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 June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----
EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission File No.1-5571
TANDY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 75-1047710
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 One Tandy Center, Fort Worth, Texas 76102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(817) 390-3700
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
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 July 31, 1994 was 63,259,777.
Index to Exhibits is on Sequential Page No. 14.
Total pages 213.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTIONS>
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
Net sales and operating revenues $ 1,009,277 $ 843,111 $ 2,001,412 $ 1,707,823
Cost of products sold 602,103 474,245 1,186,884 949,237
----------- ----------- ----------- -----------
Gross Profit 407,174 368,866 814,528 758,586
----------- ----------- ----------- -----------
Expenses:
Selling, general and administrative 346,131 306,654 678,051 619,844
Depreciation and amortization 21,052 20,438 41,796 40,403
Net interest income (15,742) (8,211) (28,736) (15,699)
----------- ----------- ----------- -----------
351,441 318,881 691,111 644,548
----------- ----------- ----------- -----------
Income before income taxes, discontinued
operations and cumulative effect of
change in accounting principle 55,733 49,985 123,417 114,038
Provision for income taxes 21,318 18,244 47,207 41,624
----------- ----------- ----------- -----------
Income from continuing operations 34,415 31,741 76,210 72,414
Loss from discontinued operations:
Operating loss, net of tax -- (39,077) -- (57,619)
Loss on disposal, net of tax -- (70,000) -- (70,000)
----------- ----------- ----------- -----------
-- (109,077) -- (127,619)
Income (loss) before cumulative effect of
change in accounting principle 34,415 (77,336) 76,210 (55,205)
Cumulative effect on prior years of change
in accounting principle -- -- -- 13,014
----------- ----------- ----------- -----------
Net income (loss) $ 34,415 $ (77,336) $ 76,210 $ (42,191)
=========== =========== =========== ===========
Net income (loss) per average common and
common equivalent share:
Income from continuing operations $ 0.42 $ 0.38 $ 0.92 $ 0.88
Loss from discontinued operations -- (1.39) -- (1.63)
----------- ----------- ----------- -----------
Income (loss) before cumulative effect of
change in accounting principle 0.42 (1.01) 0.92 (0.75)
Cumulative effect on prior years of change
in accounting principle -- -- -- 0.17
----------- ----------- ----------- -----------
Net income (loss) per average common
and common equivalent share $ 0.42 $ (1.01) $ 0.92 $ (0.58)
=========== =========== =========== ===========
Average common and common equivalent
shares outstanding 78,601 78,571 78,796 78,419
=========== =========== =========== ===========
Dividends declared per common share $ 0.15 $ 0.15 $ 0.30 $ 0.30
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
<CAPTIONS>
(In thousands)
June 30, Dec. 31, June 30,
1994 1993 1993
------------ ------------ -----------
Assets
Current assets:
Cash and short-term investments $ 278,271 $ 213,235 $ 120,001
Accounts and notes receivable, less
allowance for doubtful accounts 508,612 582,443 488,039
Inventories, at lower of cost or market 1,212,099 1,276,302 1,162,527
Other current assets 118,821 88,005 141,636
------------ ------------ ------------
Total current assets 2,117,803 2,159,985 1,912,203
Property, plant and equipment, at cost,
less accumulated depreciation 489,163 463,738 437,357
Investment in discontinued operations 18,314 405,664 568,651
Other assets, net of accumulated amortization 194,253 189,712 87,659
------------ ------------ ------------
$ 2,819,533 $ 3,219,099 $ 3,005,870
============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 85,972 $ 346,164 $ 337,696
Subordinated debentures, net of
unamortized bond discount -- 31,739 31,140
Current portion of TESOP guarantee 9,800 10,050 10,550
Accounts payable 252,271 279,942 227,316
Accrued expenses 294,362 349,057 265,791
Income taxes payable 25,566 14,690 1,161
------------ ------------ ------------
Total current liabilities 667,971 1,031,642 873,654
------------ ------------ ------------
Notes payable, due after one year 81,718 127,708 163,863
Guarantee of TESOP indebtedness 54,030 58,930 63,830
Deferred income taxes -- -- 30,713
Other non-current liabilities 47,959 50,069 49,485
------------ ------------ ------------
Total other liabilities 183,707 236,707 307,891
------------ ------------ ------------
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, 100,000 shares
authorized and issued 429,982 429,982 429,982
Series C PERCS, 150,000 shares
authorized and issued 100,000 100,000 100,000
Common stock, $1 par value, 250,000,000 shares
authorized with 85,645,000 shares issued 85,645 85,645 85,645
Additional paid-in-capital 89,645 85,752 83,095
Retained earnings 2,066,932 2,028,041 1,926,487
Foreign currency translation effects 1,288 1,003 (11,460)
Stock held in treasury, at cost 22,221,000,
21,689,000 and 21,932,000 common
shares, respectively (738,706) (707,331) (710,537)
Unearned deferred compensation related to TESOP (66,931) (72,342) (78,887)
------------ ------------ ------------
Total stockholders' equity 1,967,855 1,950,750 1,824,325
Commitments and contingent liabilities
------------ ------------ ------------
$ 2,819,533 $ 3,219,099 $ 3,005,870
============ ============ ============
The accompanying notes are an integral part of these financial statements.
