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 September 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 October 31, 1994 was 61,612,524.
Index to Exhibits is on Sequential Page No. 13.
Total pages 17.
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 Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
Net sales and operating revenues $ 1,119,155 $ 939,897 $ 3,120,567 $ 2,647,720
Cost of products sold 671,499 539,362 1,858,383 1,488,599
----------- ----------- ----------- -----------
Gross profit 447,656 400,535 1,262,184 1,159,121
----------- ----------- ----------- -----------
Expenses:
Selling, general and administrative 365,497 317,699 1,043,548 937,543
Depreciation and amortization 20,473 20,090 62,269 60,493
----------- ----------- ----------- -----------
Net operating income 61,686 62,746 156,367 161,085
Interest income 16,866 15,326 61,967 48,136
Interest expense (4,234) (11,050) (20,599) (28,161)
----------- ----------- ----------- -----------
Net interest income 12,632 4,276 41,368 19,975
----------- ----------- ----------- -----------
Income before income taxes, discontinued
operations and cumulative effect of
change in accounting principle 74,318 67,022 197,735 181,060
Provision for income taxes 28,127 24,463 75,334 66,087
Income from continuing operations 46,191 42,559 122,401 114,973
Loss from discontinued operations:
Operating loss, net of tax -- -- -- (57,619)
Loss on disposal, net of tax -- -- -- (70,000)
----------- ----------- ----------- -----------
-- -- -- (127,619)
Income (loss) before cumulative effect of
change in accounting principle 46,191 42,559 122,401 (12,646)
Cumulative effect on prior years of change
in accounting principle -- -- -- 13,014
----------- ----------- ----------- -----------
Net income 46,191 42,559 122,401 368
Preferred dividends 1,707 1,807 5,120 5,421
----------- ----------- ----------- -----------
Net income (loss) available to common shareholders $ 44,484 $ 40,752 $ 117,281 $ (5,053)
=========== =========== =========== ===========
Net income (loss) available per average common
and common equivalent share:
Income from continuing operations $ 0.58 $ 0.52 $ 1.51 $ 1.41
Loss from discontinued operations -- -- -- (1.65)
----------- ----------- ----------- -----------
Income (loss) before cumulative effect of
change in accounting principle 0.58 0.52 1.51 (0.24)
Cumulative effect on prior years of change
in accounting principle -- -- -- 0.17
----------- ----------- ----------- -----------
Net income (loss) available per average common
and common equivalent share $ 0.58 $ 0.52 $ 1.51 $ (0.07)
=========== =========== =========== ===========
Average common and common equivalent
shares outstanding 77,158 77,801 77,550 77,514
=========== =========== =========== ===========
Dividends declared per common share $ 0.15 $ 0.15 $ 0.45 $ 0.45
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
<CAPTIONS>
(In thousands)
1994 1993 1993
------------ ------------ ------------
Assets
Current assets:
Cash and short-term investments $ 221,024 $ 213,235 $ 118,183
Accounts and notes receivable, less
allowance for doubtful accounts 557,411 582,443 553,478
Inventories, at lower of cost or market 1,401,904 1,276,302 1,382,572
Other current assets 125,125 88,005 148,110
------------ ------------ ------------
Total current assets 2,305,464 2,159,985 2,202,343
Property, plant and equipment, at cost,
less accumulated depreciation 480,446 463,738 444,670
Investment in discontinued operations -- 405,664 475,403
Other assets, net of accumulated amortization 193,683 189,712 182,613
------------ ------------ ------------
$ 2,979,593 $ 3,219,099 $ 3,305,029
============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 97,344 $ 346,164 $ 493,816
Subordinated debentures, net of
unamortized bond discount -- 31,739 31,439
Current portion of TESOP guarantee 9,800 10,050 10,550
Accounts payable 385,849 279,942 296,981
Income taxes payable 38,245 14,690 4,617
Accrued expenses 312,359 349,057 290,086
------------ ------------ ------------
Total current liabilities 843,597 1,031,642 1,127,489
------------ ------------ ------------
Notes payable, due after one year 76,723 127,708 163,868
Guarantee of TESOP indebtedness 54,030 58,930 63,830
Deferred income taxes -- -- 30,713
Other non-current liabilities 50,972 50,069 47,956
------------ ------------ ------------
Total other liabilities 181,725 236,707 306,367
------------ ------------ ------------
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 100,000 100,000 100,000
Series C PERCS, 150,000 shares
authorized and issued 429,982 429,982 429,982
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 91,016 85,752 81,925
Retained earnings 2,094,640 2,028,041 1,950,280
Foreign currency translation effects 1,695 1,003 978
Stock held in treasury, at cost 23,349,000,
21,689,000 and 21,634,000 common shares,
respectively (784,351) (707,331) (700,751)
Unearned deferred compensation related to TESOP (64,356) (72,342) (76,886)
------------ ------------ ------------
Total stockholders' equity 1,954,271 1,950,750 1,871,173
Commitments and contingent liabilities
------------ ------------ ------------
$ 2,979,593 $ 3,219,099 $ 3,305,029
============ ============ ============
The accompanying notes are an integral part of these financial statements.
