ITEM 1. BUSINESS.
GENERAL The Company engages in the retail sale of consumer electronics including personal computers primarily in the United States. The Company's retail operations include the Radio Shack, McDuff Electronics, VideoConcepts, The Edge in Electronics, Computer City and Incredible Universe store chains as well as some new concepts which it is testing. These new test concepts are Famous Brand Electronics Warehouse, Energy Express Plus and Audio Video & Computers.
Radio Shack. Radio Shack is the Company's largest operating division. At December 31, 1993, Radio Shack had 4,553 company-owned stores located throughout the United States. These stores average approximately 2,370 square feet in area and are located in major malls, strip centers and individual store fronts, primarily in metropolitan markets. To provide service to smaller communities, Radio Shack had on the same date a network of 2,002 dealer/franchise stores. The dealers are generally engaged in other retail operations and augment their sales with Radio Shack products. In addition, Radio Shack had 65 international dealers at December 31, 1993.
The 4,553 company-owned stores carry a broad assortment of electronic parts and accessories, audio/video equipment, cellular and conventional telephones as well as specialized products such as scanners, electronic toys and personal computers. The personal computers offered through these consumer stores primarily target entry level users seeking computers for home, individual and small business use.
Tandy Name Brand Retail Group. The Tandy Name Brand Retail Group is comprised of VideoConcepts, McDuff Electronics and The Edge in Electronics retail outlets. At December 31, 1993, this group operated a total of 322 stores which sell name brand televisions, audio equipment, personal computers and other electronic products and appliances.
The Tandy Name Brand Retail Group operates two distinctly different types of store formats -- mall stores and supercenters. The 231 mall stores average 3,100 square feet in size while the 75 supercenters, which are located in stand-alone or strip center locations, average 12,200 square feet. Mall stores sell primarily electronic, audio and video products. The supercenter product offerings also include major appliances.
The Company closed approximately 110 Tandy Name Brand Retail Group stores in the first quarter of 1993. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" found in Item 7 and Note 4 of the Notes to Consolidated Financial Statements for more information.
"The Edge in Electronics" began operating in 1990. This chain of electronic boutique stores is designed for mall customers interested in fashionable personal and portable name brand electronics. As of December 31, 1993, these 16 stores were located in major malls and averaged approximately 1,100 square feet.
Computer City. As of December 31, 1993, the Company had 40 Computer City stores open, three of which were in Europe. The Computer City chain operates as a supercenter format featuring many name brand computers, software and related products, including U. S. Logic, Tandy, IBM, Apple, Sony, Lotus, Borland, Microsoft, Packard-Bell, Compaq, AST and Hewlett-Packard. These stores average about 23,500 square feet and carry more than 5,000 products. The Company has opened two new stores since December 31, 1993 and plans to open an additional 22 stores later in 1994.
Incredible Universe. In August 1993 Incredible Universe became a separate division of Tandy. At December 31, 1993, Tandy operated three Incredible Universe stores: one in Portland, Oregon; a second in Arlington, Texas; and a third store located in northeast Dallas, Texas. These 160,000 to 200,000 square foot stores offer a broad selection of consumer electronics and appliances. The Company recently opened its fourth store in Miami, Florida, and announced plans to open stores in Tempe, Arizona; Columbus, Ohio; Sacramento, California and Hollywood, Florida. In addition, more Incredible Universe stores are currently planned for 1994 and 1995.
Supporting the retail operations is an extensive infrastructure that includes:
A&A International, Inc. - This wholly owned subsidiary of the Company serves the wide-ranging international import/export, sourcing, evaluation, logistics and quality control needs of the Company. InterTAN Inc. is the largest outside customer of the Company. Most of A&A's activity for InterTAN originates from manufacturers in the Far East. For more discussion on InterTAN see Note 21 of the Notes to Consolidated Financial Statements.
Tandy Service Centers - The Company maintains a large service and support network in the consumer electronics retail industry. These centers repair name brand and private label products sold through all of the Company's retail distribution channels. Over one million parts are stocked in the Tandy Service division which includes 116 service centers throughout the nation.
Regional Distribution Centers - The 14 distribution centers ship over one million cartons each month to both Radio Shack and the Tandy Name Brand Retail Group operations. This group will also be instrumental in supporting the new Radio Shack Gift Express service.
Tandy Information Services - TIS collects information from the retail stores nationwide and updates a large database with sales information. This database is a sophisticated marketing tool benefiting every phase of the Company's operations. TIS also processes the inventory, accounting, payroll, telecommunications and operating information for all of the Company's operations. In addition, specialized information is tracked for the Company's distribution and corporate activities.
Tandy Credit Corporation - This operation, a wholly owned subsidiary of the Company, helps support sales of the Company's retail operations and provides retail divisions additional marketing flexibility through the utilization of credit promotions. This group maintains and manages Tandy's various private label credit cards.
Tandy Transportation, Inc. - A large fleet of tractors and trailers transports much of the merchandise from the ports of entry to the Company's regional distribution centers and local distribution facilities for delivery to Radio Shack and Tandy Name Brand Retail Group stores.
Consumer Electronics Manufacturing - The Company also engages in the manufacturing business with 11 manufacturing facilities in the United States and three overseas manufacturing operations in China, Hong Kong and Taiwan. The China operation is a joint venture. These 14 manufacturing facilities cover a total of 1,674,000 square feet and employ over 4,700 workers and professionals as of December 31, 1993, excluding those persons working at facilities included in discontinued operations. The Company continues to manufacture a variety of products for use in its consumer electronics retailing operations. The products include audio, video, telephony, antennas, wire and cable products and a wide variety of hard to find parts for consumer electronic products. Most of the Company's manufacturing output is sold through the Radio Shack store chain. In addition, the Company has previously operated several related marketing businesses that manufacture and sell consumer electronics and computers to retailers and end users, see "Discontinued Operations" below for further information.
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. ready-to-assemble furniture manufacturing and related marketing business, the Memtek Products division and the Lika printed circuit board business. The divestiture plan replaced the Company's plan to spin off all of the Company's manufacturing and marketing businesses as described in Tandy's Transition Report on Form 10-K/A-4 for the six-month period ended December 31, 1992. In connection with the plan of divestiture the Company accounted for the divestiture of these businesses as discontinued operations. Prior year results of operations have been reclassified to reflect the discontinued operations treatment.
Computer Manufacturing. In furtherance of the divestiture plan, the Company closed the sale of the computer manufacturing and marketing businesses to AST Research, Inc. ("AST") on July 13, 1993. In accordance with the terms of the definitive agreement between Tandy and AST, Tandy received $15,000,000 upon closing of the sale. The balance of the purchase price of $90,000,000 (as adjusted post-closing based on the results of an audit of the assets and liabilities conveyed) is payable by a promissory note. The promissory note is payable in three years and interest is accrued and paid annually. The interest rate on the promissory note is currently 3.75% per annum and is adjusted annually, not to exceed 5% per annum. The terms of the promissory note stipulate that the outstanding principal balance may be paid at maturity at AST's option in cash or the common stock of AST. However, at Tandy's option not more than 50% of the initial principal balance may be paid in common stock of AST. The promissory note is supported by a standby letter of credit in the amount of the lesser of $100,000,000 or 70% of the outstanding principal amount of the promissory note. At December 31, 1993, the standby letter of credit approximated $67,704,000. Accounts receivable relating to the computer operations, approximating $83,000,000 at June 30, 1993, inured to the benefit of Tandy upon collection. At December 31, 1993, the balance of the remaining accounts receivable, net of allowance for doubtful accounts, was $7,700,000. Tandy also retained certain inventory which it intends to liquidate before June 30, 1994. At December 31, 1993, this inventory amounted to approximately $3,700,000.
In October 1993, the Company sold its computer marketing operations in France to AST, together with certain other multimedia assets and additional Swedish inventory, for an aggregate of approximately $6,700,000, which was evidenced by an increase in the amount of the promissory note described above to $96,700,000. The Company has discounted this note by $2,000,000 and the discount will be recognized as interest using the effective interest rate method over the life of the note.
Memtek Products. On November 10, 1993, the Company executed a definitive agreement with Hanny Magnetics (B.V.I.) Limited, a British Virgin Islands corporation ("Hanny") to purchase certain assets of the Company's Memtek Products operations, including the license agreement with Memorex Telex, N.V. for the use of the Memorex trademark on licensed consumer electronics products. This sale closed on December 16, 1993. As of December 31, 1993, Tandy has received payments of $62,500,000, recorded a $7,102,000 receivable from Hanny for the remaining purchase price and retained approximately $61,000,000 in accounts receivable and certain other assets for liquidation. Hanny is a subsidiary of Hanny Magnetics (Holdings) Limited, a Bermuda corporation, listed on the Hong Kong Stock Exchange. At December 31, 1993, accounts receivable, net of related allowance for doubtful accounts, retained by Tandy approximated $40,100,000.
O'Sullivan Industries. On November 23, 1993, the Company announced that it would sell the common stock of O'Sullivan Industries, Inc. ("O'Sullivan") in an initial public offering. On January 27, 1994 the Company announced that it had reached an agreement with the underwriters to sell O'Sullivan Industries Holdings, Inc., the parent company of O'Sullivan, common stock to the public at $22 per share. The net proceeds realized by Tandy in the initial public offering, together with the $40,000,000 cash dividend from O'Sullivan Industries, Inc., approximated $350,000,000. The initial public offering closed on February 2, 1994.
Pursuant to a Tax Sharing and Tax Benefit Reimbursement Agreement between Tandy and O'Sullivan Industries Holdings, Inc. the Company will receive payments from O'Sullivan resulting from an 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 time period. The Company will 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 January 24, 1994, the Company announced that it had signed a definitive agreement to sell its manufacturing facilities which make Lika printed circuit boards. This divestiture is expected to close by June 1994 and is expected to yield approximately $17,000,000 in proceeds, including cash, a note and the liquidation of certain retained assets.
In connection with the computer manufacturing sale and the Memtek Products sale, the Company agreed to retain certain liabilities primarily relating to warranty obligations on products sold prior to the sale. Management believes that accrued reserves, as reflected on its December 31, 1993 balance sheet, are adequate to cover estimated future warranty obligations for the products and for any remaining costs to dispose of these operations.
With the closing of the Lika transaction, the divestiture program announced in June 1993 will be complete. The proceeds from the divestitures are being used to reduce short-term debt and for the expansion of the Incredible Universe and Computer City store operations. See "Management's Discussion and Analysis of Results of Operations and Financial Condition" and Note 3 of the Notes to Consolidated Financial Statements for further information.
SALE OF JOINT VENTURE INTEREST During the quarter ended September 30, 1993, the Company entered into definitive agreements with Nokia Corporation ("Nokia") to sell the Company's interests in two cellular telephone manufacturing joint ventures with Nokia, TMC Company Ltd. located in Masan, Korea, and TNC Company located in Fort Worth, Texas. Pursuant to the terms of the definitive agreements, the Company received an aggregate of approximately $31,700,000 for its interests in these joint ventures. The Company also entered into a three-year Preferred Supplier Agreement pursuant to which it has agreed to purchase from Nokia substantially all of Radio Shack's requirements for cellular telephones at prevailing competitive market prices at the time of the purchase. These operations were not part of the overall divestment plan adopted in June 1993 by the Company's Board of Directors; therefore, the gain from the sale and their results of operations are not included in discontinued operations.
SEASONALITY As is the case with other retail businesses, the Company's net sales and other revenues are greater during the Christmas season than during other periods of the year. There is a corresponding pre-seasonal inventory build-up requiring working capital associated with this increased sales volume. For additional information, see Note 22 of the Notes to Consolidated Financial Statements.
PATENTS AND TRADEMARKS Tandy owns or is licensed to use many trademarks related to its business in the United States and in foreign countries. Radio Shack, Computer City, Incredible Universe, McDuff Electronics, VideoConcepts, Realistic, Tandy and Optimus are some of the registered marks most widely used by the Company. Tandy believes that the Radio Shack, Computer City and Incredible Universe names and marks are well-recognized and associated with a high-quality service provider by consumers. The Company's products are sold primarily under the Radio Shack, Optimus, Tandy and Realistic trademarks which are registered in the U.S. and many foreign countries. The Company believes that the loss of the Radio Shack name or mark would be material to its business, but does not believe that the loss of any one trademark registration would be material.
Tandy also owns, and is in the process of applying for, various patents relating to retail and support functions.
SUPPLIERS The Company obtains merchandise from a large number of suppliers from various parts of the world. Alternative sources of supply exist for most merchandise purchased by the Company. As the Company's product line is diverse, the Company would not expect a lack of availability of any single product to have a material impact on its operations.
BACKLOG ORDERS The Company has no material backlog of orders for the products it sells.
COMPETITION The consumer electronics retail business is highly competitive. The Company competes in the sale of its products with department stores, mail order houses, discount stores, general merchants, home appliance stores and gift stores which sell comparable products manufactured by others. Competitors range in size from local drug and hardware stores to large chains and department stores. Computer store chains and franchise groups as well as independent computer stores and several major retailers compete with the Company in the retail personal computer marketplace. Consumer electronic and computer mail-order companies also compete with the Company. The products which compete with those sold by the Company are manufactured by numerous domestic and foreign manufacturers. Many of these products carry nationally recognized brand names or private labels and are sold in markets common to the Company. Some of the Company's competitors have financial resources equal to or greater than the Company's resources.
Management believes that among the factors that are important to its competitive position are price, quality, service and the broad selection of electronic products and computers carried at conveniently located retail outlets. The Company's utilization of trained personnel and its ability to use national and local advertising media are important to the Company's ability to compete in the consumer electronics marketplace. Management of the Company believes it is a strong competitor in each of the factors referenced above. Given the highly competitive nature of the consumer electronics retail business, no assurance can be given that the Company will continue to compete successfully in all of the factors referenced above. However, the Company would be adversely affected if its competitors were to offer their products at significantly lower prices, introduce innovative or technologically superior products not yet available to the Company or if the Company were unable to obtain products in a timely manner for an extended period of time.
The Company focuses on various types of store formats to address the marketplace. Each of the Company's retailing formats uses a distinct but complementary path to the marketplace, based on its unique customer appeal, marketing strengths and margin structure.
Radio Shack. Radio Shack stores offer the shopping convenience of approximately 6,555 outlets, high-quality private label products, unique selection, knowledgeable personnel and excellent customer service. Radio Shack has strong sales in approximately 3,200 different items in such consumer-demand product categories as speakers, batteries, communications equipment, tape decks, antennas, electronic components and accessories.
Computer City. Computer City stores offer approximately 5,000 different name-brand items, competitive prices and excellent customer service on computers, computer software and accessories.
