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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ________________to _________________
.
Commission file number 1-10062
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InterTAN, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 75-2130875
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Main Street, Suite 1805
Fort Worth, Texas 76102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 817-348-9701
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, par value $1.00 per share* New York Stock Exchange
(*Includes related preferred stock purchase rights)
Securities registered pursuant of Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or l5(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( X )
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The aggregate market value of the voting stock held by non-affiliates of
the registrant as of September 16, 1996 was $70,702,675 based on the New York
Stock Exchange closing price on such date.
As of September 16, 1996 there were 11,312,428 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Stockholders are attached as
Exhibit 13 to this Annual Report on Form lO-K and are incorporated by reference
into parts I, II and IV. Portions of the definitive Proxy Statement for the 1996
Annual Meeting of Stockholders are incorporated by reference into Part III. With
the exception of those portions which are incorporated by reference in this
Annual Report on Form 10-K the 1996 Annual Report to Stockholders and the
definitive l996 Proxy Statement are not to be deemed incorporated into or filed
as part of this Report.
PART I
Item 1. BUSINESS
InterTAN was incorporated in the State of Delaware in June 1986 in order
to receive from Tandy Corporation ("Tandy") the assets and businesses of its
foreign retail operations, conducted in Canada under the "RadioShack" and "Tandy
Computer Center" trade names, in Australia under the "Tandy Electronics" trade
name and in the United Kingdom and Europe under the "Tandy" trade name.
Following the transfer of assets, on January 16, 1987 Tandy distributed shares
of InterTAN common stock to the Tandy stockholders in a tax free distribution on
the basis of one InterTAN share for every ten Tandy shares held. Thus Tandy
effected a spin-off and divestiture of its entire foreign retail operations and
its then entire ownership interest in InterTAN and its operations, thereby
constituting InterTAN as an independent public corporation.
FACTORS THAT COULD AFFECT FUTURE PERFORMANCE
This report contains certain forward looking statements about the
business and financial condition of InterTAN, Inc. ("InterTAN" or the
"Company"), including various statements contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The forward-
looking statements are reasonably based on current assumptions regarding
important risk factors. Accordingly, actual results may vary significantly from
those expressed in the forward looking statements, and the inclusion of such
statements should not be regarded as a representation by the Company or any
other person that the anticipated results expressed therein will be achieved.
The following information sets forth certain factors that could cause the actual
results to differ materially from those contained in forward looking statements.
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Reliance on Tandy Relationship. Tandy, including certain of its
affiliates, is the Company's principal supplier, is the licensor of the
Company's principal trade names, and is a secured creditor of the Company.
Maintaining its contractual relationships, particularly the supply and license
arrangements, with Tandy is critical to the Company. The loss of such
relationships with Tandy would have a material adverse effect on the Company.
See "Business - Suppliers", "- Merchandise, License and Advertising Agreements"
and Note 3 to the Notes to Consolidated Financial Statements contained in
InterTAN's 1996 Annual Report to Stockholders.
Quarterly Variations; Seasonality. The Company's quarterly results of
operations may fluctuate significantly as the result of the timing of the
opening of, and the amount of net sales contributed by, new stores and the
timing of costs associated with the selection, leasing, construction and
opening of new stores, as well as seasonal factors, product introductions and
changes in product mix. The Company's business is seasonal, with sales and
earnings being relatively lower during the fiscal quarters other than the second
fiscal quarter which includes the Christmas selling season. Adverse business and
economic conditions during this period may adversely affect results of
operations. In addition, excluding the effects of new store openings, the
Company's inventories and related short-term financing needs are seasonal,
with the greatest requirements occurring during its second fiscal quarter. The
Company's financial results for a particular quarter may not be indicative of
results for an entire year and the Company's revenues and/or expenses will vary
from quarter to quarter. The Company's operating results may also be affected by
changes in global economic conditions in the markets where its stores are
located, as well as by weather and other natural conditions. See "Business -
Other - Seasonality" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Competition. The retailing industry in which the Company operates is
highly competitive. Products substantially similar to those sold through the
Company's retail outlets are sold by many other retail stores, including
department and discount stores, consumer electronics chains and computer
outlets. The nature and extent of competition differs from store to store and
also from product line to product line. Certain of the Company's competitors are
larger, have a high degree of market recognition and have greater resources,
financial or otherwise, than the Company. In addition, some large United States
retailers have recently expanded into the Canadian market.
The Company believes that the major competitive factors in its
businesses include customer service, store location, product availability and
selection, price, technical support, and marketing and sales capabilities. The
Company's utilization of trained personnel and the ability to use national and
local advertising media in each country in which it operates are important to
the Company's ability to compete in its businesses. Given the highly competitive
nature of the retail industry, no assurances can be given that the Company will
continue to compete successfully with respect to the above-referenced factors.
See "Business - Geographic Analysis."
Product Supply. The Company's merchandise strategy places heavy emphasis
on private label products. These products are typically sourced for the Company
in the Far East and manufactured to the Company's order and specification.
Consequently, private label products require larger minimum order quantities and
longer lead times than nationally branded product which is generally available
locally on reasonably short notice. There can be no assurance that the Company
will be able to arrange for the production of private label goods to the level
required to meet its merchandising objectives. The
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private label goods being sourced by the Company in the Far East are also
typically purchased by Tandy and are, therefore manufactured to North American
standards. These products are, with minor, and in many cases no, modifications,
suitable for sale in Canada. However, the Company's Australian and U.K.
operations require products using voltage and other specifications which differ
from North American standards. There can be no assurance that vendors will agree
to manufacture products to these specifications in quantities that are
affordable to the Company. Delays in the timing of arrival of goods from the Far
East could also have an adverse impact on the Company's business, particularly
delays during the Christmas selling season. See "Business - Business Strategy"
and "- Products."
Dependence on Product Development. The Company's operating results are,
and will continue to be, subject in part to the introduction and acceptance of
new products in the consumer electronics industry. Fluctuations in consumer
demand, which could be caused by lack of successful product development, delays
in product introductions, product related difficulties or lack of consumer
acceptance, could adversely affect the growth rate of sales of products and
services and could adversely affect the Company's operating results. The
Company's operating results are also affected by its ability to anticipate and
quickly respond to the changes taking place in its markets as consumers' needs,
interests and preferences alter with time. There can be no assurance that the
Company will be successful in this regard. See "Business - Products and
Distribution" and "- Business Strategy - Strategic Alliances."
Offering Additional Products and Services. The Company's strategy,
particularly in Canada due to its alliance with Rogers Cantel, Inc., includes
offering additional communications products and services, which may include,
among others, paging, cable television, home security monitoring and
communication, cellular phone service, local phone service, and Internet access.
Entry into new markets entails risks associated with the state of development of
the market, intense competition from companies already operating in those
markets, potential competition from companies that may have greater financial
resources and experience than the Company, and increased selling and marketing
expenses. There can be no assurance that the Company's products or services will
receive market acceptance in a timely manner, or at all, or that prices and
demand in new markets will be at a level sufficient to provide profitable
operations. See "Business - Products and Distribution" and "- Business
Strategy - Strategic Alliances."
Reliance on Successful Expansion. The Company's success is dependent in
part upon its ability to open and operate new stores on a profitable basis and
to increase sales at existing stores. The Company's performance is also
dependent to a significant degree upon its ability to hire, train and integrate
qualified employees into its operations. The Company plans to open approximately
20 new stores in fiscal 1997. There can be no assurances that the Company will
be able to locate and obtain favorable store sites to meet its expansion goals,
attract and retain competent personnel, open new stores on a timely and cost-
efficient basis or operate the new and existing stores on a profitable basis.
The Company plans to open new stores in existing markets, which may result in
the diversion of sales from existing stores and thus some reduction in
comparable store sales. See "Business" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Net Sales and Operating
Revenues."
Need for Additional Financing. The Company requires substantial capital
to fund its inventory purchases and store openings and renovations.
Consequently, the Company's ability to grow
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and the future of its operations will be affected by the availability of
financing and the terms thereof. There can be no assurance that the Company will
have access to the financing necessary to meet its growth plans or that such
financing will be available to the Company on favorable terms. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources."
Possible Income Tax Reassessments. The Company is in discussion with
Revenue Canada regarding several issues relating to the Company's spin-off from
Tandy and the Company's former operations in continental Europe. If Revenue
Canada were to prevail in its stated position on these matters, after the
Company had unsuccessfully pursued a11 rights of appeal, the Company would
likely need to seek additional financing. Depending on the level of
reassessments, the Company may also need to seek additional financing to post
deposits necessary to pursue its rights of appeal. There can be no assurance
that such additional financing would be available. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Income Taxes"
and "- Liquidity and Capital Resources."
Management Information Systems. The Company's success is dependent to a
significant degree upon the accuracy and proper utilization of its management
information systems. For example, the Company's ability to manage its
inventories, accounts receivable, accounts payable and to price its products
appropriately, depends upon the quality and utilization of the information
generated by its management information systems. In addition, the success of the
Company's expansion plan is dependent to a significant degree upon its
management information systems. The failure of the Company's management
information systems to adapt to business needs resulting from, among other
things, expansion of its store base and the further development of its various
businesses, could have a material adverse effect on the Company. See "Business-
Management Information Systems."
Volatility of Stock Price. The price of the Common Stock may be subject
to significant fluctuations in response to the Company's operating results,
developments in the consumer electronics industry, general market movements,
economic conditions, and other factors. For example, announcements of
fluctuations in the Company's, its vendors' or its competitors' operating
results, and market conditions for growth stocks or retail industry stocks in
general, could have a significant impact on the price of the Common Stock. In
addition, the U.S. stock market in recent years has experienced price and volume
fluctuations in general that may have been unrelated or disproportionate to the
operating performance of individual companies. These fluctuations, as well as
general economic and market conditions, may adversely affect the market price of
the Common Stock and the ability of the Company to access the capital markets,
if necessary, to finance its future operations. See "Market for the Registrant's
Common Equity and Related Stockholder Matters" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
Currency Fluctuation and Global Economic Risks. The Company's financial
results are reported in U.S. Dollars. Due to the structure of the Company's
operations, possible periodic fluctuation of local currencies against the U.S.
dollar will have an impact on the Company's financial results. The Company's
subsidiaries conduct business in several foreign currencies; accordingly,
depreciation in the value of those currencies against the U.S. dollar reduces
earnings as reported by the Company in its financial statements. The Company and
its subsidiaries purchased approximately 30% of their inventory through Tandy in
fiscal 1996. These purchases were all made in U.S. dollars and the products
purchased were sold in Canada, the United Kingdom and Australia in local
currencies.
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Accordingly, exchange rate fluctuations could have a significant effect on the
Company's gross margins. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations."
Currency exchange rates may fluctuate significantly over short periods
of time. Such rates generally are determined by the forces of supply and demand
in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates, and other
complex factors, as seen from an international perspective. Currency exchange
rates also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks, or the failure to intervene, or by currency
controls or political developments in the United States or abroad.
Furthermore, due to the nature of the Company's operations, the
operating results of the Company may, from time to time, be generally affected
by global economic and political conditions and such conditions in each
particular country in which the Company operates.
DESCRIPTION OF BUSINESS
InterTAN is engaged principally in the sale of consumer electronics
products and services through company-operated retail stores and dealer outlets
in Canada, the United Kingdom and Australia. The Company also sells product to
direct resellers and end users in certain European countries where the Company
has no company-operated stores or licensed dealers. InterTAN's ongoing retail
operations are conducted through three wholly-owned subsidiaries, InterTAN
Australia Ltd. ("InterTAN Australia"), a New South Wales corporation which
operates in Australia under the trade name "Tandy Electronics", InterTAN Canada
Ltd. ("InterTAN Canada"), an Alberta corporation which operates in Canada under
the trade name "RadioShack", and InterTAN U.K. Limited ("InterTAN U.K."), a U.K.
corporation which operates in the United Kingdom under the "Tandy" trade name.
As used herein, "InterTAN" or "Company" sometimes collectively refers to
InterTAN, InterTAN Australia, InterTAN Canada and InterTAN U.K., accordinng to
the context.
In May 1993, InterTAN announced it was discontinuing its continental
European operations. These operations were closed during fiscal year 1994. In
addition, InterTAN Canada no longer trades under the Tandy Computer Center trade
name.
As at June 30, 1996, InterTAN's company-operated retail stores and
dealers totaled 1,780 consisting of 450 company-operated and 402 dealer stores
in Canada, 345 company-operated and 171 dealer stores in the U.K., and 210
company-operated and 202 dealer stores in Australia. InterTAN's company-operated
retail stores are located primarily in leased premises. The "dealers" included
in the above totals are independent retail businesses which operate under their
own trade names but are permitted, under dealer agreements, to purchase any of
the products sold by company-operated stores. The dealer agreements contain a
sub-license permitting such dealer to designate its consumer electronics
department or business as a "RadioShack Dealer", a "Tandy Dealer", or a "Tandy
Electronics Dealer", as applicable.
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EMPLOYEES
As at June 30, 1996 InterTAN employed approximately 4,300 persons.
Approximately 130 of InterTAN Canada's employees are represented by unions.
Those employees are engaged in InterTAN Canada's warehousing and distribution
operations and in the Company's stores in the province of Manitoba.
Approximately 60 of InterTAN Australia's employees are represented by three
separate unions. Approximately 30 of those individuals are employed in
warehousing operations while the balance, who are repair technicians and
security monitoring staff, are represented by separate unions.
PRODUCTS AND DISTRIBUTION
InterTAN's stores carry a broad range of private label and brand name,
moderately priced, quality consumer electronics products. The Company's private
label products are similar, and in many instances identical, to those sold
through Tandy's RadioShack retail stores in the United States. The selection of
products offered for sale is comprehensive ranging from, among other things,
small parts and accessories to large ticket items such as stereo systems and
computers. Classes of product include: parts and accessories, audio and video
products, computer hardware and software, communication equipment, cellular
phones and other wireless services, personal electronics products, telephones
and fax machines, batteries and other small electronic items. It is management's
view that the range of products offered by InterTAN is broader than that
typically offered by others in the retail consumer electronics industry. The
product line in InterTAN stores varies from country to country due to product
availability, local laws, regulations and consumer preferences. The trade-marks
RadioShack, Optimus and Tandy are used under license from Tandy; the Company's
trade-marked brands include Genexxa and Techcessories. See "Merchandise, License
and Advertising Agreements - License Agreements." InterTAN also offers its
customers a selection of brand name products including, among others, Panasonic,
AT&T, Compaq, IBM, Sony, Fisher, Microsoft and Sanyo (the lack of a (R), TM or
SM is not intended, regarding a11 of the names referred to herein above, to
indicate a lack of registration therefor). These brand name products have been
selected to complement InterTAN's own private label lines either as extensions
or to offer consumers a choice against which they may compare the relative
capability and value of InterTAN'S private label products. Brand name goods are
also used to test new products. Products substantially similar to those sold
through InterTAN's retail outlets are sold by many other retail stores,
including department stores, consumer electronics chains and computer outlets.
In addition, management believes InterTAN is recognized as the leading
retailer of certain categories of products (e.g., scanners and multi-testers),
as being a primary source for other specific products (e.g., parts and
accessories and cellular phones) and as having the widest selection in a given
category (e.g., batteries). These areas of specialty and market leadership
typically generate higher gross margin returns relative to certain of the
Company's other product lines.
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1996 SALES BY PRODUCT GROUP
(Rounded to nearest 1%)
Product Group Total
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Audio/Video 18%
Parts & Accessories 22%
Computers 14%
Communications 6%
Personal Electronics 9%
Other 31%
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100%
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InterTAN believes that it has an efficient product distribution system
and efficient store operations systems and procedures. InterTAN has
traditionally emphasized store operations and has developed information systems
to monitor and control store performance.
The store format typically incorporates the concept of small,
strategically located stores mostly in primary and secondary retailing centers,
and provides the customer with convenience and readily available products to
meet a wide range of consumer electronic needs. InterTAN emphasizes product
knowledge and customer service. Management believes that many customers perceive
store personnel as having superior product knowledge and are, accordingly, a
trusted information resource for consumers. InterTAN also provides after-sale
service for all the products it sells during warranty periods and beyond. The
Company has adapted RadioShack USA's "Repair Shop at RadioShack" program in each
of its three markets. Under this program the Company offers out of warranty
service to customers to repar a wide range of nationally branded electronic
products. Regional service centers provide repair capability within a
satisfactory turnaround period.
MANAGEMENT INFORMATION SYSTEMS
The Company has a network of point-of-sale terminals in every company-
operated store in each of the three countries in which it operates. Each of the
Company's stores has at least one or more computers which serve as point-of-sale
terminals and are linked to operations headquarters in the particular country.
This information network, referred to as EPOS, provides detailed sales and
margin information on a daily basis, updates InterTAN's customer database and
provides improved financial controls, as well as acting as a monitor of
individual store performance. In Canada and the United Kingdom, EPOS is also
linked directly to a system used to automatically replenish a store's stock as
inventory is sold. These programs are store specific and not only ensure that
stores are fully stocked with inventory in adequate and appropriate quantities
but also relieve store managers of time consuming stock ordering duties, leaving
them more time to spend with customers and staff. Management is currently in the
process of integrating automatic inventory replenishment into the EPOS system in
Australia. While various aspects of this system are currently operational,
implementation of the entire program will not be completed until the fourth
quarter of fiscal year 1997.
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SUPPLIERS
InterTAN acquires approximately 30% of its inventory pursuant to a
merchandise agreement with Tandy and acquires the balance from numerous other
manufacturers located in the United States and in the countries in which
InterTAN has operations. InterTAN uses Tandy's purchasing and export agent, A&A
International, Inc. ("A&A"), a wholly-owned subsidiary of Tandy, as its
exclusive purchasing agent and exporter in the Far East. See "Merchandise,
License and Advertising Agreements - Merchandise Agreements." In addition,
InterTAN Canada previously operated a small manufacturing plant which
manufactured TV antennas and CB car antennas and packaged miscellaneous parts
and accessories. This plant was closed during fiscal 1995 and the products
previously manufactured are now purchased locally or directly from Tandy or
through A&A.
InterTAN purchased approximately $95 million of products through Tandy
in fiscal 1996. This amount is exclusive of certain costs normally associated
with cost of goods such as duties, freight and certain taxes. Under its
merchandise arrangements with Tandy, InterTAN may purchase any products which
Tandy has available for sale in its then current RadioShack catalog, or those
products which may otherwise be reasonably available from Tandy or through A&A.
Through its ongoing relationship with Tandy, InterTAN is able to take advantage
of Tandy's sourcing strength to obtain products which management believes
generate gross margins which are higher than industry averages and which offer
enhanced customer value. InterTAN is not materially dependent on any one
supplier other than Tandy. See "Merchandise, License and Advertising
Agreements."
GEOGRAPHIC ANALYSIS
The principal geographic areas of operations for InterTAN are Canada,
Australia and the United Kingdom. InterTAN closed all company-operated outlets
in continental Europe during fiscal year 1994. InterTAN has broader market
coverage than most of its competitors due to the large number of stores in each
country in which it operates. Market coverage is further enhanced by the dealer
networks.
A table appears in Note 14 to the Consolidated Financial Statements
contained in InterTAN's 1996 Annual Report to Stockholders which appears on page
35 of Exhibit 13 to this Annual Report on Form 10-K which shows net sales,
operating profit and identifiable assets of the Company by geographic area for
the three years ended June 30, 1996. This table is incorporated herein by
reference.
Canada. As at June 30, 1996, InterTAN Canada operated a total of 450
RadioShack stores in Canada. In addition, a network of associated dealers
accounts for a further 402 Canadian RadioShack locations. InterTAN Canada uses a
form of contract management program in a small number of its company-operated
stores.
The consumer electronics industry in Canada is highly competitive. The
influx of "big box" retailers into the Canadian market, some of them with
origins in the United States, has added additional pressure to an already
competitive marketplace. These conditions have been made even more difficult by
the consumer's resistance to the price levels of the most recent generation of
personal computers. Further, digital satellite systems, which have made a
positive contribution to retailing results in the United States, have yet to be
introduced in Canada due to regulatory restrictions and supplier
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constraints. Management believes that InterTAN Canada's range of products and
service orientation differentiate the Company from other consumer electronics
retailers in Canada.
Based on publicly available material, InterTAN believes that the largest
retailers in Canada in fiscal 1996 (other than department stores) which have a
product line similar to, or competitive with, products offered for sale by
InterTAN Canada were:
Approximate No. of Stores:
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Future Shop 72
Adventure Electronique 139
InterTAN's other main competitors in Canada are department stores, general
retailers and other consumer electonics retailers.
InterTAN Canada's RadioShack stores are very similar to those operated
by Tandy in the United States. Because of its geographic proximity to the United
States, InterTAN Canada enjoys the benefit of name recognition, and advertising
in general, as many of Tandy's advertising programs penetrate the border through
media such as cable television and print media.
The Company is the market leader in Canada in the number of retail
locations and offers the broadest geographic coverage. InterTAN Canada also
maintains a strong presence in secondary retail markets through its dealer
network.
InterTAN Canada has a broad customer base. Management believes that the
Company is considered the primary place to shop for products and advice in
selected niches such as parts and accessories, cellular phones and personal
electronics.
United Kingdom. As at June 30, 1996, InterTAN U.K. had 345 company-
operated stores and 171 dealer stores in the U.K., all operating under the Tandy
name. Management has identified InterTAN U.K.'s primary competitors as:
Approximate No. of Stores:
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Dixons/Curry's Group 771
Regional Electricity Boards 695
Comet (Kingfisher Group) 234
Consumer electronics retailing is undergoing significant change in the
United Kingdom. In the last 18 months, the number of retail outlets has declined
by approximately 650; additionally, there has been a shift from traditional
"High Street" or similar downtown or in-town locations towards out-of-town
centers. While these out-of-town centers account for approximately 35% of total
consumer electronics retail sales, they tend to have a much different product
mix than stores located in the High Street, with 70% of sales coming from white
goods and large brown goods. This shift to out-of-town locations, combined with
the closure of several chains which previously traded in downtown locations,
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has left basically three competitors in the High Street - InterTAN U.K., Dixons
and independents. It is management's view that Dixons is InterTAN's most direct
competitor in the United Kingdom.
Management believes that the shift towards out-of-town retailing will
provide the Company with several strategic opportunities to fill the retail gap
left in the High Street. Management believes that certain customer profiles will
continue to shop in High Street locations and there will be continuing customer
demand for products such as portable electronics and accessories from recognized
retailers in those locations.
Australia. As at June 30, 1996 InterTAN Australia had 210 company-
operated stores and 202 dealer stores. Of the 210 company-operated retail
stores, 146 are operated under "contract management" arrangements. Under the
contract management arrangement, the store manager is not employed by InterTAN
Australia. InterTAN Australia supplies the store inventory. The store manager is
generally obliged to build up a cash deposit to InterTAN Australia amounting to
50% of the average stock value at the store. The gross profit attained by the
store is split between InterTAN Australia and the contract manager, who is
responsible for paying normal operating expenses such as labor and utility costs
out of his/her share of the gross profits. Out of its share of the gross
profits, InterTAN Australia is responsible for all payments and duties under the
relevant store lease and other fixed operating expenses. InterTAN Australia is
committed to providing warranty and service back-up, including advertising and
training. Management believes that the contract management program is successful
in improving margins and reducing costs by placing responsibility for bottom
line performance on the contract manager.
While the retailing of household goods in Australia is showing signs of
improvement, performance in this category is still weak in comparison with other
retail sectors, such as recreational goods and food. While the drought
conditions in certain parts of Australia are improving, the general economic
conditions in rural Australia continue to be poor. Further, the entrance into
Australia of several new category-killer chains has put pressure on both sales
and margins. In prior years, further turmoil was created in the marketplace as
several of the Company's competitors went through periods of financial
reorganization which resulted in downward pressure on pricing of certain
products.
As the economy in Australia begins to improve, the Company is positioned
to take advantage of the opportunity to increase sales by building on its market
strengths - a large number of convenient sales outlets, a broad product
offering, including many unusual and hard to find items, and a well - trained
and service oriented sales staff. With 412 company-operated and dealer
locations, InterTAN Australia is Australia's largest consumer electronics retail
chain in number of locations.
Management believes that InterTAN's primary competitors in Australia
are:
Approximate No. of Stores:
--------------------------
Vox 240
Brash 128
Dick Smith 78
Harvey Norman 59
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There are few fully independent consumer electronics retailers in Australia
since many of the independently owned electronics retailers are members of
large buying groups such as Betta and Retravision, each having approximately 300
and 525 members, respectively.
Business Strategy
In recent years, the Company had experienced gradually eroding margins
in its markets in Canada, Australia and the United Kingdom. Management believes
that one of the factors which contributed to this decline in margins was a shift
in the product mix from higher margin private label products, sourced primarily
through Tandy, to lower margin nationally branded products. In response to this
and other concerns, InterTAN has adopted a business strategy intended to refocus
the Company in its unique market niche and to incorporate many of the new
service initiatives created by Tandy's RadioShack division. As a first step in
implementing this strategy, the Company appointed new management at corporate
headquarters and in the Canadian and United Kingdom subsidiaries. A marketing
director was also added to the Australian subsidiary. These individuals were
recruited not only for their broad-based business skills, but more importantly
for their extensive retail experience. The new strategy also involved the
relocation of the Company's corporate headquarters from Canada to Fort Worth,
Texas. This step was intended to strengthen InterTAN's strategic relationship
with Tandy.
The Company has an agreement with Tandy to enable it to take advantage
of certain marketing and service initiatives introduced by RadioShack USA. These
include the positioning statement "You've got questions. We've got answers." and
the service initiatives: "The Repair Shop at RadioShack"; "RadioShack Express";
and "RadioShack Unlimited". See "Merchandise, License and Advertising
Agreements - Advertising Agreement." Being located in Fort Worth should better
enable the Company to maximize the benefits of these new initiatives. The key
elements of InterTAN's business strategy are discussed more fully below.
Products. InterTAN's strategy focuses on a product plan dedicated to
profitable sales growth by improving operating margins while at the same time
increasing sales. Cornerstones of this plan are a product offering which
includes a higher concentration of private label goods, emphasis on core
categories, simplifing the number of private label offerings and managing the
performance of lower margin product groups. This strategy will be complemented
by the introduction of certain of Tandy's service initiatives designed not only
to produce revenue in their own right, but also to increase traffic in the
Company's stores.
During fiscal year 1996, the Company's sales consisted of the following:
Private label goods 59%
Name brand goods 27%
Computers l4%
----
l00%
====
The Company's objective is to gradually increase the percentage in the
product mix of higher margin private label goods from the present level. In
order to achieve this objective, the Company is working more closely with A&A,
which should enable the Company to expand the range of private label products
available to its customers and to leverage Tandy's sourcing capabilities to
negotiate
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<PAGE>
favorable prices and product offerings with Far East vendors. Increasing the
level of private label products in the merchandise mix will be a gradual process
as these products require longer lead times. Success in attaining this goal
could also be influenced by a surge in popularity of products, such as personal
computers and cellular phones, for which no private label offering is currently
available.
InterTAN has identified six categories which yield attractive margins and in
which management believes the Company has a strong position in all of its
markets. These include parts and accessories, telephones (including answering
machines and fax machines), cellular phones, personal electronics products,
communications equipment and batteries. These categories are emphasized in the
Company's merchandising and marketing programs. InterTAN believes that regular
promotion of these items and displaying them in a prominent place in its stores
will result in higher sales and margins.
In prior periods the Company utilized on its private label goods several brand
names which were used under license from Tandy. In addition, InterTAN had
developed many of its own brand names. Management believes that the numerous
private label names then in use not only resulted in customer confusion but also
increased the Company's product sourcing and marketing costs. In response to
these concerns, the number of private label brand names has been reduced to
five. Three of those - RadioShack, Optimus and Tandy - are used under license
from Tandy. The remaining two - Genexxa and Techcessories - were developed and
are owned by InterTAN and are typically used on private label goods sourced from
a supplier other than Tandy.
The final cornerstone of InterTAN's product strategy is managing the impact of
lower margin product categories. These categories include but are not limited
to, computers and video games. The Company has de-emphasized sales of video
games in all of its operations and will, in most cases, only stock the most
popular items. The Company has also reached an agreement in Canada with a
leading supplier of video and computer games and software to stock those items
in RadioShack Canada stores on a sale or return basis. This has reduced
inventory costs and obsolescence risks associated with those products. While
computers yield relatively low margins, the Company believes it is necessary to
stock and display them to meet customer expectations and to stimulate sales of
higher margin accessories and components. To minimize the impact on overall
margins, the Company carefully monitors the level of computer sales to ensure
that their share of the total sales mix is kept at a manageable level.
