increasing direct sales to corporations, government and
education customers, creating a build-to-order program which allows customers to
order custom-configured personal computers, and developing the ability to
purchase products on-line via the Internet. Management of CCI and Tandy believe
that these actions will 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,
management may be required to close additional stores, sell certain assets or
take other measures deemed necessary to achieve improved operating performance.
NOTE 6 - IMPAIRMENT OF LONG-LIVED ASSETS
Upon adoption of FAS 121 in the first quarter of 1996, the Company recognized
an initial non-cash impairment loss of approximately $26.0 million to conform
with this statement, primarily as a result of grouping long-lived assets at
their lowest level of cash flows to determine impairment as required by this
statement. Fair value was principally determined based upon estimated future
discounted cash flows (before interest) related to each group of assets.
The Company recognized an additional non-cash impairment charge of $86.8
million in the fourth quarter of 1996 primarily related to the disposal of
certain long-lived assets pursuant to its restructuring plan (see Note 4). These
assets principally related to the Incredible Universe, Computer City and McDuff
stores that were part of the store closure plan, and certain foreign real
estate. Fair value was principally determined by quoted market prices.
NOTE 7 - AST SECURITIES
On July 12, 1996, the Company received $60.0 million in cash and $30.0
million in AST common stock as final payment of a $90.0 million note payable
from AST to the Company. The Company's original cost basis approximated $6.67
per share.
During the fourth quarter of 1996, the Company sold 85,000 shares of the
acquired stock for proceeds aggregating $0.5 million. Based upon AST's closing
market price at December 31, 1996, and a proposal from Samsung Electronics Co.,
Ltd. ("Samsung") to purchase the remaining outstanding shares of AST for $5.10
per share, the Company recognized a pre-tax loss of $7.0 million on the stock
because the decline in the price was determined to be other than temporary. The
$7.0 million loss was charged to selling, general and administrative expenses in
the accompanying 1996 Consolidated Statements of Income. The then remaining
unrealized pre-tax loss of $4.0 million, considered a temporary market decline,
was recorded as a $2.6 million, net of tax, reduction to stockholders' equity.
During August 1997, the Company sold the remaining 4,413,594 shares of AST
common stock under a tender offer from Samsung for total proceeds of $23.8
million and recovered the $2.6 million, net of tax, temporary market decline
originally recorded as a reduction of equity. Additionally, a gain of $1.3
million was recognized on the sale which has been included as a reduction to
SG&A expense in the accompanying 1997 Consolidated Statements of Income.
NOTE 8 - SALE OF CREDIT OPERATIONS
In December 1994, the Company sold its Computer City and Incredible Universe
private label credit card portfolios to SPS Transactions Services, a
majority-owned subsidiary of Dean Witter, Discover & Company ("SPS"). As a
result of the transaction, Tandy received cash of $85.8 million at the time of
the sale, and a deferred payment of $179.8 million during 1995. The Company
discounted the deferred payment by 5.0% to yield interest income of
approximately $3.5 million over the twelve month payout period.
On March 30, 1995, the Company completed the sale, at net book value, of the
RadioShack and Tandy Name Brand private label credit card accounts and
substantially all related accounts receivable to Hurley State Bank, a subsidiary
of SPS. As a result of the transaction, Tandy received $342.8 million in cash
and a deferred payment of $49.4 million. All of the deferred payment was
received in 1995, except for $2.1 million, which was received in 1996.
NOTE 9 - CASH EQUIVALENTS
The weighted average interest rates were 5.9% and 5.7% at December 31, 1997
and 1996, respectively, for cash equivalents totaling $53.1 million and $25.4
million, respectively.
NOTE 10 - ACCOUNTS AND NOTES RECEIVABLE
Accounts and Notes Receivable
December 31,
---------------------------
(In millions) 1997 1996
- ------------- -------- --------
Trade accounts receivable $ 175.4 $ 211.0
Receivables from InterTAN 3.1 9.5
Current portion of Fry's notes receivable 27.6 --
Receivables from service providers 23.4 1.9
Other receivables 30.6 12.7
Less allowance for doubtful accounts (8.8) (7.9)
-------- --------
$ 251.3 $ 227.2
======== ========
As of December 31, the Company had the following notes receivable
outstanding:
Notes Receivable
December 31,
---------------------------
(In millions) 1997 1996
- ------------- -------- --------
InterTAN (see Note 26) $ -- $ 19.5
Fry's (see Note 4) 75.3 --
Other 4.7 --
-------- ---------
80.0 19.5
Less amount classified as
accounts and notes receivable (28.8) (4.9)
-------- ---------
Total amount classified as other
assets $ 51.2 $ 14.6
======== =========
Interest income earned, including accretion of discount if applicable, on the
amounts outstanding during the three years ended December 31 was as follows:
Year Ended
December 31,
-------------------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
AST (1) $ -- $ 2.6 $ 4.9
InterTAN 5.4 6.7 8.3
Fry's 3.3 -- --
Credit card operations (2) -- -- 18.5
Other (3) 4.5 3.7 10.6
-------- -------- --------
Total $ 13.2 $ 13.0 $ 42.3
======== ======== ========
(1) The note receivable from AST was paid in full in 1996.
(2) The Company completed the sale of its credit card operations during 1995
(see Note 8).
(3) Other interest income for 1995 included $6.2 million of IRS settlements.
Allowance for Doubtful Accounts
December 31,
------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Balance at the beginning of the year $ 7.9 $ 5.8 $ 21.4
Provision for credit losses and bad debt
included in selling, general and
administrative expense 2.6 2.8 15.7
Reserve on credit accounts sold -- -- (18.8)
Uncollected receivables written off,
net of recoveries (1.7) (0.7) (12.5)
-------- -------- --------
Balance at the end of the year $ 8.8 $ 7.9 $ 5.8
======== ======== ========
NOTE 11 - OTHER CURRENT ASSETS
The December 31, 1997 balance of other current assets includes $67.5 million
of deferred income taxes primarily relating to the remaining accrued
restructuring costs and insurance reserves, $28.0 million of properties held for
sale relating to five Incredible Universe locations which the Company had not
disposed of at December 31, 1997 and the current portion of notes receivable
(see Note 10). The December 31, 1996 balance of other current assets included
$99.2 million of deferred income taxes principally relating to the Company's
1996 restructuring plan and charges related thereto (see Notes 4, 6 and 17).
NOTE 12 - PROPERTY, PLANT AND EQUIPMENT
December 31,
--------------------------
(In millions) 1997 1996
- ------------- -------- --------
Land $ 16.9 $ 18.8
Buildings 180.9 209.3
Buildings under capital lease 31.3 34.4
Furniture, fixtures and equipment 474.8 402.0
Leasehold improvements 377.8 369.8
------- --------
1,081.7 1,034.3
Less accumulated depreciation
and amortization of capital leases (559.8) (488.7)
------- --------
$ 521.9 $ 545.6
======= ========
NOTE 13 - TREASURY STOCK REPURCHASE PROGRAM
On March 3, 1997, the Company announced that its Board of Directors
authorized management to purchase an additional 10.0 million 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 for 1997 brings the total authorization to 30.0
million shares of which 21.0 million shares, totaling $529.2 million, had been
purchased as of December 31, 1997. These purchases are in addition to the shares
required for employee plans which are purchased throughout the year.
NOTE 14 - INDEBTEDNESS AND BORROWING FACILITIES
Tandy's short-term credit facilities, including revolving credit lines, are
summarized in the accompanying short-term borrowing facilities table below. The
method used to compute averages in the short-term borrowing facilities table is
based on a daily weighted average computation which takes into consideration the
time period such debt was outstanding as well as the amount outstanding. The
Company's primary source of short-term debt, for which borrowings and repayments
are presented net of each other in the Consolidated Statements of Cash Flows,
consists of short-term seasonal bank debt and commercial paper. The commercial
paper has a typical maturity of 90 days or less, as does the short-term seasonal
bank debt.
The Company has an active commercial paper program. A $500.0 million
committed facility is in place as backup for the commercial paper program. This
facility is composed of two agreements: a one-year facility for $200.0 million
expiring June 1998 and a five-year facility for $300.0 million expiring June
2001. Annual commitment fees for the two facilities are 0.07% of the $200.0
million facility per annum and 0.10% of the $300.0 million facility per annum,
respectively, whether used or unused. The banks limit the amount of commercial
paper that may be outstanding to a maximum of $500.0 million. At December 31,
1997, there was $35.0 million of commercial paper outstanding backed up by these
facilities.
On August 19, 1997, the Company issued $150.0 million of 10 year unsecured
senior notes under a $300.0 million Debt Shelf Registration Statement (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. Tandy's medium-term
notes outstanding at December 31, 1997 under the 1991 and 1997 shelf
registrations totaled $30.0 million compared to $54.5 million at December 31,
1996. The interest rates at December 31, 1997 for the outstanding $30.0 million
in medium-term notes ranged from 6.31% to 8.63%, with the weighted average
coupon rates being 8.2% and 8.5% at December 31, 1997 and 1996, respectively.
On July 17, 1997, the Company provided to CCI a $150.0 million line of credit
which expired on December 31, 1997. Any borrowings and related interest charges
on this line of credit between CCI and the Company were treated as intercompany
and eliminated in consolidation. On December 19, 1997, CCI replaced the $150.0
million line of credit with a revolving credit facility with a syndicate of six
banks. As of December 31, 1997, $30.0 million was outstanding under this line of
credit. This $150.0 million credit facility matures in December 1998. Tandy
Corporation is the guarantor of the new credit line.
The Company established an employee stock ownership trust in June 1990.
Further information on the trust and its related indebtedness, which is
guaranteed by the Company, is detailed in the discussion of the Tandy Fund in
Note 19.
Long-term borrowings and capital lease obligations outstanding at December
31, 1997 mature as follows:
(In millions)
- -----------------------------------------------------------------
1998.................................................. $ 39.3
1999.................................................. 19.8
2000.................................................. 15.4
2001.................................................. 18.2
2002.................................................. 5.8
2003 and thereafter................................... 176.9
--------
Total................................................. $ 275.4
========
- -----------------------------------------------------------------
The fair value of the Company's long-term debt of $224.9 million (including
current portion, but excluding capital leases) is approximately $230.6 million
at December 31, 1997. The fair value was computed using interest rates which
were in effect at December 31, 1997 for similar debt instruments.
Borrowings payable within one year are summarized in the accompanying
short-term debt table below. The short-term debt caption includes primarily
domestic seasonal borrowings.
Short-Term Debt
December 31,
--------------------
(In millions) 1997 1996
- ------------- -------- -------
Short-term bank debt and other short-term debt $ 225.2 $ 156.7
Current portion of long-term debt 25.0 28.7
Commercial paper, less unamortized discount 35.0 59.9
Current portion of capitalized lease obligations 1.9 0.4
Current portion of guarantee of TESOP indebtedness 12.4 12.3
-------- --------
Total short-term debt $ 299.5 $ 258.0
======== ========
Long-Term Debt
December 31,
--------------------
(In millions) 1997 1996
- ------------- -------- --------
Notes payable with interest rates
at December 31, 1997 ranging from
5.10% to 5.30% $ 9.1 $ 9.3
Notes payable issued pursuant to the
Registration Statement with an
interest rate of 6.95%, net of
unamortized issuance costs of
$6.3 million 143.7 --
Medium-term notes payable, net of
issuance cost, with interest
rates at December 31, 1997 ranging
from 6.31% to 8.63% 30.0 54.5
-------- --------
182.8 63.8
Less portion due within one year
included in current notes payable (25.0) (28.7)
-------- --------
157.8 35.1
-------- --------
Capital lease obligations (see Note 24) 50.5 29.7
Less current portion (1.9) (0.4)
-------- --------
48.6 29.3
-------- --------
Guarantee of TESOP indebtedness
(see Note 19) 42.1 52.2
Less current portion (12.4) (12.3)
-------- --------
29.7 39.9
-------- --------
Total long-term debt $ 236.1 $ 104.3
======== ========
Short-Term Borrowing Facilities
Year Ended December 31,
--------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Domestic seasonal bank credit lines
and bank money market lines:
Lines available at year end $1,190.0 $ 987.0 $ 940.0
Loans outstanding at year end $ 225.2 $ 147.2 $ 64.9
Weighted average interest rate at
year end 6.5% 5.9% 6.0%
Weighted average of loans
outstanding during year $ 216.9 $ 91.8 $ 107.0
Weighted average interest rate during
period 5.9% 5.6% 6.2%
Short-term foreign credit lines:
Lines available at year end $ 132.3 $ 157.6 $ 139.1
Loans outstanding at year end None None None
Weighted average interest rate at
year end N/A N/A N/A
Weighted average of loans outstanding
during period $ 0.8 N/A $ 0.3
Weighted average interest rate during
period 6.0% N/A 3.8%
Letters of credit and banker's acceptance
lines of credit:
Lines available at year end $ 237.3 $ 230.3 $ 417.5
Acceptances outstanding at year end None None None
Letters of credit open against
outstanding purchase orders at year end $ 65.9 $ 33.9 $ 79.9
Commercial paper credit facilities:
Commercial paper outstanding at year end $ 35.0 $ 59.9 $ 101.3
Weighted average interest rate at
year end 7.1% 5.8% 6.0%
Weighted average of commercial paper
outstanding during period $ 189.7 $ 210.2 $ 198.1
Weighted average interest rate during
period 5.9% 5.7% 6.2%
NOTE 15 - LEASES AND COMMITMENTS
Tandy leases rather than owns most of its facilities. The RadioShack stores
comprise the largest portion of Tandy's leased facilities. The RadioShack and
Computer City stores are located primarily in major shopping malls, shopping
centers or freestanding facilities owned by other companies. Store leases are
generally based on a minimum rental plus a percentage of the store's sales in
excess of a stipulated base figure. Tandy also leases distribution centers and
office space.
Future minimum rent commitments at December 31, 1997 for all long-term
noncancelable leases (net of immaterial amounts of sublease rent income) are
included in the following table.
(In millions) Operating Leases Capital Leases
- --------------------------------------------------------------------------------
1998................................ $160.0 $ 12.1
1999................................ 148.8 12.2
2000................................ 124.1 12.4
2001................................ 94.2 12.5
2002................................ 68.8 9.1
2003 and thereafter............... 202.0 52.0
-------
Total minimum lease payments.................................. 110.3
Less: Amount representing interest............................ (59.8)
-------
Present value of net minimum lease payments................... $ 50.5
=======
Future minimum rent commitments in the table above exclude future rent
obligations associated with stores closed pursuant to the restructuring plan.
Estimated payments to settle future rent obligations associated with these
stores have been accrued in the restructuring reserve (see Note 4).
Rent Expense
Year Ended December 31,
--------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Minimum rents $ 221.9 $ 238.9 $ 216.6
Contingent rents 2.8 2.8 2.9
Sublease rent income (2.1) (1.9) (1.9)
-------- -------- --------
Total rent expense $ 222.6 $ 239.8 $ 217.6
========= ======== ========
NOTE 16 - ACCRUED EXPENSES
December 31,
---------------------
(In millions) 1997 1996
- ------------- -------- --------
Payroll and bonuses $ 56.6 $ 55.8
Sales and payroll taxes 52.0 53.4
Insurance 66.8 65.6
Deferred service contract income 6.8 11.6
Rent 22.3 27.5
Advertising 22.2 30.7
Restructuring reserve 28.6 137.7
Other 17.8 43.0
-------- --------
$ 273.1 $ 425.3
======== ========
NOTE 17 - INCOME TAXES
The components of the provision (benefit) for income taxes and a
reconciliation of the U.S. statutory tax rate to the Company's effective income
tax rate are given in the accompanying tables.
Income Tax Expense (Benefit)
Year Ended December 31,
-------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Current
Federal $ 12.4 $ 79.7 $ 105.1
State 2.6 5.3 11.4
Foreign 2.3 2.5 3.1
-------- ------- --------
17.3 87.5 119.6
-------- ------- --------
Deferred
Federal 92.3 (131.8) 11.7
State 7.4 (9.7) --
Foreign -- -- --
-------- ------- --------
99.7 (141.5) 11.7
-------- ------- --------
Provision (benefit) for income taxes $ 117.0 $ (54.0) $ 131.3
======== ======= ========
<PAGE>
Statutory vs. Effective Tax Rate
Year Ended December 31,
--------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Components of pre-tax income (loss)
from continuing operations:
United States $ 295.0 $ (148.6) $ 341.2
Foreign 8.9 3.0 2.0
-------- -------- --------
Income (loss) before income taxes 303.9 (145.6) 343.2
Statutory tax rate x 35% x 35% x 35%
-------- -------- --------
Federal income tax expense (benefit)
at statutory rate 106.4 (51.0) 120.1
State income taxes, less federal income
tax effect 6.5 (2.8) 7.4
Other, net 4.1 (0.2) 3.8
-------- -------- --------
Total income tax expense (benefit) $ 117.0 $ (54.0) $ 131.3
======== ======== ========
Effective tax rate 38.5% 37.1% 38.3%
======== ======== ========
The 1996 tax rate differed from the 1997 and 1995 tax rates due primarily to
foreign income taxes which were incurred on foreign income despite the overall
loss incurred by the Company.
Deferred tax assets and liabilities as of December 31, 1997 and 1996 were
comprised of the following:
December 31,
---------------------
(In millions) 1997 1996
- ------------- -------- ---------
Deferred Tax Assets
Bad debt reserve $ 3.9 $ 3.6
Intercompany profit elimination 6.9 4.0
Deferred service contract income 3.9 4.3
Restructuring reserves 35.5 51.9
Inventory impairment -- 32.0
Long-lived asset impairment 4.0 30.4
Insurance reserves 18.6 17.6
Depreciation and amortization -- 7.2
Rental agreements 6.4 5.2
Other 16.2 16.3
-------- --------
Total deferred tax assets 95.4 172.5
-------- --------
Deferred Tax Liabilities
Inventory adjustments, net 5.0 5.0
Deferred taxes on foreign operations 3.4 2.8
Depreciation and amortization 38.0 --
Other 10.0 --
-------- --------
Total deferred tax liabilities 56.4 7.8
-------- --------
Net Deferred Tax Assets $ 39.0 $ 164.7
======== ========
The net deferred tax asset is
classified as follows:
Other current assets $ 67.5 $ 99.2
Noncurrent assets (liabilities) (28.5) 65.5
-------- --------
Net Deferred Tax Assets $ 39.0 $ 164.7
======== ========
Management anticipates generating enough pre-tax income in the future to
realize the full benefit of U.S. deferred tax assets related to future
deductible amounts. Accordingly, a valuation allowance is not required at
December 31, 1997 and 1996.
