FOOL CONFERENCE CALL SYNOPSIS*
By Deborah Tidwell (TMF Debit)

CompUSA, Inc.
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14951 North Dallas Parkway
Dallas, TX 75240
972-982-4000
http://www.compusa.com

ALEXANDRIA, VA (August 15, 1997)/FOOLWIRE/ --- CompUSA, Inc. reported their fourth quarter and fiscal year-end 1997 results on August 13th. They had record earnings for the fourth quarter of $23 million or $0.24 per share, a 94% increase over last year. For the full fiscal year, they reported record earnings of $0.99 per share compared to $0.65 per share last year.

SALES. They achieved record sales for both the fourth quarter and fiscal year. Net sales for the fourth quarter increased 23% from last year. The increase is due to the additional sales volume of the 24 new stores added since the fourth quarter of fiscal 1996, a 9.7% increase in comp store sales, and the maturation of the company's existing stores. For the year, net sales were up 22% and comparable store sales for the year increased 5.9%. They maintained strong sales productivity for the quarter with average sales per store of approximately $8.8 million, about the same as last year. Sales productivity in the first and fourth quarter are historically lower than in the second and third. Fourth quarter and full year for fiscal 1996 were 14 and 53 weeks respectively. The comparable periods for fiscal 1997 were 13 and 52 weeks.

GROSS MARGIN. This is the tenth consecutive quarter of improved gross margin percent and operating income percent compared to the prior year. All margin comparisons showed improvement. The fourth quarter gross margin was 14.8%, up 80 basis points from the fourth quarter last year and up almost 50 basis points from the third quarter of 1997. For the entire fiscal year, gross margin was 14.3%, up 70 basis points from the comparable period last year. All of these increases were the result of the same basic factors -- higher product margins, an increase in the ratio of service revenue to total revenue, and improvement in controllable cost such as inventory shrinkage.

PRODUCT MIX SHIFT & FEWER COMPETITORS. Part of the reason the product margins are higher is mix. As they get a greater base out there and as people use the software and peripheral side of the business, that helps the margins. Also, the promotional climate isn't as tough as it was. As they lose more competitors and as more find out that they can't make any money just selling PCs alone, that helps CompUSA because they don't have to be quite so promotional to get customers into the stores.

STORE EXPENSES. They opened six new computer superstores in the fourth quarter and today they operate 133 CompUSA stores in 61 major markets across the US. In fiscal 1998 they plan to continue their growth strategy and expect to open approximately 30-40 new locations. The improvements in margins were partially offset by higher occupancy costs resulting from the 24 new stores. At year end, 34% of their stores were less than two years old, up from 30% a year ago. Store opening expenses for both the quarter and fiscal year were relatively flat compared to last year. There were, however, two offsetting factors -- higher labor costs associated with their increases in service businesses where labor is essentially their cost of sales, and that was offset by lower advertising expenses as a result of higher vendor participation. Compared to last quarter, store operating expenses as a percent of sales increased to 9% from 8.3%. Sales per store decreased from the third to fourth quarter. As expected, there is a de-leveraging of service fixed expenses.

G&A EXPENSES. General and administrative expenses for the fourth quarter were 2.4%, up 20 basis points from the fourth quarter 1996. This increase is primarily the result of transition costs incurred related to the integration of PCs Compleat and CompUSA's mail order operation. For the full year, G&A was relatively flat compared to the prior year. On a per-store basis, they continue to see improvement. G&A expense per store in the fourth quarter decreased 3% compared to last year. The effective tax rate for the year was 38.5% and they expect it to be approximately the same for FY 1998.

CASH, ACCOUNTS RECEIVABLE, INVENTORY. They ended the year with $210 million in cash, approximately the same level as a year ago. This is after opening 24 stores in the year and making significant investments back into their business. Accounts receivable were $215 million at the end of the fiscal year compared to $148 million last year. This increase is a result of their continued growth in their direct sales business. Inventory at the end of the year was $501 million or $3.7 million per store compared to $399 million or $3.6 million per store a year ago. Inventories are in-line with their expectations and are in good shape. For the fiscal year, inventory turnover was 7.2 times, compared to 7.7 for fiscal 1996. This decrease is attributable in part to their continued focus on building their direct business. They continue to increase their investment in their centralized configuration center to further enhance their ability to serve the corporate customer.

PAYABLES & CAPITAL EXPENSES. Accounts payable at the end of the fourth quarter represented 96% of inventory compared to 95% a year ago. Net capital expenditures totaled $18 million for the fourth quarter and $74 million for the full fiscal year. Depreciation and amortization was approximately $10 million in the fourth quarter and $36 million for the year. Capital expenses for fiscal 1998 should be around $100 million as they plan to open 30-40 new stores, upgrade their systems in their current stores, and continue to invest in systems to support their various businesses.