STRATEGIC ALLIANCES. InterTAN has the largest number of sales outlets among
consumer electronics retailers in both Canada and Australia and is among the top
three in the United Kingdom. The Company has over twenty years of retail
experience in all of its markets and is known for its knowledgeable and
friendly sales associates. Management believes that there are opportunities to
leverage on this strength by forming strategic alliances with other businesses
which are also leaders in their respective fields.
An example of such an alliance is the retail association announced in the
fourth quarter of fiscal year 1996 between RadioShack Canada and Rogers Cantel,
Inc. ("Cantel"), Canada's only nationally-licensed wireless communications
company. Cantel will initially build 70 to 100 retail stores in major malls
across Canada; RadioShack Canada will manage the majority of those stores. The
stores will predominantly carry Cantel's existing and new products. However,
approximately one quarter of the selling space will be devoted to the Company's
end products and accessories. Additionally, most of
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RadioShack Canada's 450 company-operated stores will exclusively feature Cantel
wireless communications products and services. Cantel will fund the fixturing of
"Wireless Specialists" sections in those stores for the exclusive offering of
Cantel cellular products (including digital), paging and other services. This
relationship aligns the Company's consumer electronics retail expertise with
Cantel's technological strength.
The Company has already established alliances with major cellular carriers in
both Australia and the United Kingdom and will continue to pursue alliance
opportunities, to the extent practicable, in other areas of its business in all
three countries.
RETAIL OPERATIONS. InterTAN will maintain its current strategy of leasing
conveniently located stores in malls in Canada, malls and High Street locations
in the United Kingdom and malls and street locations in Australia. The Company
is also testing smaller formats, including the express store concept and retail
kiosks, in Canada and the United Kingdom. These formats feature a targeted range
of merchandise in a more compact floor plan and are established in high traffic
areas that do not presently have a company-operated store or which could support
a second location. A selected number of clearance stores are also being tested
in the United Kingdom.
ADVERTISING. Traditionally, InterTAN's advertising approach has been strongly
product and price oriented and skewed heavily toward the utilization of print
media with broadcast media support only occurring during the Christmas selling
season. During fiscal year 1996, the Company added informative image
advertising to promote its strength of having knowledgeable and service
oriented sales associates whom consumers can trust to take the "technological
mystery" out of their electronics purchases. Also, specific advertising with an
emphasis on service was created as The Repair Shop program and other service
initiatives were launched in each of the countries, thereby giving consumers
additional reasons to buy, other than promotional prices alone. This strategy
was supported by additional television image advertising outside of the
Christmas period. In addition, InterTAN's flyer, catalog, newspaper insert and
other newspaper advertising programs now carry the "You've got questions. We've
got answers." positioning statement. The Repair Shop program and additional
service initiatives were also featured as they were introduced. The Company
continues to rely on a strong flyer program including direct mailings to
households, newspaper inserts and other forms of distribution of its pre-printed
advertising material. In Canada, for example, during fiscal year 1996 the
Company's flyer program reached over 50% of Canadian households on a regular
basis. Additional direct mail promotions were made to encourage repeat business
in the Company's core categories where it has strong market positions and
attractive margins. As well, innovative credit promotions and extended product
warranties were offered and featured in the Company's advertising.
INVENTORY AND DISTRIBUTION. Management believes that initiatives taken in the
Management Information Systems area, including the installation of EPOS systems
in all three countries and the use of automatic stock replenishment in Canada
and the United Kingdom, combined with increased management attention focused on
inventory flow, have generated higher inventory turns. The inventory turn ratio
had increased steadily in recent years rising from 1.67 for fiscal year 1993 to
1.81 for the 1994 fiscal year and to 1.86 for fiscal year 1995. While management
has continued to focus on inventory control, the additional inventory
requirements needed to increase sales of private label goods (see "Business
Strategy - Products") have made it difficult to maintain inventory turns at
fiscal year 1995 levels. Consequently, inventory turns decreased to 1.83 for
fiscal year 1996. The larger
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<PAGE>
minimum order size and longer lead time associated with private label purchases
present risks that cannot be eliminated.
Management believes that InterTAN's warehouse facilities are generally well
located and efficent in each country. Late in fiscal year 1995, the parts
warehouse in Canada was consolidated with the central warehouse to take
advantage of excess capacity. This action has resulted in lower costs and
improved effectiveness. A number of changes were made to the warehouse in the
United Kingdom, including recruitment of new management, changes to the physical
layout and improved security, all intended to improve performance, productivity
and cost control.
Management implemented improvements to its material handling systems in
fiscal 1994 wich continue to increase productivity. Specifically, an electronic
material picking system was installed in InterTAN's Canadian warehouse
operations, which has increased the speed, accuracy and efficiency of inventory
distribution. During fiscal year 1995, a new system for picking parts was
introduced in Canada which has further increased the efficiency of inventory
distribution. In the United Kingdom, a conveyorized batch picking system was
installed late in fiscal year 1994 which has improved productivity and the flow
of goods. During fiscal year 1995, InterTAN U.K. commenced a major enhancement
of its computer hardware and software. The roll out of this new system was
completed in fiscal year 1996 and has produced improved warehousing and
distribution efficiencies. Early in fiscal year 1996, a new carrier was engaged
in the United Kingdom to distribute inventory from the warehouse to the stores.
One of the benefits of this new arrangement is the more frequent inventory
replenishment of the InterTAN U.K. stores.
MERCHANDISE, LICENSE AND ADVERTISING AGREEMENTS
MERCHANDISE AGREEMENT. In October 1993 the Company and Tandy entered into a
new Merchandise Agreement. This agreement requires the Company to use A&A as
its exclusive exporter of products from the Far East during the term thereof.
Consequently, the Company must pay A&A an annual purchasing agent/exporter fee
equal to $1 million plus 0.2% of the Company's consolidated sales in excess of
$500 million less certain credits the Company earns by purchasing products from
Tandy and A&A.
The Merchandise Agreement originally required the Company to provide
irrevocable letters of credit to A&A in support of 100% of outstanding
inventory purchase orders. In May 1994, this provision was amended to lower the
level of letter of credit coverage to a minimum of 60% during the December to
April period gradually rising to 90% in August. In October, 1995, agreement was
reached to further lower the letter of credit requirements on certain Canadian
purchases. The Company has recently reached agreement with Tandy whereby the
same reduced letter of credit requirements have been extended to the Company's
other subsidiaries.
The terms of the various commissions and fees payable by InterTAN to Tandy
under the Merchandise Agreement are to be reviewed by the parties during the six
month periods ending June 30, 2000 and June 30, 2005. In the event that
satisfactory agreement regarding such terms is not reached following such
reviews, the Merchandise Agreement may be canceled by either party following
180 days prior written notice.
15
<PAGE>
LICENSE AGREEMENTS. In October and November, 1993 the Company entered into a
series of license agreements with Tandy. These agreements permit InterTAN to use
the "RadioShack" trade name in Canada, the "Tandy" trade name in the United
Kingdom and the "Tandy Electronics" trade name in Australia and New Zealand.
Effective July 1, 1996, the expiry dates of these license agreements were
extended from June 30, 2000 to June 30, 2006, with automatic annual extensions
to June 30, 2010. The license agreements may be terminated with five years
prior written notice by either party. Each of the license agreements also
provides for a license to use certain of Tandy's trademarks. In addition,
InterTAN has the right to sublicense to its dealers and franchisees.
In consideration for these rights, the Company was obliged to pay a royalty of
0.25% of consolidated sales beginning in fiscal year 1996. This royalty will
increase by up to 0.25% each fiscal year until it reaches a maximum of up to
1.0% in fiscal year 1999.
Both the Merchandise Agreement and the license agreements may be revoked by
Tandy in the event of a change in control of InterTAN, the default by the
Company in payment of certain indebtedness owing to Tandy or a breach of the
terms of the agreements.
The rights to use the trade names licensed by Tandy are currently, and in
varying degrees (depending on the country of business), essential to InterTAN's
marketing ability. The loss of the licenses, particularly the license for the
RadioShack trade name for Canada, could have a material adverse impact on the
business of InterTAN. Because Tandy's U.S. advertising program includes
television advertising received in parts of Canada, and because InterTAN
Canada's RadioShack stores have a high profile and wide acceptance, the
license to use Tandy's trademarks in Canada is more valuable than in the
other countries in which InterTAN operates.
ADVERTISING AGREEMENT. In June 1995, the Company announced an advertising
agreement (the "InterTAN Advertising Agreement") with Tandy. Under the terms of
the InterTAN Advertising Agreement, the Company is entitled to the limited use
of certain materials and marks developed by or for Tandy since January 1, 1994,
including the service marks and the trademarks "The Repair Shop at RadioShack",
"RadioShack Unlimited" and "You've got questions. We've got answers." The right
to use any marks covered by the InterTAN Advertising Agreement are vested in the
Company by being added to the license agreements described above. In
consideration for use of the materials and marks developed during calendar year
1994, the Company paid to Tandy a one-time license fee of $100,000. With respect
to materials and marks developed during the term of the agreement, the Company
has agreed to pay to Tandy 6% of Tandy's cost, as defined, of developing such
materials and marks. The agreement currently expires December 31, 1996 but may,
at the Company's request, and at Tandy's option, be extended.
OTHER
SEASONALITY. InterTAN's business is seasonal, with sales peaking in the
November - December Christmas selling season. The United Kingdom and Australian
operations were historically reported with a one month lag. Effective with
fiscal year 1995, these subsidiaries changed their fiscal year end from May 31
to June 30 to coincide with that of the parent company. This change in reporting
did not have a material effect on the annual consolidated financial statements.
Cash flow requirements are also
16
<PAGE>
seasonal since inventories build prior to the Christmas selling season.
Significant inventory growth for all operations typically begins to build in
late summer and peaks in mid November.
COMPETITION. InterTAN is a specialty consumer electronics retailer and
management is not aware of any direct competitors in the niche market in which
the Company operates in most of InterTAN's markets. However, products
substantially similar to many of those sold through InterTAN's retail outlets
are sold by many other retail stores, including department and discount stores,
consumer electronics chains and computer outlets. See "Geographic Analysis."
Some of these competitors have greater resources, financial or otherwise, than
InterTAN.
Item 2. PROPERTIES.
InterTAN owns three facilities consisting of a 412,000 square-foot
building (owned by InterTAN Canada) containing office and warehouse space in
Barrie, Ontario, Canada, where the headquarters of InterTAN Canada are
located, a 152,000 square-foot building (owned by InterTAN Australia) containing
office and warehouse space in Mount Druitt, New South Wales, Australia, where
the headquarters of InterTAN Australia are located, and a 43,000 square-foot
building (owned by InterTAN U.K.) located near Birmingham, England, where the
headquarters for InterTAN U.K. and a properties warehouse are located.
IntertTAN U.K. leases three facilities totaling 136,000 square feet near
Birmingham, England in which the Company's distribution center and repair
facilities are located.exit
InterTAN's head office is located in a 6,675 square-foot facility in Fort
Worth, Texas.
With the exception of a retail store being located in each of InterTAN's three
owned properties discussed above, InterTAN's retailing operations are primarily
conducted in leased facilities. The average store size is between 1,200 and
1,800 square feet.
For additional information concerning InterTAN's properties, the following
sections of Exhibit 13 attached hereto are hereby incorporated by reference:
Page
----
Rent Expense 17
Retail Square Feet 1
Sales Outlets 13
Item 3. LEGAL PROCEEDINGS.
With the exception of the matters discussed in Notes 5 and 9 of the Notes to
Consolidated Financial Statements contained in InterTAN's 1996 Annual Report to
Stockholders which appear on pages 29 and 30 and 32, respectively, of Exhibit 13
attached hereto, such Notes being incorporated herein by reference, there are no
material pending legal proceedings, other than ordinary routine litigation
incidental to InterTAN's business, to which InterTAN or any of its subsidiaries
is a party or to which any of their property is subject.
17
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The principal United States market in which InterTAN's common stock
trades is the New York Stock Exchange. The common stock also trades in Canada on
the Toronto Stock Exchange.
The high and low closing sales prices (in U.S. dollars), as reported by
the New York Stock Exchange, of InterTan's common stock for each full quarterly
period within the two most recent fiscal years are set out below:
Quarter Ended High Low
------------- ----- ---
June 1996 6 7/8 5 1/4
March 1996 6 1/2 4 5/8
December 1995 9 3/8 7 1/8
September 1995 10 7 1/4
June 1995 7 7/8 6 5/8
March 1995 8 7/8 6 3/4
December 1994 8 3/4 6 3/4
September 1994 7 3/8 5 1/2
As of September 16, 1996, there were approximately 11,700 recordholders of
InterTAN's common stock.
InterTAN has never declared cash dividends. Based upon InterTAN's
long-term growth opportunities, in the opinion of management, the stockholders
are best served by InterTAN pursuing a strategy of reinvesting all profits.
Further, InterTAN is currently precluded from paying dividends under both the
Tandy Loan Agreement and the Syndicated Loan Agreement.
ITEM 6. SELECTED FINANCIAL DATA.
"Financial Highlights" contained in InterTAN's 1996 Annual Report to
Stockholders which appears on page 1 of Exhibit 13 attached hereto is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" contained in InterTAN's 1996 Annual Report to Stockholders which
appears on pages 13 through 21 of Exhibit 13 attached hereto is incorporated
herein by reference.
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<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following reports, statements and notes contained in InterTAN's 1996
Annual Report to Stockholders which appear on the indicated pages of Exhibit 13
attached hereto are incorporated herein by reference:
Report of Independent Accountants - page 38
Consolidated Statements of Operations - Three years ended June 30, 1996
- page 22
Consolidated Balance Sheets - Two years ended June 30, 1996 - page 23
Consolidated Statements of Cash Flows - Three years ended June 30, 1996
- page 24
Consolidated Statements of Stockholders' Equity - Three years ended June
30, 1996 - page 25
Notes to Consolidated Financial Statements - pages 26-37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There has been no change in independent accountants and no disagreement
with any independent accountant on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure during
the period since the end of fiscal 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this Item with respect to directors and
executive officers has been omitted pursuant to General Instruction G(3) to Form
10-K. This information is incorporated by reference from the 1996 definitive
proxy statement filed with the Securities and Exchange Commission pursuant to
Regulation 14A.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item with respect to executive
compensation has been omitted pursuant to General Instruction G(3) to Form
10-K. The information is incorporated herein by reference from the 1996
definitive proxy statement filed with the Securities and Exchange Commission
pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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) to Form 10-K. This information is incorporated by
reference from the 1996 definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Regulation 14A.
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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) to Form 10-K. This information is
incorporated by reference from the 1996 definitive proxy statement filed
with the Securities and Exchange Commission pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
(1) Financial Statements
The consolidated financial statements of InterTAN
incorporated by reference in this Form 10-K are listed
in the index given in Item 8.
(2) Financial Statement Schedules:
Financial Statement Schedule VIII is filed herewith.
All other financial statement schedules are omitted
because they are not applicable or the required
information is included in the consolidated financial
statements or Management's Discussion and Analysis of
Financial Condition and Results of Operations in the
Company's 1996 Annual Report to Stockholders and
included in Exhibit 13 attached hereto.
(3) Exhibits required by Item 601 of Regulation S-K:
Exhibit No. Description
----------- -----------
3(a) Restated Certificate of Incorporation
(Filed as Exhibit 3(a) to InterTAN's
Registration Statement on Form 10 and
incorporated herein by reference).
3(a)(i) Certificate of Amendment of Restated
Certificate of Incorporation (Filed
as Exhibit 3(a)(i) to InterTAN's
Annual Report on Form 10-K for fiscal
year ended June 30, 1995 and
incorporated herein by reference).
3(a)(ii) Certificate of Designation,
Preferences and Rights of Series A
Junior Participating Preferred Stock
(Filed as Exhibit 3(a)(i) to
InterTAN's Registration Statement on
Form 10 and incorporated herein by
reference).
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<PAGE>
3(b) Bylaws (Filed as Exhibit 3(b) to InterTAN's Registration
Statement on Form 10 and incorporated herein by reference).
3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as Exhibit
3(b)(i) to InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1990 and incorporated herein by reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as Exhibit
3(b)(ii) to InterTAN's Annual Report on Form 10-K for fiscal
year ended June 30, 1995 and incorporated herein by reference).
* 3(b)(iii) Amended and Restated Bylaws.
4(a) Articles Fifth and Tenth of the Restated Certificate of
Incorporation (included in Exhibit 3(a)).
4(b) Amended and Restated Rights Agreement between InterTAN, Inc. and
The First National Bank of Boston (Filed as Exhibit 4(b) to
InterTAN's Report on Form 8-K dated September 25, 1989 and
incorporated herein by reference).
4(c) Trust Indenture securing the issue of 9% Convertible
Subordinated Debentures due August 30, 2000 (Filed as Exhibit
4(c) to InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1993 and incorporated herein by reference).
10(a) InterTAN, Inc. Restated 1986 Stock Option Plan (as amended as of
February 22, 1994 and April 18, 1995) (Filed as Exhibit 10(a) to
InterTAN's Annual Report on Form 10-K for fiscal year ended June
30, 1995 and incorporated herein by reference).
10(b) InterTAN, Inc. Restated 1991 Non-Employee Director Stock Option
Plan (as amended through February 21, 1994) (Filed as Exhibit
10(b) to InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1995 and incorporated herein by reference).
10(c) Secured Loan Agreement with Trans World Electronics, Inc. (Filed
as Exhibit 10(g) to InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1993 and incorporated herein by
reference).
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<PAGE>
10(c)(i) First Amendment to Secured Loan Agreement with Trans World
Electronics, Inc. dated January 4, 1994 (Filed as Exhibit
10(e)(i) to InterTAN's Annual Report on Form 10-K for fiscal
year ended June 30, 1994 and incorporated herein by reference).
10(c)(ii) Second Amendment to Secured Loan Agreement with Trans World
Electronics, Inc. dated as of May 6, 1994 (Filed as Exhibit
10(g)(i) to InterTAN's Quarterly Report on Form 10-Q for quarter
ended March 31, 1994 and incorporated herein by reference).
10(d) Warrant Agreement with Trans World Electronics, Inc. (Filed as
Exhibit 10(h) to InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1993 and incorporated herein by
reference).
10(e) Registration Rights Agreement between InterTAN, Inc. and Trans
World Electronics, Inc. (Filed as Exhibit 10(i) to InterTAN's
Annual Report on Form 10-K for fiscal year ended June 30, 1993
and incorporated herein by reference).
10(f) Employment Agreement between InterTAN, Inc. and James T. Nichols
dated January 1, 1995 (Filed as Exhibit 10(ii) to InterTAN's
Quarterly Report on Form 10-Q for quarter ended March 31, 1995
and incorporated herein by reference).
10(g) Employment Agreement between InterTAN, Inc. and David S.
Goldberg dated February 3, 1995 (Filed as Exhibit 10(iii) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended March
31, 1995 and incorporated herein by reference).
10(h) Employment Agreement between InterTAN, Inc. and John A. Capstick
dated February 20, 1995 (Filed as Exhibit 10(iv) to InterTAN's
Quarterly Report on Form 10-Q for quarter ended March 31, 1995
and incorporated herein by reference).
10(h)(i) Letter dated December 6, 1995 extending term of employment
agreement for John A. Capstick (Filed as Exhibit 10(b) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended
December 31, 1995 and incorporated herein by reference).
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<PAGE>
10(i) Employment Agreement between InterTAN, Inc. and James G.
Gingerich dated March 1, 1995 (Filed as Exhibit 10(v) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended March
31, 1995 and incorporated herein by reference).
10(j) Employment Agreement between InterTAN, Inc. and Douglas C.
Saunders dated March 10, 1995 (Filed as Exhibit 10(vi) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended March
31, 1995 and incorporated herein by reference).
10(k) Minutes of Settlement dated April 13, 1995 between InterTAN,
Inc. and James B. Williams (Filed as Exhibit 10(k) to InterTAN's
Annual Report on Form 10-K for fiscal year ended June 30, 1995
and incorporated herein by reference).
10(1) Retirement and Severance Agreement dated July 31, 1994 between
InterTAN, Inc. and Louis G. Neumann (Filed as Exhibit 10(1) to
InterTAN's Annual Report on Form 10-K for fiscal year ended June
30, 1995 and incorporated herein by reference).
10(m) Merchandise Agreement dated October 15, 1993 between InterTAN,
Inc., InterTAN Canada Ltd., InterTAN U.K. Limited, InterTAN
Australia Ltd., Technotron Sales Corp. Pty. Limited, Tandy
Corporation and A&A International, Inc. (Filed as Exhibit 10(m)
to InterTAN's Quarterly Report on Form 10-Q for quarter ended
December 31, 1993 and incorporated herein by reference).
10(m)(i) First Amendment to Merchandise Agreement dated November 1, 1993
(Filed as Exhibit 10(m)(i) to InterTAN's Quarterly Report on
Form 10-Q for quarter ended March 31, 1994 and incorporated
herein by reference).
10(m)(ii) Second Amendment to Merchandise Agreement dated October 2, 1995
(Filed as Exhibit 10 to InterTAN's Quarterly Report on Form 10-Q
for quarter ended September 30, 1995 and incorporated herein by
reference).
10(m)(iii) Third Amendment to Merchandise Agreement dated February 1, 1996
(Filed as Exhibit 10(b) to InterTAN's Quarterly Report on Form
10-Q for quarter ended March 31, 1996 and incorporated herein by
reference).
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<PAGE>
10(n) License Agreement dated November 4, 1993 between Tandy
Corporation and InterTAN Australia Ltd. (Filed as Exhibit 10(n)
to InterTAN's Quarterly Report on Form 10-Q for quarter ended
December 31, 1993 and incorporated herein by reference).
10(o) License Agreement dated November 4, 1993 between Tandy
Corporation and InterTAN U.K. Limited (Filed as Exhibit 10(o) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended
December 31, 1993 and incorporated herein by reference).
10(o)(i) First Amendment to License Agreement (United Kingdom) between
InterTAN U.K. Limited and Tandy Corporation dated April 21, 1995
(Filed as Exhibit 10(o)(i) to InterTAN's Annual Report on Form
10-K for fiscal year ended June 30, 1995 and incorporated herein
by reference).
10(p) License Agreement dated November 4, 1993 between Tandy
Corporation and InterTAN Canada Ltd. (Filed as Exhibit 10(p) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended
December 31, 1993 and incorporated herein by reference).
10(p)(i) First Amendment to License Agreement (Canada) between InterTAN
Canada Ltd. and Tandy Corporation dated March 24, 1995 (Filed as
Exhibit 10(i) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended March 31, 1995 and incorporated herein by
reference).
10(p)(ii) Second Amendment to License Agreement (Canada), Second Amendment
to License Agreement (United Kingdom), and First Amendment to
License Agreement (Australia and New Zealand), each dated
November 9, 1995 (Filed as Exhibit 10(a) to InterTAN's Quarterly
Report on Form 10-Q for quarter ended December 31, 1995 and
incorporated herein by reference).
* 10(p)(iii) Third Amendment to License Agreement (Canada), Third Amendment
to License Agreement (United Kingdom), and Second Amendment to
License Agreement (Australia and New Zealand), each dated June
26, 1996.
10(q) Credit Agreement dated as of May 6, 1994 (Filed as Exhibit
10(q) to InterTAN's Quarterly Report on Form 10-Q for quarter
ended March 31, 1994 and incorporated herein by reference).
24
<PAGE>
10(q)(i) Amending Agreement and Extension Agreement, each dated as of
April 25, 1995, amending and extending Credit Agreement (Filed
as Exhibit 10(q)(i) to InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1995 and incorporated herein by
reference).
10(q)(ii) Amending Agreement dated March 1, 1996, amending and extending
Credit Agreement (Filed as Exhibit 10(c) to InterTAN's Quarterly
Report on Form 10-Q for quarter ended March 31, 1996 and
incorporated herein by reference).
* 10(q)(iii) Amending Agreement dated June 25, 1996, amending and extending
Credit Agreement.
10(r) Inventory Repurchase Agreement dated as of May 6, 1994 (Filed as
Exhibit 10(r) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended December 31, 1994 and incorporated herein by
reference).
10(s) InterTAN Advertising Agreement and first amendment thereto
(Filed as Exhibit 10(s) to InterTAN's Annual Report on Form 10-K
for fiscal year ended June 30, 1995 and incorporated herein by
reference).
10(s)(i) Second Amendment to InterTAN Advertising Agreement dated to be
effective as of January 1, 1996 (Filed as Exhibit 10(a) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended March
31, 1996 and incorporated herein by reference).
10(t) Master Sales Agreement (United Kingdom) dated to be effective as
of December 31, 1995, among InterTAN, Inc., InterTAN U.K.
Limited, and Tandy Corporation (Filed as Exhibit 10(c) to
InterTAN's Quarterly Report on Form 10-Q for quarter ended
December 31, 1995 and incorporated herein by reference).
* 11 Statement of Computations of Earnings per Share.
* 13 1996 Annual Report to Stockholders page 1 ("Financial
Highlights" only) and pages 13 through 38.
21 Subsidiaries of InterTAN, Inc. (Filed as Exhibit 21 to
InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1995 and incorporated herein by reference).
25
<PAGE>
* 23 Consent of Independent Accountants
* 27 Article 5 Financial Data Schedule
- --------------
* Filed herewith
(b) No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended June 30, 1996.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
InterTAN, Inc.
September 27, 1996 /s/James T. Nichols
-------------------------------------
James T. Nichols
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on the 27th day of September 1996 by the
following persons on behalf of InterTAN, Inc. and in the capacities indicated.
Signature Title
- --------- -----
/s/James G. Gingerich Senior Vice President and
- -------------------------- Chief Financial Officer
James G. Gingerich (Principal Financial Officer)
/s/Douglas C. Saunders Vice President and
- -------------------------- Corporate Controller
Douglas C. Saunders (Principal Accounting Officer)
/s/John A. Capstick Director and
- -------------------------- Chairman of the Board
John A. Capstick
/s/Brian H. Christopher
- --------------------------
Brian H. Christopher Director
/s/Clark A. Johnson
- --------------------------
Clark A. Johnson Director
/s/Walter F. Loeb
- --------------------------
Walter F. Loeb Director
/s/John H. McDaniel
- --------------------------
John H. McDaniel Director
/s/W. Darcy McKeough
- --------------------------
W. Darcy McKeough Director
/s/Ron. G. Stegall
- --------------------------
Ron G. Stegall Director
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
InterTAN, Inc.
Our audits of the consolidated financial statements referred to in our report
dated September 18, 1996, appearing on Page 38 of the 1996 Annual Report to
Shareholders of InterTAN, Inc. (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K),
also included an audit of the Financial Statement Schedules listed in Item 14(a)
of this Form 10-K. In our opinion, these Financial Statement Schedules present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Fort Worth, Texas
September 18, 1996
<PAGE>
SCHEDULE VIII
InterTAN, Inc.
Valuation and Qualifying Accounts and Reserves
(In thousands)
Business Restructuring Reserve
<TABLE>
<CAPTION>
Deducted Deducted Deducted Included Included in Total
from from from Other in in Other
Inventory Property and Non-Current Accrued Non-Current
Equipment Assets Expenses Liabilities
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993 $ 25,140 $ 21,926 $ 858 $ 26,507 $ 5,400 $ 79,831
Payments and other
dispositions, net (25,140) (21,926) (858) (20,127) (5,400) (73,451)
--------- --------- -------- --------- --------- ---------
Balance, June 30, 1994 - - - 6,380 - 6,380
Credited to cost
and expense - - - (1,600) - (1,600)
Payments and other
dispositions, net - - - (2,170) - (2,170)
--------- --------- -------- --------- --------- ---------
Balance, June 30, 1995 - - - 2,610 - 2,610
Payments and other
dispositions, net - - - 20 - 20
--------- --------- -------- --------- --------- ---------
Balance, June 30, 1996 $ - $ - $ - $ 2,630 $ - $ 2,630
========= ========= ======== ========= ========= =========
</TABLE>
<PAGE>
SCHEDULE VIII
InterTAN, Inc.
Valuation and Qualifying Accounts and Reserves
(In thousands)
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Allowance for Doubtful Accounts
Balance, beginning of year $ 1,175 $ 1,259 $ 1,308
Additions charged to profit and loss 599 126 375
Accounts receivable charged off,
net of recoveries (28) (210) (424)
---------- ---------- ----------
Balance, end of year $ 1,746 $ 1,175 $ 1,259
========== ========== ==========
Deferred Tax Valuation Allowance
Balance, beginning of year $ 28,107 $ 37,578 $ -
Additions to valuation allowance 3,610 3,427 54,987
Adjustments to valuation allowance (329) (9,100) (17,828)
Reduction in deferred tax assets (927) (3,690) -
Other - (108) 419
---------- ---------- ----------
Balance, end of year $ 30,461 $ 28,107 $ 37,578
========== ========== ==========
</TABLE>
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
----------- -----------
3(a) Restated Certificate of Incorporation (Filed as Exhibit
3(a) to InterTAN's Registration Statement on Form 10
and incorporated herein by reference).
