<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31,1997 or
--------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
------- -------
Commission file number 1-10062
-------
InterTAN, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2130875
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
201 Main Street, Suite 1805
Fort Worth, Texas 76102
- ------------------------------ ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 348-9701
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(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
----- -----
At April 30, 1997, 11,686,015 shares of the registrant's common stock, par value
$1.00 per share, were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1
FINANCIAL STATEMENTS
The Registrant's financial statements at and for the quarter ended March 31,
1997, providing the information required by Rule 10-01 of Regulation S-X, are
included herewith as Exhibit A.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required by Item 303 of Regulation S-K is included herewith as
Exhibit B.
2
<PAGE>
EXHIBIT A - FINANCIAL STATEMENTS AT AND FOR THE QUARTER ENDED MARCH 31, 1997.
3
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
INTERTAN, INC.
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
-------------------- --------------------
1997 1996 1997 1996
-------- -------- ------- --------
<S> <C> <C> <C> <C>
Net sales and operating revenues..................... $109,555 $108,757 $412,776 $403,840
Other income ........................................ 289 196 545 697
-----------------------------------------------------
109,844 108,953 413,321 404,537
-----------------------------------------------------
Operating costs and expenses:
Cost of products sold.............................. 58,802 59,410 229,335 226,661
Selling, general and administrative expenses....... 50,766 48,840 166,508 156,754
Depreciation and amortization...................... 2,566 2,014 7,162 5,827
-----------------------------------------------------
112,134 110,264 403,005 389,242
-----------------------------------------------------
Operating income (loss).............................. (2,290) (1,311) 10,316 15,295
Foreign currency transaction (gains) losses.......... 124 (69) (802) (261)
Interest expense, net................................ 1,503 1,516 5,008 5,163
-----------------------------------------------------
Income (loss) before income taxes.................... (3,917) (2,758) 6,110 10,393
Provision for income taxes........................... 1,216 1,350 6,373 6,369
-----------------------------------------------------
Net income (loss).................................... $ (5,133) $ (4,108) $ (263) $ 4,024
=====================================================
Primary net income (loss) per average common share... $ (0.45) $ (0.38) $ (0.02) $ 0.37
Fully diluted net income (loss) per
average common share............................... $ (0.45) $ (0.38) $ (0.02) $ 0.34
Average common shares outstanding.................... 11,527 10,943 11,373 10,964
Average common shares outstanding
assuming full dilution............................. 11,527 10,943 11,373 17,722
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
4
<PAGE>
CONSOLIDATED BALANCE SHEETS
INTERTAN, INC.
- --------------------------------------------------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
March 31 June 30 March 31
1997 1996 1996
-----------------------------------------------
Assets
<S> <C> <C> <C>
Current Assets:
Cash and short-term investments.................................... $ 39,036 $ 34,096 $ 38,597
Accounts receivable, less allowance for doubtful accounts.......... 9,829 9,422 10,775
Inventories........................................................ 171,757 162,207 160,916
Other current assets............................................... 6,258 7,628 8,585
Deferred income taxes.............................................. 435 3,831 1,853
-----------------------------------------------
Total current assets.......................................... 227,315 217,184 220,726
Property and equipment, less accumulated depreciation
and amortization................................................... 38,904 39,129 38,690
Other assets......................................................... 2,648 2,928 2,851
Deferred income taxes................................................ - 2,392 4,958
-----------------------------------------------
$268,867 $261,633 $267,225
===============================================
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term bank borrowings......................................... $ 9,769 $ 975 $ -
Current maturities of notes payable to Tandy Corporation........... 6,958 6,958 17,071
Accounts payable................................................... 21,641 24,082 15,227
Accounts payable to Tandy Corporation.............................. 398 894 470
Accrued expenses................................................... 31,518 25,833 26,031
Income taxes payable............................................... 12,290 12,971 13,689
-----------------------------------------------
Total current liabilities..................................... 82,574 71,713 72,488
Long-term notes payable to Tandy Corporation,
less current maturities......................................... 16,344 23,070 22,992
9% convertible subordinated debentures............................... 41,030 41,660 41,797
Other liabilities.................................................... 6,475 5,678 5,699
-----------------------------------------------
146,423 142,121 142,976
-----------------------------------------------
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, 11,629,245, 11,172,506 and 11,034,112
shares issued and outstanding................................. 11,629 11,173 11,034
Additional paid-in capital......................................... 113,686 111,678 111,008
Retained earnings.................................................. 18,869 19,132 25,397
Foreign currency translation effects............................... (21,740) (22,471) (23,190)
-----------------------------------------------
Total stockholders' equity.................................... 122,444 119,512 124,249
-----------------------------------------------
Commitments and contingent liabilities...............................
$268,867 $261,633 $267,225
===============================================
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition and
Results of Operations are an integral part of these statements.
5
<PAGE>
Consolidated Statements of Cash Flows
InterTAN, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands) Nine months ended
March 31
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................................................... $ (263) $ 4,024
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization...................................................... 7,162 5,827
Deferred income taxes.............................................................. 5,801 6,708
Foreign currency transaction gains, unrealized..................................... (735) (261)
Other.............................................................................. 1,706 1,786
Cash provided by (used for) current assets and liabilities:
Accounts receivable................................................................ (307) (2,100)
Inventories........................................................................ (8,370) (12,990)
Other current assets............................................................... 1,203 524
Accounts payable................................................................... (3,168) (2,400)
Accounts payable to Tandy Corporation.............................................. (499) 26
Accrued expenses................................................................... 5,525 496
Income taxes payable............................................................... (483) (346)
------- --------
Net cash provided by operating activities.......................................... 7,572 1,294
------- --------
Cash flows from investing activities:
Additions to property and equipment..................................................... (6,566) (9,649)
Proceeds from sales of property and equipment........................................... 161 343
Other investing activities.............................................................. 1,089 1,955
------- --------
Net cash used in investing activities................................................. (5,316) (7,351)
------- --------
Cash flows from financing activities:
Changes in short-term bank borrowings, net............................................. 8,630 3,718
Proceeds from issuance of common stock to employee plans................................ 1,427 1,445
Proceeds from exercise of stock options................................................. - 760
Principal repayments on long-term borrowings............................................ (6,958) (6,958)
------- --------
Net cash provided by (used in) financing activities................................... 3,099 (1,035)
Effect of exchange rate changes on cash.................................................. (415) 429
------- --------
Net increase (decrease) in cash and short-term investments............................... 4,940 (6,663)
Cash and short-term investments, beginning of period..................................... 34,096 $ 45,260
------- --------
Cash and short-term investments, end of period........................................... 39,036 38,597
======= ========
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition
and Results of Operations are an integral part of these statements.
6
<PAGE>
Consolidated Statements of Stockholders' Equity
InterTAN, Inc.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(In thousands)
Foreign
Additional Currency Total
Common Stock Paid-in Retained Translation Stockholders'
Shares Amount Capital Earnings Effects Equity
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996................. 11,173 $11,173 $111,678 $19,132 ($22,471) $119,512
Net foreign currency
translation adjustments................. - - - - 731 731
Issuance of common stock
to employee plans....................... 456 456 2,008 - - 2,464
Net income............................... - - - (263) - (263)
------- ------- -------- ------- -------- --------
Balance at March 31, 1997................ 11,629 $11,629 $113,686 $18,869 ($21,740) $122,444
====== ======= ======== ======= ======== ========
</TABLE>
The comments in Management's Discussion and Analysis of Financial Condition
and Results of Operations are an integral part of these statements.
