<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, 2000 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)
<TABLE>
<S> <C>
Delaware 75-2130875
- -------------------------------------------------------------- ---------------------------------
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
3300 Highway #7, Suite 904
Concord, Ontario Canada L4K 4M3
- -------------------------------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (905) 760-9701
---------------------------------
</TABLE>
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, 2000, 28,928,818 shares of the registrant's common stock, par value
$1.00 per share, were outstanding.
1
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TABLE OF CONTENTS
PART I
Page
Introductory note regarding forward-looking information 3
ITEM 1 - Financial Statements and Supplementary Data
Consolidated Statements of Operations 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II
ITEM 1 - Legal Proceedings 26
ITEM 4 - Submission of Matters to a Vote of Security Holders 26
ITEM 6 - Exhibits and Reports on Form 8-K 26
OTHER
Signatures 29
2
<PAGE>
INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain matters discussed herein, including comments about the growth of the
dealer division and the introduction of broadband internet connectivity in
Australia, continued growth in the sale of the latest technological products,
including direct-to-home satellite, the pace of gross margin erosion in Canada,
the mix of contract and prepaid cellular sales in Australia, growth in the sale
of parts and accessories and of products carrying after sale compensation,
continued strong growth in Canadian stores with a Panasonic Wall, management's
estimate of the implications of the introduction of the goods and services tax
in Australia, management's assessment of the impact of Year 2000 issues on the
company's financial performance, and the adequacy of the Company's liquidity are
forward-looking statements about the business, financial condition and prospects
of InterTAN, Inc. (the "Company" or "InterTAN"). The actual results of the
Company could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties including, but not limited
to, international economic conditions, interest and foreign exchange rate
fluctuations, the adequacy of the indemnity obtained in connection with the
sale of the United Kingdom subsidiary, various tax issues (including possible
reassessments), changes in product demand and consumer preferences, competitive
products, pricing and promotional activity, availability of products, developing
and maintaining alliances with strategic vendors, inventory risks due to shifts
in market conditions, dependence on manufacturers' product development, the
regulatory and trade environment, certain aspects of Year 2000 compliance, real
estate market conditions in the United Kingdom 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.
3
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements Of Operations (Unaudited)
InterTAN, Inc.
- --------------------------------------------------------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
----------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales and operating revenues.......... $104,604 $ 88,066 $381,777 $408,289
Other income.............................. 69 73 218 202
--------------- --------------- --------------- ---------------
104,673 88,139 381,995 408,491
--------------- --------------- --------------- ---------------
Operating costs and expenses:
Cost of products sold.................. 59,817 49,266 222,542 230,775
Selling, general and administrative
expenses.............................. 37,297 32,817 118,853 140,971
Depreciation and amortization.......... 1,552 1,388 4,443 5,008
Loss on disposal of United Kingdom
subsidiary and other restructuring
charges................................ - 34,712 - 35,088
--------------- --------------- --------------- ---------------
98,666 118,183 345,838 411,842
--------------- --------------- --------------- ---------------
Operating income (loss)................... 6,007 (30,044) 36,157 (3,351)
Foreign currency transaction
(gains) losses....................... 127 80 291 (375)
Interest income........................... (862) (475) (1,674) (1,011)
Interest expense.......................... 129 1,025 414 4,307
--------------- --------------- --------------- ---------------
Income (loss) before income taxes......... 6,613 (30,674) 37,126 (6,272)
Provision for income taxes................ 2,985 10,548 16,750 21,481
--------------- --------------- --------------- ---------------
Net income (loss)......................... $ 3,628 $(41,222) $ 20,376 $(27,753)
=============== =============== =============== ===============
Basic net income (loss) per
average common share................. $0.12 $(2.08) $0.68 $(1.44)
Diluted net income (loss) per
average common share................. $0.12 $(2.08) $0.66 $(1.44)
Average common shares outstanding......... 29,737 19,785 29,898 19,227
Average common shares outstanding
assuming dilution.................... 30,647 19,785 30,728 19,227
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
4
<PAGE>
Consolidated Balance Sheets (Unaudited)
InterTAN, Inc.
- -------------------------------------------------------------------------------
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31 June 30 March 31
2000 1999 1999
-------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets:
Cash and short-term investments.......................... $ 49,450 $ 47,403 $ 44,095
Accounts receivable, less allowance for doubtful
accounts............................................ 11,479 9,841 7,582
Inventories.............................................. 115,343 111,934 111,081
Other current assets..................................... 3,003 3,567 3,829
Deferred income taxes.................................... 1,215 1,247 378
-------------------------------------------------------------
Total current assets................................. 180,490 173,992 166,965
Property and equipment, less accumulated
depreciation and amortization..........................
21,925 20,123 19,094
Other assets................................................. 259 276 287
Deferred income taxes........................................ 3,988 3,924 -
-------------------------------------------------------------
Total Assets................................................. $ 206,662 $ 198,315 $ 186,346
=============================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable......................................... 21,912 15,883 19,398
Accrued expenses......................................... 17,484 17,369 18,550
Income taxes payable..................................... 32,326 39,286 31,999
Deferred service contract revenue - current portion...... 5,347 4,488 4,169
-------------------------------------------------------------
Total current liabilities........................... 77,069 77,026 74,116
9% convertible subordinated debentures....................... - - 24,431
Deferred service contract revenue - non-current
portion................................................. 4,772 4,008 3,732
Other liabilities............................................ 6,380 6,521 6,371
-------------------------------------------------------------
88,221 87,555 108,650
-------------------------------------------------------------
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, 30,408,449, 29,782,803 and
22,875,210 issued................................... 30,408 29,783 22,875
Additional paid-in capital............................... 145,138 141,126 120,826
Retained earnings (deficit).............................. (14,519) (34,895) (38,003)
Accumulated other comprehensive loss..................... (27,118) (25,254) (28,002)
Common stock in treasury, at cost, 1,504,611,
0 and 0 shares, respectively........................ (15,468) - -
-------------------------------------------------------------
Total stockholders' equity.......................... 118,441 110,760 77,696
-------------------------------------------------------------
Commitments and contingent liabilities
Total Liabilities and Stockholders' Equity................... $ 206,662 $ 198,315 $ 186,346
=============================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
5
<PAGE>
Consolidated Statements of Cash Flows (Unaudited)
InterTAN, Inc.
- --------------------------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
March 31
-----------------------------------
2000 1999
-----------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)...................................................... $ 20,376 $ (27,753)
Adjustments to reconcile net income
(loss) to cash provided by operating activities:
Depreciation and amortization...................................... 4,443 5,008
Foreign currency transaction gains, unrealized..................... - (292)
Loss on disposal of United Kingdom
subsidiary and other restructuring charges..................... - 35,088
Other.............................................................. 1,609 1,399
Cash provided by (used in) current assets and liabilities:
Accounts receivable................................................ (1,693) (3,897)
Inventories........................................................ (5,526) (13,830)
Other current assets............................................... 225 (2,353)
Accounts payable................................................... 6,361 14,759
Accrued expenses................................................... 2,061 3,015
Income taxes payable............................................... (7,311) 11,462
-----------------------------------
Net cash provided by operating activities.......................... 20,545 22,606
-----------------------------------
Cash flows from investing activities:
Additions to property and equipment.................................... (6,798) (5,412)
Proceeds from sales of property and equipment.......................... 114 103
Effect of sale of United Kingdom subsidiary on cash.................... - (10,971)
Other investing activities............................................. 321 1,489
-----------------------------------
Net cash used in investing activities................................ (6,363) (14,791)
-----------------------------------
Cash flows from financing activities:
Changes in short-term bank borrowings, net............................. - 2,411
Proceeds from issuance of common stock to
employee plans..................................................... 1,437 1,172
Proceeds from exercise of stock options................................ 1,776 64
Purchase of treasury stock............................................. (15,468) -
Cash paid for fractional shares........................................ (45) -
-----------------------------------
Net cash provided by (used in) financing activities.................. (12,300) 3,647
-----------------------------------
Effect of exchange rate changes on cash.................................... 165 (178)
-----------------------------------
Net increase in cash and short-term investments............................ 2,047 11,284
Cash and short-term investments, beginning of period....................... 47,403 32,811
-----------------------------------
Cash and short-term investments, end of period............................. $ 49,450 $ 44,095
===================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Notes to Consolidated Financial Statements
Note 1 Basis of Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation S-X, "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 InterTAN, Inc.'s ("InterTAN" or the
"Company") Annual Report on Form 10-K for the fiscal year ended June 30, 1999,
and, in the opinion of the Company, include all adjustments necessary for a fair
presentation of the Company's financial position as of March 31, 2000 and 1999
and the results of its operations for the three and nine months ended March 31,
2000 and 1999 and its cash flows for the nine months ended March 31, 2000 and
1999. Such adjustments are of a normal and recurring nature. Operating results
for the three and nine months ended March 31, 2000 are not necessarily
indicative of the results that can be expected for the fiscal year ended June
30, 2000. 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, 1999.