NOTE 18 - TANDY STOCK PLAN
Eligible employees may contribute 1% to 7% of annual compensation to purchase
Company common stock at fair market value. The Company matches 40%, 60% or 80%
of the employee's contribution depending on the length of the employee's
continuous participation in the Tandy Stock Plan. Tandy's contributions to the
Stock Plan were $13.7 million, $14.5 million and $18.0 million for the years
ended December 31, 1997, 1996 and 1995, respectively.
NOTE 19 - TANDY FUND
On January 1, 1996, the Tandy Employees Stock Ownership Plan ("TESOP"), a
leveraged employee stock ownership plan, was amended and merged with the Tandy
Employees Deferred Salary and Investment Plan ("DIP") and renamed the Tandy Fund
("Plan"). The Plan is a defined contribution plan.
Eligible employees are provided with the choice to direct their contributions
into various investment options, including investing in Company common stock.
Participants may defer, via direct salary reductions, a minimum of 1% of gross
salary and wages up to a maximum of 8%, in increments of 1%. Contributions per
participant are limited to certain annual maximums as set forth by the Internal
Revenue Code.
Company contributions are made directly to the Tandy Fund through the TESOP
portion of the Plan. Participants become fully vested in Company contributions
upon the earlier to occur of five years of service with the Company or three
years of participation in the Plan.
TESOP Portion of the Tandy Fund: On July 31, 1990, prior to its merger into
the Tandy Fund, the trustee of the TESOP, which is now the Tandy Fund
(collectively the "Tandy Fund"), borrowed $100.0 million at an interest rate of
9.34% with varying semiannual principal payments due through June 30, 2000. The
Tandy Fund trustee used the proceeds from the issuance of the 1990 notes to
purchase 100,000 shares of TESOP Preferred Stock from Tandy at a price of $1,000
per share. In December 1994, the Tandy Fund entered into an agreement with an
unrelated third party to refinance a portion of the Tandy Fund's indebtedness by
borrowing $5.1 million at 8.76%. This debt matures in December 2000. Pursuant to
that agreement, in December 1997, 1996 and 1995, the Tandy Fund borrowed an
additional $2.2 million at 6.73%, $3.5 million at 7.01% and $4.3 million at
6.47%, respectively. This additional indebtedness matures in December of 2002,
2001 and 2001, respectively. Dividend payments and contributions from Tandy will
be used to repay the indebtedness. Each share of TESOP Preferred Stock is
convertible into 43.536 shares of Company common stock. The annual cumulative
dividend on TESOP Preferred Stock is $75.00 per share, payable semi-annually.
Because Tandy has guaranteed the repayment of these notes, the indebtedness of
the Tandy Fund is recognized as a long-term obligation in the accompanying
Consolidated Balance Sheets. An offsetting charge has been made in the
stockholders' equity section of the accompanying Consolidated Balance Sheets to
reflect unearned compensation related to the Tandy Fund.
Compensation and interest costs related to the Tandy Fund before the
reduction for the allocation of dividends are presented below for each year
ended December 31:
(In millions) 1997 1996 1995
------------- ---- ---- ----
Compensation $ 9.5 $ 8.0 $ 7.5
Interest 4.4 5.1 5.7
During the term of the TESOP notes, the TESOP Preferred Stock will be
allocated to the participants annually based on the total debt service made on
the indebtedness.
As shares of the TESOP Preferred Stock are allocated to the Tandy Fund
participants, compensation expense is recorded and unearned compensation is
reduced. Interest expense on the TESOP notes is also recognized as a cost of the
Tandy Fund. The compensation component of the Tandy Fund expense is reduced by
the amount of dividends accrued on the TESOP Preferred Stock, with any dividends
in excess of the compensation expense reflected as a reduction of interest
expense.
Contributions from Tandy to the Tandy Fund for the years ended December 31,
1997, 1996 and 1995 totaled $14.5 million, $11.4 million and $11.2 million,
respectively, including dividends paid on the TESOP Preferred Stock of $6.1
million, $6.3 million and $6.5 million, respectively.
At December 31, 1997, 55,238 shares of TESOP Preferred Stock had been
released and allocated to participants' accounts in the Tandy Fund (including
20,130 shares which had been withdrawn by participants). At December 31, 1997,
an additional 10,052 shares of TESOP Preferred Stock were released for
allocation to participants at the March 31, 1998 annual allocation date. At
December 31, 1997, 34,710 shares of TESOP Preferred Stock were available for
later release and allocation to participants over the remaining life of the
TESOP notes. The appraised value of these shares was $59.5 million at December
31, 1997.
The TESOP Preferred Stock has certain liquidation preferences and may be
redeemed after July 1, 1994, at specified premiums.
NOTE 20 - STOCK OPTIONS AND PERFORMANCE AWARDS
The Company applies Accounting Principles Board ("APB"), Opinion No. 25 and
related interpretations in accounting for its stock option plans, which are
described below. Historically, the exercise price of options has been equal to
or greater than fair market value at the date of grant. Accordingly, no
compensation cost has been recognized for its stock option plans.
Tandy Corporation 1985 Stock Option Plan ("1985 SOP"): Under the 1985 SOP, as
amended, options to acquire up to 4.0 million registered shares of Tandy's
common stock were authorized to be granted to officers and key management
employees of the Company. No further grants may be made under the 1985 SOP, as
its term has expired. The Organization and Compensation Committee of the Board
of Directors (the "Committee") had sole discretion in the granting of options.
Generally, the term of incentive stock options did not exceed 10 years and
vested ratably over three years. Nonstatutory stock options did not exceed a
term of 10 years plus one month and vested ratably over five years. The options
did not have an exercise price less than 100% of fair market value of Company
common stock on date of grant.
Under the 1985 SOP there were 916,513 and 1,596,260 vested options which
could have been exercised for a total price of $15.6 million and $27.7 million
at December 31, 1997 and 1996, respectively.
Tandy Corporation 1993 Incentive Stock Plan ("1993 ISP"): In March 1993, the
Board of Directors adopted the 1993 ISP, which was approved by the shareholders
in October 1993. A total of 6.0 million shares of the Company's common stock was
reserved for issuance under the 1993 ISP. In May 1995, the shareholders approved
an amendment to the 1993 ISP to provide for an initial option grant of 10,000
shares to each non-employee director, to increase the annual September option
grant to directors from 6,000 to 8,000 shares and to provide for payment of all
or one-half of director retainer fees in Company common stock.
The 1993 ISP permits the grant of incentive stock options ("ISOs"),
nonstatutory stock options (options which are not ISOs) ("NSOs"), stock
appreciation rights ("SARs"), restricted stock, performance units or performance
shares.
Grants of options under the 1993 ISP shall be for terms specified by the
Committee, except that the term shall not exceed 10 years. Provisions of the
1993 ISP generally provide that in the event of a change in control, all options
become immediately and fully exercisable and all restrictions on restricted
stock lapse.
As part of the 1993 ISP, the shareholders approved an amendment in May 1995,
whereby each non-employee director of the Company receives a grant of NSOs for
8,000 shares of the Company's common stock on the first business day of
September of each year ("Director Options"). Director Options have an exercise
price of 100% of the fair market value of the Company's common stock on the
trading day prior to the date of grant, vest as to one-third of the shares
annually on the first three anniversary dates of the date of grant and expire 10
years after the date of grant.
The exercise price of an option (other than a Director Option) is determined
by the Committee, provided that the exercise price shall not be less than 100%
of the fair market value of a share of the Company's common stock on the date of
grant.
Under the 1993 ISP, there were 1,528,054 and 1,138,860 vested options which
could have been exercised for a total exercise price of $34.8 million and $25.1
million at December 31, 1997 and 1996, respectively. In addition, at December
31, 1997 and 1996 there were 59,160 and 2,774,878 shares available for
additional grants under the 1993 ISP, respectively. The 1993 ISP shall terminate
on the tenth anniversary of the day preceding the date of its adoption by the
Board and no option or award shall be granted under the 1993 ISP thereafter.
The Company granted, under the 1993 ISP 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 December 31,
1997, there were 1,658,800 stock awards outstanding and eligible for ultimate
vesting pursuant to this restricted stock award.
The Company, as of February 1, 1997, also granted under the 1993 ISP an
aggregate of approximately 370,500 stock options of 1,500 shares each to
RadioShack district sales managers, 3,000 shares each to RadioShack regional
sales managers, and 2,000 shares each to Computer City sales managers. The
exercise price of the options is equal to the fair market value at the date of
the grant.
On May 15, 1997, the Committee awarded a total of 26,000 shares of restricted
stock under the 1993 ISP to two executive officers, based on past performance.
Compensation expense of approximately $1.0 million was recognized in association
with the restricted stock awards.
Tandy Corporation 1997 Incentive Stock Plan ("1997 ISP"): In February 1997,
the Board of Directors adopted the 1997 ISP, which was approved by shareholders
on May 15, 1997. A total of 5.5 million shares of the Company's common stock was
reserved for issuance under the 1997 ISP. The 1997 ISP provides that the maximum
number of shares of Company common stock that an eligible employee may receive
in any calendar year in respect of options and performance awards may not exceed
500,000 shares. The maximum dollar amount of cash or the fair market value of
shares in any calendar year in respect of performance units may not exceed $1.5
million.
The 1997 ISP permits the grant of ISOs, NSOs, SARs, restricted stock,
performance units or performance shares.
Grants of options under the 1997 ISP shall be for terms specified by the
Committee, except that the term shall not exceed 10 years. Provisions of the
1997 ISP generally provide that in the event of a change in control, all options
become immediately and fully exercisable and all restrictions on restricted
stock lapse. In addition, a pre-determined percentage of any performance units
vests and restrictions on a pre-determined percentage of performance shares
lapse.
As part of the 1997 ISP, each non-employee director of the Company receives,
unless a grant is made at that time under the 1993 ISP, Director Options under
similar terms as described in the 1993 ISP section above. New directors upon
election or appointment will, unless a grant is made at that time under the 1993
ISP, receive a one-time grant of 10,000 shares.
The exercise price of shares under an option (other than a Director Option)
is determined by the Committee, provided that the exercise price shall not be
less than 100% of the fair market value of a share of the Company's common stock
on the date of grant. As provided in the 1997 ISP, the exercise price of each
Director Option shall not be less than 100% of the fair market value of the
Company's common stock on the day preceding the date of grant.
Under the 1997 ISP, there were no vested options at December 31, 1997. In
addition, there were 5.5 million shares available on December 31, 1997 for
grants under the 1997 ISP.
The Company granted, under the 1997 ISP on February 1, 1998, an aggregate of
approximately 324,750 restricted stock awards of 250 shares each to 1,299
RadioShack store managers not included in the February 1, 1997 grant as
described in the 1993 ISP section above. 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, 2000 and the Company common
stock closes at $58 1/8 or more for 20 consecutive trading days, the stock will
vest at that time, and otherwise, (2) the shares will vest on February 1, 2003
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.
The Company also granted under the 1997 ISP on February 1, 1998, an aggregate
of approximately 178,500 stock options of 750 shares each to RadioShack district
sales managers, 1,500 shares each to RadioShack regional sales managers and
1,000 shares each to three RadioShack members of management in the
dealer/franchise department. The exercise price of the options is equal to the
fair market value at the date of the grant.
Pro forma information regarding net income and earnings per share as required
by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("FAS 123") has been determined as if the Company had
accounted for its employee stock options and restricted stock awards under the
fair value method of that statement. The fair value of each option or restricted
stock award is estimated on the date of grant using the Black-Scholes option
pricing model. The weighted average assumptions used for stock option grants in
1997, 1996 and 1995 were, respectively: expected dividend yield of 1.7%, 2.0%
and 1.3%, expected volatility of 25.5%, 27.9% and 27.3%; risk free interest
rates of 6.1%, 6.7% and 6.1%; and expected lives of six, seven and seven years.
The weighted average assumptions used for restricted stock grants in 1997 were:
expected dividend yield of 1.7%, expected volatility of 25.9%, risk free
interest rate of 6.3% and expected life of five years.
For purposes of pro forma disclosures, the estimated fair value of the
options and restricted stock awards is amortized to expense over the vesting
period. The Company's pro forma information follows:
<TABLE>
<CAPTION>
(In millions, except
per share amounts) 1997 1996 1995
- ------------------------------------------------------ ---------------------- ----------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) available
to common shareholders $ 180.8 $ 171.5 $ (97.9) $ (101.6) $ 205.4 $ 203.2
Net income (loss) available
per common share:
Basic $ 1.69 $ 1.60 $ (0.82) $ (0.85) $ 1.62 $ 1.61
Diluted $ 1.63 $ 1.55 $ (0.82) $ (0.85) $ 1.58 $ 1.57
</TABLE>
The effects of applying FAS No. 123 in this pro forma disclosure are not
indicative of future amounts as the pro forma amounts above do not include the
impact of stock option and restricted stock awards granted prior to 1995.
<PAGE>
A summary of stock option transactions under the Company's stock option plans
and information about fixed price stock options follow:
<TABLE>
Summary of Stock Option Transactions
<CAPTION>
(Share amounts in thousands) 1997 1996 1995
- -------------------------------- ---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------------------- --------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year 4,568 $ 20.67 4,398 $ 20.52 4,352 $ 18.08
Grants............... 1,044 30.29 908 20.96 1,044 27.64
Exercised........... (1,086) 18.66 (536) 17.53 (986) 17.23
Forfeited............ (80) 23.96 (202) 26.98 (12) 20.82
-------- -------- --------
Outstanding at end of year 4,446 $ 23.36 4,568 $ 20.67 4,398 $ 20.52
======== ======== ========
Exercisable at end of year 2,445 $ 20.63 2,736 $ 19.20 2,506 $ 17.74
======== ======== ========
Weighted average fair value
of options granted during
the year $ 9.64 $ 7.50 $ 10.25
======== ======== ========
</TABLE>
<TABLE>
Fixed Price Stock Options
<CAPTION>
(Share amounts
in thousands) Options Outstanding Options Exercisable
- --------------------------------------------------------------- ---------------------------
Weighted
Shares Average Weighted Shares Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price at 12/31/97 Exercise Price
- --------------- ------------ ---------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$12.53 - 20.09 1,540 6.17 yrs $ 17.65 1,041 $ 16.55
20.09 - 22.09 1,035 4.46 yrs 21.42 892 21.36
22.31 - 27.75 1,125 7.61 yrs 25.75 453 27.12
28.28 - 33.19 179 8.49 yrs 31.41 49 31.10
35.13 - 35.13 567 9.63 yrs 35.13 10 35.13
-------- --------
$12.53 - 35.13 4,446 6.67 yrs $ 23.36 2,445 $20.63
======== ========
</TABLE>
NOTE 21 - PREFERRED SHARE PURCHASE RIGHTS
In August 1986, the Board of Directors adopted a stockholder rights plan and
declared a dividend of one right for each outstanding share of Tandy common
stock. The rights, as amended, which will expire on June 22, 2000, are currently
represented by the common stock certificates and when they become exercisable
will entitle holders to purchase one one-thousandth of a share of Tandy Series A
Junior Participating Preferred Stock for an exercise price of $70 (subject to
adjustment). The rights will become exercisable and will trade separately from
the common stock only upon the date of public announcement that a person, entity
or group ("Person") has acquired 15% or more of Tandy's outstanding common stock
without the prior consent or approval of the disinterested directors ("Acquiring
Person") or ten days after the commencement or public announcement of a tender
or exchange offer which would result in any person becoming an Acquiring Person.
In the event that any person becomes an Acquiring Person, the rights will be
exercisable for 60 days thereafter for Tandy common stock with a prior market
value (as determined under the rights plan) equal to twice the exercise price.
In the event that, after any person becomes an Acquiring Person, the Company
engages in certain mergers, consolidations, or sales of assets representing 50%
or more of its assets or earning power with an Acquiring Person (or persons
acting on behalf of or in concert with an Acquiring Person) or in which all
holders of common stock are not treated alike, the rights will be exercisable
for common stock of the acquiring or surviving company with a prior market value
(as determined under the rights plan) equal to twice the exercise price. The
rights will not be exercisable by any Acquiring Person. The rights are
redeemable at a price of $0.05 per right prior to any person becoming an
Acquiring Person or, under certain circumstances, after the expiration of the
60-day period described above, but the rights may not be redeemed or the rights
plan amended for 180 days following a change in a majority of the members of the
Board (or if certain agreements are entered into during such 180-day period).
NOTE 22 - TERMINATION PROTECTION PLANS
In August 1990 and in May 1995, the Board of Directors of the Company
approved amendments to the termination protection plans. These plans provide for
defined termination benefits to be paid to eligible employees of the Company who
have been terminated, without cause, following a change in control of the
Company (as defined). In addition, for a certain period of time following
employee termination, the Company, at its expense, must continue to provide on
behalf of the terminated employee certain employment benefits. In general,
during the twelve months following a change in control, the Company may not
terminate or change existing employee benefit plans in any way which will effect
accrued benefits or decrease the rate of the Company's contribution to the
plans.
NOTE 23 - ISSUANCE OF SERIES C PERCS AND TENDER OFFER
In February 1992, the Company issued 15.0 million depositary shares of Series
C Conversion Preferred Stock ("Series C PERCS") at $29.50 per depositary share
(equivalent to $2,950.00 for each Series C PERCS). Each of the depositary shares
represented ownership of 1/100th of a share of Series C PERCS. The annual
dividend for each depositary share was $2.14 (based on the annual dividend rate
for each Series C PERCS of $214.00).