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTIONS>
(In thousands)
Six Months Ended
June 30,
-------------------------------
1994 1993
------------ ------------
Cash flows from operating activities:
Net income (loss) $ 76,210 $ (42,191)
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect on prior years of change in accounting principle -- (13,014)
Loss reserve on disposal of discontinued operations -- 70,000
Depreciation and amortization 41,796 51,376
Provision for credit losses and bad debts 13,049 25,892
Other items 6,454 4,036
Changes in operating assets and liabilities
Receivables 103,433 112,510
Inventories 64,766 50,372
Other current assets (2,199) (22,392)
Accounts payable, accrued expenses and income taxes (97,839) (86,655)
------------ ------------
Net cash provided by operating activities 205,670 149,934
------------ ------------
Investing activities:
Additions to property, plant and equipment, net of retirements (67,858) (35,717)
Proceeds from sale of divested operations 351,250 --
Other investing activities (651) (2,709)
------------ ------------
Net cash provided (used) by investing activities 282,741 (38,426)
------------ ------------
Financing activities:
Purchase of treasury stock (50,208) (11,818)
Sale of treasury stock to employee stock purchase program 22,752 24,642
Dividends paid (37,399) (37,423)
Redemption of subordinated debentures (32,431) --
Changes in short-term borrowings, net (274,420) (60,818)
Changes in long-term borrowings, net (51,669) (18,716)
------------ ------------
Net cash used by financing activities (423,375) (104,133)
------------ ------------
Increase in cash and short-term investments 65,036 7,375
Cash and short-term investments, beginning of period 213,235 112,626
------------ ------------
Cash and short-term investments, end of period $ 278,271 $ 120,001
============ ============
The accompanying notes are an integral part of these financial statements.
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 and six months ended
June 30, 1994 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1994. For further information,
refer to the consolidated financial statements and management's
discussion and analysis of results of operations and financial condition
included in Tandy Corporation's ("Tandy" or the "Company") Form 10-K for
the year ended December 31, 1993.
NOTE 2-RELATIONS WITH INTERTAN
As of June 30, 1994, InterTAN owed Tandy an aggregate of $56,884,000.
The current portion of the InterTAN obligation approximates $5,023,000
and the non-current portion approximates $51,861,000. During the quarter
ended June 30, 1994, Tandy recognized approximately $2,906,000 of sales
to and commission income from InterTAN and interest income of $2,041,000.
During the six months ended June 30, 1994, Tandy recognized approximately
$14,043,000 of sales to and commission income from InterTAN and interest
income of $4,014,000. Sales to InterTAN approximated $19,416,000 and
$33,660,000, respectively, for the three- and six-month periods ending
June 30, 1993.
InterTAN has increased its bank revolving credit facility to Canadian
$60,000,000. In the case of InterTAN's default on the bank credit line,
Tandy will, at the option of InterTAN's new banking syndicate, purchase
InterTAN's inventory and related accounts receivable at 50% of their net
book value, up to the amount of outstanding bank loans, but not to exceed
Canadian $60,000,000. In that event, Tandy could foreclose on its first
priority lien on InterTAN's assets. If Tandy fails to purchase the
inventory and related accounts receivable of InterTAN from the banking
syndicate, the syndicate upon notice to Tandy and expiration of time, can
foreclose on InterTAN's assets in Canada and the U.K. ahead of Tandy.