Note 2 Sale of United Kingdom Subsidiary
In January, 1999, the Company completed the sale of 100% of the stock of its
United Kingdom subsidiary, InterTAN U.K. Ltd., recognizing an aggregate loss of
$35,088,000. InterTAN U.K. Ltd.'s results of operations through December 31,
1998 are included in the accompanying Consolidated Financial Statements.
Below is a summary of net sales and operating revenues, operating income and net
income for the United Kingdom subsidiary for the three and nine months ended
March 31, 2000 and 1999, respectively:
<TABLE>
<CAPTION>
(In thousands)
Three months ended Nine months ended
March 31 March 31
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales and
operating revenues $ - $ - $ - $ 97,141
Operating income (loss)/1/ $ - $(34,712) $ - $(31,723)
Net income (loss)/1/ $ - $(34,712) $ - $(32,641)
</TABLE>
/1/Includes loss on disposal for the three and nine months ended March 31,
1999 of $34,712 and $35,088, respectively.
Note 3 Treasury Stock Repurchase Program
In November, 1999, the Company's Board of Directors announced a share repurchase
program under which management was authorized to purchase up to 1,500,000 of the
Company's
7
<PAGE>
common stock over a period of three years. As a result of unanticipated market
conditions, the repurchase program was accelerated, and by March 31, 2000, all
1,500,000 shares had been acquired at an aggregate cost of $15,468,000. In
April, 2000, the Company announced that the Board of Directors had authorized a
further program, subject to regulatory approval, for the repurchase of up to
1,500,000 additional shares. Purchases of common shares under the new program
are dependent on market conditions.
Note 4 Stock Split
On November 30, 1999, the Company's Board of Directors announced a three-for-two
stock split of InterTAN's common stock for stockholders of record at the close
of business on December 16, 1999, payable on January 13, 2000. This resulted
in the issuance of 10,075,447 of common stock, including 1,537 shares held
in treasury. A corresponding decrease of $10,075,447 was made to additional
paid-in-capital. Payments aggregating approximately $45,000 were also made in
satisfaction of 2,639 fractional shares. This amount was also charged to
additional paid-in capital. All references made to the number of shares of
common stock issued or outstanding, per share prices and basic and diluted net
income per common share amounts in the consolidated financial statements and the
accompanying notes have been adjusted to reflect the split on a retroactive
basis. Previously awarded stock options, restrictive stock awards and certain
other agreements payable in the Company's common stock have been adjusted or
amended to reflect the split.
Note 5 Net Income per average Common Share
Basic net income (loss) per share ("EPS") is calculated by dividing the net
income or loss for a period by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution which
would occur if securities or other contracts to issue common stock were
exercised or converted.
Basic and diluted net income (loss) per average common share and a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation is set out below:
8
<PAGE>
<TABLE>
<CAPTION>
(In thousands, except for per share data)
Three months ended
March 31, 2000 March 31, 1999
---------------------------------------------- ------------------------------------------------
Income Shares Per Share Loss Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------- -------------- ----------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $3,628 $(41,222)
============ ==========
Basic EPS
Income available to
common stockholders $3,628 29,737 $0.12 $(41,222) 19,785 $(2.08)
========= ==========
Effect of Dilutive Securities
9% convertible debentures - - -/1/ -/1/
Stock options - 910 -/1/ -/1/
------------ ------- -------- ------
Diluted EPS
Income available to common
stockholders including
assumed conversions $3,628 30,647 $0.12 $(41,222) 19,785 $(2.08)
============ ======= ======== ======== ====== =========
</TABLE>
<TABLE>
<CAPTION>
(In thousands, except for per share data)
Nine months ended
March 31, 2000 March 31, 1999
----------------------------------------------- -------------------------------------------------
Income(loss) Shares Per Share Income(loss) Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
--------------- -------------- ---------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $20,376 $(27,753)
=========== ===========
Basic EPS
Income available to
common stockholders $20,376 29,898 $0.68 $(27,753) 19,227 $(1.44)
=========== ===========
Effect of Dilutive Securities
9% convertible debentures - - -/1/ -/1/
Stock options - 830 -/1/ -/1/
----------- -------- --------- -------
Diluted EPS
Income available to common
stockholders including
assumed conversions $20,376 30,728 $0.66 $(27,753) 19,227 $(1.44)
=========== ======== ========= ========= ======= ============
</TABLE>
(1) The effects of stock options and the 9% subordinated convertible debenture
during the three and nine-month periods ended March 31, 1999 were anti-
dilutive during such periods.
During the three and nine-month periods ended March 31, 1999, the Company's
potentially dilutive instruments included its 9% convertible subordinated
debentures (the "Debentures"). Under the terms of their issuance, the
Debentures were convertible into common stock at the rate of approximately Cdn
$5.61 per share, equivalent to approximately 6,567,000 shares in the aggregate
at March 31, 1999. During the fourth quarter of fiscal year 1999, the Company
served notice of redemption on all remaining Debenture holders and all such
Debenture holders exercised their right of conversion. Also, at March 31, 2000
and 1999, the Company's directors and employees held options to purchase
1,784,360 and 1,832,253 common shares, respectively, at prices ranging from
$2.4792 to $14.75 and $2.3333 to $5.5417, respectively. During the three
9
<PAGE>
months ended March 31, 2000, all but 1,875 of such options were considered in
calculating diluted EPS. The dilutive effect of these options in future periods
will depend on the average price of the Company's common stock during such
periods.
Note 6 Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. For the Company, comprehensive income
(loss) includes net income (loss) and the net change in foreign currency
translation effects. The comprehensive incomes for the three and nine months
ended March 31, 2000 were $589,000 and $18,512,000, respectively. For the three
and nine months ended March 31, 1999, the comprehensive losses were $35,419,000
and $23,541,000, respectively.
Note 7 Income Taxes
The provisions for domestic and foreign income taxes for the three-month periods
ended March 31, 2000 and 1999 were $2,985,000 and $10,548,000, respectively. For
the nine-month period ended March 31, 2000, an income tax provision of
$16,750,000 was recorded, compared with $21,481,000 in the first nine months of
the prior year. The Company's income tax expense primarily represents Canadian
and Australian income tax on the profits earned by its subsidiaries in those
countries. The provision for income taxes for the three and nine-month periods
ended March 31, 1999 also included a charge of $8,039,000 related to the
settlement of a dispute with the Canadian tax authorities relating to the 1990
to 1993 taxation years. No tax was currently payable in the United Kingdom for
the three or nine-month periods ended March 31, 1999, nor had any benefit been
recognized for the accumulated losses in that country.
An audit of the 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 a portion of the tax in dispute.
The tax levied by Revenue Canada in reassessing those years was offset by
refunds arising from the carryback of losses incurred in subsequent years.
Depending on the ultimate resolution of these issues, the Company could
potentially have an additional liability in the range of $0 to $12,000,000. 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. It is not practical for management to make any reasonable
determination of when this remaining outstanding Canadian tax issue will
ultimately be resolved. An audit of the Company's Canadian subsidiary's income
tax returns by Revenue Canada for the 1995 - 1996 taxation years is in process.
Audits of the Company's United States income tax returns for the 1990-1994 years
by the Internal Revenue Service (the "IRS") were completed during 1999. The
Company has been advised that the IRS alleges that the Company owes additional
taxes in respect of those years. The issues involved relate primarily to the
Company's former operations in continental Europe and the United Kingdom. The
Company disagrees with the IRS's position on these issues and believes it has
meritorious arguments in its defense. The Company has filed a protest rebutting
the assertions made by the IRS and is in the process of vigorously defending its
position. Management believes that it has a provision recorded sufficient to
pay the estimated liability
10
<PAGE>
resulting from the issues in dispute; however, the amount ultimately paid could
differ from management's estimate.
