FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

CompUSA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CPU)") else Response.Write("(NYSE: CPU)") end if %>
14951 North Dallas Parkway
Dallas, TX 75240
(214) 982-4000
(800) COMPUSA
http://www.compusa.com

UNION CITY, Ca., October 30, 1996/FOOLWIRE/ --- CompUSA released first quarter 1997 earnings this morning. First quarter was an outstanding one for CompUSA as evidenced by their strong sales and record earnings. Earnings were $14 million, a 107% increase over the prior year. Higher sales and productivity per store and improved gross profit margins were the primary reasons for the increase in earnings over last year.

EARNINGS. Earnings per share more than doubled to $0.31 per share with the average shares outstanding increasing approximately 11% from the prior year. The increase in the shares outstanding is primarily the result of the 2 million shares issued in the equity offering in September 1995 and the 3 million shares issued for the purchase of PCs Compleat last May.

SALES AND COMPS. They achieved sales of $991 million in the first quarter, a 27% increase over last year. The increase was due to 22 new stores open since the first quarter of FY 1996, the continued growth in their direct and service businesses, and the maturation of the company store base. Sales productivity also improved. Even with the addition of 12 new stores during the previous two quarters, the average sales per store increased to $8.9 million.

The effective tax rate decreased to 38.5% and they expect that tax rate to continue for the remainder of the fiscal year.

MARGINS. Comparing the first quarter to the first quarter of last year, gross margin as a percent of sales improved 130 basis points to 13.8%. The causes of this increase are essentially the same ones they have been discussing over the last 3 quarters. The improvement was the result of higher product margins, improvement in the controllable costs such as inventory shrinkage and freight, and continued growth in their service revenues which have increased as a percent of total revenue. The service revenues typically have higher gross margins than merchandise sales. Comparing the gross profit to the fourth quarter of FY 1996 (last quarter), there was a decrease of 20 basis points. The change was due to several factors, the slight shift in the product mix toward notebooks, occupancy costs which is essentially a fixed cost representing a higher percentage of net sales as a result of the first quarter including only 13 weeks of sales compared to 14 weeks in the fourth quarter. These two factors were partially offset by an increase in service revenue.

STORE OPERATING EXPENSES. Looking at store operating expenses, for the first quarter they were 9.1% of sales compared to 8.9% a year ago. The increase as a percent of sales was primarily due to the following: sales from new stores increased as a percent of total sales. New stores generally have higher store operating expenses as a percent of sales compared to more mature stores due to lower sales volume. In addition, service revenue increased as a percentage of sales and store personnel expenses as a percent of sales are higher for service revenues than merchandise sales. Comparing store operating expenses to Q4 1996, they remain constant at 9.1%.

GENERAL & ADMINISTRATIVE EXPENSES. G&A expenses were 2.1% of net sales compared to 1.9% last year. This increase was primarily the result of increased accruals for incentive compensation. Comparing G&A to Q4, there is a decrease of 10 basis points. This reduction is the result of decreased accruals for incentive compensation in the first quarter and leveraging of other expenses.

CASH. Overall their balance sheet continues to strengthen. Cash was approximately $266 million at quarter end, up $58 million from year end. Cash is up primarily as a result of the accounts payable/inventory ratio of 104% compared to 95% at year end.

INVENTORIES. Inventories were $564 million, or $5 million per store compared to $4.6 million per store a year ago. The increase is the result of the staging of inventory for the fourteen new stores in the second quarter, development of the direct product distribution center, and the planned increases of inventory as they enter the second quarter. Inventory turns for the quarter were 7.3 compared to last year's 7.4.

INQUIRIES REGARDING INVENTORY. Yesterday, they received numerous calls concerning their inventory levels. Overall, inventories have not been an issue for them. They believe that inventory management is one of the strengths of the company. They are very satisfied with the quality and quantity of inventory as they move into the holiday season.

CAPITAL. They continued also to improve their capital structure with their debt-to-capital ratio decreasing to 25.6%. There continues to be no borrowings under a $75 million bank line. Cash flow (EBITDA) increased to $35 million. The four-quarter trailing EBITDA was $155 million and EBITDA-to-total interest ratio was 12.4 times. Capital expenditures totalled $18 million for the quarter and they anticipate annual capital expenditure requirements to be approximately $65-70 million. Depreciation and amortization for the quarter were approximately $8 million.

HIGHLIGHTS FOR THE QUARTER. They more than doubled last year's first quarter earnings. Comp store sales for the first quarter were up 7.2%, a great accomplishment given that they were cycling last year's introduction and heavy promotion of Windows '95.

EXPANSION. They opened 3 computer superstores during the quarter, Plano and Lubbock Texas and their first store in Alaska in Anchorage. Today they operate 113 locations. They plan to open 14 stores this quarter including 5 that are already open.