TANDY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
<CAPTIONS>
(In thousands) Nine Months Ended
September 30,
----------------------------------
1994 1993
------------ ------------
Cash flows from operating activities:
Net income $ 122,401 $ 368
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 62,269 73,649
Provision for credit losses and bad debts 25,642 37,209
Other items 6,004 4,419
Changes in operating assets and liabilities:
Receivables 68,623 89,454
Inventories (121,769) (170,704)
Other current assets (5,356) (24,837)
Accounts payable, accrued expenses and income taxes 51,318 (8,410)
------------ ------------
Net cash provided by operating activities 209,132 58,134
------------ ------------
Investing activities:
Additions to property, plant and equipment (136,662) (75,875)
Proceeds from sale of assets 59,477 2,635
Proceeds from sale of divested operations 351,250 17,800
Purchase of InterTAN bank debt and restructuring
of working capital loans -- (31,663)
Other investing activities 766 (2,065)
------------ ------------
Net cash provided (used) by investing activities 274,831 (89,168)
------------ ------------
Financing activities:
Purchase of treasury stock (100,990) (13,541)
Sale of treasury stock to employee stock purchase program 31,586 32,738
Dividends paid (54,941) (56,144)
Redemption of subordinated debentures (32,431) --
Changes in short-term borrowings, net (267,719) 102,696
Repayment of long-term borrowings (51,679) (29,158)
------------ ------------
Net cash provided (used) by financing activities (476,174) 36,591
------------ ------------
Increase in cash and short-term investments 7,789 5,557
Cash and short-term investments, beginning of period 213,235 112,626
------------ ------------
Cash and short-term investments, end of period $ 221,024 $ 118,183
============ ============
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 nine months ended September 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 September 30, 1994, InterTAN owed Tandy an aggregate of
$55,242,000 in connection with the 1993 InterTAN debt
restructuring. The current portion of the InterTAN
obligation approximates $10,381,000, and the non-current
portion approximates $44,861,000. This debt is secured by a
first priority lien on InterTAN's assets in Canada and the
U.K. During the quarter ended September 30, 1994, Tandy
recognized approximately $3,066,000 of sales to and
commission income from InterTAN and interest income of
$2,072,000. During the nine months ended September 30, 1994,
Tandy recognized approximately $17,109,000 of sales to and
commission income from InterTAN and interest income of
$6,086,000. Sales to InterTAN approximated $34,112,000 and
$67,772,000, respectively, for the three- and nine-month
periods ending September 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 in Canada and
the U.K. 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
1,449,007 shares of InterTAN common stock at a price of
$6.618 per share. At September 30, 1994, InterTAN's common
stock price, as quoted in the Wall Street Journal, was $6.875
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 and operating revenues.
InterTAN purchases from third parties through A&A
International are no longer recorded as sales, reflecting the
arrangement under the new merchandise agreement.
Accordingly, sales by Tandy to InterTAN in 1994 are
considerably lower than sales disclosed in prior years;
however, the earned income relating thereto is not materially
different.