Note 8 Bank Debt
In November, 1999, the Company replaced its previous revolving credit facility
with a new facility with Bank of America Canada (the "Revolving Credit
Facility"). The Revolving Credit Facility is denominated in Canadian dollars in
an amount not to exceed C$67,000,000 (approximately $46,200,000 at March 31,
2000 rates of exchange). The amount of credit actually available at any
particular time is dependent on a variety of factors including the level of
eligible inventories and accounts receivable of InterTAN Canada. The amount of
available credit is then reduced by the amount of trade accounts payable then
outstanding as well as certain other reserves. The interest rate under the
facility is the Canadian prime rate, London Inter Bank Offered Rate plus 1.5% or
Bankers Acceptance Rate plus 1.5%, as elected by the Company at the time of
borrowing. Letters of credit are charged at the rate of 1.5% per annum. In
addition, a standby fee is payable on the unused portion of the credit facility.
The amount of this fee is subject to certain thresholds, and ranges from 0.375%
to 0.50% of the unused credit line. The Revolving Credit Facility is
collateralized by a first priority lien over all of the assets of InterTAN
Canada and is guaranteed by InterTAN, Inc. Borrowings under the Revolving Credit
Facility by InterTAN Canada Ltd. may be directed to InterTAN, Inc. Subject to
certain financial covenants, the payment of dividends and the repurchase of
common stock by the Company is permitted. There were no loans outstanding
against the facility at March 31, 2000 and approximately $15,000 was committed
in support of letters of credit. Approximately $26,120,000 was available for use
at March 31, 2000.
Note 9 Non-employee Stock Options
In June, 1999, the Company adopted a plan which would grant additional options
to purchase common stock to each non-employee director (such options are
collectively referred to as "the 1999 Director Plan"). This plan received
shareholder approval at the Company's annual meeting of stockholders on November
9, 1999. Under the 1999 Director Plan, each non-employee director was granted
an option to purchase 30,000 shares of the Company's common stock at an exercise
price of $10.50 per share. Options granted under this plan will be exercisable
on a cumulative basis equal to one fourth per year on the date fixed for the
Company's annual meeting of stockholders, commencing with the 1999 meeting.
Under this plan, the Company will recognize aggregate compensation expense of
$910,000 of which approximately $57,000 and $313,000, respectively, was
recognized during the three and nine months ended March 31, 2000. The balance
will be amortized ratably over the remainder of the vesting period.
Note 10 Commitments and Contingencies
In connection with the sale of its United Kingdom subsidiary, the Company has
indemnified the purchaser for certain contingencies primarily relating to real
estate matters associated with store leases and working capital adjustments. In
addition, the Company remains contingently liable as guarantor of certain leases
of the United Kingdom subsidiary. At the time of the sale, the lease obligation
assumed by the purchaser and guaranteed by the Company was approximately
$32,000,000 and the average remaining life of such leases was approximately 6
years. If the purchaser were to default on the lease obligations, management
believes the Company could reduce the exposure through assignment, subletting
and other means. The Company has
11
<PAGE>
obtained an indemnity from the parent company of the purchaser for approximately
$13,000,000 which is management's best estimate of the Company's potential
exposure under these guarantees. The amount of this indemnity declines over time
as the Company's risk diminishes. Apart from this matter and the issues
discussed in Note 7, there are no material pending proceedings or claims, other
than routine matters 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.
Note 11 Segment Reporting
The Company is managed along geographic lines. All references in these notes to
"Canada", "Australia", "United Kingdom" and "Corporate Headquarters" refer to
the Company's reportable segments, unless otherwise noted. The Company's United
Kingdom subsidiary was sold in the third quarter of fiscal year 1999.
Transactions between segments are not common and are not material to the segment
information. The table below summarizes net sales and operating revenues,
operating income and identifiable assets for the Company's segments.
Consolidated operating income is reconciled to the Company's income before
income taxes (in thousands):
Net Sales and Operating Revenues and
Operating Income by Segment:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales and operating revenues
Canada $ 77,358 $ 63,613 $288,219 $232,120
Australia 27,246 24,453 93,558 79,028
United Kingdom/1/ - - - 97,141
$104,604 $ 88,066 $381,777 $408,289
=========== ============ ============= ============
Operating income (loss)
Canada $ 5,962 $ 4,957 $ 34,156 $ 27,367
Australia 1,282 1,422 6,088 5,750
United Kingdom/1/ - (34,712) - (31,723)
----------- ------------ ------------ -----------
7,244 (28,333) 40,244 1,394
General corporate expenses 1,237 1,711 (4,087) 4,745
----------- ------------ ------------ -----------
Operating income (loss) 6,007 (30,044) 36,157 (3,351)
Foreign currency transaction (gains)
losses 127 80 291 (375)
Interest income (862) (475) (1,674) (1,011)
Interest expense 129 1,025 414 4,307
----------- ------------ ------------ -----------
Net income (loss) before income taxes $ 6,613 $(30,674) $ 37,126 $ (6,272)
=========== ============ ============ ===========
</TABLE>
Identifiable Assets by Segment
<TABLE>
<CAPTION>
March 31 June 30 March 31
2000 1999 1999
<S> <C> <C> <C>
Canada $155,013 $136,703 $127,886
Australia 49,571 53,787 54,477
United Kingdom/1/ - - -
Corporate 2,078 7,825 3,983
---------- --------- ----------
$206,662 $198,315 $186,346
========== ========= ==========
</TABLE>
/1/The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
InterTAN is engaged in the sale of consumer electronics products primarily
through company-operated retail stores and dealer outlets in Canada and
Australia. The Company's retail operations are conducted through two wholly-
owned subsidiaries: InterTAN Australia Ltd., which operates in Australia under
the trade names "Tandy" and Tandy Electronics; and InterTAN Canada Ltd., which
operates in Canada under the trade name "RadioShack". The Company previously
also had retail and dealer outlets in the United Kingdom. These operations were
conducted through a wholly owned subsidiary, InterTAN U.K. Limited, which
operated under the "Tandy" name. Effective January, 1999, the Company's
subsidiary in the United Kingdom was sold. All of these trade names are used
under license from Tandy Corporation ("Tandy"). In addition, the Company has
entered into an agreement in Canada with Rogers Cantel Inc. ("Cantel") to
operate telecommunications stores on its behalf, currently trading under the
banner Rogers AT&T (the "Rogers AT&T stores"). At March 31, 2000, 51 Rogers AT&T
stores were in operation.
As indicated above, in January 1999, the Company sold its United Kingdom
subsidiary. In addition, during the third quarter of fiscal year 1999, a
special tax charge of $8,039,000 was recorded, reflecting the settlement of a
dispute with the Canadian tax authorities. The table below, reflects the results
of the Company's operations for the three and nine-month periods ended March 31,
2000 compared with the reported results of operations for the same period a year
ago as well as those same results of operations, adjusted to remove the results
of the United Kingdom subsidiary, and the special Canadian tax charge.
13
<PAGE>
InterTAN, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited - In thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
2000 1999 2000 1999
As As As As
Reported Adjusted Reported Adjusted
---------- ---------------- ---------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales and operating
revenues.................. $104,604 $ 88,066 $88,066 $381,777 $408,289 $311,148
Other income............... 69 73 73 218 202 171
---------- ---------------- ---------------- --------------- --------------- -----------
104,673 88,139 88,139 381,995 408,491 311,319
Operating costs and
expenses:
Cost of products sold..... 59,817 49,266 49,266 222,542 230,775 173,697
Selling, general and
administrative expenses.. 37,297 32,817 32,817 118,853 140,971 105,098
Depreciation and
amortization............. 1,552 1,388 1,388 4,443 5,008 4,152
Loss of disposition of
United Kingdom
subsidiary.............. - 34,712 - - 35,088 -
---------- ---------------- ---------------- --------------- --------------- -----------
98,666 118,183 83,471 345,838 411,842 282,947
---------- ---------------- ---------------- --------------- --------------- -----------
Operating income (loss).... 6,007 (30,044) 4,668 36,157 (3,351) 28,372
Foreign currency
transaction (gains)
losses.................... 127 80 80 291 (375) (366)
Interest income............ (862) (475) (475) (1,674) (1,011) (900)
Interest expense........... 129 1,025 1,025 414 4,307 3,269
---------- ---------------- ---------------- --------------- --------------- ------------
Income (loss) before
income taxes.............. 6,613 (30,674) 4,038 37,126 (6,272) 26,369
Provision for income taxes. 2,985 10,548 2,509 16,750 21,481 13,442
---------- ---------------- ---------------- --------------- --------------- -----------
Net income (loss).......... $ 3,628 $(41,222) $ 1,529 $ 20,376 $(27,753) $ 12,927
========== ================= ================ =============== =============== ===========
Basic net income (loss)
per average common share.. $ 0.12 $ (2.08) $ 0.08 $ 0.68 $ (1.44) $ 0.67
Diluted net income (loss)
per average common share.. $ 0.12 $ (2.08) $ 0.08 $ 0.66 $ (1.44) $ 0.53
</TABLE>
Foreign Exchange Effects
Profit and loss accounts, including sales, are translated from local
currency values to U.S. dollars at monthly average exchange rates. During
the third quarter of fiscal year 2000, the U.S. dollar was weaker against
the Canadian but stronger against the Australian dollar relative to the
comparable values during the third quarter of the prior year. As a result,
the same local currency amounts in Canada translate into more U.S. dollars
as compared with the prior year. For example, if local currency sales in
Canada in the third quarter of fiscal year 2000 were the same as those in
the third quarter of the prior year, the current fiscal year income
statement would reflect a 4.0% increase in sales when reported in U.S.
