SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 -------------------------------------------- December 30, 1996 Date of Report (Date of earliest event reported) TANDY CORPORATION (Exact name of registrant as specified in charter) Delaware 1-5571 75-1047710 (State or other (Commission (IRS Employer jurisdiction of File Number) identification No.) incorporation) 1800 Tandy Center, Fort Worth, Texas 76102 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code (817) 390-3700 Page 1 of 13 Item 2. Acquisition or Disposition of Assets The text of two press releases issued by the Company on December 30, 1996 are set forth below: December 30, 1996 TC-96-054 TANDY CORPORATION PLANS TO EXIT THE INCREDIBLE UNIVERSE Fort Worth, Texas -- Tandy Corporation (NYSE:TAN) announced a plan to exit the Incredible Universe business. Six stores are under contract to be sold to another retailer and the plan calls for the remainder of the stores to be sold to other retailers or for other real estate uses. The chain consists of 17 stores and negotiations on the future of other locations will be ongoing. "The Incredible Universe concept was developed to provide a larger selection, non-commissioned sales environment, and a `hands-on' experience. While individual stores enjoyed success and customers surveyed had strong positives for Incredible Universe, the economic model is not viable for Tandy," said John V. Roach, Chairman and Chief Executive Officer. It is anticipated that the phase out of store operations will take about six months. Sales, operating expenses, and earnings of Incredible Universe will be segregated during the phase out period. Costs associated with exiting the business will be recorded in the year ending December 31, 1996 to the extent permitted by accounting standards. Additionally, as part of a strategic plan to reposition Computer City to focus on the experienced user, SOHO(Small Office, Home Office) customer, corporate market and enhance profitable growth potential, the Company adopted a plan to close 19 stores and relocate two others of its 108 North American stores. (See accompanying list.) It is anticipated essentially all charges related to the Computer City plans will be recognized in the year ending December 31, 1996. The Company has not finalized its review of costs associated with its strategic moves; however, preliminary estimates of such costs are on the order of $170 million after-tax and will be recognized in the fourth quarter of 1996. Previously, Tandy announced an additional estimated charge in excess of $20 million after-tax to discontinue its McDuff stores. The cash flow benefit from the combined actions is expected to exceed the loss. Tandy Corporation, one of the nation's largest retailers of consumer electronics, sells its products through approximately 6,800 RadioShackSM, and 113 domestic foreign Computer City(R) outlets. Store dispositions will require various governmental filings and approvals. Statements made in this announcement which are forward-looking statements involve risks and uncertainties including, but not limited to, economic conditions, product demand, competitive pricing, governmental approvals, success of marketing efforts to liquidate inventory, fixed assets and real estate and other cost of discontinuing certain retail stores, method of ultimate disposition, availability of product, third parties completing the purchase of assets and real estate and other risks indicated in Company filings with the Securities and Exchange Commission. Computer City Stores to Close or Relocate Los Angeles - Riverside (CA) Los Angeles - South Coast (CA) Los Angeles - Cerritos (CA) Los Angeles - Brea (CA) Los Angeles - Torrance (CA) Los Angeles - Beverly Hills (CA) Los Angeles - Montclair (CA) San Jose -Milpitas (CA) Charlotte (NC) Cincinnati (OH) Washington DC - Tysons Washington DC - Fairfax Washington DC - Rockville Baltimore - Glen Burnie (MD) Baltimore - Timonium (MD) Boston - Burlington (MA) Houston - Greenspoint (TX) Chicago - Oakbrook (IL)* Atlanta - Buckhead (GA)* Cherry Hill (NJ) King of Prussia (PA) * Denotes stores to be relocated. December 30, 1996 TC-96-055 TANDY CORPORATION ENTERS INTO AGREEMENTS TO SELL MULTIPLE INCREDIBLE UNIVERSE LOCATIONS Fort Worth, Texas -- Tandy Corporation (NYSE:TAN) has entered into contracts with Fry's Electronics, Inc., Palo Alto, California for the sale of the assets in six Incredible Universe stores located in the Arlington, TX, Dallas, TX, Phoenix, AZ, Portland, OR, Sacramento, CA and San Diego, CA markets. In addition, contracts have been entered into to sell the six buildings and land to limited partnerships who will lease the stores to Fry's. The closing of each of the sales is contingent upon clearance of certain governmental filings, additional real estate and other due diligence, and other contingencies. Each of these six Incredible Universe stores will continue to be operated by Tandy until after the closing of each respective transaction, at which time Fry's will commence management of the unit. The transaction closings are projected to begin in February and