Tandy announced on January 23, 1995 that it had exercised its right to call
all the issued and outstanding Series C PERCS for conversion on March 10, 1995,
prior to its mandatory conversion date of April 15, 1995. For each Series C
PERCS depositary share redeemed, 1.575514 Tandy common shares were issued for an
aggregate of approximately 23.6 million shares. In addition, each Series C PERCS
depositary share received a dividend in cash of $0.321 representing the accrued
dividend from January 16, 1995 through the redemption date of March 10, 1995.
NOTE 24 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash flows from operating activities included cash payments as follows:
Year Ended December 31,
------------------------------------------------
(In millions) 1997 1996 1995
- ------------- ------------- -------------- -------------
Interest paid $ 42.8 $ 37.8 $ 34.8
Income taxes paid 51.9 60.7 68.4
During 1997, the Company received notes approximating $98.3 million as a
partial payment on the sale of Incredible Universe assets. In 1996, the Company
received $30.0 million in AST common stock as partial payment of a $90.0 million
note receivable from AST (see Note 7).
Capital lease obligations of $22.1 million, $4.4 million and $6.0 million
were recorded during the years ended December 31, 1997, 1996 and 1995,
respectively, for the lease of certain retail stores and equipment.
NOTE 25 - CONTINGENCIES
Tandy has various claims, lawsuits, disputes with third parties,
investigations and pending actions involving allegations of negligence, product
defects, discrimination, infringement of intellectual property rights, tax
deficiencies, violations of permits or licenses, and breach of contract and
other matters against the Company and its subsidiaries incident to the operation
of its business. The liability, if any, associated with these matters was not
determinable at December 31, 1997. While certain of these matters involve
substantial amounts, and although occasional adverse settlements or resolutions
may occur and negatively impact earnings in the year of settlement, it is the
opinion of management that their ultimate resolution will not have a materially
adverse effect on Tandy's financial position.
Pursuant to the Company's Tax Sharing and Tax Benefit Reimbursement Agreement
(the "Agreement") with O'Sullivan Industries ("O'Sullivan"), a former subsidiary
of Tandy, the Company receives payments from O'Sullivan approximating the
federal tax benefit that O'Sullivan realizes from the increased tax basis of its
assets resulting from the initial public offering completed in February 1994.
The higher tax basis increases O'Sullivan's tax deductions and, accordingly,
reduces income taxes payable by O'Sullivan. For the years ended December 31,
1997, 1996 and 1995, the Company recognized income of $5.8 million, $0.2 million
and $1.3 million, net of tax, respectively, under this Agreement. These payments
will continue to be made over a 15-year time period, and are contingent upon
O'Sullivan's level of earnings from year to year. The income is recorded as a
reduction of selling, general and administrative expenses in the accompanying
Consolidated Statements of Income.
NOTE 26 - RELATIONS WITH INTERTAN
InterTAN, Inc. ("InterTAN"), the former foreign retail operations of Tandy,
was spun off to Tandy stockholders as a tax-free dividend in fiscal 1987.
Summarized in the tables below are the notes and other receivables due from
InterTAN at December 31, 1997 and 1996, as well as the income components
generated from operations relative to InterTAN for each of the three years ended
December 31, 1997, 1996 and 1995.
December 31,
-----------------------
(In millions) 1997 1996
- ------------- -------- --------
Gross amount of notes $ -- $ 27.8
Discount -- (8.3)
-------- --------
Net amount of notes $ -- $ 19.5
======== ========
Current portion of notes $ -- $ 4.9
Non-current portion of notes -- 14.6
Other current receivables 3.1 4.6
-------- --------
$ 3.1 $ 24.1
======== ========
Year Ended December 31,
----------------------------------
(In millions) 1997 1996 1995
- ------------- -------- -------- --------
Sales and commission income $ 8.4 $ 8.5 $ 10.9
Interest income 2.0 2.9 4.1
Accretion of discount 3.4 3.8 4.2
Royalty income 3.3 2.0 0.8
-------- -------- ---------
Total income $ 17.1 $ 17.2 $ 20.0
======== ======== =========
In August 1993, Trans World Electronics, Inc. ("Trans World"), a subsidiary
of Tandy, reached an agreement with InterTAN's banking syndicate to buy
approximately $42.0 million of InterTAN's debt at a negotiated, discounted
price. The debt purchased from the banks was restructured into a seven-year note
with interest of 8.64% (the "Series A" note). Trans World also provided
approximately $10.0 million in working capital and trade credit to InterTAN.
Interest on the working capital loan (the "Series B" note) of 8.11% was due
semiannually beginning February 25, 1994 until the note was paid in full in
1996. On December 30, 1997, InterTAN repaid the gross amount of the "Series A"
note in full. In consideration for the extension of credit, Trans World had
received five-year warrants exercisable for approximately 1,450,000 shares of
InterTAN common stock. The warrants were returned to InterTAN in December 1997
upon repayment of the "Series A" note. Due to the repayment of the "Series A"
note in 1997, the Company will no longer receive interest income or have an
accretion of discount from InterTAN. The Company recognized a gain of $4.7
million upon retirement of the "Series A" note equal to the proceeds recovered
less the net amount of the note receivable at the date of retirement. The gain
has been classified as a reduction to SG&A expense in the accompanying 1997
Consolidated Statements of Income.
Under the terms of a merchandise agreement reached with InterTAN in October
1993, as amended, InterTAN may purchase, on payment terms, certain products sold
or secured by Tandy. A&A International, Inc. ("A&A"), a subsidiary of Tandy, is
and will continue to be the exclusive purchasing agent for products originating
in Asia for InterTAN. A&A receives commission income for this service. License
agreements, as amended, also provide a royalty payable to Tandy, which began in
the September 1995 quarter.
NOTE 27 - QUARTERLY DATA (UNAUDITED)
As the Company's operations are predominantly retail oriented, its business
is subject to seasonal fluctuations with the December 31 quarter being the most
significant in terms of sales and profits because of the Christmas selling
season.
During the quarter ended December 31, 1996, the Company recognized a FAS 121
charge and a restructuring charge of $86.8 million and $136.6 million,
respectively. In addition, gross profit for the fourth quarter of 1996 was
impacted by a lower of cost or market inventory impairment of $91.4 million,
largely attributable to the restructuring plan associated with inventory
liquidations for closed stores (see Note 4).
During the quarter ended December 31, 1997, the Company revised its provision
for store closings pursuant to the 1996 store closure plan and recognized an
additional charge of $11.6 million related to store closings pursuant to the
1996 store closure plan.
<PAGE>
<TABLE>
QUARTERLY DATA (Unaudited)
<CAPTION>
Three Months Ended
---------------------------------------------------------
(In millions, except per share amounts) March 31 June 30 Sept. 30 Dec. 31
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Net sales and operating revenues $ 1,291.7 $ 1,146.0 $ 1,227.5 $ 1,707.0
Gross profit $ 451.6 $ 445.6 $ 468.0 $ 649.1
Net income $ 25.6 $ 28.7 $ 36.4 $ 96.2
Preferred dividends $ 1.6 $ 1.5 $ 1.5 $ 1.5
Net income available to common
shareholders $ 24.0 $ 27.2 $ 34.9 $ 94.7
Net income available per common share:
Basic $ 0.22 $ 0.25 $ 0.33 $ 0.92
Diluted $ 0.21 $ 0.24 $ 0.32 $ 0.88
Shares used in computing earnings
per common share:
Basic 111.8 108.3 105.7 103.2
Diluted 116.4 113.2 110.8 108.6
Dividends declared per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10
Year ended December 31, 1996:
Net sales and operating revenues $ 1,447.0 $ 1,352.9 $ 1,434.9 $ 2,050.7
Gross profit $ 491.7 $ 474.0 $ 484.2 $ 572.5
Net income (loss) $ 14.5 $ 9.3 $ 22.3 $ (137.7)
Preferred dividends $ 1.6 $ 1.6 $ 1.6 $ 1.5
Net income (loss) available to
common shareholders $ 12.9 $ 7.7 $ 20.7 $ (139.2)
Net income (loss) available per
common share:
Basic $ 0.11 $ 0.06 $ 0.17 $ (1.20)
Diluted $ 0.11 $ 0.06 $ 0.17 $ (1.20)
Shares used in computing earnings
per common share:
Basic 122.3 121.1 118.9 116.4
Diluted 122.3 121.1 118.9 116.4
Dividends declared per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10
</TABLE>
<PAGE>
TANDY CORPORATION
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page No.
2a Agreement for Purchase and Sale of Assets dated as of June 30,
1993 between AST Research, Inc., as Purchaser and Tandy
Corporation, TE Electronics Inc., and GRiD Systems Corporation,
as Sellers (without exhibits) (filed as Exhibit 2 to Tandy's July
13, 1993 Form 8-K filed on July 27, 1993, Accession No.
0000096289-93-000004 and incorporated herein by reference).
2b Amended and Restated Stock Exchange Agreement dated February 1,
1994 by and among O'Sullivan Industries Holdings, Inc., and TE
Electronics Inc. (filed as Exhibit 2b to Tandy's Form 10-K filed
on March 30, 1994, Accession No. 0000096289-94-000029 and
incorporated herein by reference).
2c U.S. Purchase Agreement dated January 26, 1994 by and among
O'Sullivan Industries Holdings, Inc., TE Electronics Inc. and the
U.S. Underwriters which included Merrill Lynch & Co., Wheat First
Butcher & Singer, The Chicago Dearborn Company and Rauscher
Pierce Refsnes, Inc. (filed as Exhibit 2c to Tandy's Form 10-K
filed on March 30, 1994, Accession No. 0000096289-94-000029 and
incorporated herein by reference).
2d International Purchase Agreement dated January 26, 1994 by and
among O'Sullivan Industries Holdings, Inc., TE Electronics Inc.
and the U.S. Underwriters which included Merrill Lynch
International Limited and UBS Limited (filed as Exhibit 2d to
Tandy's Form 10-K filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated herein by reference).
2e Acquisition Agreement dated January 18, 1995 between Hurley State
Bank, as purchaser and Tandy Credit Corporation as seller
(without exhibits) (filed as Exhibit (c) to Tandy's January 18,
1995 Form 8-K filed on February 2, 1995, Accession No.
0000096289-95-000008 and incorporated herein by reference).
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. 66
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. 73
10t* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation. 76
10u* Form of December 1997 Deferred Salary and Bonus Agreement
(Stock Investment) with selected Executive Employees of Tandy
Corporation. 79
10v* Form of December 1997 Salary and Bonus Agreement with selected
Executive Employees of Tandy Corporation. 84
10w* Tandy Corporation Executive Deferred Compensation Plan,
effective April 1, 1998. 89
10x* Tandy Corporation Executive Deferred Stock Plan, effective
April 1, 1998. 97
10y* Tandy Corporation Unfunded Deferred Compensation Plan for
Directors as amended and restated January 1, 1998. 106
11 Statement of Computation of Ratios of Earnings to Fixed
Charges. 109
21 Subsidiaries. 110
23 Consent of Independent Accountants. 111
27.1 Financial Data Schedule. 112
27.2 Restated Financial Data Schedule. 113
27.3 Restated Financial Data Schedule. 114
- ------------------------
* Each of these exhibits is a "management contract or compensatory plan,
contract, or arrangement".
<PAGE>
EXHIBIT 10b
December 31, 1996
TO:
FROM:
SUBJECT: Compensation Plan, Fiscal Year 1997
Your compensation plan for fiscal year 1997, as approved by the Organization and
Compensation Committee of the Board of Directors, is outlined below.
Your compensation plan for fiscal year 1997 is outlined below.
I. FY 1997 Base Salary
-------
Your Base Salary for FY97 shall be $.
II. Your bonus for FY97 shall be determined by multiplying the percent
determined in the following TARGET INCENTIVE GOALS times the FACTORS
set forth below.
The bonus amounts payable are subject to limitations set forth in
Paragraph III and IV.
TARGET INCENTIVE GOALS:
1. INCOME
Each percentage point of positive change that the Tandy Corporation
and subsidiaries income from operations (before income taxes)
increases from $.
2. EARNINGS PER SHARE
Each percentage point of positive change that the Tandy Corporation
earnings per share increases from the $ per share.
3. STOCK PRICE
a. Each percentage point of positive change that the Tandy
Corporation stock price increases, based on the average daily
closing price for 1996 and 1997.
b. If Tandy's average daily closing stock price outperforms the
"Peer Group's" average daily closing stock price, you will
receive an additional bonus of $.
Income and Earnings Per Share will be calculated excluding the
effect of Financial Accounting Standards requirements i.e. FAS121.
Percentages shall be calculated to two decimal points.
Your factors to be used for each of the calculations above are as
follows:
1. Income increase: $
2. Earnings per share increase: $
3. Stock price increase: $
Page 2
January 1, 1997
Compensation Plan, FY97
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target Incentive Goal
-----------------------------------------------------------------
Minimum Increase %
------------------
1. Income
2. Earnings per share
3. Stock price
a. Tandy Stock Increase
b. Peer Group N/A
Bonus amounts earned from each of the factors which exceed the Minimum
Increase above will be accumulated. No bonus will be paid unless the
accumulated bonus exceeds % of your base salary.
Bonus will only be paid on each goal which exceeds the Minimum Increase
----
% set forth above.
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to exceed $.
V. This compensation plan is not an employment contract, but a method of
calculating your total earnings. You forfeit your rights to receive a
bonus if you resign before the end of the current fiscal year. If you
are terminated by the Company, your rights to receive a bonus will be
at the sole discretion of the Company and in such amount as the
Company might decide. If you retire at age 55 or over, provided the
Company has given its consent to your early retirement, or die before
the end of the then current fiscal year, your bonus will be calculated
using actual results to the nearest end of the month preceding or
succeeding such event, which will then be adjusted using the latest
budget to include the remaining months of the year. Example:
Retirement date is August 10. Bonus calculations would include actual
results through July 31 and the latest budgeted numbers from August
through December. The bonus calculated, which will be an annual bonus,
will then be prorated for the partial year worked i.e. 7/12 times
annual bonus calculated in this example. The Stock Price percentage
will be calculated using only actual results to the nearest end of the
month for this year and last year. The amount will be paid to you or
the legal representative of your estate.
VI. If at any time during your continued employment, your responsibility,
duties or title changes, this plan is subject to revision or termination
by the Company at the time of the foregoing change. A partial year bonus
will be calculated using the methodology set forth in paragraph V.
<PAGE>
January 1, 1997
TO:
FROM:
SUBJECT: Compensation Plan, Fiscal Year 1997
Your compensation plan for fiscal year 1997 is outlined below.
I. FY 1997 Base Salary
-------
Your Base Salary for FY97 shall be $.
II. Your bonus for FY97 shall be determined by multiplying the percent
determined in the following TARGET INCENTIVE GOALS times the FACTORS set
forth below.
The bonus amounts payable are subject to limitations set forth in
Paragraph III and IV.
TARGET INCENTIVE GOALS:
TANDY CORPORATION
a. INCOME
Each percentage point of positive change that the Tandy Corporation
and subsidiaries income from operations (before income taxes)
increases from $.
b. EARNINGS PER SHARE
Each percentage point of positive change that the Tandy Corporation
earnings per share increases from $ per share.
c. STOCK PRICE
Each percentage point of positive change that the Tandy Corporation
stock price increases, based on the average daily closing price for
1996 and 1997.
If Tandy's average daily closing stock price outperforms the "Peer
Group's" average daily closing stock price, you will receive an
additional bonus of $.
Income and Earnings Per Share will be calculated excluding the
effect of Financial Accounting Standards requirements i.e. FAS121.
<PAGE>
Page 2
January 1, 1997
Compensation Plan, FY97
RADIO SHACK
INCOME
Each percentage point of positive change that the Radio Shack
Division net income (before income taxes) increase from $.
Radio Shack results will be adjusted to reflect TE Manufacturing and
distribution operations for 1996 and 1997.
Percentages shall be calculated to two decimal points.
Your factors to be used for each of the calculations above are as
follows:
TANDY
a. Income increase: $
b. Earnings per share increase: $
c. Stock price increase: $
RADIO SHACK
Income increase: $
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target Incentive Goal
-----------------------------------------------------------------
Minimum Increase %
------------------
TANDY
a. Income
b. Earnings per share
c. Stock price
a. Tandy Stock Increase
b. Peer Group N/A
RADIO SHACK
Income
Bonus amounts earned from each of the factors which exceed the Minimum
Increase above will be accumulated. No bonus will be paid unless the
accumulated bonus exceeds % of your base salary.
Bonus will only be paid on each goal which exceeds the Minimum Increase
% set forth above.
<PAGE>
Page 3
January 1, 199
Compensation Plan, FY97
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to exceed $.
V. This compensation plan is not an employment contract, but a method of
calculating your total earnings. You forfeit your rights to receive
a bonus if you resign before the end of the current fiscal year. If you
are terminated by the Company, your rights to receive a bonus will be
at the sole discretion of the Company and in such amount as the Company
might decide. If you retire at age 55 or over, provided the Company
has given its consent to your early retirement, or die before the end of
the then current fiscal year, your bonus will be calculated using
actual results to the nearest end of the month preceding or succeeding
such event, which will then be adjusted using the latest budget to
include the remaining months of the year. Example: Retirement date is
August 10. Bonus calculations would include actual results through July
31 and the latest budgeted numbers from August through December. The
bonus calculated, which will be an annual bonus, will then be prorated
for the partial year worked i.e. 7/12 times annual bonus calculated in
this example. The Stock Price percentage will be calculated using only
actual results to the nearest end of the month for this year and last
year. The amount will be paid to you or the legal representative of
your estate.
VI. If at any time during your continued employment, your responsibility,
duties or title changes, this plan is subject to revision or termination
by the Company at the time of the foregoing change. A partial year bonus
will be calculated using the methodology set forth in paragraph V.
<PAGE>
January 1, 1997
TO:
FROM:
SUBJECT: Compensation Plan, Fiscal Year 1997
Your compensation plan for fiscal year 1997 is outlined below.
I. FY 1997 Base Salary
-------
Your Base Salary for FY97 shall be $.
II. Your bonus for FY97 shall be determined by multiplying the percent
determined in the following TARGET INCENTIVE GOALS times the FACTORS
set forth below.