3(a)(i) Certificate of Amendment of Restated Certificate of
Incorporation (Filed as Exhibit 3(a)(i) to InterTAN's
Annual Report on Form 10-K for fiscal year ended June
30, 1995 and incorporated herein by reference).
3(a)(ii) Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock (Filed as
Exhibit 3(a)(i) to InterTAN's Registration Statement on
Form 10 and incorporated herein by reference).
3(b) Bylaws (Filed as Exhibit 3(b) to InterTAN's
Registration Statement on Form 10 and incorporated
herein by reference).
3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as
Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-
K for fiscal year ended June 30, 1990 and incorporated
herein by reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as
Exhibit 3(b)(ii) to InterTAN's Annual Report on Form
10-K for fiscal year ended June 30, 1995 and
incorporated herein by reference).
*3(b)(iii) Amended and Restated Bylaws.
4(a) Articles Fifth and Tenth of the Restated Certificate of
Incorporation (included in Exhibit 3(a)).
4(b) Amended and Restated Rights Agreement between InterTAN,
Inc. and The First National Bank of Boston (Filed as
Exhibit 4(b) to InterTAN's Report on Form 8-K dated
September 25, 1989 and incorporated herein by
reference).
4(c) Trust Indenture securing the issue of 9% Convertible
Subordinated Debentures due August 30, 2000 (Filed as
Exhibit 4(c) to InterTAN's Annual Report on Form 10-K
for fiscal year ended June 30, 1993 and incorporated
herein by reference).
<PAGE>
Exhibit No. Description
----------- -----------
10(a) InterTAN, Inc. Restated 1986 Stock Option Plan (as
amended as of February 22, 1994 and April 18, 1995)
(Filed as exhibit 10(a) to InterTAN's Annual Report on
Form 10-K for fiscal year ended June 30, 1995 and
incorporated herein by reference).
10(b) InterTAN, Inc. Restated 1991 Non-Employee Director
Stock Option Plan (as amended through February 21,
1994) (Filed as Exhibit 10(b) to InterTAN's Annual
Report on Form 10-K for fiscal year ended June 30, 1995
and incorporated herein by reference).
10(c) Secured Loan Agreement with Trans World Electronics,
Inc. (Filed as Exhibit 10(g) to InterTAN's Annual
Report on Form 10-K for fiscal year ended June 30, 1993
and incorporated herein by reference).
10(c)(i) First Amendment to Secured Loan Agreement with Trans
World Electronics, Inc. dated January 4, 1994 (Filed as
Exhibit 10(e)(i) to InterTAN's Annual Report on Form
10-K for fiscal year ended June 30, 1994 and
incorporated herein by reference).
10(c)(ii) Second Amendment to Secured Loan Agreement with Trans
World Electronics, Inc. dated as of May 6, 1994 (Filed
as Exhibit 10(g)(i) to InterTAN's Quarterly Report on
Form 10-Q for quarter ended March 31, 1994 and
incorporated herein by reference).
10(d) Warrant Agreement with Trans World Electronics, Inc.
(Filed as Exhibit 10(h) to InterTAN's Annual Report on
Form 10-K for fiscal year ended June 30, 1993 and
incorporated herein by reference).
10(e) Registration Rights Agreement between InterTAN, Inc.
and Trans World Electronics, Inc. (Filed as Exhibit
10(i) to InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1993 and incorporated herein
by reference).
10(f) Employment Agreement between InterTAN, Inc. and James
T. Nichols dated January 1, 1995 (Filed as Exhibit
10(ii) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended March 31, 1995 and incorporated herein by
reference).
10(g) Employment Agreement between InterTAN, Inc. and David
S. Goldberg dated February 3, 1995 (Filed as Exhibit
10(iii) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended March 31, 1995 and incorporated herein by
reference).
<PAGE>
Exhibit No. Description
----------- -----------
10(h) Employment Agreement between InterTAN, Inc. and John A.
Capstick dated February 20, 1995 (Filed as Exhibit
10(iv) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended March 31, 1995 and incorporated herein by
reference).
10(h)(i) Letter dated December 6, 1995 extending term of
employment agreement for John A. Capstick (Filed as
Exhibit 10(b) to InterTAN's Quarterly Report on Form
10-Q for quarter ended December 31, 1995 and
incorporated herein by reference).
10(i) Employment Agreement between InterTAN, Inc. and James
G. Gingerich dated March 1, 1995 (Filed as Exhibit
10(v) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended March 31, 1995 and incorporated herein by
reference).
10(j) Employment Agreement between InterTAN, Inc. and Douglas
C. Saunders dated March 10, 1995 (Filed as Exhibit
10(vi) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended March 31, 1995 and incorporated herein by
reference).
10(k) Minutes of Settlement dated April 13, 1995 between
InterTAN, Inc. and James B. Williams (Filed as Exhibit
10(k) to InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1995 and incorporated herein
by reference).
10(l) Retirement and Severance Agreement dated July 31, 1994
between InterTAN, Inc. and Louis G. Neumann (Filed as
Exhibit 10(l) to InterTAN's Annual Report on Form 10-K
for fiscal year ended June 30, 1995 and incorporated
herein by reference).
10(m) Merchandise Agreement dated October 15, 1993 between
InterTAN, Inc., InterTAN Canada Ltd., InterTAN U.K.
Limited, InterTAN Australia Ltd., Technotron Sales
Corp. Pty. Limited, Tandy Corporation and A&A
International, Inc. (Filed as Exhibit 10(m) to
InterTAN's Quarterly Report on Form 10-Q for quarter
ended December 31, 1993 and incorporated herein by
reference).
10(m)(i) First Amendment to Merchandise Agreement dated November
1, 1993 (Filed as Exhibit 10(m)(i) to InterTAN's
Quarterly Report on Form 10-Q for quarter ended March
31, 1994 and incorporated herein by reference).
<PAGE>
Exhibit No. Description
----------- -----------
10(m)(ii) Second Amendment to Merchandise Agreement dated October
2, 1995 (Filed as Exhibit 10 to InterTAN's Quarterly
Report on Form 10-Q for quarter ended September 30,
1995 and incorporated herein by reference).
10(m)(iii) Third Amendment to Merchandise Agreement dated February
1, 1996 (Filed as Exhibit 10(b) to InterTAN's Quarterly
Report on Form 10-Q for quarter ended March 31, 1996
and incorporated herein by reference).
10(n) License Agreement dated November 4, 1993 between Tandy
Corporation and InterTAN Australia Ltd. (Filed as
Exhibit 10(n) to InterTAN's Quarterly Report on Form
10-Q for quarter ended December 31, 1993 and
incorporated herein by reference).
10(o) License Agreement dated November 4, 1993 between Tandy
Corporation and InterTAN U.K. Limited (Filed as Exhibit
10(o) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended December 31, 1993 and incorporated herein
by reference).
10(o)(i) First Amendment to License Agreement (United Kingdom)
between InterTAN U.K. Limited and Tandy Corporation
dated April 21, 1995 (Filed as Exhibit 10(o)(i) to
InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1995 and incorporated herein by
reference).
10(p) License Agreement dated November 4, 1993 between Tandy
Corporation and InterTAN Canada Ltd. (Filed as Exhibit
10(p) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended December 31, 1993 and incorporated herein
by reference).
10(p)(i) First Amendment to License Agreement (Canada) between
InterTAN Canada Ltd. and Tandy Corporation dated March
24, 1995 (Filed as Exhibit 10(i) to InterTAN's
Quarterly Report on Form 10-Q for quarter ended March
31, 1995 and incorporated herein by reference).
10(p)(ii) Second Amendment to License Agreement (Canada), Second
Amendment to License Agreement (United Kingdom), and
First Amendment to License Agreement (Australia and New
Zealand), each dated November 9, 1995 (Filed as Exhibit
10(a) to InterTAN's Quarterly Report on Form 10-Q for
quarter ended December 31, 1995 and incorporated herein
by reference).
<PAGE>
Exhibit No. Description
----------- -----------
*10(p)(iii) Third Amendment to License Agreement (Canada), Third
Amendment to License Agreement (United Kingdom), and
Second Amendment to License Agreement (Australia and
New Zealand), each dated June 26, 1996.
10(q) Credit Agreement dated as of May 6, 1994 (Filed as
Exhibit 10(q) to InterTAN's Quarterly Report on Form
10-Q for quarter ended March 31, 1994 and incorporated
herein by reference).
10(q)(i) Amending Agreement and Extension Agreement, each dated
as of April 25, 1995, amending and extending Credit
Agreement (Filed as Exhibit 10(q)(i) to InterTAN's
Annual Report on Form 10-K for fiscal year ended June
30, 1995 and incorporated herein by reference).
10(q)(ii) Amending Agreement dated March 1, 1996, amending and
extending Credit Agreement (Filed as Exhibit 10(c) to
InterTAN's Quarterly Report on Form 10-Q for quarter
ended March 31, 1996 and incorporated herein by
reference).
*10(q)(iii) Amending Agreement dated June 25, 1996, amending and
extending Credit Agreement.
10(r) Inventory Repurchase Agreement dated as of May 6, 1994
(Filed as Exhibit 10(r) to InterTAN's Quarterly Report
on Form 10-Q for quarter ended December 31, 1994 and
incorporated herein by reference).
10(s) InterTAN Advertising Agreement and first amendment
thereto (Filed as Exhibit 10(s) to InterTAN's Annual
Report on Form 10-K for fiscal year ended June 30, 1995
and incorporated herein by reference).
10(s)(i) Second Amendment to InterTAN Advertising Agreement
dated to be effective as of January 1, 1996 (Filed as
Exhibit 10(a) to InterTAN's Quarterly Report on Form
10-Q for quarter ended March 31, 1996 and incorporated
herein by reference).
10(t) Master Sales Agreement (United Kingdom) dated to be
effective as of December 31, 1995, among InterTAN,
Inc., InterTAN U.K. Limited, and Tandy Corporation
(Filed as Exhibit 10(c) to InterTAN's Quarterly Report
on Form 10-Q for quarter ended December 31, 1995 and
incorporated herein by reference).
<PAGE>
Exhibit No. Description
----------- -----------
* 11 Statement of Computations of Earnings per Share.
* 13 1996 Annual Report to Stockholders page 1 ("Financial
Highlights" only) and pages 13 through 38.
21 Subsidiaries of InterTAN, Inc. (Filed as Exhibit 21 to
InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1995 and incorporated herein by
reference).
* 23 Consent of Independent Accountants.
* 27 Article 5 Financial Data Schedule.
_________________
* Filed herewith
<PAGE>
Exhibit 3(b)(iii)
INTERTAN, INC.
AMENDED AND RESTATED BYLAWS
(AS AMENDED THROUGH FEBRUARY 19, 1996)
ARTICLE I
OFFICES
SECTION 1. Registered Office. The registered office of InterTAN,
-----------------
Inc. (hereinafter called the "Corporation") within the State of Delaware shall
be located in the City of Wilmington, County of New Castle.
SECTION 2. Other Offices. The Corporation may also have an
-------------
office or offices and keep the books and records of the Corporation, except as
may otherwise be required by law, in such other place or places, within or
without the State of Delaware, as the Board of Directors of the Corporation
(hereinafter sometimes called the "Board") may from time to time determine or
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of stockholders of the
-----------------
Corporation shall be held at the office of the Corporation in the State of
Delaware or at such other place, within or without the State of Delaware, as
may from time to time be fixed by the Board or specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of stockholders
---------------
of the Corporation for the election of Directors (which shall be by a plurality
vote) and for the transaction of such other business as may properly come before
the meeting shall be held annually on such date and at such time as may be fixed
by the Board.
To be properly brought before the annual meeting, business must be
either (a) specified in the notice of the meeting (or any supplement thereto)
<PAGE>
given by or at the direction of the Board, (b) otherwise properly brought
before the annual meeting by or at the direction of the Board, or (c) otherwise
properly brought before the meeting by a stockholder. In addition to any other
applicable requirements, for business to be properly brought before the annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. A stockholder's proposal must
be received at the principal executive offices of the Corporation on a timely
basis in accordance with the rules and regulations of the Securities and
Exchange Commission. A stockholder's notice to the Secretary shall set forth as
to each matter the stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and record address of the stockholder proposing such business, (iii)
the class and number of shares of the Corporation which are beneficially owned
by the stockholder, and (iv) any material interest of the stockholder in such
business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be transacted at the annual meeting except in accordance with the
procedures set forth in this Section; provided, however, that nothing in this
Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
The Chairman of the annual meeting shall, if the facts warrant,
determine and declare to the meeting that certain business was not properly
brought before the meeting in accordance with the provision of this Section, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
SECTION 3. Special Meetings. Special meetings of the
----------------
stockholders for any purpose or purposes, unless otherwise prescribed by statue
or by the Corporation's Restated Certificate of Incorporation, may be called by
the Chairman of the Board or the President and shall be called by the President
or Secretary at the request in writing of a majority of the Board of Directors.
Such request shall state the purpose or purposes of the proposed meeting.
Business transacted at all special meetings shall be confined to the purposes
stated in the notice of special meeting.
SECTION 4. Action. As provided in the Corporation's Restated
------
Certificate of Incorporation, no action required to be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.
SECTION 5. Notice. Written or printed notice of every meeting of
------
stockholders, annual or special, stating the time and place thereof,
<PAGE>
and, if a special meeting, the purpose or purposes in general terms for which
the meeting is called shall, not less than ten (10) days before such meeting, be
served upon or mailed to each stockholder entitled to vote thereat, at his
address as it appears upon the books of the Corporation or, if such stockholder
shall have filed with the Secretary of the Corporation a written request that
notices intended for him be mailed to some other address, then to the address
designated in such request.
SECTION 6. Quorum. Except as otherwise provided by law or by the
------
Corporation's Restated Certificate of Incorporation, the presence in person or
by proxy at any meeting of stockholders of the holders of a majority of the
shares of the capital stock of the Corporation issued and outstanding and
entitled to vote thereat shall be requisite and shall constitute a quorum. If,
however, such majority shall not be represented at any meeting of the
stockholders regularly called, the holders of a majority of the shares present
in person or by proxy and entitled to vote thereat shall have power to adjourn
the meeting to another time, or to another time and place, without notice other
than announcement of adjournment at the meeting, and there may be successive
adjournments for like cause and in like manner until the requisite amount of
shares entitled to vote at such meeting shall be represented. At such adjourned
meeting at which the requisite amount of shares entitled to vote thereat shall
be represented, any business may be transacted at the meeting as originally
notified.
SECTION 7. Votes and Proxies. At each meeting of stockholders,
-----------------
every stockholder shall have one vote for each share of capital stock entitled
to vote which is registered in his name on the books of the Corporation on the
date on which the transfer books were closed, if closed, or on the date set by
the Board of Directors for the determination of stockholders entitled to vote at
such meeting. At such meeting every stockholder shall be entitled to vote in
person, or by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to the meeting in
question, unless said instrument provides for a longer period during which it is
to remain in force.
At all meetings of the stockholders, a quorum being present, all
matters shall be decided by a majority vote of the shares of stock entitled to
vote held by stockholders present in person or by proxy, except as otherwise
required by the Restated Certificate of Incorporation or by any applicable law.
Unless so directed by the Chairman of the meeting, or required by the Delaware
General Corporation Laws, the vote thereat on any question need not be by
ballot.
On a vote by ballot, each ballot shall be signed by the stockholder
voting, or in his name by his proxy, if there be such proxy, and shall state the
number of shares voted by him and the number of votes to which each share is
<PAGE>
entitled. On a vote by ballot, the Chairman shall appoint two inspectors of
election, who shall first take and subscribe an oath or affirmation faithfully
to execute the duties of inspector at such meeting with strict impartiality and
according to the best of their ability and who shall take charge of the polls
and after the balloting shall make a certificate of the result of the vote
taken; but no director or candidate for the office of director shall be
appointed as such inspector.
SECTION 8. Stock List. At least ten (10) days before every
----------
election of directors, a complete list of stockholders entitled to vote at such
meeting, arranged in alphabetical order, with the residence of each and the
number of voting shares held by each shall be made available by the Secretary
for inspection. Such list shall be open, at a specified place within the city
or at the place where the meeting is to be held for said ten (10) days, to the
examination of any stockholder entitled to vote at that meeting and shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
ARTICLE III
DIRECTORS
SECTION 1. Number. The business and property of the Corporation
------
shall be conducted and managed by a board consisting of such number of directors
as shall be fixed from time to time by resolution adopted by a majority of the
entire Board of Directors, but not less than three (3), none of whom need be a
stockholder.
The board shall initially be composed of three (3) directors elected
by the Incorporator of the Corporation. Any vacancy resulting from any increase
in the size of the Board of Directors shall be filled as provided in Section 4
of this Article III. No decrease in the number of the directors shall have the
effect of removing any incumbent director from office.
SECTION 2. Term of Office. As provided in the Restated
--------------
Certificate of Incorporation, the directors shall be divided into three classes,
designated Class I, Class II and Class III. Each class shall consist, as nearly
as may be possible, of one-third of the total number of directors constituting
the entire Board of Directors. The exact number of directors and the exact
number of directors in each such class shall be determined from time to time by
resolution adopted by the Board of Directors. From the initial Board of
Directors elected by the Incorporator of the Corporation, the Class I director
shall serve for a one year term, the Class II director for a two year term and
the Class III director for a three year term. At each annual meeting of
stockholders
<PAGE>
beginning in 1987, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director elected to fill a newly created
directorship resulting from an increase in the number of directors shall hold
office for a term that shall coincide with the remaining term of that class, but
in no case will a decrease in the number of directors shorten the term of any
incumbent director. A director shall hold office until the annual meeting for
the year in which his term expires and until his successor shall be elected and
shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. No director shall be removed from
office without cause, except upon the affirmative vote of the holders of eighty
percent (80%) of the shares then entitled to vote at an election of directors.
SECTION 3. Election of Directors. Nominations for the election of
---------------------
directors may be made by the Board of Directors or a nominating committee
appointed by the Board of Directors or by any stockholder entitled to vote in
the election of directors generally. However, any stockholder entitled to vote
in the election of directors generally may nominate one or more persons for
election as directors at a meeting only if written notice of such stockholder's
intent to make such nomination or nominations has been given, either by personal
delivery or by United States mail, postage prepaid, to the Secretary of the
Corporation not later than (i) with respect to an election to be held at an
annual meeting, ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting, and (ii) with respect to an election to be
held at a special meeting for the election of directors, the close of business
on the tenth (10th) day following the date on which notice of such meeting is
first given to stockholders. Each such notice shall set forth: (A) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (B) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (C) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (D) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules and regulations
of the Securities and Exchange Commission as then in effect; and (E) the consent
of each nominee to serve as a director of the Corporation if so elected. The
presiding officer of the meeting may refuse to acknowledge the nomination of any
person not made in compliance with the foregoing procedure. The vote necessary
to elect directors shall be as set forth in these Bylaws including, without
limitation, Article II,
<PAGE>
Section 7 hereof, unless otherwise required by the Delaware General Corporation
Laws.
SECTION 4. Vacancies. If any vacancy shall occur among the
---------
directors, or if the number of directors shall at any time be increased, the
directors in office, although less than a quorum, by a majority vote may fill
the vacancies or newly created directorships. When one or more directors shall
resign from the Board of Directors, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as herein provided in the filling of other vacancies.
SECTION 5. Meetings. Meetings of the Board of Directors shall be
--------
held at such place within or without the State of Delaware as may from time to
time be fixed by resolution of the Board of Directors or by the Chairman of the
Board, or by the President or as may be specified in the notice or waiver of
notice of any meeting. Meetings may be held at any time upon the call of the
Chairman of the Board, the President or the Secretary or any two (2) of the
directors in office by oral, telegraphic, or written notice, duly served or sent
or mailed to each director no less than one (1) day before such meeting.
Meetings may be held at any time and place without notice if all the directors
are present, or if those not present shall in writing or by telegram or cable
waive notice thereof. A regular meeting of the Board of Directors may be held
without notice immediately following the annual meeting of stockholders at the
place where such annual meeting is held. Regular meetings of the board may also
be held without notice at such time and place as shall from time to time be
determined by resolution of the Board of Directors. Members of the Board of
Directors may participate in a meeting of such board by means of conference
telephone or similar communication equipment by means of which all persons
participating in the meeting can hear each other, and participation in the
meeting pursuant hereto shall constitute presence in person at such meeting.
SECTION 6. Quorum. One third, but not less than two (2), of the
------
directors shall constitute a quorum for the transaction of business. If at any
meeting of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time without
notice other than announcement of the adjournment at the meeting, and at such
adjourned meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally notified.
SECTION 7. Compensation. The directors may be paid their
------------
expenses, if any, of attendance at each meeting of the Board of Directors, a
fixed sum for attendance at each meeting of the Board of Directors and/or a
<PAGE>
stated fee as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of the Executive Committee and/or other committees may be
allowed like compensation and reimbursement of expenses for attending committee
meetings.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 1. Executive Committee. The Board of Directors may, by
-------------------
resolution passed by a majority of the whole board, appoint an Executive
Committee of two (2) or more members, to serve at the pleasure of the Board of
Directors, to consist of such directors as the Board of Directors may from time
to time designate. The chairman of the Executive Committee shall be designated
by the Board of Directors.
SECTION 2. Procedure. The Executive Committee, by a vote of a
---------
majority of its members, shall fix its own times and places of meeting, shall
determine the number of its members constituting a quorum for the transaction of
business, and shall prescribe its own rules of procedure, no change in which
shall be made other than by a majority vote of its members. Members of the
Executive Committee or any other committee may participate in a meeting of such
committee by means of conference telephone or similar communication equipment by
means of which all persons participating in the meeting can hear each other, and
participation in the meeting pursuant hereto shall constitute presence in person
at such meeting.
SECTION 3. Powers. During the interval between the meetings of
------
the Board of Directors, the Executive Committee shall possess and may exercise
all the powers of the Board of Directors in the management and direction of the
business and affairs of the Corporation, to the extent permitted by law.
SECTION 4. Minutes. The Executive Committee shall keep regular
-------
minutes of its proceedings and all action by the Executive Committee shall be
reported to the Board of Directors at its next meeting. Such action shall be
subject to review by the Board of Directors, provided that no rights of third
parties shall be affected by such review.
SECTION 5. Other Committees. From time to time the Board of
----------------
Directors, by the affirmative vote of a majority of the entire Board of
Directors, may appoint other committees for any purpose or purposes, and such
<PAGE>
committees shall have such powers as shall be conferred by the resolutions of
appointment, and as shall be permitted by law.
ARTICLE V
OFFICERS
SECTION 1. Officers. The Board of Directors shall elect, as
--------
officers, a Chairman of the Board, a President, a Chief Executive Officer, a
Treasurer and a Secretary, and in their discretion one or more of the following
officers: Chief Operating Officer, Executive Vice Presidents, Senior Vice
Presidents, Vice Presidents, Assistant Secretaries, and Assistant Treasurers.
Such officers shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of stockholders, and each shall hold office
until the corresponding meeting of the Board of Directors in the next year and
until his successor shall have been duly executed and qualified, or until he
shall have died or resigned or shall have been removed in the manner provided
herein. The powers and duties of two or more officers may be exercised and
performed by the same person, except the offices of President and Secretary.
SECTION 2. Vacancies. Any vacancy in any office may be filled
---------
for the unexpired portion of the term by the Board of Directors at any regular
or special meeting.
SECTION 3. Chairman of the Board. The Chairman of the Board (who
---------------------
may also hold the office of Chief Executive Officer and/or President or other
offices) shall preside at all meetings of the stockholders and the Board of
Directors and have such other duties as the Board of Directors may prescribe.
In the Chairman's absence, such duties shall be attended to by the President or
any Vice President.
SECTION 4. President/Chief Executive Officer. The President and
---------------------------------
Chief Executive Officer shall be the chief executive officer of the Corporation,
and, subject to the provisions of these Bylaws, shall have general and active
control of all of its business and affairs. He shall have the power to (i)
appoint and remove subordinate officers, agents and employees, except that he
may not remove those elected or appointed by the Board of Directors, and (ii)
delegate and determine their duties. He shall keep the Board of Directors and
the Executive Committee (if any) fully informed and shall consult them
concerning the business of the Corporation. He may sign, with the Secretary or
another officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of the Corporation and any deeds, bonds,
mortgages, contracts, checks, notes, drafts or other instruments the issue or
execution of which shall have been authorized by resolution of the Board of
Directors, except
<PAGE>
in cases where the signing and execution thereof has been expressly delegated by
these Bylaws or by the Board of Directors to some other officer or agent of the
Corporation, or shall be required by law to be otherwise executed. He shall
vote, or give a proxy to any other officer of the Corporation to vote, all
shares of stock of any other corporation standing in the name of the
Corporation. He shall, in general, perform all other duties normally incident to
or as usually appertain to the office of President and Chief Executive Officer
and such other duties as may be prescribed by these Bylaws, the stockholders,
the Board of Directors or the Executive Committee (if any), from time to time.
If the positions of President and Chief Executive Officer are held by
two persons, then the Chief Executive Officer shall have the powers and
responsibilities described in the previous paragraph. In such case, the
President shall be considered the Chief Operating Officer, and he shall have the
responsibilities assigned to him by the Chief Executive Officer.
SECTION 5. Executive Vice Presidents. The Executive Vice
-------------------------
Presidents, if any, shall perform such duties as the Board of Directors may
prescribe. In the absence or disability of the President, the Executive Vice
Presidents, in the order of their seniority in each office, or in such order as
may be specified by the Board of Directors, shall perform the duties and
exercise the powers of the President. In addition, the Executive Vice
Presidents shall perform such duties as from time to time may be delegated to
them by the Chairman of the Board or President.
SECTION 6. Senior Vice Presidents. The Senior Vice Presidents, if
----------------------
any, shall perform such duties as the Board of Directors may prescribe. In the
absence or disability of the President and the Executive Vice Presidents, the
Senior Vice Presidents in the order of their seniority in each office, or in
such other order as may be specified by the Board of Directors, shall perform
the duties and exercise the powers of the President. In addition, the Senior
Vice Presidents shall perform such duties as may from time to time be delegated
to them by the Chairman of the Board, President or Executive Vice Presidents.
SECTION 7. Vice Presidents. The Vice Presidents shall perform
---------------
such duties as the Board of Directors may prescribe. In the absence or
disability of the President, the Executive Vice Presidents, and the Senior Vice
Presidents, the Vice Presidents in the order of their seniority in each office,
or in such other order as may be specified by the Board of Directors, shall
perform the duties and exercise the powers of the President. In addition, the
Vice Presidents shall perform such duties as may from time to time be delegated
to them by the Chairman of the Board, President, Executive Vice Presidents, or
Senior Vice Presidents.
<PAGE>
SECTION 8. Treasurer. The Treasurer shall have charge of and be
---------
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors; he may endorse for collection on behalf of the Corporation, checks,
notes and other obligations; he may sign receipts and vouchers for payments made
to the Corporation; singly or jointly with another person as the Board of
Directors may authorize, he may sign checks of the Corporation and pay out and
dispose of the proceeds under the direction of the Board of Directors; he shall
cause to be kept correct books of account of all the business and transactions
of the Corporation, shall see that adequate audits thereof are currently and
regularly made, and shall examine and certify the accounts of the Corporation;
he shall render to the Board of Directors, the Executive Committee, the Chairman
of the Board or to the President, whenever requested, an account of the
financial condition of the Corporation; he may sign with the Chairman of the
Board, the President, or a Vice President, certificates of stock of the
Corporation; and, in general, shall perform all the duties incident to the
office of a treasurer of a corporation, and such other duties as from time to
time may be assigned to him by the Board of Directors.
SECTION 9. Assistant Treasurer. The Assistant Treasurers, if
-------------------
any, in order of their seniority shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties as the President or the Board of Directors shall
prescribe.
SECTION 10. Secretary. The Secretary shall keep the minutes of
---------
all meetings of the stockholders and of the Board of Directors, and the
committees thereof, in books provided for that purpose; he shall see that all
notices are duly given in accordance with the provisions of law and these
Bylaws; he shall be custodian of the records and of the corporate seal or seals
of the Corporation; he shall see that the corporate seal is affixed to all
documents, the execution of which, on behalf of the Corporation, under its seal,
is duly authorized and when the seal is so affixed he may attest the same; he
may sign, with the Chairman of the Board, the President, or a Vice President,
certificates of stock of the Corporation; and in general he shall perform all
duties incident to the office of a secretary of a corporation, and such other
duties as from time to time may be assigned to him by the Board of Directors.
SECTION 11. Assistant Secretaries. The Assistant Secretaries, if
---------------------
any, in order of their seniority shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such other duties as the President or the Board of Directors shall
prescribe.