be completed by June 30, 1997. All extended service contracts and warranties will be honored. Fry's Electronics operates ten computer and consumer electronics stores of up to 150,000 square feet in California. Fry's Electronics, Inc. is a private company founded in 1985. Financial terms of the sales are not disclosed. The restructuring charges announced by Tandy on December 30 (See additional news release TC-96-054) anticipated the execution of these agreements. Tandy Corporation, one of the nation's largest retailers of consumer electronics, sells it products through approximately 6,800 RadioShackSM and 113 Computer City(R) outlets. Store dispositions will require various governmental filings and approvals. Statements made in this announcement which are forward-looking statements involve risks and uncertainties including, but not limited to, economic conditions, product demand, competitive pricing, success of marketing efforts to liquidate inventory, fixed assets and real estate and other cost of discontinuing certain retail stores, method of ultimate disposition, availability of product, third parties completing the purchase of assets and real estate and other risks indicated in Company filings with the Securities and Exchange Commission. (End of Text of Press Releases) The transactions with Fry's Electronics, Inc. include the sale of inventories and non-inventory assets for six Incredible Universe stores. The transactions with six limited partnerships include the sales of real estate, which will then be leased to Fry's. Under the contracts, the six closings are projected to begin in February and be completed by June 30, 1997. Before the sales of real estate to the limited partnerships, certain conditions and obligations must be satisfied, which include payments by Tandy of approximately $91,000,000 relating to the real estate. The limited partnerships will purchase the real estate of the six stores through cash payments of $25,000,000, in aggregate, and notes totaling $40,000,000. These notes mature in four years at an interest rate of 6.57%, payable quarterly. One year notes bearing an interest rate of 5.91% will be given by Fry's to purchase inventories at amounts based upon values at the closing date for each transaction. Principal is due in equal quarterly payments along with accrued interest. Five year notes totaling $5,000,000 will be given by Fry's to purchase non-inventory assets. Principal is due in equal annual installments. These notes bear an interest rate of 6.70%, payable quarterly. If either Tandy or Fry's breaches its obligations in any material respect, the non-breaching party will have the option to cancel the transactions and demand liquidated damages of $10,000,000. The following unaudited pro forma income statements for the year ended December 31, 1995, and the nine months ended September 30, 1996, reflect the historical accounts of the Company for those periods, adjusted to give pro forma effect to the exiting of the Incredible Universe retail operations, closing 21 Computer City locations and the discontinuance of the Specialty Retail Group, primarily McDuff stores, as if the exit plan had been consummated at the beginning of each period presented. The following unaudited pro forma balance sheet as of September 30, 1996, reflects the historical accounts of the Company to give pro forma effect to the sale of six Incredible Universe operations, the closing of 21 Computer City locations and the discontinuance of the Specialty Retail Group, primarily 53 McDuff stores, as if this portion of the exit plan had been completed as of September 30, 1996. Remaining assets relating to the exit plan have been written down to estimated net realizable value. The pro forma financial data and accompanying notes should be read in conjunction with the description of the exit plan contained elsewhere herein and the Consolidated Financial Statements and related notes included in the Company's 1996 Annual Report on Form 10-K and the Company's September 30, 1996, Quarterly Report on form 10-Q previously filed with the Securities and Exchange Commission. The Company believes that the assumptions used in the following statements provide a reasonable basis on which to present the pro forma financial data. The pro forma adjustments are based upon available information and certain assumptions that the Corporation believes are reasonable under the circumstances. The pro forma financial information is provided for informational purposes only and should not be construed to be indicative of the Company's financial condition or results of operations had the exit plan been consummated on the dates assumed and are not meant to be indicative of the results of operations which can be expected for any subsequent period or its financial condition on any future date. Item 7. Financial Statements and Exhibits Listed below are the financial statements, pro forma financial information and exhibits, if any, filed as a part of this Report: (a) None (b) Pro Forma Financial Information 1. Pro Forma Consolidated Statement of Income for the year ended December 31, 1995. 