The inventory repurchase agreement between InterTAN's banking syndicate
and Tandy has been amended and restated to reflect the foregoing. As
required by an agreement with Tandy, InterTAN has registered the warrants
received by Tandy as part of the consideration for the debt
restructuring, under the Securities Act of 1933. These warrants have a
five-year term and are exercisable for approximately 1,450,000 shares of
InterTAN common stock at a price of $6.62 per share.
A&A International will continue as the exclusive purchasing agent for
InterTAN in the Far East on a commission basis. Commencing in March 1994,
only the purchasing agent commission and sales by Tandy manufacturing
plants to InterTAN were recorded as sales. InterTAN purchases from third
parties through A&A International are no longer recorded as sales,
reflecting the arrangement under the new merchandise agreement.
Accordingly, management expects that reported sales by Tandy to InterTAN
in 1994 will be considerably lower than sales disclosed in prior years;
however, the earned income relating thereto will not be materially
different.
NOTE 3-DISCONTINUED OPERATIONS
On June 25, 1993, the Board of Directors of Tandy adopted a formal plan
of divestiture under which it would sell its computer manufacturing and
marketing businesses, the O'Sullivan Industries, Inc. ("O'Sullivan")
ready-to-assemble furniture manufacturing and related marketing business,
the Memtek Products division and the Lika printed circuit board business.
As of June 30, 1994, all manufacturing operations except Lika have been
divested.
O'Sullivan Industries. On January 27, 1994, the Company announced that
it had reached an agreement with the underwriters to sell common stock of
O'Sullivan Industries Holdings, Inc., the parent company of O'Sullivan,
to the public at $22 per share. The net proceeds realized by Tandy in
the initial public offering, together with a $40,000,000 cash dividend
from O'Sullivan, approximated $350,000,000. The initial public offering
closed on February 2, 1994.
Tandy has accrued approximately $1,893,000 and $3,155,000 during the
quarter and six months ended June 30, 1994, pursuant to the Tax Sharing
and Tax Benefit Reimbursement Agreement between Tandy and O'Sullivan
Industries Holdings, Inc. in which the Company will receive payments from
O'Sullivan resulting from the increased tax basis of O'Sullivan's assets,
thereby increasing tax deductions and, accordingly, reducing income taxes
payable by O'Sullivan. The amount to be received by the Company each
year will approximate the federal tax benefit expected to be realized
with respect to the increased tax basis. These payments will be made
over a 15-year period. The Company has recognized and will continue to
recognize these payments as additional sale proceeds and gain in the year
in which the payments become due and payable to the Company.
Lika. On August 4, 1994, Tandy signed an agreement to sell its Lika
printed circuit board division to Viktron Limited Partnership, an
Illinois limited partnership. This transaction is expected to close,
subject to the completion of due diligence, in September 1994.
NOTE 4-REVOLVING CREDIT AGREEMENT
The backup facility to Tandy's commercial paper program was renewed in
May 1994. This agreement is to be used only if maturing commercial paper
cannot be repaid due to an inability to sell new paper. The agreement is
composed of two facilities--one for $200,000,000 expiring in May 1995 and
another $200,000,000 facility expiring in May 1997. Annual commitment
fees for the facilities are 2/25 of 1% per annum and 1/8 of 1% per annum,
respectively, whether used or unused. At June 30, 1994, there were no
amounts outstanding in the facility.
NOTE 5-SHARE REPURCHASE PROGRAM
On August 1, 1994, the Company announced that its Board of Directors
authorized management to purchase up to 7,500,000 shares of its common
stock in addition to shares required for employee plans. Purchases will
be made from time to time in the open market, and it is expected that
funding of the program will come from existing cash and short-term debt.