<PAGE>
SECTION 12. Subordinate Officers. The Board of Directors may
--------------------
appoint such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period, have such authority and perform such duties
as the Board of Directors may prescribe. The Board of Directors may, from time
to time, authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
SECTION 13. Compensation. The Board of Directors shall have power
------------
to fix the compensation of all officers of the Corporation. It may authorize
any officer, upon whom the power of appointing subordinate officers may have
been conferred, to fix the compensation of such subordinate officers.
SECTION 14. Removal. Any officer of the Corporation may be
-------
removed, with or without cause, by a majority vote of the Board of Directors at
a meeting called for that purpose.
SECTION 15. Bonds. The Board of Directors may require any officer
-----
of the Corporation to give a bond to the Corporation, conditional upon the
faithful performance of his duties, with one or more sureties and in such
amounts as may be satisfactory to the Board of Directors.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. Form and Execution of Certificates. The interest of
----------------------------------
each stockholder of the Corporation shall be evidenced by a certificate or
certificates for shares of stock in such form as may be prescribed from time to
time by law and by the Board of Directors. The certificates of stock of each
class and series now authorized or which may hereafter be authorized by the
Restated Certificate of Incorporation shall be consecutively numbered and signed
by the Chairman of the Board, the President, or a Vice President together either
with the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer of the Corporation, and may be countersigned and registered in such
manner as the Board of Directors may prescribe, and shall bear the corporate
seal or a printed or engraved facsimile thereof. Where any such certificate is
signed by a transfer agent or transfer clerk and/or by a registrar, the
signatures of any such Chairman of the Board, President, Vice President,
Treasurer, Assistant Treasurer, Secretary or Assistant Secretary upon such
certificate may be facsimiles engraved or printed. In case any officer or
officers who shall have signed, or whose facsimile signature or signatures shall
have been placed upon, such certificate or certificates shall have
<PAGE>
ceased to be such, whether because of death, resignation or otherwise, before
such certificate or certificates shall have been issued and delivered, such
certificate or certificates may nevertheless be issued and delivered with the
same effect as if such officer or officers had not ceased to be such at the date
of its issue and delivery.
SECTION 2. Transfer of Shares. The shares of the stock of the
------------------
Corporation shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney lawfully constituted, upon surrender for
cancellation of certificates for the same number of shares, with an assignment
and power of transfer endorsed thereon or attached thereto, duly executed, with
such proof or guaranty of the authenticity of the signature as the Corporation
or its agents may reasonably require. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
SECTION 3. Record Dates. The Board of Directors shall fix in
------------
advance a time not more than sixty (60) days prior to the date of any meeting of
stockholders as the time as of which stockholders entitled to notice of and to
vote at such a meeting shall be determined, and all persons who were holders of
record of voting stock at such time and no others shall be entitled to notice of
and to vote at such meeting, notwithstanding any transfer of any stock on the
books of the Corporation after any record date fixed as aforesaid. The Board of
Directors may also, in its discretion, fix in advance a date not exceeding fifty
(50) days preceding the date fixed for the payment of any dividend or the making
of any distribution, or for the delivery of evidence of rights, or evidences of
interests arising out of any issuance, change, conversion or exchange of capital
stock, as a record date for the determination of the stockholders entitled to
receive or participate in any such dividend, distribution, rights or interests,
notwithstanding any transfer of any stock on the books of the Corporation after
any record date fixed as aforesaid.
SECTION 4. Lost or Destroyed Certificates. In case of the loss or
------------------------------
destruction of any outstanding certificate of stock, a new certificate may be
issued upon the following conditions: (i) The owner of said certificate shall
file with the Secretary of the Corporation an affidavit giving the facts in
relation to the ownership, and in relation to the loss or destruction of said
certificate, stating its number and the number of shares represented thereby;
such affidavit to be in such form and contain such statements as shall satisfy
the Chairman of the Board and Secretary that said certificate has been
accidentally destroyed or lost, and that a new certificate ought to be issued in
lieu thereof; upon being so satisfied, the Chairman of the Board and Secretary
shall require such owner to file an open penalty indemnity bond in such sum and
in such form as they may deem advisable, and with a surety or sureties approved
by them, to
<PAGE>
indemnify and save harmless the Corporation from any claim, loss, damage or
liability which may be occasioned by the issuance of a new certificate in lieu
thereof; upon such indemnity bond being so filed, a new certificate for the same
number of shares shall be issued to the owner of the certificate so lost or
destroyed; and the transfer agent and/or registrar of stock, if any, shall
countersign and register such new certificate upon receipt of a written order
signed by the said Chairman of the Board and Secretary, and thereupon the
Corporation will save harmless said transfer agent and/or registrar in the
premises; or (ii) The Corporation authorizes its transfer agent to accept from
the owner of said certificate an open penalty indemnity bond in such sum and in
such form as the Corporation shall determine. The President or any Vice
President may act hereunder in the stead of the Chairman of the Board, and an
Assistant Secretary in the stead of the Secretary. In case of the surrender of
the original certificate, in lieu of which a new certificate has been issued, or
the surrender of such new certificate, for cancellation, the bond of indemnity
given as a condition of the issue of such new certificate may be surrendered. A
new certificate may be issued without requiring any bond when in the judgment of
the Board of Directors it is proper to do so.
ARTICLE VII
CHECK, NOTES, ETC.
SECTION 1. Execution of Checks, Notes, etc. All checks and drafts
-------------------------------
on the Corporation's bank accounts and all bills of exchange and promissory
notes, and all acceptances, obligations and other instruments for the payment of
money, shall be signed by such officer or officers, agent or agents, as shall be
thereunto authorized from time to time by the Board of Directors.
SECTION 2. Execution of Contracts, Assignments, etc. All
----------------------------------------
contracts, agreements, endorsements, assignments, transfers, stock powers, or
other instruments (except as provided in Sections 1 and 3 of this Article VII)
shall be signed by the Chairman of the Board, President, any Executive Vice
President, Senior Vice President, or Vice President and by the Secretary or any
Assistant Secretary or the Treasurer or any Assistant Treasurer, or by such
other officer or officers, agent or agents, as shall be thereunto authorized
from time to time by the Board of Directors.
SECTION 3. Execution of Proxies. The Chairman of the Board,
--------------------
President, or a Vice President of the Corporation may authorize from time to
time the signature and issuance of proxies to vote upon shares of stock of other
companies standing in the name of the Corporation. All such proxies shall be
signed in the name of the Corporation by the Chairman of the Board, President,
or a Vice President and by the Secretary or an Assistant Secretary.
<PAGE>
ARTICLE VIII
WAIVERS AND CONSENTS
SECTION 1. Waivers. Whenever under the provisions of any law or
-------
under the provisions of the Restated Certificate of Incorporation of the
Corporation or these Bylaws, the Corporation, or the Board of Directors or any
committee thereof, is authorized to take any action after notice to stockholders
or the directors or the members of such committee, or after the lapse of a
prescribed period of time, such action may be taken without notice and without
the lapse of any period of time if, at any time before or after such action be
completed, such requirements be waived in writing by the person or persons
entitled to said notice or entitled to participate in the action to be taken,
or, in the case of a stockholder, by his attorney thereunto authorized.
SECTION 2. Consents. Any action required or permitted to be
--------
taken at any meeting of the Board of Directors or of any committee of the Board
of Directors may be taken without a meeting, if a written consent thereto is
signed by all members of the Board of Directors or of such committee, as the
case may be, and such written consent is filed with the minutes of proceedings
of the Board of Directors or of such committee.
ARTICLE IX
DIVIDENDS AND RESERVE FUNDS
SECTION 1. Dividends. Except as otherwise provided by law or by
---------
the Restated Certificate of Incorporation, the Board of Directors may declare
dividends out of the surplus of the Corporation at such times and in such
amounts as it may from time to time designate.
SECTION 2. Reserve Funds. Before crediting net profits to the
-------------
surplus in any year, there may be set aside out of the net profits of the
Corporation for that year such sum or sums as the Board of Directors from time
to time in its absolute discretion may deem proper as a reserve fund or funds to
meet contingencies or for equalizing dividends or for repairing or maintaining
any property of the Corporation or for such other purpose as the Board of
Directors shall deem conducive to the interest of the Corporation.
<PAGE>
ARTICLE X
INSPECTION OF BOOKS
The Board of Directors shall determine from time to time whether, and
if allowed when and under what conditions and regulations, the accounts and
books of the Corporation (except such as may by statute be specifically open to
inspection) or any of them shall be open to the inspection of the stockholders;
and the stockholders' rights in this respect are and shall be restricted and
limited accordingly.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall end on the thirtieth day of
June of each year unless another date shall be fixed by resolution of the Board
of Directors. After such date is fixed it may be changed for future fiscal
years at any time or from time to time by further resolution of the Board of
Directors.
ARTICLE XII
SEAL
The corporate seal shall be circular in form and shall contain the
name of the Corporation, the State of Incorporation, the words "Corporate Seal",
and the year of incorporation.
ARTICLE XIII
AMENDMENTS
Except as otherwise provided by law, these Bylaws or the Restated
Certificate of Incorporation of the Corporation, these Bylaws may be altered,
amended or repealed (i) at any regular or special meeting of the stockholders by
the affirmative vote of the holders of a majority of the stock issued and
outstanding and entitled to vote thereat or (ii) at any regular or special
meeting of the Board of Directors by affirmative vote of a majority of the
directors then in office; provided, however, that notice of the proposed
alteration or amendment shall have been contained in the notice of the meeting.
<PAGE>
ARTICLE XIV
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
The Corporation shall indemnify and reimburse each person, and his
heirs, executors or administrators, who is made or is threatened to be made a
party to any action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he was or is a director, officer,
employee or agent of the Corporation or was or is serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement,
actually or reasonably incurred by him in connection with such action, suit or
proceeding and shall advance the expenses incurred by any officer or director in
defending any such action, suit or proceeding to the full extent permitted by
Section 145 of the General Corporation Law of the State of Delaware as it may be
amended or supplemented from time to time. Such right of indemnification or
advancement of expenses of any such person shall not be deemed exclusive of any
other rights to which he may be entitled under any statute, bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office.
The foregoing provisions of this Article XIV shall be deemed to be a
contract between the Corporation and each person who serves in any capacity
specified therein at any time while this Bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or part upon
any such state of facts.
I, the undersigned, being the Secretary of the Corporation DO HEREBY
CERTIFY that the foregoing are the Bylaws, as amended and restated, of said
Corporation, as approved by the Board of Directors of said Corporation on May
22, 1996.
/s/David S. Goldberg
--------------------
David S. Goldberg, Secretary
<PAGE>
EXHIBIT 10(P)(III)
THIRD AMENDMENT TO LICENSE AGREEMENT
(CANADA)
This THIRD AMENDMENT TO LICENSE AGREEMENT (Canada) is dated as of the 26th day
of June, 1996 between Tandy Corporation ("Tandy") and InterTAN Canada Ltd.
("ITC")
WHEREAS, Tandy and ITC entered into that certain License Agreement (Canada) on
November 4, 1993 (the "License Agreement");
WHEREAS, Tandy and ITC entered into that certain First Amendment to License
Agreement (Canada) on March 24, 1995 and effective as of April 1, 1995; and
WHEREAS, Tandy and ITC entered into that certain Second Amendment to License
Agreement (Canada) on November 9, 1995 and effective as of that date; and
WHEREAS, the parties hereto desire to amend certain provisions of the License
Agreement, including Sections 4.a), 5.a), 5.c), and 6 thereof to provide for
extension of the term of the License and restructuring of the royalty;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Section 4.a) of the ITC License Agreement is hereby amended by deleting
Section 4.a) in its entirety and substituting the following:
"a) The initial term of this License Agreement shall be from
November 3, 1993 to June 30, 2006. However, beginning July 1, 1997
and continuing annually an additional year shall be automatically
added to the initial term each July 1 thereafter until July 1, 2000 in
the manner set out in the example below:
EXAMPLE: Date: Term Extended To:
---- ----------------
July 1, 1997 June 30, 2007
July 1, 1998 June 30, 2008
July 1, 1999 June 30, 2009
July 1, 2000 June 30, 2010
July 1, 2001 June 30, 2010 (Term not
<PAGE>
extended automatically)
Either party may terminate this License Agreement at any time without
cause during the initial term or any extension thereof set out above
by providing the other party five (5) years prior written notice of
termination. Such termination shall be effective on June 30 next
following the expiration of five (5) years from the date appearing on
the written notice of termination. Any and all of the foregoing
notwithstanding, said License Agreement shall automatically terminate
on the termination of the Merchandise Agreement between inter alia
Tandy and ITC, dated on or about October 15, 1993. On or before June
30, 2005, the parties agree to discuss further extension of this
License Agreement, however such discussions shall not imply any duty
whatsoever on the part of Tandy to do anything beyond discussing the
matter."
2. Section 4. of the ITC License Agreement is hereby amended by adding to the
end thereof the following new subsection:
"c) Tandy may permit other uses by ITC of the above-licensed trade
name, service mark and trademarks (e.g. use of trade name and service
mark on the Internet), such use being subject to (i) whatever rules,
regulations, procedures, conditions and restrictions as Tandy may
impose upon ITC, and (ii) royalties payable in accordance with
paragraph 5 hereof."
3. Section 5.a) of the ITC License Agreement is hereby amended by deleting
Section 5.a) in its entirety and substituting the following:
"a) ITC shall pay to Tandy a royalty on Gross Revenue derived from
all retail stores or other facilities of any kind or nature using or
deriving benefit directly or indirectly from the use of service marks
or trade names licensed under paragraph 1 hereof. Such royalty shall
be calculated, on a consolidated basis with the other members of the
ITI-Group, and paid by ITC in U.S. dollars to Tandy in Fort Worth,
Texas, U.S.A. concurrently with the submission of the Royalty and
Sales Report specified in paragraph 5(c) at the following rates:
(i) On ITI-Group Gross Revenue (excluding income from services)
derived from sales of product purchased through A&A
International, Inc. ("A&A-sourced Products") the rate shall be
determined as follows:
2
<PAGE>
Schedule of Royalties for A&A-sourced Products
----------------------------------------------
ITI - Group
Royalty Percentage
Percent of ITI-Group Gross Revenue Jul-96 Jul-97 Jul-98
(excluding income from services) Jun-97 Jun-98 beyond
from A&A-sourced Products
46.9% or less 0.50% 0.75% 1.00%
47.0% - 51.9% 0.30% 0.55% 0.80%
52.0% - 56.9% 0.15% 0.35% 0.60%
57.0% - 61.9% 0.15% 0.20% 0.45%
62% or greater 0.15% 0.15% 0.35%
By September 30 of each year, ITC and the ITI-Group shall
calculate its consolidated revenue from sales of A&A-sourced
Products (excluding income from services) for the most recently
completed fiscal year ended June 30 and its total Gross Revenue
(both excluding income from services and including income from
services) from sales of all products and services for the most
recently completed fiscal year ended June 30. The percentage of
Gross Revenue represented by sales of A&A-sourced Products will
be calculated by dividing the total Gross Revenue from sales of
A&A sourced Products (excluding income from services) by the
total Gross Revenue from sales of all Products. The resulting
percentage of Gross Revenue from A&A-sourced Products will be
compared to the percentages listed in the column entitled
"Percent of ITI-Group Gross Revenue from A&A-sourced Products
(excluding income from services)" in the Schedule of Royalties
---------------------
for A&A-sourced Products set out above in order to determine the
------------------------
Royalty Percentage applicable to Gross Revenue from sales of
A&A-sourced Products (excluding income from services) for the
then-current fiscal year.
EXAMPLE:
FY 1996 Total Gross Revenue
(excluding income from services) = 100
FY 1996 Gross Revenue (excluding income
from services) from A&A-sourced Products = 50
50 100 = 50% of Gross Revenue of the ITI-Group as a whole
(excluding income from services) are from sales of A&A-sourced
Products.
3
<PAGE>
If 50% is compared to the first column of the Schedule of
Royalties for A&A-sourced Products, then for FY 1997 (beginning
July 1, 1996 and ending June 30, 1997), the Royalty Percentage
is 0.30% on revenue from A&A-sourced Products (excluding income
from services), to be calculated and paid in accordance with
this paragraph 5(a) and paragraph 5(c) below.
(ii) On Gross Revenue derived from any and all other sources
(including income from services related to A&A-sourced
Products), the rate shall be:
from and including July 1, 1995 through June 30, 1996, a rate of
0.25% of Gross Revenue;
from and including July 1, 1996 through June 30, 1997, a rate of
0.50% of Gross Revenue;
from and including July 1, 1997 through June 30, 1998, a rate of
0.75% of Gross Revenue;
from and including July 1, 1998 through June 30, 2006, and
during any extension of the initial term, through June 30, 2010,
a rate of 1.00% of Gross Revenue.
Except where expressly stated otherwise, "Gross Revenue" as used
-------------
herein shall mean all revenues of the ITI-Group derived from the
sale or lease of products, and the rendering of services minus
any returns or allowances."
4. Section 5.c) of the ITC License Agreement is hereby amended by deleting
Section 5.c) in its entirety and substituting the following:
"c) On or before the 30th day following the close of each calendar
quarter commencing with the third calendar quarter in 1995 during the
term of this Agreement, ITC and the ITI-Group shall furnish to Tandy a
complete and accurate report, certified to be accurate by an officer
of InterTAN, Inc. Such report shall show ITI-Group consolidated
figures on the following: gross sales, itemized discounts and
allowances deducted from gross sales price, and returns of all
products and services sold during the preceding calendar quarter (all
in U.S. dollars calculated using the average exchange rate for such
quarter) for each of Sections 5.a)(i) and 5.a)(ii). Each such report
is to be accompanied by payment in full by ITC of its portion of the
amount of royalties due. Receipt or acceptance by Tandy of any report
furnished pursuant to this Agreement,
4
<PAGE>
or of any sums paid hereunder shall not preclude Tandy from
questioning the correctness thereof at any time. In the event that any
inconsistencies or mistakes are discovered in such reports or
payments, they shall be rectified immediately and the appropriate
payment made by ITC or refunded to ITC by Tandy, as the case may be,
within 30 days of discovery."
5. Section 6 of the ITC License Agreement is hereby amended by deleting
Section 6 in its entirety.
6. The fifth paragraph on page 1 of the ITC License Agreement is amended by
inserting in the second line of such paragraph after the words "ITC owned"
the following: "(or managed)".
7. Section 2 of the ITC License Agreement is amended to insert after the word
"used" in the second and fifth line of such section the following:
"currently (or formerly)".
8. Section 8 of the ITC License Agreement is amended by deleting such section
in its entirety and substituting the following:
"All products made or services offered for sale under the licenses to
one or more trade names, trademarks or service marks granted under
paragraphs 1 or 2 shall be sold by ITC (a) at retail in Canada through
retail stores owned, managed, or franchised by ITC, or through duly
appointed dealers for use with dealer programs, or through franchisees
for use with franchise programs, or (b) in such other manner as
permitted by Tandy."
9. Subclauses (ii) and (iii) of Section 9(b) of the ITC License Agreement are
hereby amended by inserting after "August 25, 1993" and "October 15, 1993",
respectively, the following: "as amended, from time to time,".
10. Section 19 of the ITC License Agreement is hereby amended to delete the
word "and" in the third line of such section after the word "owned" and to
insert the following: ", managed, or".
11. The ITC License Agreement is further amended by adding the following new
Section 35:
"Notwithstanding anything herein to the contrary, Tandy may, in its sole
discretion, waive any breach, default, or event of default arising under
the terms of this License Agreement. No failure or delay in exercising
any right, power or remedy under any provision of this License Agreement
shall operate as a waiver of or otherwise shall
5
<PAGE>
prejudice any of the rights, powers or remedies of Tandy. No right,
power or remedy herein conferred upon Tandy is intended to be exclusive
of any other right, power or remedy, and each and every such right,
power or remedy shall be cumulative of every other right, power or
remedy given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise."
12. Except as modified hereby, all other terms and provisions of the License
Agreement as previously amended shall remain unchanged and in full force
and effect.
THE PARTIES HERETO have executed this Amendment as of the day and year first
written above, to be effective as of July 1, 1996.
INTERTAN CANADA LTD. TANDY CORPORATION
By: /s/James T. Nichols By: /s/Dwain H. Hughes
------------------- -------------------------
Name: James T. Nichols Name: Dwain H. Hughes
Its: President Its: Senior Vice President and
Chief Financial Officer
6
<PAGE>
The following join in this Amendment for purposes of calculation and payment of
royalties on a consolidated basis as set out in Section 5 of the License
Agreement (Canada) as hereby amended:
InterTAN, INC.
By: /s/James T. Nichols
-------------------
Its: President and Chief Executive Officer
InterTAN AUSTRALIA LTD.
By: /s/James T. Nichols
-------------------
Its: Director
InterTAN U.K. LIMITED
By: /s/James T. Nichols
-------------------
Its: Director
TECHNOTRON SALES CORP. PTY. LTD.
By: /s/James T. Nichols
-------------------
Its: Director
7
<PAGE>
THIRD AMENDMENT TO LICENSE AGREEMENT
(UNITED KINGDOM)
This THIRD AMENDMENT TO LICENSE AGREEMENT (UNITED KINGDOM) is dated as of the
26th day of June, 1996 between Tandy Corporation ("Tandy") and InterTAN U.K.
Limited ("ITUK").
WHEREAS, Tandy and ITUK entered into that certain License Agreement (UNITED
KINGDOM) on November 4, 1993 (the "License Agreement");
WHEREAS, Tandy and ITUK entered into that certain First Amendment to License
Agreement (UNITED KINGDOM) on April 21, 1995 and effective as of April 1, 1995;
and
WHEREAS, Tandy and ITUK entered into that certain Second Amendment to License
Agreement (UNITED KINGDOM) on November 9, 1995 and effective as of that date;
and
WHEREAS, the parties hereto desire to amend certain provisions of the License
Agreement, including Sections 4.a), 5.a), 5.c), and 6 thereof to provide for
extension of the term of the License and restructuring of the royalty;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Immediately prior to Section 1., a definition shall be added as follows:
""United Kingdom" - wherever the term United Kingdom is used in this
License Agreement, such term shall mean England, Scotland, Wales,
Northern Ireland and it further shall be deemed to include the
Republic of Ireland."
2. Section 4.a) of the ITUK License Agreement is hereby amended by deleting
Section 4.a) in its entirety and substituting the following:
"a) The initial term of this License Agreement shall be from
November 3, 1993 to June 30, 2006. However, beginning July 1, 1997
and continuing annually an additional year shall be automatically
added to the initial term each July 1 thereafter until July 1, 2000 in
the manner set out in the example below:
EXAMPLE: Date: Term Extended To:
---- ----------------
July 1, 1997 June 30, 2007
July 1, 1998 June 30, 2008
July 1, 1999 June 30, 2009
July 1, 2000 June 30, 2010
July 1, 2001 June 30, 2010 (Term not
1
<PAGE>
extended automatically)
Either party may terminate this License Agreement at any time without
cause during the initial term or any extension thereof set out above
by providing the other party five (5) years prior written notice of
termination. Such termination shall be effective on June 30 next
following the expiration of five (5) years from the date appearing on
the written notice of termination. Any and all of the foregoing
notwithstanding, said License Agreement shall automatically terminate
on the termination of the Merchandise Agreement between inter alia
Tandy and ITUK, dated on or about October 15, 1993. On or before June
30, 2005, the parties agree to discuss further extension of this
License Agreement, however such discussions shall not imply any duty
whatsoever on the part of Tandy to do anything beyond discussing the
matter."
3. Section 4. of the ITUK License Agreement is hereby amended by adding to the
end thereof the following new subsection:
"c) Tandy may permit other uses by ITUK of the above-licensed trade
name, service mark and trademarks (e.g. use of trade name and service
mark on the Internet), such use being subject to (i) whatever rules,
regulations, procedures, conditions and restrictions as Tandy may
impose upon ITUK, and (ii) royalties payable in accordance with
paragraph 5 hereof."
4. Section 5.a) of the ITUK License Agreement is hereby amended by deleting
Section 5.a) in its entirety and substituting the following:
"a) ITUK shall pay to Tandy a royalty on Gross Revenue derived from
all retail stores or other facilities of any kind or nature using or
deriving benefit directly or indirectly from the use of service marks
or trade names licensed under paragraph 1 hereof. Such royalty shall
be calculated, on a consolidated basis with the other members of the
ITI-Group and paid by ITUK, in U.S. dollars to Tandy in Fort Worth,
Texas, U.S.A. concurrently with the submission of the Royalty and
Sales Report specified in paragraph 5(c) at the following rates:
(i) On ITI-Group Gross Revenue (excluding income from services)
derived from sales of product purchased through A&A
International, Inc. ("A&A-sourced Products") the rate shall be
determined as follows:
2
<PAGE>
Schedule of Royalties for A&A-sourced Products
----------------------------------------------
ITI-Group
Royalty Percentage
Percent of ITI-Group Gross Revenue Jul-96 Jul-97 Jul-98
(excluding income from services) Jun-97 Jun-98 beyond
from A&A-sourced Products
46.9% or less 0.50% 0.75% 1.00%
47.0% - 51.9% 0.30% 0.55% 0.80%
52.0% - 56.9% 0.15% 0.35% 0.60%
57.0% - 61.9% 0.15% 0.20% 0.45%
62% or greater 0.15% 0.15% 0.35%
By September 30 of each year, ITUK and the ITI-Group shall
calculate its consolidated revenue from sales of A&A-sourced
Products (excluding income from services) for the most recently
completed fiscal year ended June 30 and its total Gross Revenue
(both excluding income from services and including income from
services) from sales of all products and services for the most
recently completed fiscal year ended June 30. The percentage of
Gross Revenue represented by sales of A&A-sourced Products will
be calculated by ITUK by dividing the total Gross Revenue from
sales of A&A-sourced Products (excluding income from services)
by the total Gross Revenue from sales of all Products (excluding
services). The resulting percentage of Gross Revenue from A&A-
sourced Products will be compared to the percentages listed in
the column entitled "Percent of ITI-Group Gross Revenue from
A&A-sourced Products (excluding income from services)" in the
Schedule of Royalties for A&A-sourced Products set out above in
----------------------------------------------
order to determine the Royalty Percentage applicable to Gross
Revenue from sales of A&A-sourced Products (excluding income
from services) for the then-current fiscal year.
EXAMPLE:
FY 1996 Total Gross Revenue
(excluding income from services) = 100
FY 1996 Gross Revenue (excluding income
from services) from A&A-sourced Products = 50
50 100 = 50% of Gross Revenue of the ITI-Group as a whole
(excluding income from services) are from sales of A&A-sourced
Products.
If 50% is compared to the first column of the Schedule of
Royalties for A&A-sourced Products, then for FY 1997 (beginning
July 1, 1996
3
<PAGE>
and ending June 30, 1997), the Royalty Percentage
is 0.30% on revenue from A&A-sourced Products (excluding income
from services), to be calculated and paid in accordance with
this paragraph 5(a) and paragraph 5(c) below.
(ii) On Gross Revenue derived from any and all other sources
(including income from services related to A&A-sourced
Products), the rate shall be:
from and including July 1, 1995 through June 30, 1996, a rate of
0.25% of Gross Revenue;
from and including July 1, 1996 through June 30, 1997, a rate of
0.50% of Gross Revenue;
from and including July 1, 1997 through June 30, 1998, a rate of
0.75% of Gross Revenue;
from and including July 1, 1998 through June 30, 2006, and
during any extension of the initial term, through June 30, 2010,
a rate of 1.00% of Gross Revenue.
Except where expressly stated otherwise, "Gross Revenue" as used
herein shall mean all revenue of the ITI-Group derived from the
sale or lease of products, and the rendering of services minus
any returns or allowances."
5. Section 5.c) of the ITUK License Agreement is hereby amended by deleting
Section 5.c) in its entirety and substituting the following:
"c) On or before the 30th day following the close of each calendar
quarter commencing with the third calendar quarter in 1995 during the
term of this Agreement, ITUK and the ITI-Group shall furnish to Tandy
a complete and accurate report, certified to be accurate by an officer
of InterTAN, Inc. Such report shall show ITI-Group consolidated
figures on the following: gross sales, itemized discounts and
allowances deducted from gross sales price, and returns of all
products and services sold during the preceding calendar quarter (all
in U.S. Dollars, calculated using the average exchange rate for such
quarter) for each of Sections 5.a)(i) and 5.a)(ii). Each such report
is to be accompanied by payment in full by ITUK of its portion of the
amount of royalties due. Receipt or acceptance by Tandy of any report
furnished pursuant to this Agreement, or of any sums paid hereunder
shall not preclude Tandy from questioning the correctness thereof at
any time. In the event that any inconsistencies or mistakes are
discovered in such reports or payments, they shall be rectified
immediately and the appropriate payment made by ITUK or refunded to
ITUK by Tandy, as the case may be, within 30 days of discovery."