Tandy Name Brand Retail Group. This group sells name brand consumer electronics and appliances in three distinctly different types of store formats. VideoConcepts and McDuff Electronics mall stores average approximately 3,100 square feet in size. McDuff SuperCenters average approximately 12,200 square feet and are located in many secondary markets. The Edge in Electronics stores average approximately 1,100 square feet in size, carry approximately 1,000 different name brand personal and portable consumer electronics products and are located in major markets.
Incredible Universe. A new concept in the retailing of name brand consumer electronics are 160,000 to 200,000 square foot stores which provide the customer with a "universe" of choices. These stores carry over 85,000 different stock-keeping units.
The Company has faced intense competition in its consumer electronics retailing businesses. Competition is driven by technology and product cycles, as well as the economy. In the consumer electronics retailing business, competitive factors include price, product quality, manufacturing and distribution capability and brand reputation. The Company believes that its retailing formats compete effectively in their respective marketplaces.
RESEARCH AND DEVELOPMENT Research and development expenditures are not significant.
EMPLOYEES As of December 31, 1993, the Company had approximately 42,000 employees, excluding 2,000 full time employees associated with discontinued operations at O'Sullivan and Lika. The number also excludes temporary retail employees remaining from the Christmas selling season. Management of the Company considers the relationship between the Company and its employees to be good. It does not anticipate any work stoppage due to labor difficulties.
ITEM 2.


ITEM 2. PROPERTIES.
Information on the Company's properties is in "Management's Discussion and Analysis of Results of Operations and Financial Condition" and the financial statements included in this Form 10-K and is incorporated herein by reference. The following items are discussed further on the following pages:
Page Retail Outlets . . . . . . . . . 16 Property, Plant and Equipment. . 43 Leases . . . . . . . . . . . . . 47
The Company leases rather than owns most of its retail facilities. However, the land and buildings of most of the Incredible Universe stores are owned rather than leased. The Radio Shack, Tandy Name Brand Retail Group and Computer City stores are located primarily in major shopping malls, stand-alone buildings or shopping centers owned by other companies. The Company owns most of the property on which its executive offices are located in Fort Worth, Texas as well as five distribution facilities and most of its manufacturing facilities and land located throughout the United States. Existing warehouse and office facilities are deemed adequate to meet the Company's needs in the foreseeable future.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
In July 1985, Pan American Electronics, Inc., a Radio Shack dealer in Mission, Texas ("Pan Am"), filed suit against the Company in the 92nd Judicial District Court in Hidalgo County, Texas. The Plaintiff's complaint alleged breach of contract and fraud based upon the allegations that the Company made certain misrepresentations and acted beyond the scope of its authority under the dealer agreement, with the alleged result that the plaintiff was forced out of the computer mail order business in 1984. In November 1993, Pan Am and Tandy resolved the pending litigation and the lawsuit was dismissed in December 1993. Although the terms of the settlement are confidential, the resolution of this legal action did not have a materially adverse impact on the Company's financial position or results of operation.
There are various other claims, lawsuits, disputes with third parties, investigations and pending actions involving allegations of negligence, product defects, discrimination, patent infringement, tax deficiencies and breach of contract 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 December 31, 1993. 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 Tandy's financial position.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders held October 15, 1993, the Company elected directors to serve for the ensuing year and voted to adopt the Tandy Corporation 1993 Incentive Stock Plan. Out of the 80,915,627 eligible votes, 63,361,775 votes were cast at the meeting either by proxies solicited in accordance with Schedule 14A or by security holders voting in person. There were 9,890,351 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. No other matters were voted on at the meeting. The tabulation of votes for each nominee is set forth below under Item No. 1 and the vote on the Tandy Corporation 1993 Incentive Stock Plan is set forth under Item No. 2 below:
Nominees for Directors ______________________
Item No. 1 __________ VOTES VOTES DIRECTORS FOR WITHHELD _________ _____ ________
James I. Cash, Jr. 62,626,072 735,703 Caroline R. Hunt 62,588,534 773,241 Lewis F. Kornfeld, Jr. 62,507,688 854,087 Jack L. Messman 62,848,102 513,673 William G. Morton, Jr. 62,606,784 754,991 Thomas G. Plaskett 62,216,712 1,145,063 John V. Roach 62,391,582 970,193 William T. Smith 62,598,399 763,376 Alfred J. Stein 62,569,000 792,775 William E. Tucker 62,627,905 733,870 Jesse L. Upchurch 62,792,385 569,390 John A. Wilson 62,679,493 682,282
1993 Incentive Stock Plan _________________________
Item No. 2 __________
FOR AGAINST ABSTAIN ___ _______ _______
52,196,098 10,338,869 826,808
EXECUTIVE OFFICERS OF THE REGISTRANT (SEE ITEM 10 OF PART III). The following is a list of Tandy Corporation's executive officers, their ages, positions and length of service with the Company as of March 30, 1994
Position (Date Elected Years with Name to Current Position) Age Company ____ ____________________ ___ __________
John V. Roach Chairman of the Board, 55 26 Chief Executive Officer and President (July 1982)
William C. Bousquette Executive Vice President 57 3 (1) and Chief Financial Officer (January 1994)
Herschel C. Winn Senior Vice President and 62 25 Secretary (November 1979)
Robert M. McClure Senior Vice President 58 21 (2) (January 1994)
Lou Ann Blaylock Vice President - 55 23 (3) Corporate Relations (January 1993)
Dwain H. Hughes Vice President and 46 14 (4) Treasurer (June 1991)
Ronald L. Parrish Vice President - 51 7 Corporate Development (April 1987)
Richard L. Ramsey Vice President and 48 27 Controller (January 1986)
Frederick W. Padden Vice President - Law 61 3 (5) and Assistant Secretary (January 1994)
Leonard H. Roberts President of Radio Shack 45 (6) (July 1993)
David M. Thirion Vice President - 46 17 (7) Retail Services (January 1993-August 1993)
James B. Sheets Vice President - Legal 42 17 (8) (January 1993-December 1993) and Assistant Secretary (November 1986-December 1993)
Bernie S. Appel Senior Vice President, 61 33 (9) Tandy Corporation and Chairman, Radio Shack Division (January 1992- March 1993)
There are no family relationships among the executive officers listed and there are no arrangements or understandings pursuant to which any of them were appointed as executive officers. All executive officers of Tandy Corporation are elected by the Board of Directors annually to serve for the ensuing year, or until their successors are elected. All of the executive officers listed above have served the Company in various capacities over the past five years, except for Mr. Bousquette, Mr. Padden and Mr. Roberts.
(1) Mr. Bousquette previously served as Executive Vice President and Chief Financial Officer of the Company from November 1990 until January 1993 when he was elected as Chief Executive Officer of TE Electronics Inc. Prior to joining Tandy, he served as Executive Vice President and Chief Financial Officer of Emerson Electric Company from March 1984 until November 1990.
(2) Mr. McClure served as President of the Tandy Electronics Division from August 1987 until January 1993 when he was elected as Chief Operating Officer and President of TE Electronics Inc.
(3) Mrs. Blaylock was Director of Corporate Relations from January 1986 until she was elected Vice President - Corporate Relations in January 1993.
(4) Mr. Hughes was elected Vice President and Treasurer of the Company in June 1991. From June 1989 until June 1991, Mr. Hughes was Assistant Treasurer of the Company; and, from 1984 until June 1989, he was Director of the Company's Internal Audit Department.
(5) Mr. Padden has been Vice President, General Counsel and Secretary of TE Electronics Inc. since January 1993. From January 1991 to January 1993 he was the Deputy General Counsel - Intellectual Property for Tandy Corporation. Prior to joining Tandy he was a General Attorney at AT&T-Bell Laboratories from 1984 to January 1991.
(6) Mr. Roberts became President of the Radio Shack Division on July 7, 1993. Prior to joining Tandy he served as the Chairman and Chief Executive Officer of Shoney's Inc. from 1990 to 1993 and as President and Chief Executive Officer of Arby's, Inc. from 1985 to 1990.
(7) Mr. Thirion resigned as the Vice President - Retail Services in August 1993 to become the Senior Vice President and General Manager of the Tandy Name Brand Retail Group Division. Mr. Thirion was Vice President of the Radio Shack Division from January 1989 until January 1993.
(8) Mr. Sheets served as Assistant Secretary of the Company, a position he was elected to in November 1986. Mr. Sheets also served as Deputy General Counsel - Corporate from November 1986 until he was elected Vice President - Legal in January 1993. Mr. Sheets resigned effective December 31, 1993.
(9) Mr. Appel was President of the Radio Shack Division from June 1984 until January 1992. In January 1992 Mr Appel was appointed as the Senior Vice President of Tandy Corporation and Chairman of the Radio Shack division. Mr. Appel resigned as an executive officer of the Company on March 1, 1993 and retired as an employee of Tandy on June 30, 1993.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET FOR COMMON STOCK The Company's common stock is listed on the New York Stock Exchange and trades under the symbol "TAN". The following table presents the high and low sale prices for the Company's common stock for each quarter of the two and one-half years ended December 31, 1993.
Dividends Quarter Ended: High Low Close Declared ____ ___ _____ _________
December 31, 1993 $50 3/4 $35 3/8 $49 1/2 $.15 September 30,1993 37 3/8 28 1/8 36 7/8 .15 June 30, 1993 32 3/8 28 3/8 30 .15 March 31, 1993 32 1/8 24 5/8 29 5/8 .15 December 31, 1992 31 3/4 24 5/8 29 3/4 .15 September 30,1992 27 3/4 22 1/4 27 1/8 .15 June 30, 1992 29 5/8 23 7/8 24 1/2 .15 March 31, 1992 31 1/4 23 7/8 29 3/4 .15 December 31, 1991 30 1/8 24 3/8 28 7/8 .15 September 30, 1991 28 3/4 23 3/8 28 3/8 .15
HOLDERS OF RECORD At March 22, 1994 there were 35,227 holders of record of the Company's common stock.
DIVIDENDS The Board of Directors periodically reviews the Company's dividend policy. The quarterly dividend rate is currently $.15.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED SUPPLEMENTAL FINANCIAL DATA (UNAUDITED) TANDY CORPORATION AND SUBSIDIARIES
(1) The Company changed its fiscal year end from a June 30 to a December 31 year end effective with the six month transition period ended December 31, 1992. (2) See Note 2 of the Notes to Consolidated Financial Statements for a discussion of the change in accounting principles. (3) Income (loss) per share amounts and average common and common equivalent share amounts for the six months ending December 31, 1992 and fiscal 1992 have been retroactively restated to reflect the assumption that the Series C PERCS would convert into 12,457,100 common shares in lieu of the previously used conversion amount of 15,000,000 common shares based upon the Company's December 31, 1993 closing price of its common stock of $49.50 per share. See Note 2 of the Notes to Consolidated Financial Statements. (4) Computed using income from continuing operations. (5) Includes investment in discontinued operations. (6) At December 31, 1993, December 31, 1992 and June 30, 1992, computed assuming the Series C PERCS will convertinto 12,457,100 shares of common stock.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
Tandy Corporation ("Tandy" or the "Company") changed its fiscal year end from June 30 to December 31 effective December 31, 1992.
The following Management's Discussion and Analysis of Results of Operations and Financial Condition compares the full calendar year ended December 31, 1993 with the full fiscal years ended June 30, 1992 and 1991. Although these twelve-month periods end at different times, management believes that the seasonality of the retail business relating to Christmas is so significant that it would distort trends and related percentage comparisons to sales for the readers if a full year's results were compared to the six-month transition period ended December 31, 1992.
NET SALES AND OPERATING REVENUES For the year ending December 31, 1993, overall sales grew 12% to $4,102,551,000 as compared to $3,649,284,000 for the fiscal year ending June 30, 1992. This increase was primarily due to the opening of three Incredible Universe stores and the expansion of the Computer City chain. On a comparable store basis, Radio Shack's sales increased slightly during the year ended December 31, 1993 as compared to the fiscal year ended June 30, 1992. A moderate increase in sales of Radio Shack's core business (i.e., consumer electronics and accessories) was offset by a decline in sales of personal computers through the Radio Shack division.
The decrease in Radio Shack's computer business reflects the impact of sharply lower pricing in response to competitive pressures in the marketplace. The changing dynamics of the personal computer business has had a significant impact on Radio Shack's performance during fiscal years 1993, 1992 and 1991. A combination of shifts in retail distribution to super stores and telemarketing combined with rapidly declining prices has taken the computer category from approximately 17.0% of Radio Shack's sales with a gross profit of 29.0% in the year ended June 30, 1992 to approximately 14.2% of sales and a gross profit of 15.2% for the year ended December 31, 1993. Radio Shack's extensive assortment of electronic parts, accessories and specialty items differentiates it from other consumer electronics retailers in the marketplace. The table below shows the breakdown by major category of Radio Shack sales.
The decline in Radio Shack's computer sales has been offset by sales of the Computer City chain. The Computer City chain opened its 40th supercenter in December 1993, approximately two years after its initial launching of eight stores. Computer City's sales increases were the result of 25 additional stores since June 30, 1992 and comparable store sales gains at old stores in excess of 30% for the year ended December 31, 1993.
The Name Brand Retail Group experienced a sales decrease in calendar 1993 as compared to the June 1992 fiscal year. This decrease was primarily a result of the closing of 110 McDuff and VideoConcepts stores in February 1993. This decline was offset in part by the addition of three Incredible Universe stores. The first two Incredible Universe stores were opened in the fall of 1992 with the third having been added in the fall of 1993.
Shipments to InterTAN Inc. decreased for calendar year 1993 as compared to the fiscal year ended June 30, 1992. See the discussion in the "InterTAN Update" found on page 23.
For the six-month period ending December 31, 1992, net sales and operating revenues increased 6.4% to $2,161,149,000. This increase was primarily due to the opening of two Incredible Universe stores and expansion of the Computer City chain. Comparable store sales were essentially even with the six-month period ended December 31, 1991.
The change in the Company's sales in the fiscal years ended June 30, 1992 and 1991 reflected a continued adverse product cycle in consumer electronics, a weak economy and widespread price cutting in the personal computer market. Sales through all retail stores increased 3.2% in the fiscal year ended June 30, 1992 as compared with fiscal 1991.