NOTE 6-RETIREMENT OF DEBT
The Company's issue of 10% subordinated debentures due June 30, 1994 was
called by the Company on February 23, 1994 for redemption on April 1,
1994. The redemption was at a price equal to 100% of face value of the
subordinated debentures for a total of $32,431,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Net Sales and Operating Revenues
Net sales and operating revenues for the periods ended June 30 were:
<CAPTIONS>
(In thousands)
Three Months Ended % Increase Six Months Ended % Increase
-------------------------- ---------- -------------------------- ----------
1994 1993 1994 1993
----------- ----------- ----------- -----------
Radio Shack $ 595,375 $ 569,799 4.5% $ 1,198,094 $ 1,155,446 3.7%
Tandy Name Brand 93,561 94,511 (1.0) 194,408 222,166 * (12.5)
Incredible Universe 59,196 23,033 157.0 110,189 44,897 145.4
Computer City 241,693 126,223 91.5 453,480 231,182 96.2
----------- ----------- ----------- -----------
989,825 813,566 21.7 1,956,171 1,653,691 18.3
Import/Export and Other Sales 19,452 29,545 (34.2) 45,241 54,132 (16.4)
----------- ----------- ----------- -----------
$ 1,009,277 $ 843,111 19.7% $ 2,001,412 $ 1,707,823 17.2%
=========== =========== =========== ===========
* Includes 110 McDuff/VideoConcepts stores closed during the March 1993 quarter.
Sales of retail operations increased in virtually all areas except Tandy
Name Brand, which closed 110 stores in the March quarter of 1993.
Excluding the closed stores, retail operations had a 22% sales gain for
the quarter ended June 30, 1994 and a 21% sales gain for the six-month
period. Radio Shack's new promotional programs which began this quarter
had favorable sales results for June with 7% comparable store sales
gains. The opening of new Incredible Universe and Computer City stores
in the latter part of 1993 and the first two quarters of 1994 increased
sales for those divisions. Since June 30, 1993, 25 Computer City stores
and three Incredible Universe stores have opened. On a same-store basis,
U.S. retail sales increased 4.4% for the quarter and 4.5% for the
six-month period. Commencing in March 1994, InterTAN purchases from
third parties through A&A International are no longer recorded as sales;
therefore, sales by the Import/Export group have decreased approximately
$18,400,000 for the quarter and $22,300,000 for the six-month period.
Increases in repair and other income from support operations have
partially offset this decline by $5,500,000 for the quarter and
$8,800,000 for the six-month period.
Gross Profit
Gross profit as a percent of net sales declined to 40.3% during the three
months ended June 30, 1994 from 43.8% during the corresponding 1993
period. For the six months ended June 30, 1994 and 1993, the gross
profit percentages were 40.7% and 44.4%, respectively. This trend toward
lower gross margins is expected to continue as additional sales are
contributed by Computer City and Incredible Universe stores which operate
on lower margins. In the second quarter of fiscal 1994, Computer City
and Incredible Universe accounted for approximately 30% of consolidated
sales compared to 18% in the second quarter of 1993. For the six months
ended June 30, 1994 and 1993, Computer City and Incredible Universe
accounted for approximately 28% and 16% of consolidated sales,
respectively. As computer sales at Radio Shack decrease and sales of
higher-margin items increase, gross profit at Radio Shack may continue to
increase slightly.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percent of sales and
operating revenues declined 2.1 percentage points in comparison with the
second quarter of 1993 and declined 2.4 percentage points in comparison
with the six months ended June 30, 1993. Most expense categories,
including rent, payroll and bad debt expense, were lower as a percent of
sales during the three and six months ended June 30, 1994 as compared
with the same prior year periods. The improved quality of credit card
receivables resulted in a reduction of bad debt expense of $10,695,000
for the six months ended June 30, 1994, in comparison with the six months
ended June 30, 1993. The lower rent and payroll costs as a percent of
sales reflects the lower relative costs associated with the Company's
newer retail formats. Advertising costs increased this quarter as a
result of Radio Shack's new promotional programs. The Company expects
SG&A expenses as a percent of sales to continue to decrease as more
Computer City and Incredible Universe stores are opened.
Net Interest Income
Interest income and expense for the periods ended June 30 were:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
(In thousands) 1994 1993 1994 1993
-------- -------- -------- --------
Interest income $ 22,114 $ 16,111 $ 45,101 $ 32,810
Interest expense (6,372) (7,900) (16,365) (17,111)
-------- -------- -------- --------
$ 15,742 $ 8,211 $ 28,736 $ 15,699
======== ======== ======== ========
Proceeds from divestitures resulted in increased short-term investments
and decreased short-term borrowings and thus impacted interest income and
interest expense. The increase in interest income is also due in part to
interest earned on notes receivable from AST Research Inc. and InterTAN.