Canadian tax authorities are reviewing InterTAN's Canadian
subsidiary's 1987-89 tax returns. The Company cannot
determine whether the ultimate resolution of that review
will have an effect on InterTAN's ability to meet its
obligations to Tandy but at the present the Company believes
that the ultimate resolution of this review will not impair
InterTAN's ability to meet its obligations to Tandy.
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.
O'Sullivan Industries. On January 27, 1994, the Company
announced that it had reached an agreement with the
underwriters to sell all the common stock of O'Sullivan
Industries Holdings, Inc. ("O'Sullivan"), the parent
company of O'Sullivan Industries, Inc., 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 Industries, Inc., approximated
$350,000,000. The initial public offering closed on
February 2, 1994.
Tandy has accrued approximately $1,893,000 and $5,048,000
during the quarter and nine months ended September 30, 1994,
pursuant to the Tax Sharing and Tax Benefit Reimbursement
Agreement between Tandy and O'Sullivan under which Tandy
will receive payments from O'Sullivan approximating the
federal tax benefit that O'Sullivan will realize because
the tax basis of its assets increased in the initial public
offering. The higher tax basis increases O'Sullivan's tax
deductions and, accordingly, reduces income taxes payable
by O'Sullivan. These payments will be made over a 15-year
period and are contingent upon O'Sullivan's taxable income
in each year. 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 pursuant to the Agreement.
Lika. On August 4, 1994, Tandy signed an agreement to sell
the assets used in its Lika printed circuit board division to
Viktron Limited Partnership, an Illinois limited partnership.
The proceeds from the sale approximated $17,000,000 which
included $7,754,000 in cash, liquidation of retained assets
of $5,594,000 and secured promissory notes for $3,032,000.
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 commercial 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 September 30, 1994, there were no amounts
outstanding under 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. As
of September 30, 1994, approximately 1,059,000 shares have
been repuruchased under this program.
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
September 30 were:
<CAPTIONS>
(In thousands) Three Months Ended % Increase Nine Months Ended % Increase
September 30, (Decrease) September 30, (Decrease)
---------------------------- ---------- ---------------------------- ----------
1994 1993 1994 1993
------------ ------------ ------------ ------------
Radio Shack $ 633,323 $ 602,308 5.1 % $ 1,831,417 $ 1,757,754 4.2 %
Tandy Name Brand 100,891 106,672 -5.4 295,299 328,838 * -10.2
Incredible Universe 87,102 28,939 201.0 197,291 73,836 167.2
Computer City 278,478 153,582 81.3 731,958 384,764 90.2
------------ ------------ ------------ ------------
1,099,794 891,501 23.4 3,055,965 2,545,192 20.1
Import/Export and Other 19,361 48,396 -60.0 64,602 102,528 -37.0
------------ ------------ ------------ ------------
$ 1,119,155 $ 939,897 19.1 % $ 3,120,567 $ 2,647,720 17.9 %
============ ============ ============ ============
* Includes 110 McDuff/VideoConcepts stores closed during the March 1993 quarter.
U.S. retail operations had a 23% sales gain for the quarter
ended September 30, 1994 and a 22% sales gain for the
nine-month period, excluding closed stores. Comparable sales
gains for U.S. retail stores approximates 3% for the quarter
and 4% for the nine months ended September 30, 1994. Radio
Shack's sales increases reflected higher volumes for core
electronic products and parts which were partially offset by
a decline in computer sales. Tandy Name Brand's decrease in
sales in the quarter is due primarily to the closing of
under-performing stores as leases expired during the year.
The opening of new Incredible Universe and Computer City
stores in the latter part of 1993 and the first three
quarters of 1994 increased sales for those divisions. Since
September 30, 1993, 30 Computer City stores and four
Incredible Universe stores have opened. Commencing in March
1994, InterTAN purchases from third parties through A&A
International were no longer recorded as sales, but instead,
A&A International recognized commission income on such
purchases; therefore, sales by the Import/Export group have
decreased approximately $31,636,000 for the quarter and
$53,971,000 for the nine-month period but earned income
relating thereto was not materially different. Increases in
repair and other income from support operations have
partially offset this decrease.