The increase in sales in the fiscal year ended June 30, 1992 was primarily due to new store expansions. During fiscal 1992, 15 Computer City stores, 34 McDuff and VideoConcepts stores and seven of The Edge in Electronics stores were opened. On a company-wide basis, comparable store sales declined 1% in fiscal 1992 following a similar decline in the prior year. Comparable store sales increased slightly at Radio Shack in fiscal 1992 due to the continued strengthening of its electronics parts, accessories and specialty items business. This increase more than offset a decline in Radio Shack's computer business which was impacted significantly by extensive price cutting in the marketplace. Comparable store sales of the McDuff and VideoConcepts stores were down 10% in fiscal 1992 as compared to fiscal 1991, reflecting intense competitive pressures in name brand electronics retailing.
To address the pricing and distribution shifts in computer retailing, the Computer City chain of super stores was launched in October 1991 (fiscal year ended June 30, 1992). The Computer City format is designed to sell high volumes of well known name brand personal computers and related products at discount prices.
Though in operation for only the last seven months of fiscal 1992, Computer City's sales more than offset the decline in the Company's U.S. computer sales through Radio Shack and direct sales. As of June 30, 1992, 15 Computer City stores were in operation, 13 in the U.S. and two in Europe.
GROSS PROFIT Gross profit as a percent of sales and operating revenues for the year ended December 31, 1993 was 41.9% as compared to 43.5% for the six months ended December 31, 1992, 47.2% for the fiscal year ended June 30, 1992 and 48.7% for the fiscal year ended June 30, 1991. The decline, in part, reflects the faster growth of new high-volume formats such as Computer City and Incredible Universe with inherently lower gross margins than Radio Shack stores. The Company expects this trend to continue as sales at Incredible Universe and Computer City increase. Combined Computer City and Incredible Universe sales contributed 18.6%, 8.9% and 2.6% to consolidated sales in the fiscal year ended December 31, 1993, the six months ended December 31, 1992 and the fiscal year ended June 30, 1992, respectively. The 5.3% decline in gross profit percent from fiscal 1992 reflects the growth of the newer retail businesses. Management expects the long-term impact of accelerated growth for its new businesses to result in a lower consolidated gross margin as a percent of sales and operating revenues.
In addition to the increasing effect of the lower gross margin businesses, Radio Shack's gross margin has trended down during the fiscal years ended December 31, 1993 and June 30, 1992 and 1991 because of a decline in computer margins resulting from more competitive pricing. In the absence of any additional major decreases in computer retail prices in the industry, management believes this decline in Radio Shack's gross margin will diminish during 1994. Partially offsetting the decline were increased sales of high-margin electronic parts, accessories and specialty items sold through Radio Shack. In management's opinion, new concepts which could increase Radio Shack gross margins include introducing the Radio Shack Gift Express program, creating new store formats and the launching of The Repair Shop at Radio Shack, a name brand out-of-warranty repair program. Competitive pressures in name brand electronics retailing decreased McDuff's and VideoConcepts' gross margins in each of the three fiscal years ended December 31, 1993 and June 30, 1992 and 1991. Additionally, gross margins were impacted in the McDuff and VideoConcepts units by the increasing percentage of sales related to the lower margin computer category.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses ("SG&A") as a percent of sales and operating revenues for the year ended December 31, 1993 declined from the year ended June 30, 1992 and declined for the six months ended December 31, 1992 from the six months ended December 31, 1991. The accompanying table summarizes the breakdown of various components of SG&A and their related percentage of sales and operating revenues. The lower SG&A percent reflects the lower costs, relative to net sales and operating revenues associated with the Company's newer retail formats, as well as the lower operating costs achieved through cost reduction programs and the further streamlining of operations in the new retail formats.
SG&A expenses as a percent of sales and operating revenues declined in the fiscal year ended June 30, 1992 as compared with fiscal 1991. The benefits of actions taken to streamline operations and reduce costs are reflected in most expense categories in fiscal 1992.
Year-to-year comparisons are impacted by the $18,987,000 gain which includes a foreign currency gain of $6,894,000 in fiscal year 1992 from the sale of a Japanese subsidiary, the assets of which were primarily real estate, and the remaining foreign currency gain of $3,748,000 recognized in 1992 as opposed to a foreign currency gain of only $762,000 in 1993. The Company's exposure to foreign currency fluctuations has decreased significantly with the disposal of the Company's computer manufacturing and marketing operations as well as the disposal of Memtek Products. Both of these operations had significant European operations.
Advertising costs have decreased in dollars and as a percent of sales and operating revenues in the fiscal year ended December 31, 1993 as compared to the fiscal years ended June 30, 1992 and 1991. Management has focused its efforts on more efficient advertising methods in Radio Shack utilizing the Company's data base of customer activity to reduce costs while maintaining market awareness.
Rent expense has declined slightly in dollars and more significantly as a percent of sales during the year ended December 31, 1993 as compared to fiscal 1992. This percentage decrease results primarily from the fact that the Company owns most of the Incredible Universe locations and is additionally impacted by Computer City's low rent to sales ratio.
The Company's credit operations have been successful in supporting sales of the retail operations. Private label credit cards represented 34% of credit sales for the year ended December 31, 1993, 36% for the six months ended December 31, 1992, 43% in fiscal 1992 and 44% in fiscal 1991. This decline in the percentage results from increased sales through the Computer City and Incredible Universe stores which have a lower percentage of private label card usage. A decrease in bad debt expense relates to tighter credit controls and a 4% decline from fiscal 1992 in overall private label credit card sales. Expenses associated with the credit card operations which are included in SG&A expense have decreased.
PROVISION FOR BUSINESS RESTRUCTURING The Company adopted a plan resulting in business restructuring charges during the six months ended December 31, 1992 designed to improve the Company's competitiveness and future profitability. The pre-tax charge of $48,000,000 related primarily to the closing of approximately 110 of the 432 Tandy Name Brand Retail Group stores, mainly McDuff Supercenters in major market areas and, to a lesser extent, the elimination of certain product lines. Some product lines were reduced or eliminated after consideration of competitive factors and market trends.
In the fourth quarter of fiscal year 1991, the Company recorded a business restructuring charge of $8,531,000. The charge covered anticipated costs associated with Radio Shack computer centers which were being closed, relocated or converted to other store formats or sales offices. These costs included the estimated lease obligations for store closings and relocations as well as estimated fixed asset write-offs for all affected stores.
DEPRECIATION AND AMORTIZATION Depreciation and amortization expense as a percentage of sales and operating revenues decreased slightly in the year ended December 31, 1993 as compared with the year ended June 30, 1992. The dollar amount of depreciation and amortization expense for the year ended December 31, 1993 increased 7% over the dollar amount for the year ended June 30, 1992, due to additional capital expenditures related to the three Incredible Universe stores and the addition of 25 new Computer City stores. The dollar amount of depreciation and amortization expense for the year ended June 30, 1992 increased 5% over the prior fiscal year due to increased capital expenditures related to the new Tandy Name Brand Retail Group and Computer City super stores and the remodeling of Radio Shack stores.
Net interest income of $25,831,000 for the year ended December 31, 1993 and $24,245,000 for the fiscal year ended June 30, 1992 was attributable primarily to interest income earned by the credit operations. The decrease in interest income of the credit company in the year ended December 31, 1993 as compared to the fiscal year ended June 30, 1992 resulted from a decrease in the average credit card receivables outstanding during the period. This decline results from increased payments from credit customers reflecting the overall improvement in the economy and a desire by consumers to shift debt to lower interest rate instruments. The increase in interest income of the credit company in the six months ended December 31, 1992 as compared to December 31, 1991 resulted from growth of consumer credit card receivables. The decrease in interest income of the credit company in the fiscal year ended June 30, 1992 as compared with fiscal year 1991 resulted from the securitization of private label receivables in June 1991.
Interest income, exclusive of Tandy Credit Corporation's income, represented primarily interest on short-term investments. The increase in interest income for the year ended December 31, 1993 compared to the fiscal year ended June 30, 1992 was due to the increase in short-term investments as proceeds from the divestiture of discontinued operations were received and to the recognition of interest income on the AST and InterTAN notes receivable. Interest income as it relates to InterTAN notes receivable will increase in fiscal 1994 as the Company will commence recording the accretion of discount relating thereto. See further discussion on notes receivable in the "InterTAN Update".
The decrease in interest expense for the year ended December 31, 1993 as compared to the year ended June 30, 1992 is due to the decrease of total debt and lower U.S. interest rates. Overall interest expense should decline in fiscal 1994 as the Company receives cash proceeds from the disposal of its discontinued operations and applies a significant portion of such proceeds against short-term debt and toward the retirement of its 10% subordinated debentures. Partially offsetting the decline in expected interest expense in 1994 will be higher interest rates resulting from the Federal Reserve Bank's move to keep inflation low in the overall U.S. economy. The decrease in interest expense in the fiscal year ended June 30, 1992 reflected the reduced debt attributable to the securitization of private label credit card receivables and lower interest rates.
PROVISION FOR INCOME TAXES The effective tax rate for the year ended December 31, 1993 was 37.1%. The higher effective tax rate for the year ended December 31, 1993 as compared to 36.2% for the year ended June 30, 1992 and 36.0% for the year ended June 30, 1991 reflects the impact of the increase of the federal tax rate to 35% from 34%. The effective tax rate for the six-month period ended December 31, 1992 was 34.2%. This lower effective rate reflects the successful resolution of certain IRS examinations during the period.
The requirements of Financial Accounting Standard No. 109, "Accounting for Income Taxes", which the Company adopted January 1, 1993, are discussed in Note 12 of the Notes to Consolidated Financial Statements.
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. ready-to-assemble furniture manufacturing and related marketing business, the Memtek Products division and the Lika printed circuit board business. The divestiture plan replaced the Company's plan to spin off all of the Company's manufacturing and marketing businesses as described in Tandy's Transition Report on Form 10-K/A-4 for the six-month period ended December 31, 1992. In connection with the plan of divestiture the Company accounted for the divestiture of these businesses as discontinued operations and recognized an after-tax charge of $70,000,000 in its quarter ended June 30, 1993. This charge was subsequently reduced by approximately $15,822,000 in the quarter ended December 31, 1993. The reduction of the reserve previously taken resulted from the better than anticipated sales price received for O'Sullivan Industries Holdings, Inc. partially offset by additional foreign currency translation losses and below plan operating results of the divested companies during the divestment period, net of related income tax adjustments. Prior year results of operations have been reclassified to reflect the discontinued operations treatment.
Computer Manufacturing. In furtherance of the divestiture plan, the Company closed the sale of the computer manufacturing and marketing businesses to AST Research, Inc. ("AST") on July 13, 1993. In accordance with the terms of the definitive agreement between Tandy and AST, Tandy received $15,000,000 upon closing of the sale. The balance of the purchase price of $90,000,000 (as adjusted post-closing based on the results of an audit of the assets and liabilities conveyed) is payable by a promissory note. The promissory note is payable in three years and interest is accrued and paid annually. The interest rate on the promissory note is currently 3.75% per annum and is adjusted annually, not to exceed 5% per annum. The terms of the promissory note stipulate that the outstanding principal balance may be paid at maturity at AST's option in cash or the common stock of AST. However, at Tandy's option not more than 50% of the initial principal balance may be paid in common stock of AST. The promissory note is supported by a standby letter of credit in the amount of the lesser of $100,000,000 or 70% of the outstanding principal amount of the promissory note. At December 31, 1993, the standby letter of credit approximated $67,704,000. Accounts receivable relating to the computer operations, approximating $83,000,000 at June 30, 1993, inured to the benefit of Tandy upon collection. At December 31, 1993, the balance of the remaining accounts receivable, net of allowance for doubtful accounts, was $7,700,000. Tandy also retained certain inventory which it intends to liquidate before June 30, 1994. At December 31, 1993, this inventory amounted to approximately $3,700,000.
In October 1993, the Company sold its computer marketing operations in France to AST, together with certain other multimedia assets and additional Swedish inventory, for an aggregate of approximately $6,700,000, which was evidenced by an increase in the amount of the promissory note described above to $96,700,000. The Company has discounted this note by $2,000,000 and the discount will be recognized as income using the effective interest rate method over the life of the note.
Memtek Products. On November 10, 1993, the Company executed a definitive agreement with Hanny Magnetics (B.V.I.) Limited, a British Virgin Islands corporation ("Hanny") to purchase certain assets of the Company's Memtek Products operations, including the license agreement with Memorex Telex, N.V. for the use of the Memorex trademark on licensed consumer electronics products. This sale closed on December 16, 1993. As of December 31, 1993, Tandy has received payments of $62,500,000, recorded a $7,102,000 receivable from Hanny for the remaining purchase price and retained approximately $61,000,000 in accounts receivable and certain other assets for liquidation. Hanny is a subsidiary of Hanny Magnetics (Holdings) Limited, a Bermuda corporation, listed on the Hong Kong Stock Exchange. At December 31, 1993, accounts receivable, net of related allowance for doubtful accounts, retained by Tandy approximated $40,100,000.
O'Sullivan Industries. On November 23, 1993, the Company announced that it would sell the common stock of O'Sullivan Industries, Inc. ("O'Sullivan") in an initial public offering. On January 27, 1994 the Company announced that it had reached an agreement with the underwriters to sell O'Sullivan Industries Holdings, Inc., the parent company of O'Sullivan, common stock to the public at $22 per share. The net proceeds realized by Tandy in the initial public offering, together with the $40,000,000 cash dividend from O'Sullivan, approximated $350,000,000. The initial public offering closed on February 2, 1994.
Pursuant to a Tax Sharing and Tax Benefit Reimbursement Agreement between Tandy and O'Sullivan Industries Holdings, Inc., the Company will receive payments from O'Sullivan resulting from an 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 time period. The Company will 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 January 24, 1994, the Company announced that it had signed a definitive agreement to sell its manufacturing facilities which make Lika printed circuit boards. This divestiture is expected to close by June 1994 and is expected to yield approximately $17,000,000 in proceeds, including cash, a note and the liquidation of certain retained assets.
In connection with the computer manufacturing sale and the Memtek Products sale, the Company agreed to retain certain liabilities primarily relating to warranty obligations on products sold prior to the sale. Management believes that accrued reserves, as reflected on its December 31, 1993 balance sheet, are adequate to cover estimated future warranty obligations for the products and for any remaining costs to dispose of these operations.
With the closing of the Lika transaction, the divestiture program announced in June 1993 will be complete. Proceeds from the formal divestiture plan should total approximately $715,000,000 including net income tax benefits of $16,600,000 and notes receivable of approximately $100,000,000 that mature by the end of 1996. The proceeds from the divestitures are being used to reduce short-term debt and for the expansion of the Incredible Universe and Computer City store operations.