4
<PAGE>
6. Section 6 of the ITUK License Agreement is hereby amended by deleting
Section 6 in its entirety.
7. The fifth paragraph on page 1 of the ITUK License Agreement is amended by
inserting in the second line of such paragraph after the words "ITUK owned"
the following: "(or managed)".
8. Section 2 of the ITUK License Agreement is amended to insert after the word
"used" in the third and sixth line of such section the following:
"currently (or formerly)".
9. Section 8 of the ITUK License Agreement is amended by deleting such section
in its entirety and substituting the following:
"All products made or services offered for sale under the licenses to
one or more trade names, trademarks or service marks granted under
paragraphs 1 or 2 shall be sold by ITUK (a) at retail in the United
Kingdom through retail stores owned, managed, or franchised by ITUK, or
through duly appointed dealers for use with dealer programs, or through
franchisees for use with franchise programs, (b) through export dealers
in France, Holland, Belgium and Germany, or (c) in such other manner as
permitted by Tandy."
10. Subclauses (ii) and (iii) of Section 9(b) of the ITUK License Agreement are
hereby amended by inserting after "August 25, 1993" and "October 15, 1993",
respectively, the following: "as amended, from time to time,".
11. Section 19 of the ITUK License Agreement is hereby amended to delete the
word "and" in the fourth line of such section after the word "owned" and to
insert the following: ", managed, or".
12. The ITUK License Agreement is further amended by adding the following new
Section 35:
"Notwithstanding anything herein to the contrary, Tandy may, in its sole
discretion, waive any breach, default, or event of default arising under
the terms of this License Agreement. No failure or delay in exercising
any right, power or remedy under any provision of this License Agreement
shall operate as a waiver of or otherwise shall prejudice any of the
rights, powers or remedies of Tandy. No right, power or remedy herein
conferred upon Tandy is intended to be exclusive of any other right,
power or remedy, and each and every such right, power or remedy shall be
cumulative of every other right, power or remedy given hereunder or now
or hereafter existing at law or in equity or by statute or otherwise."
5
<PAGE>
13. Except as modified hereby, all other terms and provisions of the License
Agreement as previously amended shall remain unchanged and in full force
and effect.
THE PARTIES HERETO have executed this Amendment as of the day and year first
written above, to be effective as of July 1, 1996.
INTERTAN U. K. LIMITED TANDY CORPORATION
By: /s/James T. Nichols By: /s/Dwain H. Hughes
------------------- -------------------------
Name: James T. Nichols Name: Dwain H. Hughes
Its: Director Its: Senior Vice President and
Chief Financial Officer
The following join in this Amendment for purposes of calculation and payment of
royalties on a consolidated basis as set out in Section 5 of the License
Agreement (United Kingdom) as hereby amended:
InterTAN, INC.
By: /s/James T. Nichols
-------------------
Its: President and Chief Executive Officer
InterTAN AUSTRALIA LTD.
By: /s/James T. Nichols
-------------------
Its: Director
InterTAN CANADA LTD.
By: /s/James T. Nichols
-------------------
Its: President
TECHNOTRON SALES CORP. PTY. LTD.
By: /s/James T. Nichols
-------------------
Its: Director
6
<PAGE>
SECOND AMENDMENT TO LICENSE AGREEMENT
(AUSTRALIA AND NEW ZEALAND)
This SECOND AMENDMENT TO LICENSE AGREEMENT (AUSTRALIA AND NEW ZEALAND) is dated
as of the 26th day of June, 1996 between Tandy Corporation ("Tandy") and
InterTAN AUSTRALIA Ltd. ("ITA")
WHEREAS, Tandy and ITA entered into that certain License Agreement (AUSTRALIA
AND NEW ZEALAND) on November 4, 1993 (the "License Agreement");
WHEREAS, Tandy and ITA entered into that certain First Amendment to License
Agreement (AUSTRALIA AND NEW ZEALAND) on November 9, 1995 and effective as of
that date; and
WHEREAS, the parties hereto desire to amend certain provisions of the License
Agreement, including Sections 4.a), 5.a), 5.c), and 6 thereof to provide for
extension of the term of the License and restructuring of the royalty;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Section 4.a) of the ITA License Agreement is hereby amended by deleting
Section 4.a) in its entirety and substituting the following:
"a) The initial term of this License Agreement shall be from
November 3, 1993 to June 30, 2006. However, beginning July 1, 1997
and continuing annually an additional year shall be automatically
added to the initial term each July 1 thereafter until July 1, 2000 in
the manner set out in the example below:
EXAMPLE: Date: Term Extended To:
----- -----------------
July 1, 1997 June 30, 2007
July 1, 1998 June 30, 2008
July 1, 1999 June 30, 2009
July 1, 2000 June 30, 2010
July 1, 2001 June 30, 2010 (Term not
extended automatically)
1
<PAGE>
Either party may terminate this License Agreement at any time without
cause during the initial term or any extension thereof set out above
by providing the other party five (5) years prior written notice of
termination. Such termination shall be effective on June 30 next
following the expiration of five (5) years from the date appearing on
the written notice of termination. Any and all of the foregoing
notwithstanding, said License Agreement shall automatically terminate
on the termination of the Merchandise Agreement between inter alia
Tandy and ITA, dated on or about October 15, 1993. On or before June
30, 2005, the parties agree to discuss further extension of this
License Agreement, however such discussions shall not imply any duty
whatsoever on the part of Tandy to do anything beyond discussing the
matter."
2. Section 4. of the ITA License Agreement is hereby amended by adding to the
end thereof the following new subsection:
"c) Tandy may permit other uses by ITA of the trade name, service
mark and trademarks (e.g. use of trade name and service mark on the
Internet), such use being subject to (i) whatever rules, regulations,
procedures, conditions and restrictions as Tandy may impose upon ITA,
and (ii) royalties payable in accordance with paragraph 5 hereof."
3. Section 5.a) of the ITA License Agreement is hereby amended by deleting
Section 5.a) in its entirety and substituting the following:
"a) ITA shall pay to Tandy a royalty on Gross Revenue derived from
all retail stores or other facilities of any kind or nature using or
deriving benefit directly or indirectly from the use of service marks
or trade names licensed under paragraph 1 hereof. Such royalty shall
be calculated, on a consolidated basis with the other members of the
ITI-Group and paid by ITA, in U.S. dollars to Tandy in Fort Worth,
Texas, U.S.A. concurrently with the submission of the Royalty and
Sales Report specified in paragraph 5(c) at the following rates:
(i) On ITI-Group Gross Revenue (excluding income from services)
derived from sales of product purchased through A&A
International, Inc. ("A&A-sourced Products") the rate shall be
determined as follows:
2
<PAGE>
Schedule of Royalties for A&A-sourced Products
----------------------------------------------
ITI-Group
Royalty Percentage
Percent of ITI-Group Gross Revenue Jul-96 Jul-97 Jul-98
(excluding income from services) Jun-97 Jun-98 beyond
from A&A-sourced Products
46.9% or less 0.50% 0.75% 1.00%
47.0% - 51.9% 0.30% 0.55% 0.80%
52.0% - 56.9% 0.15% 0.35% 0.60%
57.0% - 61.9% 0.15% 0.20% 0.45%
62% or greater 0.15% 0.15% 0.35%
By September 30 of each year, ITA and the ITI-Group shall calculate its
revenue from sales of A&A-sourced Products (excluding income from services)
for the most recently completed fiscal year ended June 30 and its total Gross
Revenue (both excluding income from services and including income from
services) from sales of all products and services for the most recently
completed fiscal year ended June 30. The percentage of Gross Revenue
represented by sales of A&A-sourced Products will be calculated by dividing
the total Gross Revenue from sales of A&A-sourced Products (excluding income
from services) by the total Gross Revenue from the sales of all Products. The
resulting percentage of Gross Revenue from A&A-sourced Products will be
compared to the percentages listed in the column entitled "Percent of ITI-
Group Gross Revenue from A&A-sourced Products (excluding income from
services)" in the Schedule of Royalties for A&A-sourced Products set out
----------------------------------------------
above in order to determine the Royalty Percentage applicable to Gross
Revenue from sales of A&A-sourced Products (excluding income from services)
for the then-current fiscal year.
EXAMPLE:
FY 1996 Total Gross Revenue
(excluding income from services) = 100
FY 1996 Gross Revenue (excluding income
from services) from A&A-sourced Products = 50
50/100 = 50% of Gross Revenue of the ITI-Group as a whole
(excluding income from services) are from sales of A&A-sourced
Products.
3
<PAGE>
If 50% is compared to the first column of the Schedule of
Royalties for A&A-sourced Products, then for FY 1997 (beginning
July 1, 1996 and ending June 30, 1997), the Royalty Percentage
is 0.30% on revenue from A&A-sourced Products (excluding income
from services), to be calculated and paid in accordance with
this paragraph 5(a) and paragraph 5(c) below.
(ii) On Gross Revenue derived from any and all other sources
(including income from services related to A&A-sourced
Products), the rate shall be:
from and including July 1, 1995 through June 30, 1996, a rate of
0.25% of Gross Revenue;
from and including July 1, 1996 through June 30, 1997, a rate of
0.50% of Gross Revenue;
from and including July 1, 1997 through June 30, 1998, a rate of
0.75% of Gross Revenue;
from and including July 1, 1998 through June 30, 2006, and
during any extension of the initial term, through June 30, 2010,
a rate of 1.00% of Gross Revenue.
Except where expressly stated otherwise, "Gross Revenue" as used
herein shall mean all revenue of the ITI-Group derived from
sales or leases of product, rendering of services minus any
returns or allowances."
4. Section 5.c) of the ITA License Agreement is hereby amended by deleting
Section 5.c) in its entirety and substituting the following:
"c) On or before the 30th day following the close of each calendar
quarter commencing with the second calendar quarter in 1995 during the
term of this Agreement, ITA and the ITI-Group shall furnish to Tandy a
complete and accurate report, certified to be accurate by an officer
of InterTAN, Inc. Such report shall show ITI-Group consolidated
figures on the following: gross sales, itemized discounts and
allowances deducted from gross sales price, and returns of all
products and services sold during the preceding calendar quarter (all
in U.S. dollars, calculated using the average exchange rate for such
quarter) for each of Sections 5.a)(i) and 5.a)(ii). Each such report
is to be accompanied by payment in full by ITA of its portion of the
amount of royalties due. Receipt or acceptance by Tandy of any report
furnished pursuant to this Agreement,
4
<PAGE>
or of any sums paid hereunder shall not preclude Tandy from
questioning the correctness thereof at any time. In the event that any
inconsistencies or mistakes are discovered in such reports or
payments, they shall be rectified immediately and the appropriate
payment made by ITA or refunded to ITA by Tandy, as the case may be,
within 30 days of discovery."
5. Section 6 of the ITA License Agreement is hereby amended by deleting
Section 6 in its entirety.
6. The fifth paragraph on page 1 of the ITA License Agreement is amended by
inserting in the second line of such paragraph after the words "ITA owned"
the following: "(or managed)".
7. Section 2 of the ITA License Agreement is amended to insert after the word
"used" in the second and sixth line of such section the following:
"currently (or formerly)".
8. Section 8 of the ITA License Agreement is amended by deleting such section
in its entirety and substituting the following:
"All products made or services offered for sale under the licenses to
one or more trade names, trademarks or service marks granted under
paragraphs 1 or 2 shall be sold by ITA (a) at retail in Australia and
New Zealand through retail stores owned, managed, or franchised by ITA,
or through duly appointed dealers for use with dealer programs, or
through franchisees for use with franchise programs, (b) through export
dealers, as the case may be, in New Zealand, or (c) in such other manner
as permitted by Tandy."
9. Subclauses (ii) and (iii) of Section 9(b) of the ITA License Agreement are
hereby amended by inserting after "August 25, 1993" and "October 15, 1993",
respectively, the following: "as amended, from time to time,".
10. Section 19 of the ITA License Agreement is hereby amended to delete the
word "and" in the fourth line of such section after the word "owned" and to
insert the following: ", managed, or".
11. The ITA License Agreement is further amended by adding the following new
Section 35:
"Notwithstanding anything herein to the contrary, Tandy may, in its sole
discretion, waive any breach, default, or event of default arising under
the terms of this License Agreement. No failure or delay in exercising
any right, power or remedy under any provision of this
5
<PAGE>
License Agreement shall operate as a waiver of or otherwise shall
prejudice any of the rights, powers or remedies of Tandy. No right,
power or remedy herein conferred upon Tandy is intended to be exclusive
of any other right, power or remedy, and each and every such right,
power or remedy shall be cumulative of every other right, power or
remedy given hereunder or now or hereafter existing at law or in equity
or by statute or otherwise."
12. Except as modified hereby, all other terms and provisions of the License
Agreement as previously amended shall remain unchanged and in full force
and effect.
THE PARTIES HERETO have executed this Amendment as of the day and year first
written above, to be effective as of July 1, 1996.
INTERTAN AUSTRALIA LTD. TANDY CORPORATION
By: /s/James T. Nichols By: /s/Dwain H. Hughes
--------------------- --------------------
Name: James T. Nichols Name: Dwain H. Hughes
Its: Director Its: Senior Vice President and
Chief Financial Officer
6
<PAGE>
The following join in this Amendment for purposes of calculation and payment of
royalties on a consolidated basis as set out in Section 5 of the License
Agreement (Australia and New Zealand) as hereby amended:
InterTAN, INC.
By: /s/James T. Nichols
-------------------
Its: President and Chief Executive Officer
InterTAN CANADA LTD.
By: /s/James T. Nichols
-------------------
Its: President
InterTAN U.K. LIMITED
By: /s/James T. Nichols
-------------------
Its: Director
TECHNOTRON SALES CORP. PTY. LTD.
By: /s/James T. Nichols
-------------------
Its: Director
7
<PAGE>
Exhibit 10(q)(iii)
AMENDING AGREEMENT
------------------
THIS AGREEMENT, dated as of June 25, 1996, is made by and between
INTERTAN CANADA LTD., a corporation existing under the laws of the Province of
Alberta ("ICL"), INTERTAN U.K. LIMITED, a limited liability company existing
under the laws of England ("IUK"), INTERTAN INC., a corporation existing under
the laws of Delaware ("InterTAN"), CANADIAN IMPERIAL BANK OF COMMERCE, a
Canadian chartered bank ("CIBC"), as Agent and the Lenders from time to time
listed on the signature pages hereof.
WHEREAS the parties hereto entered into a credit agreement dated as of
May 6, 1994 whereby the Lenders established certain credits in favour of the
Borrowers which agreement was amended by Amending Agreement dated as of April
25, 1995 and further amended by Amending Agreement dated as of March 1, 1996
(together referred to as the "Credit Agreement");
AND WHEREAS the parties wish to further amend the Credit Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the parties hereto agree as
follows:
1. Interpretation. In this Agreement, defined terms shall have the
--------------
meaning given in the Credit Agreement.
2. Amendments.
----------
(a) The definition of Repayment Date is amended to read as follows:
"Repayment Date" means August 16, 1996 until such time as the U.K.
Lenders have delivered to the Agent, a Notice of Extension in the form
of Schedule L at which time Repayment Date shall mean August 15, 1997,
and Repayment Date shall mean such later date, if any, as may be from
time to time applicable pursuant to Section 3.5.
(b) Section 2.1(f) is amended to permit advances by the U.K. Lenders by
way of acceptances upon agreement of the relative U.K. Lender and the
applicable Borrower as follows:
the U.K. Lenders agree to establish a revolving facility and
thereunder to make available to IUK (but not ICL) from time to
time, Accommodation by way of U.K. Base Rate Loans, Letters of
Credit, Performance Bonds and LIBOR Loans (and by way of
acceptances of
<PAGE>
-2-
the relevant U.K. Lender upon such terms and the execution of
such documents as such U.K. Lender and IUK may agree) in the
maximum principal amount not to exceed Cdn. $21,800,000 or the
Exchange Equivalent thereof (the "UK Revolving Credit").
(c) Section 2.2(vi) is deleted, Section 2.2(vii) is renumbered as 2.2(vi)
and as a result of the foregoing, Section 2.2(v) is amended to delete the words
"excluding Letters of Guarantee referred to in Section 2.2(vi),".
(d) Section 2.12 is amended so that the third and fourth sentences read as
follows:
No Forward Exchange Contract shall provide for a term which extends
beyond a period of nine months from its date of booking except as
otherwise consented to in writing by the applicable Lender. If any
Forward Exchange Contract is outstanding upon the acceleration of the
Credits pursuant to Section 13.1. or if any Forward Exchange Contract
is outstanding on the Repayment Date, the applicable Borrower shall
forthwith pay an amount (the "deposit amount") equal to the amount of
the Borrower's liability under such Forward Exchange Contract, such
deposit amount to be held by the applicable Lender, for application in
respect of amounts owing by the Borrower under such Forward Exchange
Contract or in respect of any other amount payable under the Loan
Documents.
(e) Section 5.6 dealing with Letters of Credit/Letters of Guarantee and/or
Performance Bonds is amended so that the last line thereof reads as follows:
No Letter of Credit, Letter of Guarantee or Performance Bond will have
a Maturity Date beyond a period of one year from the date of issue
except as otherwise consented to in writing by the Agent.
(f) Section 8.1 dealing with Security is amended to delete the references
to Technotron and IAL from subsections (a) and (h) to delete the reference to
Technotron from subsection (k) and subsection 8.1(1) is deleted in its entirety.
(g) Section 8.3 dealing with Opinions of Counsel is amended to delete the
references to IAL and Technotron.
(h) Section 11.1(b) dealing with the Use of Proceeds of the Credits is
amended to read as follows:
The Borrowers will use the proceeds of the Credits to finance their
inventory purchases and for other general corporate purposes; provided
that such proceeds are not loaned, made available by Letters of
Credit, Letters of
<PAGE>
-3-
Guarantee or otherwise, to IAL or Technotron and further provided that
neither Borrower shall use or permit the proceeds of the Credits to be
used to finance the inventory purchase of any Affiliate if under
applicable law respecting financial assistance it would be prohibited
from doing so and unless the Borrowers have obtained the prior consent
in writing of the Lenders. In addition, neither Borrower shall use the
proceeds of the Credits to repay or refinance any indebtedness
incurred for the purpose of acquiring shares in IUK or otherwise in
contravention of Section 151 of the Companies Act 1985 of Great
Britain. Any existing Letters of Credit, Letters of Guarantee or
Performance Bonds issued at the request of the Borrowers in support of
operating indebtedness of IAL or Technotron shall be replaced from the
proceeds of the credit established by Westpac Banking Corporation in
favour of such companies and referred to in Section 11.2(b).
(i) Section 11.2(b) dealing with Indebtedness is amended to read as
follows:
Neither Borrower will, nor will it permit any of its Subsidiaries to,
and each will cause IAL, Technotron and InterTAN not to, create, incur
or suffer to exist any Indebtedness, except the Indebtedness
hereunder, such Indebtedness as may be consented to in writing by the
Majority Lenders, the Indebtedness set out in Schedule "E" and such
Indebtedness of IAL and Technotron to Westpac Banking Corporation as
contemplated by the facilities letter dated May 6, 1996 from Westpac
Banking Corporation to IAL and Technotron and as may be incurred
pursuant to the definitive agreement as amended from time to time (the
"Westpac Facilities").
(j) Section 11.2(e) dealing with Investments and Acquisitions is amended
to delete subsection 11.2(e)(v) dealing with Letters of Guarantee
issued for the benefit of IAL.
(k) Section 11.2(f) dealing with Guarantees is amended to read as follows:
Neither Borrower will, nor will it permit any of its Subsidiaries to,
and each will cause IAL and Technotron not to, make or suffer any
Guarantee except as permitted by the Westpac Facilities, or by
endorsement of instruments for deposit or collection in the ordinary
course of business.
(l) Section 11.2(g) dealing with Liens is amended to add "; and" after
Majority Lenders in (xi) and add subsection (xii) as follows:
(xii) Liens granted by IAL or Technotron to Westpac Banking
Corporation pursuant to the Westpac Facilities.
<PAGE>
-4-
(m) Section 11.2(l) dealing with Capital Expenditures is amended to read
as follows:
InterTAN will not permit its annual capital expenditures on a
consolidated basis to exceed U.S.$9,000,000 in its 1994 fiscal year,
U.S.$12,000,000 in its 1995 and 1996 fiscal years, U.S.$13,000,000 in
its 1997 fiscal year, and U.S.$13,000,000 in each subsequent fiscal
year unless otherwise approved by the Majority Lenders.
(n) Exhibit One to the Credit Agreement is replaced by Exhibit One to this
Amending Agreement.
(o) Schedule E to the Credit Agreement is replaced by Schedule E to this
Agreement.
(p) Schedule L in the form attached to this Agreement as Schedule L is
added to the Credit Agreement.
3. CONTINUING EFFECT. Each of the parties hereto acknowledges and agrees
-----------------
that the Credit Agreement as amended by this Agreement shall be and continue in
full force and effect.
4. COUNTERPARTS. This Agreement may be executed in counterparts, each of
------------
which will be deemed to be an original and which together will constitute one
and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date and year first above written.
CANADIAN IMPERIAL BANK OF
COMMERCE, as Agent
By: /s/ H. D. Chataway
----------------------
Authorized Officer:
<PAGE>
-5-
CANADIAN IMPERIAL BANK OF
COMMERCE, as Lender
By: /s/ H. D. Chataway
------------------------------------------
Authorized Officer:
THE FIRST NATIONAL BANK OF BOSTON,
as U.K. Administrative Agent and as a Lender
By: /s/ Judy C.E. Kelly
------------------------------------------
Authorized Officer: Vice President
LLOYDS BANK PLC
By: /s/ J. N. Mortell
------------------------------------------
Authorized Officer: Manager Corporate Banking
CREDIT LYONNAIS CANADA
By: /s/ C. M. Stade
------------------------------------------
Authorized Officer: Caroline M. Stade
Ass. Vice President
INTERTAN CANADA LTD.
By: /s/ James G. Gingerich
------------------------------------------
Name: James G. Gingerich
Title: Vice President
<PAGE>
-6-
INTERTAN INC.
By: /s/ James T. Nichols
--------------------
Name: James T. Nichols
Title: President and CEO
INTERTAN U.K. LIMITED
By: /s/ James T. Nichols
--------------------
Name: James T. Nichols
Title: Director
<PAGE>
-7-
EXHIBIT ONE
-----------
COMMITMENTS OF LENDERS
----------------------
% Commitment Cdn. $ Commitment
Lender (on a several basis) (on a several basis)
- ------ -------------------- --------------------
I. OVERDRAFT CREDIT
----------------
1. CIBC 100% $4,000,000
II. CANADIAN FEC CREDIT
-------------------
Credit Lyonnais 100% $1,000,000
Canada
III. DOMESTIC REVOLVING CREDIT
-------------------------
1. CIBC 60.99% $17,200,000
2. Credit Lyonnais 39.01% $11,000,000
-----------
Canada $28,200,000
IV. U.K. OVERDRAFT CREDIT
---------------------
1. Lloyds Bank Plc 100% $4,000,000
V. U.K. FEC CREDIT
---------------
1. The First National 100% $1,000,000
Bank of Boston
VI. U.K. REVOLVING CREDIT
---------------------
1. The First National 56.88% $12,400,000
Bank of Boston
2. Lloyds Bank Plc 43.12% $9,400,000
-----------
<PAGE>
-8-
$21,800,000
SCHEDULE E
----------
PERMITTED INDEBTEDNESS
----------------------
1. Indebtedness owed by one or more of the Obligors to one or more of Tandy
Corporation, A & A International, Inc., Trans World Electronics, Inc.
(collectively the "Tandy Group") and any subsidiary of any one or more of
the Tandy Group, under the Secured Loan Agreement.
2. Indebtedness incurred in respect of capital leases under which the total
aggregate payments do not exceed Cdn. $5,000,000.
3. Indebtedness incurred in respect of operating leases of equipment and
vehicles entered into in the ordinary course of business and with respect
to which liens have been registered by the lessor.
4. Foreign currency hedging contracts entered into with institutions other
than the Lenders, having a face amount of no more than Cdn. $30,000,000 in
the aggregate, on the understanding that any obligations under such
contracts are unsecured.
5. Interest rate swaps entered into with institutions other than the Lenders
on principal amounts not exceeding Cdn. $75,000,000 in the aggregate, on
the understanding that any obligations under such contracts are unsecured.
6. Indebtedness of IAL and Technotron to any financial institution in
Australia, including West Pac Banking Corporation, up to a maximum amount
of Australian $12,000,000 in the aggregate.
7. The following inter-corporate Indebtedness plus any accrued interest
thereon which shall not exceed:
(i) Australian $17,614,270 owed by IAL and Technotron to InterTan.
(ii) (Pounds)19,050,873 owed by IUK to Intertan.
8. The convertible subordinated debentures issued under the Trust Indenture or
any Subordinated Debt of IAL, ICL, IUK or Technotron to InterTan arising
from the loan of the proceeds of such debentures.
<PAGE>
-9-
SCHEDULE L
----------
NOTICE OF EXTENSION
-------------------
TO: Canadian Imperial Bank of Commerce, as Agent for the Lenders from time
to time under the Credit Agreement dated as of May 6, 1994 between
InterTan Canada Ltd., InterTan U.K. Limited, InterTan Inc. and
Canadian Imperial Bank of Commerce, as Agent for the Lenders from time
to time listed on the signature pages thereof (such agreement as
amended from time to time being the "Credit Agreement")
The undersigned confirm that the Repayment Date as defined in the
Credit Agreement is extended to August 15, 1997 pursuant to Section 3.5 of the
Credit Agreement.
DATED this 25th day of June, 1996.
LLOYDS BANK PLC
By: /s/ J. N. Mortell
------------------------------------------
Authorized Officer Manager Corporate Banking
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Judy C.E. Kelly
-------------------------------------------
Authorized Officer Vice President
<PAGE>
Statement of Computation of Earnings per Share Exhibit 11
InterTAN, Inc.
- -------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
----------------------- -------------------------
June 30 June 30
1996 1995 1996 1995
----------------------- -------------------------
Primary Earnings Per Share
<S> <C> <C> <C> <C>
Net income (loss)....................................................($6,265) ($4,459) ($2,241) $8,123
======================= =========================
Weighted average number of common shares outstanding................. 11,069 10,134 10,901 9,964
Weighted average number of common shares issuable under
warrants and stock option plans, net of assumed treasury stock
repurchases at average market prices........................... (a) (a) (a) 79
------------------------ -------------------------
Weighted average number of common and common equivalent
shares outstanding................................................ 11,069 10,134 10,901 10,043
======================= ==========================
Primary net income (loss) per average common share $(0.57) $(0.44) $(0.21) $0.81
======================== ==========================
Fully Diluted Earnings Per Share
Reconciliation of net income (loss) per statements to amounts used in
computation of fully diluted net income (loss) per average
common share:
Net income (loss), as reported.......................................($6,265) ($4,459) ($2,241) $8,123
Adjustments for assumed conversion of the 9% convertible
subordinated debentures:
Add interest on the debentures....................................... (a) (a) (a) 3,927
Add amortization expense on the debentures........................... (a) (a) (a) 363
Add foreign exchange loss recognized on interest payable
on convertible debentures......................................... (a) (a) (a) 20
Add foreign exchange transaction loss recognized
on the debentures................................................. (a) (a) (a) 354
Less income tax effect of the debentures............................. (a) (a) (a) (1,586)
------------------------ -------------------------
Net income (loss), as adjusted.......................................($6,265) ($4,459) ($2,241) $11,201
======================== =========================
Reconciliation of weighted average number of shares outstanding to
amount used in computation of fully diluted net income per average
common share:
Weighted average number of shares outstanding........................ 11,069 10,134 10,901 9,964
Adjustments for assumed conversion of the 9% convertible subordinated
debentures to common stock........................................ (a) (a) (a) 7,124
Adjustments for assumed exercise of warrants and stock options,
net of assumed treasury stock repurchases at period end prices... (a) (a) (a) 79
Weighted average number of common and common equivalent shares
------------------------ -------------------------
outstanding, as adjusted.......................................... 11,069 10,134 10,901 17,186
======================== =========================
Fully diluted net income (loss) per average
common share...................................................... $(0.57) $ (0.44) $ (0.21) $ 0.65
======================== ==========================
</TABLE>
(a) These items are anti-dilutive and thus are omitted from the calculation.
<PAGE>
Exhibit 13
Company Profile
InterTAN, Inc., headquartered in Fort Worth, Texas, is an international
consumer electronics retailer with approximately 1,800 company-operated retail
stores and dealer outlets in Canada, the United Kingdom and Australia.