Gross Profit
Gross profit as a percent of net sales was 40.0% during the
three months ended September 30, 1994 as compared to 42.6%
during the corresponding 1993 period. For the nine months
ended September 30, 1994 and 1993, the gross profit
percentages were 40.4% and 43.8%, respectively. This trend
toward lower gross margins is expected to continue as
additional sales are made by Computer City and Incredible
Universe stores which operate on lower margins. In the third
quarter of fiscal 1994, Computer City and Incredible Universe
accounted for approximately 33% of consolidated sales
compared to 19% in the third quarter of 1993. For the nine
months ended September 30, 1994 and 1993, Computer City and
Incredible Universe accounted for approximately 30% and 17%
of consolidated sales, respectively. Gross profit at Radio
Shack has improved in the last nine months in comparison with
the prior year. 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 1.1 percentage points
in comparison with the third quarter of 1993 and declined 2.0
percentage points in comparison with the nine months ended
September 30, 1993. Most expense categories, including rent,
payroll, utilities and bad debt expense, were lower as a
percent of sales during the three and nine months ended
September 30, 1994 as compared with the same prior year
periods. Efforts to improve the quality of the credit card
receivables portfolio through adjustments to the scoring
model and more stringent credit line monitoring have resulted
in a reduction of bad debt expense of $9,419,000 for the nine
months ended September 30, 1994, in comparison with the nine
months ended September 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. As a
result of Radio Shack's new promotional programs, advertising
costs increased $7,937,000 or 20% this quarter in comparison
with the prior year period. The Company expects SG&A
expenses as a percent of sales to continue to decrease as
Computer City and Incredible Universe, which operate on lower
costs, become more significant portions of the Company's
total business.
Net Interest Income
Proceeds from divestitures and cash provided by operating
activities 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 $984,000 and $2,768,000 for the three and nine
months ended September 30, 1994, respectively. Interest
income from AST Research Inc. approximated $1,482,000 for the
current quarter and $4,619,000 for the nine months ended
September 30, 1994. Tandy also received $721,000 in interest
income from the IRS reflecting the settlement of outstanding
tax issues during the quarter and $9,567,000 for the
nine-month period. Interest income earned by Tandy Credit
Corporation decreased $2,434,000 from that earned in the
September 30, 1993 quarter due to increased use of credit
promotions. Reduced debt levels resulted in interest expense
which was 62% lower compared to the three months ended
September 30, 1993 and 27% lower compared to the nine months
ended September 30, 1993.
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 nine months of 1994 and
1993 were 38.1% and 36.5%, 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%.
The IRS Dallas field office is reviewing the Company's
1987-1989 tax returns. The review in Dallas could lead to
referral to the National office. The resolution of this
matter could result in additional taxes to the Company related
to the spin-off of InterTAN and raises questions about the
private letter rulings issued by the IRS regarding the spin-off
and certain other tax matters. Although aggregate additional
taxes involved in these transactions could potentially range
from $0 to $26 million, based on the advice of the Company's
independent tax advisors the Company believes it would prevail
if any tax litigation had to be instituted and in any event
the Company believes the ultimate resolution would have no
material impact on the Company's financial condition or
results of operations.
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. Current and prior year periods weighted
average share calculations reflect the reduction of 1,049,000
common shares because Tandy's common stock price at September
30, 1994 was higher than the PERCS strike price which reduces
the number of common shares that would be issued to PERCS
shareholders upon conversion. Earnings per share from
continuing operations for the three and nine months ended
September 30, 1994 increased from that for the same periods
of 1993. The Company recorded losses from discontinued
operations of $127,619,000 or $1.65 per share for the first
nine months of fiscal 1993, partially offset by a benefit of
$13,014,000, or $0.17 per share, for the cumulative effect on
prior years of a change in accounting principle.
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 nine-month period ended September 30, 1994
as compared with the same period of the prior year. This
increase relates primarily to increased net income in 1994.
Cash provided by investing activities for the nine-month
period ended September 30, 1994 includes $351,250,000
received from the divestiture of discontinued operations.
Proceeds from asset sales approximated $59,477,000 and
primarily relate to the sale and leaseback of certain stores.