7
<PAGE>
EXHIBIT B - 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"). 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
---------------------
The Company is a retailer of consumer electronics products with locations in
Canada, Australia and the United Kingdom. The number of company-operated stores
and dealers at March 31, 1997 and 1996 is presented in the table below:
SALES OUTLETS
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
------------------------ -----------------------
ENDING OPENED CLOSED ENDING OPENED CLOSED
<S> <C> <C> <C> <C> <C> <C>
CANADA
Company-operated 452* 1 4 448 2 3
Dealers 429 6 3 420 3 5
----- -- -- ----- -- --
881 7 7 868 5 8
=== == == ===== == =
AUSTRALIA
Company-operated 212 - 1 209 2 1
Dealers 195 1 16 202 2 18
----- -- -- ----- -- --
407 1 17 411 4 19
===== == == ===== == ==
UNITED KINGDOM
Company-operated 348 - 3 346 1 2
Dealers 172 - 3 175 10 -
----- -- -- ----- -- --
520 - 6 521 11 2
===== == == ===== == ==
TOTAL
Company-operated 1,012 1 8 1,003 5 6
Dealers 796 7 22 797 15 23
----- -- -- ----- -- --
1,808 8 30 1,800 20 29
===== == == ===== == ==
</TABLE>
*In addition, the Company operated 49 stores on behalf of Rogers Cantel Inc.
8
<PAGE>
OPERATING INCOME
The Company's operating income (loss) for each geographic segment for the three
and nine-month periods ended March 31, 1997 and 1996 is presented in the
following table (in thousands):
OPERATING INCOME (LOSS)
------------------------
<TABLE>
<CAPTION>
UNITED CORPORATE
CANADA AUSTRALIA KINGDOM EXPENSES TOTAL
------ --------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Three Months Ended
March 31, 1997 $ 3,210 $ 547 $(4,963) $(1,084) $(2,290)
Three Months Ended
March 31, 1996 $ 3,589 $ 153 $(3,801) $(1,252) $(1,311)
Nine Months Ended
March 31, 1997 $16,247 $3,914 $(6,712) $(3,133) $10,316
Nine Months Ended
March 31, 1996 $19,326 $2,370 $(2,874) $(3,527) $15,295
</TABLE>
Foreign exchange fluctuations accounted for $263,000 of the increase in the
consolidated operating loss for the three-month period ended March 31, 1997.
For the nine-month period ended March 31, 1997, the effect of foreign exchange
fluctuations was not significant.
NET SALES
Net sales for the quarter ended March 31, 1997 were $109,555,000, an increase of
0.7% over the sales for the same quarter in the prior year of $108,757,000.
When the impact of fluctuations in the value of the US dollar in relation to the
currencies of the countries in which the Company operates is removed, the sales
increase reverses to a loss of 2.2%. Comparative store sales, measured at the
same exchange rate, decreased by 4.5% from the same quarter in the prior year.
Year to date, sales have increased by 2.2% in US dollars. In local currency,
however, year to date sales have decreased by 0.2%. Comparative store sales for
the nine months ended March 31, 1997 have decreased 2.0% from the same period a
year ago.
The table which follows shows by country the percentage changes in net sales for
the quarter and nine months ended March 31, 1997 compared to the corresponding
periods in the prior year. Changes are presented in both US dollars and local
currencies to illustrate the effects of exchange rate fluctuations. The change
in comparative store sales, measured at the same exchange rates, is also shown:
9
<PAGE>
NET SALES
---------
PERCENTAGE INCREASE (DECREASE)
------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1997
LOCAL COMPARATIVE LOCAL COMPARATIVE
US$ CURRENCY STORE US$ CURRENCY STORE
----- -------- ----------- ----- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Canada 1.1 % 0.4 % (3.4)% (0.2)% (0.2)% (2.9)%
Australia (1.4)% (4.2)% (7.6)% 9.7 % 4.0 % 1.2 %
United Kingdom 1.6 % (4.7)% (4.1)% 1.7 % (2.5)% (2.6)%
</TABLE>
Like most retailers, the sales performance of the Company for the quarter was
negatively affected by the fact that last year was a leap year, resulting in an
extra selling day in February, and by the fact that Easter in 1997 fell in March
rather than April, as was the case a year ago. Management estimates that these
two factors combined to affect the sales comparison with last year by
approximately $2 million or 2 percentage points. In addition, soft computer and
cellular sales depressed sales in all three of the Company's markets.
Management believes that consumers have delayed major computer purchases in the
anticipation of the introduction of the new MMX technology. The roll-out of
these products took place much later in the countries in which the Company
operates than was the case in the United States. The transition from analog to
digital-based cellular products has also had a negative effect on sales
performance, particularly in the U.K. and Australia.
In Canada, severe winter weather conditions in Eastern Canada and certain
regions of the west placed pressure on sales. While the performance of the new
company-operated Cantel stores continues to run short of expectations, some
improvements have been made. Management has recently been reorganized at store
level to control costs and the stores have been remerchandised to display the
complete product assortment - both cellular and other communications end
equipment and accessories - more effectively. At quarter-end, the Company
operated 49 stores on behalf of Rogers Cantel Inc., increasing to 57 stores in
April.
The impact of soft cellular sales was felt most in Australia. In that country,
the government-controlled air network will not be supporting analog product
beyond 1999. Management believes customers are reluctant to commit to a product
which has such a short life. While digital product is available, until recently
its pricing was such that it was not an affordable alternative to many
consumers. Management anticipates that this situation should be improved with
the introduction of newer, more attractively priced digital products late in the
fiscal year.
In the U.K., sales performance was affected by the nature of the Company's
agreement to sell computers for the German manufacturer, Vobis Microcomputer AG
("Vobis"). Under this arrangement, Vobis retains title to and merchandising
control of the inventory and the Company is the sales agent for Vobis,
receiving a commission on each sale. Had the Company purchased,
10
<PAGE>
managed and sold computer inventory as it had done in the past, the revenue
generated from the sale of computers, rather than commissions earned, would have
produced an overall small sales gain. Difficulties with product supply and
quality have also been experienced with this program. Management is actively
working with Vobis to address these issues. Cellular sales were also soft in
the U.K., with the number of activations down from a year ago. Management
attributes this decline to a pricing policy by carriers designed to encourage
consumers away from analog product, which has been traditionally more affordable
than digital product.
GROSS MARGIN AND COST OF PRODUCTS SOLD
The gross margin percentage increased to 46.3% in the third quarter of fiscal
1997 from 45.4% a year ago, an increase of 90 basis points. The most significant
improvement was in Australia, where margins strengthened by 5.4 percentage
points over the same quarter last year. In the United Kingdom, margins declined
by 60 basis points, while in Canada margins increased by 10 basis points. Year
to date, the consolidated gross margin percentage is 50 basis points ahead of
the prior year.
The effect of a higher gross margin percentage, combined with the effect of
stronger currencies generally, was partially offset by the negative impact of
lower sales. Overall, gross margin dollars for the quarter increased by
$1,407,000:
Increase in margin percentage $ 1,118,000
Decrease in sales (1,135,000)
Foreign exchange rate effects 1,424,000
-----------
$ 1,407,000
===========
In Canada, pricing cuts were taken on a selected group of products which were
then promoted in an effort to grow sales. Despite the pressure that this
strategy placed on margins, Canada was nevertheless able to achieve a slight
increase in the gross margin percentage by increasing the proportion of higher
margin private label products, especially batteries and parts and accessories,
in the sales mix.
A higher gross margin percentage continues to be a significant factor in the
improved performance of the Australian subsidiary. There are a variety of
reasons for this margin increase, including initiatives directed at increasing
the level of extended warranty contracts and the introduction of an innovative
and profitable service to recondition rechargeable batteries. Cellular air time
rebates, reflecting cumulative activations, continue to be an increasingly
important factor in Australia's margin improvement. Finally, while weak cellular
sales depressed overall sales, the reduction had a positive effect on the gross
margin performance.
11
<PAGE>
In the U.K., significant efforts were made to promote the sale of discontinued
merchandise, not only to clear older stock and reduce inventory levels
generally, but also to generate sales. Sales of these products drove down the
gross margin percentage for the quarter. The negative effect of this reduction
was partially offset by commissions from the sale of Vobis computers, which flow
directly to margin. See discussion under "Net Sales".
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Total selling, general and administrative expenses ("SG&A expenses") for the
three months ended March 31, 1997 were $50,766,000 compared to $48,840,000 in
the third quarter of the prior year, an increase of $1,926,000 or 3.9%. Year to
date, SG&A expenses have increased from $156,754,000 for the nine months ended
March 31, 1996 to $166,508,000 in the current period, an increase of $9,754,000
or 6.2%. Foreign currency rate fluctuations accounted for $1,587,000 and
$3,710,000 of the increase for the quarter and year-to-date, respectively. When
these foreign currency effects are eliminated, SG&A expenses for the quarter and
year to date increased, at constant exchange rates by 0.7% and 3.8%,
respectively.