The accretion of discount included in interest income from InterTAN
approximated $933,000 and $1,784,000 for the three and six months ended
June 30, 1994, respectively. Tandy also received $4,391,000 in interest
income from the IRS reflecting the settlement of outstanding tax issues
during the quarter and $8,846,000 for the six-month period. Interest
income earned by Tandy Credit Corporation decreased $3,895,000 from that
earned in the June 30, 1993 quarter due to lower outstanding credit card
receivable balances and increased use of credit promotions. A $2,000,000
IRS interest accrual was recorded during the March 31, 1994 quarter;
excluding this accrual, interest expense was 16% lower than in the six
months ended June 30, 1993. Interest expense in the current quarter was
19% lower than during the second quarter of 1993, primarily due to lower
debt levels.
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 each
of the first two quarters of 1994 and 1993 were 38.25% and 36.50%,
respectively. The increase is primarily due to federal tax rate
legislation enacted during 1993 whereby the corporate income tax rate was
increased to 35% from 34%.
Earnings Per Share
Earnings per share is calculated by dividing net income less Series B
preferred stock dividends paid or payable by average common and common
share equivalents outstanding during the respective periods. For the
three months ended June 30, 1994 and 1993, preferred dividends amounted
to $1,607,000 and $1,782,000, respectively. Preferred dividends amounted
to $3,413,000 and $3,614,000 for the six months ended June 30, 1994 and
1993, respectively. Earnings per share from continuing operations for
the three and six months ended June 30, 1994 increased from that for the
same periods of 1993. However, the Company recorded losses from
discontinued operations of $127,619,000 or $1.63 per share for the first
six months of fiscal 1993, partially offset by a benefit of $13,014,000,
or $0.17 per share, for cumulative effect on prior years of change in
accounting principle. The loss from discontinued operations for the
second quarter of 1993 was $109,077,000 or $1.39 per share, which
included a loss on disposal of $70,000,000.
Cash Flow and Financial Condition
Tandy's cash flow and financial condition, in management's opinion,
remains strong. Cash flow from operating activities increased in the
three- and six-month periods ended June 30, 1994 as compared with the
same periods of the prior year. This increase relates primarily to
increased operating income in 1994 as losses from discontinued operations
decreased cash flow in 1993. Cash provided by investing activities for
the six-month period ended June 30, 1994 includes cash received from the
divestiture of discontinued operations. Property, plant and equipment
additions have increased in comparison with that of the prior year due to
additional fixtures required for the Radio Shack Gift Express (SM)
program, new Radio Shack (R) stores and the Company's expansion of its
Computer City (R) and Incredible Universe (R) store concepts. Management
anticipates capital expenditure requirements to continue to increase over
1993 levels while Computer City and Incredible Universe retail chains are
expanding. Cash used for financing activities increased for the
six-month period ended June 30, 1994 due to the reduction of debt. The
Company's issue of 10% subordinated debentures due June 30, 1994 was
called by the Company on February 23, 1994 for redemption on April 1,
1994. The redemption was at 100% of face value or $32,431,000.
Cash and short-term investments at June 30, 1994 were $278,271,000 as
compared to $120,001,000 at June 30, 1993. Total debt as a percentage of
total capitalization was 10.5% at June 30, 1994, compared to 22.8% at
December 31, 1993 and 23.0% at June 30, 1993. Total debt has been
reduced as proceeds from divested manufacturing operations and cash flows
from operating activities have been used to pay off debt. Long-term debt
as a percentage of total capitalization was 6.2% at June 30, 1994
compared to 7.4% at December 31, 1993 and 9.4% at June 30, 1993.
The revolving credit backup facility to Tandy's commercial paper program
was renewed in May 1994. This agreement is to be used only if maturing
commercial paper cannot be repaid due to an inability to sell new paper.
The agreement is composed of two facilities--one for $200,000,000
expiring in May 1995 and another $200,000,000 facility expiring in May
1997. Annual commitment fees for the facilities are 2/25 of 1% per annum
and 1/8 of 1% per annum, respectively, whether used or unused.