Tandy's cash flow and liquidity, in management's opinion, remains strong. During the year ended December 31, 1993, cash provided by operations was $322,294,000 as compared to $146,782,000 for the fiscal year ended June 30, 1992. The increased cash flow from operations in calendar 1993 compared to fiscal year ended June 30, 1992 was due partially to receivables which provided $30,133,000 in cash in 1993 but used $121,719,000 in 1992. The decline in accounts receivable in 1993 versus 1992 is due to the liquidation of receivables related to the divested operations and lower consumer receivables related to the Company's private label credit card portfolio. The latter reason reflects consumers' desires to liquidate debt with higher interest rates and the overall improved economy. Inventory required less cash in calendar 1993 than in fiscal 1992. The increase in inventory during 1993 related to new store openings and the expansion of Radio Shack's core product lines.
Investing activities involved capital expenditures, net of retirements, primarily for retail expansion of $129,287,000 for the year ended December 31, 1993 compared to $127,495,000 for the fiscal year ended June 30, 1992. Proceeds received from the sale of divested operations totaled $111,988,000 during the year ended December 31, 1993. Investing activities in 1993 also included $31,663,000 for the purchase of InterTAN's bank debt and the extension/funding of a working capital line of credit. See "InterTAN Update" for further information. Short-term debt of $46,885,000 and long-term debt of $62,195,000 were retired during 1993. Future store expansions and refurbishments and other capital expenditures are expected to approximate $150,000,000 to $180,000,000 per year over the next two years and will be funded primarily from available cash, proceeds from divestiture of discontinued operations, cash flow from operations and proceeds from possible sale/leaseback arrangements of Incredible Universe stores.
Operating cash flow in the fiscal year ended June 30, 1992 was $146,782,000 compared to $617,353,000 for the fiscal year ended June 30, 1991. This decreased cash flow was partially due to the $89,441,000 increase in inventories for the Tandy Name Brand Retail Group and Computer City store expansions in fiscal 1992 compared to a $151,339,000 decrease in inventories in 1991. Operating cash flow was also higher in 1991 due to the cash proceeds from the securitization of $350,000,000 of credit card receivables.
The Company's investing activities were generally for capital expenditures in fiscal 1992 which totaled $127,495,000. The capital expenditures were used principally for Radio Shack's store remodeling program, expansion of the Computer City store chain and initial construction of two Incredible Universe stores.
Financing activities in the fiscal year ended June 30, 1992 included the sale of Depositary Shares of PERCS for $430,000,000 and the subsequent purchase of common stock with the proceeds of this preferred stock issue. Long-term and short-term debt of $20,098,000 was retired in the year ended June 30, 1992 compared to fiscal 1991 retirements of $441,577,000.
Following are the current credit ratings for Tandy Corporation: Standard Category Moody's and Poor's ________ _______ __________
Senior Unsecured Baa2 A- Subordinated Baa3 BBB Medium Term Notes Baa2 A- Preferred Stock Baa3 BBB ESOP Senior Notes Baa2 A- Commercial Paper P-2 A-2
The above ratings are investment grade ratings. Management does not believe that a downgrade in 1993 by Moody's has had or will have a materially adverse effect on the Company's ability to borrow funds although the borrowings may be slightly more costly.
CAPITAL STRUCTURE AND FINANCIAL CONDITION The Company's balance sheet and financial condition continue to be strong. The Company's available borrowing facilities as of December 31, 1993 are detailed in Note 9 of the Notes to Consolidated Financial Statements and are incorporated herein by reference.
Proceeds from the sale of divested operations totaled $111,988,000 through December 31, 1993. The net assets associated with discontinued operations remaining to be divested were $405,664,000 at December 31, 1993 and related primarily to O'Sullivan which was disposed of in February 1994 and Lika whose sale is pending. Other information related to discontinued operations are discussed in "Discontinued Operations".
In the fiscal year ended June 30, 1992, the Company issued 150,000 PERCS shares and used the proceeds of this offering to purchase $430,000,000 of the Company's common stock for treasury. Each PERCS share has an annual dividend rate of $214.00 and is automatically convertible on April 15, 1995 into 100 shares of common stock, par value $1 per share, subject to possible adjustment based upon the market value of the common stock on the conversion date or the occurrence of certain other events. Based upon the market price of the Company's common stock at December 31, 1993, each PERCS share would have converted into 83 shares. At any time prior to April 15, 1995, the Company may call the PERCS. The PERCS are discussed further in Note 18 of the Notes to Consolidated Financial Statements.
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 will be at the price of 100% of face value or approximately $32,000,000.
In fiscal 1991, the Company filed a shelf registration for $500,000,000, of which $400,000,000 was designated for medium-term notes, and Tandy Credit Corporation increased its medium-term note program by $200,000,000. During fiscal 1991, short-term debt was refinanced by the issuance of $155,500,000 in medium-term notes. In the fourth quarter of fiscal 1991, Tandy Credit Corporation completed an asset securitization to increase financial flexibility. Credit card receivables were sold to the Tandy Master Trust which issued $350,000,000 of participating 8.25% Class A Asset Backed Certificates, Series A. Proceeds were primarily used to retire short-term debt.
Tandy established an employee stock ownership plan ("TESOP") in 1990. This plan issued $100,000,000 of debt in July 1990 to purchase preferred stock from the Company for funding of the plan. The Company has guaranteed the repayment of the TESOP notes and, as a result, the indebtedness of the TESOP has been recognized as a long-term obligation on the Company's consolidated balance sheet. Dividend payments and contributions by the Company will be used to repay the indebtedness.
The debt-to-capitalization ratio was 22.8%, 27.3%, 23.4% and 24.8% at December 31, 1993, December 31, 1992, June 30, 1992 and June 30, 1991, respectively. This debt-to-capitalization ratio should improve further in fiscal 1994 due to the cash proceeds from divestitures being used to retire debt.
The Company's available borrowing facilities as of December 31, 1993 are detailed in Note 9 of the Notes to Consolidated Financial Statements. Management believes that the Company's present borrowing capacity is greater than the established credit lines and long-term debt in place. Management believes that the Company's cash flow from operations, cash and short-term investments, expected proceeds from divestitures and its available borrowing facilities are more than adequate to fund planned store expansion, growth in the Company's private label credit accounts, retirement of the 10% subordinated debentures and to meet debt service and preferred dividend requirements.
Inflation has not significantly impacted the Company over the past three years. Management does not expect inflation to have a significant impact on operations in the foreseeable future unless global situations substantially affect the world economy.
The American Institute of Certified Public Accountants issued Statement of Position 93-7, "Reporting on Advertising Costs" in December 1993. The statement generally requires all advertising costs to be expensed in the period in which the costs are incurred or the first time the advertising takes place and is effective for years beginning after June 15, 1994. The statement is not anticipated to have any material effect on the results of operation or financial condition of the Company.
SALE OF JOINT VENTURE INTEREST During the quarter ended September 30, 1993, the Company entered into definitive agreements with Nokia Corporation ("Nokia") to sell the Company's interests in two cellular telephone manufacturing joint ventures with Nokia, TMC Company Ltd. located in Masan, Korea, and TNC Company located in Fort Worth, Texas. Pursuant to the terms of the definitive agreements, the Company received an aggregate of approximately $31,700,000 for its interests in these joint ventures. The Company also entered into a three-year Preferred Supplier Agreement pursuant to which it has agreed to purchase from Nokia substantially all of Radio Shack's requirements for cellular telephones at prevailing competitive market prices at the time of the purchase. These operations were not part of the overall divestment plan adopted in June 1993 by the Company's Board of Directors; therefore, the gain on the sale and their results of operations are not included in discontinued operations.
INTERTAN UPDATE InterTAN Inc. ("InterTAN"), the former foreign retail operations of Tandy, was spun off to Tandy stockholders as a tax-free dividend in fiscal 1987. Under the merchandise purchase terms of the original distribution agreement, InterTAN could purchase on payment terms from Tandy, at negotiated prices, new and replacement models of products that Tandy had in its Radio Shack U.S. catalog or which Tandy may reasonably secure. A&A International ("A&A"), a subsidiary of Tandy, was the exclusive purchasing agent for products originating in the Far East for InterTAN.
On July 16, 1993 InterTAN had an account payable to Tandy of approximately $17,000,000 of which $7,600,000 was in default. InterTAN's outstanding purchase orders for merchandise placed under the distribution agreement with Tandy, but not yet shipped, totaled approximately $44,000,000. Because InterTAN had defaulted, on July 16 Tandy terminated the merchandise purchase terms of the distribution agreement and the license agreements. Tandy offered InterTAN interim license agreements which expired July 22, 1993, unless extended. These were extended on July 23, 1993.
On July 30, 1993 Trans World Electronics, Inc. ("Trans World"), a subsidiary of Tandy, reached agreement with InterTAN's banking syndicate to buy approximately $42,000,000 of InterTAN's debt at a negotiated, discounted price. The closing of this purchase occurred on August 5, 1993, at which time Tandy resumed limited shipments to InterTAN and granted a series of short-term, interim licenses pending the execution of new license and merchandise agreements. The debt purchased from the banks has been restructured into a seven-year note with interest of 8.64% due semiannually beginning February 25, 1994 and semiannual principal payments beginning February 25, 1995 (the "Series A" note). Trans World also provided approximately $10,000,000 in working capital and trade credit to InterTAN. Interest on the working capital loan (the "Series B" note) of 8.11% is due semiannually beginning February 25, 1994 with the principal due in full on August 25, 1996. Trans World also has received warrants with a five-year term exercisable for approximately 1,450,000 shares of InterTAN common stock at an exercise price of $6.62 per share. As required by an agreement with Trans World, InterTAN filed a registration statement on January 21, 1994 seeking to register the warrants under the Securities Act of 1933.
In addition to the bank debt purchased by Trans World and the working capital loan, InterTAN's obligations to Trans World included two additional notes for approximately $23,665,000 (the "Series C" note) and $24,037,000 (the "Series D" note) with interest rates of 7.5% and 8%, respectively. The notes represent the restructuring of InterTAN accounts payable for merchandise already shipped and require monthly interest payments. Also, InterTAN had obligations for purchase orders outstanding for merchandise ordered by A&A for InterTAN but not yet shipped totaling approximately $31,262,000 at December 31, 1993. All principal and interest on the Series C note was paid in full by December 31, 1993. As merchandise under existing outstanding purchase orders is shipped, A&A will invoice InterTAN and amounts owed will be assigned to Trans World and will increase the amount of the Series D note. The balance of the Series D note as of December 31, 1993 was approximately $7,500,000. All of Tandy's debt from InterTAN is secured by a first priority lien on substantially all of InterTAN's assets.
A new merchandise agreement was reached with InterTAN in October 1993 which requires future purchase orders be backed by letters of credit posted by InterTAN. New license agreements have been negotiated which provide for a future royalty to Tandy.
As required by the various agreements now existing between Tandy and InterTAN, InterTAN has obtained a bank revolving credit facility for Canadian $30,000,000 (U.S. $22,662,000 equivalent at December 31, 1993). Tandy has agreed with InterTAN's new banking agent, that in case of InterTAN's default on the bank credit line, Tandy will, at the option of the bank, 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 (U.S. $45,324,000 equivalent at December 31, 1993). 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 bank, InterTAN's banking agent, upon notice to Tandy and expiration of time, can foreclose upon InterTAN's assets ahead of Tandy. At December 31, 1993, InterTAN had no borrowings under this revolving credit facility.
As of December 31,1993 InterTAN owed Tandy an aggregate of $63,511,000. The current portion of the obligation approximates $11,650,000 and the non-current portion approximates $51,861,000. In 1993 Tandy has not recognized any accretion of discount on the note receivable from InterTAN resulting from the purchase of the bank debt at a discounted price but will commence accretion of such discount in 1994 due to InterTAN's financial results and payment history as of December 31, 1993. Accretion of this discount will be based on the effective interest rate method and will approximate $3,856,000 in 1994. During the year ended December 31, 1993, Tandy recognized approximately $93,315,000 of sales to InterTAN and interest income of $3,085,000. Tandy's sales to InterTAN totaled $90,130,000 during the six months ended December 31, 1992, $171,126,000 during fiscal 1992, and $160,024,000 during fiscal 1991.
A&A 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 will be recorded as sales. InterTAN purchases from third parties through A&A will no longer be 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 in prior years, however, the earned income relating thereto will not be materially different.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Index to Consolidated Financial Statements and Financial Statement Schedules is found on page 29. The Company's Financial Statements, Notes to Consolidated Financial Statements and Financial Statement Schedules follow the index.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Tandy will file a definitive proxy statement with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A. The information called for by this Item with respect to directors has been omitted pursuant to General Instruction G(3). This information is incorporated by reference from the Proxy Statement for the 1994 Annual Meeting. For information relating to the Executive Officers of the Company, see Part I of this report. The Section 16(A) reporting information is incorporated by reference from the Proxy Statement for the 1994 Annual Meeting.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Tandy will file a definitive proxy statement with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A. The information called for by this Item with respect to executive compensation has been omitted pursuant to General Instruction G(3). This information is incorporated by reference from the Proxy Statement for the 1994 Annual Meeting.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Tandy will file a definitive proxy statement with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A. The information called for by this Item with respect to security ownership of certain beneficial owners and management has been omitted pursuant to General Instruction G(3). This information is incorporated by reference from the Proxy Statement for the 1994 Annual Meeting.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Tandy will file a definitive proxy statement with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A. The information called for by this Item with respect to certain relationships and transactions with management and others has been omitted pursuant to General Instruction G(3). This information is incorporated by reference from the Proxy Statement for the 1994 Annual Meeting.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report. 1. Financial Statements 2. Financial Statement Schedules
The financial statements and financial statement schedules filed as a part of this report are listed in the "Index to Consolidated Financial Statements and Financial Statement Schedules" on page 29. The index, statements and schedules are incorporated herein by reference.
3. 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 63, which immediately precedes such exhibits.
Certain instruments defining the rights of holders of long-term debt of the Company and its consolidated subsidiaries are not filed as exhibits to this report because the total amount of securities authorized thereunder does not exceed ten percent of the total assets of the Company on a consolidated basis. The Company hereby agrees to furnish the Securities and Exchange Commission copies of such instruments upon request.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the three months ended December 31, 1993.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Tandy Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TANDY CORPORATION
March 30, 1994 /s/ John V. Roach ______________________ John V. Roach Chairman of the Board, Chief Executive Officer and President
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Tandy Corporation has duly caused this report to be signed on its behalf by the following persons in the capacities indicated on this 30th day of March, 1994.