The bonus amounts payable are subject to limitations set forth in
Paragraph III and IV.
TARGET INCENTIVE GOALS:
1. INCOME
Each percentage point of positive change that the Tandy Corporation
and subsidiaries income from operations (before income taxes)
increases from $.
2. EARNINGS PER SHARE
Each percentage point of positive change that the Tandy Corporation
earnings per share increases from $ per share.
3. STOCK PRICE
a. Each percentage point of positive change that the Tandy
Corporation stock price increases, based on the average daily
closing price for 1996 and 1997.
b. If Tandy's average daily closing stock price outperforms the
"Peer Group's" average daily closing stock price, you will
receive an additional bonus of $.
Income and Earnings Per Share will be calculated excluding the effect
of Financial Accounting Standards requirements i.e. FAS121.
Your factors to be used for each of the calculations above are as
follows:
1. Income increase: $
2. Earnings per share increase: $
3. Stock price increase: $
INCOME - TE, ETC.
Each percentage point of positive change that the TE-US, TE-Asia, and
Tandy Transportation net income (Pre Admin) increases from $ times a
factor of $.
<PAGE>
Page 2
January 1, 1997
Compensation Plan, FY97
INCOME - REPAIR, ETC.
Each percentage point of positive change that the Tandy Services
(Repair, Parts Departments and Falcon and all the Distribution Operating
Units) net income (Pre Admin) increases from $ times a factor of $.
Percentages shall be calculated to two decimal points.
III. Minimum Bonus
Minimum Threshold Increase Percent for Each Target Incentive Goal
-----------------------------------------------------------------
Minimum Increase %
------------------
1. Tandy Corp Income
2. Earnings per share
3. Stock price
a. Tandy Stock Increase
b. Peer Group N/A
4. Net Income - TE, etc.
5. Net Income - Repair, etc.
Bonus amounts earned from each of the factors which exceed the Minimum
Increase above will be accumulated. No bonus will be paid unless the
accumulated bonus exceeds % of your base salary.
Bonus will only be paid on each goal which exceeds the Minimum Increase
----
% set forth above.
IV. Maximum Bonus:
The bonus paid will be limited to an amount not to exceed $.
V. This compensation plan is not an employment contract, but a method
of calculating your total earnings. You forfeit your rights to receive
a bonus if you resign before the end of the current fiscal year. If you
are terminated by the Company, your rights to receive a bonus will be
at the sole discretion of the Company and in such amount as the Company
might decide. If you retire at age 55 or over, provided the Company has
given its consent to your early retirement, or die before the end of the
then current fiscal year, your bonus will be calculated using actual
results to the nearest end of the month preceding or succeeding such
event, which will then be adjusted using the latest budget to include
the remaining months of the year. Example: Retirement date is August
10. Bonus calculations would include actual results through July 31
and the latest budgeted numbers from August through December. The bonus
calculated, which will be an annual bonus, will then be prorated for
the partial year worked i.e. 7/12 times annual bonus calculated in this
example. The Stock Price percentage will be calculated using only
actual results to the nearest end of the month for this year and last
year. The amount will be paid to you or the legal representative of
your estate.
VI. If at any time during your continued employment, your responsibility,
duties or title changes, this plan is subject to revision or termination
by the Company at the time of the foregoing change. A partial year bonus
will be calculated using the methodology set forth in paragraph V.
<PAGE>
EXHIBIT 10s
FORM OF
DEFERRED COMPENSATION AGREEMENT
BETWEEN
TANDY CORPORATION AND
THIS AGREEMENT made this 2nd day of October, 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:
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 the 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. In consideration for the amounts to be credited to the
- ------------------------
Deferred Compensation Account (defined below), on the date of this Agreement,
Executive shall relinquish to Tandy _____ shares of Tandy common stock that are
designated to vest on January 2, 1998 under a Restricted Stock Agreement dated
January 2, 1996 between Executive and Tandy; and thereafter, Executive shall
have no rights with respect to such common stock.
Deferred Compensation Account.
- -----------------------------
1. Tandy shall establish a book reserve (the "Deferred Compensation
Account").
2. Tandy shall credit ____ shares of Tandy common stock (the "Shares") to the
Deferred Compensation Account on January 2, 1998. In addition, Tandy shall
credit to the Deferred Compensation Account an amount equal to the cash
dividends attributable to the Shares as of the cash dividend record
date(s) set by the Board of Directors of Tandy after the date hereof and
prior to the delivery of the Shares to Executive. Notwithstanding the
foregoing, if the Executive would not have vested in the shares of Tandy
common stock designated to vest on January 2, 1998 which he surrendered,
no amount shall be credited to the Deferred Compensation Account.
3. The Shares shall be equitably adjusted by the Organization and
Compensation Committee of the Board of Directors of Tandy (the "O & C
Committee") to take into account any recapitalization, reorganization,
merger, stock split, stock dividend or other changes in Tandy common stock
from the date of this Agreement until the date the Shares are delivered
under the terms hereof.
Investment of Deferred Compensation Account.
- -------------------------------------------
1. Other than with respect to the Shares, Tandy shall invest, from time to
time, an amount of its assets equal to the remaining value of the Deferred
Compensation Account in such mutual funds, stocks, bonds, securities, or
other investments as may be selected by Executive in his sole discretion,
provided that no portion of the remaining value or Tandy assets
attributable thereto may be invested in Tandy common or preferred stock.
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, loss, cost or expense in connection with any decrease in the value
of 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, 2002.
Executive may, on or before December 31, 2000, elect in writing to receive
the amount credited to the Deferred Compensation Account in more than one
annual installment, but no more than ten annual installments, provided
that payment shall not begin prior to January 2, 2002. If Executive shall
die prior to the payment of any amount remaining in the Deferred
Compensation Account, then such amount shall be paid in cash and Shares,
as the case may be, in a single payment to his beneficiary or estate, as
the case may be.
2. Prior to the commencement of benefits under this Agreement, the Executive
may request a distribution due to a Hardship (as defined below). If the
Executive has commenced to receive installment payments under this
Agreement, he may request acceleration of such payments in the event of a
Hardship. The Executive may request a Hardship distribution or
acceleration by submitting a written request to the O & C Committee
accompanied by evidence to demonstrate that the circumstances being
experienced qualify as a Hardship. The O & C Committee shall, in its sole
discretion, determine whether the Executive has experienced a Hardship.
Any distribution on account of Hardship shall be limited to an amount
sufficient to meet the Hardship.
For purposes of this Agreement, a Hardship is an immediate financial need
of the Executive resulting from extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Executive.
3. Any amounts credited to the Deferred Compensation Account shall be paid as
follows:
(a) Distribution of the Shares credited to the Deferred Compensation
Account as of January 2, 1998 shall be paid solely in shares of Tandy
common stock; and
(b) Distribution of the remaining value shall be paid in cash.
Beneficiary. The beneficiary under this Agreement shall be Executive's spouse.
- -----------
If Executive's spouse predeceases the Executive or dies simultaneously with the
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 amounts which may be invested
or credited under the provisions of this Agreement shall continue for
all purposes to be a part of the general assets of Tandy and no person or
entity, other than Tandy, shall by virtue of the provisions of this
Agreement have any interest in such amounts. To the extent that any person
or entity acquires a right to receive payments or the delivery of the
Shares 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, at Tandy's expense, a grantor trust (commonly referred
to as a rabbi trust). If a grantor trust is created, Tandy shall deposit
the assets allocated to 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. The O & C Committee shall have full power and authority to interpret,
construe, and administer this Agreement. The O & C Committee's
interpretation and construction of this Agreement, and its actions
hereunder, including any valuation of the Deferred Compensation Account
or the amount of the payment or the identity of the 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, and venue for any actions hereunder or related
to this Agreement shall be in Tarrant County, 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
______________________________
<PAGE>
EXHIBIT 10t
FORM OF
DEFERRED COMPENSATION AGREEMENT
BETWEEN
TANDY CORPORATION AND
_____________________
THIS AGREEMENT made this 2nd day of October, 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:
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 the 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. In consideration for the amounts to be credited to the
- ------------------------
Deferred Compensation Account (defined below), on the date of this Agreement,
Executive shall relinquish to Tandy his shares of Tandy common stock that are
designated to vest on the following dates and in the following amounts:
1.___ shares of Tandy common stock on January 2, 1998 under a Restricted Stock
Agreement dated January 2, 1996 between Executive and Tandy;
2.___ shares of Tandy common stock on May 15, 1998 under a Restricted Stock
Agreement dated May 15, 1997 between Executive and Tandy; and
thereafter, Executive shall have no rights with respect to such common
stock.
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 January 2, 1998, shares of Tandy common stock (the "January
Shares"). In addition, Tandy shall credit to the Deferred
Compensation Account an amount equal to the cash dividends
attributable to the January Shares as of the cash dividend record
date(s) set by the Board of Directors of Tandy after the date hereof
and prior to the delivery of such shares to Executive.
(b) On May 15, 1998, ___ shares of Tandy common stock (the "May Shares").
In addition, Tandy shall credit to the Deferred Compensation Account
an amount equal to the cash dividends attributable to the May Shares
as of the cash dividend record date(s) set by the Board of Directors
of Tandy after the date hereof and prior to the delivery of such
shares to Executive.
(c) Notwithstanding the foregoing, if the Executive would not have vested
in the shares of Tandy common stock designated to vest on January 2,
1998 and May 15, 1998 which he surrendered, no amount shall be
credited to the Deferred Compensation Account.
3. The January Shares and May Shares shall be equitably adjusted by the
Organization and Compensation Committee of the Board of Directors of Tandy
(the "O & C Committee") to take into account any recapitalization,
reorganization, merger, stock split, stock dividend or other changes in
Tandy common stock from the date of this Agreement until the January
Shares and May Shares are delivered under the terms hereof. The January
Shares and the May Shares are collectively referred to as (the "Shares").
Investment of Deferred Compensation Account.
- -------------------------------------------
1. Other than with respect to the Shares, Tandy shall invest, from time to
time, an amount of its assets equal to the remaining value of the Deferred
Compensation Account in such mutual funds, stocks, bonds, securities, or
other investments as may be selected by Executive in his sole discretion,
provided that no portion of the remaining value or Tandy assets
attributable thereto may be invested in Tandy common or preferred stock.
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, loss, cost or expense in connection with any decrease in the value
of the assets credited to 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 the date which is one year after
the date Executive terminates employment with Tandy, Tandy shall pay to
Executive in a single sum the amount credited to the Deferred Compensation
Account.
Executive may, at any time prior to termination of employment, elect in
writing to receive the amount credited to the Deferred Compensation
Account in more than one annual installment, but no more than ten annual
installments, provided that payment shall not begin prior to one year
after termination of employment. If Executive shall die prior to the
payment of any amount remaining in the Deferred Compensation Account, then
such amount shall be paid in cash and Shares, as the case may be, in a
single payment to his beneficiary or estate, as the case may be.
2. Prior to the commencement of benefits under this Agreement, the Executive
may request a distribution due to a Hardship (as defined below). If the
Executive has commenced to receive installment payments under this
Agreement, he may request acceleration of such payments in the event of
a Hardship. The Executive may request a Hardship distribution or
acceleration by submitting a written request to the O & C Committee
accompanied by evidence to demonstrate that the circumstances being
experienced qualify as a Hardship. The O & C Committee shall, in its
sole discretion, determine whether the Executive has experienced a
Hardship. Any distribution on account of Hardship shall be limited to an
amount sufficient to meet the Hardship.
For purposes of this Agreement, a Hardship is an immediate financial need
of the Executive resulting from extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Executive.
3. Any amounts credited to the Deferred Compensation Account shall be paid
as follows:
(a) Distribution of the January Shares and May Shares credited to the
Deferred Compensation Account as of January 2, 1998 and May 15, 1998,
respectively, shall be paid solely in shares of Tandy common stock;
and
(b) Distribution of the remaining value shall be paid in cash.
Beneficiary. The beneficiary under this Agreement shall be Executive's spouse.
- -----------
If Executive's spouse predeceases the Executive or dies simultaneously with the
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 amounts which may
be invested or credited under the provisions of this Agreement shall
continue for all purposes to be a part of the general assets of Tandy and
no person or entity, other than Tandy, shall by virtue of the provisions
of this Agreement have any interest in such amounts. To the extent that
any person or entity acquires a right to receive payments or the delivery
of the Shares 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, at Tandy's expense, a grantor trust (commonly referred
to as a rabbi trust). If a grantor trust is created, Tandy shall deposit
the assets allocated to 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. The O & C Committee shall have full power and authority to interpret,
construe, and administer this Agreement. The O & C Committee's
interpretation and construction of this Agreement, and its actions
hereunder, including any valuation of the Deferred Compensation Account or
the amount of the payment or the identity of the recipient of the payment,
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, and venue for any actions hereunder or related
to this Agreement shall be in Tarrant County, 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
_______________________________
<PAGE>
EXHIBIT 10u
DEFERRED SALARY AND BONUS AGREEMENT (STOCK INVESTMENT)
BETWEEN
TANDY CORPORATION AND
_________________________
THIS AGREEMENT made this__ day of December, 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:
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 the compensation of 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:
Definitions. For purposes of this Agreement, the following capitalized
-----------
terms shall have the following meanings:
"Common Stock" means the common stock, par value of $1.00 per share, of
Tandy.
"Dividend Equivalent" means the amount equal to the cash dividend payable
on a single share of Common Stock.
"Market Value" means the average of the closing prices of a share of Common
Stock on the New York Stock Exchange for each trading day in a calendar
month.
"Stock Unit" means a unit of account which is deemed to equal a single
share of Common Stock.
Deferral of Compensation. Executive hereby agrees to defer the receipt of
-------------------------
the following cash compensation elected below, subject to the terms and
conditions of this Agreement:
____ Executive's Biweekly Net Salary to be paid from January 1, 1998
through March 31, 1998 (the "Salary Deferral Period"). "Biweekly
Net Salary" shall mean Executive's gross biweekly salary less ___
for each biweekly payroll period.
____ Executive's Net Bonus (if any). "Net Bonus" shall mean Executive's
bonus which, if earned and due, would otherwise be paid in
February, 1998 (the "Bonus Payment Month") 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) As soon as practicable following each pay period end in the
Salary Deferral Period, Stock Units in an amount equal to the
applicable Biweekly Net Salary divided by the Market Value for
the month of deferral, plus additional Stock Units equal to 12%
of the Biweekly Net Salary Stock Units (the "Salary Matching
Contribution");
(b) As soon as practicable after the last day of the Bonus Payment
Month, Stock Units equal to the Net Bonus, if any, divided by
the Market Value for the month of deferral, plus additional
Stock Units equal to 12% of the Net Bonus Stock Units (the
"Bonus Matching Contribution"); and
(c) If the payment date under this Agreement is on or after the
earlier of January 1, 2004 or termination of employment,
additional Stock Units equal to 25% of the Biweekly Net Salary
Stock Units and the Net Bonus Stock Units (which amount shall
vest 20% each December 31st beginning with December 31, 1998).
Investment of Deferred Compensation Account.
-------------------------------------------
1. Executive's Deferred Compensation Account shall remain invested in
Stock Units for the duration of this Agreement.
2. With respect to any cash dividend paid on Common Stock, Executive's
Deferred Compensation Account shall be credited (as soon as
administratively feasible in the month following the month which
includes the record date for such dividend) with the number of Stock
Units (including fractions thereof) equal to
(a) the product of the number of Stock Units credited to the
Deferred Compensation Account on the record date for such
dividend times the Dividend Equivalent, divided by
----------
(b) the Market Value (for the month which includes the record date
for such dividend) of a share of Common Stock.
3. Executive agrees on behalf of himself and his beneficiary to assume
all risk, loss, cost or expense in connection with any decrease in the
value of 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. Executive hereby elects that payment of his vested benefit hereunder
will begin (circle and complete the applicable election):
(a) on the first business day of February coincident with, or
immediately following, Executive's termination of employment
with Tandy;
(b) on the first business day of February _____, (fill in year); or
(c) on the earlier of "A" or "B".
Executive hereby elects that his payment, as described above, will be
made in the following form (circle and complete the applicable
election):
(a) single sum; or
(b) ___annual installments (not to exceed 10).
Executive's payment election shall be irrevocable except that if above
Executive elects payment in the form of a single sum, then he may
change such election to an election for periodic payments, provided,
however, that such periodic payments commence on the same day that the
single sum would have been paid and that such election change is filed
with the Organization and Compensation Committee of the Board of
Directors of Tandy (the "0 & C Committee") at least 12 months prior to
the day payment of the single sum was to be made. This change in
election may be made only once.
Notwithstanding the election above, if this paragraph is checked,
Executive hereby elects that if his employment with Tandy is
involuntarily terminated, Executive shall receive in a single sum all
the benefits due him under this paragraph on the last business day of
the month immediately following the month in which his termination of
employment occurs.
2. After Executive's death any amount remaining in the Deferred
Compensation Account shall be paid in a single sum to his beneficiary,
as soon as administratively feasible in the calendar year following
the calendar year of Executive's death.
3. Prior to the commencement of benefits under this Agreement,
Executive may request a distribution due to a Hardship (as defined
below). If Executive has commenced to receive installment payments
under this Agreement, he may request acceleration of such payments in
the event of a Hardship. Executive may request a Hardship
distribution or acceleration by submitting a written request to the
0 & C Committee accompanied by evidence to demonstrate that the
circumstances being experienced qualify as a Hardship. The 0 & C
Committee shall, in its sole discretion, determine whether Executive
has experienced a Hardship. Any distribution on account of Hardship
shall be limited to the lesser of an amount sufficient to meet the
Hardship or the vested balance of Executive's Deferred Compensation
Account.
For purposes of this Agreement, a Hardship is an immediate
financial need of Executive resulting from extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of Executive.
4. In the event of Executive's Disability, Executive's benefit under this
Agreement shall be paid to him (or his legal representative) in the
manner prescribed by the 0 & C Committee in its sole discretion.
"Disability" means a physical or mental infirmity which the 0 & C
Committee, in its sole discretion, has determined impairs Executive's
ability to perform substantially his duties for a period of one
hundred eighty (180) consecutive days.