On August 1, 1994, the Company announced that its Board of Directors
authorized management to purchase up to 7,500,000 shares of its common
stock in addition to shares required for employee plans. Purchases will
be made from time to time in the open market, and it is expected that
funding of the program will come from existing cash and short-term debt.
Inventory
Compared to June 30, 1993, total inventories at June 30, 1994 have
increased $49,572,000 or 4%. The increase in total inventory levels was
primarily attributable to inventory increases necessary to support new
store openings of Computer City and Incredible Universe store concepts.
Partially offsetting this increase was decreased inventory levels at
Radio Shack and Tandy Name Brand due to efficiencies achieved in the
replenishment system and the carrying levels of computer-related items.
Inventory levels have been reduced from the amounts maintained at
December 31, 1993 due to seasonal fluctuations in inventory levels of
Radio Shack and Tandy Name Brand and improvements in the replenishment
system. This decrease since December was partially offset by a combined
increase in inventory levels to support new Incredible Universe and
Computer City stores, resulting in a net decrease of 5% in inventory
levels since December 31, 1993. Inventory is primarily comprised of
finished goods.
Changes in Stockholders' Equity
(in thousands) Outstanding
Common Shares Dollars
------------- ----------
Balance at December 31, 1993 63,956 $1,950,750
Foreign currency translation
adjustments, net of deferred
taxes -- 285
Sale of treasury stock to
employee plans 573 22,752
Purchase of treasury stock (1,176) (49,543)
Exercise of stock options 71 2,268
Repurchase of preferred stock -- (2,959)
Preferred stock dividends,
net of tax -- (2,218)
PERCS dividend -- (16,050)
TESOP deferred compensation earned -- 5,411
Common stock dividends -- (19,051)
Net income -- 76,210
------------- ----------
Balance at June 30, 1994 63,424 $1,967,855
============= ==========
Discontinued Operations
On June 25, 1993, the Board of Directors of Tandy adopted a formal plan
of divestiture under which it would sell its computer manufacturing and
marketing businesses, the O'Sullivan Industries, Inc. ("O'Sullivan")
ready-to-assemble furniture manufacturing and related marketing business,
the Memtek Products division and the Lika printed circuit board business.
As of June 30, 1994, all manufacturing operations except Lika have been
divested.
O'Sullivan Industries. On January 27, 1994, the Company announced that
it had reached an agreement with the underwriters to sell common stock of
O'Sullivan Industries Holdings, Inc., the parent company of O'Sullivan,
to the public at $22 per share. The net proceeds realized by Tandy in
the initial public offering, together with a $40,000,000 cash dividend
from O'Sullivan, approximated $350,000,000. The initial public offering
closed on February 2, 1994.
Tandy has accrued approximately $1,893,000 and $3,155,000 during the
quarter and six months ended June 30, 1994, pursuant to the Tax Sharing
and Tax Benefit Reimbursement Agreement between Tandy and O'Sullivan
Industries Holdings, Inc. in which the Company will receive payments from
O'Sullivan resulting from the increased tax basis of O'Sullivan's assets,
thereby increasing tax deductions and, accordingly, reducing income taxes
payable by O'Sullivan. The amount to be received by the Company each
year will approximate the federal tax benefit expected to be realized
with respect to the increased tax basis. These payments will be made
over a 15-year period. The Company has recognized and will continue to
recognize these payments as additional sale proceeds and gain in the year
in which the payments become due and payable to the Company.
Lika. On August 4, 1994, Tandy signed an agreement to sell its Lika
printed circuit board division to Viktron Limited Partnership, an
Illinois limited partnership. This transaction is expected to close,
subject to the completion of due diligence, in September 1994.
InterTAN Update
As of June 30, 1994, InterTAN owed Tandy an aggregate of $56,884,000.
The current portion of the InterTAN obligation approximates $5,023,000
and the non-current portion approximates $51,861,000. During the quarter
ended June 30, 1994, Tandy recognized approximately $2,906,000 of sales
to and commission income from InterTAN and interest income of $2,041,000.
During the six months ended June 30, 1994, Tandy recognized approximately
$14,043,000 of sales to and commission income from InterTAN and interest
income of $4,014,000. Sales to InterTAN approximated $19,416,000 and
$33,660,000, respectively, for the three- and six-month periods ending
June 30, 1993.