Signature Title
/s/ John V. Roach Chairman of the Board, Chief ___________________________ John V. Roach Executive Officer and President (Chief Executive Officer)
/s/ William C. Bousquette Executive Vice President and ___________________________ William C. Bousquette Chief Financial Officer (Principal Financial Officer)
/s/ Richard L. Ramsey Vice President and Controller ___________________________ Richard L. Ramsey (Principal Accounting Officer)
/s/ James I. Cash, Jr. Director ___________________________ James I. Cash, Jr.
/s/ Caroline R. Hunt Director ___________________________ Caroline R. Hunt
/s/ Lewis F. Kornfeld, Jr. Director ___________________________ Lewis F. Kornfeld, Jr.
/s/ Jack L. Messman Director ___________________________ Jack L. Messman
/s/ William G. Morton Director ___________________________ William G. Morton
/s/ Thomas G. Plaskett Director ___________________________ Thomas G. Plaskett
/s/ William T. Smith Director ___________________________ William T. Smith
/s/ Alfred J. Stein Director ___________________________ Alfred J. Stein
/s/ William E.Tucker Director ___________________________ William E. Tucker
/s/ Jesse L. Upchurch Director ___________________________ Jesse L. Upchurch
/s/ John A. Wilson Director ___________________________ John A. Wilson
TANDY CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
Report of Independent Accountants. . . . . . . . . . 30 Consolidated Statements of Income for the year ended December 31, 1993, the six months ended December 31, 1992 and each of the two years ended June 30, 1992. . . . . . . . . . . . . . . . . . . 31 Consolidated Balance Sheets at December 31, 1993 and December 31, 1992. . . . . . . . . . . . . . . 32 Consolidated Statements of Cash Flows for the year ended December 31, 1993, the six months ended December 31, 1992 and each of the two years ended June 30, 1992. . . . . . . . . . . . . . . . . . . 33 Consolidated Statements of Stockholders' Equity for the year ended December 31, 1993, the six months ended December 31, 1992 and the two years ended June 30, 1992 . . . . . . . . . . . . . . . . . . 34-35 Notes to Consolidated Financial Statements . . . . . 36-60 Financial Statement Schedules: V-Property, Plant and Equipment. . . . . . . . . . 61 VI-Accumulated Depreciation and Amortization of Property, Plant and Equipment . . . . . . . . . . 62 X-Supplementary Income Statement Information . . . 62
Separate financial statements of Tandy Corporation have been omitted because Tandy is primarily an operating company and the amount of restricted net assets of consolidated and unconsolidated subsidiaries and Tandy's equity in undistributed earnings of 50% or less-owned companies accounted for by the equity method are not significant. All subsidiaries of Tandy Corporation are included in the consolidated financial statements. Financial statements of 50% or less-owned companies have been omitted because they do not, considered individually or in the aggregate, constitute a significant subsidiary.
The financial statement schedules should be read in conjunction with the consolidated financial statements. All other schedules have been omitted because they are not applicable, not required or the information is included in the consolidated financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Tandy Corporation
In our opinion, the consolidated financial statements listed in the accompanying index on page 29 present fairly, in all material respects, the financial position of Tandy Corporation and its subsidiaries (the "Company") at December 31, 1993 and 1992, and the results of their operations and their cash flows for the year ended December 31, 1993, the six months ended December 31, 1992, and for each of the two years in the period ended June 30, 1992 in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for income taxes in 1993 and for extended warranty and service contracts in fiscal 1991.
/s/ Price Waterhouse____________________ PRICE WATERHOUSE
Fort Worth, Texas February 22, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tandy Corporation and Subsidiaries
NOTE 1-DESCRIPTION OF BUSINESS
Tandy Corporation ("Tandy" or the "Company") is engaged in consumer electronics retailing including the retail sale of personal computers. Radio Shack is the largest of Tandy's retail store systems with company-owned stores and dealer/franchise outlets. The Tandy Name Brand Retail Group includes McDuff Electronics mall stores and Supercenters, VideoConcepts mall stores and The Edge in Electronics stores. Tandy also operates the Computer City and Incredible Universe store chains. Additionally, Tandy continues to operate certain related retail support groups and consumer electronics manufacturing businesses.
NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of Tandy and its wholly owned subsidiaries, including its credit and insurance subsidiaries. Investments in 20% to 50% owned companies are accounted for on the equity method. The manufacturing and marketing operations included in the divestment plan have been accounted for as discontinued operations. See Note 3 for further information relating to discontinued operations. Significant intercompany transactions are eliminated in consolidation.
CHANGE IN FISCAL YEAR: On January 10, 1993, the Board of Directors authorized the fiscal year of Tandy to be changed from June 30 to December 31 and as of December 31, 1992 this change was made. The fiscal periods of certain foreign operations end one month earlier than the Company's year end to facilitate their inclusion in the consolidated financial statements.
FOREIGN CURRENCY TRANSLATION: In accordance with the Financial Accounting Standards Board (the "FASB") Statement No. 52, "Foreign Currency Translation," balance sheet accounts of the Company's foreign operations are translated from foreign currencies into U.S. dollars at year end or historical rates while income and expenses are translated at the weighted average sales exchange rates for the year. Translation gains or losses related to net assets located outside the United States are shown as a separate component of stockholders' equity. Losses aggregating $19,803,000, net of tax, relating to discontinued operations were transferred from equity and charged to loss on disposal of discontinued operations during 1993. Gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than the entity's functional currency) are included in net income. Such foreign currency transaction gains approximated $762,000 for the year ended December 31, 1993, $3,065,000 for the six months ended December 31, 1992 and $10,642,000 and $13,051,000 for fiscal years 1992 and 1991, respectively.
CHANGE IN ACCOUNTING PRINCIPLE-PROVISION FOR INCOME TAXES: In January 1993, the Company adopted Statement of Financial Accounting Standards ("FAS") No. 109, "Accounting for Income Taxes" ("FAS 109") and applied the provisions prospectively. The adoption of FAS 109 changes the Company's method of accounting for income taxes from the deferred method ("APB 11") to an asset and liability approach. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
The adjustments to the January 1, 1993 balance sheet to adopt FAS 109 totaled $13,014,000. Approximately $9,786,000 of this adjustment related to continuing operations and the remaining $3,228,000 was from discontinued operations. The aggregate amount of $13,014,000 is reflected in the accompanying 1993 Consolidated Statements of Income as the cumulative effect of change in accounting principle. It primarily represents the impact of adjusting deferred taxes to reflect the then current tax rate of 34% as opposed to the higher tax rates that were in effect when the deferred taxes originated. See Note 12 for further discussion of income taxes.
CHANGE IN ACCOUNTING PRINCIPLE-EXTENDED WARRANTY AND SERVICE CONTRACTS: Tandy's retail operations offer extended warranty and service contracts on products sold. These contracts generally provide extended warranty coverage for periods of 12 to 48 months.
The FASB issued Technical Bulletin No. 90-1, "Accounting for Separately Priced Extended Warranty and Product Maintenance Contracts" in December 1990. This bulletin requires revenues from sales of extended warranty and service contracts to be recognized ratably over the lives of the contracts. Costs directly related to sales of such contracts are to be deferred and charged to expense proportionately as the revenues are recognized. A loss is recognized on extended warranty and service contracts if the sum of the expected costs of providing services under the contracts exceeds related unearned revenue.
During the fourth quarter of fiscal 1991, the Company elected to adopt this technical bulletin on a retroactive basis to the beginning of fiscal 1991 by restating the previously reported three quarters. The method of adoption included the application of this accounting change to all existing contracts outstanding at July 1, 1990 and to all contracts entered into during fiscal 1991. Prior to the adoption of this technical bulletin, the Company had recognized a portion of the extended warranty and service contract revenues immediately, deferred the remaining revenues which were recognized ratably over their contract lives and expensed associated costs as incurred.
The effect of this change for fiscal 1991 was to decrease income before the cumulative effect of the change in accounting by $3,708,000 ($.05 per share). The cumulative effect of the change on years prior to 1991, net of income taxes of $5,471,000, was to decrease 1991 net income by $10,619,000 ($.14 per share).
CASH AND SHORT-TERM INVESTMENTS: Cash on hand in stores, deposits in banks and short-term investments with original maturities of three months or less are considered cash and cash equivalents. Short-term investments are carried at cost, which approximates market value.
ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS: CREDIT OPERATIONS-The customer receivables of the credit operations are classified as current assets, including amounts which are contractually due after one year. This is consistent with retail industry practices.
Finance charges, late charges and returned check fees arising from the Company's private label credit cards are recognized when earned, as interest income. The Company's policy is to write off accounts after 210 days past the initial billing date without payment of the amount due or whenever deemed uncollectible by management, whichever is sooner. Collection efforts continue subsequent to write-off.
The Company is charged a fee by an outside accounts receivable processing service for establishing new accounts. These initial direct costs are capitalized and amortized on a straight-line basis over a period of 84 months, the estimated life over which the account will be used by a customer. These costs are shown in the accompanying consolidated balance sheets as a part of the related accounts receivable. Amortization of these loan origination costs are included as a reduction of interest income in the accompanying consolidated statements of income. Costs to process accounts on an ongoing basis are expensed as incurred.
OTHER CUSTOMER RECEIVABLES-An allowance for doubtful accounts is provided when accounts are determined to be uncollectible.
Concentrations of credit risk with respect to customer receivables are limited due to the large number of customers comprising the Company's base and their location in many different geographic areas of the country.
INVENTORIES: Inventories are stated at the lower of cost (principally based on average cost) or market value.
PROPERTY AND EQUIPMENT: For financial reporting purposes, depreciation and amortization are primarily calculated using the straight-line method, which amortizes the cost of the assets over their estimated useful lives. The ranges of estimated useful lives are: _____________________________________________________________ Buildings. . . . . . . . . . . . . . . . . . . .10-40 years Equipment. . . . . . . . . . . . . . . . . . . . 2-15 years Leasehold improvements . . . . . . . . . . . . .the shorter of the life of the improvements or the term of the related lease and certain renewal periods _____________________________________________________________
When depreciable assets are sold or retired, the related cost and accumulated depreciation are removed from the accounts. Any gains or losses are included in selling, general and administrative expenses. Major additions and betterments are capitalized. Maintenance and repairs which do not materially improve or extend the lives of the respective assets are charged to operating expenses as incurred.
AMORTIZATION OF EXCESS PURCHASE PRICE OVER NET TANGIBLE ASSETS OF BUSINESSES ACQUIRED: The excess purchase price is generally amortized over a 40-year period using the straight-line method and is classified as a non-current asset.
FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of financial instruments is determined by reference to various market data and other valuation techniques as appropriate. Unless otherwise disclosed, the fair values of financial instruments approximate their recorded values.
REVENUES: Retail sales are recorded on the accrual basis. Credit service charges are recorded monthly on the basis of customer account balances.
PRE-STORE OPENING EXPENSES: Direct incremental expenses associated with the openings of new stores are deferred and amortized over a twelve-month period from the date of the store opening.
NET INCOME PER AVERAGE COMMON AND COMMON EQUIVALENT SHARE: Net income per average common and common equivalent share is computed by dividing net income less the Series B convertible stock dividends, net of taxes, by the weighted average common and common equivalent shares outstanding during the period. Current year weighted average share calculations include 12,457,000 common shares relating to the Preferred Equity Redemption Convertible Preferred Stock ("PERCS"). Per share amounts and the weighted average number of shares outstanding for the six-month period ended December 31, 1992 and for the fiscal year ended June 30, 1992, have been retroactively restated to reflect the assumption that the PERCS would convert into 12,457,000 common shares in lieu of the maximum number of common shares of 15,000,000. The reduction is based upon Tandy's common stock price at December 31, 1993 being in excess of the conversion strike price thereby reducing the number of common shares that would be issued to PERCS shareholders upon conversion. Earnings per share amounts previously reported by the Company for the six months ended December 31, 1992 and the fiscal year ended June 30, 1992 were $0.84 and $2.58 for income from continuing operations, respectively, and $0.02 and $2.24 for net income, respectively. Fiscal 1991 and 1990 were not effected as the PERCS were not outstanding during these years.
The Series B convertible stock dividends, net of taxes, were $7,136,000 for the fiscal year ended December 31, 1993, $2,419,000 for the six months ended December 31, 1992, $4,911,000 in fiscal 1992 and $4,538,000 in fiscal 1991. The taxes netted against these amounts were $0, $1,246,000, $2,530,000 and $2,337,000, respectively. Upon adoption of FAS 109 as of January 1, 1993 and in accordance with EITF 92-3, preferred dividends utilized in the earnings per share calculation can no longer be reduced for associated tax benefits paid on unallocated preferred stock held by an employee stock ownership plan.
As the Series C PERCS mandatorily convert into common stock, they are considered outstanding common stock and the dividends are not deducted from net income for purposes of calculating net income per average common and common equivalent share. Dividends on the Series C PERCS, which were issued in February 1992, were $32,100,000 for the year ended December 31, 1993, $16,050,000 for the six months ended December 31, 1992 and $12,573,000 for the year ended June 30, 1992.
Fully diluted earnings per common and common equivalent share are not presented since dilution is less than 3%.
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. ready-to-assemble furniture manufacturing and related marketing business, the Memtek Products division and the Lika printed circuit board business. The divestiture plan replaced the Company's plan to spin off all of the Company's manufacturing and marketing businesses as described in Tandy's Transition Report on Form 10-K/A-4 for the six-month period ended December 31, 1992. In connection with the plan of divestiture the Company accounted for the divestiture of these businesses as discontinued operations and recognized an after-tax charge of $70,000,000 in its quarter ended June 30, 1993. This charge was subsequently reduced by approximately $15,822,000 in the quarter ended December 31, 1993. The reduction of the reserve previously taken resulted from the better than anticipated sales price received for O'Sullivan Industries Holdings, Inc. partially offset by additional foreign currency translation losses and below plan operating results of the divested companies during the divestment period, net of related income tax adjustments. Prior year results of operations have been reclassified to reflect the discontinued operations treatment.
Computer Manufacturing. In furtherance of the divestiture plan, the Company closed the sale of the computer manufacturing and marketing businesses to AST Research, Inc. ("AST") on July 13, 1993. In accordance with the terms of the definitive agreement between Tandy and AST, Tandy received $15,000,000 upon closing of the sale. The balance of the purchase price of $90,000,000 (as adjusted post-closing based on the results of an audit of the assets and liabilities conveyed) is payable by a promissory note. The promissory note is payable in three years and interest is accrued and paid annually. The interest rate on the promissory note is currently 3.75% per annum and is adjusted annually, not to exceed 5% per annum. The terms of the promissory note stipulate that the outstanding principal balance may be paid at maturity at AST's option in cash or the common stock of AST. However, at Tandy's option not more than 50% of the initial principal balance may be paid in common stock of AST. The promissory note is supported by a standby letter of credit in the amount of the lesser of $100,000,000 or 70% of the outstanding principal amount of the promissory note. At December 31, 1993, the standby letter of credit approximated $67,704,000. Accounts receivable relating to the computer operations, approximating $83,000,000 at June 30, 1993, inured to the benefit of Tandy upon collection. At December 31, 1993, the balance of the remaining accounts receivable, net of allowance for doubtful accounts, was $7,700,000. Tandy also retained certain inventory which it intends to liquidate before June 30, 1994. At December 31, 1993, this inventory amounted to approximately $3,700,000.