The following table provides a breakdown of SG&A expenses by major category for
the three and nine-month periods ended March 31, 1997 (percentages shown are as
a rate to sales):
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
(In thousands, except percents)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31 MARCH 31
1997 1996 1997 1996
------------- ------------- ------------- -------------
AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT.
------- ---- ------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising $ 5,384 4.9 $ 5,344 4.9 $ 22,240 5.4 $ 20,704 5.1
Rent 10,831 9.9 10,110 9.3 32,634 7.9 30,590 7.6
Payroll 20,459 18.7 19,997 18.4 67,418 16.3 63,620 15.8
Taxes
(other than
income taxes) 4,336 4.0 3,927 3.6 13,714 3.3 12,636 3.1
Telephone and
Utilities 1,917 1.7 1,842 1.7 5,637 1.4 5,248 1.3
Other 7,839 7.1 7,620 7.0 24,865 6.0 23,956 5.9
------- ---- ------- ---- -------- ---- ------- ----
Total $50,766 46.3 $48,840 44.9 $166,508 40.3 $156,754 38.8
======= ==== ======= ==== ======== ==== ======== ====
</TABLE>
As indicated above, while SG&A expenses increased by $1,926,000 for the quarter,
$1,587,000 of this increase was attributable to foreign currency rate effects.
Previous initiatives to control SG&A spending had an effect in the third
quarter, as the real increase in SG&A spending of $339,000, measured at
constant exchange rates, is more than explained by one-time severance
12
<PAGE>
costs and the scheduled increase in the royalty payable to Tandy Corporation
("Tandy"). Consequently, a sales performance which fell short of expectations
was the major factor contributing to an increase in the SG&A percentage for the
quarter of 1.4 percentage points to 46.3%.
Management's stated objective for fiscal year 1997 was to achieve a one
percentage point increase in operating margin as a percentage of sales (i.e.,
the gross margin percentage, net of the change in the SG&A percentage). While
the gross margin percentage for the quarter was increased by 90 basis points,
the effect of this improvement was more than offset by the increase in the SG&A
percentage. In future quarters, management will continue its focus on this
issue and will take further action to keep SG&A growth more closely aligned with
realized sales gains. However, as a result of performance year to date,
management believes it is unlikely that the operating margin objective will be
achieved for the fiscal year.
NET INTEREST EXPENSE
Net interest expense of $1,503,000 for the three months ended March 31, 1997 was
comparable with the corresponding amount reported during the same quarter last
year. Net interest expense for the nine months ended March 31, 1997 of
$5,008,000 was $155,000 lower than in the same period last fiscal year.
PROVISION FOR INCOME TAXES
An income tax provision of $1,216,000 was recorded during the quarter, primarily
relating to the profits of the Canadian subsidiary. In the third quarter of
fiscal year 1996, a net tax provision of $1,350,000 was recorded. For the nine
months ended March 31, 1997, income tax expense of $6,373,000 was recorded
compared to $6,369,000 in the first nine months of the prior year. The unusually
high effective tax rate, on a consolidated basis, is due to the fact that the
Company received no tax benefit from the operating losses incurred by its U.K.
subsidiary, while tax expense must be recognized on the profits of the Canadian
subsidiary. Management expects this trend to continue until profitability is
restored in the U.K.
NET INCOME PER AVERAGE COMMON SHARE
The primary and fully diluted net losses per average common share were $0.45 for
the three-month period ended March 31, 1997, as compared to a loss of $0.38 for
the same quarter in the prior year. For the nine-month period ended March 31,
1997, the primary and fully diluted net losses per average common share were
$0.02, compared to net incomes of $0.37 and $0.34, respectively, for the same
period a year ago.
13
<PAGE>
In the nine-month period ended March 31, 1996, the difference between primary
and fully diluted net income per average common share was due primarily to the
Company's 9% convertible subordinated debentures (the "Debentures"), which are
convertible into 6,745,346 common shares. The Company has outstanding warrants
exercisable for 1,449,007 common shares at an exercise price of $6.618 per
share. At March 31, 1997 and March 31, 1996, directors and employees of the
Company and its subsidiaries held options to purchase 795,333 and 502,000
shares, respectively, at prices ranging from $5.31 to $8.1875 per share. The
outstanding warrants and options were also considered in determining primary and
fully diluted net income per average common share. The dilutive effect of these
various instruments will likely continue in future periods, and exchange rate
impacts on the Debentures could increase or decrease their dilutive effects.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 128, Earnings per Share ("FAS 128"), which is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Effective December 31, 1997, the Company will
adopt FAS 128, which established new standards for computing and presenting
earnings per share ("EPS"). The statement requires dual presentation of basic
and diluted EPS on the face of the income statement for entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation, to the numerator and denominator of
the diluted EPS computation. Basic EPS excludes the effect of potentially
dilutive securities while diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised,
converted, or resulted in the issuance of common stock that would then share in
the earnings of the entity. For the three and nine months ended March 31, 1997,
pro forma basic and diluted loss per common share computed pursuant to FAS 128
would not have differed from that presented on the face of the Consolidated
Statement of Operations.
FINANCIAL CONDITION
-------------------
Most balance sheet accounts are translated from their values in local currency
to US dollars at the respective month end rates. The table below outlines the
percentage change, to March 31, 1997, in exchange rates as measured against the
US dollar:
<TABLE>
<CAPTION>
FOREIGN EXCHANGE RATE FLUCTUATIONS
----------------------------------
% INCREASE % INCREASE
(DECREASE) (DECREASE)
FROM MARCH 31, 1996 FROM JUNE 30, 1996
------------------- ------------------
<S> <C> <C>
Canada (1.8) (1.5)
Australia 0.5 (0.2)
United Kingdom 7.3 5.6
</TABLE>
14
<PAGE>
INVENTORIES
Inventories have increased from $162,207,000 at June 30, 1996 to
$171,757,000 at March 31, 1997, an increase of $9,550,000. Inventories at March
31, 1996 were $160,916,000, resulting in a year-on-year increase of $10,841,000.
Approximately 20% of each of these increases is attributable to foreign currency
rate effects, in particular a stronger pound sterling. The remainder is
primarily attributable to the United Kingdom subsidiary, where higher inventory
levels have resulted from the implementation of the Company's merchandising
strategy, which places greater emphasis on private label products, as these
products require larger order sizes and longer order lead time. The effects
of this strategy had been experienced earlier in Canada and Australia. Also
contributing to the increases in the United Kingdom subsidiary's inventory was a
lower than expected level of sales both during the third quarter and year-to-
date. Inventory levels in the United Kingdom subsidiary are being actively
managed down and some improvement was experienced during the third quarter.
Management anticipates that by the end of the fiscal year, inventories in the
United Kingdom subsidiary will be more closely aligned with the prior year.
Management also believes that the Company's inventory, in all three countries,
is of good quality and will be sold through in the ordinary course of business,
without the need for significant mark downs.
CURRENT MATURITIES OF NOTES PAYABLE TO TANDY CORPORATION
Current maturities of notes payable to Tandy have decreased from $17,071,000 at
March 31, 1996 to $6,958,000 at March 31, 1997 and June 30, 1996. This decrease
results from the scheduled repayment of the Series B Note to Trans World
Electronics, Inc. ("Trans World"), a subsidiary of Tandy, in the principal
amount of $10,113,000. The balances of $6,958,000 at March 31, 1997 and June 30,
1996, represent the amount of the Series A Note payable to Trans World over the
next twelve months.
ACCOUNTS PAYABLE
The level of accounts payable has decreased from $24,082,000 at June 30, 1996 to
$21,641,000 at March 31, 1997. At March 31, 1997, accounts payable were
$6,414,000 higher than at March 31, 1996. This increase in accounts payable
result primarily from an increase in the level of inventories, deferred payment
terms with suppliers and from foreign currency rate effects.