InterTAN has increased its bank revolving credit facility to Canadian
$60,000,000. In the case of InterTAN's default on the bank credit line,
Tandy will, at the option of InterTAN's new banking syndicate, purchase
InterTAN's inventory and related accounts receivable at 50% of their net
book value, up to the amount of outstanding bank loans, but not to exceed
Canadian $60,000,000. In that event, Tandy could foreclose on its first
priority lien on InterTAN's assets. If Tandy fails to purchase the
inventory and related accounts receivable of InterTAN from the banking
syndicate, the syndicate upon notice to Tandy and expiration of time, can
foreclose on InterTAN's assets in Canada and the U.K. ahead of Tandy.
The inventory repurchase agreement between InterTAN's banking syndicate
and Tandy has been amended and restated to reflect the foregoing. As
required by an agreement with Tandy, InterTAN has registered the warrants
received by Tandy as part of the consideration for the debt
restructuring, under the Securities Act of 1933. These warrants have a
five-year term and are exercisable for approximately 1,450,000 shares of
InterTAN common stock at a price of $6.62 per share.
A&A International will continue as the exclusive purchasing agent for
InterTAN in the Far East on a commission basis. Commencing in March
1994, only the purchasing agent commission and sales by Tandy
manufacturing plants to InterTAN were recorded as sales. InterTAN
purchases from third parties through A&A International are no longer
recorded as sales, reflecting the arrangement under the new merchandise
agreement. Accordingly, management expects that reported sales by Tandy
to InterTAN in 1994 will be considerably lower than sales disclosed in
prior years; however, the earned income relating thereto will not be
materially different.
Credit Card Subsidiary
Tandy National Bank ("the Bank"), a limited purpose nationally chartered
credit card bank, was established on May 11, 1994. The Bank, a wholly
owned subsidiary of Tandy Corporation, was created to operate the
consumer credit card programs for Tandy. All new accounts approved after
May 12, 1994 will be originated and owned by the Bank. Existing Tandy
Credit Corporation ("TCC") cardholders who wish to utilize Tandy's
consumer credit card program in the future may open an account with the
Bank simply by making a purchase with their existing credit card. If
this occurs, the Bank will open an account for the cardholder and pay off
the existing balance with TCC. TCC will now purchase receivables from
the Bank instead of Tandy. The Bank will act as servicer of the accounts
and will receive a servicing fee from TCC.
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, securities matters, 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
June 30, 1994. 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 the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders held on May 19, 1994, the Company
elected directors to serve for the ensuing year and voted to approve the
Compensation Plan for the Chief Executive Officer. Out of the 78,906,184
eligible votes, 68,559,225 votes were cast at the meeting either by
proxies solicited in accordance with Schedule 14A or by security holders
voting in person. There were 5,530,940 broker non-votes which are not
included in the following table as they were not treated as being present
at the meeting. In the case of directors, abstentions are treated as
votes withheld and are included in the table. The tabulation of votes
for each nominee is set forth below under Item No. 1 and the vote on the
Compensation Plan for the Chief Executive Officer is set forth under Item
No. 2 below:
Item No. 1
-----------
Nominees for Directors
----------------------
VOTES VOTES
DIRECTORS FOR WITHHELD
--------------- ----------- --------
James I. Cash, Jr. 67,726,059 833,166
Caroline R. Hunt 67,643,596 915,629
Lewis R. Kornfeld, Jr. 67,505,106 1,054,119
Jack L. Messman 67,696,773 862,452
William G. Morton, Jr. 67,474,555 1,084,670
Thomas G. Plaskett 67,412,721 1,146,504
John V. Roach 67,230,932 1,328,293
William T. Smith 67,603,265 955,960
Alfred J. Stein 67,562,979 996,246
William E. Tucker 67,283,335 1,275,890
Jesse L. Upchurch 67,857,030 702,195
John A. Wilson 67,752,648 806,577
Item No. 2
-----------
Compensation Plan for the Chief Executive Officer
-------------------------------------------------
FOR AGAINST ABSTAIN
--- ------- -------
62,488,025 5,220,232 850,968
ITEM 5. OTHER INFORMATION
On August 1, 1994, the Company announced that its Board of Directors
authorized management to purchase up to 7,500,000 shares of its common
stock in addition to shares required for employee plans. Purchases will
be made from time to time in the open market, and it is expected that
funding of the program will come from existing cash and short-term debt.
