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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 1-5571
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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
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
The number of shares outstanding of the issuer's Common Stock, $1 par value, on
April 30, 1999 was 96,769,519.
Index to Exhibits is on Sequential Page No. 17. Total pages 23.
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Ended
March 31,
--------------------
(In millions, except per share amounts) 1999 1998
- --------------------------------------- -------- --------
<S> <C> <C>
Net sales and operating revenues $ 890.2 $1,258.3
Cost of products sold 439.5 784.0
-------- --------
Gross profit 450.7 474.3
-------- --------
Expenses (income):
Selling, general and administrative 339.4 379.6
Depreciation and amortization 21.0 25.8
Interest income (4.5) (1.7)
Interest expense 8.3 10.3
Restricted stock awards (5.1) --
-------- --------
359.1 414.0
-------- --------
Income before income taxes 91.6 60.3
Provision for income taxes 35.7 23.2
-------- --------
Net income 55.9 37.1
Preferred dividends 1.4 1.5
-------- --------
Net income available to common shareholders $ 54.5 $ 35.6
======== ========
Net income available per common share:
Basic $ 0.56 $ 0.35
======== ========
Diluted $ 0.54 $ 0.34
======== ========
Shares used in computing earnings per common share:
Basic 97.2 101.8
======== ========
Diluted 101.9 106.8
======== ========
Dividends declared per common share $ 0.10 $ 0.10
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
March 31, December 31, March 31,
1998 1998 1998
(In millions, except for share amounts) (Unaudited) (Unaudited)
- -------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 53.9 $ 64.5 $ 77.9
Accounts and notes receivable, less allowance for
doubtful accounts 189.7 215.2 223.1
Inventories, at lower of cost or market 878.9 912.1 1,182.1
Other current assets 110.3 106.8 142.2
-------- -------- --------
Total current assets 1,232.8 1,298.6 1,625.3
Property, plant and equipment, at cost, less
accumulated depreciation 433.7 433.8 523.9
Other assets, net of accumulated amortization 265.2 261.2 83.3
-------- -------- --------
$1,931.7 $1,993.6 $2,232.5
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term debt, including current maturities of $ 297.9 $ 233.2 $ 266.5
long-term debt
Accounts payable 148.4 206.4 287.7
Accrued expenses 235.8 334.4 238.5
Income taxes payable 97.7 105.5 63.9
-------- -------- --------
Total current liabilities 779.8 879.5 856.6
-------- -------- --------
Long-term debt, excluding current maturities 266.0 235.1 277.1
Other non-current liabilities 33.1 27.5 49.8
-------- -------- --------
Total other liabilities 299.1 262.6 326.9
-------- -------- --------
Common stock put options 13.3 3.3 --
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; 76,000, 77,000 and 78,000
shares outstanding respectively 100.0 100.0 100.0
Common stock, $1 par value, 250,000,000 shares
authorized; 139,184,000, 139,184,000 and 138,332,000
shares issued, respectively 139.2 139.2 138.3
Additional paid-in capital 113.3 109.7 26.7
Retained earnings 1,738.6 1,693.4 1,701.9
Common stock in treasury, at cost; 42,451,000,
41,747,000 and 36,812,000 shares,
respectively (1,221.9) (1,161.6) (881.6)
Unearned deferred compensation (28.6) (31.5) (34.8)
Accumulated other comprehensive loss (1.1) (1.0) (1.5)
-------- -------- --------
Total stockholders' equity 839.5 848.2 1,049.0
Commitments and contingent liabilities
-------- -------- --------
$1,931.7 $1,993.6 $2,232.5
======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTION>
Three Months Ended
March 31,
----------------------
(In millions) 1999 1998
------------ -------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 55.9 $ 37.1
Adjustments to reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 21.0 25.8
Restricted stock awards (5.1) --
Other items 6.6 6.6
Changes in operating assets and liabilities:
Receivables 28.0 28.0
Inventories 33.3 23.1
Other current assets (3.5) 5.7
Accounts payable, accrued expenses and income taxes (156.5) (86.9)
-------- --------
Net cash (used) provided by operating activities (20.3) 39.4
-------- --------
Investing activities:
Additions to property, plant and equipment (21.7) (28.2)
Proceeds from sale of property, plant and equipment 0.8 2.5
Other investing activities (4.7) --
-------- --------
Net cash used by investing activities (25.6) (25.7)
-------- --------
Financing activities:
Purchases of treasury stock (67.7) (59.0)
Proceeds from sale of common stock put options 1.0 --
Sales of treasury stock to employee stock plans 13.9 12.5
Proceeds from exercise of stock options 3.9 8.5
Dividends paid (10.8) (11.5)
Changes in short-term borrowings, net 64.8 (36.6)
Additions to long-term borrowings 31.9 44.8
Repayments of long-term borrowings (1.7) (0.4)
-------- --------
Net cash provided (used) by financing activities 35.3 (41.7)
-------- --------
Decrease in cash and cash equivalents (10.6) (28.0)
Cash and cash equivalents, beginning of period 64.5 105.9
-------- --------
Cash and cash equivalents, end of period $ 53.9 $ 77.9
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. For further information, refer
to the consolidated financial statements and management's discussion and
analysis of results of operations and financial condition included in Tandy
Corporation's 1998 Annual Report on Form 10-K for the year ended December 31,
1998.
NOTE 2 - EARNINGS PER SHARE
Effective December 31, 1997, Tandy adopted Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share" ("FAS 128"). FAS 128
established new standards for computing and presenting earnings per share
("EPS"). The statement requires dual presentation of basic and diluted EPS on
the face of the income statement for entities with complex capital structures
and requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes the effect of potentially dilutive securities while diluted
EPS reflects the potential dilution that would have occurred if securities or
other contracts to issue common stock were exercised, converted, or resulted in
the issuance of common stock that would have then shared in the earnings of the
entity. The following schedule is a reconciliation of the numerators and
denominators used in computing the basic and diluted earnings per share
calculations for the three months ended March 31, 1999 and 1998, respectively.
