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EXHIBIT 12
NEWS RELEASE
CONTACTS:
James E. Skinner
Executive Vice President and CFO
(972) 982-4000
FOR IMMEDIATE RELEASE
Stacie Shirley
Senior Director - Financial Initiatives
(972) 982-5323
COMPUSA INC. REPORTS FINANCIAL RESULTS FOR
THE SECOND QUARTER OF FISCAL 2000
DALLAS, FEBRUARY 1, 2000 -- COMPUSA INC. (NYSE: CPU), America's Largest
Computer Superstore(R) retailer, today announced financial results for the
second quarter ended December 25, 1999.
Excluding the costs associated with the Company's information
technology (IT) initiatives and other non-recurring and transition costs for the
second quarters of fiscal 2000 and fiscal 1999 as described below, the Company
reported net income of $2.8 million, or $0.03 per share, and $15.7 million, or
$0.17 per share, for such fiscal quarters, respectively. The Company's net sales
for the second quarter of fiscal 2000 decreased approximately 21% to $1.38
billion from $1.75 billion for the comparable period ended December 26, 1998,
and comparable store sales for the Company's Retail business for the quarter
decreased 1.8% for the 204 stores open one year or more.
Excluding the costs associated with the Company's IT initiatives and
other non-recurring and transition costs for the first six months of fiscal 2000
and fiscal 1999, the Company reported a net loss of approximately $1 million, or
$0.01 per share, and net income of $23.5 million, or $0.25 per share,
respectively. Net sales decreased approximately 13% to $2.73 billion from $3.13
billion for the first six months of fiscal 1999, and comparable store sales for
the Company's Retail business decreased 1% for the 204 stores open one year or
more.
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The Company incurred certain non-recurring and transition costs in the
first and second quarters of fiscal 2000 primarily related to a company-wide
restructuring and the IT initiatives described below. The Company also incurred
non-recurring costs in the second quarter of fiscal 1999 related to the
Company's acquisition of Computer City. Including these charges, the Company
reported a net loss of $2.0 million, or $0.02 per share, for the second quarter
of fiscal 2000, compared with net income of $12.9 million, or $0.14 per share,
for the second quarter of fiscal 1999. Including these charges, the Company
reported a net loss of $14.9 million, or $0.16 per share, for the first six
months of fiscal 2000, compared with net income of $19.1 million, or $0.21 per
share, for the first six months of fiscal 1999.
The following table summarizes the financial results for the second
quarter of fiscal 2000 and fiscal 1999:
-------------------------------- ---------------------------------
Thirteen weeks ended Thirteen weeks ended
December 25, 1999 December 26, 1998
Pre-tax After-tax Pre-tax After-tax
Income/ Income/ Income/ Income/
(Loss) (Loss) (Loss) (Loss)
(In thousands) (Per Share) (In thousands) (Per Share)
-------------------------------- ---------------------------------
CompUSA "Core" Operating Income $ 21,260 $ 0.14 $25,129 $ 0.17
Non-Recurring/Transition Costs (6,258) (0.04) - -
Information Technology (IT) Initiatives (1,477) (0.01) - -
Non-Recurring Computer City Costs - - (4,587) (0.03)
----------------- -------------- ------------------ --------------
13,525 0.09 20,542 0.14
cozone.com inc. (16,788) (0.11) 428 0.00
----------------- -------------- ------------------- -------------
$ (3,263) $(0.02) $20,970 $ 0.14
================= ============== =================== =============
CompUSA "Core"
CompUSA "Core" represents all CompUSA operations except the Company's
Internet subsidiary, cozone.com inc. This includes Retail, Direct, Training,
Technical Services, Call Center and CompUSA PC(TM) build-to-order businesses.
The Company's "Core" operations experienced a sales decline of
approximately 18% in the second quarter of fiscal 2000 compared with the same
period a year ago, which was primarily due to a decrease in the Company's Direct
sales business. Direct sales in the second quarter of fiscal 2000 decreased 59%
to $218 million compared with the same period a year ago.
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The decrease was primarily a result of reducing or eliminating sales to
customers that did not meet certain profitability objectives and the
consolidation of the Direct sales organization to a regional sales force with
centralized sales support. Sales for the related Technical Services and Training
businesses also declined as a result of these changes. Technical Services sales
and Training sales decreased 15% to $30 million and 37% to $17 million,
respectively, from the comparable period a year ago.
Offsetting the impact of the sales decline was a significant increase
in the Company's "Core" gross margin percentage achieved as a result of
implementing its new operating strategy. The strategy included restructuring the
Direct sales business as explained above, and increasing the retail product
margins by reducing promotional efforts and emphasizing higher-margin product
categories such as notebook computers, cameras, and video games. These changes
contributed to the increase of gross margins for CompUSA "Core" operations to
16.3% for the second quarter of fiscal 2000, from 13.6% for the second quarter
of fiscal 1999.
Non-Recurring / Transition Costs
In connection with the implementation of the new operating strategy,
the Company recorded approximately $6.3 million of non-recurring and transition
costs in the second quarter of fiscal 2000. These costs were recorded primarily
in operating expenses.