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 14, which immediately precedes such exhibits.
b) Reports on Form 8-K.
No reports on Form 8-K were filed for the quarter ended
June 30, 1994.
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: August 12, 1994 By /s/ Richard L. Ramsey
----------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: August 12, 1994 /s/ William C. Bousquette
----------------------------
William C. Bousquette
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
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 be 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).
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 August 4, 1993 (filed as Exhibit 4B
to Tandy's 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).
4a Indenture, dated June 30, 1974, for 10%
Subordinated Debentures due 1994 (filed
as Exhibit 4a to Tandy's Form 10-K filed
on March 30, 1994, Accession No.0000096289-
94-000029 and incorporated herein by
reference).
4b 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).
4c 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). 17
4d Continuing Guaranty dated as of June 18,
1991 by Tandy Corporation in favor of
holders of indebtedness issued by Tandy
Credit Corporation that is or may be
publicly traded and is rated by at least
one nationally recognized rating agency
(filed as Exhibit 4e to Tandy's Form 10-K
filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated
herein by reference).
10a* Salary Continuation Plan for Executive
Employees of Tandy Corporation and
Subsidiaries including amendment dated
June 14, 1984 with respect to participation
by certain executive employees, as restated
October 4, 1990 (filed as Exhibit 10a to
Tandy's Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10b* Form of Executive Pay Plan Letters (filed
as Exhibit 10b to Tandy's Form 10-K filed
on March 30, 1994, Accession No.0000096289-
94-000029 and incorporated herein by
reference).
10c* Post Retirement Death Benefit Plan for
Selected Executive Employees of Tandy
Corporation and Subsidiaries as restated
June 10, 1991 (filed as Exhibit 10c to
Tandy's Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10d* Tandy Corporation Officers Deferred
Compensation Plan as restated July 10,
1992 (filed as Exhibit 10d to Tandy's
Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10e* Special Compensation Plan No. 1 for Tandy
Corporation Executive Officers, adopted
in 1993 (filed as Exhibit 10e to Tandy's
Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10f* Special Compensation Plan No. 2 for Tandy
Corporation Executive Officers, adopted
in 1993 (filed as Exhibit 10f to Tandy's
Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10g* Special Compensation Plan for Directors
of Tandy Corporation dated November 13,
1986 (filed as Exhibit 10g to Tandy's
Form 10-K filed on March 30, 1994,
Accession No. 0000096289-94-000029 and
incorporated herein by reference).
10h* Director Fee Resolution (filed as Exhibit
10h to Tandy's Form 10-K filed on March
30, 1994, Accession No. 0000096289-94-
000029 and incorporated herein by reference).
10i* Tandy Corporation 1985 Stock Option Plan
as restated effective August 1990 (filed
as Exhibit 10i to Tandy's Form 10-K
filed on March 30, 1994, Accession No.
0000096289-94-000029 and incorporated
herein by reference).
10j* Tandy Corporation 1993 Incentive Stock
Plan as restated October 14, 1993 (filed
as Exhibit 4B to Tandy's Form S-8 for
Tandy Corporation Incentive Stock Plan,
Reg. No. 33-51603, filed on November 12,
1993, Accession No. 0000096289-93-000017
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* Restated Trust Agreement Tandy Employees
Supplemental Stock Program through
Amendment No. III dated March 29, 1993
(filed as Exhibit 10H to Tandy's Form
10-K/A-4 filed on September 3, 1993,
Accession No. 0000096289-93-000011 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-K filed on March 30, 1994, Accession
No. 0000096289-94-000029 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 to Tandy's Form 10-K filed
on March 30, 1994, Accession No.
0000096289-94-000029 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 30, 1994, Accession No.
0000096289-94-000029 and incorporated
herein by reference).
11 Statement of Computation of Earnings per
Share 212
12 Statement of Computation of Ratios of
Earnings to Fixed Charges 213
_______________________
* Each of these exhibits is a "management contract or
compensatory plan, contract, or arrangement".