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 1998
------------------------------------- -------------------------------------
Dollars and shares in millions, Income Shares Per Share Income Shares Per Share
except per share amounts) (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------------------ ----------- ------------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 55.9 $ 37.1
Less: Preferred stock dividends (1.4) (1.5)
-------- --------
Basic EPS
Net income available to common
shareholders 54.5 97.2 $ 0.56 35.6 101.8 $ 0.35
======== ========
Effect of dilutive securities:
Plus dividends on Series B
preferred stock 1.4 1.5
Additional contribution required
for TESOP if preferred stock had
been converted (1.1) 3.3 (1.0) 3.5
Stock options 1.4 1.5
-------- -------- -------- --------
Diluted EPS
Net income available to common
shareholders plus assumed
conversions $ 54.8 101.9 $ 0.54 $ 36.1 106.8 $ 0.34
======== ======== ======== ======== ======== ========
</TABLE>
NOTE 3 - SALE OF COMPUTER CITY, INC.
On August 31, 1998, Tandy completed the sale of 100% of the outstanding common
stock of its Computer City, Inc. subsidiary to CompUSA Inc. Tandy received
approximately $36.5 million in cash and an unsecured subordinated note for
$136.0 million as consideration for the sale. Tandy recognized a loss of $108.2
million from the sale of Computer City in 1998, which included certain
liabilities and contractual obligations incurred by Tandy. Computer City's
results from operations through August 31, 1998 are included in the accompanying
Consolidated Financial Statements.
Below is a summary of net sales and operating revenues and net losses, both in
total and per share, for Computer City for the three months ended March 31, 1999
and 1998, respectively.
Three Months Ended
March 31,
(In millions, except ---------------------
per share amounts) 1999 1998
----------------- -------- --------
Net sales and operating revenues $ -- $ 479.7
Net loss -- (6.0)
Loss per share $ -- $ (0.05)
NOTE 4 - RESTRICTED STOCK AWARDS
On February 1, 1998, Tandy granted, under the 1997 Incentive Stock Plan,
approximately 324,750 restricted stock awards consisting of 250 shares each to
1,299 RadioShack store managers not included in the February 1, 1997 restricted
stock grant to over 5,000 store managers. The restricted stock awards had a
weighted average fair market value of $39.22 per share when granted. This
restricted stock will vest at the end of five years on February 2, 2003, if
managers receiving the grants are employed by Tandy at a store manager or higher
position at that time. However, the grants provide that the restricted shares
could vest early if Tandy common stock closes at $58 1/8 or more for any 20
consecutive trading days after February 1, 2000. Compensation expense, equal to
the fair market value of the shares, will be recognized over the remaining
vesting period when it becomes probable that the performance criteria will be
met or upon actual vesting. At March 31, 1999, there were 202,000 restricted
stock awards outstanding and eligible for ultimate vesting pursuant to this
restricted stock award.
NOTE 5 - COMPREHENSIVE INCOME
Comprehensive income for the three months ended March 31, 1999 and 1998 was
$55.8 million and $37.3 million, respectively.
NOTE 6 - SEGMENT DISCLOSURES
The table below summarizes net sales and operating revenues, operating profit
(loss) and assets for Tandy's reportable segments. Consolidated operating profit
(loss) is reconciled to Tandy's income before income taxes.
Three Months Ended
March 31,
--------------------
(In millions) 1999 1998
- ------------- -------- --------
Net sales and operating revenues:
RadioShack $ 890.2 $ 778.5
Computer City (1) -- 479.7
Closed units -- 0.1
-------- --------
$ 890.2 $1,258.3
======== ========
Operating profit (loss):
RadioShack $ 106.4 $ 84.7
Computer City (1) -- (9.8)
Closed units -- --
Corporate administration and other (11.0) (6.0)
-------- --------
95.4 68.9
Interest income (2) 4.5 1.7
Interest expense (2) (8.3) (10.3)
-------- --------
Income before income taxes $ 91.6 $ 60.3
======== ========
At March 31,
--------------------
Assets: 1999 1998
-------- --------
RadioShack $1,370.8 $1,315.9
Computer City (1) -- 493.5
Corporate administration and other 560.9 423.1
-------- --------
$1,931.7 $2,232.5
======== ========
(1) Computer City was sold to CompUSA on August 31, 1998.
(2) Tandy does not allocate interest income or expense to its operating
segments.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION ("MD&A")
Factors That May Affect Future Results
With the exception of historical information, the matters discussed in MD&A
contain forward-looking statements that involve various risks and uncertainties
and are indicated by words such as "anticipates," "expects," "believes,"
"plans," "could," and similar words and phrases. Factors that could cause Tandy
Corporation's actual results to differ materially from management's projections,
forecasts, estimates and expectations include, but are not limited to, the
following:
o changes in the amount and degree of promotional intensity exerted by current
competitors and potential new competition from both retail stores and
alternative methods or channels of distribution, such as electronic and
telephone shopping services and mail order;
o changes in general U.S. or regional U.S. economic conditions including, but
not limited to, consumer credit availability, interest rates, inflation,
personal discretionary spending levels and consumer sentiment about the
economy in general;
o the presence or absence of new products or product features in the
merchandise categories Tandy sells and changes in Tandy's actual merchandise
sales mix;
o the inability to negotiate profitable contracts or execute business plans
with providers of such services as cellular, PCS, direct-to-home satellite
and home connectivity;
o the inability to collect the level of anticipated residuals and commissions
for products and services sold by RadioShack;
o lack of availability or access to sources of supply inventory (as a large
importer of consumer electronic products from Asia, unfavorable trade
imbalances could negatively affect Tandy);
o the inability to retain and grow an effective management team in a dynamic
environment or changes in the cost or availability of a suitable work force
to manage and support RadioShack's service-driven operating strategies;
o the potential negative impact of year 2000 issues; or
o the imposition of new restrictions or regulations regarding the sale of
products and/or services Tandy sells or changes in tax rules and regulations
applicable to Tandy.
Additionally, 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
services to consumers.