InterTAN's retail operations are conducted under trade names licensed from Tandy
Corporation: "RadioShack" in Canada, "Tandy" in the United Kingdom and "Tandy
Electronics" in Australia.
InterTAN carries a broad range of private label and brand name consumer
electronics products, including audio and video, communication products,
telephones, cellular equipment, computers, personal electronics, batteries and
parts and accessories. InterTAN is committed to providing consumers with high
quality merchandise, convenient locations and excellent service from friendly,
knowledgeable sales associates.
InterTAN's common shares are traded on the New York Stock Exchange under the
symbol "ITN" and the Toronto Stock Exchange under the symbol "ITA."
[Three images (all being photographs) appear in the foregoing text and are
described as follows: 1) a caller-ID telephone device; 2) a personal computer
consisting of a CPU, monitor with built-in speakers, keyboard and mouse; and 3)
an assortment of batteries for general consumer usage.]
Financial Highlights
<TABLE>
<CAPTION>
(In thousands, except percent, per
share data, Year ended June 30 number
of sales outlets and number of employees) 1996 1995 1994 1993/3/ 1992/3/
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Results:
<S> <C> <C> <C> <C> <C>
Net sales $506,445 $491,751 $465,766 $641,966 $681,440
Gross profit percent 44.3 43.2 44.3 43.0 48.7
Operating income 11,629 13,861/1/ 16,851/1/ (93,155)/1/ (49,554)/1/
Net income (loss) (2,241) 8,123 9,649 (109,060) (45,892)
Primary net income (loss) per average common share (0.21) .81 2.09 (12.20) (5.15)
Fully diluted net income (loss) per average common share (0.21) .65 1.50 (12.20) (5.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Financial Position at Year End:
Total assets 261,633 262,039 258,591 240,534 361,422
Net working capital 145,471 157,582 148,108 40,989 160,141
Long-term debt 64,730 83,555 89,831 40,000/2/ 40,000
Stockholders' equity 119,512 113,326 101,513 82,179 201,025
- -----------------------------------------------------------------------------------------------------------------------------------
Other Information at Year End:
Number of sales outlets 1,780 1,839 1,817 2,136 2,341
Retail square feet (Company-operated stores) 1,707 1,780 1,821 2,272 2,648
Number of employees 4,343 4,217 4,220 5,662 6,200
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Fiscal years 1995, 1994, 1993 and 1992 include provisions (credits) of
($1,600,000), ($3,612,000), $77,400,000 and $49,754,000, respectively,
relating to business restructuring.
/2/ Classified as current in 1993 and included in debt to be refinanced on the
balance sheet. If the long-term debt had not been reclassified, net working
capital would have been $80,989,000.
/3/ Amounts for 1993 and 1992 include results for the Company's former
operations in continental Europe which have been closed.
1
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Introductory Note Regarding Forward Looking Information
With the exception of historical information, the matters discussed herein are
forward looking statements about the business, financial condition and prospects
of InterTAN, Inc. (the "Company" or "InterTAN"). The actual results of the
Company could differ materially from those indicated by the forward looking
statements because of various risks and uncertainties including, but not limited
to, international economic conditions, interest and foreign exchange rate
fluctuations, various tax issues, including possible reassessments, changes in
product demand, competitive products and pricing, availability of products,
inventory risks due to shifts in market conditions, dependence on manufacturers'
product development, the regulatory and trade environment, real estate market
fluctuations and other risks indicated in the Company's previous filings with
the Securities and Exchange Commission. These risks and uncertainties are
beyond the ability of the Company to control, and in many cases the Company
cannot predict the risks and uncertainties that could cause its actual results
to differ materially from those indicated by the forward looking statements.
Results of Operations
Overview
InterTAN is engaged in the sale of consumer electronics products through
company-operated retail stores and dealer outlets in Canada, the United Kingdom
and Australia. The Company's ongoing retail operations are conducted through
three wholly-owned subsidiaries: InterTAN Australia Ltd., which operates in
Australia under the trade name "Tandy Electronics"; InterTAN Canada Ltd., which
operates in Canada under the trade name "RadioShack"; and InterTAN U.K. Limited,
which operates in the United Kingdom under the "Tandy" trade name. All of these
trade names are used under license from Tandy Corporation ("Tandy") of Fort
Worth, Texas.
The geographic distribution of the Company's sales outlets is summarized in the
following table:
Sales Outlets
Fiscal Year 1996 June 30
Ending Opened Closed 1995 1994
- --------------------------------------------------------
Canada
Company-operated 450 9 5 446 451
Dealer 402 21 48 429 425
- --------------------------------------------------------
852 30 53 875 876
- --------------------------------------------------------
Australia
Company-operated 210 9 4 205 210
Dealer 202 23 81 260 266
- --------------------------------------------------------
412 32 85 465 476
- --------------------------------------------------------
United Kingdom
Company-operated 345 14 4 335 334
Dealer 171 17 10 164 131
- --------------------------------------------------------
516 31 14 499 465
- --------------------------------------------------------
Total
Company-operated 1,005 32 13 986 995
Dealer 775 61 139 853 822
- --------------------------------------------------------
1,780 93 152 1,839 1,817
- --------------------------------------------------------
13
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
The dealers included in the preceding table are independent retail businesses
which operate under their own trade names but are permitted, under dealer
agreements, to purchase any of the products sold by InterTAN company stores.
The dealer agreements contain a license permitting the dealer to designate the
consumer electronics department of the dealer's business as a "RadioShack
Dealer," a "Tandy Dealer," or a "Tandy Electronics Dealer," as applicable.
Sales to dealers accounted for approximately 9% of total sales during fiscal
year 1996.
InterTAN's business is seasonal; sales peak in the November-December Christmas
selling season. The Company's cash flow requirements are also seasonal since
inventories build prior to the Christmas selling season. Significant inventory
growth for all operations typically begins to build in late summer and peaks in
November.
The Company's fiscal year ends June 30. Historically, units operating outside
North America reported on a May 31 fiscal year end. Effective with fiscal year
1995, the Company's subsidiaries in Australia and the United Kingdom changed
their fiscal year end to June 30 to coincide with that of the parent Company,
thus eliminating the historical one-month lag in reporting. As a consequence of
this change, losses incurred in Australia and the United Kingdom during the
month of June, 1994, aggregating $1,740,000, have been charged directly to
retained earnings. In order to facilitate the comparison of results for fiscal
year 1995 with those of fiscal year 1994, management has revised the 1994
results to show what they would have been had this change in reporting been
given retroactive effect. The table which follows presents a statement of
operations which compares results for the current year with results for fiscal
years 1995 and 1994, as revised and as reported:
<TABLE>
<CAPTION>
Year ended June 30
1996 1995 1994 1994
(In thousands, except per share data) (Revised) (As Reported)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and operating revenues $506,445 $491,751 $467,629 $465,766
Other income 902 1,217 713 771
- --------------------------------------------------------------------------------------------------------------
507,347 492,968 468,342 466,537
Operating costs and expenses:
Cost of products sold 282,052 279,436 261,449 259,338
Selling, general and administrative expenses 205,694 193,767 186,221 186,017
Depreciation and amortization 7,972 7,504 7,951 7,943
Provision for business restructuring -- (1,600) (3,612) (3,612)
- --------------------------------------------------------------------------------------------------------------
495,718 479,107 452,009 449,686
Operating income 11,629 13,861 16,333 16,851
Foreign currency transaction (gains) losses (338) 314 (2,207) (1,472)
Interest expense, net 6,709 7,462 8,459 8,351
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 5,258 6,085 10,081 9,972
Provision (benefit) for income taxes 7,499 (2,038) (9,677) (9,677)
- --------------------------------------------------------------------------------------------------------------
Net income (loss) $(2,241) $8,123 $19,758 $19,649
- --------------------------------------------------------------------------------------------------------------
Primary net income (loss) per average common share $(0.21) $0.81 $2.10 $2.09
- --------------------------------------------------------------------------------------------------------------
Fully diluted net income (loss) per average common share $(0.21) $0.65 $1.50 $1.50
- --------------------------------------------------------------------------------------------------------------
Average common shares outstanding 10,901 10,043 9,422 9,422
- --------------------------------------------------------------------------------------------------------------
Average common shares outstanding assuming full dilution 10,901 17,186 13,639 13,639
- --------------------------------------------------------------------------------------------------------------
</TABLE>
In the discussion of Results of Operations which follows, when comparisons are
made between fiscal years 1995 and 1994, comparisons will be made, in all cases,
with the results as revised. Management believes that these revised results
provide the most meaningful basis of comparison.
Since the impact of the fluctuations of local country currencies against the
U.S. dollar can be significant, the following analysis of the income and expense
categories is based both on amounts expressed in U.S. dollars and as a percent
of sales. Profit and loss accounts, including sales, are generally translated
from local currency values to U.S. dollars at the monthly average exchange
rates.
14
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
During fiscal year 1996, the U.S. dollar was weaker against the Canadian and
Australian dollars than in fiscal year 1995. As a result, the same local
currency amounts translate into more U.S. dollars as compared with the prior
year. For example, if local currency sales of the Canadian operation in fiscal
1996 were equal to those in fiscal 1995, the fiscal 1996 income statement would
reflect a 1.4% increase in sales when reported in U.S. dollars. On the other
hand, during fiscal year 1996 the U.S. dollar strengthened against the pound
sterling. Consequently, in the United Kingdom, the same local currency amounts
would translate into less U.S. dollars in fiscal year 1996 as compared with
fiscal year 1995. The table below outlines the percentage change of the
weighted average exchange rates as compared to the prior year:
1996 1995 1994
- ---------------------------------------------------
Canada 1.4 (3.1) (6.4)
Australia 2.1 8.3 (3.2)
United Kingdom (1.9) 5.6 (8.9)
- ---------------------------------------------------
Net Sales and Operating Revenues
Net sales and operating revenues ("sales") in U.S. dollars increased by
$14,694,000 in fiscal year 1996, an increase of 3.0% over fiscal year 1995. The
impact on sales of stronger Australian and Canadian dollars was partially
offset by a weaker pound sterling. On a net basis, foreign exchange effects
accounted for $1,450,000 of the increase. In constant dollars, therefore, sales
increased by $13,244,000, or 2.7%. This increase in sales, measured at
comparable exchange rates, was attributable, in part, to an increase in the
number of company-operated stores. During fiscal year 1996, the Company opened
32 new company-operated stores while closing 13 stores for a net increase of 19
company-operated stores. In fiscal years 1995 and 1994, the Company reduced the
number of stores by 9 and 33, respectively. The Company is actively seeking
viable new and replacement locations, particularly in the United Kingdom, where
management believes prospects for increasing sales are greatest. Net additions
are planned for fiscal year 1997 in all three countries, aggregating
approximately 15 company-operated stores, with about one-half of those in the
United Kingdom. The Company's strategy of reviewing and closing certain
marginal locations, where appropriate, will also continue.
The decrease in the number of dealers is primarily attributable to programs in
Canada and Australia designed to eliminate dealers that were not purchasing
product in sufficient quantities to make them profitable to the Company. The
reduction in the number of dealers is not expected to have a material effect on
sales. The Company intends to continue to explore opportunities to expand its
dealer base to produce sales from communities too small to support company-
operated stores.
The following table illustrates the total percentage sales increase (decrease)
by geographic area as measured in U.S. dollars and local currencies:
Sales Increase (Decrease)
U.S. dollars
Year ended June 30
(Percent change) 1996 1995 1994
- -------------------------------------------------
Canada 2.2 2.0 (6.4)
Australia 12.1 7.8 (3.1)
United Kingdom (0.6) 8.8 1.2
- -------------------------------------------------
Local Currencies
Year ended June 30
1996 1995 1994
- -------------------------------------------------
Canada 1.0 5.3 0
Australia 10.3 (0.1) (0.5)
United Kingdom 1.3 3.2 10.9
- -------------------------------------------------
The following table illustrates comparative company-operated store sales
measured in comparable exchange rates:
Comparative Company-Operated Store Sales/1/
U.S. dollars
Year ended June 30
(Percent change) 1996 1995 1994
- ---------------------------------------------------------------------------
Canada 0.6 6.5 1.7
Australia 10.7 2.5 4.0
United Kingdom (0.7) 4.1 11.0
/1/ Derived from the accumulation of each store's monthly sales in local
currency for those months in which it was open both in the current and
preceding year.
- -------------------------------------------------
Comparative stores sales increased during fiscal year 1996 as a whole by 1.9%.
The effect of a difficult fiscal 1996 Christmas quarter partially offset gains
made during the other periods of the year. While comparative store sales
increased by 0.3%, 6.4% and 5.1% in the September, March and June quarters,
respectively, a comparative store sales loss of 3.6% occurred in December
quarter. Management believes that certain steps taken to refocus the Company
into its market niche, including the decision to de-emphasize the video game
business, had a temporary unfavorable impact on sales. For example, reduced
video game sales depressed overall sales by 2.1%, requiring improvements in
other product categories just to stay even with the prior year.
During fiscal year 1996, the Company implemented a number of new service
initiatives and advertising programs made available to it under an advertising
agreement concluded with Tandy late in fiscal year 1995. These included the
positioning statement, "You've got questions. We've got answers." and the new
service initiative, "The Repair Shop at RadioShack." The Company is also in the
early stages of implementing the service initiative, "RadioShack Unlimited."
15
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
The steps taken to refocus the Company into its niche market together with the
introduction of these and other new service initiatives had an overall positive
impact on sales during fiscal year 1996 and management believes that sales will
continue to benefit from this strategy during fiscal year 1997.
Net sales increased by $24,122,000 in fiscal year 1995. A stronger Australian
dollar and pound sterling accounted for $7,034,000 of the increase. Sales at
comparable exchange rates increased by 3.6% in fiscal year 1995. This increase
in sales was achieved despite a net reduction of nine company-operated stores.
Comparative store sales increased by 4.9% during fiscal year 1995.
Net sales decreased by $176,200,000 during fiscal year 1994. Elimination of
sales in continental Europe following the closure of European operations
accounted for $157,175,000 of this decline. A stronger U.S. dollar explains a
further reduction in sales of $28,423,000. When both of these factors are
removed, sales in the Company's ongoing markets measured at comparable exchange
rates increased by 2.4% in fiscal year 1994. The closure of a net 33 stores
during the year had a negative impact on sales. Comparative store sales for the
year increased by 5.1%.
Gross Profit
Gross profit in fiscal year 1996 was $12,078,000 higher than in fiscal 1995,
primarily due to an increase in sales and an improvement in the gross margin
percentage. The following analysis summarizes the components of the increase in
gross profit over that experienced in fiscal year 1995 (in thousands):
- ---------------------------------------------------
Higher gross margin percentage $5,488
Higher sales 5,725
Stronger foreign currencies 865
- ---------------------------------------------------
$12,078
The following table illustrates gross profit as a percentage of sales, by
geographic area:
(As a percent of sales) 1996 1995 1994
(Revised)
- ---------------------------------------------------
Canada 45.6 45.1 46.8
Australia 45.5 43.8 43.1
United Kingdom 41.6 39.9 40.3
- ---------------------------------------------------
Consolidated 44.3 43.2 44.1
The gross profit percentage for fiscal year 1996 rose from 43.2% a year ago to
44.3%, an increase of 1.1 percentage points. Management's overall objective for
the year had been to improve margins by a full percentage point. This objective
was achieved as margins increased in all markets. This improvement results
primarily from a merchandising strategy which places greater emphasis on the
Company's higher margin core categories, including parts and accessories and
private label goods. Increased cellular phone revenues, emphasis on the sale of
extended warranty contracts and tighter controls over inventories also had a
positive effect on margins.
Management believes that the steps taken to refocus the Company in its niche
market as well as the benefits of current and planned service and other
initiatives will continue to make a positive contribution to margins in fiscal
year 1997. However, it may be unrealistic to expect that improvement will
continue at the pace experienced in fiscal 1996.
In fiscal year 1995, the gross margin percentage declined by 0.9 percentage
points. Much of this decline occurred in Canada and was due to a swing in the
sales mix away from private label goods towards branded product, in particular
computers. Management addressed this issue by better managing the percentage of
computers in the product mix. The effect of the decline in Canadian margins was
partially offset by an improvement in the gross margin percentage in Australia
following the installation of an electronic point-of-sale system in that
operation.
In fiscal year 1994, the gross margin percentage improved by 0.9 percentage
points. In fiscal year 1993, however, margins had been depressed by the low
margin on sales in continental Europe. The margin percentage in the Company's
core markets of Canada, Australia and the United Kingdom actually declined by
1.8 percentage points. Reductions in margin percentages in Australia and the
United Kingdom were partially offset by an improvement in Canada. These
reductions were attributable to competitive pricing pressure and to the
introduction of lower margin branded products in Australia.
Selling, General and Administrative Expenses
Selling, general and administrative expense ("SG&A"), as a percentage of
sales, increased from 39.4% in fiscal year 1995 to 40.6% in the current year.
The following chart illustrates SG&A expense as a percentage of sales by
geographic area:
SG&A Expense by Geographic Area
(As a percent of sales) 1996 1995 1994
(Revised)
- ---------------------------------------------------
Canada 35.6 34.5 36.2
Australia 41.6 41.9 41.6
United Kingdom 45.0 42.1 42.0
- ---------------------------------------------------
Consolidated 40.6 39.4 39.8
16
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
The following table provides a breakdown of SG&A expense by major category (in
thousands):
<TABLE>
<CAPTION>
SG&A Expense by Category
1996 1995 1994
(Revised)
Dollars % of Sales Dollars % of Sales Dollars % of Sales
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Payroll $83,507 16.5 $78,359 15.9 $75,469 16.1
Advertising 26,045 5.1 24,638 5.0 24,880 5.3
Rent 40,918 8.1 39,423 8.0 38,845 8.3
Taxes (other than income taxes) 16,942 3.3 16,160 3.3 15,593 3.3
Telephone, telex and utilities 6,865 1.4 6,669 1.4 6,863 1.5
Other 31,417 6.2 28,518 5.8 24,571 5.3
- ---------------------------------------------------------------------------------------------------------------
$205,694 40.6 $193,767 39.4 $186,221 39.8
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Foreign exchange rate effects did not have a material effect on the increase in
SG&A expenses during fiscal year 1996.
Implementing a strategy of growing the business by refocusing the Company in
its niche market, introducing new service and other initiatives and expanding in
selected markets of necessity required some increase in SG&A spending. The
increase in the number of stores resulted in higher rent and increased store
payroll costs. Payroll costs also increased as a result of the "Repair Shop at
RadioShack" initiative as well as the strengthening of the management teams in
all three countries. Management information systems were also improved,
particularly in the United Kingdom.
Management's objective had been to keep SG&A expense as a rate to sales flat
with the prior year. This objective proved to be unattainable, primarily as a
result of sales in the December quarter which did not meet expectations.
Management will continue to focus its attention on controlling costs, with an
overall strategy of reducing SG&A as a percentage of sales during fiscal 1997,
after excluding the scheduled 0.25 percentage point increase in the royalty
payable to Tandy.
In fiscal year 1995, SG&A expense increased by $7,546,000. After the effects
of foreign exchange rate fluctuations are eliminated, the increase, measured at
constant exchange rates was $4,544,000. SG&A spending in fiscal year 1995 was
heavily affected by the decision to refocus the Company in its niche market.
This action resulted in one-time costs incurred in the process of restructuring
the business, including the severance of two senior executives and the
retirement of a third as well as the relocation of the corporate headquarters
from Toronto to Fort Worth. These one-time costs totaled approximately
$1,500,000.
In fiscal year 1994, SG&A expense was reduced by $96,320,000. After the
effects of foreign exchange and the impact of the closure of the Company's
operation in continental Europe are eliminated, SG&A in the Company's core
markets, measured at constant exchange rates, declined by $9,848,000. Almost 60%
of this reduction was in payroll. These savings resulted from management's focus
on managing payroll at the store level and eliminating certain functions in
central units and corporate headquarters.
Depreciation and Amortization
Depreciation and amortization expense increased modestly in fiscal year 1996
by $468,000, primarily as a result of increased capital spending on store
renovations, new stores and investments in management information systems.
Depreciation and amortization expense had decreased by $477,000 during fiscal
year 1995, primarily as a result of reduced capital spending during the period
of the Company's financial restructuring. In fiscal year 1994, depreciation and
amortization expense fell by $5,570,000. Most of this reduction was attributable
to the closure of operations in continental Europe. Management anticipates that
depreciation and amortization expense will increase in future periods as capital
spending increases to renew assets and in response to growth in the business.
Most of this spending will be on store expansion, remodeling and upgrading.
Provision for Business Restructuring
In May, 1993, the Board of Directors approved management's plan to discontinue
the Company's continental European retail operations. The Company recorded a
pre-tax charge in the fourth quarter of fiscal 1993 in the amount of $77,400,000
in connection with the shutdown to provide for management's best estimate of the
costs of inventory liquidation, lease commitments, payroll and severance, other
operating costs during the shutdown period, and losses on the disposal of fixed
assets and leaseholds. At June 30, 1994, all inventory and assets had been
sold, all significant leases had been canceled and all employees had been
terminated.
17
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
The credit of $3,612,000 to the business restructuring provision in fiscal
1994 represents the cumulative translation adjustment effects of liquidating the
European business entities. During the fourth quarter of fiscal 1995, certain
European claims and contingencies were settled for amounts less than originally
estimated. As a result of these settlements and certain other developments,
management reduced the accrual by $1,600,000.
Management believes the remaining restructuring reserve at June 30, 1996 of
$2,630,000 is adequate to provide for the Company's remaining obligations in
Europe including those arising from legal actions brought against the Company by
former employees, dealers and franchisees.
Foreign Currency Transaction (Gains)/Losses
A foreign currency transaction gain of $338,000 arose during fiscal year 1996
compared to a foreign currency loss of $314,000 in fiscal year 1995. These
gains and losses resulted from a variety of factors, including the effect of
fluctuating foreign currency values on inter-company debt and regular trade
payables denominated in currencies other than the functional currency of the
debtor. The Company's major exposure to foreign currency risks are the Canadian
dollar denominated subordinated convertible debentures (the "Debentures")
carried on the books of the Company and the U.S. dollar denominated notes due to
Tandy which are recorded in the Canadian subsidiary. Historically, these two
debts provided a natural hedge, as the related foreign currency risks were
largely offsetting. The risk with respect to these two debts will increase with
time as the notes payable to Tandy are paid down. In fiscal year 1994, a
foreign currency transaction gain of $1,472,000 was experienced. This gain was
attributable primarily to a gain on the repayment of a loan owing by the
Canadian subsidiary to the Company.
Net Interest Expense
Interest expense, net of interest income, was $6,709,000, $7,462,000 and
$8,351,000 for fiscal years 1996, 1995 and 1994, respectively.
The reduction in net interest expense in fiscal year 1996 results from reduced
interest bearing debt as a consequence of principal repayments on the notes
payable to Tandy as well as the voluntary conversion of a portion of the
Debentures by the holders thereof. In addition, the amortization of a
significant portion of the Company's bank financing costs had been completed in
fiscal 1995. The reduction in net interest expense during fiscal year 1995 is
attributable to lower average net debt, primarily because of the fact that
during part of fiscal year 1994, interest was being paid to Tandy on short-term
debt which had accumulated during the period of the Company's financial
restructuring. The effect of this reduction in net debt was partially offset by
an increase in the amortization of financing charges. The increase in net
interest expense in fiscal year 1994 was due to a combination of higher rates,
the amortization of financing costs and increased average borrowings.
Income Taxes
In assessing the required valuation allowance against the deferred tax assets
at June 30, 1994, the Company concluded that it was more likely than not that a
portion of the deferred tax assets of the Canadian subsidiary would be used to
offset future tax. This conclusion was primarily influenced by the successful
completion of new financing arrangements in the form of bank loans and the
Debentures, negotiation of its loan and merchandising agreements with Tandy and
the closure of its European operations. Accordingly, during fiscal year 1994,
the Company recognized a deferred tax benefit in the amount of $12,325,000. This
deferred tax benefit was partially offset by current tax expenses related to
U.S. taxes on foreign interest income and certain Canadian federal and
provincial taxes, resulting in a net tax benefit of $9,677,000.
During fiscal 1995, management reviewed the realization of its remaining
deferred tax assets. Based on the operating performance of the Canadian
subsidiary, particularly in the first two quarters, management concluded that
the valuation allowance should be further reduced by approximately $9,100,000
and the Company recognized a deferred tax benefit of that amount. The Company
also recorded a current tax benefit of $1,000,000 relating to the parent
Company. These tax benefits were partially offset by a provision for Canadian
federal and provincial income taxes on the profits of the Canadian subsidiary,
resulting in a net tax benefit for the year of $2,038,000.
The provision for taxes for fiscal year 1996 of $7,499,000 primarily
represents a provision for Canadian federal and provincial taxes on the profits
of the Canadian subsidiary.
At June 30, 1996, the Company had deferred tax assets in all three countries
aggregating $36,684,000 against which a valuation allowance has been recorded in
the amount of $30,461,000. Approximately $20,500,000 of the valuation allowance
relates to loss carryforwards in Australia and the United Kingdom. The
potential realization of the deferred tax assets will be reviewed on a regular
basis.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1987 to 1989 taxation years was completed during fiscal year 1994, resulting in
additional tax being levied against the Canadian subsidiary. The Company has
appealed these reassessments and, pending the outcome of these matters, the
Company, by Canadian law, was required to pay one-half of the tax in dispute.
The tax levied by Revenue Canada in reassessing those years was offset by
refunds arising from the carryback of losses incurred in subsequent years.
18
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Depending on the ultimate resolution of these issues, the Company could
potentially have an additional liability in the range of $0 to $10,700,000. The
Company believes it has meritorious arguments in defense of a number of the
issues raised by Revenue Canada and it is in the process of vigorously defending
its position. It is management's determination that no additional provision
need be recorded for these reassessments. In order for the Company to succeed
in appealing certain aspects of these reassessments, it must succeed in
defending the possible reassessments discussed immediately below.
The Company was advised in August 1995 that Revenue Canada intended to extend
the scope of its 1987 to 1989 reassessments to raise certain issues flowing from
the spin-off of the Company from Tandy in fiscal year 1987. Management
disagrees with Revenue Canada's views on these issues and will vigorously defend
the Company's position should Revenue Canada pursue these issues. Management
believes it has meritorious arguments supporting its stance and, accordingly, no
additional provision has been recorded for these possible reassessments. Tax
reassessments related to these issues, if successfully pursued, could
potentially range from $14,000,000 to $20,000,000. As required by Canadian law,
the Company would be required to post a deposit of one-half of the tax in
dispute, including interest, in order to appeal any reassessment.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1990 to 1993 taxation years was commenced during the 1995 fiscal year. While to
date no reassessments have been issued by Revenue Canada arising from this
audit, the Company has been advised that Revenue Canada is challenging certain
interest deductions relating to the Canadian subsidiary's former operations in
continental Europe and is proposing to tax certain foreign exchange gains
related to such operations. Management estimates that the possible range of
loss should Revenue Canada ultimately prevail in these matters, after all
appeals have been unsuccessfully pursued by the Company, could range from
$18,000,000 to $25,000,000. Assuming Revenue Canada pursues these issues, in
order for the Company to proceed with such appeals, the Company would be
required to post a deposit equal to one-half of the 1990-1993 tax in dispute,
together with interest, which management estimates should not exceed $9,000,000.
Management believes it has meritorious arguments in support of the deductibility
of such interest and in support of its treatment of the foreign exchange gains
and is prepared to vigorously defend its position should the Canadian tax
authorities proceed with such a challenge. Accordingly, it is management's
assessment that no provision need be recorded for these possible claims.
Net Income per Average Common Share
The primary net loss and fully diluted loss per average common share were both
$0.21 for fiscal year 1996 as the effect of the Debentures was anti-dilutive.
For fiscal years 1995 and 1994, primary net income per average common share and
fully diluted net income per average common share were $0.81 and $0.65, and
$2.09 and $1.50, respectively. In each of those periods, the difference between
primary and fully diluted net income per average common share was due primarily
to the dilutive effect of the Debentures, which are convertible into 7,123,860
common shares. Because the Debentures were anti-dilutive during one or more
quarters of fiscal years 1996 and 1995, fully diluted net income (loss) per
average common share during the four quarters of those fiscal years do not total
fully diluted net income per average common share for those fiscal years as a
whole. The dilutive effect of this instrument will likely continue in future
periods and exchange rate impacts on the Debentures may increase or decrease
their dilutive effects.
The Company has outstanding warrants exercisable for 1,449,007 common shares
at an exercise price of $6.618 per share. Also, in fiscal years 1996, 1995 and
1994, the Company's directors and employees held options to purchase 650,833,
650,000 and 707,499 common shares, respectively, at exercise prices ranging from
$5.31 to $8.1875, $5.31 to $8.125 and $5.31 to $7.125, respectively. The
outstanding warrants and options were also considered in determining primary and
fully diluted net income per average common share.