In October 1993, the Company sold its computer marketing operations in France to AST, together with certain other multimedia assets and additional Swedish inventory, for an aggregate of approximately $6,700,000, which was evidenced by an increase in the amount of the promissory note described above to $96,700,000. The Company has discounted this note by $2,000,000 and the discount will be recognized as income using the effective interest rate method over the life of the note.
Memtek Products. On November 10, 1993, the Company executed a definitive agreement with Hanny Magnetics (B.V.I.) Limited, a British Virgin Islands corporation ("Hanny") to purchase certain assets of the Company's Memtek Products operations, including the license agreement with Memorex Telex, N.V. for the use of the Memorex trademark on licensed consumer electronics products. This sale closed on December 16, 1993. As of December 31, 1993, Tandy has received payments of $62,500,000, recorded a $7,102,000 receivable from Hanny for the remaining purchase price and retained approximately $61,000,000 in accounts receivable and certain other assets for liquidation. Hanny is a subsidiary of Hanny Magnetics (Holdings) Limited, a Bermuda corporation, listed on the Hong Kong Stock Exchange. At December 31, 1993, accounts receivable, net of related allowance for doubtful accounts, retained by Tandy approximated $40,100,000.
O'Sullivan Industries. On November 23, 1993, the Company announced that it would sell the common stock of O'Sullivan Industries, Inc. ("O'Sullivan") in an initial public offering. On January 27, 1994 the Company announced that it had reached an agreement with the underwriters to sell O'Sullivan Industries Holdings, Inc., the parent company of O'Sullivan, common stock to the public at $22 per share. The net proceeds realized by Tandy in the initial public offering, together with the $40,000,000 cash dividend from O'Sullivan, approximated $350,000,000. The initial public offering closed on February 2, 1994.
Pursuant to a Tax Sharing and Tax Benefit Reimbursement Agreement between Tandy and O'Sullivan Industries Holdings, Inc., the Company will receive payments from O'Sullivan resulting from an 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 time period. The Company will 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 January 24, 1994, the Company announced that it had signed a definitive agreement to sell its manufacturing facilities which make Lika printed circuit boards. This divestiture is expected to close by June 1994 and is expected to yield approximately $17,000,000 in proceeds, including cash, a note and the liquidation of certain retained assets.
In connection with the computer manufacturing sale and the Memtek Products sale, the Company agreed to retain certain liabilities primarily relating to warranty obligations on products sold prior to the sale. Management believes that accrued reserves, as reflected on its December 31, 1993 balance sheet, are adequate to cover estimated future warranty obligations for the products and for any remaining costs to dispose of these operations.
With the closing of the Lika transaction, the divestiture program announced in June 1993 will be complete. Proceeds from the formal divestiture plan should total approximately $715,000,000 including net income tax benefits of $16,600,000 and notes receivable of approximately $100,000,000 that mature by the end of 1996. The proceeds from the divestitures are being used to reduce short-term debt and for the expansion of the Incredible Universe and Computer City store operations.
The losses from discontinued operations prior to the measurement date are outlined in the table below.
A loss from the sale of the Company's computer manufacturing operations to AST, inclusive of losses from operations during the phase out period, is offset by the gains from the sale of Memtek Products, O'Sullivan and Lika, also inclusive of results of operations during the phase out period.
Interest expense of $4,608,000 allocated through the measurement date of June 30, 1993 and $5,170,000 for the six months ended December 31, 1992, have been allocated to discontinued operations based on the percentage of the net assets of discontinued operations to total net assets.
At December 31, 1993 net assets of discontinued operations consist primarily of inventories, accounts receivable and property, plant and equipment, primarily relating to O'Sullivan and Lika operations.
NOTE 4-RESTRUCTURING AND OTHER CHARGES
The Company adopted a plan resulting in business restructuring charges during the six months ended December 31, 1992 designed to improve the Company's competitiveness and future profitability. The pre-tax charge of $48,000,000 related primarily to the closing of approximately 110 of the 432 Tandy Name Brand Retail Group stores, mainly McDuff Supercenters in major market areas and, to a lesser extent, the elimination of certain product lines. Some product lines were reduced or eliminated after consideration of competitive factors and market trends. Additional restructuring charges of $39,500,000 related to discontinued operations were recognized in the six months ending December 31, 1992 and primarily related to the write-off of goodwill, the rationalization of certain product lines and the closure of certain operations. This restructuring charge is included in the operating loss from discontinued operations.
In fiscal 1991 an $8,531,000 charge was incurred for restructuring. The charges consisted principally of costs associated with closings of Radio Shack computer centers. Restructuring charges relating to continuing operations are presented in the accompanying income statements as a separate line item.
NOTE 5-SHORT-TERM INVESTMENTS
The weighted average interest rate was 3.2% at December 31, 1993 for short-term investments totaling $153,839,000. The weighted average interest rate was 3.5% at December 31, 1992 for short-term investments totaling $40,913,000.
NOTE 6-ACCOUNTS AND NOTES RECEIVABLE
Accounts and Notes Receivable
Effective May 1, 1991, the Company transferred $573,500,000 of its customer receivables to a trust which, in turn, on June 18, 1991, sold $350,000,000 of certificates representing undivided interests in the trust in a public offering. Net proceeds from the sale of receivables approximated $346,000,000 and the Company recognized a gain of approximately $3,900,000 related to the transaction. At December 31, 1993 and 1992, all $350,000,000 of the certificates were outstanding and, accordingly, were not reflected in the Company's accounts receivable balances. The fair value of the certificates at December 31, 1993 was approximately $367,815,000. At December 31, 1993, the balance of the receivables in the trust approximated $651,700,000. The Company owns the remaining undivided interest in the trust not represented by the certificates and will continue to service the receivables for the trust.
Cash flows generated from the receivables in the trust are dedicated to the payment of interest on the certificates which have an annual fixed interest rate of 8.25%, absorption of defaulted accounts in the trust and payment of servicing fees to the Company with any remaining cash flows remitted to the Company. In the event that such excess cash flows are not sufficient to absorb defaulted accounts, the Company is contingently liable up to a maximum amount of $136,100,000.
Under this agreement the trust may issue additional series of certificates from time to time. Terms of any future series will be determined at the time of issuance.
NOTE 7-PROPERTY, PLANT AND EQUIPMENT
December 31, ____________________ (In thousands) 1993 1992 _____________________________________________________________
Land . . . . . . . . . . . . . . . . . . $ 32,346 $ 20,942 Buildings. . . . . . . . . . . . . . . . 174,126 156,783 Furniture, fixtures and equipment . . . 394,242 393,886 Leasehold improvements . . . . . . . . . 314,424 310,509 ________ ________ 915,138 882,120 Less accumulated depreciation. . . . . . 451,400 437,180 ________ ________ Property, plant and equipment related to continuing operations. . . . . . . . . 463,738 444,940 Property, plant and equipment related to discontinued operations, net . . . . . -- 101,645 ________ ________ $463,738 $546,585 ________ ________ ________ ________
NOTE 8-OTHER ASSETS
Other assets includes the excess purchase price over net tangible assets of businesses acquired for continuing operations of $18,207,000 at December 31, 1993 and $18,728,000 at December 31, 1992. These amounts are net of accumulated amortization of $4,485,000, and $3,964,000, respectively. The balance at December 31, 1993 includes long-term receivables relating to InterTAN and AST of $126,384,000, net of discount of $22,198,000. See Notes 3 and 21 for a further description of the terms of the AST and InterTAN notes receivable. The balance at December 31, 1992 includes other assets relating to discontinued operations of approximately $207,864,000.
NOTE 9-INDEBTEDNESS AND BORROWING FACILITIES
Borrowings payable within one year are summarized in the accompanying short-term debt table on page 45. The short-term debt caption includes primarily domestic seasonal borrowings. The current portion of long-term debt at December 31, 1993 includes $82,701,000 of medium-term notes and other loans compared to $48,696,000 at December 31, 1992. The short-term debt additionally includes $31,739,000 of 10% subordinated debentures due June 30, 1994. This subordinated debenture has been called by the Company for redemption on April 1, 1994.
Tandy's short-term credit facilities, including revolving credit lines, are summarized in the accompanying short-term borrowing facilities table found on page 46.
A commercial paper program was established during fiscal 1991 for Tandy. The Company has a $400,000,000 committed facility in place for the commercial paper program. This facility is to be used only if maturing commercial paper cannot be repaid due to an inability to sell new paper. This facility is composed of two tranches of $200,000,000 each expiring in June 1994 with annual commitment fees for the tranches of 1/10 of 1% per annum and 3/20 of 1% per annum, respectively, whether used or unused. The commercial paper facility limits the amount of commercial paper that may be outstanding to a maximum of $400,000,000.
Long-term debt at December 31, 1993 and December 31, 1992 totaled $186,638,000 and $322,778,000, respectively. Included in both years are $45,000,000 of 8.69% senior notes due January 15, 1995. These senior notes have been outstanding since February 7, 1990.
Tandy completed a $500,000,000 shelf registration in January 1991 of which $400,000,000 was designated for medium-term notes. Tandy Credit's $400,000,000 shelf registration was amended in October 1990 to add a $200,000,000 Series B medium-term note program. At December 31, 1993 available borrowing capacity under Tandy's and Tandy Credit's medium-term note programs aggregated $429,200,000. Medium-term notes outstanding at December 31, 1993 totaled $125,479,00 compared 6to $148,900,000 at December 31, 1992. The weighted average coupon rates of medium-term notes outstanding at both of these dates was 8.7%.
The Company established an employee stock ownership trust in June 1990. Further information on the trust and its related indebtedness, which is guaranteed by the Company, is detailed in the discussion of the Tandy Employees Stock Ownership Plan in Note 14.
Long-term borrowings outstanding at December 31, 1993 mature as follows:
(In thousands) _____________________________________________________________ 1994 . . . . . . . . . . . . . . . . . . . $124,490 1995 . . . . . . . . . . . . . . . . . . . 61,008 1996 . . . . . . . . . . . . . . . . . . . 22,678 1997 . . . . . . . . . . . . . . . . . . . 40,921 1998 . . . . . . . . . . . . . . . . . . . 37,331 1999 and thereafter. . . . . . . . . . . . 24,700 _____________________________________________________________
The fair value of the Company's long-term debt of $311,128,000 (including current portion) is approximately $328,516,000 at December 31, 1993.
Consolidated interest expense was $39,707,000 for the year ended December 31, 1993, $20,532,000 for the six months ended December 31, 1992 and $43,154,000, and $70,313,000 for the years ended June 30, 1992 and 1991. Interest income, primarily related to the Company's credit card operations, totaled $65,538,000 for the year ended December 31, 1993, $33,290,000 for the six months ended December 31, 1992 and $67,399,000 and $98,872,000 for the years ended June 30, 1992 and 1991.
NOTE 10-LEASES
Tandy leases rather than owns most of its facilities. The Radio Shack stores comprise the largest portion of Tandy's leased facilities. The Radio Shack, Tandy Name Brand Retail Group and Computer City stores are located primarily in major shopping malls, shopping centers or freestanding facilities owned by other companies. The Company owns most of the Incredible Universe stores. The store leases are generally based on a minimum rental plus a percentage of the store's sales in excess of a stipulated base figure. Radio Shack store leases average approximately 10 years, generally with renewal options. Tandy also leases distribution centers and office space. Capital leases are not material as the Company's operations are basically structured in a manner that precludes the need for significant financing or capital leases.
Future minimum rent commitments at December 31, 1993 for all long-term noncancelable leases (net of immaterial amounts of sublease rent income) are in the following table.
(In thousands) ------------------------------------------------------------- 1994 . . . . . . . . . . . . . . . . . . . $144,102 1995 . . . . . . . . . . . . . . . . . . . 140,105 1996 . . . . . . . . . . . . . . . . . . . 126,148 1997 . . . . . . . . . . . . . . . . . . . 109,907 1998 . . . . . . . . . . . . . . . . . . . 93,541 1999 and thereafter. . . . . . . . . . . . 305,763 -------------------------------------------------------------
NOTE 12-INCOME TAXES
The components of the provision for income taxes and a reconciliation of the U.S. statutory tax rate to the Company's effective income tax rate are given in the accompanying tables.
As of December 31, 1993, the Company has tax net operating loss carryforwards of approximately $20,659,000 which are available to offset future taxable income. These carryforwards which are expected to be fully utilized, expire beginning in the year ending December 31, 2006. Accordingly, the Company has recognized a deferred tax asset relating to these carryforwards.
In January 1993, the Company adopted FAS No. 109. The adoption of FAS 109 changes the Company's method of accounting for income taxes from the deferred method ("APB 11") to an asset and liability approach. Previously, the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
The adjustments to the January 1, 1993 balance sheet to adopt FAS 109 totaled $13,014,000. Approximately $9,786,000 of this adjustment related to continuing operations and the remaining $3,228,000 was from discontinued operations. The aggregate amount of $13,014,000 is reflected in 1993 net income as the cumulative effect of change in accounting principle. It primarily represents the impact of adjusting deferred taxes to reflect the then current tax rate of 34% as opposed to the higher tax rates that were in effect when the deferred taxes originated. The Company subsequently increased its U.S. deferred tax asset in 1993 as a result of legislation enacted during 1993 which increased the corporate tax rate from 34% to 35%. Deferred tax assets and liabilities as of December 31, 1993 for continuing operations were comprised of the following:
Deferred Tax Assets ___________________
(In thousands) December 31, 1993 _________________
Bad debt reserve $14,268 Intercompany profit elimination 6,654 Deferred service contract income 41,290 Restructuring reserves 3,362 Insurance reserves 5,607 Loss carryforwards and carrybacks 7,231 Foreign tax credits 4,396 _______ 82,808 Valuation allowance (4,396) _______ Total deferred tax assets 78,412 _______
Deferred Tax Liabilities ________________________
Inventory adjustments, net 8,445 Depreciation and amortization 8,322 Credit card origination costs 3,221 Deferred taxes on foreign operations 4,275 Other 4,269 _______ Total deferred tax liabilities 28,532 _______
Net Deferred Tax Assets $49,880 _______ _______
NOTE 13-STOCK PURCHASE AND SAVINGS PLANS
Stock purchase and savings plans are offered by Tandy Corporation to its employees. These plans are designed to provide employees with a consistent investment program which provides for their retirement and an opportunity to participate in the Company's growth.