Segment Reporting Disclosures
All references to RadioShack and Computer City in MD&A refer to Tandy's
reportable segments, unless otherwise noted. The RadioShack segment includes the
RadioShack retail division and its related retail support operations. The
Computer City segment includes Computer City, Inc., which was sold to CompUSA
Inc. on August 31, 1998. The closed units segment includes all Tandy stores and
non-retail units which were part of the store closure plan announced in December
1996. The corporate administration and other segment includes corporate units
which serve all areas of Tandy and, also, income or expenses which were not
allocated to the RadioShack and Computer City segments. See "Note 6 - Segment
Disclosures" for additional information on operating profit (loss) and assets
for each reportable segment.
Net Sales and Operating Revenues
Net sales and operating revenues for the periods ended March 31 were:
Three Months Ended
March 31,
-------------------- % Increase
(In millions) 1999 1998 (Decrease)
- ------------- -------- -------- --------
RadioShack $ 890.2 $ 778.5 14.3%
Computer City -- 479.7 (100.0)
-------- --------
Retail segments 890.2 1,258.2 (29.2)
Closed units -- 0.1 (100.0)
-------- --------
$ 890.2 $1,258.3 (29.3)%
======== ========
Consolidated net sales and operating revenues decreased 29.3% from $1,258.3
million for the three months ended March 31, 1998 to $890.2 million for the
three months ended March 31, 1999, due to the sale of Computer City to CompUSA
on August 31, 1998. Consolidated comparable store sales for the first quarter of
1999 are not meaningful due to this sale.
RadioShack's overall sales increased 14.3% for the three months ended March 31,
1999, compared to the corresponding prior year period. RadioShack comparable
store sales increased 12.6% for the quarter, compared to the first quarter in
the prior year. This sales increase was driven primarily by strong sales of
communications products and prepaid wireless airtime and, to a lesser extent,
increases in sales of "direct-to-home" satellite systems and services, as well
as personal computers.
Sales of communications products increased approximately 23% during the quarter
ended March 31, 1999 compared to the same period ended March 31, 1998, due to
strong sales of PCS and cellular telephones.
Sales of personal computers increased approximately 16% over the first quarter
of 1998. The average selling price of personal computers in the first quarter of
1999 was 7% higher than in the first quarter of 1998, due primarily to the
liquidation of IBM computer products in the first quarter of 1998 as RadioShack
transitioned to Compaq computers. Despite the increase in the average selling
price during the first quarter of 1999, management expects the average selling
price of personal computers to decrease for the remainder of the year, which
will result in the average selling price in 1999 to be less than in 1998.
The audio and video category experienced a sales decrease in the first quarter
of 1999 compared to the first quarter of 1998, despite a significant increase in
sales of direct-to-home satellite systems and services. On May 13, 1999, Tandy
announced that it had entered into a multi-year retail sales and service
agreement with Thomson Consumer Electronics, Inc. ("Thomson"). Under this
agreement, Thomson will supply RadioShack with various RCA branded audio and
video components such as receivers, amplifiers, camcorders, speakers,
televisions, digital video discs (DVD) and VCRs. RCA products will be sold
through RCA Digital Entertainment Centers at RadioShack via a
"store-within-a-store" concept similar to the Sprint Store at RadioShack.
Management believes this agreement will allow RadioShack to be more competitive
in the evolution of digital technology which will enhance sales in the audio and
video category.
RETAIL OUTLETS
- --------------
March 31, December 31, March 31, December 31,
1999 1998 1998 1997
-------- -------- -------- --------
RadioShack
Company-owned 5,037 5,039 4,978 4,972
Dealer/Franchise 1,989 1,991 1,946 1,934
-------- -------- -------- --------
7,026 7,030 6,924 6,906
Computer City --(1) --(1) 96 96
-------- -------- -------- --------
Total number of retail outlets 7,026 7,030 7,020 7,002
======== ======== ======== ========
(1) Computer City was sold on August 31, 1998.
Gross Profit
Tandy's gross profit as a percent of net sales and operating revenues was 50.6%
for the three months ended March 31, 1999, compared to 37.7% for the
corresponding 1998 period. This increase in gross profit was primarily the
result of RadioShack sales accounting for all of Tandy's consolidated net sales
and operating revenues during the first quarter of 1999, due to the sale of
Computer City in 1998. Computer City had an inherently lower gross margin than
RadioShack.
RadioShack's gross profit increased 10.4% in dollars for the three months ended
March 31, 1999 versus 1998, but decreased as a percentage of RadioShack's total
sales by 1.8 percentage points during the same period. This percentage decrease
was partly due to a shift within RadioShack's product offerings to increased
sales of prepaid wireless airtime, which has a significantly lower gross margin
than the overall RadioShack average gross margin. The percentage decrease was
also impacted by a percentage point decrease in the gross margin of
communication products. This decrease at RadioShack was partially offset by an
increase in residual income which has 100% gross margin.
Selling, General and Administrative Expense
Selling, general and administrative ("SG&A") expense for Tandy as a percent of
net sales and operating revenues for the first quarter of 1999 was 38.1%,
compared to 30.2% during the first quarter of 1998. The higher SG&A percentage
was due primarily to the sale of Computer City, which operated at lower relative
SG&A expense levels than consolidated Tandy Corporation. Excluding Computer City
and other closed units pursuant to the 1996 restructuring plan, comparable SG&A
expense as a percentage of sales for Tandy would have approximated 38.1% and
39.8% for the three months ended March 31, 1999 and 1998, respectively. This
decrease was due primarily to an increase in sales at RadioShack, offset
slightly by an increase in corporate overhead expense related to information
systems, legal and tax related expenses, and employee benefit plans.
RadioShack's SG&A expense as a percent of their sales and operating revenues
decreased 2.1 percentage points for the three months ended March 31, 1999, when
compared to the same period in the prior year, due primarily to significant
increases in comparable store sales. For the three months ended March 31, 1999,
RadioShack's advertising expense and rent expense increased in dollars, but
decreased as a percent of sales and operating revenues when compared to the same
period in the prior year. Advertising expense increased in dollars due primarily
to increased television advertising and print media during the first quarter of
1999. Rent expense increased in dollars for the quarter ended March 31, 1999
compared to the quarter ended March 31, 1998, due to new store openings and
lease renewals at slightly higher rates. Salary expense increased in dollars and
increased slightly as a percent of RadioShack's sales and operating revenues
during the first quarter of 1999 due to retail store expansions and increases in
commissions, bonuses and other incentives resulting from strong comparable store
sales and profits.