ACCRUED EXPENSES
Accrued expenses have increased from $25,833,000 at June 30, 1996 and
$26,031,000 at March 31, 1996 to $31,518,000 at March 31, 1997. These increases
result from a variety of timing differences, including the payment of
compensation, advertising costs and property and sales taxes. The increase in
the sale of extended warranties has also lead to an increase in deferred service
contract income.
15
<PAGE>
INCOME TAXES PAYABLE
Income taxes payable were $12,290,000 at March 31, 1997 compared to balances at
June 30, 1996 and March 31, 1996 of $12,971,000 and $13,689,000, respectively.
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 carry-back 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 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 in the immediately following paragraph.
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 likely 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. 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 likely be
required to post a cash deposit or letters of credit equal to one-half of the
1990-1993 tax in dispute, together with interest, which management estimates
should not exceed $9,000,000. Notwithstanding that the Company is still in
discussions with Revenue Canada regarding these issues, Revenue Canada was
required to issue a protective reassessment for one
16
<PAGE>
of the years because the time period during which such reassessment could
legally be issued was about to expire. The amount of the reassessment,
including interest, is approximately $13,800,000. This amount relates to the
1992 taxation year only and is reflected in the range described immediately
above. The Company has appealed this reassessment and, as indicated above, may
be required to post a cash deposit or letters of credit equal to one-half of the
reassessment, pending the outcome of such appeal. 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 following the conclusion of discussions with the Company and
its advisors. Accordingly, it is management's assessment that no provision need
be recorded for these possible claims.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Operating activities generated $7,572,000 in cash during the nine months ended
March 31, 1997 compared to $1,294,000 in the same period of the prior year, an
increase of $6,278,000. Increases in inventory levels used $4,620,000 less cash
than in the previous fiscal year. Accrued expenses conserved $5,525,000 in cash
for the period as compared to $496,000 in the previous year, the difference
relating primarily to the timing of advertising expenditures and an accrual for
the payment of sales related taxes in the United Kingdom. The benefits of the
additional cash generated by these changes were partially offset by a reduction
in net income, adjusted to reconcile net income to cash, which generated
$4,413,000 less cash than last year, falling from $18,084,000 for the nine
months ended March 31, 1996 to $13,671,000 at the end of the third quarter of
the current fiscal year.
Cash flow from investing activities consumed $5,316,000 during the current year
to date period, as compared with $7,351,000 a year ago. This decrease is
primarily attributable to a planned reduction in capital spending.
Financing activities provided $3,099,000 in cash during the nine months ended
March 31, 1997, while consuming $1,035,000 in cash during the same period a year
ago. This change results primarily from an increase of $4,912,000 in the level
of short-term borrowings needed to finance operations. This increase in cash
was partially offset by the fact that there were no exercises of stock options
by employees, thus no cash generated, during the nine months ended March 31,
1997. The exercise of such options had generated $760,000 in cash a year ago.
The Company's principal sources of liquidity during fiscal year 1997 are its
cash and short-term investments, its cash flow from operations and its banking
facilities.
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 established a one year revolving facility in
an amount which is determined using an inventory level calculation not to exceed
Cdn$60,000,000 ($43,332,000 at March 31, 1997 exchange rates). This agreement
has been renewed and now extends through mid-August, 1997.
17
<PAGE>
The Company intends to request a further extension of the facility prior to
August, 1997 and reasonably believes that the banking syndicate will agree to
such renewal; however, there can be no guarantee of such renewal. This facility
is used primarily to provide letters of credit in support of purchase orders
and, from time to time, to finance inventory purchases. At March 31, 1997,
there were borrowings against the credit facility aggregating $9,769,000.
In September 1996, the Company's Australian subsidiaries, InterTAN Australia
Ltd. and Technotron Sales Corp. Pty. Ltd., entered into a credit agreement with
an Australian bank (the "Australian Facility"). This agreement established a
credit facility in the amount of A$12,000,000 ($9,432,000 at March 31, 1997
exchange rates). The Australian Facility has no fixed term and may be
terminated at any time upon five days prior written notice by the lender. All
or any part of the facility may be used to provide letters of credit in support
of purchase orders. A maximum amount of A$5,000,000 ($3,930,000 at March 31,
1997 exchange rates) may be used in support of short-term borrowings. Interest
is charged on such borrowings at the Australian Indicator Lending Rate plus 1.25
percentage points. At March 31, 1997, there were no borrowings outstanding
against the Australian Facility.
In addition to the credit facilities described above, the Company's principal
sources of outside financing have been from the borrowings evidenced by the
Series A Note payable to Trans World and the Debentures.
Both the Series A Note and the Syndicated Loan Agreement preclude the Company
from paying dividends on its common stock. Accordingly, any such payment would
require the refinancing of any amounts outstanding under these loan agreements
or the consent of the Company's banking syndicate and Trans World; there can be
no assurance that either event would occur. In addition, the Series A Note 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, annual capital
spending and lease commitments 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. At March 31, 1997,
the Company was in compliance with all of these requirements. Management expects
that the Company will meet these requirements, as modified, during the remainder
of fiscal year 1997.
The Company's primary uses of liquidity during the remainder of fiscal year 1997
will include the funding of capital expenditures which the Company anticipates
will approximate $2,200,000 during the remainder of fiscal year 1997, mainly
related to store expansion, remodeling and upgrading. As previously described,
the Company believes that it may be required to post additional tax deposits or
letters of credit with Revenue Canada in order to appeal existing, and,
possibly, additional reassessments of tax. See "Income Taxes Payable".
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 Australian Facility
18
<PAGE>
will provide the Company with sufficient liquidity to meet its planned
requirements through the 1997 Christmas selling season, provided the amount of
any additional tax deposits were not at the upper end of the ranges described
above under "Income Taxes Payable". 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, on terms
acceptable to the Company.
CONTINGENCIES
-------------
Claims have been made by a former employee for damages for wrongful dismissal
totaling approximately $870,000. The Company is vigorously defending this
action. The Company believes that the possible range of loss in this matter is
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.
In the fourth quarter of fiscal year 1993, the Company recorded a pre-tax charge
of $77,400,000 in connection with the Company's plan to close its continental
European retail operations. The shutdown process is now substantially complete.
Management believes that the remaining provision is adequate to provide for the
Company's remaining obligations in Europe, including claims brought against the
Company by certain trade creditors, former employees, dealers and franchisees.
Apart from these matters and those described under "Income Taxes Payable", 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 its property is subject.
BASIS OF FINANCIAL STATEMENTS
-----------------------------
The accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation SX, "Interim Financial Statements", and do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial statements have
been prepared in conformity with accounting principles and practices (including
consolidation practices) as reflected in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996, and, in the opinion of the
Company, include all adjustments necessary for fair presentation of the
Company's financial position as of March 31, 1997 and 1996 and the results of
its operations for the three and nine months ended March 31, 1997 and 1996 and
its cash flow for the nine months ended March 31, 1997 and 1996. Such
adjustments are of a normal and recurring nature. Operating results for the
three and nine months ended March 31, 1997 are not necessarily indicative of the
results that can be expected for the fiscal year ended June 30, 1997. For
further information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The various matters discussed under the heading "Contingencies" on
page 19 of this Form 10-Q are incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were put to a vote of the Company's stockholders during the
three month period ended March 31, 1997.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) 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).
3(b) Bylaws (Filed on 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).
20
<PAGE>
Exhibit No. Description
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 (filed as Exhibit
3(b)(iii) to InterTAN's Annual Report on Form
10-K for fiscal year ended June 30, 1996 and
incorporated herein by reference).
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).
4(d) Warrant Agreement dated August 5, 1993 between
InterTAN, Inc. and 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(a) Amending Agreement dated February 11, 1997
amending the Credit Agreement.
*10(b) Third Amendment to InterTAN Advertising
Agreement dated to be effective as of January
1, 1997.
21
<PAGE>
Exhibit No. Description
*10(c) Retirement Agreement dated March 3, 1997
between InterTAN, Inc. and James Michael Wood.
*11 Statement of Computation of Earnings Per Share.
*27 Article 5, Financial Data Schedule.
- ----------------------
* Filed herewith
b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter
ended March 31, 1997.