TANDY CORPORATION STOCK PURCHASE PROGRAM. The Program is available to most employees who have been employed at least six months. Each participant may contribute 1% to 10% of annual compensation, except that the President of the Company may limit the maximum contribution for employees of certain divisions or subsidiaries to a percentage less than 10%. The Company matches 40%, 60% or 80% of the employee's contribution depending on the length of the employee's participation in the program. The Company periodically purchases common stock on the open market and then sells the number of shares required by the program each month at a price equal to the average of the daily closing prices for that month. The stock purchased by each participant is distributed annually after December 31. In the event of a tender offer (other than an issuer tender offer) or a change in control, as defined in the program, all stock credited to participants' accounts will be distributed to the participants. If the Company elects, treasury shares or authorized but unissued shares may be used. Tandy's contributions to the stock purchase program were $18,955,000 for the year ended December 31, 1993 and $8,756,000 for the six months ended December 31, 1992. For fiscal 1992 and 1991 the Company's contributions were $20,253,000 and $19,614,000, respectively.
TANDY EMPLOYEES DEFERRED SALARY AND INVESTMENT PLAN. The Plan became effective on July 1, 1982. An eligible employee electing to participate in this plan may defer 5% of annual compensation, subject to certain limitations established by the Tax Reform Act of 1986. The Company pays this amount into the plan as a deferred salary contribution for the account of the employee. The employee's 5% contribution is considered deferred compensation and is not taxed to the employee as long as it remains in the plan. Prior to October 1, 1990, the Company matched 80% of the employee's deferred salary contribution. This matching contribution ceased on September 30, 1990. Beginning October 1990, the Company began making contributions to the newly formed employee stock ownership plan described in Note 14 in lieu of the matching contributions to the deferred salary and investment plan. To participate in the employee stock ownership plan, employees must continue to make deferred salary contributions to the Tandy Employees Deferred Salary and Investment Plan. The plan is available to most employees who have been employed at least one year. The contributions made by the Company until the employee stock ownership plan became effective October 1, 1990 were fully vested upon payment to the trustee. In June 1992, the Company received a determination letter ruling that the Tandy Employees Deferred Salary and Investment Plan is a qualified 401(k) plan. An administrative committee appointed by the Board of Directors invests the plan's assets. A substantial majority of the plan's assets are invested in Tandy securities. The Company's contribution to the investment plan from July 1, 1990 through September 30, 1990 was $3,401,000.
NOTE 14-TANDY EMPLOYEES STOCK OWNERSHIP PLAN
As a continuation of the Company's programs to encourage employee ownership of Tandy stock, the Company formed the Tandy Employees Stock Ownership Plan and trust (the "TESOP") on June 28, 1990. On July 31, 1990, the TESOP trustee borrowed $100,000,000 at an interest rate of 9.34% with varying semi-annual principal payments through June 30, 2000. Dividend payments and contributions from Tandy will be used to repay the indebtedness. Because Tandy has guaranteed the repayment of these notes, the indebtedness of the TESOP is recognized as a long-term obligation in the accompanying consolidated balance sheet. An offsetting charge has been made in the stockholders' equity section of the accompanying consolidated balance sheet to reflect unearned compensation related to the TESOP.
The TESOP trustee used the proceeds from the issuance of the notes to purchase 100,000 shares of Series B TESOP Convertible Preferred Stock (the "TESOP Preferred Stock") from Tandy at a price of $1,000 per share. Each share of such stock is convertible into 21.768 shares of Tandy common stock. The number of shares of Company common stock into which each share of the TESOP Preferred Stock is convertible ("the Conversion Price") is subject to anti-dilution adjustment upon the occurrence of a number of corporate events. The annual cumulative dividend on TESOP Preferred Stock is $75.00 per share, payable semi-annually. This series of stock has certain liquidation preferences and may be redeemed by Tandy after July 1, 1994 at specified premiums. The TESOP Preferred Stock will be held by the trustee until redemption or conversion and may not be sold or distributed outside the TESOP except for resale to Tandy. The TESOP requires that shares of TESOP Preferred Stock not yet allocated to any participant's account, as well as allocated shares for which no voting instructions are received, be voted by the trustee in proportion to the votes cast with respect to allocated shares of TESOP Preferred Stock.
Participants in the Tandy Employees Deferred Salary and Investment Plan became eligible to participate in the TESOP effective October 1, 1990. At that time the Company began making payments to the TESOP in lieu of its matching contributions to the Tandy Employees Deferred Salary and Investment Plan. During the term of the TESOP, the TESOP Preferred Stock will be allocated to the participants semi-annually based on the principal payments made on the indebtedness. The allocations to the individual participants' accounts are determined according to the terms of the TESOP. As vested participants withdraw from the TESOP, payments are made in cash or Tandy common stock. The preferred stock has a face value of $1,000 per share and the Company is obligated to redeem the preferred stock at the higher of the appraised value or $1,000 per share in the event of a participant's withdrawal. The Company has the option to redeem the preferred stock in either cash or common stock. Participants in the TESOP that were hired prior to October 1, 1990 became immediately vested in all allocations made to their accounts. Employees hired after September 30, 1990 who become TESOP participants will become vested in amounts allocated to their accounts upon the earlier of three years of participation in the TESOP or the completion of five years of employment with the Company. Forfeited shares are returned to the TESOP and allocated to the accounts of other participants.
In June 1992 the Company received a determination letter ruling from the IRS that the TESOP was a qualified employee stock ownership plan.
In fiscal 1991 Tandy recorded, as a component of stockholders' equity, $100,000,000 of unearned compensation to reflect the value of the TESOP Preferred Stock sold to the TESOP. As shares of the TESOP Preferred Stock are allocated to the TESOP participants, compensation expense is recorded and unearned compensation is reduced. Interest expense on the TESOP notes is also recognized as a cost of the TESOP. The compensation component of the TESOP expense is reduced by the amount of dividends accrued on the TESOP Preferred Stock with any dividends in excess of the compensation expense reflected as a reduction of interest expense. During the year ended December 31, 1993, the compensation and interest costs related to the TESOP before the reduction for the allocation of dividends were $9,605,000 and $7,195,000, respectively. During the six months ended December 31, 1992, the compensation and interest costs related to the TESOP before the reduction for the allocation of dividends were $4,266,000 and $3,969,000, respectively. Such amounts for fiscal 1992 were $8,233,000 and $8,526,000, respectively. For the fiscal year ended June 30, 1991, these amounts were $5,967,000 and $8,488,000, respectively. Contributions from Tandy to the TESOP for the year ended December 31, 1993 and the six months ended December 31, 1992 totaled $17,895,000 and $9,269,000, respectively, including the $7,135,000 and $3,665,000 of dividends paid on the TESOP Preferred Stock. Contributions for the year ended June 30, 1992 totaled $16,926,000, including the $7,441,000 of dividends paid on the TESOP Preferred Stock. The fiscal 1991 cash contributions were $15,108,000, including $6,875,000 of dividends paid on the TESOP Preferred Stock.
At September 30, 1993, 25,620 shares of TESOP Preferred Stock had been released and allocated to participants' accounts in the TESOP (including 6,093 shares which had been withdrawn by participants). During the six months ended December 31, 1993, 5,400 shares of TESOP Preferred Stock were released for allocation to participants at March 31, 1994. At December 31, 1993, 68,980 shares of TESOP Preferred Stock were available for later release and allocation to participants over the remaining life of the TESOP.
Under the terms of Tandy's guarantee of the notes, Tandy is obligated to make annual contributions to the TESOP to enable it to pay principal and interest on the debt securities. Tandy has fully and unconditionally guaranteed the TESOP's payment obligations, whether at maturity, upon redemption, upon declaration of acceleration or otherwise. The holders of the notes have no recourse against the assets of the TESOP except in the event that the TESOP defaults on payments due and then only to the extent that the TESOP holds cash payments made by Tandy to the TESOP to enable it to meet its obligations under the notes and any earnings attributable to such contributions. No amounts were in default as of December 31, 1993.
The TESOP fiscal year ends on March 31. At March 31, 1993, the TESOP held as assets $97,725,000 of TESOP Preferred Stock and $4,511,000 of receivables and had liabilities comprised of the remaining principal on the notes of $79,680,000 and accrued interest payable on the notes of $1,861,000, resulting in net assets of $20,695,000.
NOTE 15-STOCK OPTIONS AND PERFORMANCE AWARDS
1985 Stock Option Plan ______________________ Under the 1985 Stock Option Plan, as amended, options to acquire up to 2,000,000 shares of Tandy's common stock may be granted to officers and key management employees of the Company. The shares authorized for issuance under the Plan upon the exercising of an option have been registered with the Securities and Exchange Commission. The Organization and Compensation Committee (the "Committee") has sole discretion in determining whether to grant options, who shall receive them, the number of options granted to any individual and whether an option will be an incentive stock option or a nonstatutory stock option. The term of incentive stock options may not exceed 10 years and the term of nonstatutory stock options may not exceed a term of 10 years plus one month. No option may be exercised within one year of the date of grant and then may be exercised in specified installments only after stated intervals of time.
The maximum amount that may be exercised at the expiration of each of the first through fifth anniversaries of the nonstatutory stock options is 20%. On each of the first three anniversaries of the date of grant of the incentive stock options, one-third of each individual's options become exercisable. Upon termination of employment, the optionee must exercise all currently vested options by the earlier of the option expiration date(s) or three months from the date of termination of employment or forfeit such options, except that upon retirement at age 55 or older the three months is extended to 12 months in the case of nonstatutory stock options only. Notwithstanding the grant of options initially exercisable in installments, upon the termination of employment as a result of death or total disability of an optionee, all options then held shall for a period of 12 months, subject to earlier termination at the fixed expiration date, become immediately exercisable without regard to dates at which the installments are exercisable. Upon the retirement of an optionee at age 55 or older, the Committee may in its discretion accelerate the dates at which remaining installments of options may be exercised to the date of retirement. In the event of a change in control, all outstanding options become immediately exercisable for the full number of shares subject to options. The option price was determined by the Committee at the time the option is granted, but the option price will not be less than 100% of the fair market value of the stock on the date of grant. Since the option prices have been fixed at the market price on the date of grant, no compensation has been charged against earnings by the Company. Authorized and unissued shares or treasury stock may be issued to participants when options are exercised.
The 1985 Stock Option Plan provides for adjustments to be made to options outstanding under the plan in order to prevent dilution of options upon the occurrence of a number of events, including the distribution of shares of a subsidiary of the Company to its stockholders.
Tandy assumed an option plan which had been created by GRiD prior to its acquisition. All unexercised GRiD options expired June 30, 1993. Under the 1985 Stock Option Plan there were 1,268,205 vested options which could have been exercised for a total price of $44,710,134 at December 31, 1993. Shares available for additional grants under the 1985 Stock Option Plan were 138,599 at December 31, 1993.
1993 Incentive Stock Plan _________________________ During March 1993, the Board adopted the Tandy Corporation 1993 Incentive Stock Plan (the "1993 Plan"). The 1993 Plan was approved by stockholders in October 1993. Certain provisions of the 1993 Plan were amended by the Board on October 15, 1993. The 1993 Plan is administered by the Organization and Compensation Committee (the "Committee") of the Board. A total of 3,000,000 shares of the Company's common stock were reserved for issuance under the 1993 Plan and have been registered with the Securities and Exchange Commission.
The 1993 Plan permits the grant of incentive stock options ("ISOs"), nonstatutory stock options (options which are not ISOs) ("NSOs"), stock appreciation rights ("SARs"), restricted stock, performance units or performance shares.
Grants of options under the 1993 Plan shall be for terms specified by the Committee, except that the term shall not exceed 10 years (5 years if granted to a 10% or more stockholder of the Company's common stock). Subject to the discretion of the Committee, options become exercisable in such installments and at such times payments for shares issuable upon exercise of an option may be made in cash, common stock, or a combination of both. The amount payable upon exercise of a SAR may be made at the discretion of the Committee either in cash or common stock or in a combination of cash and common stock. Provisions of the 1993 Plan generally provide that in the event of a change in control all options become immediately and fully exercisable and all restrictions lapse on restricted stock.
As part of the 1993 Plan, each non-employee director of the Company receives a grant of NSOs for 3,000 shares of the Company's common stock on the first business day of September of each year ("Director Options"). Director Options have an exercise price of 100% of the fair market value of the Company's common stock on the trading day prior to the date of grant, vest as to one-third of the shares annually on the first three anniversary dates of the date of grant and expire 10 years after the date of grant. The first grant of the Director Options was made on September 1, 1993.
The exercise price of an option (other than a Director Option) is determined by the Committee, provided that the exercise price shall not be less than 100% of the fair market value of a share of the Company's common stock on the date of grant.
At December 31, 1993 there were no vested options which could have been exercised and 2,650,050 shares available for additional grants under the 1993 Plan. The 1993 Plan shall terminate on the tenth anniversary of the day preceding the date of its adoption by the Board and no option or award shall be granted under the 1993 Plan thereafter.
Stock option activity from June 30, 1990 through December 31, 1993, including the exercise of GRiD options, is summarized in the accompanying chart.
NOTE 16-PREFERRED SHARE PURCHASE RIGHTS
In August 1986 the Board of Directors adopted a stockholder rights plan and declared a dividend of one right for each outstanding share of Tandy common stock. The Board amended the rights plan in June 1988 and amended and restated the rights plan in June 1990. The rights, which will expire on June 22, 2000, are currently represented by the common stock certificates and when they become exercisable will entitle holders to purchase one one-thousandth of a share of Tandy Series A Junior Participating Preferred Stock for an exercise price of $140 (subject to adjustment). The rights will become exercisable and will trade separately from the common stock only upon the date of public announcement that a person, entity or group ("Person") has acquired 15% or more of Tandy's outstanding common stock without the prior consent or approval of the disinterested directors ("Acquiring Person") or ten days after the commencement or public announcement of a tender or exchange offer which would result in any person becoming an Acquiring Person. In the event that any person becomes an Acquiring Person, the rights will be exercisable for 60 days thereafter for Tandy common stock with a prior market value (as determined under the rights plan) equal to twice the exercise price. In the event that, after any person becomes an Acquiring Person, the Company engages in certain mergers, consolidations, or sales of assets representing 50% or more of its assets or earning power with an Acquiring Person (or persons acting on behalf of or in concert with an Acquiring Person) or in which all holders of common stock are not treated alike, the rights will be exercisable for common stock of the acquiring or surviving company with a prior market value (as determined under the rights plan) equal to twice the exercise price. The rights will not be exercisable by any Acquiring Person. The rights are redeemable at a price of $.05 per right prior to any person becoming an Acquiring Person or, under certain circumstances, after the expiration of the 60-day period described above, but the rights may not be redeemed or the rights plan amended for 180 days following a change in a majority of the members of the Board (or if certain agreements are entered into during such 180-day period).