2. Pro forma Consolidated Statement of Income for the nine months ended September 30, 1996. 3. Pro Forma Consolidated Balance Sheet as of September 30, 1996. 4. Notes to the Pro Forma Consolidated Financial Statements. (c) Exhibits - None SIGNATURE 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 this 14th day of January, 1997. TANDY CORPORATION (Registrant) Date January 14, 1997 By: /s/ Dwain Hughes ------------------------- Dwain H. Hughes Senior Vice President and Chief Financial Officer INDEX TO EXHIBITS Sequential Page Exhibit Description of Exhibit Number - - - - ----------------- --------------------------------------- ------------ (a) None (b) Pro Forma Financial Information (b) 1 Pro Forma Consolidated Statement of 9 Income for the year ended December 31, 1995 (b) 2 Pro Forma Consolidated Statement of 10 Income for the nine months ended September 30, 1996 (b) 3 Pro Forma Consolidated Balance Sheet 11 as of September 30, 1996 (b) 4 Notes to the Pro Forma Consolidated 12 Financial Statements Page 8 of 13 Exhibit (b) 1 Tandy Corporation and Subsidiaries Pro Forma Consolidated Statement of Income For the Year Ended December 31, 1995 (Unaudited) (in thousands, except per Pro Forma share amounts) Historical Adjustments As Reported (Note 1) Pro Forma ----------- ------------ ------------ Net sales and operating $ 5,839,067 $ (1,321,946) $ 4,517,121 revenues Cost of products sold 3,764,884 (1,093,461) 2,671,423 ----------- ------------ ------------ Gross profit 2,074,183 (228,485) 1,845,698 Expenses/(income): Selling, general and 1,646,436 (272,248) 1,374,188 administrative Depreciation and amortization 91,990 (16,198) 75,792 Provision for restructuring 1,100 (1,100) - cost Interest income (42,322) (5,861) (48,183) Interest expense 33,706 (4,094) 29,612 ----------- ------------ ------------ 1,730,910 (299,501) 1,431,409 ----------- ------------ ------------ Income before income taxes 343,273 71,016 414,289 Provision for income taxes 131,299 27,164 158,463 ----------- ------------ ------------ Net income 211,974 43,852 255,826 Preferred dividends 6,537 - 6,537 ----------- ------------ ------------ Net income available to common shareholders $ 205,437 43,852 $ 249,289 =========== ============ ============ Net income available per average common and common equivalent share $ 3.12 $ 3.78 =========== ============ Average common and common equivalent shares outstanding 65,928 65,928 =========== ============ See Accompanying Notes to the Pro Forma Consolidated Financial Statements Page 9 of 13 Exhibit (b) 2 Tandy Corporation and Subsidiaries Pro Forma Consolidated Statement of Income For the Nine Months Ended September 30, 1996 (Unaudited) Pro Forma (in thousands, except per share Historical Adjustments amounts) As Reported (Note 1) Pro Forma ------------ ------------ ----------- Net sales and operating revenues $ 4,234,690 $ (975,508) $ 3,259,182 Cost of products sold 2,784,767 (813,825) 1,970,942 ------------ ------------ ----------- Gross profit 1,449,923 (161,683) 1,288,240 Expenses/(income): Selling, general and 1,230,316 (221,674) 1,008,642 administrative Depreciation and amortization 79,722 (14,816) 64,906 Provision for restructuring 25,500 (25,500) - reserve Impairment of long-lived assets 26,033 (18,534) 7,499 Interest income (10,051) (4,820) (14,871) Interest expense 25,064 (3,435) 21,629 ------------ ------------ ----------- 1,376,584 (288,779) 1,087,805 ------------ ------------ ----------- Income before income taxes 73,339 127,096 200,435 Provision for income taxes 27,238 47,203 74,441 ------------ ------------ ----------- Net income 46,101 79,893 125,994 Preferred dividends 4,775 - 4,775 ------------ ------------ ----------- Net income available to common shareholders $ 41,326 $ 79,893 $ 121,219 ============ ============ =========== Net income available per average common and common equivalent share $ 0.68 $ 2.00 ============ =========== Average common and common equivalent shares outstanding 60,673 60,673 ============ =========== See Accompanying Notes to the Pro Forma Consolidated Financial Statements. Page 10 of 13 Exhibit (b) 3 Tandy Corporation and Subsidiaries Pro Forma Consolidated Balance Sheet September 30, 1996 (Unaudited) (in thousands) Pro Forma Historical Adjustments As Reported (Note 2) Pro Forma ---------- ---------- ----------- Assets Current assets: Cash and short-term investments $ 124,956 $ (12,350) $ 112,606 Accounts and notes receivable, less allowance for doubtful accounts 206,017 78,700 284,717 Inventories, at lower of cost or market 1,671,034 (220,141) 1,450,893 Other current assets 88,473 - 88,473 ---------- ---------- ----------- Total current assets 2,090,480 (153,791) 1,936,689 Property, plant and equipment, at cost, less accumulated depreciation 619,984 (87,135) 532,849 Other assets, net of accumulated amortization 82,192 145,602 227,794 ---------- ---------- ----------- $2,792,656 $ (95,324) $ 2,697,332 ========== ========== =========== Liabilities and Stockholders' Equity Current liabilities: Short-term debt, including current maturities of long-term debt $ 441,570 $ - $ 