Restricted Stock Awards
In the fourth quarter of 1998, Tandy recorded estimated compensation expense of
$82.6 million related to the early vesting of restricted stock awards that had
been granted to its store managers on February 1, 1997. These awards vested on
March 1, 1999 and the actual price of the stock and the number of shares vested
differed slightly from the 1998 fourth quarter estimate. The amount of this
difference, $5.1 million, was recorded as a credit to expense in the first
quarter of 1999.
On February 1, 1998, Tandy granted, under the 1997 Incentive Stock Plan,
approximately 324,750 restricted stock awards consisting of 250 shares each to
1,299 RadioShack store managers not included in the February 1, 1997 restricted
stock grant to over 5,000 store managers. The restricted stock awards had a
weighted average fair market value of $39.22 per share when granted. This
restricted stock will vest at the end of five years on February 2, 2003, if
Tandy employs the managers at a store manager or higher position, at that time.
However, the grants provide that the restricted shares could vest early if Tandy
common stock closes at $58 1/8 or more for any 20 consecutive trading days after
February 1, 2000. Compensation expense, equal to the fair market value of the
shares, will be recognized over the remaining vesting period when it becomes
probable that the performance criteria will be met or upon actual vesting. At
March 31, 1999, there were 202,000 restricted stock awards outstanding and
eligible for ultimate vesting pursuant to this restricted stock award.
Tandy does not plan to continue granting restricted stock awards to RadioShack
store managers. See "1999 Incentive Stock Plan" below regarding the February
1999 grant of stock options to RadioShack store managers.
Sale of Computer City, Inc.
On August 31, 1998, Tandy completed the sale of 100% of the outstanding common
stock of its Computer City subsidiary to CompUSA. Tandy received approximately
$36.5 million in cash and an unsecured subordinated note for $136.0 million as
consideration for the sale. The note, which is of equal priority with CompUSA's
existing subordinated debt, bears interest at 9.48% per annum and is payable
over a ten year period. Interest is payable on June 30 and December 31 of each
year; the first payment was made on December 31, 1998. Beginning on December 31,
2001, principal payments will be due semiannually until the note matures on June
30, 2008. Tandy recognized a loss of $108.2 million from the sale of Computer
City in 1998, which included certain liabilities and contractual obligations
incurred by Tandy. Although no significant additional provisions are expected in
1999 relating to the sale of Computer City, unexpected contractual requirements
associated with the sale, among other factors, could result in additional
charges.
Net Interest Expense
Net interest expense for the three months ended March 31, 1999 was $3.8 million
versus $8.6 for the comparable three months in 1998. Interest expense decreased
$2.0 million for the three months ended March 31, 1999 versus March 31, 1998
due, in part, because Tandy no longer incurred interest expense on Computer City
capital lease obligations, after the sale of this subsidiary. Also, Tandy
reduced its average debt outstanding during the first quarter of 1999 when
compared to the first quarter in the prior year. Interest income increased $2.8
million for the three months ended March 31, 1999 compared to the prior year
period, due to interest from the CompUSA note receivable. Net interest expense
is expected to decrease moderately during the remainder of 1999.
Provision for Income Taxes
Provision for income taxes for each quarterly period is based on the estimate of
the annual effective tax rate for the fiscal year, as evaluated at the end of
each quarter. The effective tax rates for the first quarter of 1999 and 1998
were 39.0% and 38.5%, respectively. The increase in the effective tax rate over
the prior year is due primarily to an increase in the effective state tax rate,
which results from a higher percentage of income being earned in states with
higher tax rates.
Cash Flow and Financial Condition
Cash flow used by operating activities approximated $20.3 million in the three
month period ended March 31, 1999 as compared to cash provided by operating
activities of $39.4 million in the prior year. This change related mainly to a
$68.6 million shift among working capital components, primarily attributable to
a decrease in accounts payable and accrued expenses at March 31, 1999 from
December 31, 1998. This decrease resulted, for the most part, from the payment
of accrued payroll taxes related to the restricted stock grant and the payment
of accrued bonuses in the first quarter of 1999.
Investing activities used $25.6 million in cash flow in the three months ended
March 31, 1999, compared to $25.7 million during the same period of the prior
year. Investing activities for the three months ended March 31, 1999 included
capital expenditures totaling $21.7 million, primarily for retail expansion and
upgrade of information systems. Management anticipates that capital expenditure
requirements will approximate $78.0 million to $88.0 million for the remainder
of 1999, primarily to support RadioShack future store expansions and
refurbishments, and to update additional information systems.
Cash provided by financing activities for the three months ended March 31, 1999
was $35.3 million, compared to cash used by financing activities of $41.7
million in the previous year. Purchases of treasury stock required $67.7 million
for the three months ended March 31, 1999, compared to $59.0 million during the
same period of 1998. The current year's stock repurchases were partially funded
by $17.8 million received from stock option exercises and the sale of treasury
stock to employee stock plans, as well as by a net increase in debt. Medium-term
notes issued by Tandy under its 1997 Debt Shelf Registration provided
approximately $32.0 million for the three months ended March 31, 1999.
Cash and cash equivalents at March 31, 1999 were $53.9 million, compared to
$64.5 million at December 31, 1998 and $77.9 million at March 31, 1998. Total
debt as a percentage of total capitalization was 40.2% at March 31, 1999,
compared to 35.6% at December 31, 1998 and 34.1% at March 31, 1998. These
increases in the debt-to-capitalization ratios resulted primarily from a
reduction in stockholders' equity from share repurchases, the sale of Computer
City and an increase in borrowings at March 31, 1999. Long-term debt as a
percentage of total capitalization was 19.0% at March 31, 1998, compared to
17.9% at December 31, 1998 and 17.4% at March 31, 1998.