dollars. The exact opposite would hold true in Australia, where the
currency declined by 0.8% over the third quarter of fiscal year 1999.
14
<PAGE>
The following table outlines, for the three-month period ended March 31, 2000,
the percentage change in the weighted average exchange rates of the currencies
of Canada and Australia as compared to the same three-month period in the prior
year:
___________________________________
Canada 4.0%
Australia (0.8)%
___________________________________
Sales Outlets
The geographic distribution of the Company's sales outlets is summarized in the
following table:
<TABLE>
<CAPTION>
Mar 31 Dec 31 Sept 30 Jun 30 Mar 31
2000 1999 1999 1999 1999
<S> <C> <C> <C> <C> <C>
Canada
Company-operated 457/(1)/ 459/(1)/ 450/(1)/ 450/(1)/ 449/(1)/
Dealer 346 343 338 330 332
- -------------------------------------------------------------------------------
803 802 788 780 781
- -------------------------------------------------------------------------------
Australia
Company-operated 221 222 222 222 225
Dealer 111 124 124 124 126
- -------------------------------------------------------------------------------
332 346 346 346 351
- -------------------------------------------------------------------------------
Total
Company-operated 678 681 672 672 674
Dealer 457 467 462 454 458
- -------------------------------------------------------------------------------
1,135 1,148 1,134 1,126 1,132
- -------------------------------------------------------------------------------
</TABLE>
(1) At March 31, 2000, December 31, 1999, September 30, 1999, June 30, 1999 and
March 31, 1999, the Company operated 51, 50, 45, 45, and 45 stores,
respectively, on behalf of Rogers AT&T. Also at the same dates the company
operated 3, 3, 1, 1 and 7 store-in-store formats in certain locations of
the Hudson's Bay Company. Since all of these locations are not company-
owned, they are not included in the above table.
15
<PAGE>
Net Sales and Operating Revenues
Net sales and operating revenues ("sales") in U.S. dollars during the third
quarter of fiscal year 2000 were $104,604,000, an increase of 18.8% over the
same period a year ago. This sales comparison was affected by foreign currency
fluctuations. The increase, measured at the same exchange rates, was 15.6%.
The table which follows shows, by geographic segment, the percentage changes in
net sales for the quarter and nine months ended March 31, 2000, compared to the
corresponding period in the prior year. Changes are presented in both U.S.
dollars and local currencies to show the effects of exchange rate fluctuations.
The change in comparative - stores sales, measured at the same exchange rates,
is also shown:
Net Sales
---------
Percentage Increase (Decrease)
------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, 2000 March 31, 2000
Local Comparative Local Comparative
Currency US$ Store Currency US$ Store
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canada 16.9% 21.6% 12.9% 19.6% 24.2% 16.1%
Australia 12.2% 11.4% 10.9% 14.3% 18.4% 11.5%
----- ----- ----- ------ ------ -----
Combined 15.6% 18.8% 12.3% 18.3% 22.7% 14.8%
===== ===== ===== ====== ====== =====
Including United Kingdom/1/ 15.6% 18.8% 12.3% (8.5)% (6.5)% 14.8%
===== ===== ===== ====== ====== =====
</TABLE>
/1/ The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
The three month-period ended March 31, 2000 represents the ninth consecutive
quarter of double-digit comparable store sales growth at InterTAN. The
Company's consumers continue to demand products displaying the latest in
technological advances, and, in particular, digital products. This consumer
demand was reflected in the sales performance in both of InterTAN's countries
and was particularly evident in cellular, computers and related accessories,
and, in Canada, direct-to-home satellite.
Sales in Canada for the three-month period ended March 31, 2000 increased by
16.9% in local currency over the same quarter a year ago, with comparable-store
sales increasing by 12.9% during the same period. The direct-to-home satellite
market continues to provide significant revenue growth opportunities in Canada.
Sales in this category for the quarter were up 95% over the same quarter last
year, with unit sales more than double last year's level. Sales of computer
hardware were up over 25% and would have been even stronger but for the late
delivery of product by a key vendor. Wireless/PCS was also a significant
component of the strong Canadian sales performance, with sales in that category
increasing by 22% over the prior year quarter. The seasonal goods and
miscellaneous income category was up over 50%, led by the sale of radio-
controlled cars, as that product continues to be a year round item. The
expansion of the Company's Panasonic Wall store-in-store concept from 20 to 200
stores, which was completed during the quarter ended December 31, 1999 continues
to be a major factor in building sales in
16
<PAGE>
the audio/video and personal electronics categories. The stores with the
Panasonic Wall continue to significantly out-perform the rest of the Company's
stores in these important categories. As previously announced, The Company and
Panasonic have agreed that this concept will be further expanded to an
additional 200 stores for a total of 400 stores during the latter part of fiscal
year 2000 and early part of fiscal year 2001.
In Australia, sales for the quarter increased by 12.2%, with comparable store
sales increasing by 10.9%. Sales of computers and related accessories continue
to be an important factor in sales growth in Australia. Sales of PC's and
monitors increased by 112% and, when accessories and other peripherals are
included, sales in the computer category as a whole increased by 62%. This
strong performance is reflective of the Company's new computer strategy in
Australia which includes both a re-merchandising of the stores and an enhanced
marketing program. Sales of TV's, VCR's and camcorders increased by 42% and
sales of CD players and hi-fi components grew by 29%. Sales of cellular/PCS,
including air time cards, increased by 27% over the prior year quarter. Sales
of prepaid models and related airtime cards were particularly strong. Going
forward, management will continue to roll out of many of the new initiatives,
strategies and alliances introduced earlier in Canada. These strategies will
include:
. Re-assorting the stores to make the Company's presentation in important
growth categories, such as high-tech digital products, even more
compelling.
. Re-modeling approximately one-third of the stores to the next generation
look by the end of the current calendar year. These stores will be
larger than the Company's existing stores and provide an opportunity to
more effectively merchandise a broader and deeper product assortment.
. Continued growth from the dealer division. The Company will aggressively
pursue opportunities to build its dealer base and to increase sales to
existing dealers.
. Introduction of broadband Internet connectivity. This product is a
logical extension to the Company's growing PC accessory line.
Gross Profit
Gross profit for the third quarter of fiscal year 2000 in U.S. dollars increased
by $5,988,000, up 15.4% from the same quarter last year. Measured at the same
exchange rates, gross profit increased by 12.5%.
The following analysis summarizes the components of the change in gross profit
from the comparable prior year quarter (in thousands):
- -------------------------------------------------------------------------------
Higher sales $6,223
Lower gross margin percentage (1,264)
Foreign currency rate effects 1,028
- -------------------------------------------------------------------------------
Increase in gross profit $5,987
===============================================================================
17
<PAGE>
The following table illustrates gross profit as a percentage of sales, by
segment area, for the three and nine-month periods ended March 31, 2000 and
1999:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 March 31
2000 1999 2000 1999
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada 42.5% 42.8% 41.4% 43.4%
Australia 43.7% 47.3% 42.8% 46.4%
- ------------------------------------------------------------------------------
Combined 42.8% 44.1% 41.7% 44.2%
United Kingdom/1/ - - - 41.2%
- ------------------------------------------------------------------------------
Consolidated 42.8% 44.1% 41.7% 43.5%
==============================================================================
</TABLE>
/1/ The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
There were a variety of factors that contributed to the reduction in the gross
margin percentages in Canada and Australia.