22
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
(Registrant)
Date: May 14, 1997 By: /s/James T. Nichols
---------------------------------
James T. Nichols
President and Chief Executive Officer
(Authorized Officer)
By: /s/Douglas C. Saunders
----------------------------------
Douglas C. Saunders
Vice President and Corporate Controller
(Principal Accounting Officer)
23
<PAGE>
INTERTAN, INC.
FORM 10-Q
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 on 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 (filed as Exhibit
3(b)(iii) to InterTAN's Annual Report on Form
10-K for fiscal year ended June 30, 1996 and
incorporated herein by reference).
<PAGE>
Exhibit No. Description
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).
4(d) Warrant Agreement dated August 5, 1993 between
InterTAN, Inc. and 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(a) Amending Agreement dated
February 11, 1997 amending the Credit
Agreement.
*10(b) Third Amendment to InterTAN Advertising
Agreement dated to be effective as of January
1, 1997.
*10(c) Retirement Agreement dated March 3, 1997
between InterTAN, Inc. and James Michael Wood.
*11 Statement of Computation of Earnings Per
Share.
*27 Article 5, Financial Data Schedule.
- -------------------
* Filed herewith
<PAGE>
Exhibit 10(a)
-------------
AMENDING AGREEMENT
------------------
THIS AGREEMENT, dated as of February 11, 1997, 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,
Amending Agreement dated as of June 25, 1996 and Amending Agreement dated as of
September 11, 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)Section 11.1(m) is amended to read as follows:
(m) Cash Interest Coverage Ratio.
----------------------------
InterTAN will have a Cash Interest Coverage Ratio calculated at the
end of each period set out below of not less than (i) 1.25:1 for the nine
month period ending March 31, 1994 and the twelve month periods ending
June 30, 1994 and September 30, 1994, (ii) 1.50:1 for the twelve month
period ending December 31, 1994, (iii) 1.05:1 for the twelve month period
ending March 31, 1996, 1.25:1 for the twelve month period ending June 30,
1996, .90:1 for the twelve month period ending September 30, 1996 and (iv)
1.0:1 for the twelve month periods ending December 31, 1996 and March 31,
1997, 1.05:1 for the twelve
<PAGE>
2
month period ending June 30, 1997 and 1.50:1 for each twelve month period
ending each March 31, June 30, September 30 and December 31 thereafter.
3. AMENDMENT FEE. The Borrower shall pay to the Agent for the benefit of the
-------------
Lenders, upon the execution and delivery of this Agreement, a fee for the
amendment of the Credit Agreement equal to one-fifth of one percent of the
amount of the Credits, to be dispersed to the Lenders according to their pro
rata shares.
4. 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.
5. 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/ Jeff Bond
-------------------------------------------
Authorized Officer
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/ Judith C.E. Kelly
-------------------------------------------
Vice President
<PAGE>
3
LLOYDS BANK PLC
By: /s/ J.N. Mortell
-------------------------------------------
Manager, Corporate Banking
CREDIT LYONNAIS CANADA
By: /s/ Dexter M. Blackwood
-------------------------------------------
By: /s/ C.M. Stade
-------------------------------------------
INTERTAN CANADA LTD.
By: /s/ James G. Gingerich
-------------------------------------------
Vice President
INTERTAN INC.
By: /s/ James T. Nichols
-------------------------------------------
President and CEO
INTERTAN U.K. LIMITED
By: /s/ James T. Nichols
-------------------------------------------
Director
<PAGE>
Exhibit 10(b)
-------------
Third Amendment to
------------------
InterTAN Advertising Agreement
------------------------------
This Third Amendment to the InterTAN Advertising Agreement (the "Agreement") is
by and between InterTAN, the InterTAN Group, and Tandy (all as defined in the
Agreement). The parties hereto agree as follows:
1. Paragraph 1. of the Agreement (as previously amended), Section a), entitled
"License of Materials". is hereby deleted and in its place is added the
----------------------------------------------------------------------
following:
- ---------
"a) License of Materials.
--------------------
(i) Subject to all payments required hereunder being timely made by
INTERTAN GROUP and to INTERTAN GROUP's compliance with all the
terms of this Agreement, TANDY agrees to provide InterTAN with
the following (which are collectively referred to in this
Agreement as "Materials"):
(a) Market Research. Copies of all printed market research
---------------
completed between January 1, 1994 and to December 31, 1997
on The Repair Shop at Radio Shack, You've Got Questions!
We've Got Answers! and the Radio Shack Gift Express programs
("Programs") which were used by TANDY in the development of
new and updated marketing strategies for TANDY's Radio Shack
Division;
1
<PAGE>
(b) Program Schedules. Copies of printed Radio Shack
-----------------
advertising schedules and calendars (including all changes)
for 1997 for the Programs;
(c) Sales Percentage. Printed bi-monthly advice of sales growth
----------------
percentage by category for the Programs in 1997;
(d) Flyers and Inserts. Pre-release printed copies of all
------------------
flyers and inserts for the Programs used by TANDY during
1997;
(e) Television Commercials. Video tape copies of all newly
----------------------
developed television commercials used by TANDY for the
Programs during 1997; and
(f) Radio Commercials. Cassette copies of all newly developed
-----------------
radio commercials used by TANDY for the Programs during
1997.
(ii) Subject to TANDY's entering into a definitive agreement with
Lord, Dentsu & Partners and subject to the provisions of that
agreement, TANDY grants a non-assignable, non-exclusive license
to INTERTAN GROUP to use the Materials in the Licensed Countries
in the limited manner specified in this Agreement.
(iii) INTERTAN GROUP shall have no right to sublicense or disclose any
of the Materials to any third party other than dealers and
franchisees duly granted a sublicense by INTERTAN GROUP in
accordance with the terms and conditions of the applicable
License Agreement. INTERTAN GROUP agrees to use the Materials
provided only as a source for concepts and ideas and will not
use the actual Materials provided in any other way.
(iv) INTERTAN GROUP will use only photography, talent, props and
backdrops which it currently owns, or which it purchases or
licenses for its own use, in any advertisements produced by the
INTERTAN GROUP arising from the Materials.
2
<PAGE>
(v) INTERTAN GROUP agrees to keep all information specified in
subparagraphs (i)(a), (b) and (c) above confidential and not to
provide this information to any third party. INTERTAN GROUP
agrees to keep all items specified in subparagraphs (i)(d), (e)
and (f) above confidential until five days after an item has been
published or broadcast to the general public anywhere in the
United States. INTERTAN agrees to return to TANDY or destroy
all copies and originals of confidential information within 30
days after expiration or other termination of this Agreement."
2. Paragraphs 3.b)(i) and (ii) of the Agreement are hereby deleted in its
entirety and in their place the following is substituted:
(i) During the term of this Agreement, InterTAN also agrees to pay TANDY,
on a monthly basis, in U.S. Dollars, 6% of all payments of
compensation for services which are made by TANDY to Lord, Dentsu &
Partners under the agreement then existing between Lord, Dentsu &
Partners and TANDY, provided that the total of such monthly payments
in the aggregate for the term of the Agreement as amended hereby shall
not exceed $196,813.
(ii) TANDY will invoice InterTAN monthly for 6% of such payments made
during the preceding month beginning with the first full month
following the effective date of the Agreement as amended by this Third
Amendment thereto. TANDY will invoice, and InterTAN shall pay TANDY in
April, 1997, 6% of the aggregate amount of the payments made to Lord,
Dentsu & Partners during the period from January 1, 1997 to March 31,
1997. Further, the parties hereto agree that 50% of the base retainer
of $3,000 per month actually paid to DMB&G Associates, L.L.C. by
InterTAN for its consulting services, up to a maximum of $18,000.00,
may be taken as a credit against amounts due hereunder, provided that
InterTAN furnishes to TANDY proof of payment prior to or
contemporaneously with the taking of each credit.
3
<PAGE>
3. Paragraph 10 of the Agreement, entitled "TERM." is hereby deleted in its
----
entirety and in its place the following is substituted:
"10. TERM.
----
The term of this Agreement is from January 1, 1997 through December 31,
1997. In the event TANDY's agreement with Lord, Dentsu & Partners
terminates prior to the expiration of the term of this Agreement, and
provided that no party hereto is then in default of this Agreement, the
parties hereto agree to negotiate terms for an amendment to this Agreement
to provide for its possible continuation for the balance of the remaining
term under such new terms and conditions as are appropriate under the
circumstances, in TANDY's opinion."