19
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
The Company's principal sources of outside financing are its loan from Tandy,
the Debentures and bank facilities.
On August 5, 1993, Tandy, through its wholly-owned subsidiary, Trans World
Electronics, Inc., acquired the debt then outstanding under the Company's
Revolving Credit and Term Loan Agreement of $41,748,000. This debt was then
restructured as a term loan facility ("Series A Note") bearing interest at
8.64%. It is payable semi-annually over a six year period commencing February
25, 1995. In addition, Tandy provided the Company with a $10,113,000 three-year
loan ("Series B Note") which bears interest at 8.11% and was due on August 25,
1996. The agreement governing these loans is herein referred to as the "Tandy
Loan Agreement." During fiscal year 1996, the Company made scheduled repayments
on the Series A Note aggregating $6,958,000. In addition, the Series B Note was
retired early in May, 1996.
As part of the financial restructuring indicated above, the Company entered
into a Merchandise Agreement with Tandy which requires the Company to use
Tandy's export unit as its exclusive exporter of products from the Far East
through the term of the Merchandise Agreement. The Merchandise Agreement
requires the Company to support a percentage of the total cost of purchase
orders placed with Far Eastern suppliers with either letters of credit or cash
deposits. The percentage ranges from a low of 60% in the December to April
period to a high of 90% in August. In October, 1995, agreement was reached to
lower the letter of credit posting requirement on Canadian purchases. The
Company has reached agreement with Tandy whereby the same reduced letter of
credit requirements have been extended to the Company's other subsidiaries.
On May 6, 1994, InterTAN Canada Ltd., InterTAN, Inc., and InterTAN U.K.
Limited entered into a one-year credit agreement ("Syndicated Loan Agreement")
with a syndicate of banks. This agreement has been renewed and now extends
through mid-August, 1997. This facility is used primarily to provide letters of
credit in support of purchase orders. At June 30, 1996, there were borrowings
against the credit facility aggregating $975,000. In addition, $29,279,000 was
committed in support of letters of credit and a further $399,000 was committed
in support of foreign exchange contracts. At June 30, 1996, $13,345,000 of
credit was available for use.
Both the Tandy Loan Agreement and the Syndicated Loan Agreement preclude the
Company from paying dividends on its common stock. In addition, the Tandy Loan
Agreement and the Syndicated Loan Agreement contain covenants which require the
Company to maintain tangible net worth at a specified minimum level and which
limit the level of debt due both to Tandy as well as other parties, capital
spending, lease commitments, store openings and require the Company to maintain
debt to equity and working capital ratios at agreed levels. These loan
agreements also require the Company to meet certain interest coverage ratios.
During fiscal year 1996, the Company was in compliance with all of these
requirements except for the interest coverage ratio tests under the Syndicated
Loan Agreement at December 31, 1995 and under the Tandy Loan Agreement at June
30, 1996. All members of the bank syndicate and Tandy have waived these events
of non-compliance.
During fiscal year 1994, the Company closed a private placement of
Cdn$60,000,000 of 9% subordinated convertible debentures which will mature on
August 30, 2000. Interest on the Debentures is payable semi-annually, at the end
of February and August. At June 30, 1996, Cdn$56,812,000 ($41,660,000 at the
June 30, 1996 exchange rate) of Debentures were outstanding. The conversion rate
is 118.7310 common shares for each Cdn$1,000 face amount of Debentures,
equivalent to a conversion price of approximately Cdn$8.42, or $6.17 per share
at the June 30, 1996 exchange rate. The Debentures are subordinated to all
senior indebtedness of the Company, including the Company's revolving bank
facility and the Tandy Loan Agreement.
Operating activities generated $12,185,000 in cash during fiscal year 1996, an
increase of $4,155,000 over the cash generated during fiscal year 1995.
Increases in inventories consumed $13,698,000 in cash during fiscal year 1996,
while reductions in inventories had generated $1,687,000 in cash a year ago.
The increase in the Company's inventory levels in fiscal year 1996 results from
a merchandising strategy which places greater emphasis on higher margin private
label goods. These products require larger order sizes and longer lead times.
An improvement in the Company's in-stock position and a wider product assortment
also contributed to the increase. The effect of this reduction in cash was
partially offset by an increase in accounts payable which preserved $9,960,000
in cash compared to $834,000 in fiscal 1995. Net income, adjusted to reconcile
net income to cash, generated $15,418,000 in cash, $1,634,000 more than in
fiscal year 1995. Operating activities resulted in an inflow of cash of
$8,030,000 during fiscal year 1995, compared to an outflow of $24,788,000 during
fiscal year 1994. Net income in fiscal year 1995, adjusted to reconcile net
income to cash, generated only $1,357,000 more cash than in fiscal year 1994.
However, significant cash outflows had occurred in fiscal 1994 as the European
restructuring reserve was reduced and amounts owing to Tandy and other creditors
which had accumulated during the period of the Company's financial restructuring
were liquidated. These outflows were partially offset by tax refunds of
approximately $14,000,000.
20
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Investing activities consumed $9,961,000 in cash in fiscal year 1996 compared
to $5,773,000 in fiscal year 1995. This change results primarily from an
increase in additions to property and equipment as the Company proceeds with a
plan to open new stores and renovate existing stores. In fiscal year 1994,
investing activities generated cash of $9,013,000 as the proceeds from the
liquidation of assets in continental Europe significantly exceeded routine
additions to property and equipment.
In fiscal year 1996, financing activities consumed $13,895,000 in cash. The
effects of scheduled repayments on the Series A Note payable to Tandy as well as
the early retirement of the Series B Note were partially offset by short-term
borrowings and cash generated from the sale of stock to employee plans. In
fiscal year 1995, financing activities consumed $1,658,000 in cash. Cash
consumed by the principal payment of debt to Tandy was partially offset by the
proceeds from the sale of common stock to employee plans. In fiscal year 1994,
cash generated by the sale of stock to employee plans together with the net
proceeds from long-term borrowings contributed $47,095,000 in cash.
The Company's primary uses of liquidity in fiscal year 1997 will include the
building of inventory levels for the 1996 Christmas selling season, the funding
of capital additions and the servicing of debt. The Company anticipates that
capital additions will approximate $12,000,000 in fiscal year 1997, mainly
related to store expansion, remodeling and upgrading. The Company's debt
servicing requirements in fiscal year 1997 are estimated to be $13,300,000 and
include principal payments on the Tandy Loan of $6,958,000. In addition, as
previously described, the Company believes that it could possibly receive
additional reassessments of tax from Revenue Canada. See "Income Taxes."
The Company's primary sources of liquidity in fiscal year 1997 will be its
cash and short-term investments on hand, cash generated from operations and the
syndicated credit facility. In addition, the Company has recently concluded an
agreement with an Australian bank which would provide a further credit facility
to the Australian subsidiary in the amount of A$12,000,000 ($9,450,000 at the
June 30, 1996 rate of exchange). While the Syndicated Loan Agreement together
with the new Australian facility will be used primarily to support letters of
credit issued in accordance with the Merchandise Agreement, management believes
that it will be necessary to borrow against these facilities as inventories are
built for the 1996 Christmas selling season. Borrowings against the Syndicated
Loan Agreement will also be required from time to time to fund operations,
primarily in the United Kingdom. Management believes these facilities will be
adequate to provide letters of credit to the level required by peak outstanding
orders.
Management believes that the Company's cash and short-term investments on hand
and its cash flow from operations coupled with the Syndicated Loan Agreement and
the new credit facility in Australia will provide the Company with sufficient
liquidity to meet its planned requirements through fiscal year 1997, provided
the amount of any additional tax deposits were not at the upper end of the
ranges described above under "Income Taxes." If this were the case, the Company
would be required to seek additional sources of liquidity. Management is
currently in the process of studying additional funding alternatives. However,
there can be no assurance that additional funding would be available, if
required.
21
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended June 30
(In thousands, except per share data) 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales and operating revenues $506,445 $491,751 $465,766
Other income 902 1,217 771
- ------------------------------------------------------------------------------------------------------
507,347 492,968 466,537
- ------------------------------------------------------------------------------------------------------
Operating costs and expenses:
Cost of products sold (including purchases from
Tandy Corporation of $86,366, $69,091, and $94,604, respectively) 282,052 279,436 259,338
Selling, general and administrative expenses 205,694 193,767 186,017
Depreciation and amortization 7,972 7,504 7,943
Provision for business restructuring -- (1,600) (3,612)
- ------------------------------------------------------------------------------------------------------
495,718 479,107 449,686
- ------------------------------------------------------------------------------------------------------
Operating income 11,629 13,861 16,851
Foreign currency transaction (gains) losses (338) 314 (1,472)
Interest expense, net 6,709 7,462 8,351
- ------------------------------------------------------------------------------------------------------
Income before income taxes 5,258 6,085 9,972
Provision (benefit) for income taxes 7,499 (2,038) (9,677)
- ------------------------------------------------------------------------------------------------------
Net income (loss) $(2,241) $8,123 $19,649
- ------------------------------------------------------------------------------------------------------
Primary net income (loss) per average common share $(0.21) $0.81 $2.09
- ------------------------------------------------------------------------------------------------------
Fully diluted net income (loss) per average common share $(0.21) $0.65 $1.50
- ------------------------------------------------------------------------------------------------------
Average common shares outstanding 10,901 10,043 9,422
- ------------------------------------------------------------------------------------------------------
Average common shares outstanding assuming full dilution 10,901 17,186 13,639
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, June 30,
(In thousands, except share amounts) 1996 1995
- ----------------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current Assets:
Cash and short-term investments $ 34,096 $ 45,260
Accounts receivable, less allowance for doubtful accounts 9,422 8,710
Inventories 162,207 146,184
Other current assets 7,628 9,377
Deferred income taxes 3,831 8,484
- ----------------------------------------------------------------------------------------------
Total current assets 217,184 218,015
Property and equipment, less accumulated depreciation and amortization 39,129 34,996
Other assets 2,928 4,117
Deferred income taxes 2,392 4,911
- ----------------------------------------------------------------------------------------------
$261,633 $262,039
- ----------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term bank borrowings $ 975 $ --
Current maturities of notes payable to Tandy Corporation 6,958 6,958
Accounts payable 24,082 14,039
Accounts payable to Tandy Corporation 894 429
Accrued expenses 25,833 25,104
Income taxes payable 12,971 13,903
- ----------------------------------------------------------------------------------------------
Total current liabilities 71,713 60,433
Long-term notes payable to Tandy Corporation, less current maturities 23,070 39,833
9% convertible subordinated debentures 41,660 43,722
Other liabilities 5,678 4,725
- ----------------------------------------------------------------------------------------------
142,121 148,713
- ----------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, no par value, 1,000,000 shares authorized,
none issued or outstanding -- --
Common stock, $1 par value, 40,000,000 shares authorized,
11,172,506 and 10,192,767 issued and outstanding 11,173 10,193
Additional paid-in capital 111,678 106,376
Retained earnings 19,132 21,373
Foreign currency translation effects (22,471) (24,616)
- ----------------------------------------------------------------------------------------------
Total stockholders' equity 119,512 113,326
- ----------------------------------------------------------------------------------------------
Commitments and contingent liabilities
$261,633 $262,039
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended June 30
(In thousands) 1996 1995 1994
- --------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C>
Net income (loss) $ (2,241) $ 8,123 $ 19,649
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Results from the Australia and the U.K. transitional
month (see Note 1) -- (1,740) --
Depreciation and amortization 7,972 9,444 8,840
Deferred income taxes 7,172 (1,392) (12,325)
Foreign currency transaction gains, unrealized (100) (170) (89)
Provision for business restructuring -- (1,600) (3,612)
Other 2,615 1,119 (36)
Cash provided by (used for) current assets and liabilities:
Receivables (674) (1,517) (816)
Inventories (13,698) 1,687 3,441
Other current assets 1,298 (1,480) (661)
Accounts payable 9,960 834 (5,819)
Accounts and short-term notes payable to Tandy Corporation 449 (851) (10,320)
Accrued expenses 452 (3,667) (39,201)
Income taxes payable (1,020) (760) 16,161
- --------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 12,185 8,030 (24,788)
- --------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (12,119) (7,530) (7,011)
Proceeds from sales of property and equipment 331 1,538 18,227
Other investment activities 1,827 219 (2,203)
- --------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (9,961) (5,773) 9,013
- --------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Changes in short-term borrowings, net 972 -- --
Proceeds from issuance of common stock to employee plans 1,484 1,809 3,103
Proceeds from exercise of stock options 760 12 --
Proceeds from long-term borrowings -- -- 55,137
Principal repayments on long-term borrowings (17,111) (3,479) (11,145)
- --------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (13,895) (1,658) 47,095
- --------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 507 395 (1,150)
- --------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and short-term investments (11,164) 994 30,170
Cash and short-term investments, beginning of year 45,260 44,266 14,096
- --------------------------------------------------------------------------------------------------
Cash and short-term investments, end of year $34,096 $45,260 $44,266
- --------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information
Cash paid (received) during the year for:
Interest $7,976 $8,616 $6,338
Income taxes $967 $271 $(13,288)
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Foreign
Retained Currency
Common Stock Additional Earnings Translation
(In thousands) Shares Amount Paid-In Capital (Deficit) Effects
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1993 9,201 $9,201 $98,855 $(4,659) $(21,218)
Net foreign currency translation adjustments -- -- -- -- (5,573)
Issuance of warrants to purchase common stock -- -- 2,155 -- --
Issuance of common stock to employee plans 514 514 2,589 -- --
Net income -- -- -- 19,649 --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1994 9,715 9,715 103,599 14,990 (26,791)
Net foreign currency translation adjustments -- -- -- -- 2,175
Issuance of common stock to employee plans 476 476 2,767 -- --
Issuance of common stock under stock option plans 2 2 10 -- --
Results from Australia and the U.K. transitional month
(see Note 1) -- -- -- (1,740) --
Net income -- -- -- 8,123 --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 10,193 10,193 106,376 21,373 (24,616)
Net foreign currency translation adjustments -- -- -- -- 2,145
Issuance of common stock to employee plans 483 483 2,805 -- --
Issuance of common stock under stock option plans 118 118 642 -- --
Conversion of subordinated debentures to
common stock 379 379 1,855 -- --
Net loss -- -- -- (2,241) --
- ---------------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 11,173 11,173 $111,678 $19,132 $(22,471)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
25
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 1 Summary Of Significant
Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. The Company operates consumer electronic retail stores in
Canada, Australia, and the United Kingdom. The Company's operations in
continental Europe (Belgium and France) were closed during fiscal year 1994.
All material intercompany transactions, balances and profits have been
eliminated. The Company's fiscal year ends June 30. For fiscal years 1994 and
prior, units operating outside North America reported on a May 31 fiscal year
end. Effective with fiscal year 1995, the Company's subsidiaries in Australia
and the United Kingdom changed their fiscal year end to June 30 to coincide with
that of the parent company. This change did not have a material impact on the
comparability of the Company's consolidated financial statements for the year as
a whole. Losses for the month of June, 1994, in Australia and the United
Kingdom, which totaled $1,740,000, were charged directly to retained earnings.
Cash and Short-Term Investments
Cash in stores, deposits in banks and short-term investments with original
maturities of three months or less are considered as cash and cash equivalents.
Inventory
Inventories are comprised primarily of finished merchandise and are stated at
the lower of cost, based on the average cost method, or market value.
Property and Equipment
Property and equipment are recorded at cost and depreciated over the estimated
useful lives of the assets using the straight-line method. Estimated useful
lives range from 25 to 40 years for buildings, 2 to 8 years for fixtures and
equipment and 25 years for lease premiums. Leasehold improvements are amortized
over the life of the lease or the useful life of the asset, whichever is
shorter.
Maintenance and repairs are charged to expense as incurred. Renewals and
improvements which materially prolong the useful lives of the assets are
capitalized. The cost and related accumulated depreciation of property retired
or sold are removed from the accounts, and gains or losses are recognized in the
income statement.
Net Sales and Operating Revenues
Net sales and operating revenues include items related to normal business
operations, including service contract and repair income. Service contract
revenue, net of direct selling expenses, is recognized over the life of the
contract.
Translation of Foreign Currencies
The local currencies of the Company's foreign entities are the functional
currencies of those entities. For reporting purposes, assets and liabilities
are translated to U.S. dollars using the exchange rates in effect at the balance
sheet date; income and expense items are translated using monthly average
exchange rates. The effects of exchange rate changes on net assets located
outside the United States are recorded in a separate account in equity. Gains
and losses from foreign currency transactions are included in the operations of
each period.
Contract Management
At June 30, 1996, InterTAN Australia had 210 company-operated stores, of which
146 were operated under "contract management" arrangements. Under the typical
contract management arrangement, the store manager is not employed by InterTAN
Australia, but is under contract to operate the store on behalf of the Company.
InterTAN Australia selects and supplies the store location (including lease
payments and other fixed location charges) and also supplies leasehold
improvements, fixtures and store inventory. InterTAN Australia is also
committed to provide service back-up, including advertising and training. The
contract manager is responsible for providing the labor and overhead necessary
to operate the store (i.e., labor, store utility and other operating costs).
The contract manager may be required to provide a cash deposit. In return for
the service of operating the store, the contract manager receives compensation
equal to one-half of the store's gross profit.
The revenue, as well as the expenses paid by the Company, related to contract
management stores are included in the consolidated statement of operations. The
contract manager's compensation is included in selling, general and
administrative expenses. Contract managers' deposits are included in the "Other
liabilities" section of the consolidated balance sheet and amounted to
$3,145,000 and $2,044,000 at June 30, 1996 and June 30, 1995, respectively.
Capitalized Financing Costs
Costs incurred in connection with the issuance of debt are capitalized and are
amortized over the term of the respective debt. These costs, which include
underwriting, bank, legal and accounting fees totaled $4,198,000. Amortization
for fiscal years 1996, 1995 and 1994 was $608,000, $1,199,000 and $640,000,
respectively. Unamortized balances at June 30, 1996 and June 30, 1995 were
$1,805,000 and $2,392,000, respectively.
Advertising Costs
Advertising costs are expensed the first time the related advertising occurs.
During fiscal years 1996, 1995 and 1994, advertising expense was $26,045,000,
$24,419,000 and $24,898,000, respectively.
26
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Income Taxes
The Company records deferred income taxes under the asset and liability
approach which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
book amounts and tax basis of assets and liabilities. However, deferred tax
assets can be recognized only to the extent that it is more likely than not that
the Company will realize the benefits of that deferred tax asset.
InterTAN considers the earnings of its foreign subsidiaries to be permanently
reinvested for use in those operations and, consequently, deferred federal
income taxes, net of applicable foreign tax credits, are not provided on the
undistributed earnings of foreign subsidiaries. If the earnings of those
subsidiaries as of June 30, 1996 were remitted to the parent, approximately
$16,207,000, subject to adjustment for deemed foreign taxes paid, would be
included in the taxable income of the parent. By operation of tax statutes
currently in effect, the Company would incur certain U.S. income taxes,
including alternative minimum tax. Such remittances may also be subject to
certain foreign withholding taxes (presently rates range from 0% to 15%) for
which there would likely be no U.S. tax relief.
Forward Exchange Contracts
Gains and losses on contracts entered to hedge open inventory purchase orders
are included in the cost of the merchandise purchased. Gains and losses on
contracts intended to mitigate the effects of exchange rate fluctuations on
payables and debt denominated in currencies other than the functional currency
of the debtor are included in income in the periods the exchange rates change.
Earnings per Share
The Company computes primary net income (loss) per average common share by
dividing net income by the sum of the weighted average number of common shares
outstanding and dilutive common stock equivalents as determined using the
treasury stock method. Dilutive common stock equivalents consist of outstanding
stock options and warrants. Fully diluted net income per average common share
assumes conversion of the 9% subordinated convertible debentures ("Debentures")
into common stock, whereby the related interest expense and foreign currency
transaction (gains) losses, net of tax, are added back to net income.
New Accounting Standards
In March 1995, the FASB issued FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"),
which is effective for fiscal years beginning after December 15, 1995.
Effective July 1, 1996, the Company will adopt SFAS 121 which requires that
long-lived assets (i.e. property, plant and equipment and goodwill) held and
used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the net book value of the asset may not be
recoverable. An impairment loss will be recognized if the sum of the expected
future cash flows (undiscounted and before interest) from the use of the asset
is less than the net book value of the asset. The amount of the impairment loss
will generally be measured as the difference between the net book value of the
assets and the estimated fair value of the related assets. The adoption of SFAS
121 in the first quarter of fiscal 1997 is not expected to have a material
effect on the Company's consolidated financial statements.
In October 1995, the FASB issued FAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), which is effective for fiscal years beginning after
December 15, 1995. Effective July 1, 1996, the Company will adopt SFAS 123
which establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value based
method of accounting for an employee stock option or similar equity instrument
and encourages all entities to adopt that method of accounting for all of their
employee stock option compensation plans. However, it also allows an entity to
continue to measure compensation cost for those plans using the intrinsic value
based method of accounting as prescribed by Accounting Principles Board Option
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"). Entities
electing to remain with the accounting in APB 25 must make pro forma disclosures
of net income and earnings per share as if the fair value based method of
accounting defined in SFAS 123 had been applied. The Company will continue to
account for stock-based employee compensation plans under the intrinsic method
pursuant to APB 25 and will make the disclosures in the fiscal 1997 financial
statements as required by SFAS 123.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, and related revenues and
expenses, and disclosure of gain and loss contingencies at the date of the
financial statements. Actual results could differ from those estimates.
Classification
Certain prior year balances have been reclassified to conform with the current
year presentation.
Note 2 Bank Debt
On May 6, 1994, InterTAN Canada Ltd., InterTAN Inc., and InterTAN U.K. Limited
entered into a one-year credit agreement ("Syndicated Loan Agreement") with a
syndicate of
27
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
banks (the "Bank Syndicate"). The Syndicated Loan Agreement is used primarily
to provide letters of credit in support of the Company's inventory purchases.
This agreement established a one year revolving facility in an amount which is
determined using an inventory level calculation not to exceed Cdn$60,000,000
($43,998,000 at June 30, 1996 exchange rates). The interest rate under the
credit facility is Canadian prime rate plus 1% on loans to InterTAN Canada Ltd.
and the U.K. base rate plus 2% for loans to InterTAN U.K. Limited. In addition,
a standby fee of 0.25% per annum is payable on unused credit facilities. The
credit agreement is secured principally by an inventory repurchase agreement
among the syndicated agent, the Company and Tandy Corporation ("Tandy"), the
Company's principal supplier. This Syndicated Loan Agreement has been renewed
and now extends through mid-August, 1997.
The Syndicated Loan Agreement requires the Company to maintain tangible net
worth greater than $80,000,000 before considering the effects of foreign
currency translation. The Company must also maintain net capital expenditures
at or below $12,000,000 per annum in fiscal year 1996 and $13,000,000
thereafter, maintain a consolidated working capital ratio above 2.0:1 and a debt
to equity ratio, as defined, below 0.75:1. The Syndicated Loan Agreement also
requires the Company to maintain earnings before depreciation and amortization,
interest and taxes less capital expenditures of at least 1.50 times net finance
charges for each twelve month period ending September 30, 1995 and December 31,
1995, 1.05 times net finance charges for the twelve month period ended March 31,
1996, 1.25 times net finance charges for the twelve month period ended June 30,
1996 and 1.5 times net finance charges for each twelve month period ending
September, December, March, and June thereafter. In September, 1996, the cash
interest coverage ratio for the twelve month period ended September 30, 1996 was
amended from 1.5 times net finance charges to 0.9 times net finance charges.
The Company has met all of its covenants throughout fiscal year 1996, except the
cash interest coverage ratio at December 31, 1995. However, each member of the
Bank Syndicate has waived such non-compliance. The Syndicated Loan Agreement
also precludes the Company from paying dividends.
At June 30, 1996, there were borrowings against the credit facility
aggregating $975,000. In addition, $29,279,000 was committed in support of
letters of credit issued primarily to secure product purchases from Far Eastern
suppliers and a further $399,000 was committed in support of foreign exchange
contracts. $13,345,000 of credit was available for use at June 30, 1996.
One of the Company's directors also serves as a director of the agent bank of
the Bank Syndicate.
Note 3 Restructuring of Debt
and Merchandise Agreement
with Tandy
On August 5, 1993, Tandy, through its wholly-owned subsidiary, Trans World
Electronics, Inc., acquired the debt then outstanding under the Company's
Revolving Credit and Term Loan Agreement of $41,748,000. This debt was then
restructured as a term loan facility ("Series A Note") bearing interest at
8.64%. It is payable semi-annually over a six year period commencing February
25, 1995. In addition, Tandy provided the Company with a $10,113,000 three year
loan ("Series B Note") which bears interest at 8.11% and was due on August 25,
1996. The Series B Note was repaid in May, 1996.
Since October 15, 1993, the Company's purchase orders with Tandy have been
supported, based on a formula agreed with Tandy, by letters of credit issued by
banks on behalf of InterTAN or backed by cash deposits.
Under the terms of the agreement concerning the Series A Note ("Tandy Loan
Agreement"), the Company has granted Tandy a first priority lien over all of the
assets of the Company and its subsidiaries. In addition, InterTAN has pledged
the shares of each of its subsidiaries to Tandy. The Tandy Loan Agreement
allows new revolving credit facility lenders to participate in the security
granted to Tandy. The Series A Note can be repaid at any time without penalty.
The Tandy Loan Agreement requires the Company to maintain tangible net worth
greater than $80,000,000 before considering the effects of foreign currency
translation. Total debt due to Tandy, including long-term notes payable under
the Tandy Loan Agreement, accounts payable, and open inventory purchase orders
placed with Tandy which are not supported by letters of credit, is limited to
$60,000,000. In addition, total debt due to parties other than Tandy, excluding
the Debentures and trade payables, is limited to $50,000,000. The Tandy Loan
Agreement also requires the Company to maintain earnings before interest, taxes
and unrealized foreign currency transaction gains or losses of at least 2.0
times finance charges for each six and twelve month period ending December 31
and June 30, respectively. In addition, the Company is required to maintain
capital expenditures below agreed levels during each six month period throughout
the term of the loan. The Company has met all of those covenants except for the
financial charge ratio which was 1.9 at June 30, 1996; Tandy has waived such
non-compliance. The Tandy Loan Agreement also precludes the Company from paying
dividends.
28
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
The Series A Note matures as follows (in thousands):
For Years ending June 30
- -------------------------------------
1997 $6,958
1998 6,958
1999 6,958
2000 6,958
2001 and thereafter 3,479
- -------------------------------------
$31,311
- -------------------------------------
In consideration for Tandy's extension of credit, InterTAN agreed to issue to
Tandy five-year warrants to purchase 1,449,007 shares of the Company's common
stock exercisable beginning August 5, 1993 at an exercise price of $6.618, which
was the market price of the Company's common stock at the date of issuance.
These warrants were valued at $2,155,000 and this amount was recorded as a
discount against the Series A and B Notes. The discount is being amortized over
the term of the notes. Amortization during fiscal years 1996, 1995 and 1994 was
$308,000, $308,000 and $257,000, respectively.
In October and November, 1993, the Company and Tandy entered into a new
Merchandise Agreement and a series of license agreements. These license
agreements permit InterTAN to use, in designated countries, the "Tandy," "Tandy
Electronics" and "RadioShack" trade names until June 30, 2000. Effective July
1, 1996, these license agreements were extended to June 30, 2006, with automatic
annual extensions to June 30, 2010. The license agreements may be terminated
with five years prior written notice by either party. In consideration for
these licenses, the Company is obliged to pay a royalty of 0.25% of consolidated
sales beginning in fiscal year 1996. This royalty will increase by up to 0.25
percentage points each fiscal year until it reaches a maximum of up to 1.0% in
fiscal 1999. During fiscal year 1996, the Company paid Tandy royalties totaling
$1,260,000. The Company is obliged to use Tandy's export unit, A & A
International, Inc. ("A & A"), as its exclusive exporter of products from the
Far East under the terms of the Merchandise Agreement. In such connection, the
Company must pay a purchasing agent/exporter fee to A & A calculated by adding
0.2% of consolidated sales in excess of $500,000,000 to the base amount of
$1,000,000 and deducting from this certain credits the Company earns by
purchasing products from Tandy and A & A. The Company paid A & A fees totaling
$785,000, $810,000, $829,000 in 1996, 1995 and 1994, respectively, under the
current and previous arrangements. In the event a change in control of InterTAN
or any of its subsidiaries occurs, Tandy may revoke such agreements.