In March 1997, Tandy announced its Board of Directors had authorized management
to purchase up to 10.0 million additional shares of its common stock through its
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 its stock. This increase
brought the total authorization to 30.0 million shares, of which approximately
26.6 million shares, totaling $781.4 million, had been purchased as of March 31,
1999. During the quarter ended March 31, 1999, Tandy repurchased approximately
0.7 million shares for $35.6 million under the program. Additionally, on October
26, 1998, Tandy announced its Board of Directors had authorized the repurchase
of up to 5.0 million shares of Tandy common stock for an indefinite period of
time to be used to offset the dilution of stock option grants under Tandy's
incentive stock plans. As of March 31, 1999, Tandy had purchased approximately
1.7 million shares for $81.5 million under this program, which included the
repurchase of approximately 0.3 million shares for $17.7 million during the
first quarter of 1999. Purchases will continue to be made from time to time in
the open market and it is expected that funding of these programs will come
primarily from operating cash flow and existing funding sources.
In connection with the share repurchase program, the Board of Directors, at
their October 23, 1998 meeting, authorized management to sell up to one million
put options on Tandy common stock. Such options grant the purchaser the right to
sell shares of Tandy's common stock to Tandy at specified prices upon exercise
of the options. These put options are exercisable only at maturity and can be
settled in cash at Tandy's option, in lieu of repurchasing the stock. The issued
put options have a maturity of six months. Since inception, 280,000 options had
been sold as of March 31, 1999; 80,000 of these options have a strike price of
$40.71 and were sold in 1998. The remaining 200,000 options have strike prices
ranging from $45.08 to $55.20 and were sold during the first quarter of 1999. At
March 31, 1999, all 280,000 options remained outstanding and the full redemption
value of the options was classified as common stock put options in the
accompanying Consolidated Balance Sheet. The related offset was recorded in
common stock in treasury, net of premiums received. Additionally, 100,000
options were sold in April 1999 with a strike price of $65.89. Put options will
continue to be sold from time to time in order to take advantage of attractive
share price levels, as determined by management. The timing and terms of the
transactions, including maturities, depend on market conditions, Tandy's
liquidity and other considerations.
In May 1997, Tandy filed a $300.0 million Debt Shelf Registration Statement
("Shelf Registration") with the S.E.C., which was declared effective in August
1997. On August 19, 1997, Tandy issued $150.0 million of 10 year unsecured notes
under the Shelf Registration. The interest rate on the notes is 6.95% per annum
with interest payable on September 1 and March 1 of each year, commencing March
1, 1998. The notes are due September 1, 2007. In December 1997 and January 1998,
Tandy issued $4.0 million and $45.0 million, respectively, in medium-term notes
under the remaining $150.0 million Shelf Registration. An additional $32.0
million of medium-term notes were issued in January 1999. Tandy's medium and
long-term notes outstanding at March 31, 1999 under the 1991 and 1997 shelf
registrations totaled $232.0, compared to $225.0 million outstanding at March
31, 1998. The interest rates at March 31, 1999 for the outstanding $81.8 million
in medium-term notes ranged from 6.09% to 7.25% with a weighted average coupon
rate of 6.2%. As of May 10, 1999, Tandy had remaining availability of $69.0
million under the Shelf Registration.
Inventory
Total inventories at March 31, 1999 decreased $33.2 million or 3.6% since
December 31, 1998 and decreased $303.2 million or 25.6% since March 31, 1998.
The decrease in inventory since year end was due to normal seasonal fluctuations
and strong sales at RadioShack. The decrease since the first quarter of 1998 was
due primarily to the sale of Computer City, offset slightly by an increase in
inventory at RadioShack related to wireless communication products, personal
computers and satellite systems.
Accrual for 1996 Business Restructuring
In the fourth quarter of 1996, Tandy initiated certain restructuring programs to
exit its Incredible Universe business, close 21 unprofitable Computer City
stores and close its 53 remaining McDuff stores. These restructuring programs
were undertaken as a result of the highly competitive environment in the
electronics industry. See Tandy's 1998 Annual Report for a discussion of the
1996 restructuring reserve transactions. The following schedule is an analysis
of additional reserves and amounts charged against the reserve during the three
months ended March 31, 1999. Real estate obligations shown below primarily
represent estimated amounts to be incurred in terminating remaining leases.
Charges
Balance Additional 1/1/99- Balance
(In millions) 12/31/98 Reserves 3/31/99 3/31/99
- ------------- -------- -------- -------- --------
Real estate obligations $ 19.4 -- (1.6) $ 17.8
Other 0.8 -- -- 0.8
-------- -------- -------- --------
$ 20.2 -- (1.6) $ 18.6
======== ======== ======== ========
Although no significant additional provisions are expected in 1999 relating to
the 1996 restructuring, unexpected delays in closing of real estate sales, among
other factors, could result in additional charges.
1999 Incentive Stock Plan
In February 1999, Tandy, based upon the Board of Directors' authorization,
adopted the Tandy Corporation 1999 Incentive Stock Plan ("1999 ISP"), which
authorizes the grants of non-qualified stock options and stock appreciation
rights to broad based employee groups and other eligible employees. Grants of
restricted stock, performance awards and options intended to qualify as
incentive stock options under the Internal Revenue Code are not authorized under
the 1999 ISP. In addition, repricing of outstanding options is not permitted
under the plan. The 1999 ISP will be administered by an independent committee of
the Board as a broadly based plan to provide stock option incentives primarily
to RadioShack's 5,000 plus store managers and to other eligible employees of
Tandy. A total of 4.75 million shares of Tandy common stock was reserved for
issuance under the 1999 ISP.
The Organization and Compensation Committee of the Board granted approximately
1,087,500 stock options under the 1999 ISP at fair market value on February 24,
1999 to over 5,000 RadioShack store managers employed as of that date.