FY 1997 ACCOMPLISHMENTS. Fiscal 1997 was an exciting year with many highlights. Sales were $4.6 billion, a 22% increase. Earnings increased 57% to $94 million, their third consecutive year of record earnings. They achieved several significant milestones including reaching their annual gross margin of 14.3%, the highest annual margin in their history. They achieved an annual operating margin of 3.4%, the first time they passed the 3% threshold since the company went public. They completed their integration of PC Compleat with CompUSA mail order operations. They recently renamed the combined operations CompUSA Direct and are now fulfilling all mail order and web site orders out of CompUSA Direct. They are celebrating the grand opening of this unit with exciting and ongoing promotions.

STRONG SERVICE/TRAINING BUSINESS GROWTH. Their significant sales gains and continuing gross margin improvement underscored the strength of their operating model. There are many reasons for the improvement, but one major factor was the growth in their training and technical service businesses, both of which produce higher gross margins than product sales. During the quarter and the year, these businesses grew at a much faster rate than CompUSA's other businesses and they expect that trend to continue. They continued to diversify their operating model to meet their customers' wide-ranging needs and expectations.

NEW PROJECTS. In order to achieve their goals in fiscal 1998, several projects are already underway. First, the CompUSA PC. CompUSA recently announced entering the build-to-order PC market which they see as an exciting new business for them and a way to sell computers any way their customers want to buy them. They will be rolling out the build-to-order program sometime in mid-September. At this time, certain of their corporate customers and customers who call in on their 800 line are the ones they are placing orders for those products. Once they roll out the program, people will be able to see a display of the products in stores and will be able to go through a custom configuration at the point of sale, be it at retail, mail order, Internet, 800 number, or through corporate sales. They are developing store formats for smaller markets that can serve populations as small as 40,000 people. They are going to take six small markets in Dallas that range in population from 40,000 to 150,000 people and the stores will range in size from 4,000 to about 12,000 square feet. They opened some smaller stores so far in Colorado Springs, on the order of 18,000 square feet, and those have been very successful. So they are excited about this smaller store floor size. In addition, they are rolling out new business centers designed to cater specifically to their small business customers.

AVERAGE SELLING PRICES. They were asked about ASPs for the rest of the calendar year. They said that they think they will see somewhat of a reversal of the declines in ASP. They have seen the lines from the manufacturers for the Fall and think it is the most exciting thing they have seen in a number of years for the Fall selling season because the timing is right. Instead of having products coming out too early or too late for the selling season, the 266-300 mHz PCs are coming out at the appropriate time to get the greatest benefit from a retail selling perspective. By putting in those new technologies, which are at relatively high price points, even though they will be selling a lot of sub-$1000 product, they will be selling a lot of products in the $2000-$3000 range as well which should allow for a slight increase in ASPs in the fourth calendar quarter this year.

RETAIL DESKTOP BUSINESS. There has been a resurgence in the retail desktop business recently. They think it is significantly because of the higher-priced PCs. More than higher price, it's because of the later technology PCs -- the 200 mHz Pentium MMX on up, and particularly the 233 and 266. The sales are very strong in the sub-$1000 PC category. The introduction of the $799 and $999 new Compaq products as well as now the new introduction from Hewlett-Packard that is coming out at $999 bodes well for the sub-$1000 category. These products are attracting new customers and it is very important for the long-run because it means more software sales, more peripheral sales, and more return sales after the fact. They did research and were very excited about it because they found that 41% of the people buying sub-$1000 PCs were first-time buyers. Also, they dropped down in demographics. Typical CompUSA customers have a family income of $75,000. These people have family incomes of $55,000.

DIRECT PC SALES. As far as their direct business, today they think they are the third largest corporate reseller in the country. They have been winning big orders. They dominate small and mid-size business and now they are starting to dominate the larger businesses. Three years ago, CompUSA couldn't have handled a $100 million account, now they can very easily and do. Upgrading to Windows NT is happening all across corporate America and they are seeing a benefit that is going to occur for quite awhile just in terms of upgrading. Every corporation is either doing it or looking at it. CompUSA is a total solution provider. They can solve the hardware, they can install it, they can train people, they can deliver, they can fix the computer. They are the largest independent trainer in the country today and are a major player in technical services today. ASPs this quarter were essentially flat compared to last quarter.

WINDOWS '98. They were asked about their outlook on Windows '98. They responded that they think it will come out mid-to-late first quarter of calendar 1998. They think everyone is sensitive to not messing up Christmas, including Microsoft. And they think Microsoft is willing to work with the dates to accommodate that as are the hardware manufacturers. They are all looking at what would be the most efficient vouchering-type program. They think there are plans with everyone, with a general understanding that type of program will have to be in the works. This is not something that will happen the first week in January as did MMX, which made things difficult. They don't think it should have a major impact.

THE UPS STRIKE. They were asked if the UPS strike was affecting them. They responded that they are dealing with their vendors today in alternate methods of getting products to them. For the most part it hasn't been an issue. They do most of the significant volume through their cross-stock facilities, so they end up running common carriers. In terms of shipping to customers, they had some good plans in place in advance of the strike. Prior to the strike, their UPS volume was significant, but so far they have been able to go through alternate carriers. They did not have an exclusive relationship prior to the strike with any given carrier and that helps them out. One of the things people don't recognize is that CompUSA does a huge amount of their business on actual PCs that they deliver and install themselves with their own vans, and that is about a third of their business.

* 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.