Note 4 Debentures
During fiscal year 1994, the Company closed a private placement of
Cdn$60,000,000 ($43,998,000 at June 30, 1996 exchange rates) of 9% subordinated
convertible debentures which will mature on August 30, 2000. The Debentures are
convertible, at the option of the holder, at any time at a conversion rate of
118.7310 common shares for each Cdn$1,000 face amount of Debentures, equivalent
to a conversion price of approximately Cdn$8.42, or $6.17 per share at the June
30, 1996 exchange rate. The Debentures are subordinated to all senior
indebtedness of the Company, including the Syndicated Loan Agreement and the
Tandy Loan Agreement.
The Debentures are not redeemable by the Company until August 30, 1996.
Thereafter, the Debentures are redeemable, in whole or in part, on a pro rata
basis, upon 30 business days notice at a redemption price equal to the principal
amount thereof, plus accrued and unpaid interest, if any, provided that the
current market price of the Company's common shares as of the date of such
notice is not less than 125% of the conversion price. After August 30, 1999,
the Debentures will be redeemable upon 30 business days notice at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest, if
any, regardless of the current market price of the Company's common shares.
After February 28, 2000, the Company may redeem the Debentures by issuing and
delivering to the holders that number of the Company's common shares obtained by
dividing the principal amount of the Debentures by 95% of the market price of
the Company's common stock at the date of redemption.
Note 5 Business Restructuring
In May, 1993, the Board of Directors approved management's plan to discontinue
the Company's continental European retail operations. The Company recorded a
pre-tax charge in the fourth quarter of fiscal 1993 in the amount of $77,400,000
in connection with the shutdown to provide for management's best estimate of the
costs of inventory liquidation, lease commitments, payroll and severance, other
operating costs during the shut down period, and losses on the disposal of fixed
assets and leaseholds. At June 30, 1994, all inventory and assets had been
sold, all significant leases had been canceled and all employees had been
terminated.
The credit of $3,612,000 to the business restructuring provision in fiscal
1994 represents the cumulative translation adjustment effects of liquidating the
European business entities. During the fourth quarter of fiscal 1995, certain
European claims and contingencies were settled for amounts less than originally
estimated. As a result of these settlements and certain other developments,
management reduced the accrual by $1,600,000.
29
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Management believes the remaining restructuring reserve at June 30, 1996 of
$2,630,000 is adequate to provide for the Company's remaining obligations in
Europe including those arising from legal actions brought against the Company by
former employees, dealers and franchisees.
Note 6 Property and Equipment
Property and equipment at June 30, 1996 and June 30, 1995 are summarized as
follows (in thousands):
1996 1995
- -------------------------------------------------------
Land $ 1,137 $ 1,086
Buildings 10,218 9,849
Equipment, furniture and fixtures 40,477 34,041
Leasehold improvements 40,189 35,123
Leasehold premiums 8,664 9,003
- -------------------------------------------------------
100,685 89,102
Less accumulated depreciation
and amortization 61,556 54,106
- -------------------------------------------------------
Property and equipment, net $39,129 $34,996
- -------------------------------------------------------
During fiscal year 1995, the Company retired certain fully depreciated assets
consisting primarily of furniture and fixtures and leasehold improvements.
Note 7 Accrued Expenses
The following is a summary of accrued expenses at June 30, 1996 and June 30,
1995 (in thousands):
1996 1995
- ------------------------------------------------------
Restructuring costs $ 2,630 $ 2,610
Payroll and bonuses 7,227 6,949
Taxes (other than income taxes) 2,554 2,887
Deferred service contract income 4,121 2,247
Other 9,301 10,411
- ------------------------------------------------------
$25,833 $25,104
- ------------------------------------------------------
Note 8 Income Taxes
The components of the provisions for domestic and foreign income taxes are
shown below (in thousands):
Year ended June 30
1996 1995 1994
- ---------------------------------------------------
Current
United States $ (374) $(1,178) $ 1,965
Foreign 701 532 683
- ---------------------------------------------------
327 (646) 2,648
Deferred
Foreign 7,172 (1,392) (12,325)
- ---------------------------------------------------
Total income tax
expense (benefit) $7,499 $(2,038) $(9,677)
- ---------------------------------------------------
30
(1 of 2)
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Components of the difference between income tax expense and the amount
calculated by applying the U.S. statutory rate of 35% to income before income
taxes are as follows (in thousands):
Year ended June 30
1996 1995 1994
- -----------------------------------------------------
Components of
pre-tax income (loss):
United States $(1,872) $(3,578) $2,105
Foreign 7,130 9,663 7,867
- --------------------------------------------------------
Income before income taxes 5,258 6,085 9,972
Statutory U.S. tax rate 35% 35% 35%
- --------------------------------------------------------
Federal income tax
expense at statutory rate 1,840 2,130 3,490
Foreign tax rate
differentials 887 927 369
Provincial income
taxes, less foreign
federal income
tax benefit 1,433 900 569
U.S. tax on foreign
dividends and interest -- -- 1,500
Book losses for which no
tax benefit was recognized 3,610 3,427 1,811
Adjustment to valuation
allowance for deferred
tax assets (329) (9,100) (17,828)
Other, net 58 (322) 412
- ---------------------------------------------------------
Total income tax
expense (benefit) $7,499 $(2,038) $(9,677)
- ---------------------------------------------------------
Deferred tax assets are comprised of the following at June 30 (in thousands):
June 30, June 30,
1996 1995
- ---------------------------------------------------
Deferred Tax Assets
Depreciation $ 2,045 $ 2,133
Deferred service contracts 1,454 895
Reserves for business
restructuring 835 1,224
Loss carryforwards 28,157 34,283
Other 4,193 2,967
- ----------------------------------------------------
36,684 41,502
Valuation allowance (30,461) (28,107)
- ----------------------------------------------------
Deferred tax asset $ 6,223 $ 13,395
- ----------------------------------------------------
At the time of adoption of SFAS 109 in July, 1993, the Company had net
deferred tax assets, before considering the valuation allowance, in the amount
of $54,987,000. In assessing the future benefit, if any, which might be derived
from these deferred tax assets, the Company considered its recent operating
history and financial condition. At that time, the Company was in default under
its financing and merchandising arrangements and had incurred operating losses
in fiscal
30
(2 of 2)
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
1993. New financing and merchandising arrangements were under negotiation, but
nothing had been finalized and arrangements under consideration were all
contingent on the Company's significantly improved performance during fiscal
year 1994. Under these circumstances, the Company believed it was necessary to
record a valuation allowance equal to the entire net deferred tax asset balance.
During fiscal year 1994, the Company successfully negotiated new financing
agreements, obtained additional financing through bank loans and convertible
debentures and renegotiated its merchandising agreements with Tandy. In
assessing the required valuation allowance against the deferred tax assets at
June 30, 1994, the Company concluded that it was more likely than not that a
portion of the deferred tax assets of the Canadian subsidiary would be used to
offset future tax. Accordingly, the Company recognized a deferred tax benefit
in the amount of $12,325,000. In addition, during fiscal year 1994, the Company
realized the benefit of certain deferred tax assets in connection with reserves
for business restructuring. As a consequence, the valuation allowance was
further reduced by $5,503,000.
During fiscal 1995, management reviewed the realization of its remaining
deferred tax assets. Based on the operating performance of the Canadian
subsidiary, particularly in the first two quarters, management concluded that
the valuation allowance should be further reduced by $9,100,000 and the Company
recognized a deferred tax benefit of that amount.
For Canadian tax purposes, the Company has net operating loss carryforwards of
approximately $17,546,000 which can be used to offset future taxable income in
Canada. These loss carryforwards will expire in 2001. The Company also has net
operating loss carryforwards for tax purposes of approximately $56,871,000 and
$4,812,000 in the United Kingdom and Australia, respectively. These losses can
be carried forward indefinitely in both jurisdictions. Certain restrictions may
apply to the use of these loss carryforwards in the event of a change in control
of the Company.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1987 to 1989 taxation years was completed during fiscal year 1994, resulting in
additional tax being levied against the Canadian subsidiary. The Company has
appealed these reassessments and, pending the outcome of these matters, the
Company, by Canadian law, was required to pay one-half of the tax in dispute.
The tax levied by Revenue Canada in reassessing those years was offset by
refunds arising from the carryback of losses incurred in subsequent years.
Depending on the ultimate resolution of these issues, the Company could
potentially have an additional liability in the range of $0 to $10,700,000. The
Company believes it has meritorious arguments in defense of a number of the
issues raised by Revenue Canada and it is in the process of vigorously defending
its position. It is management's determination that no additional provision
need be recorded for these reassessments. In order for the Company to succeed
in appealing certain aspects of these reassessments, it must succeed in
defending the possible reassessments discussed immediately below.
The Company was advised in August 1995 that Revenue Canada intended to extend
the scope of its 1987 to 1989 reassessments to raise certain issues flowing from
the spin-off of the Company from Tandy in fiscal year 1987. Management
disagrees with Revenue Canada's views on these issues and will vigorously defend
the Company's position should Revenue Canada pursue these issues. Management
believes it has meritorious arguments supporting its stance and, accordingly, no
additional provision has been recorded for these possible reassessments. Tax
assessments related to these issues, if successfully pursued, could potentially
range from $14,000,000 to $20,000,000. As required by Canadian law, the Company
would be required to post a deposit of one-half of the tax in dispute, including
interest, in order to appeal any reassessment.
An audit of the Canadian income tax returns of the Canadian subsidiary for the
1990 to 1993 taxation years was commenced during the 1995 fiscal year. While to
date no reassessments have been issued by Revenue Canada arising from this
audit, the Company has been advised that Revenue Canada is challenging certain
interest deductions relating to the Canadian subsidiary's former operations in
continental Europe and is proposing to tax certain foreign exchange gains
related to such operations. Management estimates that the possible range of
loss should Revenue Canada ultimately prevail in these matters, after all
appeals have been unsuccessfully pursued by the Company, could range from
$18,000,000 to $25,000,000. Assuming Revenue Canada pursues these issues, in
order for the Company to proceed with such appeals, the Company would be
required to post a deposit equal to one-half of the 1990-1993 tax in dispute,
together with interest, which management estimates should not exceed $9,000,000.
Management believes it has meritorious arguments in support of the deductibility
of such interest and in support of its treatment of the foreign exchange gains
and is prepared to vigorously defend its position should the Canadian tax
authorities proceed with such a challenge. Accordingly, it is management's
assessment that no provision need be recorded for these possible claims.
31
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
An audit of the former French branch of the Canadian subsidiary was also
completed by the French tax authorities for the 1988 through 1990 taxation
years. An assessment of approximately $2,000,000 has been issued. The Company
has appealed this assessment. It is management's view that the Company will be
successful in its appeal process. Accordingly, no provision has been made in
the accounts for this assessment. In order to avoid having to pay this tax
while the appeal proceeds, the Company has provided the French tax authorities
with a letter of guarantee for the amount in dispute.
Note 9 Commitments and Contingencies
The Company leases virtually all of its retail space under operating leases
with terms ranging from three to twenty-five years. Canadian leases are normally
based on a minimum rental plus a percentage of store sales in excess of a
stipulated base. The remainder of InterTAN's store leases generally provide for
fixed monthly rent adjusted periodically using inflation indices and rent
reviews.
In fiscal years 1996, 1995, and 1994, minimum rents, including immaterial
contingent rents and sublease rental income, were $34,033,000, $32,585,000 and
$31,985,000, respectively. Future minimum rent commitments at June 30, 1996 for
all long-term non-cancelable leases (net of immaterial sublease rent income) are
as follows (in thousands):
- --------------------------------
1997 $ 31,700
1998 29,289
1999 26,015
2000 21,333
2001 16,250
2002 and thereafter 123,391
- --------------------------------
A claim has been made by a former employee for damages for wrongful dismissal
totaling $880,000. The Company is vigorously defending this action. The
Company believes that the possible range of loss in this matter is substantially
less than the amount claimed by this former employee, and the Company has
recorded a provision representing its best estimate of any liability which may
ultimately arise from this matter.
Apart from this matter and those described in Notes 5 and 8, there are no
material pending legal proceedings or claims other than routine litigation
incidental to the Company's business to which the Company or any of its
subsidiaries is a party or to which any of their property is subject.
Note 10 Financial Instruments
Other than long-term debt instruments, management believes that the book value
of the Company's financial instruments recorded on the balance sheet is a
reasonable estimate of their fair value based on their nature and generally
short maturity; such instruments include cash and short-term investments,
accounts receivable, short-term bank borrowings, accounts payable and accrued
expenses. The estimated fair values of the Company's long-term debt instruments
are shown in the table below (in thousands).
June 30, 1996 June 30, 1995
Book Estimated Book Estimated
value fair value value fair value
- --------------------------------------------------------------------
Notes payable
to Tandy $31,311 $31,397 $48,382 $48,514
Discount on
Tandy notes (1,283) -- (1,590) --
- --------------------------------------------------------------------
Carrying value of
notes payable
to Tandy $30,028 $31,397 $46,792 $48,514
- --------------------------------------------------------------------
9% convertible
subordinated
debentures $41,660 $44,785 $43,722 $54,727
- --------------------------------------------------------------------
The estimated fair value of the note payable to Tandy has been determined by
discounting the related cash flows using management's estimate of the Company's
incremental borrowing rate for similar issues. The estimated fair value of the
Debentures is based on market values.
The Company enters into foreign exchange contracts to hedge against exchange
rate fluctuations on certain debts, payables and open inventory purchase orders
denominated in currencies other than the functional currency of the issuing
entity.
All forward exchange contracts are written with international financial
institutions. The Company's risk in those transactions is limited to the cost
of replacing the contracts at current market rates in the event of
nonperformance by the counterparties. The Company believes its risk of
counterparty nonperformance is remote, and any losses incurred would not be
material. At June 30, 1996 and 1995, the Company had approximately $25,795,000
and $9,050,000, respectively, of forward exchange contracts outstanding with a
market value of approximately $17,000 and $91,000, respectively. Maturity on
these contracts outstanding at June 30, 1996 and 1995 ranged from one to six
months from fiscal year-end.
32
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 11 Stock Purchase and Savings Plans
The Company's Stock Purchase Program is available to most employees. Each
participant may contribute from 1% to 10% of annual compensation. The Company
matches from 40% to 80% of the employee's contribution depending on the length
of the employee's participation in the program. Shares are provided to the plan
either by periodic purchases on the open market or by the Company issuing new
shares.
Under the InterTAN Canada Ltd. Employee Savings Plan (the "Savings Plan"), a
participating employee may contribute 5% of annual compensation into the plan.
The Canadian subsidiary matches 80% of the employee's contribution. The Savings
Plan is available to most Canadian employees who have been employed at least two
years. An employee may also elect to contribute an additional 5% of annual
compensation to the plan which is not matched by the employer. The Canadian
subsidiary's contributions are fully vested at the end of each calendar quarter.
An Administrative Committee appointed by the Company's Board of Directors
directs the investment of the plan's assets; a significant portion of which are
invested in InterTAN common stock.
Effective October 1, 1995, the InterTAN Employee Deferred Salary and
Investment Plan was amended and restated as the InterTAN, Inc. 401(k) Plan. This
plan is available to all U.S. employees who have completed at least two months
service with the Company. Eligible employees may contribute, subject to
statutory limits, up to 14% of their salary to the plan. The Company matches the
employee contributions, subject to statutory limits, to a maximum of 4% of
salary. Fifty percent of the Company's contributions vest in the first year with
full vesting after an employee has completed two years of service with the
Company. Employees have a number of investment options available to them within
the plan, one of which is InterTAN common stock.
The aggregate cost of these plans included in other selling, general and
administration expense totaled $1,811,000, $1,563,000 and $1,682,000 in 1996,
1995 and 1994, respectively.
Note 12 Stock Option Plans
In 1986, the Company adopted the InterTAN, Inc. 1986 Stock Option Plan (the
"1986 Stock Option Plan") under which the Organization and Compensation
Committee of the Board of Directors may grant options to key management
employees to purchase up to an aggregate of 800,000 shares of the Company's
common stock. Incentive options granted under this plan are exercisable on a
cumulative basis equal to one-third for each year outstanding; unless otherwise
specified by the Committee, nonstatutory options issued under the plan are
exercisable on a cumulative basis equal to 20% for each year outstanding. Upon
death or disability of an optionee, all options then held become immediately
exercisable for one year, and upon retirement, at age 50 or older, the Committee
may accelerate the dates at which the outstanding options may be exercised.
Options under this plan generally expire ten years after the date of grant. The
exercise price of the options granted is determined by the Committee, but cannot
be less than 100% of the market price at the date of grant; accordingly, no
compensation is charged against earnings.
In May, 1996, the Board of Directors unanimously approved the InterTAN, Inc.
1996 Stock Option Plan (the "1996 Stock Option Plan"). Subject to shareholder
approval, under the terms of the 1996 Stock Option Plan the Committee may grant
options to key management employees to purchase up to an aggregate of 1,500,000
shares of the Company's common stock. The terms and conditions of the 1996
Stock Option Plan are substantially similar to those of the 1986 Stock Option
Plan. Options outstanding under the 1986 Stock Option Plan will remain in force
until they are exercised, canceled or expire.
At June 30, 1996, options to purchase 500,833 shares were outstanding under
the 1986 Stock Option Plan, at prices ranging from $5.31 to $8.1875 per share;
153,167 options were exercisable at that date. Under the 1986 Stock Option Plan,
there were options to purchase 89,695 and 208,528 shares of common stock
available for future grant at the end of fiscal 1996 and 1995, respectively. No
options have been issued under the 1996 Stock Option Plan.
In 1991, the Company adopted the Non-Employee Director Stock Option Plan
("Director Plan") under which each director was granted an option, exercisable
immediately, to purchase 25,000 shares of the Company's common stock. Upon
election, all new non-employee directors are granted an option to purchase
25,000 shares of the Company's common stock. Options granted under the Director
Plan are exercisable at a price equal to 100% of the market price at the date of
grant. The options generally expire ten years after the date of grant unless
the optionee ceases to be a non-employee director, in which case the options
expire one year after the date of cessation. Common stock issued under the
Director Plan cannot exceed 200,000 shares.
At June 30, 1996, options to purchase 150,000 shares were outstanding under
the Director Plan at a price of $7.125 per share for a total option price of
$1,069,000. At that date, 150,000 options were exercisable. As of June 30, 1996
and 1995, options to purchase 50,000 shares of stock were available for future
grant under the Director Plan.
33
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
A summary of transactions relating to these stock option plans is as follows:
Number Total
of Shares Share Price
- ------------------------------------------------------------------
Outstanding at June 30, 1995 650,000 $4,531,000
Granted ($6.69 to $7.88 per share) 210,000 1,585,000
Expired/canceled ($5.31 to
$7.94 per share) (91,167) (623,000)
Exercised ($5.31 to $6.75 per share) (118,000) (760,000)
- ------------------------------------------------------------------
Outstanding at June 30, 1996 650,833 $4,733,000
- ------------------------------------------------------------------
Note 13 Preferred Stock Purchase Rights
In December, 1986, the Board of Directors adopted a shareholder rights plan,
which expires in September, 1999, and declared a dividend of one right for each
outstanding share of InterTAN common stock. The plan was amended in October,
1987 and September, 1989. The rights are represented by the Company's common
stock certificates; and if they become exercisable, will entitle holders to
purchase one one-hundredth of a share of InterTAN Series A Junior Participating
Preferred Stock for a purchase price of $175 (subject to adjustment). The
rights become exercisable and will trade separately from the common stock only
upon the date of a public announcement that a person, entity or group ("person")
has acquired 20% or more of InterTAN's outstanding common stock without the
prior approval of the Company ("Acquiring Person"), or, 10 days after the
commencement or the public announcement of an offer which would result in any
person becoming an Acquiring Person. In the event that an Acquiring Person
becomes the beneficial owner of 20% or more of the common stock of the Company,
the rights will be exercisable for InterTAN equity securities with a fair market
value (as determined under the rights plan) equal to $350. In accordance with
the terms of the rights plan, the rights are redeemable at a price of $0.03 per
right.
Note 14 Geographic Areas
The Company operates in one industry segment: consumer electronics retailing.
The principal geographic areas of InterTAN's operations are Canada, Australia,
the United Kingdom and, previously, continental Europe.
As previously discussed in Note 5, the Company has closed all company-operated
outlets in continental Europe and recorded a $77,400,000 restructuring charge in
fiscal year 1993. Credit provisions of $1,600,000 and $3,612,000 have been
recorded in continental European income for 1995 and 1994, respectively.
Transfers between geographic areas were immaterial.
The following table shows net sales, operating profit and identifiable assets
by geographic area for fiscal 1996, 1995 and 1994 (in thousands):
34
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
United Continental
Canada Australia Kingdom Europe Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
June 30, 1996
Net sales and operating revenues $249,413 $93,896 $163,136 $ -- $506,445
Other income 41 426 435 -- 902
- ----------------------------------------------------------------------------------------------------------------------
Net sales and other income $249,454 $94,322 $163,571 $ -- $507,347
- ----------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 21,274 $2,777 $ (7,807) $ -- $ 16,244
General corporate expenses (4,615)
Foreign currency transaction gains 338
Interest expense, net (6,709)
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 5,258
- ----------------------------------------------------------------------------------------------------------------------
Identifiable assets $124,404 $48,839 $ 75,948 $ 2,111 $251,302
Corporate assets 10,331
- ----------------------------------------------------------------------------------------------------------------------
Total assets $261,633
- ----------------------------------------------------------------------------------------------------------------------
June 30, 1995
Net sales and operating revenues $243,949 $83,724 $164,078 $ -- $491,751
Other income 413 362 442 -- 1,217
- ----------------------------------------------------------------------------------------------------------------------
Net sales and other income $244,362 $84,086 $164,520 $ -- $492,968
- ----------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 22,820 $ 534 $ (5,954) $ 1,600 $ 19,000
General corporate expenses (5,139)
Foreign currency transaction losses (314)
Interest expense, net (7,462)
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 6,085
- ----------------------------------------------------------------------------------------------------------------------
Identifiable assets $128,214 $41,837 $ 67,105 $ 2,427 $239,583
Corporate assets 22,456
- ----------------------------------------------------------------------------------------------------------------------
Total assets $262,039
- ----------------------------------------------------------------------------------------------------------------------
June 30, 1994
Net sales and operating revenues $239,106 $76,486 $150,174 $ -- $465,766
Other income (62) 301 532 -- 771
- ----------------------------------------------------------------------------------------------------------------------
Net sales and other income $239,044 $76,787 $150,706 $ -- $466,537
- ----------------------------------------------------------------------------------------------------------------------
Operating profit (loss) $ 21,927 $ 304 $ (5,017) $ 3,612 $ 20,826
General corporate expenses (3,975)
Foreign currency transaction gains 1,472
Interest expense, net (8,351)
- ----------------------------------------------------------------------------------------------------------------------
Income before income taxes $ 9,972
- ----------------------------------------------------------------------------------------------------------------------
Identifiable assets $116,478 $42,683 $ 71,576 $ 3,190 $233,927
Corporate assets 24,664
- ----------------------------------------------------------------------------------------------------------------------
Total assets $258,591
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
Note 15 Quarterly Data (Unaudited)
Quarter ended
September 30
(In thousands, except per share data) 1995 1994
- ----------------------------------------------------------------------------
Net sales and operating revenues $113,672 $111,799
Other income 203 104
- ----------------------------------------------------------------------------
113,875 111,903
Operating costs and expenses:
Cost of products sold 63,463 64,402
Selling, general and administrative expenses 48,247 45,429
Depreciation and amortization 1,832 2,027
Provision for business restructuring -- --
- ----------------------------------------------------------------------------
113,542 111,858
- ----------------------------------------------------------------------------
Operating income (loss) 333 45
Foreign currency transaction (gains) losses (148) (303)
Interest expense, net 1,738 2,133
- ----------------------------------------------------------------------------
Income (loss) before income taxes (1,257) (1,785)
Provision (benefit) for income taxes 948 (34)
- ----------------------------------------------------------------------------
Net income (loss) $(2,205) $(1,751)
- ----------------------------------------------------------------------------
Primary net income (loss) per average common share $(0.21) $(0.18)
Fully diluted net income (loss) per average
common share(1) $(0.21) $(0.18)
- ----------------------------------------------------------------------------
Average common shares outstanding 10,453 9,794
Average common shares outstanding assuming
full dilution 10,453 9,794
- ----------------------------------------------------------------------------
(1) The sum of fully-diluted earnings per share for the four quarters ending
June 30, 1996 and 1995 do not approximate the fully diluted earnings per
share as reported for the respective years primarily because the Company's
convertible debentures were dilutive in the second quarter, but anti-
dilutive in all other quarters and for each year as a whole.
36
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Quarter ended Quarter ended Quarter ended
December 31 March 31 June 30
1995 1994 1996 1995 1996 1995
- --------------------------------------------------------------------------------
$ 181,411 $183,684 $108,757 $101,001 $102,605 $95,267
298 862 196 217 205 34
- --------------------------------------------------------------------------------
181,709 184,546 108,953 101,218 102,810 95,301
103,788 105,989 59,410 56,344 55,391 52,701
59,667 57,124 48,840 45,678 48,940 45,536
1,981 1,969 2,014 1,865 2,145 1,643
-- -- -- -- -- (1,600)
- --------------------------------------------------------------------------------
165,436 165,082 110,264 103,887 106,476 98,280
- --------------------------------------------------------------------------------
16,273 19,464 (1,311) (2,669) (3,666) (2,979)
(44) 72 (69) 85 (77) 460
1,909 2,278 1,516 1,631 1,546 1,420
- --------------------------------------------------------------------------------
14,408 17,114 (2,758) (4,385) (5,135) (4,859)
4,071 (2,341) 1,350 737 1,130 (400)
- --------------------------------------------------------------------------------
$ 10,337 $ 19,455 $ (4,108) $ (5,122) $ (6,265) $ (4,459)
- --------------------------------------------------------------------------------
$ 0.93 $ 1.90 $ (0.38) $ (0.51) $ (0.57) $ (0.44)
$ 0.58 $ 1.06 $ (0.38) $ (0.51) $ (0.57) $ (0.44)
- --------------------------------------------------------------------------------
11,148 10,225 10,943 10,026 11,069 10,134
17,893 17,425 10,943 10,026 11,069 10,134
- --------------------------------------------------------------------------------
37
<PAGE>
INTERTAN, INC.
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Board of Directors and Stockholders
of InterTAN, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of InterTAN,
Inc. and its subsidiaries at June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1996, 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 required 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.
/s/Price Waterhouse LLP
Fort Worth, Texas
September 18, 1996
Market Price and Related Matters
The high and low closing prices in U.S. dollars of InterTAN's common stock on
the New York Stock Exchange for each full quarterly period within the two most
recent fiscal years are as set out below:
Quarter ended High Low
- ------------------------------------
June 1996 6 7/8 5 1/4
March 1996 6 1/2 4 5/8
December 1995 9 3/8 7 1/8
September 1995 10 7 1/4
June 1995 7 7/8 6 5/8
March 1995 8 7/8 6 3/4
December 1994 8 3/4 6 3/4
September 1994 7 3/8 5 1/2
- ------------------------------------
As of August 31, 1996 there were approximately 11,700 recordholders of
InterTAN's common stock.
InterTAN has never declared cash dividends. Based upon InterTAN's long-term
growth opportunities, in the opinion of management, the stockholders are best
served by reinvesting all profits. Further, InterTAN is currently precluded
from paying dividends under the Tandy Loan Agreement and Syndicated Loan
Agreement.
38
<PAGE>
EXHIBIT 23
INTERTAN, INC.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 33-74314) and
in the Registration Statements on Form S-8 (Nos. 33-63090, 33-92286, 33-29055
and 333-4344) of InterTAN, Inc. of our report dated September 18, 1996 appearing
on page 38 of the Annual Report to shareholders, which is incorporated in this
Annual Report on Form 10-K for the year ended June 30, 1996. We also consent to
the incorporation by reference of our report on the Financial Statement
Schedules, which is also included in this Form 10-K.
/s/Price Waterhouse LLP
PRICE WATERHOUSE LLP
Fort Worth, Texas
September 27, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CAPTION>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> JUN-30-1996
<CASH> 34,096
<SECURITIES> 0
<RECEIVABLES> 9,422
<ALLOWANCES> 0
<INVENTORY> 162,207
<CURRENT-ASSETS> 217,184
<PP&E> 39,129
<DEPRECIATION> 0
<TOTAL-ASSETS> 261,633
<CURRENT-LIABILITIES> 71,713
<BONDS> 64,730
0
0
<COMMON> 11,173
<OTHER-SE> 108,339
<TOTAL-LIABILITY-AND-EQUITY> 261,633
<SALES> 506,445
<TOTAL-REVENUES> 507,347
<CGS> 282,052
<TOTAL-COSTS> 282,052
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,709
<INCOME-PRETAX> 5,258
<INCOME-TAX> 7,499
<INCOME-CONTINUING> (2,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,241)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