Changes in Stockholders' Equity
Outstanding
(In millions) Common Shares Dollars
- ------------- ------------- ------------
Balance at December 31, 1998 97.4 $ 848.2
Foreign currency translation adjustments,
net of deferred taxes -- (0.1)
Sale of treasury stock to employee
stock plans 0.3 13.8
Purchases of treasury stock (1.3) (66.5)
Common stock put options -- (9.0)
Exercise of stock options and grant
of stock awards 0.3 6.7
Repurchase of preferred stock -- (1.7)
Preferred stock dividends, net of tax -- (0.9)
TESOP and restricted stock deferred
compensation earned -- 2.9
Common stock dividends declared -- (9.8)
Net income -- 55.9
-------- --------
Balance at March 31, 1999 96.7 $ 839.5
======== ========
Recent Events
On April 21, 1999, Tandy announced it had entered into a strategic agreement
with NorthPoint Communications, Inc. ("NorthPoint"), a leading provider of
Digital Subscriber Line ("DSL") technology. DSL technology transports data at
guaranteed speeds up to 25 times faster than common dial-up modems, allowing for
high-speed Internet access and other data-intensive applications. Management
anticipates this alliance will accelerate the adoption rate of these services at
an affordable price to the mass market. Additionally, NorthPoint will provide
RadioShack with DSL services for consumer display purposes in many of its retail
stores as well as for internal use. NorthPoint currently operates in 17 markets
in the U.S. and expects to expand its service territory to 28 markets by the end
of 1999.
Management believes this agreement is a significant step towards achieving
Tandy's strategic plan for RadioShack to become America's "Home Connectivity
Store," similar to its existing concept of America's "Telephone Store." Home
connectivity will provide solutions for connecting to and utilizing high-speed
bandwidth. Bandwidth refers to volume at which data can be transmitted and,
depending on the volume delivered, may enable consumers to have such
capabilities as instant and/or high speed Internet, movies on demand and
multiple phone/fax connections through a single phone line.
Year 2000 Readiness Disclosure
Tandy's management recognizes the need to take action to reach its goal that its
operations and relationships with key vendors, service providers, customers and
other third parties will not be adversely impacted by software processing errors
arising from calculations using the year 2000 and beyond. Like many companies, a
significant number of Tandy's computer applications and systems require
modifications in order for these systems to be ready for the year 2000. All
statements made and referred to here are year 2000 Readiness Disclosures under
the "Year 2000 Information and Readiness Disclosure Act."
State of Readiness: Tandy is using a combination of internal and external
resources to identify, assess, remediate and test its many different information
technology ("IT") systems such as point of sale, payroll, credit, purchase
ordering, merchandise distribution, management reporting, manufacturing,
mainframe, and client/server applications, as well as its non-IT systems (e.g.
heating, ventilating and air conditioning systems, building security systems,
etc.).
Since beginning the project in 1995, Tandy has completed identifying and
assessing 100% of its internal mid-range and mainframe IT applications as well
as its data communication and telecommunication systems for year 2000 readiness.
An inventory and assessment of Tandy's workstations, which includes desktop and
notebook computers, will be completed in the second quarter of 1999. As of March
31, 1999, remediation and unit testing was approximately 94% complete for
mid-range and mainframe applications. Unit testing ensures the accuracy of the
programming changes to the code. For data communication and telecommunication
systems, verification of year 2000 readiness was approximately 77% complete as
of March 31, 1999 and is expected to be 100% complete by September 30, 1999.
Remediation and testing to determine if all of Tandy's mission critical systems
will interface and operate effectively to process data containing dates
subsequent to January 1, 2000 are expected to be completed by the end of 1999.
Third-party software systems, including financial systems, point-of-sale and
manufacturing, have been or will be implemented during 1999. The vendors of
these third-party software packages have stated that they are year 2000 ready;
however, Tandy will conduct its own testing in 1999. This testing is estimated
to be completed by year end.
With respect to non-IT system issues, Tandy is in the process of identifying and
assessing its significant building and process and production control systems
for any year 2000 issues relating to the operations of its facilities.
Identification and assessment of security access, building control systems and
elevators in the buildings which serve as Tandy's corporate headquarters have
been completed and approximately 80% have been certified as year 2000 ready by
the vendors at March 31, 1999. Tandy is in the process of identifying and
assessing non-IT year 2000 issues of its remote locations, such as its
distribution centers, manufacturing plants, and administrative offices, and does
not expect any significant issues to arise from this process. All of Tandy's
significant non-IT systems are expected to be year 2000 ready or appropriate
workarounds and contingency plans in place by October 1999.
Although unforeseen circumstances may arise, the year 2000 remediation program
is presently on schedule. Tandy will continue communicating with its key
suppliers, utilities, financial institutions, customers and others to determine
their state of year 2000 readiness, to coordinate year 2000 conversions where
appropriate and to determine the extent to which Tandy's interface systems are
vulnerable.
Costs: In management's opinion, the financial impact of being year 2000 ready is
not expected to be material to Tandy's consolidated financial position, results
of operations or cash flows. Management anticipates that total expenditures
associated with the year 2000 internal modifications will range from $12.0
million to $15.0 million, which has been and will continue to be funded from
operating cash flow. As of March 31, 1999, approximately $7.6 million
representing internal payroll and related benefits, depreciation expense,
machine time and incentive bonuses, among other costs, has been spent on these
internal modifications. An additional $0.9 million has been paid to external
parties for consulting and professional fees. As required by generally accepted
accounting principles, all these costs are expensed as incurred. Combined,
internal and external costs related to the year 2000 project account for
approximately 7.0% of Tandy's annual IT budget. Additionally, Tandy has
purchased and is installing third party financial software packages and related
hardware totaling approximately $20.0 million to $25.0 million in light of the
year 2000 issue. These purchases are in addition to other capital investments
made in the normal course of business for certain third party software systems
and applications which address the ongoing retail and operational needs of
Tandy.