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 formats. Management anticipates that capital
expenditure requirements will continue to increase over 1993
levels while the Computer City and Incredible Universe retail
chains are expanding. Cash used for financing activities
increased for the nine-month period ended September 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.
Additionally, cash paid for treasury stock purchases was
$100,990,000 including $42,000,000 which was attributable to
the Board of Directors approved share repurchase program and
the remaining purchases were for ongoing employee plans. The
Company believes that its cash flow from operations, cash on
hand and availability under its existing debt facilities are
adequate to fund the planned expansion of its store formats
and share repurchase program. In addition, most of the
Company's new stores are being funded through operating
leases.
Cash and short-term investments at September 30, 1994 were
$221,024,000 as compared to $118,183,000 at September 30,
1993, such increases being primarily attributable to proceeds
from the divestiture program. Total debt as a percentage of
total capitalization was 10.9% at September 30, 1994,
compared to 22.8% at December 31, 1993 and 29.0% at September
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
6.0% at September 30, 1994 compared to 7.4% at December 31,
1993 and 8.6% at September 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 commercial 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. As
of September 30, 1994, approximately 1,059,000 shares have
been repurchased under this program.
Inventory
Compared to September 30, 1993, total inventories at
September 30, 1994 have increased $19,332,000 or 1.4%. The
increase in total inventory levels included inventory
increases to support new Computer City and Incredible
Universe stores. The majority of this increase was offset by
decreased inventory levels at Radio Shack due to efficiencies
achieved in the replenishment system and reductions of
computer levels. Inventory levels have increased 9.8% from
the amounts at December 31, 1993 primarily due to an increase
in inventory levels that support new Incredible Universe and
Computer City stores along with seasonal buildup as
distribution centers prepare for the Christmas season.
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 -- 692
Sale of treasury stock to
employee plans 799 31,586
Purchase of treasury stock (2,531) (102,681)
Exercise of stock options 72 2,299
Repurchase of preferred stock -- (2,960)
Preferred stock dividends,
net of tax -- (3,328)
PERCS dividend -- (24,075)
TESOP deferred compensation earned -- 7,986
Common stock dividends -- (28,399)
Net income -- 122,401
------------- -----------
Balance at September 30, 1994 62,296 $ 1,954,271
============= ===========
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.
O'Sullivan Industries. On January 27, 1994, the Company
announced that it had reached an agreement with the
underwriters to sell all the common stock of O'Sullivan
Industries Holdings, Inc. ("O'Sullivan"), the parent
company of O'Sullivan Industries, Inc., 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 Industries, Inc., approximated
$350,000,000. The initial public offering closed on
February 2, 1994.
Tandy has accrued approximately $1,893,000 and $5,048,000
during the quarter and nine months ended September 30, 1994,
pursuant to the Tax Sharing and Tax Benefit Reimbursement
Agreement between Tandy and O'Sullivan under which Tandy
will receive payments from O'Sullivan approximating the
federal tax benefit that O'Sullivan will realize because
the tax basis of its assets increased in the initial public
offering. The higher tax basis increases O'Sullivan's tax
deductions and, accordingly, reduces income taxes payable
by O'Sullivan. These payments will be made annually over
a 15-year period and are contingent upon O'Sullivan's
taxable income in each year. 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 pursuant to the Agreement.
Lika. On August 4, 1994, Tandy signed an agreement to sell
the assets used in its Lika printed circuit board division to
Viktron Limited Partnership, an Illinois limited partnership.
The proceeds from the sale approximated $17,000,000 which
included $7,754,000 in cash, liquidation of retained assets
of $5,594,000 and secured promissory notes for $3,032,000.