In Canada, the reduction was more than explained by a shift in the sales mix
away from higher margin private label products towards lower margin national
brands and the increase in the sale of high ticket but lower margin items, such
as computers. This shift in mix accounted for about 180 basis points of margin
decline and was almost fully offset by after sale compensation in the form of
residuals and sales-based volume rebates. The 30 basis point margin decline in
Canada was significantly less than that experienced in either the first or the
second quarters, when margins declined year on year by 280 basis points and 260
basis points, respectively. This is reflective of the fact that many of the new
programs and initiatives which have contributed to higher sales but lower
margins have now been in effect for over a year. While some deterioration in
margins will continue, management expects that the pace of reduction will
continue to slow in coming periods.
In Australia, margins for the quarter fell by 360 basis points to 43.7% from
47.3% last year. This decline is similar to that experienced in the previous
quarter. There were several factors which contributed to this decline:
. Sales of higher margin software and accessories in the computer category
did not grow as fast as the sale of CPU's to help mitigate the large
increase in sales of lower margin end product.
. A significant shift in the mix of cellular sales from more lucrative
contract programs to lower margin prepaid air time models. Management has
introduced new advertising and incentive programs for sales associates to
help offset this trend.
. Clearance activity associated with the orderly transition of certain of
the Company's product lines from house brands to nationally branded
goods.
Management estimates that a shift in product mix accounted for about one-half of
the margin decline, with cellular mix and clearance activity making up the
remainder.
Management will continue to pursue opportunities to counteract the pressure
placed on margins by the Company's customers' increasing demand for new, digital
technologies which, although
18
<PAGE>
offering great opportunities for sales growth, carry lower than our traditional
margins. Strategies will include aggressively investigating opportunities to
build sales of more profitable parts and accessories, including high speed
internet connections, batteries and other products to help the Company's
customers get "connected". Importantly, InterTAN will continue to stress the
sale of products carrying after-sale compensation, including both residuals and
sales-based volume rebates or connection bonuses. These products include direct-
to-home satellite in Canada and contract cellular in both countries. During the
three months ended March 31, 2000, after-sale compensation totaled $1,060,000,
16% of income before income taxes.
Selling, General and Administrative Expenses
SG&A expenses in Canada, Australia and at Corporate Headquarters for the quarter
increased in the aggregate by $4,480,000 over the comparable prior-year quarter.
This comparison is influenced by foreign currency rate effects. Measured at the
same exchange rates, SG&A expenses in these three segments increased by
$3,682,000 or 11%. This compares to combined increases of 15.6% and 12.5% in
sales and gross profit, respectively, all measured at the same exchange rates.
The following table provides a breakdown of selling, general and administrative
expense ("SG&A") by major category (in thousands):
Selling, General and Administrative Expenses
--------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except percents)
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
----------------------------------------- ------------------------------------------
Amount Pct. Amount Pct. Amount Pct. Amount Pct.
------------------------------------------ -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising $ 4,398 4.2 $ 3,033 3.4 $ 15,646 4.1 $ 16,402 4.0
Rent 6,348 6.1 5,801 6.6 19,566 5.1 25,454 6.2
Payroll 16,486 15.8 14,909 16.9 52,664 13.8 60,926 14.9
Taxes
(other than
income taxes) 2,394 2.3 2,163 2.5 7,805 2.0 11,094 2.7
Telephone &
utilities 1,161 1.1 1,044 1.2 3,319 0.9 4,180 1.0
Other 6,510 6.2 5,867 6.7 19,853 5.2 22,915 5.7
------------------------------------------ --------------------------------------------
Total $ 37,297 35.7 $ 32,817 37.3 $ 118,853 31.1 $ 140,971 34.5
========================================== ============================================
</TABLE>
The following is a breakdown of the same-exchange-rate increase in SG&A expenses
in Canada, Australia and the Corporate Headquarters during the third quarter of
fiscal year 2000 over the same quarter in the prior year (in thousands):
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Payroll $1,567
Advertising 1,283
Rent 427
Taxes (other than income taxes) 203
Telephone and utilities 87
Other 585
------
Total Canada and Australia 4,152
Corporate expenses (470)
------
$3,682
======
</TABLE>
Payroll increased in both Canada and Australia in support of higher sales.
Advertising expense increased in both countries, as the Company enhanced its
promotional activities to generate greater revenues. The increase in gross
advertising spending was actually higher than indicated, as much of the increase
was funded by vendors. Rent increased in both Canada and Australia, both as a
consequence of new store openings/relocations and regular rent reviews.
Corporate expenses were down, reflecting lower operating costs associated with
the Canadian office and relocation expenses recorded in the prior year. The
impact of these savings was partially offset by a number of special charges,
including costs associated with the stock option plan for non-employee
directors, the three-for two split of the Company's common stock and previously-
announced performance-based restricted stock awards to certain senior members of
management.
SG&A expenses for the nine months ended March 31, 2000 were $22,118,000 lower
than in the corresponding period last year. This reduction is more than
attributable to the sale of the United Kingdom subsidiary. Measured at the same
exchanges rates, SG&A expenses in Canada, Australia and at Corporate
Headquarters increased by 9.3% for the nine-month period. For that same period
sales and gross profit dollars, measured at the same exchange rates, increased
by 18.3% and 11.7%, respectively.
The reduction in SG&A expenses as a percentage of sales during both the three
and nine-month periods ended March 31, 2000 was attributable both to the rate of
sales growth and, to a lesser extent, the sale of the Company's United Kingdom
subsidiary. The following table illustrates SG&A as a percentage of sales, by
geographic segment area:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31 December 31
2000 1999 2000 1999
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada 33.3% 33.4% 28.4% 30.3%
Australia 37.9% 40.4% 35.4% 38.2%
- -----------------------------------------------------------------------------------------------------
Combined 35.7% 37.3% 31.1% 33.8%
United Kingdom/1/ - - - 36.9%
- -----------------------------------------------------------------------------------------------------
Consolidated 35.7% 37.3% 31.1% 34.5%
======================================================================================= ==============
</TABLE>
/1/ The Company's United Kingdom subsidiary was sold during the third quarter of
fiscal year 1999.
20
<PAGE>
Interest income and expense
Interest income increased during the three months ended March 31, 2000 by
$387,000 over the same quarter last year, reflecting the Company's stronger cash
position. During the same two periods, interest expense declined by $896,000.
Interest expense during the current quarter consisted entirely of amortization
of loan origination fees and standby charges, as the Company had no borrowings
during the quarter. The reduction in interest expense over the prior-year
quarter was attributable to the conversion of the Company's 9% subordinated
convertible debentures (the "Debentures") during the fourth quarter of fiscal
year 1999.
Provision for Income Taxes
The provision for income taxes decreased during the third quarter of fiscal year
2000 by $7,563,000 over the same period a year ago. However, last year's
provision included a special charge of $8,039,000 in settlement of a dispute
with the Canadian tax authorities. On a comparable basis, the provision for
income taxes increased by $476,000, reflecting higher profits, primarily in
Canada. On a comparable basis, the effective rate of tax for the quarter was
45.1% down significantly from 62.1% for the same quarter last year. This
reduction is attributable to the elimination of interest on the Debentures and
reduced corporate expenses, for which no tax benefit was recognized.
Goods and Services Tax - Australia
Effective July 1, 2000, Australia will move from a wholesale-based sales tax
system to a goods and services tax or GST - a system much like a European value
added tax.
Under the present system, the tax is included in the retailer's cost. The rate
ranges from 0% to 22%, depending on the class of goods. Management estimates
that the weighted average tax included in the Company's inventory in Australia
to be about 18%. The retailer recovers this tax by factoring it into the
selling price. It is important to note that the wholesale tax is a tax on the
retailer not the consumer. The consumer ultimately pays - but through a higher
retail price.
This wholesale-based tax will be replaced by the GST effective July 1, 2000.