PC COMPLEAT INTEGRATION UPDATE. They have also focused on integrating PC Compleat and identifying the synergies between the two organizations. Already they made some progreses in combining the companies. CompUSA is now managing the buying and has increased their access to additional products, services, and marketing costs. They are now managing PC Compleat's advertising collection of co-op funds. CompUSA has provided them with customer lists and have done one initial mailing. They said it is the most fruitful mailing they have had so far. So far PC Compleat is pleased with their results and they think there are additional opportunities for the two companies to help each other.

WEB PROJECT. Over the last two months they have been working on an exciting new Web site project based on Microsoft's latest tools and technologies. This new site will enable customers to shop CompUSA's online catalog and securely complete their transactions via the Internet. CompUSA will be able to gather a lot more information about their customer's needs and offer them a shopping experience tailored to their personal needs. This Web site will premiere within the next few weeks.

ALL 7 BUSINESSES CONTRIBUTED TO Q1 RESULTS. Each of their 7 businesses played a role in their Q1 success. The trends they discussed over the last few quarters continued with their direct businesses and their service businesses including technical services and training growing at a faster rate than their retail business. There are many opportunities in these areas and they believe the trends will continue. They are focused on positioning CompUSA to be a total solutions provider.

ISSUES AFFECTING COMPUSA. Obviously everyone wants to know what is going on in the second quarter. Over the last twelve months, the trend has been that their corporate and service businesses have grown at a faster rate than their retail business. Because of the wide range of opportunities on both direct and service segments, they believe that this trend will continue.

RETAIL ENVIRONMENT. Overall retail sales have been somewhat sluggish. Fortunately, CompUSA's diverse operating model is not totally dependent on any one of their 7 businesses. Like all retailers they are approaching the holiday season with cautious optimism.

APPLE COMPUTER. They are often asked if they have seen any positive progress with Apple and how do they think Apple will fare. They have seen some improvements at Apple and believe they are moving in the right direction, especially with their recent announcement of price reductions. Although Apple certainly has experienced their share of problems and perhaps some loss of market share, CompUSA believes they have a strong brand name and a good core base of loyal customers. CompUSA plans to continue to be a leading source of Apple products.

US ROBOTICS 56K MODEM. As announced earlier, US Robotics' new 56K modem is expected to be available in January 1997. Many are interested in how CompUSA thinks this product will be received in the marketplace. Although they have not actually seen the product yet, they believe it will be attractive to customers, especially in light of the demand for Internet services and the explosive growth of Internet use. They believe that a faster modem at the right price point will be a very popular selling item.

NEW JAPANESE SUPPLIERS. They are also frequently asked to comment on their new Japanese suppliers and how their products will impact CompUSA. Although new to CompUSA's product assortment, the merchandise they are receiving from such Japanese vendors as Toshiba and Sony in the desktop area, and Hitachi and Fujitsu notebooks represent established and reliable brand names to the American consumer. They believe that the addition of these new vendors will stimulate new interest in the consumer market and provide the consumer with a greater range of choices. They additionally believe that their expanded offering creates a healthy competitive environment among manufacturers, which is ultimately good for the consumer.

PRODUCT AVAILABILITY. Another area they get asked a lot about is product availability. Overall, CompUSA has a strong in-stock position on virtually all products and they are very comfortable with product availability. The minor exceptions are Apple products, which have been problematic until very recently, and high-end Wintel notebooks which are in short supply industry-wide. Given their breadth and depth of products and excellent vendor relations they feel that they are not as vulnerable as some of their competitors to product shortages.

OUTLOOK FOR THE HOLIDAY SEASON. At this time of year, they are often asked what they expect consumer demand to be like during the upcoming holiday season and what they think will be the most popular products. They believe that the release of many new products and the aggressive marketing by manufacturers could help stimulate consumer demand during the upcoming holiday season.

HOT HOLIDAY ITEMS -- HARDWARE. In the hardware category, notebooks continue to be very strong as well as the 200mHz Pentium desktop PCs that will be the cutting-edge in desktop technology. Laptop computers, as they have mentioned before, will continue to be hot in all areas. In addition, they see Microsoft's new HPCs or handheld personal computers and the personal digital assistant products becoming very popular. Also, new digital cameras and the huge satellite network's DirectPC should catch people's attention.

HOT HOLIDAY ITEMS -- SOFTWARE. In children's education software, they anticipate such titles as Toy Story's Activity Center and 101 Dalmations Animated Storybook to be top performers. In entertainment software they see such titles as Command and Conquer, Red Alert, MechWarrior II Mercenaries, and Que to be best sellers. In the area of productivity software, Windows '95 will continue to be popular as well as Netscape Navigator 3.0 and Norton Anti-Virus for Windows '95 version 2.0. In addition, Quicken's recent release of its eagerly awaited Quicken '95 version 6.0 has been selling very well and is expected to be a very hot Christmas item.

HOT HOLIDAY ITEMS -- ACCESSORIES. Lastly in the accessories category, such items as wireless keyboards, mice, and joysticks are expected to sell well in this holiday season.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.