InterTAN Update
As of September 30, 1994, InterTAN owed Tandy an aggregate of
$55,242,000 in connection with the 1993 InterTAN debt
restructuring. The current portion of the InterTAN
obligation approximates $10,381,000 and the non-current
portion approximates $44,861,000. This debt is secured by a
first priority lien on InterTAN's assets in Canada and the
U.K. During the quarter ended September 30,1994, Tandy
recognized approximately $3,066,000 of sales to and
commission income from InterTAN and interest income of
$2,072,000. During the nine months ended September 30, 1994,
Tandy recognized approximately $17,109,000 of sales to and
commission income from InterTAN and interest income of
$6,086,000. Sales to InterTAN approximated $34,112,000 and
$67,772,000, respectively, for the three- and nine-month
periods ending September 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 in Canada and
the U.K. 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
1,449,007 shares of InterTAN common stock at a price of
$6.618 per share. At September 30, 1994, InterTAN's common
stock price, as quoted in the Wall Street Journal was $6.875
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 and operating revenues.
InterTAN purchases from third parties through A&A
International are no longer recorded as sales, reflecting the
arrangement under the new merchandise agreement.
Accordingly, sales by Tandy to InterTAN in 1994 are
considerably lower than sales disclosed in prior years;
however, the earned income relating thereto is not materially
different.
Canadian tax authorities are reviewing InterTAN's
Canadian subsidiary's 1987-89 tax returns. The Company
cannot determine whether the ultimate resolution of that
review will have an effect on InterTAN's ability to meet
its obligations to Tandy but at the present the Company
believes that the ultimate resolution of this review will
not impair InterTAN's ability to meet its obligations to
Tandy.
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 provide a standardized
nation-wide consumer credit card program for Tandy. All new
accounts approved after May 12, 1994 will be originated and
owned by the Bank.
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 September 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 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) Exhibits Required by Item 601 of Regulation S-K.
A list of the exhibits required by Item 601 of Regulation
S-K and filed as part of this report is set forth in the
Index to Exhibits on page 13, which immediately precedes
such exhibits.
b) Reports on Form 8-K.
On August 1, 1994 the Company reported on Form 8-K that
the 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. No other Form 8-K
reports were filed for the quarter ended September 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: November 14, 1994 By /s/ Richard L. Ramsey
-------------------------
Richard L. Ramsey
Vice President and Controller
(Authorized Officer)
Date: November 14, 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 Amended and restated Rights Agreement
with the First National Bank of Boston
dated June 22, 1990 for Preferred Share
Purchase Rights (filed as Exhibit 4b to
Tandy's Form 10-K filed on March 30,
1994, Accession No. 0000096289-94-000029
and incorporated herein by reference).
4b Revolving Credit Agreement between Tandy
Corporation and Texas Commerce Bank,
individually and as Agent for sixteen
other banks, dated as of May 27, 1994
(without exhibits) (filed as Exhibit
4c to Tandy's Form 10Q filed on August 15,
1994, Accession No. 0000096289-94-000039
and incorporated herein by reference).
4c 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 16
12 Statement of Computation of Ratios of
Earnings to Fixed Charges 17
27 Financial Data Schedule
_______________________
* Each of these exhibits is a "management contract or
compensatory plan, contract, or arrangement".
EXHIBIT 11
TANDY CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
<CAPTIONS>
(In thousands) Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
PRIMARY EARNINGS PER SHARE
Reconciliation of net income (loss) per statements
of income to amounts used in computation of
primary earnings per share:
Net income, as reported $ 46,191 $ 42,559 $ 122,401 $ 368
Less dividends on preferred stock:
Series B (1,707) (1,807) (5,120) (5,421)
Series C (8,025) (8,025) (24,075) (24,075)
------------ ------------ ------------ ------------
Net income (loss) available to common stockholders 36,459 32,727 93,206 (29,128)
Plus dividends on Series C preferred stock 8,025 8,025 24,075 24,075
------------ ------------ ------------ ------------
Net income (loss) for primary earnings per share $ 44,484 $ 40,752 $ 117,281 $ (5,053)
============ ============ ============ ============