The Risks of Year 2000 Issues: With respect to the risks associated with its IT
and non-IT systems, Tandy believes that the most reasonably likely worst case
scenario is that some of Tandy's store operating and inventory management
systems could fail in one or more geographic areas of the United States. The
consequence of such failure could include the inability of those affected
RadioShack stores to electronically record sales transactions. This could
further result in a breakdown in Tandy's supply chain as Tandy relies on
electronic information to replenish its stores. Such an occurrence would result
in a loss of revenue; however, due to the variables involved it is not possible
to quantify the possible range of such loss.
There can be no assurance that the systems of third parties on which Tandy's
systems rely will be converted timely and that the systems will not have an
adverse effect on Tandy's systems or ongoing operations. However, concerning the
risks associated with third parties, Tandy believes that the most reasonably
likely worst case scenario is that some of Tandy's merchandise vendors will not
be compliant and will have difficulty filling and distributing orders. Failure
of one or more third party service providers on whom Tandy relies to address
year 2000 issues could also result, in a worst case scenario, in some business
interruption. The lost revenues, if any, resulting from such failures would
depend on the time period in which the failure goes uncorrected and on how
widespread the impact was.
Tandy is also in the process of assessing the implications of possible year
2000-related claims regarding products it has manufactured or sold, or is
currently manufacturing or selling. The outcomes of any year 2000 claims and the
impact of such claims cannot be determined at this time; such outcomes will
depend on the facts and circumstances of each situation and an evolving state of
law as these types of claims are addressed by legal systems in the United States
and worldwide.
Tandy has limited the scope of its risk assessment to those factors upon which
it can reasonably be expected to have an influence. For example, Tandy has made
the assumption that financial institutions and the Federal Reserve System as
well as most utility companies and national telecommunications providers will
continue to operate. Obviously, the lack of such services could have a material
effect on Tandy's ability to operate, but Tandy has little, if any, ability to
influence such an outcome, or to reasonably make alternative arrangements in
advance for such services in the event they are unavailable.
Contingency Plans: Tandy has completed a prioritization of year 2000 issues in
order to develop and document year 2000 contingency plans. Tandy has identified
its critical applications to be its merchandising and inventory systems, which
include purchasing, receiving and distribution and store replenishment and its
point-of-sale store operating system as well as its financial systems, which
includes payroll, accounts payable and receivable, banking and other financial
applications. Should any or all of the critical applications fail to perform
properly subsequent to January 1, 2000, Tandy will resort to temporary manual
processing for recording sales, ordering product and replenishing its retail
stores, which is not expected to have a material adverse impact on its
operations in the short-term. Management anticipates having a formal documented
contingency plan to deal with this scenario and others by November 1999. Tandy's
11 distribution centers are located in various geographic areas of the United
States. Should one or more of these distribution centers fail to operate due to
regional power outages or other unforeseen circumstances, Tandy's other
distribution centers which may be operating could replenish stores typically
serviced by those distribution centers for a relatively short period of time.
Management anticipates having a formal documented contingency plan to deal with
this scenario by November 1999. Although no single internal or third party
supplier accounts for a material portion of Tandy's sales and operating
revenues, management is evaluating the need for a formal list of alternative
suppliers should some existing suppliers be unable to provide product beyond the
end of calendar year 1999. Should the decision be made that such a list and
agreements with alternate suppliers be necessary, they will be developed prior
to November 1999.
All statements concerning year 2000 issues other than historical statements,
including, without limitation, estimated costs and the projected timetable of
year 2000 compliance, constitute "forward-looking statements," as defined in the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements should be read in conjunction with Tandy's disclosures under the
heading "Factors That May Affect Future Results."
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Tandy has various claims, lawsuits, disputes with third parties, investigations
and pending actions involving allegations of negligence, product defects,
discrimination, infringement of intellectual property rights, tax deficiencies,
violations of permits or licenses, and breach of contract and other matters
against Tandy and its subsidiaries incident to the operation of its business.
The liability, if any, associated with these matters was not determinable at
March 31, 1999. 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 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Required by Item 601 of Regulation S-K.
A list of the exhibits required by Item 601 of Regulation S-K and
filed as part of this report is set forth in the Index to Exhibits on
page 17, which immediately precedes such exhibits.
b) Reports on Form 8-K.
There were no Form 8-K reports filed during the quarter ended March
31, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tandy Corporation
(Registrant)
Date: May 13, 1999 By /s/ Richard L. Ramsey
--------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: May 13, 1999 /s/ Dwain H. Hughes
--------------------------
Dwain H. Hughes
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
<PAGE>
TANDY CORPORATION
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page No.
2c 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 Designation 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 December 16, 1998 (filed
as Exhibit 3b to Tandy's Form 10-K filed on March 29, 1998,
Accession No. 0000096289-99-000008 and incorporated herein by
reference).
4a Revolving Credit Agreement (Facility A) dated as of June 25, 1998
among Tandy Corporation, NationsBank, N.A., as Agent and Lender,
Citibank, N.A., as Syndication Agent and Lender, Bank of America
National Trust & Savings Association, as Documentation Agent and
Lender, BankBoston, N.A., Co-Agent and Lender, The Bank of New
York, Co-Agent and Lender, First Union National Bank, Co-Agent
and Lender, Fleet National Bank, Co-Agent and Lender, and twelve
other banks as Lenders (filed as Exhibit 4n to Tandy's Form 10-Q
filed on August 13, 1998, Accession No. 0000096289-98-000039 and
incorporated herein by reference).
4b Revolving Credit Agreement (Facility B) dated as of June 25, 1998
among Tandy Corporation, NationsBank, N.A., as Agent and Lender,
Citibank, N.A., as Syndication Agent and Lender, Bank of America
National Trust & Savings Association, as Documentation Agent and
Lender, BankBoston, N.A., Co-Agent and Lender, The Bank of New
York, Co-Agent and Lender, First Union National Bank, Co-Agent
and Lender, Fleet National Bank, Co-Agent and Lender, and twelve
other banks as Lenders (filed as Exhibit 4o to Tandy's Form 10-Q
filed on August 13, 1998, Accession No. 0000096289-98-000039 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* 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).
10c* 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).
10d* 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).
10e* 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).
10f* 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).
10g* 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).
10h* 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).
10i* 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).
10j* 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).