Under the GST, instead of the retailer paying a tax on cost, the consumer will
now pay a tax on the selling price of the goods. The rate will be 10% and, with
one or two exceptions, will apply to all goods and services. For the retailer,
this means a reduction in cost of goods sold, since it no longer pays the sales
tax. However, it will also mean lower revenues, as the government has mandated
that this tax saving must be passed on to the consumer - i.e., the retailer
cannot increase gross profit dollars as a result of the change.
The following is a brief summary of how this tax change will affect InterTAN in
Australia:
. Reported sales will decline, as the old sales tax is removed from the
selling price. Management estimates that reported sales in the Company's
stores will be reduced by about 10%. The Company will, however, report
comparable-stores sales on a consistent basis by making a corresponding
adjustment to the prior years' sales on a pro-forma basis.
. Cost of goods sold will also decline, as the old sales tax is excluded
from cost.
. Management estimates that the gross margin percentage will increase by
about 4 percentage points, as the tax is excluded from both sales and
cost of goods.
21
<PAGE>
. Importantly, the impact on gross profit dollars will be neutral.
. Management estimates that carrying value of inventories will decline by
about 10%.
. There will also be a short-turn cash flow benefit, as sales tax currently
in inventory will be refunded over a period of months.
Generally speaking, whether or not the consumer will pay more or less for a
particular item on a tax-included basis will depend primarily on the gross
margin associated with the product. The all-in price of low-ticket, high-margin
items such as parts and accessories will go up, while the price for higher-
ticket, lower margin goods such as branded telephones, televisions and digital
cameras will fall. Management believes there are some indications that
uncertainty about the direction prices will take is already causing consumer
confusion and some delays in purchases, especially of larger ticket items.
Financial Condition
-------------------
Most balance sheet accounts are translated from their values in local currency
to U.S. dollars at the respective month end rates. The table below outlines the
percentage change, to March 31, 2000, in exchange rates as measured against the
U.S. dollar:
Foreign Exchange Rate Fluctuations
----------------------------------
% Increase (Decrease) % Increase (Decrease)
from March 31, 1999 from June 30, 1999
---------------------- ----------------------
Canada 4.1 1.6
Australia (4.3) (9.1)
Inventories
Inventories increased from March 31, 1999 to March 31, 2000 by $4,262,000.
However, $1,710,000 of this increase was attributable to foreign currency rate
effects. During the same period, measured at the same exchange rates,
inventories increased by 2.3%, significantly less than the quarter-on-quarter
increases in sales and gross profit dollars. The Company was able to achieve
this increase by sourcing a greater portion of its inventories locally,
requiring shorter lead times and lower order quantities. This strategy enabled
the Company to better manage the supply chain. Similar factors explain the
increase in inventories from June 30, 1999 to March 31, 2000.
Accounts Receivable
The increases in accounts receivable at March 31, 2000 from both March 31 and
June 30, 1999 are primarily attributable to increases in sales generally and, in
particular, sales of cellular, direct-to-home satellite and similar products
involving activation income and volume rebates from vendors.
22
<PAGE>
Income Taxes Payable
The increase in income taxes payable from March 31, 1999 to March 31, 2000
results from increased profits in both the Canadian and Australian subsidiaries.
In the third quarter of fiscal year 1999, the Company reached an agreement with
the Canadian tax authorities relating to the settlement of a dispute regarding
the 1990 to 1993 taxation years. While the amount in dispute has been agreed
and a settlement agreement has been executed, the Company has not yet been fully
reassessed and, accordingly, this amount has not been paid. Management
estimates that payment relating to these issues, approximately $14,000,000, will
be made in the fourth quarter of fiscal year 2000 or early in fiscal year 2001.
The Company's remaining dispute with the Canadian tax authorities relates to the
1987 to 1989 taxation years. See Note 7 to the Company's Consolidated Financial
Statements, which is incorporated herein by reference. The Company believes it
has meritorious arguments in support of its position on the underlying issues
relating to this matter and, accordingly, no additional provision has been
recorded, pending the outcome of the appeal process. Depending on the ultimate
outcome of this matter, the Company could have an additional liability of $0 to
$12,000,000. It is not possible for management to make any reasonable
determination of when any of these issues will ultimately be resolved. An audit
of the Company's Canadian subsidiary's income tax returns by Revenue Canada for
the 1995 to 1996 taxation years is in process.
Audits of the Company's United States income tax returns for the 1990-1994 years
by the Internal Revenue Service (the "IRS") were completed during 1999. The
Company has been advised that the IRS alleges that the Company owes additional
taxes in respect of those years. The issues involved relate primarily to the
Company's former operations in continental Europe and the United Kingdom. The
Company disagrees with the IRS's position on these issues and believes it has
meritorious arguments in its defense. The Company has filed a protest rebutting
the assertions made by the IRS and is in the process of vigorously defending its
position. Management believes that it has a provision recorded sufficient to
pay the estimated liability resulting from the issues in dispute; however, the
amount ultimately paid could differ from management's estimate.
Liquidity and Capital Resources
-------------------------------
Cash flows from operating activities during the nine-month period ended March
31, 2000 generated $20,545,000 in cash, compared with $22,606,000 in cash during
the comparable period last year. This change was due primarily to changes in
working capital, partially offset by an increase in net income, adjusted for
non-cash items. In the nine months ended March 31, 2000, working capital
changes consumed $5,883,000 in cash, while generating $9,156,00 in cash in the
comparable period a year ago. Net income, adjusted for non-cash items, on the
other hand improved significantly, generating $12,978,000 more cash than in the
same period last year.
Cash flow from investing activities consumed $6,363,000 and $14,791,000 in cash
during the nine months ended March 31, 2000, and 1999, respectively. In the
current year, this cash outflow is explained by additions to property and
equipment. In the comparable prior year period the effects of capital
expenditures had been augmented by the effects on cash of the disposal of the
United Kingdom subsidiary.
Cash flows from financing activities during the nine months ended March 31, 2000
consumed $12,300,000 in cash. In November, 1999, InterTAN's Board of Directors
announced a program under which management was authorized to purchase up to
1,500,000 shares of the Company's
23
<PAGE>
common stock. By March 31, 2000, all 1,500,000 shares had been purchased at an
aggregate cost of $15,468,000. The effects of this cash outflow were partially
offset by proceeds from the issuance of common stock to employee plans and from
the exercise of stock options. During the nine-month period ended March 31,
2000, cash flow from financing activities generated $3,647,000 in cash,
primarily as a result of changes in short-term borrowings and from the issuance
of stock to employee plans.
The Company's principal sources of liquidity are its cash and short-term
investments, its cash flow from operations and its banking facilities.
In November, 1999, the Company replaced its previous revolving credit facility
with a new facility with Bank of America Canada (the "Revolving Credit
Facility"). The Revolving Credit Facility is denominated in Canadian dollars in
an amount not to exceed C$67,000,000 (approximately $46,200,000 at March 31,
2000 rates of exchange). The amount of credit actually available at any
particular time is dependent on a variety of factors including the level of
eligible inventories and accounts receivable of InterTAN Canada. The amount of
available credit is then reduced by the amount of trade accounts payable then
outstanding as well as certain other reserves. The interest rate under the
facility is the Canadian prime rate, London Inter Bank Offered Rate plus 1.5% or
Bankers Acceptance Rate plus 1.5%, as elected by the Company at the time of
borrowing. Letters of credit are charged at the rate of 1.5% per annum. In
addition, a standby fee is payable on the unused portion of the credit facility.
The amount of this fee is subject to certain thresholds, and ranges from 0.375%
to 0.50% of the unused credit line. The Revolving Credit Facility is
collateralized by a first priority lien over all of the assets of InterTAN
Canada and is guaranteed by InterTAN, Inc. Borrowings under the Revolving Credit
Facility by InterTAN Canada Ltd. may be directed to InterTAN, Inc. Subject to
certain financial covenants, the payment of dividends and the repurchase of
common stock by the Company is permitted.
The Revolving Credit 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, 2000, there were no borrowings against the Revolving
Credit Facility and $15,000 was committed in support of letters of credit. There
was $26,120,000 of credit available for use at March 31, 2000. The Company's
Merchandise Agreement with Tandy permits the Company to support purchase orders
with a surety bond or bonds as well as letters of credit. The Company has
entered into an agreement with a major insurer to provide surety bond coverage
(the "Bond") in an amount not to exceed $18,000,000. Use of the Bond gives the
Company greater flexibility in placing orders with Far East suppliers by
releasing a portion of the credit available under the Revolving Credit Facility
for other purposes.