5. Any amounts credited to the Deferred Compensation Account shall be
paid as follows:
(a) Distribution of the Stock Units credited to the Deferred
Compensation Account shall be paid solely in shares of Tandy
Common Stock; and
(b) Distribution of any fractional shares shall be paid in cash.
6. In the event that Tandy would be denied a deduction for amounts
otherwise payable in any calendar year to Executive under this
Agreement by reason of the application of section 162(m) of the
Internal Revenue Code of 1986, as amended, the 0 & C Committee, in its
sole discretion, may reduce any payment otherwise due to Executive
(but not below zero) to the extent necessary to avoid such application
of section 162(m) and such amount not paid shall be paid to Executive
in the earliest calendar year(s) in which payment may be made without
application of section 162(m).
7. Notwithstanding anything to the contrary in this Agreement, if a
"Change in 'Control" (as defined in the Tandy Corporation 1997
Incentive Stock Plan) of Tandy occurs, then (a) effective on the
date of the Change in Control, all amounts credited under this
Agreement shall become vested and nonforfeitable, (b) effective on
the date of the Change in Control, all deferral elections shall
become null and void and no more deferrals shall be accepted under
this Agreement, and (c) within two weeks of the date of the Change
in Control, Tandy or its successor shall pay to Executive in a
single sum the value of his benefits under this Agreement.
Beneficiary. The beneficiary under this Agreement shall be Executive's
-----------
spouse. If Executive's spouse predeceases Executive or dies simultaneously
with 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 amounts
which may be invested or credited under the provisions of this
Agreement shall continue for all purposes to be a part of the general
assets of Tandy and no person or entity, other than Tandy, shall by
virtue of the provisions of this Agreement have any interest in such
amounts. To the extent that any person or entity acquires a right to
receive payments or the delivery of the shares of Common Stock 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, at Tandy's expense, a grantor trust (commonly
referred to as a rabbi trust). If a grantor trust is created, Tandy
shall deposit the assets allocated to 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. The O & C Committee shall have full power and authority to interpret,
construe, and administer this Agreement. The O & C Committee's
interpretation and construction of this Agreement, and its actions
hereunder, including any valuation of the Deferred Compensation Account
or the amount of the payment or the identity of the 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, and venue for any actions hereunder or related to
this Agreement shall be in Tarrant County, Texas.
5. The Stock Units credited to the Deferred Compensation Account shall be
equitably adjusted by the 0 & C Committee to take into account any
recapitalization, reorganization, merger, stock split, stock dividend or
other changes in Tandy Common Stock from the date of this Agreement until
the date the shares of Common Stock are delivered under the terms hereof.
<PAGE>
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
__________________________
Secretary
By:____________________________
Name: Dwain H. Hughes
Title: Sr. Vice President
Date: December 23, 1997
_______________________________
EXECUTIVE
Date:
<PAGE>
EXHIBIT 10v
DEFERRED SALARY AND BONUS AGREEMENT
BETWEEN
TANDY CORPORATION AND
_____________________
THIS AGREEMENT made this _____ day of December, 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:
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 the compensation of
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:
Definitions. For purposes of this Agreement, the following capitalized terms
- -----------
shall have the following meanings:
"Common Stock" means the common stock, par value of $1.00 per share, of Tandy.
"Dividend Equivalent" means the amount equal to the cash dividend payable on a
single share of Common Stock.
"Market Value" means the average of the closing prices of a share of Common
Stock on the New York Stock Exchange for each trading day in a calendar month.
"Stock Unit" means a unit of account which is deemed to equal a single share of
Common Stock.
Deferral of Compensation. Executive hereby agrees to defer the receipt of the
- -------------------------
following cash compensation elected below, subject to the terms and conditions
of this Agreement:
____ Executive's Biweekly Net Salary to be paid from January 1,1998 through
March 31, 1998 (the "Salary Deferral Period"). "Biweekly Net Salary"
shall mean Executive's gross biweekly salary less _________for each
biweekly payroll period.
____ Executive's Net Bonus (if any). "Net Bonus" shall mean Executive's bonus
which, if earned and due, would otherwise be paid in February, 1998 (the
"Bonus Payment Month") 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) As soon as practicable following each pay period end in the
Salary Deferral Period, the applicable Biweekly Net Salary, plus
Stock Units equal to 12% of the applicable Biweekly Net Salary
divided by the Market Value for the month of deferral (the
"Salary Matching Contribution"); and
(b) As soon as practicable after the last day of the Bonus Payment
Month, the Net Bonus, if any, plus Stock Units equal to 12% of
the Net Bonus divided by the Market Value for the month of
deferral (the "Bonus Matching Contribution").
Investment of Deferred Compensation Account.
- -------------------------------------------
1. Tandy shall invest, from time to time, 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
Executive in his sole discretion. Notwithstanding the above, the Salary
Matching Contribution and the Bonus Matching Contribution (and the
earnings thereon) shall be invested solely in Stock Units for the
duration of this Agreement and the amounts attributable to the Biweekly
Net Salary or the Net Bonus (and the earnings thereon) may not be
invested in Common Stock or Stock Units.
2. Any earnings, gains, or losses (realized or unrealized) associated with
the investment of such assets shall be credited to the Deferred
Compensation Account. With respect to any cash dividend paid on Common
Stock, Executive's Deferred Compensation Account shall be credited (as
soon as administratively feasible in the month following the month which
includes the record date for such dividend) with the number of Stock
Units (including fractions thereof) equal to
(a) the product of the number of Stock Units credited to the Deferred
Compensation Account on the record date for such dividend times
the Dividend Equivalent, divided by
----------
(b) the Market Value (for the month which includes the record date
for such dividend) of a share of Common Stock.
3. Executive agrees on behalf of himself and his beneficiary to assume all
risk, loss, cost or expense in connection with any decrease in the value
of 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. Executive hereby elects that payment of his vested benefit hereunder
will begin (circle and complete the applicable election):
(a) on the first business day of February coincident with, or
immediately following, Executive's termination of employment with
Tandy;
(b) on the first business day of February, _____ (fill in year); or
(c) on the earlier of "A" or "B".
Executive hereby elects that his payment, as described above, will be
made in the following form (circle and complete the applicable
election):
(a) single sum; or
(b) _______annual installments (not to exceed 10).
Executive's payment election shall be irrevocable except that if above
Executive elects payment in the form of a single sum, then he may change
such election to an election for periodic payments, provided, however,
that such periodic payments commence on the same day that the single sum
would have been paid and that such election change is filed with the
Organization and Compensation Committee of the Board of Directors of
Tandy (the "0 & C Committee") at least 12 months prior to the day
payment of the single sum was to be made. This change in election may be
made only once.
_______ Notwithstanding the election above, if this paragraph is
checked, Executive hereby elects that if his employment with Tandy is
involuntarily terminated, Executive shall receive in a single sum all
the benefits due him under this paragraph on the last business day of
the month immediately following the month in which his termination of
employment occurs.
2. After Executive's death any amount remaining in the Deferred
Compensation Account shall be paid in a single sum to his beneficiary,
as soon as administratively feasible in the calendar year following the
calendar year of Executive's death.
3. Prior to the commencement of benefits under this Agreement,
Executive may request a distribution due to a Hardship (as defined
below). If Executive has commenced to receive installment payments
under this Agreement, he may request acceleration of such payments in
the event of a Hardship. Executive may request a Hardship
distribution or acceleration by submitting a written request to the
0 & C Committee accompanied by evidence to demonstrate that the
circumstances being experienced qualify as a Hardship. The 0 & C
Committee shall, in its sole discretion, determine whether Executive has
experienced a Hardship. Any distribution on account of Hardship shall
be limited to an amount sufficient to meet the Hardship.
For purposes of this Agreement, a Hardship is an immediate financial
need of Executive resulting from extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
Executive.
4. Any time prior to the date elected by Executive for payment hereunder,
Executive may elect to receive in a single sum 94% of the Deferred
Compensation Account not invested in Stock Units. Upon receipt of this
amount, Executive shall forfeit the remaining 6% of the Deferred
Compensation Account not invested in Stock Units.
5. In the event of Executive's Disability, Executive's benefit under this
Agreement shall be paid to him (or his legal representative) in the
manner prescribed by the 0 & C Committee in its sole discretion.
"Disability" means a physical or mental infirmity which the 0 & C
Committee, in its sole discretion, has determined impairs Executive's
ability to perform substantially his duties for a period of one hundred
eighty (180) consecutive days.
6. Any amounts credited to the Deferred Compensation Account shall be paid
as follows:
(a) Distribution of the amounts credited to the Deferred Compensation
Account with respect to Stock Units shall be paid solely in
shares of Common Stock; and
(b) Distribution of any fractional shares or any other benefits shall
be paid in cash
7. In the event that Tandy would be denied a deduction for amounts
otherwise payable in any calendar year to Executive under this Agreement
by reason of the application of section 162(m) of the Internal Revenue
Code of 1986, as amended, the 0 & C Committee, in its sole discretion,
may reduce any payment otherwise due to Executive (but not below zero)
to the extent necessary to avoid such application of section 162(m) and
such amount not paid shall be paid to Executive in the earliest calendar
year(s) in which payment may be made without application of section
162(m).
8. Notwithstanding anything to the contrary in this Agreement, if a "Change
in Control" (as defined in the Tandy Corporation 1997 Incentive Stock
Plan) of Tandy occurs, then (a) effective on the date of the Change in
Control, all deferral elections shall become null and void and no more
deferrals shall be accepted under this Agreement and (b) within two
weeks of the date of the Change in Control, Tandy or its successor shall
pay to Executive in a single sum the value of his benefits under this
Agreement.
Beneficiary. The beneficiary under this Agreement shall be Executive's spouse.
- -----------
If Executive's spouse predeceases Executive or dies simultaneously with
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 amounts
which may be invested or credited under the provisions of this Agreement
shall continue for all purposes to be a part of the general assets of
Tandy and no person or entity, other than Tandy, shall by virtue of
the provisions of this Agreement have any interest in such amounts. To
the extent that any person or entity acquires a right to receive
payments or the delivery of the shares of Common Stock 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, at Tandy's expense, a grantor trust (commonly
referred to as a rabbi trust). If a grantor trust is created, Tandy
shall deposit the assets allocated to 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. The 0 & C Committee shall have full power and authority to interpret,
construe, and administer this Agreement. The 0 & C Committee's
interpretation and construction of this Agreement, and its actions
hereunder, including any valuation of the Deferred Compensation
Account or the amount of the payment or the identity of the 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, and venue for any actions hereunder or
related to this Agreement shall be in Tarrant County, Texas.
5. The Stock Units credited to the Deferred Compensation Account shall be
equitably adjusted by the 0 & C Committee to take into account any
recapitalization, reorganization, merger, stock split, stock dividend or
other changes in Tandy Common Stock from the date of this Agreement
until the date the shares of Common Stock are delivered under the terms
hereof.
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
Name: __________________________
Title: __________________________
Date: __________________________
_________________________________
EXECUTIVE
Date: ___________________________
<PAGE>
EXHIBIT 10w
TANDY CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective as of April 1, 1998
ARTICLE I
Purpose
1.1 General. The purpose of the Plan is to attract, motivate, and retain top
-------
management employees of the Company by providing an opportunity and an
incentive for each individual to defer the receipt of compensation
otherwise payable currently and to accumulate earnings thereon on a
tax-deferred basis.
1.2 Unfunded Plan. The Plan is intended to be an unfunded plan for purposes
--------------
of the Employee Retirement Income Security Act of 1974, as amended, and
maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees.
ARTICLE II
Definitions
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1 12% Match. "12% Match" means the amount credited to a Participant's
---------
Stock Account by reason of an elective deferral under section 6.1
hereof.
2.2 Board. "Board" means the Board of Directors of the Company.
-----
2.3 Bonus Deferral Election. "Bonus Deferral Election" means an election to
-----------------------
defer payment of an annual bonus, if any, in the form(s) provided by the
Committee subject to the requirements and terms of Article IV hereof.
2.4 Committee. "Committee" means a committee of the Board consisting of at
---------
least two (2) members, all of whom are Disinterested Directors appointed
by the Board to administer the Plan and to perform the functions set
forth herein.
2.5 Common Stock. "Common Stock" means the common stock, par value of
-------------
$1.00 per share, of the Company.
2.6 Company. "Company" means Tandy Corporation, a Delaware corporation, or
-------
any successor entity thereto, including without limitation, the
transferee of all or substantially all of the stock or assets of the
Company.
2.7 Deferral Account. "Deferral Account" means the notional account
-----------------
established and maintained for each Participant in accordance with
Article VI hereof, for bookkeeping purposes only, to measure the value
of elective deferrals made under the Plan and the earnings thereon.
Amounts credited to the Deferral Account shall be expressed in dollars
and cents.
2.8 Deferral Election. "Deferral Election" means a Salary Deferral Election
-----------------
or a Bonus Deferral Election as defined under this Article II.
2.9 Disability. "Disability" means the suffering from a physical or mental
----------
condition which, in the opinion of the Committee based upon appropriate
medical advice and examination and in accordance with rules applied
uniformly to all employees of the Company, totally and permanently
prevents the Participant, as the case may be, from performing the
customary duties of his or her regular job with the Company.
2.10 Disinterested Director. "Disinterested Director" means a director of the
----------------------
Company who is a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended.
2.11 Dividend Equivalent. "Dividend Equivalent" means the amount equal
--------------------
to the cash dividend payable on a single share of Common Stock.
2.12 Fair Value. "Fair Value" means the average of the high and low sale
-----------
prices of a share of Common Stock on the New York Stock Exchange for any
day (or if Common Stock was not traded on such day, the most recent
preceding trading day).
2.13 Participant. "Participant" means any individual who is eligible to
-----------
participate in the Plan as provided in section 4.1 hereof.
2.14 Payment Election. "Payment Election" means an election to determine the
----------------
time and manner of payments hereunder in the form(s) provided by the
Committee subject to the requirements and terms of Article VIII hereof.
2.15 Plan. "Plan" means the Tandy Corporation Executive Deferred Compensation
----
Plan, as from time to time amended.
2.16 Plan Year. "Plan Year" means the period beginning on the effective
----------
date of the Plan and ending on December 31 and thereafter any calendar
year.
2.17 Salary Deferral Election. "Salary Deferral Election" means an election
-------------------------
to defer payment of base salary in the form(s) provided by the Committee
subject to the requirements and terms of Article IV hereof.
2.18 Stock Account. "Stock Account" means the notional account established
-------------
and maintained for each Participant in accordance with Article VII
hereof, for bookkeeping purposes only, to measure the value of any 12%
Match and the Dividend Equivalents thereon. Amounts credited to the
Stock Account shall be expressed in the form of Stock Units and
fractional Stock Units.
2.19 Stock Unit. "Stock Unit" means a unit of account which is deemed to
----------
equal a single share of Common Stock.
2.20 Unforeseeable Emergency. "Unforeseeable Emergency" means an immediate
------------------------
financial need of the Participant resulting from extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant as determined by the Committee.
ARTICLE III
Administration
3.1 Committee. The Plan shall be administered by the Committee which shall
---------
hold meetings at such times as may be necessary for the proper
administration of the Plan. Except as otherwise provided in the Plan,
the Committee shall have full power to construe and interpret the Plan,
establish and amend rules and regulations for its administration, and
perform all other acts relating to the Plan, including the delegation of
administrative responsibilities that it believes reasonable and proper.
3.2 Duties. The Committee, or any person or entity designated by the
------
Committee, shall be responsible for the administration of the Plan
including but not limited to determination of eligibility, receiving
deferral elections, provision of investment choices, distribution of
benefits hereunder, maintenance of account balances, calculation of
hypothetical investment returns and any other duties concerning the
day-to-day operation of the Plan.
3.3 Adjudication. Any decision made, or action taken, by the Committee or
------------
the Board arising out of, or in connection with, the interpretation and
administration of the Plan, including but not limited to the
adjudication of claims and payment of benefits hereunder, shall be final
and conclusive.
3.4 Indemnification. No member of the Committee or its delegate shall be
---------------
liable for any action, failure to act, determination or interpretation
made in good faith with respect to this Plan or any transaction
hereunder, except for liability arising from his or her own willful
misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the
Committee for all costs and expenses and, to the extent permitted by
applicable law, any liability incurred in connection with defending
against, responding to, negotiation for the settlement of or otherwise
dealing with any claim, cause of action or dispute of any kind arising
in connection with any actions in administering this Plan or in
authorizing, denying authorization to, or failing to authorize any
transaction hereunder.
ARTICLE IV
Participation
4.1 Eligibility. Participation in the Plan shall be limited to any employee
-----------
of the Company and its subsidiaries who is either an officer of the
Company or a division officer on the effective date of the Plan or who
is otherwise selected by the Committee, in its sole discretion, to
participate in the Plan.
4.2 Filing an Election.
------------------
(a) A Salary Deferral Election shall be effective for a Plan Year if
the Participant files an executed Salary Deferral Election with
the Committee by December 15th of the Plan Year immediately
preceding such Plan Year, provided however, for the initial Plan
Year, a Participant may file an executed Salary Deferral Election
with the Committee by March 27, 1998 which shall solely cover
salary paid on or after April 1 of such Plan Year.
(b) A Bonus Deferral Election shall be effective for the Plan Year
for which the bonus, if any, is earned if the Participant files
an executed Bonus Deferral Election with the Committee by
September 30th of such Plan Year.
(c) Notwithstanding the foregoing, if (during any Plan Year) any
employee of the Company or its subsidiaries is hired or promoted
into the classification of employees eligible to participate in
the Plan described in Section 4.1, then such employee shall
become a Participant in the Plan on the first day of the second
month following such employee's date of hire or date of promotion
("Initial Eligibility Date") and he may file a Deferral Election
for the Plan Year including his Initial Eligibility Date subject
to the following:
(1) Salary Deferral Election. The Participant must file the
Salary Deferral Election no later than 10 days prior to
his Initial Eligibility Date and the Salary Deferral
Election shall solely cover salary paid on or after his
Initial Eligibility Date through the last day of such Plan
Year.