4. Paragraph 11.of the Agreement, entitled "EXTENSION OF TERM." is hereby
-----------------
deleted in its entirety and in its place the following is substituted:
"11. EXTENSION OF TERM.
-----------------
At January 1, 1998 this Agreement may be extended on new or existing terms
and conditions, at TANDY's option. INTERTAN GROUP shall provide TANDY a
written request for extension at least 30 days prior to December 1, 1997.
If the parties agree to extend this Agreement and agree on all terms
thereof, the parties shall enter into a written amendment stating the new
terms."
4
<PAGE>
5. Paragraph 12. Section a) of the Agreement, entitled "Expiration." Is hereby
----------
deleted in its entirety and in its place the following is substituted:
"a) Expiration. Unless the term is extended by written contract of
----------
the parties, and unless earlier terminated as hereinabove provided,
this Agreement shall automatically expire and terminate at the
expiration of the term provided in paragraph 10, as amended, or at the
same time as the License Agreements, whichever is earlier."
6. The Agreement is hereby ratified and confirmed in all other respects and all
of its provisions, as amended, shall continue in full force and effect.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the dates shown beneath their respective signatures hereto, to be effective as
of January 1, 1997.
InterTAN Inc.
By: /s/ James T. Nichols
----------------------------------------
Title: President and CEO
------------------------------------
Date Signed: April 7, 1997
-------------------------------
InterTAN Canada Ltd.
By: /s/ James T. Nichols
----------------------------------------
Title: President
-------------------------------------
Date Signed: April 7, 1997
-------------------------------
InterTAN U.K. Limited
By: /s/ James T. Nichols
----------------------------------------
Title: Director
-------------------------------------
Date Signed: April 7, 1997
-------------------------------
6
<PAGE>
InterTAN Australia Ltd.
By: /s/ James T. Nichols
----------------------------------------
Title: Director
-------------------------------------
Date Signed: April 7, 1997
-------------------------------
Tandy Corporation
By: /s/ Dwain H. Hughes
----------------------------------------
Title: Senior Vice President and Chief
-------------------------------------
Financial Officer
-----------------
Date Signed: April 14, 1997
-------------------------------
7
<PAGE>
Exhibit 10(c)
-------------
RETIREMENT AGREEMENT
--------------------
This Retirement Agreement ("Agreement") is made and entered into by and
between James Michael Wood ("Executive") and InterTAN, Inc. ("Company").
RECITALS
--------
WHEREAS, Executive has been employed by the Company Group (as defined
below) since November 1, 1990 and the Company has employed the Executive since
March 1, 1995 as its Vice President-Marketing Services; and
WHEREAS, the Executive and the Company have reached the following agreement
relating to the Executive's employment with the Company, and his resignation as
an employee of the Company, and to provide a complete release by the Executive
of any claims or causes of action he might have against the Company in
connection with his employment by the Company and resignation from such
employment.
NOW, THEREFORE, in consideration of the payments set forth below, and the
mutual promises and actions contained herein, it is agreed as follows:
AGREEMENT
---------
1. Departure from Employment. Effective February 28, 1997 (the
-------------------------
"Termination Date"), the Executive has resigned from employment with the
Company, and the Executive has relinquished all officer and director positions,
all other titles, and all authorities with respect to the Company and all
members of the Company Group (as defined below)(including without limitation
InterTAN Canada Ltd. and InterTAN Texas, Inc.), and the Executive has returned
(or will return) to the Company all Company-issued credit/charge/phone cards,
building security and garage access cards, office keys and all other Company
property, including all Confidential Information described in Section 4 below.
---------
As used herein, "Company Group" means the Company, and any entity that directly
or indirectly controls, is controlled by, or is under common control with, the
Company, and for purposes of this definition "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such entity through the ownership of voting
securities.
Upon execution of this Agreement, the parties hereto agree that the
InterTAN, Inc. Deferred Compensation Plan (the "Plan") dated November 1, 1990
between the Company and Executive shall terminate and the terms and provisions
of this Agreement shall supersede the Plan.
<PAGE>
2. Payments and Benefits.
----------------------
(a) Separation Payments. Subject to the provisions of, and in
-------------------
consideration of the Executive's agreement to comply with the terms of this
Agreement, the Executive will receive special separation payments totaling
$250,000.00 to be paid in one hundred twenty (120) equal monthly
installments, commencing March 1, 1997, less appropriate deductions,
offsets, and withholdings as required by law or as provided in this
Agreement. However, such payments shall cease and/or be repaid to the
Company in the event the Executive breaches this Agreement, as provided in
Sections 4, 7 and 9 hereof. All payments made hereunder are inclusive of
-------------------
any and all severance or other termination payments or benefits under any
plan, program or policy of the Company, including, without limitation, the
Plan.
(b) Continuation of Certain Benefits. Provided the Company timely
--------------------------------
receives a proper election notice from Executive regarding coverage
continuation, and provided Executive timely remits in advance all
applicable monthly premium payments to the Company, the Executive shall be
entitled to continuation of major medical and dental insurance benefits for
such time and to the extent provided by applicable law. Notwithstanding
anything herein to the contrary, any or all of such benefits may be
modified or amended from time to time by the Company.
3. Stock Options. All unvested options now held by the Executive on
-------------
shares of Company common stock shall be subject to accelerated vesting;
thereafter, all vested options will be exercisable in accordance with and
subject to the provisions of the applicable plans and agreements, which may be
modified or amended from time to time in accordance with the original terms of
the plans.
4. Consulting Services; Confidentiality and Non-Solicitation.
---------------------------------------------------------
(a) Consulting Services.
-------------------
During the period in which the Executive is receiving separation
payments hereunder, the Executive agrees to use reasonable best efforts to
be available upon the reasonable request of the President of the Company to
provide services and assistance to the Company, its successors, assigns,
employees, agents or representatives at such times and places as mutually
agreed to by the Executive and the President of the Company. The Company
agrees to reimburse the Executive for reasonable out-of-pocket expenses
incurred by the Executive in connection with the performance of such
services. Both parties agree that once the Executive finds other
employment or moves his residence from the Dallas/Fort Worth area, any
request for services or assistance by the Company that would be injurious
to Executive's job or create a hardship due to travel time will be
considered to be not reasonable.
2
<PAGE>
(b) Confidentiality and Non-Solicitation.
------------------------------------
(i) The Executive acknowledges that the Company's (including all
members of the Company Group) continued operations and success is
dependent upon (x) certain processes, formulae, specifications,
designs, systems, sales procedures, and confidential information of
the Company which are valuable, special, and unique assets; and (y)
the Company's continuing relationship with, and knowledge about, its
customers and the goodwill such relationships create. The Executive
acknowledges that all of the following information is confidential and
a valuable, special, and unique asset of the Company's business: (1)
the names, addresses, and telephone numbers of the Company's
customers; (2) the amount, nature, volume, and other information
regarding any products or services sold to any customer or required by
any customer; (3) the nature of the internal business operation of the
Company; (4) the methods, processes, formulae, specifications,
designs, systems, and know-how used, developed, or acquired by the
Company in its business; (5) the Company's prices or charges to
customers for its products and services; and (6) information regarding
the salaries, bonuses or other compensation paid by the Company to its
employees.
(ii) The Executive acknowledges that all of the information
described in paragraph (i) of this Section is "Confidential
Information," which is the sole and exclusive property of the Company.
The Executive acknowledges that all Confidential Information was
revealed to the Executive in trust, based solely upon the confidential
employment relationship then existing between the Company and the
Executive. The Executive agrees: (1) that all writings or other
records concerning Confidential Information are the sole and exclusive
property of the Company; (2) that all manuals, forms, and supplies
furnished to or used by the Executive and all data or information
placed thereon by the Executive or any other person are the Company's
sole and exclusive property; (3) that, upon execution of this
Agreement, or upon request of the Company at any time, the Executive
shall deliver to the Company all such writings, records, forms,
manuals, and supplies and all copies of such; (4) that the Executive
will not make or retain any copies of such for his own or personal
use, or take the originals or copies of such from the offices of the
Company; and (5) that the Executive will not, at any time, publish,
distribute, or deliver any such writing or records to any other person
or entity, or disclose to any person or entity the contents of such
records or writings or any of the Confidential Information.