441,570 Accounts payable 438,813 - 438,813 Accrued expenses 247,609 111,273 358,882 Income taxes payable 55,672 (13,491) 42,181 ---------- ---------- ----------- Total current liabilities 1,183,664 97,782 1,281,446 ---------- ---------- ----------- Long-term debt and capital leases, excluding current maturities 109,071 - 109,071 Other non-current liabilities 20,055 - 20,055 ---------- ---------- ----------- Total other liabilities 129,126 - 129,126 ---------- ---------- ----------- Stockholders' equity: Preferred stock 100,000 - 100,000 Common stock 85,645 - 85,645 Additional paid-in capital 105,212 - 105,212 Retained earnings 2,339,170 (193,106) 2,146,064 Foreign currency translation effects (3,248) - (3,248) Common stock in treasury, at cost (1,093,168) - (1,093,168) Unearned deferred compensation (48,865) - (48,865) Unrealized loss on securities available for sale, net of tax (4,880) - (4,880) ---------- ---------- ----------- Total stockholders' equity 1,479,866 (193,106) 1,286,760 ---------- ---------- ----------- $ 2,792,656 $ (95,324) $ 2,697,332 ========== ========== =========== See Accompanying Notes to the Pro Forma Consolidated Financial Statements. Page 11 of 13 Exhibit (b) 4 Notes to the Pro Forma Consolidated Financial Statements Note 1: To eliminate historical operating results associated with the Incredible Universe, Computer City and Specialty Retail Group, primarily McDuff, operations being exited as if the exit plan had been consummated at the beginning of the year. Results include allocation of interest expense and pro forma interest income on notes receivable relating to the sale of six Incredible Universe stores. Also included are the estimated pro forma tax effects related to the closed operations. Note 2: Pro forma adjustments are discussed below which give effect to the sale of six Incredible Universe operations, the closing of 21 Computer City locations and the discontinuance of the Specialty Retail Group, primarily 53 McDuff stores, as if this portion of the exit plan had been completed as of September 30, 1996. Remaining assets relating to the exit plan have been written down to estimated net realizable value. Cash and short-term investments. Includes payments to satisfy real estate obligations, estimated to aggregate $91,076,000, net of anticipated cash proceeds approximating $25,000,000 on sale of certain Incredible Universe stores. Also includes estimated proceeds of $53,726,000 on liquidation of certain Computer City and McDuff inventories. Adjustments do not give effect to the sale of remaining inventory amounts written down to net realizable value. Accounts and notes receivable, less allowance for doubtful accounts. Represents $78,700,000 in estimated notes receivable relating to sale of inventories of six Incredible Universe locations. These notes are due in equal quarterly installments over a period of one year at an interest rate of 5.91%. Inventories. Represents inventories relating to sale of six Incredible Universe locations and inventories liquidated certain Computer City and McDuff stores, net of reserves required to write down inventories to estimated net realizable value. Remaining inventory amounts are written down to estimated net realizable value and are not assumed to be sold without a firm contractual arrangement for such sale. The inventories are expected to be liquidated by the Company during the six months ended June 30, 1997. Property, plant and equipment, at cost, less accumulated depreciation. Includes fixed assets relating to sale of six Incredible Universe locations and reserves required to write down remaining fixed assets to their estimated net realizable value pursuant to Statement of Financial Accounting Standards No. 121 (FAS 121), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Other assets, net of accumulated amortization. Includes notes receivable of $40,000,000 relating to disposition of real estate, and notes receivable of $5,000,000 relating to non-inventory assets of six Incredible Universe locations. The real estate notes are due in four years at an annual interest rate of 6.57%. Interest is due quarterly with the principal balance due in 2001. The non-inventory notes are due in equal annual installments over a period of five years at an annual interest rate of 6.70%. Also includes long-term portion of deferred taxes on restructuring reserves relating to the exit plan. Accrued expenses. Represents restructuring reserves associated with the Incredible Universe, Computer City and Specialty Retail Group, primarily McDuff, operations. These reserves represent obligations such as lease commitments and severance payments. Income taxes payable. Represents current portion of the estimated tax effect of the exit plan. Retained earnings. Includes reserves for losses (consisting of charges to the restructuring reserve, FAS 121 long lived asset impairment write downs and lower of cost or market write downs of inventory) associated with the Incredible Universe, Computer City and Specialty Retail Group, primarily McDuff, operations being exited, net of estimated income taxes.