(2) Bonus Deferral Election. The Participant may file a Bonus
Deferral Election subject to the terms and conditions
otherwise described in this Section 4.2 and the Plan.
4.3 Irrevocable. A Deferral Election shall be irrevocable once filed with
-----------
the Committee except as provided in Articles VIII, XI, and XII hereof.
ARTICLE V
Compensation Subject to Deferral
5.1 Base Salary. With respect to the base salary otherwise payable to a
------------
Participant during the Plan Year for which a Salary Deferral Election is
in effect, the dollar amount or percentage of salary specified on such
Salary Deferral Election shall be deferred in accordance with the terms
prescribed therein; provided however that such Salary Deferral Election
shall be for no more than 80% of the Participant's salary, unless
otherwise permitted by the Committee.
5.2 Annual Bonus. With respect to the annual bonus, if any, that is earned
------------
by a Participant during the Plan Year for which a Bonus Deferral
Election is in effect, the dollar amount or percentage of annual bonus
specified on such Bonus Deferral Election shall be deferred in
accordance with the terms prescribed therein; provided however that such
Bonus Deferral Election shall be for no more than 80% of the
Participant's bonus, unless otherwise permitted by the Committee.
ARTICLE VI
Elective Deferrals
6.1 Elective Deferral. Amounts deferred under Article V hereof with respect
-----------------
to each Plan Year of participation in the Plan shall be credited to the
Participant's Deferral Account if, as, and when such amounts would
otherwise have been paid to the Participant.
6.2 Vesting. Except as provided in section 8.7 hereof, each Participant
-------
shall have a nonforfeitable and fully vested right to the amounts
credited in such Participant's Deferral Account.
6.3 Investment Choices. Each Participant shall be entitled to direct the
-------------------
deemed investment of the amounts credited to such Participant's Deferral
Account in any of the investment choices or combination of investment
choices as may be offered by the Committee from time to time in
accordance with the rules, regulations and procedures established
by the Committee. The Committee may add or remove investment choices
at its sole discretion; provided, however, no amount shall be subject
-------- -------
to forfeiture solely by reason of a removal of an investment choice in
accordance with section 6.3 hereof.
6.4 Investment Earnings. Each Participant's Deferral Account shall be
--------------------
credited with earnings and losses in accordance with such Participant's
investment choice(s). Earnings and losses shall begin to accrue with
respect to amounts credited to a Participant's Deferral Account under
section 6.1 in accordance with the procedures established by the
Committee.
ARTICLE VII
Matching Contributions
7.1 12% Match. As soon as administratively feasible after the amounts
----------
deferred by a Participant under section 6.1 hereof are credited to the
Participant's Deferral Account, such Participant's Stock Account shall
be credited with the number of Stock Units (including fractions thereof)
equal to
(a) twelve percent of such amount deferred under section 6.1, divided by
(b) the Fair Value (for the day the relevant deferral was made) of a
share of Common Stock.
7.2 Vesting. Each Participant shall have a nonforfeitable and fully vested
-------
right to the amounts credited in such Participant's Stock Account.
7.3 Dividend Equivalents. With respect to any cash dividend paid on Common
---------------------
Stock, each Participant's Stock Account shall be credited (as soon as
administratively feasible after such dividend is paid) with the number
of Stock Units (including fractions thereof) equal to
(a) the product of the number of Stock Units credited to the Stock
Account on the record date for such dividend (including Stock
Units credited as of the record date) times the Dividend
Equivalent, divided by
----------
(b) the Fair Value (for the day on which such dividend was paid) of a
share of Common Stock.
7.4 Change in Capitalization. In the event of a stock dividend, stock split,
------------------------
merger, consolidation or other recapitalization of the Company affecting
the number of outstanding shares of Common Stock, the number of Stock
Units credited to a Participant's Stock Account shall be appropriately
adjusted on the same basis as specified by the Committee.
7.5 Section 16(b). Notwithstanding any provision to the contrary,
---------------
Participants who are actually or potentially subject to section 16(b) of
the Securities Exchange Act of 1934, as amended, shall be subject to any
procedures adopted by the Committee, including without limitation the
delay of any payment from a Participant's Stock Account.
ARTICLE VIII
Distributions
8.1 Filing an Election. With each Deferral Election, a Participant must file
------------------
a Payment Election that provides for the method of payment for amounts
deferred under the Deferral Election. Such Payment Election shall be
irrevocable except that if a Participant originally elects payment in
the form of a single sum, such Participant may change such election
to an election for periodic payments, provided, however, that such
Participant may elect to make this change only once, that such
periodic payments commence on the same day that the single sum would
have otherwise been paid and that such election change is filed with the
Committee before the first day of the Plan Year immediately preceding
the Plan Year in which payment of the single sum was to be made.
8.2 Timing of Payment. With respect to (a) amounts deferred under Article V
-----------------
hereof for any Plan Year and the net earnings thereon and (b) the 12%
Match credited by reason of such deferral and the Dividend Equivalents
thereon, payment of such amounts credited under the Plan shall be
made to the Participant in the time and manner specified on the
applicable Deferral Election. Notwithstanding the foregoing and any
payment election made by a Participant, if a Participant's employment
with the Company is terminated for any reason prior to the
Participant's 55th birthday, then the Participant shall receive in
a single sum all the benefits due the Participant hereunder valued
as of the first business day of February immediately following the
calendar year in which his termination of employment occurs and paid
as soon as administratively feasible on or after such day.
8.3 Form of Payment.
---------------
(a) Any payment from a Participant's Deferral Account shall be made
in the form of cash.
(b) Any payment of Stock Units from a Participant's Stock Account
shall be made with a corresponding number of whole shares of
Common Stock and, if applicable, payment of any fractional Stock
Units shall be made in cash.
8.4 Account Balance. Upon payment to a Participant under this Article VIII,
---------------
such Participant's Deferral Account and Stock Account shall be reduced
by the cash amounts and Stock Units distributed or forfeited (under
section 8.7) from the respective accounts.
8.5 Death or Disability.
-------------------
(a) In the event of the Participant's death, the balance of such
Participant's Deferral Account and Stock Account shall be paid to
the Participant's designated beneficiary or, if no beneficiary
has been designated, to the Participant's estate in a single sum
as soon as administratively feasible after the first business day
of February following the calendar year of the Participant's
death.
(b) In the event of the Participant's Disability, the balance of such
Participant's Deferral Account and Stock Account shall be paid to
the Participant (or the Participant's legal representative) in
the manner prescribed by the Committee at its sole discretion.
8.6 Distribution for Unforeseeable Emergency. Notwithstanding any provision
----------------------------------------
to the contrary, in the event of an Unforeseeable Emergency a
Participant shall be entitled to early payment of all or part of the
balance of such Participant's Deferral Account and Stock Account to the
extent reasonably needed to satisfy the Unforeseeable Emergency need. An
application for an early payment under this section 8.6 shall be made in
accordance with the procedures and requirements adopted by the
Committee.
8.7 Early Distribution. Notwithstanding any provision to the contrary,
-------------------
a Participant shall be entitled to payment of all or part of the balance
of such Participant's Deferral Account prior to the date of distribution
specified in the applicable Payment Election in accordance with the
procedures and requirements adopted by the Committee; provided, however,
six percent of the early payment amount otherwise payable from the
Deferral Account shall be forfeited and the Participant shall have
no right or entitlement whatsoever with respect to such forfeited
amount.
8.8 Valuation of Distributions. Any distribution to be made in cash shall be
--------------------------
based on the value of the Participant's Deferral Account as of the
valuation date (described below). Any distribution to be made in the
form of Common Stock shall be based on the number of Stock Units
credited to the Participant's Stock Account as of the valuation date
(described below) and, if applicable, any distribution to be made in
cash because of fractional shares shall be based on the Fair Value as of
the applicable valuation date.
(a) Valuation Date for Distributions for Unforeseeable Emergency,
-----------------------------------------------------------------
Early Distribution and Disability. If the Participant (or his
------------------------------------
beneficiary) is entitled to a distribution under section 8.5(b),
section 8.6, or section 8.7, then the Committee shall choose for
such Participant the valuation date (or dates) for such
distribution (or distributions) and such distribution (or
distributions) shall occur as soon as administratively feasible
after such valuation date (or dates).
(b) Change in Control. If the Participant (or his beneficiary) is
-----------------
entitled to a distribution under Article XI, then the day of the
Change in Control shall be the valuation date.
(c) Valuation Date for All Other Distributions. The valuation date
--------------------------------------------
for all other distributions shall be the first business day of
February of the calendar year during which such distribution is
made.
8.9 162(m) Deduction Limitation. In the event the Company would be
-----------------------------
denied a deduction for amounts otherwise payable in any Plan Year to a
Participant under this Article VIII by reason of the application of
section 162(m) of the Internal Revenue Code of 1986, as amended, the
Committee, in its sole discretion, may reduce any payment otherwise due
to such Participant (but not below zero) to the extent necessary to
avoid such application of section 162(m) and such amount not paid and
the net earnings or Dividend Equivalents thereon shall be paid to the
Participant in the earliest Plan Year(s) in which payment may be made
without application of section 162(m).
ARTICLE IX
Statement of Accounts
Statements shall be sent no less frequently than annually to each Participant
(or such Participant's estate, beneficiary or legal representative).
ARTICLE X
Beneficiary Designation
Each Participant shall have the right, at any time, to designate any individual
or entity as such Participant's designated beneficiary. A beneficiary
designation shall be made, and may only be amended or revoked, by the
Participant by filing a written designation with the Committee or its designee
in accordance with the procedures adopted by the Committee. Any such beneficiary
designation shall apply to all benefits under this Plan and the Tandy
Corporation Executive Deferred Stock Plan.
ARTICLE XI
Change in Control
Notwithstanding anything to the contrary in this Plan or in any Payment
Election, if a "Change in Control" (as defined in the Tandy Corporation 1997
Incentive Stock Plan) of the Company occurs, then (a) effective on the date of
the Change in Control, all Deferral Elections shall become null and void and no
more deferrals shall be accepted under the Plan and (b) within two weeks of the
date of the Change in Control, the Committee shall pay to each Participant (or
his beneficiary) in a single sum the value of his or her Deferral Account, if
any, in cash and Stock Account, if any, in shares of Common Stock.
ARTICLE XII
Amendment or Termination
The Board or the Committee may (in its sole discretion) amend, modify or
terminate the Plan at any time for any or no reason; provided, however, no
amendment, modification or termination shall, without the consent of the
Participant, adversely affect such Participant's right to payment from the
Participant's vested balance under the Deferral Account and the Stock Account as
of the date of such amendment, modification or termination.
ARTICLE XIII
Miscellaneous
13.1 Unsecured Right. Any right to receive a payment under the Plan shall
----------------
be no greater than that of an unsecured general creditor of the
Company. No amount payable under the Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any claim
against a Participant. No Participant shall have the right to exercise
any of the rights or privileges of a shareholder with respect to the
Stock Units credited to such Participant's Stock Account. The Committee
may, but need not, establish a grantor trust (commonly referred to as
a "rabbi trust") to hold assets of the Company that may, but need not,
be used to pay benefits hereunder.
13.2 No Right to Continued Employment. Participation in the Plan shall not
---------------------------------
give any employee any right to remain in the employ of the Company or
any subsidiary or affiliate thereof.
13.3 Withholding. The Company shall withhold to the extent required by law
-----------
all applicable income and other taxes from amounts deferred or paid
under the Plan.
13.4 Governing Law, Jurisdiction, and Venue. The Plan shall be construed,
-----------------------------------------
governed and enforced in accordance with the laws of the State of Texas,
without reference to rules relating to conflicts of law, except to the
extent preempted by federal law. Any action arising out of or relating
to the Plan, the Company, Participants, or any transaction under the
Plan shall be brought in state or federal courts located in Tarrant
County, Texas.
13.5 Compliance with Other Laws. The Committee may, from time to time, impose
--------------------------
additional restrictions upon Participants as it deems necessary,
advisable or appropriate in order to comply with applicable federal and
state securities laws, or other federal laws.
<PAGE>
EXHIBIT 10x
TANDY CORPORATION
EXECUTIVE DEFERRED STOCK PLAN
Effective as of April 1, 1998
ARTICLE I
Purpose
1.1 General. The purpose of the Plan is to attract, motivate and retain top
-------
management employees of the Company by providing an opportunity and an
incentive for each individual to defer the receipt of compensation
otherwise payable currently and to accumulate earnings thereon on a
tax-deferred basis.
1.2 Unfunded Plan. The Plan is intended to be an unfunded plan for purposes
--------------
of the Employee Retirement Income Security Act of 1974, as amended, and
maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees.
ARTICLE II
Definitions
The following capitalized terms used in the Plan shall have the respective
meanings set forth in this Article:
2.1 12% Match. "12% Match" means the amount credited to a Participant's
---------
Stock Account by reason of an elective deferral as prescribed by section
7.1 hereof.
2.2 25% Match. "25% Match" means the amount credited to a Participant's
---------
Stock Account by reason of an elective deferral as prescribed by section
7.3 hereof.
2.3 Board. "Board" means the Board of Directors of the Company.
-----
2.4 Bonus Deferral Election. "Bonus Deferral Election" means an election to
-----------------------
defer payment of an annual bonus, If any, in the form(s) provided by the
Committee subject to the requirements and terms of Article IV hereof.
2.5 Committee. "Committee" means a committee of the Board consisting of at
---------
least two (2) members, all of whom are Disinterested Directors appointed
by the Board to administer the Plan and to perform the functions set
forth herein.
2.6 Common Stock. "Common Stock" means the common stock, par value of
------------
$1.00 per share, of the Company.
2.7 Company. "Company" means Tandy Corporation, a Delaware corporation, or
-------
any successor entity thereto, including without limitation, the
transferee of all or substantially all of the stock or assets of the
Company.
2.8 Deferral Election. "Deferral Election" means a Salary Deferral
-----------------
Election, Bonus Deferral Election, Option Deferral Election, or
Restricted Stock Deferral Election as defined under this Article II.
2.9 Disability. "Disability" means the suffering from a physical or mental
----------
condition which, in the opinion of the Committee based upon appropriate
medical advice and examination and in accordance with rules applied
uniformly to all employees of the Company, totally and permanently
prevents the Participant, as the case may be, from performing the
customary duties of his or her regular job with the Company.
2.10 Disinterested Director. "Disinterested Director" means a director of the
----------------------
Company who is a "Non-Employee Director" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended.
2.11 Dividend Equivalent. "Dividend Equivalent" means the amount equal to
--------------------
the cash dividend payable on a single share of Common Stock.
2.12 Fair Value. "Fair Value" means the average of the high and low sale
-----------
prices of a share of Common Stock on the New York Stock Exchange on any
day (or if Common Stock was not traded on such day, the most recent
preceding trading day).
2.13 Mature Common Stock. "Mature Common Stock" means Common Stock that has
-------------------
been held by the Participant for at least six months and is "mature" as
provided for in Emerging Issues Task Force (EITF) Issue No. 97-5, as
amended.
2.14 Option Deferral Election. "Option Deferral Election" means an election
-------------------------
to defer the receipt of Profit Shares otherwise transferable to the
Participant upon exercise of a Stock Option in the form(s) provided by
the Committee subject to the requirements and terms of Article IV
hereof.
2.15 Participant. "Participant" means any individual who is eligible to
-----------
participate in the Plan as provided in section 4.1 hereof.
2.16 Payment Election. "Payment Election" means an election to determine the
----------------
time and manner of payments hereunder in the form(s) provided by the
Committee subject to the requirements and terms of Article VIII hereof.
2.17 Plan. "Plan" means the Tandy Corporation Executive Deferred Stock Plan,
----
as from time to time amended.
2.18 Plan Year. "Plan Year" means the period beginning on the effective
---------
date of the Plan and ending on December 31 and thereafter any calendar
year.
2.19 Profit Shares. "Profit Shares" means (1) the total number of Common
--------------
Stock shares acquired pursuant to the exercise of a Stock Option, minus
-----
(2) the number of Mature Common Shares used to exercise the Stock
Option.
2.20 Purchase Price. "Purchase Price" means the pre-determined purchase
---------------
price for a single share of Common Stock under a Stock Option.
2.21 Restricted Stock. "Restricted Stock" means Common Stock granted to an
-----------------
employee of the Company subject to a substantial risk of forfeiture
until a date on which certain service-based requirements are satisfied.
2.22 Restricted Stock Deferral Election. "Restricted Stock Deferral Election"
----------------------------------
means an election to defer compensation in the amount of nonvested
Restricted Stock in the form(s) provided by the Committee subject to the
requirements and terms of Article IV hereof.
2.23 Salary Deferral Election. "Salary Deferral Election" means an election
-------------------------
to defer payment of base salary in the form(s) provided by the Committee
subject to the requirements and terms of Article IV hereof.
2.24 Stock Account. "Stock Account" means the notional account established
-------------
and maintained for each Participant in accordance with Article VI and
Article VII hereof, for bookkeeping purposes only. Amounts credited to
the Stock Account shall be expressed in the form of Stock Units and
fractional Stock Units.
2.25 Stock Option. "Stock Option" means a nonqualified stock option granted
------------
to an employee of the Company to purchase a pre-determined number of
shares of Common Stock at the designated Purchase Price.
2.26 Stock Unit. "Stock Unit" means a unit of account which is deemed to
----------
equal a single share of Common Stock.
2.27 Unforeseeable Emergency. "Unforeseeable Emergency" means an immediate
------------------------
financial need of the Participant resulting from extraordinary and
unforeseeable circumstances arising as a result of events beyond the
control of the Participant as determined by the Committee.
ARTICLE III
Administration
3.1 Committee. The Plan shall be administered by the Committee which shall
---------
hold meetings at such times as may be necessary for the proper
administration of the Plan. Except as otherwise provided in the Plan,
the Committee shall have full power to construe and interpret the Plan,
establish and amend rules and regulations for its administration, and
perform all other acts relating to the Plan, including the delegation of
administrative responsibilities that it believes reasonable and proper.