(iii) The Executive further agrees that at no time will he
either directly or indirectly, solicit any employee of the Company (x)
to accept employment, whether permanent or temporary, with the
Executive or any business entity which competes with and/or provides
services similar to the Company and with which the Executive is
associated in any manner, or (y) to terminate such employee's
employment with the Company.
3
<PAGE>
(iv) The Executive acknowledges that the restrictions contained
in this Section (the "Restrictions"), in view of the nature of the
business in which the Company is engaged, are reasonable and necessary
in order to protect the legitimate interests of the Company, and that
any violation thereof would result in irreparable injury to the
Company, and the Executive therefore further acknowledges that, in the
event that Executive violates, or threatens to violate, any of such
Restrictions, the Company shall be entitled to obtain from any court
of competent jurisdiction, without the posting of any bond or other
security, preliminary and permanent injunctive relief as well as
damages and an equitable accounting of all earnings, profits, and
other benefits arising from such violation, which rights shall be
cumulative and in addition to any other rights or remedies in law or
equity to which the Company or any affiliate or subsidiary of the
Company may be entitled. If the Executive violates any of the
Restrictions, the restricted period shall not run in favor of the
Executive from the time of commencement of any such violation until
such time as the violation shall be cured by the Executive to the
satisfaction of the Company. If any Restriction, or any part thereof,
is determined in any judicial or administrative proceeding to be
invalid or unenforceable, the remainder of the Restrictions shall not
thereby be affected and shall be given full effect, without regard to
the invalid provisions. If the period of time or scope of activity in
the Restrictions should be adjudged unreasonable in any judicial or
administrative proceeding, then the court or administrative body shall
have the power to reduce the period of time or the scope covered and,
in its reduced form, such provision shall then be enforceable and
shall be enforced.
5. Release by the Executive; Release by Company.
--------------------------------------------
(a) In consideration of the benefits and payments provided and to be
provided by Company herein, and as a material inducement to the Company to
enter into this Agreement, the Executive hereby releases, acquits and
forever discharges the Company, its owners, stockholders, predecessors,
successors, assigns, agents, directors, officers, employees,
representatives, attorneys, divisions, subsidiaries, affiliates, and all
persons acting by, through, under or in concert with any of them, from any
and all charges, complaints, claims, controversies, demands, rights,
disputes, and causes of action of any nature whatsoever, known or unknown,
asserted or unasserted, accrued or not accrued, arising prior to or
existing at the time of the execution of this Agreement which the Executive
may have or claim to have against any of the persons or entities released
regarding any matter. This Release includes, but is not limited to, any
claim or cause of action for discrimination under Title VII of the Civil
Rights Act of 1964, the Texas Commission on Human Rights Act, the Age
Discrimination in Employment Act, and the Americans With Disabilities Act.
It also includes any other statutory or common law cause of action
providing rights for employees against their employers. The Executive
4
<PAGE>
further covenants not to sue the Company or any member of the Company Group
or file any claim or charge with any agency complaining of any action with
respect to his employment with the Company or any member of the Company
Group.
(b) In consideration of the covenants made by Executive herein, and as
a material inducement to the Executive to enter into this Agreement, the
Company hereby releases, acquits and forever discharges the Executive, his
successors, assigns, and legal representatives, from any and all charges,
complaints, claims, controversies, demands, rights, disputes, and causes of
action of any nature whatsoever, known or unknown, asserted or unasserted,
accrued or not accrued, arising prior to or existing at the time of the
execution of this Agreement which the Company may have or claim to have
against the Executive. Notwithstanding the foregoing, the Company does not
release its claim to be reimbursed by Executive for $1,369.91 relating to
prior year tax equalization payments. The Company further covenants not to
sue the Executive with respect to his employment with the Company or any
member of the Company Group.
6. Tax Payments, Withholdings and Reporting. The Executive recognizes
----------------------------------------
that the payments and benefits provided under this Agreement, including without
limitation those provided pursuant to Section 2, may result in taxable income to
---------
him which the Company will report to the appropriate taxing authorities. The
Company shall have the right to deduct from any payment made under this
Agreement to the Executive, any business entity controlled by him or any other
person or entity, any federal, state, local or foreign income, employment or
other taxes it determines are required by law to be withheld with respect to
such payments or benefits provided thereunder or to require payment from the
Executive which he agrees to pay upon demand, for the purpose of satisfying any
such withholding requirement.
7. Non-Compliance. All of the payments provided hereunder pursuant to
--------------
Section 2 are conditioned upon the Executive's compliance with the provisions of
- ---------
Sections 4 and 9 hereof. Each of the aforementioned provisions are material
- ----------------
terms of this Agreement, and in the event of any violation of any such provision
of this Agreement by the Executive or anyone acting at Executive's direction or
on his behalf, or in the event the Executive or anyone acting at his direction
or on his behalf, at any time shall substantially denigrate any of the persons
or entities released under Section 5 above, including without limitation by way
---------
of news media or the expression to news media of personal views, opinions, or
judgments, the Company shall be entitled to withhold and terminate all payments
provided or to be provided in Section 2, without waiving the right to pursue any
---------
other available legal or equitable remedies. The Company agrees that no
statement shall be made to third parties about the Executive by executive
officers or directors of the Company that substantially denigrates him,
including without limitation by way of news media or the expression to news
media of personal views, opinions or judgments. The provisions of this Section
-------
7 shall not be applicable to any truthful statement required to be made by the
- -
Executive or any representative of the Company or its affiliates in any legal
proceeding or governmental (including all agencies thereof) or regulatory filing
or investigation.
5
<PAGE>
The Executive further agrees to reasonably cooperate with the Company, its
financial and legal advisors, and/or government officials, in any claims,
investigations, administrative proceedings, lawsuits, and other legal, internal
or business matters, as reasonably requested by the Company. To the extent the
Executive incurs travel or other expenses with respect to such activities, the
Company agrees to reimburse him for such reasonable expenses documented and
approved in accordance with Company policy.
8. No Admission. This Agreement shall not in any way be construed as an
------------
admission by the Company (including each member of the Company Group) of any act
of discrimination or other unlawful act whatsoever against the Executive or any
other person, and the Company (including each member of the Company Group)
specifically disclaims any liability to or discrimination against the Executive
or any other person on the part of itself, its employees, or its agents.
9. Confidentiality. The Executive and the Company agree that the terms
---------------
of the Agreement shall be confidential and that neither party will now or at any
time in the future disclose or cause to be disclosed the terms of this Agreement
except (a) to employees of the Company to the limited extent necessary to
perform the terms of this Agreement, (b) as required to be disclosed in the
Proxy Statement relating to the Company's 1997 annual meeting of stockholders,
and (c) as may be necessary (i) in filing tax returns or SEC or other
governmental submissions, (ii) in connection with enforcing the terms and
conditions of this Agreement in a court of law as provided herein, (iii) in
response to a valid subpoena or other lawful process, (iv) in connection with
seeking advice from professional advisors, or (v) except as otherwise required
by applicable law. In the event that either party breaches this non-disclosure
provision, the other party will be entitled to injunctive relief to obtain
specific performance of this provision and will be entitled to recover its costs
and reasonable attorneys' fees. The Company hereby acknowledges that Executive
resigned from his employment with the Company under amicable terms and Executive
shall be permitted to state such to any prospective employers.
10. Miscellaneous Provisions.
------------------------
(a) Assignment. The Executive represents that he has not transferred
----------
or assigned, or purported to assign or transfer, to any person or entity
any claim involving the Company (including any member of the Company Group)
or any portion thereof or interest therein. Any assignment in violation of
the foregoing shall be null and void. Subject to the foregoing, this
Agreement shall extend to, be binding upon, and inure to the benefit of the
parties hereto and, as the case may be, their heirs, legatees,
representatives, successors, and assigns. In the event that there shall
occur any transaction involving a change of control of the Company, then
the Company shall cause the party acquiring control of the Company to
assume the obligations of the Company under this Agreement.