IT Initiatives
The Company is implementing an IT strategy to establish a more
efficient platform for its future operations. The strategy primarily includes
the implementation of the SAP(TM) Retail(TM) Enterprise Resource Management
program. The implementation of the strategy resulted in costs of approximately
$1.5 million in the second quarter of fiscal 2000.
cozone.com
In the second quarter of fiscal 2000, the Company launched its website,
cozone.com. Sales for cozone.com's second quarter of fiscal 2000 were $7.5
million and gross margins were 8.6%. The sales results at cozone.com were below
the Company's expectations and the Company is reevaluating the role of
cozone.com in the Company's overall e-Commerce strategy.
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ABOUT COMPUSA INC.
CompUSA Inc. (www.compusa.com) is one of the nation's leading retailers
and resellers of personal computers and related products and services. The
Company currently operates 217 CompUSA Computer Superstores in 84 major
metropolitan markets across the United States that serve retail, corporate,
government and education customers and include technical service departments.
Many of these stores also include classroom training facilities. CompUSA also
offers its own build-to-order personal computer series, the CompUSA PC.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements about the
business, financial condition, and prospects of the Company. The actual results
of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties, including
without limitation changes in product demand, the availability of products,
changes in competition, economic conditions, various inventory risks due to
changes in market conditions and other risks indicated in the Company's
Securities and Exchange Commission filings and reports. The Company's focus on
its Internet business through its cozone.com subsidiary involves significant
additional risks, including without limitation failure to achieve customer
acceptance and potential significant capital investments that may be required to
be made by the Company. Moreover, the Company's IT and other strategic
initiatives involve significant additional risks that are difficult to quantify,
and if the events constituting such risks occur, they could have material
adverse consequences for the Company. Many of the foregoing risks and
uncertainties are beyond the ability of the Company to control, and in many
cases, the Company cannot predict the risks and uncertainties that could cause
its actual results to differ materially from those indicated by the
forward-looking statements. When used in this news release, the words
"believes," "anticipates," "expects," "plans" and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements.
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COMPUSA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------------------------------------------------------
DECEMBER 25, DECEMBER 26, DECEMBER 25, DECEMBER 26,
1999 1998 1999 1998
--------------------------------------------------------------------
Net sales ......................... $ 1,383,738 $ 1,753,776 $ 2,730,984 $ 3,129,215
Cost of sales and occupancy costs . 1,158,619 1,519,273 2,302,469 2,702,096
--------------------------------------------------------------------
Gross profit ...... 225,119 234,503 428,515 427,119
Operating expenses ................ 169,165 169,595 341,023 315,259
Pre-opening expenses .............. 915 2,095 2,594 3,461
General and administrative expenses 52,385 38,358 99,134 70,995
Restructuring charge .............. (397) -- (2,573) --
--------------------------------------------------------------------
Operating income (loss) . 3,051 24,455 (11,663) 37,404
Other expense (income):
Interest expense .......... 6,442 6,989 13,194 11,372
Other income, net ......... (128) (3,504) (942) (5,044)
--------------------------------------------------------------------
6,314 3,485 12,252 6,328
--------------------------------------------------------------------
Income (loss) before income taxes . (3,263) 20,970 (23,915) 31,076
Income tax expense (benefit) ...... (1,225) 8,101 (8,969) 11,975
--------------------------------------------------------------------
Net income (loss) ...... $ (2,038) $ 12,869 $ (14,946) $ 19,101
====================================================================
Basic earnings (loss) per share ... $ (0.02) $ 0.14 $ (0.16) $ 0.21
Diluted earnings (loss) per share . $ (0.02) $ 0.14 $ (0.16) $ 0.21
Weighted average common shares .... 92,694 91,408 92,697 91,325
====================================================================
Weighted average common shares
assuming dilution ....... 92,694 92,834 92,697 92,938
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COMPUSA INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
DECEMBER 25, DECEMBER 26,
1999 1998
---------------- ------------
ASSETS
Current assets:
Cash and cash equivalents ................. $ 204,914 $ 402,899
Accounts receivable, net .................. 143,036 254,988
Merchandise inventories ................... 736,181 815,825
Deferred income taxes ..................... 35,158 13,720
Prepaid expenses and other ................ 12,214 22,225
---------------- ----------
Total current assets ............. 1,131,503 1,509,657
---------------- ----------
Property and equipment, net ........................ 286,607 232,860
Deferred income taxes .............................. 30,299 23,622
Costs in excess of net assets of acquired businesses 100,801 91,390
Other assets ....................................... 8,917 5,990
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$ 1,558,127 $1,863,519
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LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .......................... $ 741,954 $ 958,363
Accrued liabilities ....................... 195,490 196,702
Deferred revenue .......................... 21,814 21,430
---------------- ----------
Total current liabilities ........ 959,258 1,176,495
---------------- ----------
Deferred revenue ................................... 27,333 24,395
Long-term debt ..................................... 236,000 246,633
Total stockholders' equity ......................... 335,536 415,996
---------------- ----------
$ 1,558,127 $1,863,519
================ ==========