The Company's Australian subsidiaries, InterTAN Australia Ltd. and Technotron
Sales Corp. Pty, Ltd., have 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 ($7,284,000 at March 31, 2000 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 ($3,035,000 at March 31, 2000 exchange rates) may
be used in support of short-term borrowings. At March 31, 2000, there were no
borrowings outstanding against the Australian Facility, nor was any amount
committed in support of letters of credit.
The Company's primary uses of liquidity include the funding of capital
expenditures, the seasonal build-up of inventories for the 2000 Christmas
selling season and possible payments in
24
<PAGE>
settlement of tax reassessments. In addition, following the completion of the
share repurchase program announced in November, 1999, the Company announced in
April 2000 that subject to regulatory approval and market conditions, management
had been authorized to purchase up to 1,500,000 additional shares. The Company
anticipates that capital additions during the remainder of fiscal year 2000 will
approximate $4,000,000, mainly related to store expansion, remodeling and
upgrading. Management is currently finalizing its capital requirements for
fiscal year 2001 and estimates those requirements to be between $12,000,000 and
$15,000,000. In addition, management expects to receive additional income tax
reassessments of approximately $14,000,000 late in fiscal year 2000 or early in
fiscal year 2001 relating to the settlement of its dispute with Revenue Canada
in respect of the 1990-1993 taxation years. See "Income Taxes". The timing of
further payments, if any, flowing from other outstanding tax issues cannot be
reasonably determine at this time. As indicated above, under the new share
repurchase plan, some purchases could occur during the remainder of fiscal year
2000 and into fiscal year 2001, as conditions warrant. It is not practical for
management to reasonably estimate the cash required to fund this program during
the balance of fiscal year 2000 and in fiscal year 2001.
Management believes that the Company's cash and short-term investments on hand
and its cash flow from operations combined with the Revolving Credit Facility,
the Australian Facility and the Bond will provide the Company with sufficient
liquidity to meet its capital expenditure requirements, to fund any income tax
reassessments and to fund its share repurchase program.
Year 2000 Issues
----------------
Management recognized that many of the Company's critical systems and those of
its key vendors and service partners required modification in order to be ready
for the Year 2000.
The Company organized Year 2000 transition teams in both Canada and Australia to
address the myriad of issues and challenges presented by the Y2K. Internal
systems and hardware were modified or replaced and all material vendors, service
providers and other stakeholders were contacted and monitored to ensure there
would be no material interruptions in supply. An outside consultant was engaged
to assess the Company's state of readiness for the Y2K transition.
Necessary modifications and testing was competed to all critical systems in both
Canada and Australia prior to the year 2000. To date the Company has experienced
only a few minor systems issues and these were resolved with little or no
disruption to the business. There have been no supply chain interruptions and
the Company's stores, warehouse and central units have been fully operational.
Product returns as a result of Y2K have been minimal. The Company does not
expect any further activity or disruptions as a result of the Year 2000
transition.
The Company's estimates that its Year 2000 compliance costs were approximately
$550,000, including approximately $225,000 paid to third-party consultants.
In management's opinion, the Company took adequate action to address Year 2000
issues and does not expect the financial impact of the Year 2000 issue to be
material to the Company's consolidated financial position, results of operations
or cash flows.
25
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The various matters discussed in Notes 7 and 10 to the Company's
Consolidated Financial Statements on page 10 and 11 of this Form 10-Q
are incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the stockholders during the three
months ended March 31, 2000.
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).
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
<PAGE>
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) Rights Agreement between InterTAN, Inc. and
Bank Boston, NA (filed as Exhibit 4 to the
company's Form 8-A filed on September 17, 1999
and incorporated herein by reference)
*10(a) Composite Copy of Deferred Compensation Plan
reflecting amendments authorized by Board of
Directors of InterTAN, Inc. on February 14, 2000.
*10(b) Amendment to Employment Letter Agreement
between InterTAN, Inc. and James G. Gingerich
dated February 15, 2000.
*10(c) Amendment to Employment Letter Agreement
between InterTAN, Inc. and Douglas C. Saunders
dated February 15, 2000.
*10(d) Amendment to Employment Letter Agreement
between InterTAN, Inc. and Jeffrey A. Losch dated
February 15, 2000.
*10(e) Plan Agreement in respect of Deferred
Compensation Plan between InterTan, Inc. and
Jeffrey A. Losch dated February 18, 2000.
*27 Article 5, Financial Data Schedule.
- -------------------------
* Filed herewith
<PAGE>
b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended March
31, 2000.
<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 12, 2000 By: /s/ James G. Gingerich
----------------------
James G. Gingerich
Executive Vice-President and
Chief Financial Officer
(Authorized Officer)
By: /s/ Douglas C. Saunders
-----------------------
Douglas C. Saunders
Vice President and Corporate Controller
(Principal Accounting Officer)
<PAGE>
Index to Exhibits
InterTAN, Inc. Form 10-Q
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).
4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation
(included in Exhibit 3(a)).
<PAGE>
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) Rights Agreement between InterTAN, Inc. and Bank Boston, NA (filed as
Exhibit 4 to the company's Form 8-A filed on September 17, 1999 and
incorporated herein by reference)
*10(a) Composite Copy of Deferred Compensation Plan reflecting amendments
authorized by Board of Directors of InterTAN, Inc. on February 14,
2000.
*10(b) Amendment to Employment Letter Agreement between InterTAN, Inc. and
James G. Gingerich dated February 15, 2000.
*10(c) Amendment to Employment Letter Agreement between InterTAN, Inc. and
Douglas C. Saunders dated February 15, 2000.
*10(d) Amendment to Employment Letter Agreement between InterTAN, Inc. and
Jeffrey A. Losch dated February 15, 2000.
*10(e) Plan Agreement in respect of Deferred Compensation Plan between
InterTan, Inc. and Jeffrey A. Losch dated February 18, 2000.
*27 Article 5, Financial Data Schedule and InterTAN Canada Ltd.
- ------------------
* Filed herewith
<PAGE>
Exhibit 10(A)
Composite Copy
(as of February 14, 2000)
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
ARTICLE ONE
PURPOSE
Section 1.1 The purpose of this InterTAN, Inc. Deferred Compensation Plan (the
"Plan") is to enable InterTAN, Inc. ("InterTAN") and its subsidiaries to secure
and retain the services of outstanding key executive personnel by providing,
subject to the provisions of the Plan, income payments to key executive
employees during their lifetime and to their beneficiaries following their
death.
ARTICLE TWO
DEFINITIONS
Section 2.1 Beneficiary. The recipient(s) designated (in accordance with
Article Seven) by a Participant in the Plan to whom benefits are payable
following his death.
Section 2.2 Committee. The Organization and Compensation Committee of the Board
of Directors of InterTAN, which shall administer the Plan in accordance with
Article Nine.
Section 2.3 Disability. A physical or mental condition which, in the opinion of
the Committee, totally and presumably permanently, prevents a Participant from
substantially performing duties for which such Participant is suited to perform
either by education or training, or if such Participant is on a Leave of Absence
when such condition develops, substantially performing duties for which such
Participant is suited to perform either by education or training. A
determination that Disability exists shall be based upon competent medical
evidence satisfactory to the Committee. The date that any person's Disability
occurs shall be deemed to be the date such condition is determined to exist by
the Committee.
Section 2.4 Employee. A regular full-time executive employee of InterTAN.
Section 2.5 Leave of Absence. Any period during which:
(a) an Employee is absent with the prior consent of InterTAN, which
consent shall be granted under uniform rules applied to all Employees on a
nondiscriminatory basis, but only if such person is an Employee immediately
prior to the commencement of such period of authorized absence and resumes
employment with InterTAN not later than the first working day following the
expiration of such period of authorized absence; or
(b) an Employee is a member of the Armed Forces of the United States
or that nation in which he resides, and his reemployment rights are guaranteed
by law, but only if such
<PAGE>
person is an Employee immediately prior to becoming a member of such Armed
Forces and resumes employment with InterTAN within the period during which his
reemployment rights are guaranteed by law.
Section 2.6 Participant. An Employee who has been selected and has accepted a
Plan Agreement as provided in Article Three.
Section 2.7 Plan Agreement. The agreement between InterTAN and a Participant,
entered into in accordance with Article Three, and in the form of attached
Exhibit "A" (as such form may be amended from time to time hereunder).