3.2 Duties. The Committee, or any person or entity designated by the
------
Committee, shall be responsible for the administration of the Plan
including but not limited to determination of eligibility, receiving
deferral elections, provision of investment choices, distribution of
benefits hereunder, maintenance of account balances, calculation of
hypothetical investment returns and any other duties concerning the
day-to-day operation of the Plan.
3.3 Adjudication. Any decision made, or action taken, by the Committee or
------------
the Board arising out of, or in connection with, the interpretation and
administration of the Plan, including but not limited to the
adjudication of claims and payment of benefits hereunder, shall be final
and conclusive.
3.4 Indemnification. No member of the Committee or its delegate shall
---------------
be liable for any action, failure to act,determination or interpretation
made in good faith with respect to this Plan or any transaction
hereunder, except for liability arising from his or her own willful
misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the
Committee for all costs and expenses and, to the extent permitted by
applicable law, any liability incurred in connection with defending
against, responding to, negotiation for the settlement of or otherwise
dealing with any claim, cause of action or dispute of any kind arising
in connection with any actions in administering this Plan or in
authorizing, denying authorization to, or failing to authorize any
transaction hereunder.
ARTICLE IV
Participation
4.1 Eligibility. Participation in the Plan shall be limited to any employee
-----------
of the Company and its subsidiaries who is either an officer of the
Company or a division officer on the effective date of the Plan or who
is otherwise selected by the Committee, in its sole discretion, to
participate in the Plan.
4.2 Filing an Election.
------------------
(a) A Salary Deferral Election shall be effective for a Plan Year if
the Participant files an executed Salary Deferral Election with
the Committee by December 15th of the Plan Year immediately
preceding such Plan Year, provided however, for the initial Plan
Year, a Participant may file an executed Salary Deferral Election
with the Committee by March 27, 1998 which shall solely cover
salary paid on or after April 1 of such Plan Year.
(b) A Bonus Deferral Election shall be effective for the Plan Year
for which the bonus, if any, is earned if the Participant files
an executed Bonus Deferral Election with the Committee by
September 30th of such Plan Year.
(c) An Option Deferral Election shall be effective for a specific
Stock Option (or portion thereof) if the Participant files an
executed Option Deferral Election with the Committee at least
six months prior to the exercise of the relevant Stock Option.
Once filed, an Option Deferral Election shall remain in effect
until the day that is 6 months prior to the last day of the term
of the relevant Stock Option and the Participant shall not be
able to exercise the specific Stock Option during the period
beginning on the day the Option Deferral Election is filed and
ending on the sixth month anniversary of such day.
Notwithstanding the foregoing, any Option Deferral Election
shall become null and void with respect to the unexercised
portion of any Stock Option if the Participant's employment is
terminated (either voluntarily or involuntarily) or there is a
Change in Control as defined in Article XII.
(d) A Restricted Stock Deferral Election shall be effective for a
specific Restricted Stock grant if the Participant files an
executed Restricted Stock Deferral Election with the Committee at
least six months prior to the date the relevant Restricted Stock
would otherwise vest.
(e) Notwithstanding the foregoing, if (during any Plan Year) any
employee of the Company or its subsidiaries is hired or promoted
into the classification of employees eligible to participate in
the Plan described in Section 4.1, then such employee shall
become a Participant in the Plan on the first day of the second
month following such employee's date of hire or date of promotion
("Initial Eligibility Date") and he may file a Deferral Election
for the Plan Year including his Initial Eligibility Date subject
to the following:
(1) Salary Deferral Election. The Participant must file the
-------------------------
Salary Deferral Election no later than 10 days prior to
his Initial Eligibility Date and the Salary Deferral
Election shall solely cover salary paid on or after his
Initial Eligibility Date through the last day of such Plan
Year.
(2) Bonus Deferral Election. The Participant may file a Bonus
-----------------------
Deferral Election subject to the terms and conditions
otherwise described in this Section 4.2 and the Plan.
(3) Option Deferral Election. The Participant may file an
--------------------------
Option Deferral Election any time prior to or after his
Initial Eligibility Date. Such Option Deferral Election
shall be subject to the terms and conditions otherwise
described in this Section 4.2 and the Plan.
(4) Restricted Stock Deferral Election. The Participant may
------------------------------------
file a Restricted Stock Deferral Election any time prior
to or after his Initial Eligibility Date. Such Restricted
Stock Deferral Election shall be subject to the terms and
conditions otherwise described in this Section 4.2 and the
Plan.
4.3 Irrevocable. A Deferral Election shall be irrevocable once filed with
-----------
the Committee except as provided in Articles IX, XII, and XIII hereof.
ARTICLE V
Compensation Subject to Deferral
5.1 Base Salary. With respect to the base salary otherwise payable to a
------------
Participant during the Plan Year for which a Salary Deferral Election is
in effect, the dollar amount or percentage of salary specified on such
Salary Deferral Election shall be deferred in accordance with the terms
prescribed therein; provided however that such Salary Deferral Election
shall be for no more than 80% of the Participant's salary, unless
otherwise permitted by the Committee.
5.2 Annual Bonus. With respect to the annual bonus, if any, that is earned
------------
by a Participant during the Plan Year for which a Bonus Deferral
Election is in effect, the dollar amount or percentage of annual bonus
specified on such Bonus Deferral Election shall be deferred in
accordance with the terms prescribed therein; provided however that such
Bonus Deferral Election shall be for no more than 80% of the
Participant's bonus, unless otherwise permitted by the Committee.
5.3 Profit Shares from Stock Option.
-------------------------------
(a) With respect to a Stock Option exercised by a Participant for
which an Option Deferral Election is in effect, the payment of
Profit Shares otherwise transferable to the Participant shall be
deferred in accordance with the terms prescribed therein.
(b) If the Option Deferral Election is only with respect to a portion
of a particular Stock Option, then any shares attributable to the
exercise of the Stock Option shall first be deemed to be Profit
Shares subject to the Option Deferral Election.
(c) Any Option Deferral Election shall require the Participant to pay
the aggregate Purchase Price payable pursuant to the exercise of
the Stock Option (or portion thereof) subject to the Option
Deferral Election, with shares of Mature Common Stock (with any
fractional shares to be paid in cash).
5.4 Restricted Stock.
----------------
(a) With respect to any Restricted Stock for which a Restricted Stock
Deferral Election is in effect, the Participant shall relinquish
such number of shares of Restricted Stock to the Company on the
day such Restricted Stock Deferral Election is filed with the
Committee and the Participant shall be entitled to an allocation
of Stock Units under section 6.1 with respect to such Restricted
Stock in accordance with the terms prescribed therein.
(b) Notwithstanding the foregoing, any restrictions which would
otherwise apply to the Restricted Stock pursuant to any other
agreements between the Company and the Participant shall continue
to apply to the deferred amounts unless and until such
restrictions lapse in accordance with the terms of such other
agreement, except as otherwise provided by the Committee.
ARTICLE VI
Elective Deferrals
- ------------------
6.1 Elective Deferral. As and when cash amounts and/or Common Stock shares
which are deferred under Article V hereof would otherwise have been paid
to the Participant (or, in the case of Restricted Stock, as and when
such shares are relinquished to the Company), the Participant's Stock
Account shall be credited, as soon as administratively feasible, with
the number of Stock Units (including fractions thereof) equal to the sum
of:
(a) the cash amounts deferred divided by the Fair Value (for the day
----------
the relevant deferral was made) of the Common Stock; and
(b) the number of shares of Common Stock deferred (plus, in the case
of Restricted Stock, the amount of any accrued dividends on such
shares of Restricted Stock divided by the Fair Value [for the day
----------
the relevant deferral was made] of the Common Stock).
6.2 Vesting.
-------
(a) Each Participant shall have a nonforfeitable and fully vested
right with respect to the Stock Units allocated to the
Participant's Stock Account (and the Dividend Equivalents
thereon) pursuant to a Salary Deferral Election, a Bonus Deferral
Election, or an Option Deferral Election.
(b) The Stock Units allocated to a Participant's Stock Account (and
the Dividend Equivalents thereon) pursuant to a Restricted Stock
Deferral Election shall become vested as provided in section
5.4(b).
ARTICLE VII
Matching Contributions
7.1 12% Match. As and when Stock Units are credited to the Participant's
---------
Stock Account by reason of a Salary Deferral Election or a Bonus
Deferral Election for a Plan Year under Article VI hereof, the
Participant's Stock Account shall be credited with an additional number
of Stock Units (including fractions thereof) equal to twelve percent of
such Stock Units credited for elective deferrals under Article VI
hereof.
7.2 Vesting for 12% Match. Each Participant shall have a nonforfeitable and
---------------------
fully vested right to the 12% Match and the Dividend Equivalents thereon
under Article VIII hereof.
7.3 25% Match. If Stock Units are credited to the Participant's Stock
---------
Account by reason of a Salary Deferral Election or a Bonus Deferral
Election for a Plan Year under Article VI hereof and payment of all
of the Stock Units is deferred (a) until after the end of the fifth
Plan Year which follows the Plan Year during which such elective
deferrals are initially made or (b) until the earlier of (1) after
the end of such fifth Plan Year or (2) the Participant's termination
of employment, the Participant's Stock Account shall be credited with
an additional number of Stock Units (including fractions thereof)
equal to twenty-five percent of such Stock Units initially credited
for elective deferrals under Article VI hereof.
7.4 Vesting for 25% Match.
---------------------
(a) Twenty percent of the 25% Match and the Dividend Equivalents
thereon under Article VIII hereof shall vest on the last day of
the initial Plan Year during which the 25% Match is credited. An
additional twenty percent of the 25% Match and the Dividend
Equivalents thereon shall vest on the last day of each succeeding
Plan Year until one-hundred percent of the 25% Match and the
Dividend Equivalents thereon become nonforfeitable and fully
vested on the last day of fourth Plan Year which follows the Plan
Year during which the 25% Match is credited.
(b) If a Participant's employment with the Company is terminated for
any reason other than death or Disability, the non-vested portion
of any 25% Match and the Dividend Equivalents thereon shall be
forfeited on the date of such termination and the Participant's
rights with respect to such forfeited amount shall be null and
void thereafter.
(c) Notwithstanding the foregoing, in the event of the Participant's
death or Disability while an employee of Tandy or any of its
subsidiaries or in the event of a Change in Control (as defined
in Article XII), any 25% Match and the Dividend Equivalents
thereon credited to the Participant's Stock Account shall become
fully vested and nonforfeitable immediately.
ARTICLE VIII
Maintenance of Stock Accounts
8.1 Dividend Equivalents. With respect to any cash dividend paid on Common
---------------------
Stock, each Participant's Stock Account shall be credited (as soon as
administratively feasible after such dividend is paid) with the number
of Stock Units (including fractions thereof) equal to
(a) the product of the number of Stock Units credited to the Stock
Account on the record date for such dividend (including Stock
Units credited as of the record date) times the Dividend
Equivalent, divided by
(b) the Fair Value (for the day such dividend was paid) of a share
of Common Stock.
8.2 Change in Capitalization. In the event of a stock dividend, stock split,
------------------------
merger, consolidation or other recapitalization of the Company affecting
the number of outstanding shares of Common Stock, the number of Stock
Units credited to a Participant's Stock Account shall be appropriately
adjusted on the same basis as specified by the Committee.
8.3 Section 16(b). Notwithstanding any provision to the contrary,
---------------
Participants who are actually or potentially subject to section 16(b) of
the Securities Exchange Act of 1934, as amended, shall be subject to any
procedures adopted by the Committee, including without limitation the
delay of any payment from a Participant's Stock Account.
ARTICLE IX
Distributions
9.1 Filing an Election. With each Deferral Election, a Participant
--------------------
must file a Payment Election that provides for the method of payment
for amounts deferred under the Deferral Election. Such Payment Election
shall be irrevocable except that if a Participant originally
elects payment in the form of a single sum, such Participant may
change such election to an election for periodic payments, provided,
however, that such Participant may elect to make this change only once,
that such periodic payments commence on the same day that the single
sum would have otherwise been paid and that such election change is
filed with the Committee before the first day of the Plan Year
immediately preceding the Plan Year in which payment of the single sum
was to be made.
9.2 Timing of Payment. With respect to (a) amounts deferred under Article V
-----------------
hereof for any Plan Year and the Dividend Equivalents thereon and
(b) the 12% Match and any 25% Match credited by reason of such deferral
and the Dividend Equivalents thereon, payment of the vested portion of
such amounts credited under the Plan shall be made to the Participant
in the time and manner specified on the applicable Deferral Election.
Notwithstanding the foregoing and any payment election made by a
Participant, if a Participant's employment with the Company is
terminated for any reason prior to the Participant's 55th birthday,
then the Participant shall receive in a single sum all vested benefits
due the Participant hereunder valued as of the first business day
of February immediately following the calendar year in which his
termination of employment occurs and paid as soon as
administratively feasible after such day.
9.3 Form of Payment. Any payment of Stock Units from a Participant's Stock
---------------
Account shall be made with a corresponding number of whole shares of
Common Stock and, if applicable, payment of any fractional Stock Units
shall be made in cash.
9.4 Stock Account Balance. Upon payment to a Participant under this Article
---------------------
IX or forfeiture pursuant to section 5.4(b) or section 7.4, such
Participant's Stock Account shall be reduced by the number of Stock
Units distributed or forfeited from the Stock Account.
9.5 Death or Disability.
-------------------
(a) In the event of the Participant's death, the vested balance of
such Participant's Stock Account shall be paid to the
Participant's designated beneficiary or, if no beneficiary has
been designated, to the Participant's estate in a single sum as
soon as soon as administratively feasible after the first
business day of February following the calendar year of the
Participant's death.
(b) In the event of the Participant's Disability, the vested balance
of such Participant's Stock Account shall be paid to the
Participant (or the Participant's legal representative) in the
manner prescribed by the Committee at its sole discretion.
9.6 Distribution for Unforeseeable Emergency. Notwithstanding any provision
----------------------------------------
to the contrary, in the event of an Unforeseeable Emergency a
Participant shall be entitled to early payment of all or part of the
vested balance of such Participant's Stock Account to the extent
reasonably needed to satisfy the Unforeseeable Emergency need. An
application for an early payment under this section 9.6 shall be made in
accordance with the procedures and requirements adopted by the
Committee.
9.7 Valuation of Distributions. Any distribution to be made in the form of
---------------------------
Common Stock shall be based on the number of Stock Units credited to the
Participant's Stock Account as of the valuation date (described below)
and, if applicable, any distribution to be made in cash because of
fractional shares shall be based on the Fair Value as of the applicable
valuation date.
(a) Valuation Date for Distributions for Unforeseeable Emergency or
--------------------------------------------------------------------
Disability. If the Participant (or his beneficiary) is entitled to a
----------
distribution under section 9.5(b) or section 9.6, then the Committee
shall choose for such Participant the valuation date (or dates) for
such distribution (or distributions) and such distribution (or
distributions) shall occur as soon as administratively feasible
after such valuation date (or dates).
(b) Change in Control. If the Participant (or his beneficiary) is
-------------------
entitled to a distribution under Article XII, then the day of the
Change in Control shall be the valuation date.
(c) Valuation Date for All Other Distributions. The valuation date for
-------------------------------------------
all other distributions shall be the first business day of February
of the calendar year during which such distribution is made.
9.8 162(m) Deduction Limitation. In the event the Company would be denied
-----------------------------
a deduction for amounts otherwise payable in any Plan Year to a
Participant under this Article IX by reason of the application of
section 162(m) of the Internal Revenue Code of 1986, as amended,
the Committee, in its sole discretion, may reduce any payment otherwise
due to such Participant (but not below zero) to the extent necessary
to avoid such application of section 162(m) and such amount not paid and
the Dividend Equivalents thereon shall be paid to the Participant in
the earliest Plan Year(s) in which payment may be made without
application of section 162(m).
ARTICLE X
Statement of Accounts
Statements shall be sent no less frequently than annually to each Participant
(or such Participant's estate, beneficiary or legal representative).
ARTICLE XI
Beneficiary Designation
Each Participant shall have the right, at any time, to designate any individual
or entity as such Participant's designated beneficiary. A beneficiary
designation shall be made, and may only be amended or revoked, by the
Participant by filing a written designation with the Committee or its designee
in accordance with the procedures adopted by the Committee. Any such beneficiary
designation shall apply to all benefits under this Plan and the Tandy
Corporation Executive Deferred Compensation Plan.
ARTICLE XII
Change in Control
Notwithstanding anything to the contrary in this Plan or in any Payment
Election, if a "Change in Control" (as defined in the Tandy Corporation 1997
Incentive Stock Plan) of the Company occurs, then (a) effective on the date of
the Change in Control, all amounts credited under the Plan shall become vested
and nonforfeitable, (b) effective on the date of the Change in Control, all
Deferral Elections shall become null and void and no more deferrals shall be
accepted under the Plan and (c) within two weeks of the date of the Change in
Control, the Committee shall pay to each Participant (or his beneficiary) in a
single sum the value of his or her Stock Account in shares of Common Stock.
ARTICLE XIII
Amendment or Termination
The Board or the Committee may amend, modify or terminate the Plan at any time
for any or no reason; provided, however, no amendment, modification or
termination shall, without the consent of the Participant, adversely affect such
Participant's right to payment from the Participant's vested balance under the
Stock Account as of the date of such amendment, modification or termination.
ARTICLE XIV
Miscellaneous
14.1 Unsecured Right. Any right to receive a payment under the Plan shall
----------------
be no greater than that of an unsecured general creditor of the
Company. No amount payable under the Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any
claim against a Participant. No Participant shall have the right to
exercise any of the rights or privileges of a shareholder with respect
to the Stock Units credited to such Participant's Stock Account. The
Committee may, but need not, establish a grantor trust (commonly
referred to as a "rabbi trust") to hold assets of the Company that
may, but need not, be used to pay benefits hereunder.
14.2 No Right to Continued Employment. Participation in the Plan shall not
---------------------------------
give any employee any right to remain in the employ of the Company or
any subsidiary or affiliate thereof.
14.3 Withholding. The Company shall withhold to the extent required by law
-----------
all applicable income and other taxes from amounts deferred or paid
under the Plan.