10k* 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).
10l* 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).
10m* 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).
10n* 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).
10o* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation, (filed as
Exhibit 10s to Tandy's Form 10-K filed on March 26, 1998,
Accession No. 0000096289-98-000017 and incorporated herein by
reference).
10p* Form of Deferred Compensation Agreement dated October 2, 1997
with selected Executive Employees of Tandy Corporation, (filed as
Exhibit 10t to Tandy's Form 10-K filed on March 26, 1998,
Accession No. 0000096289-98-000017 and incorporated herein by
reference).
10q* Form of December 1997 Deferred Salary and Bonus Agreement (Stock
Investment) with selected Executive Employees of Tandy
Corporation, (filed as Exhibit 10u to Tandy's Form 10-K filed on
March 26, 1998, Accession No. 0000096289-98-000017 and
incorporated herein by reference).
10r* Form of December 1997 Salary and Bonus Agreement with selected
Executive Employees of Tandy Corporation, (filed as Exhibit 10v
to Tandy's Form 10-K filed on March 26, 1998, Accession No.
0000096289-98-000017 and incorporated herein by reference).
10s* Tandy Corporation Executive Deferred Compensation Plan, effective
April 1, 1998, (filed as Exhibit 10w to Tandy's Form 10-K filed
on March 26, 1998, Accession No. 0000096289-98-000017 and
incorporated herein by reference).
10t* Tandy Corporation Executive Deferred Stock Plan, effective April
1, 1998, (filed as Exhibit 10x to Tandy's Form 10-K filed on
March 26, 1998, Accession No. 0000096289-98-000017 and
incorporated herein by reference).
10u* Form of September 30, 1997 Deferred Compensation Agreement
between Tandy Corporation and John V. Roach (filed as Exhibit 10z
to Tandy's Form 10-Q filed on May 13, 1998, Accession No.
0000096289-98-000025 and incorporated herein by reference).
10v* Form of September 30, 1997 Deferred Compensation Agreement
between Tandy Corporation and Leonard H. Roberts (filed as
Exhibit 10aa to Tandy's Form 10-Q filed on May 13, 1998,
Accession No. 0000096289-98-000025 and incorporated herein by
reference).
10w* Form of Executive Pay Plan Letters (filed as Exhibit 10b to
Tandy's Form 10-K filed on March 29, 1999, Accession No.
0000096289-99-000008 and incorporated herein by reference).
10x* Severance Agreement dated October 23, 1998 between Leonard H.
Roberts and Tandy Corporation (filed as Exhibit 10z to Tandy's
Form 10-K filed on March 29, 1999, Accession No.
0000096289-99-000008 and incorporated herein by reference).
10y* Tandy Corporation Unfunded Deferred Compensation Plan
for Directors as amended and restated June 1, 1998. 20
11 Statement of Computation of Ratios of Earnings to Fixed
Charges. 23
27 Financial Data Schedule.
- -----------------------
* Each of these exhibits is a "management contract or compensatory plan,
contract, or arrangement."
<PAGE>
EXHIBIT 10y
TANDY CORPORATION
UNFUNDED DEFERRED COMPENSATION PLAN
FOR DIRECTORS
(AS AMENDED AND RESTATED JUNE 1, 1998)
------------------------------------
1. PURPOSES OF THE PLAN
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 either all his/her retainer fees
or meeting fees or both (cash or Common Stock of the Company or
dividends attributable thereto), for services and meetings 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 for director retainer fees and prior to July 1, 1998 for meeting
fees.
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 retainer 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.
All deferred meeting fees payable in Company Common Stock shall also be
recorded on the books of the Company in the participating Director's
stock account under the terms, in the amounts and on the dates as set by
the Board of Directors for the payment of meeting fees. Meeting fees
elected to be deferred by a Director in Company Common Stock on and
after June 1, 1998 shall be converted to that amount of Company Common
Stock equal to the closing price of Company Common Stock as of the date
of the applicable director or committee meeting and if not a trading day
then the first trading day prior to the meeting.
If a Director's stock account is credited with shares of Company
Common Stock by reason of a deferral of either retainer fees or meeting
fees or both on or after January 1, 1998, and payment of all of the
Company Common Stock (earned by virtue of retainer fees or meeting fees
or both) 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
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 Manhattan Bank as the same shall exist from time to time during the
quarter.
6. PAYMENT IN EVENT OF DEATH
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 Director may terminate his election to defer payment of either
retainer fees or meeting fees or both 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 retainer or meeting fees or both payable 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
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
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
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
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
Three Months Ended
March 31,
--------------------
(In millions, except per share amounts) 1999 1998
- --------------------------------------- -------- --------
Ratio of Earnings to Fixed Charges:
Net income $ 55.9 $ 37.1
Plus provision for income taxes 35.7 23.2
-------- --------
Income before income taxes 91.6 60.3
-------- --------
Fixed charges:
Interest expense and amortization of debt discount 8.3 10.3
Amortization of issuance expense 0.2 0.2
Appropriate portion (33 1/3%) of rentals 16.8 18.5
-------- --------
Total fixed charges 25.3 29.0
-------- --------
Earnings before income taxes and fixed charges $ 116.9 $ 89.3
======== ========
Ratio of earnings to fixed charges 4.62 3.08
======== ========
Ratio of Earnings to Fixed Charges and
Preferred Dividends:
Total fixed charges, as above $ 25.3 $ 29.0
Preferred dividends 1.4 1.5
-------- --------
Total fixed charges and preferred dividends $ 26.7 $ 30.5
======== ========
Earnings before income taxes and fixed charges $ 116.9 $ 89.3
======== ========
Ratio of earnings to fixed charges and
preferred dividends 4.38 2.93
======== ========
<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-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000096289
<NAME> TANDY CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
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<CASH> 53,900
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<RECEIVABLES> 208,700
<ALLOWANCES> 19,000
<INVENTORY> 878,900
<CURRENT-ASSETS> 1,232,800
<PP&E> 987,887
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<TOTAL-ASSETS> 1,931,700
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0
100,000
<COMMON> 139,200
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