Weighted average number of common shares outstanding 62,965 63,754 63,352 63,563
Weighted average number of $2.14 depositary
shares, representing preferred stock,
treated as outstanding common stock due to
mandatory conversion 13,951 13,951 13,951 13,951
Weighted average number of common shares issuable
under stock option plans, net of assumed treasury
stock repurchases at average market prices 242 96 247 (b)
------------ ------------ ------------ ------------
Weighted average number of common and common
equivalent shares 77,158 77,801 77,550 77,514
============ ============ ============ ============
Net income (loss) per average common and
common equivalent share $ 0.58 $ 0.52 $ 1.51 $ (0.07)
============ ============ ============ ============
FULLY DILUTED EARNINGS PER SHARE (a)
Reconciliation of net income (loss) per statements
of income to amounts used in computation of fully
diluted earnings per share:
Net income (loss) available to common
stockholders $ 36,459 $ 32,727 $ 93,206 $ (29,128)
Plus dividends on Series C preferred stock 8,025 8,025 24,075 24,075
Adjustments for assumed conversion of Series B
preferred stock to common stock as of the
later of the beginning of the period or the
date of issuance, August 1, 1990:
Plus dividends on Series B preferred stock,
net of tax on allocated shares 1,707 (b) 5,120 (b)
Less additional contribution that would
have been required for the TESOP if
Series B preferred stock had been converted (991) (b) (2,946) (b)
------------ ------------ ------------ ------------
Net income (loss), as adjusted $ 45,200 $ 40,752 $ 119,455 $ (5,053)
============ ============ ============ ============
Reconciliation of weighted average number of shares
outstanding to amount used in computation of
fully diluted earnings per share:
Weighted average number of shares outstanding 77,158 77,801 77,550 77,514
Adjustment to reflect assumed exercise of stock
options as of the beginning of the period 116 189 49 (b)
Adjustment to reflect assumed conversion of
Series B preferred stock to common stock as
of the later of the beginning of the period
or the date of issuance, August 1, 1990 1,981 (b) 2,002 (b)
------------ ------------ ------------ ------------
Weighted average number of common and common
equivalent shares outstanding, as adjusted 79,255 77,990 79,601 77,514
============ ============ ============ ============
Fully diluted net income per average common
and common equivalent share $ 0.57 $ 0.52 $ 1.50 $ (0.07)
============ ============ ============ ============
(a) This calculation is submitted in accordance with Regulation S-K, Item 601(b)(11) although not required
by footnote 2 to paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%.
(b) For the three months and nine months ended September 30, 1993 these items are anti-dilutive and thus
are omitted from the calculation.
EXHIBIT 12
TANDY CORPORATION
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
AND RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS (1)
<CAPTIONS>
(In thousands) Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
Ratios of Earnings to Fixed Charges
Income from continuing operations $ 46,191 $ 42,559 $ 122,401 $ 114,973
Plus provision for income taxes 28,127 24,463 75,334 66,087
------------ ------------ ------------ ------------
Income before income taxes 74,318 67,022 197,735 181,060
Fixed charges:
Interest expense and amortization
of debt discount 4,234 11,050 20,599 28,161
Amortization of issuance expense 59 101 209 309
Appropriate portion (33 1/3%) of rentals 17,594 16,886 52,927 49,410
------------ ------------ ------------ ------------
Total fixed charges 21,887 28,037 73,735 77,880
------------ ------------ ------------ ------------
Earnings before income taxes
and fixed charges $ 96,205 $ 95,059 $ 271,470 $ 258,940
============ ============ ============= ============
Ratios of earnings to fixed charges 4.40 3.39 3.68 3.32
============ ============ ============= ============
Ratios of Earnings to Fixed Charges
and Preferred Dividends:
Total fixed charges, as above $ 21,887 $ 28,037 $ 73,735 $ 77,880
Preferred dividends 9,732 9,832 29,195 29,496
------------ ------------ ------------- ------------
Total fixed charges and preferred dividends $ 31,619 $ 37,869 $ 102,930 $ 107,376
============ ============ ============= ============
Earnings before income taxes, fixed charges
and preferred dividends $ 96,205 $ 95,059 $ 271,470 $ 258,940
============ ============ ============= ============
Ratios of earnings to fixed charges
and preferred dividends 3.04 2.51 2.64 2.41
============ ============ ============= ============
(1) The computation of Ratios of Earnings to Fixed Charges and Ratios of Earnings to Fixed Charges
and Preferred Dividends excludes results of operations from discontinued operations and fixed
charges relating to these same operations.