14.4 Governing Law, Jurisdiction, and Venue. The Plan shall be construed,
-----------------------------------------
governed and enforced in accordance with the laws of the State of Texas,
without reference to rules relating to conflicts of law, except to the
extent preempted by federal law. Any action arising out of or relating
to the Plan, the Company, Participants, or any transaction under the
Plan shall be brought in state or federal courts located in Tarrant
County, Texas.
14.5 Compliance with Other Laws. The Committee may, from time to time, impose
--------------------------
additional restrictions upon Participants as it deems necessary,
advisable or appropriate in order to comply with applicable federal and
state securities laws, or other federal laws.
<PAGE>
EXHIBIT 10y
TANDY CORPORATION
UNFUNDED DEFERRED COMPENSATION PLAN
FOR DIRECTORS
(AS AMENDED AND RESTATED JANUARY 1, 1998)
-----------------------------------------
1. PURPOSES OF THE PLAN
--------------------
a) The purposes of the unfunded Deferred Compensation Plan (the "Plan")
are to enable Tandy Corporation (the "Company") to attract and retain
the best qualified members of the Board of Directors of the Company
(a "Director") by providing them with a Plan to defer the payment of
all or a specified portion of the fees payable to the Director for
services rendered on behalf of the Company.
2. ELECTION TO DEFER
-----------------
a) A Director may elect on or before December 31 of any year, to defer
payment of all or a specified part of all his/her director fees (cash
or Common Stock of the Company or dividends attributable thereto),
for services during the succeeding calendar year following such
election. Any person who shall become a Director during any calendar
year, and who was not a Director of the Company on the preceding
December 31, may elect, not later than the 30th day after his or her
term begins, to defer payment of all or a specified part of such fees
for the succeeding calendar year. Any such elections shall be made by
written notice delivered to the Corporate Secretary of the Company.
Any such elections shall only be effective for the succeeding
calendar year. Notwithstanding the above, for the calendar year 1998,
any such election must be made prior to February 28, 1998.
b) Amounts deferred under this Plan will be distributed based on one of
the two following elections made by each participating Director:
(1) consecutive substantially equal annual installments up to a
maximum of ten in advance beginning on January 15 of a specified
year; or
(2) a lump sum payment on a specified date not in excess of ten years
from the date Director ceases to be a Director.
3. DIRECTORS' ACCOUNTS
-------------------
a) Cash Account
------------
All deferred cash fees shall be recorded on the books of the Company
and a memorandum cash account of the fees deferred by each
participating Director will be maintained.
b) Stock Account
-------------
All deferred fees payable in Common Stock of the Company ("Company
Common Stock") shall be recorded on the books of the Company and a
memorandum stock account of the fees in Company Common Stock deferred
by each participating Director will be maintained. The Director's
stock account shall be credited with the number of shares of Company
Common Stock otherwise payable to each participating Director under
the terms and in the amounts and on the dates set forth in the
Company's 1993 Incentive Stock Plan, as amended, and the Company's
1997 Incentive Stock Plan, as amended, as the case may be, providing
for the compensation of Directors, if they so elect, in Company
Common Stock.
If a Director's stock account is credited with shares of Company
Common Stock by reason of a deferral of director fees on or after
January 1, 1998, and payment of all of the Company Common Stock is
deferred (a) until after December 31st of the third calendar year
which follows the calendar year during which such deferrals are
initially made or (b) until after the earlier of (i) December 31st of
such third calendar year or (ii) the day the Director ceases to be a
director, the Director's stock account shall be credited with an
additional number of shares of Company Common Stock (including
fractions thereof) equal to twenty-five percent of the shares of
Company Common Stock initially credited.
c) Pension Plan Stock Account
--------------------------
Effective December 31, 1997, the Special Compensation Plan for
Directors (the "Pension Plan") was terminated and in terminating the
Pension Plan the Company calculated the single sum present value of
each Pension Plan participant's benefit and converted that amount to
Company Common Stock based on the average of the closing prices of
Company Common Stock for 1997. The amount of the Company Common Stock
shall be recorded on the books of the Company and a memorandum
account reflecting such amounts for each Director formerly
participating in the Pension Plan will be maintained (the "Pension
Plan Stock Account").
4. PAYMENT FROM DIRECTORS' ACCOUNTS
--------------------------------
a) Payment of the amount of deferred fees of a Director's cash account
shall be made in cash. Payment of the amount of deferred fees of a
Director's stock account or Pension Plan Stock Account shall be made
in Company Common Stock. Fractional Company Common Stock interests,
if any, and dividends attributable to Company Common Stock shall be
payable in cash. Each participating Director holding a stock account
or Pension Plan Stock Account, upon his or her election, shall either
be directly paid in cash or have his or her cash account credited as
of the payment date for dividends on Company Common Stock in an
amount equal to dividends attributable to the number of shares of
Company Common Stock credited to each Director's stock account or
Pension Plan Stock Account as of the record date set by the Board of
Directors of the Company.
b) The aggregate amount of deferred fees, together with interest accrued
thereon, credited to the account of any Director, at the election
of the Director, shall be paid to the Director, either (i) in a
lump sum on the date specified by the Director, or (ii) in
substantially equal annual installments not exceeding ten or (iii)
in a lump sum, upon a Change in Control or threatened Change in
Control (as hereafter defined), on a date specified by the Board
of Directors prior to any Change in Control, or (iv) if no
election is made, on 60 days following the date a Director ceases
to be a Director. The first installment shall be paid (i) in advance
on January 15 of the following calendar year in which the
Director ceases to be a Director of the Company and subsequent
installments (not exceeding nine) shall be paid promptly on
January 15 of each of the succeeding calendar years, or (ii) on the
date specified by the Director.
c) Any Director with a Pension Plan Stock Account shall be entitled to
make an election as to the method of payment of Company Common Stock
from his or her Pension Plan Stock Account. Such election must be
made prior to April 1, 1998. In such election, each Director shall
elect the method of payment (either single payment or 10 or less
annual installments) and the date such payment will be made or
begin to be made. If any Director does not elect a method of payment
or a date of such payment, then the amount of such Director's
Pension Plan Stock Account shall be distributed to him or her, in a
single sum, 60 days following the day the individual ceases to be a
Director.
For purposes of the Plan a "Change in Control" shall have the same
meaning as set forth in the Tandy Corporation 1993 Incentive Stock
Plan as amended.
5. INTEREST
--------
a) On the last day of each calendar quarter interest shall be credited
to each Director's cash account calculated on the unpaid balance in
such cash account as calculated from time to time during the quarter.
The rate of interest to be credited will be 1% per annum less than
the announced prime rate of the Chase-Chemical Bank N.A. as the same
shall exist from time to time during the quarter.
6. PAYMENT IN EVENT OF DEATH
-------------------------
a) If a Director should die before all deferred amounts credited to the
Director's cash account, stock account or Pension Plan Stock Account
have been distributed, the balance of any deferred fees, dividends if
any, and interest then in the Director's account shall be paid
promptly to the Director's designated beneficiary in the manner
designated by the Director or if no method is selected within 60 days
after the Director's death. If such Director did not designate a
beneficiary or in the event that the beneficiary or beneficiaries
designated by such Director shall have predeceased the Director, the
balance in the Director's account shall be paid promptly to the
Director's estate.
7. TERMINATION OF ELECTION
-----------------------
a) A Director may terminate his election to defer payment of fees by
written notice delivered to the Corporate Secretary of the Company.
Such termination shall become effective as of the end of the calendar
year in which notice of termination is given with respect to fees
payable for services as a Director during subsequent calendar years.
Amounts credited to the account of a Director prior to the effective
date of termination shall not be affected thereby and shall be paid
only in accordance with Sections 4 and 6 above.
8. RIGHTS UNSECURED
----------------
a) The right of any Director to receive payment of deferred amounts
under the provisions of the Plan shall be an unsecured claim against
the general assets of the Company. The maintenance of individual
Director accounts is for bookkeeping purposes only. The Company is
not obligated to acquire or set aside any particular assets for the
discharge of its obligations, nor shall any Director have any
property rights in any particular assets held by the Company, whether
or not held for the purpose of funding the Company's obligations
hereunder.
9. NONASSIGNABILITY
----------------
a) During the Director's lifetime, the right to any deferred fees,
dividends if any, and interest thereon may not be transferred,
assigned, hypothecated or pledged. Any such attempt to transfer,
assign, hypothecate or pledge the account shall be void.
10. INTERPRETATION AND AMENDMENT
----------------------------
a) The Plan shall be administered by the Corporate Governance Committee
of the Company. The decision of such Committee with respect to any
questions arising as to the interpretation of this Plan, including
the severability of any and all of the provisions thereof, shall be
final, conclusive and binding. The Company reserves the right to
modify this Plan from time to time or to repeal the Plan entirely,
provided, however, that no modification of this Plan shall operate to
annul an election already in effect for the current calendar year or
any preceding calendar year.
11. EFFECTIVE DATE
--------------
a) The effective date of this Plan will be December 15, 1995 when it
was adopted.
<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 (a)
(In millions, except per Year Ended December 31,
------------------------------------------------
share amounts) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
Ratio of Earnings to Fixed
Charges:
Income (loss) from continuing
operations $ 186.9 $ (91.6) $ 211.9 $ 224.3 $ 195.6
Plus provision (benefit) for
income taxes 117.0 (54.0) 131.3 135.2 115.5
-------- -------- -------- -------- --------
Income (loss) before income
taxes 303.9 (145.6) 343.2 359.5 311.1
-------- -------- -------- -------- --------
Fixed charges:
Interest expense and
amortization of debt discount 46.1 36.4 33.7 30.0 39.7
Amortization of issuance
expense 0.4 0.2 0.3 0.3 0.4
Appropriate portion (33 1/3%)
of rentals 74.2 80.0 72.5 70.8 67.5
-------- -------- -------- -------- --------
Total fixed charges 120.7 116.6 106.5 101.1 107.6
-------- -------- -------- -------- --------
Earnings before income taxes
and fixed charges $ 424.6 $ (29.0) $ 449.7 $ 460.6 $ 418.7
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges 3.52 (a) 4.22 4.56 3.89
======== ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges and Preferred
Dividends:
Total fixed charges, as above $ 120.7 $ 116.6 $ 106.5 $ 101.1 $ 107.6
Preferred dividends 6.1 6.3 11.3 38.9 36.7
-------- -------- -------- -------- --------
Total fixed charges and
preferred dividends $ 126.8 $ 122.9 $ 117.8 $ 140.0 $ 144.3
======== ======== ======== ======== ========
Earnings before income taxes
and fixed charges $ 424.6 $ (29.0) $ 449.7 $ 460.6 $ 418.7
======== ======== ======== ======== ========
Ratio of earnings to fixed
charges and preferred
dividends 3.35 (b) 3.82 3.29 2.90
======== ======== ======== ======== ========
(a) Earnings were not sufficient to cover fixed charges during 1996 by
approximately $145.6 million.
(b) Earnings were not sufficient to cover fixed charges and preferred dividends
during 1996 by approximately $151.9 million.
<PAGE>
TANDY CORPORATION
EXHIBIT 21
SUBSIDIARIES
The largest subsidiaries of the Company are:
State of Incorporation
----------------------
Computer City, Inc. Delaware
Technology Properties, Inc. Delaware
Trans World Electronics, Inc. Texas
All of the subsidiaries of Tandy Corporation are included in the Company's
consolidated financial statements. All other subsidiaries, considered in the
aggregate as a single subsidiary, would not constitute a significant subsidiary.
<PAGE>
TANDY CORPORATION
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Registration Nos.
33-37970, 333-27297 and 333-44125) of Tandy Corporation and to the incorporation
by reference in the Registration Statements on Form S-8 (Registration Nos.
33-23178, 33-41523, 33-51019, 33-51599, 33-51603, 333-27437 333-47893 and
333-48331) of our report dated February 24, 1998, appearing on page 32 in this
Annual Report on Form 10-K.
\s\ Price Waterhouse LLP
- -------------------------
PRICE WATERHOUSE LLP
Fort Worth, Texas
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of income contained in
Tandy Corporation's 10-K and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000096289
<NAME> FORM 10-K
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 105,900
<SECURITIES> 0
<RECEIVABLES> 260,100
<ALLOWANCES> 8,800
<INVENTORY> 1,205,200
<CURRENT-ASSETS> 1,715,500
<PP&E> 1,081,700
<DEPRECIATION> 559,800
<TOTAL-ASSETS> 2,317,500
<CURRENT-LIABILITIES> 976,400
<BONDS> 236,100
0
100,000
<COMMON> 138,300
<OTHER-SE> 820,300
<TOTAL-LIABILITY-AND-EQUITY> 2,317,500
<SALES> 5,372,200
<TOTAL-REVENUES> 5,372,000
<CGS> 3,357,900
<TOTAL-COSTS> 3,357,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,900
<INCOME-PRETAX> 303,900
<INCOME-TAX> 117,000
<INCOME-CONTINUING> 186,900
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,900
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.63
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains the restated summary financial information of Tandy
Corporation for the periods noted. Only the (EPS-PRIMARY) and (EPS-DILUTED) tags
have been restated. Restatement is due to (1) a two-for-one stock split of Tandy
common stock payable on September 22, 1997, and (2) a change in accounting
principle, specifically Statement of Financial Accounting Standards No. 128,
"Earnings per Share".
</LEGEND>
<CIK> 0000096289
<NAME> RESTATED FORM 10-Q AND FORM 10-K
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 12-MOS 9 MOS
<FISCAL-YEAR-END> Dec-31-1997 Dec-31-1997 Dec-31-1996 Dec-31-1996
<PERIOD-END> Mar-31-1997 Jun-30-1997 Dec-31-1996 Sep-30-1996
<CASH> 101,500 71,300 121,500 124,956
<SECURITIES> 21,000 38,800 18,500 25,120
<RECEIVABLES> 188,600 226,900 235,100 206,017
<ALLOWANCES> 8,300 8,800 7,900 0
<INVENTORY> 1,282,400 1,108,900 1,420,500 1,671,034
<CURRENT-ASSETS> 1,738,100 1,573,600 1,939,800 2,090,480
<PP&E> 1,050,600 1,074,700 1,034,300 619,984
<DEPRECIATION> 508,100 528,400 488,700 0
<TOTAL-ASSETS> 2,385,700 2,246,800 2,583,400 2,792,656
<CURRENT-LIABILITIES> 1,088,200 1,031,500 1,193,500 1,183,664
<BONDS> 104,200 77,900 104,300 109,071
0 0 0 0
100,000 100,000 100,000 100,000
<COMMON> 85,600 85,600 85,600 85,645
<OTHER-SE> 985,500 930,000 1,079,200 1,294,221
<TOTAL-LIABILITY-AND-EQUITY> 2,385,700 2,246,800 2,583,400 2,792,656
<SALES> 1,291,700 2,437,700 6,285,500 4,234,690
<TOTAL-REVENUES> 1,291,700 2,437,700 6,285,500 4,234,690
<CGS> 840,100 1,540,500 4,263,100 2,784,767
<TOTAL-COSTS> 840,100 1,540,500 4,263,100 2,784,767
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 6,800 14,300 23,400 15,013
<INCOME-PRETAX> 41,700 88,300 (145,600) 73,339
<INCOME-TAX> (16,100) (34,300) (54,000) 27,238
<INCOME-CONTINUING> 25,600 54,300 (91,600) 46,101
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 25,600 54,300 (91,600) 46,101
<EPS-PRIMARY> 0.22 0.47 (0.82) 0.34
<EPS-DILUTED> 0.21 0.46 (0.82) 0.34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains the restated summary financial information of Tandy
Corporation for the periods noted. Only the (EPS-PRIMARY) and (EPS-DILUTED) tags
have been restated. Restatement is due to (1) a two-for-one stock split of Tandy
common stock payable on September 22, 1997, and (2) a change in accounting
principle, specifically Statement of Financial Accounting Standards No. 128,
"Earnings per Share".
</LEGEND>
<CIK> 0000096289
<NAME> RESTATED FORM 10-Q AND FORM 10-K
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> Dec-31-1996 Dec-31-1996 Dec-31-1995 Dec-31-1994
<PERIOD-END> Mar-31-1996 Jun-30-1996 Dec-31-1995 Dec-31-1994
<CASH> 105,381 140,093 143,498 205,633
<SECURITIES> 0 0 0 0
<RECEIVABLES> 279,500 266,568 326,473 790,475
<ALLOWANCES> 0 0 5,885 21,374
<INVENTORY> 1,558,918 1,487,271 1,511,984 1,504,324
<CURRENT-ASSETS> 2,011,574 1,956,940 2,048,245 2,556,260
<PP&E> 589,170 603,586 1,066,960 977,695
<DEPRECIATION> 0 0 489,240 473,108
<TOTAL-ASSETS> 2,685,485 2,648,470 2,722,063 3,243,774
<CURRENT-LIABILITIES> 960,924 998,063 959,909 1,206,150
<BONDS> 140,719 107,261 140,813 153,318
0 0 0 429,982
100,000 100,000 100,000 100,000
<COMMON> 85,645 85,645 85,645 85,645
<OTHER-SE> 1,378,562 1,338,078 1,415,690 1,234,584
<TOTAL-LIABILITY-AND-EQUITY> 2,685,485 2,648,470 2,722,063 3,243,774
<SALES> 1,446,929 2,799,792 5,839,067 4,943,679
<TOTAL-REVENUES> 1,446,929 2,799,792 5,839,067 4,943,679
<CGS> 955,262 1,834,129 3,764,884 3,017,615
<TOTAL-COSTS> 955,262 1,834,129 3,764,884 3,017,615
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 3,320 8,544 (8,616) (48,565)
<INCOME-PRETAX> 23,036 37,827 343,273 359,540
<INCOME-TAX> 8,556 14,048 131,299 135,205
<INCOME-CONTINUING> 14,480 23,779 211,974 224,335
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 14,480 23,779 211,974 224,335
<EPS-PRIMARY> 0.11 0.17 1.62 1.46
<EPS-DILUTED> 0.11 0.17 1.58 1.43
</TABLE>