(b) Severance. If any provision of this Agreement is or may be held
---------
by a court of competent jurisdiction to be invalid, void, or unenforceable
to any extent, the validity of the remaining parts, terms or provisions of
this Agreement shall not be
6
<PAGE>
affected thereby, and such illegal or invalid part, term, or provision
shall be deemed not to be part of this Agreement. The remaining provisions
shall nevertheless survive and continue in full force and effect without
being invalidated in any way.
(c) Entire Agreement. This Agreement sets forth the entire agreement
----------------
between the parties and there are no other agreements or understandings
other than those set forth in this Agreement.
(d) Texas Law. This Agreement is made within the State of Texas and
---------
shall in all respects be interpreted, enforced, and governed under the laws
of the State of Texas, and shall in all cases be construed as a whole
(according to its fair meaning, and not strictly for or against any of the
parties).
(e) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be construed as an original for all purposes, but all
of which taken together shall constitute one and the same Agreement.
(f) Patent Assignment.
-----------------
(i) Executive shall deliver to the Company prior to its execution
of this Agreement a duly signed Assignment regarding Executive's
invention of that certain "Information Tag for Butterfly Hook" (U.S.
Patent Office Serial No. 08/678,030) (the "Tag").
(ii) Company hereby agrees with Executive that it will further
wholly assign its ownership interest in the Tag to United Displaycraft
of Des Plaines, Illinois ("UD") and negotiate and execute a Royalty
Arrangement (herein so called) whereby the Company would be paid a
7.5% lifetime royalty based upon future Tag sales by UD to persons
other than the Company Group. Contemporaneously with Company's and
UD's execution of the Royalty Arrangement, Company will assign and
transfer to Executive its property rights in such Royalty Arrangement,
in accordance with the terms thereof.
(g) Further Acts. In addition to the actions and documents recited in
------------
this Agreement as contemplated to be performed, executed and/or delivered
by the parties, the parties hereby agree to perform, execute, and/or
deliver or cause to be performed, executed and/or delivered upon the date
of execution of this Agreement, and thereafter, any and all further acts,
deeds, documents, and assurances as are reasonably necessary to consummate
the transactions contemplated by this Agreement.
(h) Indemnification. Executive shall be entitled to indemnification
---------------
to the extent permitted under Article XIV of the Company's Amended and
Restated Bylaws.
7
<PAGE>
11. SEPARATE COUNSEL. THE EXECUTIVE IS ADVISED BY THE COMPANY THAT BEFORE
----------------
HE SIGNS THIS AGREEMENT HE SHOULD CONSULT WITH AN ATTORNEY.
12. 21 DAYS TO SIGN; 7-DAY REVOCATION PERIOD. THE EXECUTIVE UNDERSTANDS
-----------------------------------------
THAT HE MAY TAKE UP TO 21 CALENDAR DAYS FROM THE DATE OF THE AGREEMENT TO
CONSIDER THIS AGREEMENT BEFORE SIGNING IT. FULLY UNDERSTANDING THE EXECUTIVE'S
RIGHTS TO TAKE TWENTY-ONE (21) DAYS TO CONSIDER SIGNING THIS AGREEMENT, AND
AFTER HAVING SUFFICIENT TIME TO CONSIDER THE EXECUTIVE'S OPTIONS, THE EXECUTIVE
HEREBY WAIVES HIS RIGHT TO TAKE THE FULL TWENTY-ONE (21) DAY PERIOD. THE
EXECUTIVE FURTHER UNDERSTANDS THAT HE MAY REVOKE THIS AGREEMENT AT ANY TIME
DURING THE SEVEN (7) CALENDAR DAYS AFTER SIGNING IT, AND THAT THIS AGREEMENT
SHALL NOT BECOME EFFECTIVE UNTIL THE SEVEN (7) DAY REVOCATION PERIOD HAS PASSED.
SIGNED this 3rd day of March, 1997.
/s/ J. Michael Wood
--------------------------------------------
Executive
THE STATE OF TEXAS (S)
(S)
COUNTY OF TARRANT (S)
Before me, a Notary Public, on this day personally appeared James Michael
Wood, known to me to be the person whose name is subscribed to the foregoing
instrument and acknowledged to me that he executed the same for the purposes and
consideration therein expressed.
Given under my hand and seal of office this 3rd day of March, 1997.
/s/ Deborah L. Ward
--------------------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
INTERTAN, INC.
By: /s/ David S. Goldberg
---------------------------------------
Name: David S. Goldberg
Title: Vice President, Secretary and
General Counsel
8
<PAGE>
THE STATE OF TEXAS (S)
(S)
COUNTY OF TARRANT (S)
Before me, a Notary Public, on this day personally appeared David S.
Goldberg, known to me to be the person and officer whose name is subscribed to
the foregoing instrument and acknowledged to me that the same was the act of
InterTAN, Inc., and that he has executed the same on behalf of said corporation
for the purposes and consideration therein expressed, and in the capacity
therein stated.
Given under my hand and seal of office this 3rd day of March, 1997.
/s/ Deborah L. Ward
-------------------------------------------------
Notary Public Signature
(PERSONALIZED SEAL)
9
<PAGE>
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE Exhibit 11
INTErTAN, INC.
- --------------------------------------------------------------------------------
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------ -----------------------
MARCH 31 MARCH 31
1997 1996 1997 1996
----------------------- ----------------------
PRIMARY EARNINGS PER SHARE
<S> <C> <C> <C> <C>
Net income......................................................... $(5,133) $(4,108) $ (263) $ 4,024
======================= ======================
Weighted average number of common shares outstanding............... 11,527 10,943 11,373 10,857
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) 107
----------------------- ----------------------
Weighted average number of common and common equivalent
shares outstanding.............................................. 11,527 10,943 11,373 10,964
======================= ======================
Primary net income per average common share $ (0.45) $ (0.38) $ (0.02) $ 0.37
======================= ======================
FULLY DILUTED EARNINGS PER SHARE
Reconciliation of net income per statements to amounts used in
computation of fully diluted net income per average common share:
Net income, as reported............................................ $(5,133) $(4,108) $ (263) $ 4,024
Adjustments for assumed conversion of the 9% convertible
subordinated debentures:
Add interest on the debentures..................................... (a) (a) (a) 2,873
Add amortization expense on the debentures......................... (a) (a) (a) 271
Less foreign exchange transaction gain recognized
on the debentures................................................. (a) (a) (a) (117)
Less income tax effect on the debentures........................... - (a) - (1,069)
----------------------- ----------------------
Net income, as adjusted............................................ $(5,133) $(4,108) $ (263) $ 5,982
======================= ======================
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...................... 11,527 10,943 11,373 10,857
Adjustments for assumed conversion of 9% convertible
subordinated debentures to common stock........................... (a) (a) (a) 6,745
Adjustments for assumed exercise of warrants and stock options,
net of assumed treasury stock repurchases at period end prices... (a) (a) (a) 107
Adjustment for converted debentures................................ - - - 13
Weighted average number of common and common equivalent shares
outstanding, as adjusted........................................ 11,527 10,943 11,373 17,722
======================= ======================
Fully diluted net income per average common shares................. $ (0.45) $ (0.38) $ (0.02) $ 0.34
======================= ======================
</TABLE>
(a) These items are anti-dilutive and thus are omitted from the calculation.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 39,036
<SECURITIES> 0
<RECEIVABLES> 9,829
<ALLOWANCES> 0
<INVENTORY> 171,757
<CURRENT-ASSETS> 227,315
<PP&E> 38,904
<DEPRECIATION> 0
<TOTAL-ASSETS> 268,867
<CURRENT-LIABILITIES> 82,574
<BONDS> 57,374
0
0
<COMMON> 11,629
<OTHER-SE> 110,815
<TOTAL-LIABILITY-AND-EQUITY> 268,867
<SALES> 412,776
<TOTAL-REVENUES> 413,321
<CGS> 229,335
<TOTAL-COSTS> 229,335
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,008
<INCOME-PRETAX> 6,110
<INCOME-TAX> 6,373
<INCOME-CONTINUING> (263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (263)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