NOTE 17-TERMINATION PROTECTION PLANS
In August 1990, the Board of Directors of the Company approved termination protection plans and amendments to various other benefit plans including the stock purchase program and deferred salary and investment plan described in Note 13. These plans provide for defined termination benefits to be paid to eligible employees of the Company who have been terminated, without cause, following a change in control of the Company (as defined). In addition, for a certain period of time following employee termination, the Company, at its expense, must continue to provide on behalf of the terminated employee certain employment benefits. In general, during the twelve months following a change in control, the Company may not terminate or change existing employee benefit plans in any way which will affect accrued benefits or decrease the rate of the Company's contribution to the plans.
NOTE 18-ISSUANCE OF SERIES C PERCS AND TENDER OFFER
In February 1992, the Company issued 15,000,000 depositary shares of Series C Conversion Preferred Stock ("Series C PERCS") at $29.50 per depositary share (equivalent to $2,950.00 for each Series C PERCS). Each of the depositary shares represents ownership of 1/100th of a share of Series C PERCS. The annual dividend for each depositary share is $2.14 (based on the annual dividend rate for each Series C PERCS of $214.00). On April 15, 1995, each of the depositary shares will automatically convert into (i) one share of Tandy common stock (equivalent to 100 shares for each Series C PERCS) subject to adjustment in certain events and (ii) the right to receive on such date an amount in cash equal to all accrued and unpaid dividends thereon. Conversion of the outstanding depositary shares (and the Series C PERCS) is also required upon certain mergers or consolidations of the Company or in connection with certain other events. The Company has reserved 15,000,000 shares of its common stock for the potential conversion of the Series C PERCS. At any time and from time to time prior to the mandatory conversion date, the Company may call the outstanding Series C PERCS (and thereby the depositary shares), in whole or in part, for redemption. Upon any such redemption, each owner of depositary shares will receive, in exchange for each depositary share so called, shares of Tandy common stock having a market value initially equal to $43.87 (equivalent to $4,387.00 for each Series C PERCS), declining by $.004085 (equivalent to $.408500 for each Series C PERCS) on each day following the date of issue of the Series C PERCS to $39.50 (equivalent to $3,950.00 for each Series C PERCS) on February 15, 1995, and equal to $39.25 (equivalent to $3,925.00 for each Series C PERCS) thereafter, plus an amount in cash equal to all proportionate accrued and unpaid dividends thereon. The liquidation preference for each depositary share is $29.50 (equivalent to $2,950 for each Series C PERCS) plus any accrued and unpaid dividends. The holders of the Series C PERCS have the right, voting together with the common stockholders as one class, to vote in the election of directors and upon such other matters coming before any meeting of the stockholders and are entitled to cast 100 common stock votes for each Series C PERCS (or one common stock vote for each depositary share).
Using a substantial portion of the proceeds from the issuance of the Series C PERCS, the Company purchased 13,500,000 shares of its common stock at $32.00 per share in a "Dutch Auction" self tender offer that expired on March 26, 1992.
NOTE 19-SUPPLEMENTAL CASH FLOW INFORMATION
The effects of changes in foreign exchange rates on cash balances have not been material. Cash flows from operating activities included cash payments as follows:
During the fiscal year ended June 30, 1991, the Company incurred non-cash financing activities which included the guarantee of TESOP indebtedness and increase in unearned deferred compensation of $100,000,000 and treasury stock issued under an earn-out program of $13,807,000.
NOTE 20-LITIGATION
In July 1985, Pan American Electronics, Inc., a Radio Shack dealer in Mission, Texas ("Pan Am"), filed suit against the Company in the 92nd Judicial District Court in Hidalgo County, Texas. The Plaintiff's complaint alleged breach of contract and fraud based upon the allegations that the Company made certain misrepresentations and acted beyond the scope of its authority under the dealer agreement, with the alleged result that the plaintiff was forced out of the computer mail order business in 1984. In November 1993, Pan Am and Tandy resolved the pending litigation and the lawsuit was dismissed in December 1993. Although the terms of the settlement are confidential, the resolution of this legal action did not have a materially adverse impact on the Company's financial position or results of operation.
There are various other claims, lawsuits, disputes with third parties, investigations and pending actions involving allegations of negligence, product defects, discrimination, patent infringement, tax deficiencies and breach of contract 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 December 31, 1993. 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 Tandy's financial position.
NOTE 21-RELATIONS WITH INTERTAN InterTAN Inc. ("InterTAN"), the former foreign retail operations of Tandy, was spun off to Tandy stockholders as a tax-free dividend in fiscal 1987. Under the merchandise purchase terms of the original distribution agreement, InterTAN could purchase on payment terms from Tandy, at negotiated prices, new and replacement models of products that Tandy had in its Radio Shack U.S. catalog or which Tandy may reasonably secure. A&A International ("A&A"), a subsidiary of Tandy, was the exclusive purchasing agent for products originating in the Far East for InterTAN.
On July 16, 1993 InterTAN had an account payable to Tandy of approximately $17,000,000 of which $7,600,000 was in default. InterTAN's outstanding purchase orders for merchandise placed under the distribution agreement with Tandy, but not yet shipped, totaled approximately $44,000,000. Because InterTAN had defaulted, on July 16 Tandy terminated the merchandise purchase terms of the distribution agreement and the license agreements. Tandy offered InterTAN interim license agreements which expired July 22, 1993, unless extended. These were extended on July 23, 1993.
On July 30, 1993 Trans World Electronics, Inc. ("Trans World"), a subsidiary of Tandy, reached agreement with InterTAN's banking syndicate to buy approximately $42,000,000 of InterTAN's debt at a negotiated, discounted price. The closing of this purchase occurred on August 5, 1993, at which time Tandy resumed limited shipments to InterTAN and granted a series of short-term, interim licenses pending the execution of new license and merchandise agreements. The debt purchased from the banks has been restructured into a seven-year note with interest of 8.64% due semiannually beginning February 25, 1994 and semiannual principal payments beginning February 25, 1995 (the "Series A" note). Trans World has provided approximately $10,000,000 in working capital and trade credit to InterTAN. Interest on the working capital loan (the "Series B" note) of 8.11% is due semiannually beginning February 25, 1994 with the principal due in full on August 25, 1996. Trans World also has received warrants with a five-year term exercisable for approximately 1,450,000 shares of InterTAN common stock at an exercise price of $6.62 per share. As required by an agreement with Trans World, InterTAN filed a registration statement on January 21, 1994 seeking to register the warrants under the Securities Act of 1933.
In addition to the bank debt purchased by Trans World and the working capital loan, InterTAN's obligations to Trans World included two additional notes for approximately $23,665,000 (the "Series C" note) and $24,037,000, (the "Series D" note) with interest rates of 7.5% and 8%, respectively. The notes represent the restructuring of InterTAN accounts payable for merchandise already shipped and require monthly interest payments. Also, InterTAN had obligations for purchase orders outstanding for merchandise ordered by A&A for InterTAN but not yet shipped totaling approximately $31,262,000 at December 31, 1993. All principal and interest on the Series C note was paid in full by December 31, 1993. As merchandise under existing outstanding purchase orders is shipped, A&A will invoice InterTAN and amounts owed will be assigned to Trans World and will increase the amount of the Series D note. The balance of the Series D note as of December 31, 1993 was approximately $7,500,000. All of Tandy's debt from InterTAN is secured by a first priority lien on substantially all of InterTAN's assets.
A new merchandise agreement was reached with InterTAN in October 1993 which requires future purchase orders be backed by letters of credit posted by InterTAN. New license agreements have been negotiated which provide for a future royalty to Tandy.
As required by the various agreements now existing between Tandy and InterTAN, InterTAN has obtained a bank revolving credit facility for Canadian $30,000,000 (U.S. $22,662,000 equivalent at December 31, 1993). Tandy has agreed with InterTAN's new banking agent, that in case of InterTAN's default on the bank credit line, Tandy will, at the option of the bank, 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 (U.S. $45,324,000 equivalent at December 31, 1993). 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 bank, InterTAN's banking agent, upon notice to Tandy and expiration of time, can foreclose upon InterTAN's assets ahead of Tandy.
As of December 31,1993 InterTAN owed Tandy an aggregate of $63,511,000. The current portion of the obligation approximates $11,650,000 and the non-current portion approximates $51,861,000. In 1993 Tandy has not recognized any accretion of discount on the note receivable from InterTAN resulting from the purchase of the bank debt at a discounted price but will commence accretion of such discount in 1994 due to InterTAN's financial results and payment history as of December 31, 1993. Accretion of this discount will be based on the effective interest rate method and will approximate $3,856,000 in 1994. During the year ended December 31, 1993, Tandy recognized approximately $93,315,000 of sales to InterTAN and interest income of $3,085,000. Tandy's sales to InterTAN totaled $90,130,000 during the six months ended December 31, 1992, $171,126,000 during fiscal 1992, and $160,024,000 during fiscal 1991.
A&A 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 will be recorded as sales. InterTAN purchases from third parties through A&A will no longer be 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 in prior years, however, the earned income relating thereto will not be materially different.
NOTE 22-QUARTERLY DATA (UNAUDITED)
As the Company's operations are predominantly retail oriented, its business is subject to seasonal fluctuations with the December 31 quarter being the most significant in terms of sales and profits because of the Christmas selling season.
During the quarter ended December 31, 1993, the Company recognized a gain, net of tax, from discontinued operations of approximately $15,822,000. This gain partially offsets the after-tax charge of $70,000,000 previously taken in the June 1993 quarter and reduces the loss on disposal of discontinued operations to approximately $54,178,000. The gain resulted from the better than anticipated sales price received for O'Sullivan partially offset by additional foreign currency translation losses and below plan operating results of the divested companies during the divestment period, net of related income tax adjustments. See Note 3 for further information on discontinued operations.
During the quarter ended March 31, 1993, the Company adopted FAS 109 which changes the Company's method of accounting for income taxes from the deferred method to an asset and liability approach. The adjustments to the January 1, 1993 balance sheet to adopt FAS 109 totaled $13,014,000. This amount is reflected in 1993 net income as the cumulative effect of a change in accounting principle. See Note 2 for further information on Change in Accounting Principle - Provision for Income Taxes.
During the quarter ended December 31, 1992, the Company provided pre-tax reserves of $48,000,000 and $39,500,000 for business restructuring relating to continuing and discontinued operations, respectively. See Note 4 for further information on restructuring and other charges.
During the quarter ended June 30, 1992, the Company completed the sale of a Japanese subsidiary, the assets of which were primarily real estate. The pre-tax gain from this sale, including recognition of foreign currency translation adjustments, was $18,987,000.
As discussed in detail in Note 2, income per share amounts and the weighted average of common and common equivalent shares outstanding for all quarters commencing with the quarter ending March 31, 1992 (date of issuance) through September 30, 1993 have been retroactively restated for the assumption that the PERCS will convert into 12,457,133 shares in lieu of the previously used 15,000,000 common shares based upon the Company's stock price at December 31, 1993.
(1) FAS No. 52, "Foreign Currency Translation," requires that foreign fixed assets and related accumulated depreciation be translated into U.S. dollars at the rates in effect at the date of the balance sheet. The amounts shown in the "Other" column reflect the changes in currency values between the balance sheet dates.
(1) FAS No. 52, "Foreign Currency Translation," requires that foreign fixed assets and related accumulated depreciation be translated into U.S. dollars at the rates in effect at the date of the balance sheet. The amounts shown in the "Other" column reflect the changes in currency values between the balance sheet dates.
TANDY CORPORATION INDEX TO EXHIBITS
Exhibit Number Description
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.
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.
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.
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.
4b Amended and restated Rights Agreement with the First National Bank of Boston dated June 22, 1990 for Preferred Share Purchase Rights.
4c(i) Revolving Credit Agreement between Tandy Credit Corporation, Tandy Corporation and Texas Commerce Bank, individually and as Agent for eleven other banks, dated as of June 17, 1991.
4c(ii) First Amendment to Revolving Credit Agreement between Tandy Credit Corporation, Tandy Corporation and Texas Commerce Bank, individually and as agent for eleven other banks, dated June 11, 1992.
4c(iii) Second Amendment to Revolving Credit Agreement between Tandy Credit Corporation, Tandy Corporation and Texas Commerce Bank National Association, individually and as agent for eleven other banks, dated June 8, 1993 (filed as Exhibit 4c(iii) to Tandy's Form 10-Q filed on November 16, 1993, Accession No. 0000096289-93-000018 and incorporated herein by reference).
4d Continuing Guaranty dated June 18, 1991 by Tandy of obligations of the Company in favor of the banks participating in the Revolving Credit Agreement.
4e 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.
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.
10b* Form of Executive Pay Plan Letters
10c* Post Retirement Death Benefit Plan for Selected Executive Employees of Tandy Corporation and Subsidiaries as restated June 10, 1991.10d
10d* Tandy Corporation Officers Deferred Compensation Plan as restated July 10, 1992.
10e* Special Compensation Plan No. 1 for Tandy Corporation Executive Officers, adopted in 1993.
10f* Special Compensation Plan No. 2 for Tandy Corporation Executive Officers, adopted in 1993.
10g* Special Compensation Plan for Directors of Tandy Corporation dated November 13, 1986.
10h* Director Fee Resolution.
10i* Tandy Corporation 1985 Stock Option Plan as restated effective August 1990.
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.
10l* Restated Trust Agreement Tandy Employees Supplemental Stock Program through Amendment No. III dated March 29, 199 (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.
10n* Tandy Corporation Termination Protection Plans for Executive Employees of Tandy Corporation and its Subsidiaries (i) the Level I and (ii) Level II Plans.
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.
10p* Form of Indemnity Agreement with Directors, Corporate Officers and two Division Officers of Tandy Corporation.
11 Statement of Computation of Earnings per Share
12 Statement of Computation of Ratios of Earnings to Fixed Charges
22 Subsidiaries
23 Consent of Independent Accountants
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* Each of these exhibits is a "management contract or compensatory plan, contract, or arrangement".