Section 2.8 Plan Benefit Amount. Plan Benefit Amount means the dollar amount
set forth and so designated in a Participant's Plan Agreement.
Section 2.9 Retirement. The following classifications of Retirement as referred
to in this Plan are defined as follows:
(a) Early Retirement. The voluntary election, as opposed to
involuntary termination by InterTAN, prior to the Participant's attaining the
age of sixty-five (65) years, by a Participant to terminate his employment after
attaining the age of fifty-five (55) years.
(b) Normal Retirement. The termination of a Participant's service with
InterTAN at the date of attaining age sixty-five (65) years.
(c) Late Retirement. The termination of a Participant's service with
InterTAN after the Participant's attaining the age of sixty-five (65) years.
Section 2.10 InterTAN. InterTAN, Inc., a Delaware corporation, and those
subsidiary corporations in which InterTAN owns at least eighty percent (80%) of
the total combined voting power of all classes of stock entitled to vote.
Section 2.11 InterTAN Subsidiary. Any corporation in which InterTAN owns at
least eighty percent (80%) of the total combined voting power of all classes of
stock entitled to vote.
ARTICLE THREE
SELECTION OF PARTICIPANTS AND
AGREEMENT TO PARTICIPATE
Section 3.1 The Committee, in its sole and exclusive discretion, shall select
from among the key executive employees of InterTAN, candidates for participation
in the Plan. A candidate shall become a Participant only upon his execution of a
Plan Agreement and a Beneficiary Designation Form (a form being attached as
Exhibit "B").
Section 3.2 Subject to Section 8.4 hereof, the Committee reserves the right,
at its discretion, and without prejudice or liability, to terminate any Plan
Agreement with any Participant of InterTAN at any time prior to the
Participant's retirement or death.
2
<PAGE>
ARTICLE FOUR
LIFE INSURANCE
Section 4.1 InterTAN may obtain life insurance insuring the life of any
Participant as a means of funding InterTAN's obligations to his Beneficiary in
whole or part. InterTAN shall be the sole owner and beneficiary of all such
policies of insurance so obtained and of all incidents of ownership therein,
including without limitation, the rights to all cash and loan values, dividends
(if any), death benefits and the right to terminate. No Beneficiary or
Participant shall be entitled to any rights, interests or equities in such
policies or to any specific asset of InterTAN of any type, and on the contrary,
their rights against InterTAN under the Plan shall be solely as general
creditors.
Section 4.2 If as a result of misrepresentations made by a Participant in any
application for life insurance upon his life obtained by InterTAN hereunder, the
insurance carrier or carriers or any reinsurance thereof successfully avoid(s)
payment to InterTAN of the proceeds of its or their policy or policies, or such
proceeds are not payable because the Participant's death results from suicide
within two (2) years of the issuance of such policy or within two (2) years of
the issuance to InterTAN of additional policies obtained by InterTAN hereunder,
then, in any of said events, notwithstanding any other provisions of the Plan or
of the Plan Agreement with such Participant, InterTAN shall have no obligation
to his Beneficiary to provide any of the death benefits otherwise payable under
the terms thereof.
Section 4.3 Each Participant shall cooperate in the securing of life insurance
on his life by furnishing such information as the insurance company may require,
taking such physical examinations as may be necessary, and taking any other
action which may be requested by InterTAN or the insurance company to obtain
such insurance coverage. If a Participant refuses to cooperate in the securing
of life insurance, or if InterTAN is unable to secure life insurance at a rate
that it deems acceptable, acting reasonably, then the Plan Agreement shall be of
no force and effect as to a Participant unless InterTAN waives such requirement
in writing.
ARTICLE FIVE
BENEFITS PAYABLE TO PARTICIPANTS AND
TO BENEFICIARIES OF PARTICIPANTS
Section 5.1 Subject to the terms and conditions of the Plan, upon the
Retirement of a Participant, InterTAN agrees to pay to Participant a Retirement
benefit as follows:
(a) Normal Retirement. If a Participant retires at the date of Normal
Retirement, then InterTAN agrees to pay to Participant or to the designated
Beneficiary of Participant in the event of the death of Participant prior to the
termination of payment of Retirement benefits hereunder, all from its general
assets, an amount equal to such Participant's Plan Benefit Amount, such sum to
be paid as set forth in Section 5.3 hereof.
3
<PAGE>
(b) Early Retirement. If a Participant retires at a time that
constitutes an Early Retirement, then InterTAN agrees to pay to Participant or
to the designated Beneficiary of Participant in the event of the death of
Participant prior to the termination of payment of Early Retirement benefits
hereunder, all from its general assets, an amount equal to such Participant's
Plan Benefit Amount reduced by five percent (5%) per year for each year that
Early Retirement precedes the date of Normal Retirement. Such year shall be a
fiscal year beginning on the date a Participant attains age fifty-five (55). Any
reduction for a part of a year shall be prorated on a daily basis assuming a 365
day year. Such amount shall be paid as set forth in Section 5.3 hereof.
(c) Late Retirement. If a Participant retires at a date that
constitutes Late Retirement, then InterTAN agrees to pay to Participant or to
the designated Beneficiary of Participant in the event of the death of
Participant prior to the termination of payment of Late Retirement benefits
hereunder, all from its general assets, an amount equal to such Participant's
Plan Benefit Amount, reduced by a percentage determined as follows:
Age on Date of Percent of Reduction
Late Retirement of Plan Benefit Amount
--------------- ----------------------
66 0%
67 0%
68 0%
69 0%
70 0%
71 20%
72 40%
73 60%
74 80%
75 100%
The percent of reduction of a Participant's Plan Benefit Amount shall be
measured on a fiscal year beginning on the date of Participant's date of birth
and shall commence on the day after the date a Participant attains age 70, and
any reduction for a part of a year shall be prorated on a daily basis at the
applicable percentage assuming a 365 day year. Such amount shall be paid as set
forth in Section 5.3 hereof.
Section 5.2 Subject to the terms and conditions of the Plan, upon the death of
a Participant, but only if the Participant is an Employee of InterTAN at his
death (except as set forth in Section 5.2(c) below) and is not entitled to
Retirement benefits pursuant to a Plan Agreement at such time, InterTAN agrees
to pay to his Beneficiary from its general assets an amount equal to such
Participant's Plan Benefit Amount as reflected in Employee's Plan Agreement or,
as the case may be, in the last amendment to such Plan Agreement. With respect
to such benefits, however, it is further provided that:
(a) no benefits shall be payable to the Beneficiary of a Participant
in those instances covered by Section 4.2;
(b) if a Participant dies while an Employee of InterTAN after the date
of his Normal Retirement, then the amount payable to his Beneficiary upon a
Participant's death shall be reduced as set forth in Section 5.1(c) hereof.
(c) the death of a Participant within the first year after involuntary
termination of employment with InterTAN as provided in Section 8.6 shall not
defeat the right of such Participant's Beneficiary to receive benefits under
this Section 5.2 so long as an event described in Section 8.5(a), (b) or (c)
occurs within one year of the date of termination of the Participant's
employment.
4
<PAGE>
Section 5.3 The aggregate amount payable upon the Normal Retirement, Early
Retirement, Late Retirement, benefits due and payable under Section 8.5 or 8.6
hereof or death of a Participant to a Participant or his Beneficiary shall be
paid in one hundred twenty (120) equal monthly installment payments commencing
on the first day of the month next following thirty (30) days after Retirement
or after the Committee's receipt of a certified death or proof of death
certificate verifying the Participant's death or at the time stated in Section
8.5 or 8.6 hereof. A Participant shall notify InterTAN of Retirement by hand
delivery or by certified or registered mail, return receipt requested, postage
prepaid, of a written Notice of Retirement specifying the effective date of
Retirement, such written notice to be addressed to: Organization and
Compensation Committee of the Board of Directors, InterTAN, Inc., Suite 904,
3300 Highway #7, Concord, Ontario, Canada L4K 4M3. Such notice shall be deemed
to be received when actually received by said Organization and Compensation
Committee at said address as may be changed from time to time in the Plan
Agreements, as amended.
Section 5.4 Until actually paid and delivered to the Participant or to the
Beneficiary entitled to same, none of the benefits payable by InterTAN under any
Plan Agreement shall be liable for the debts or liabilities of either the
Participant or his Beneficiary, nor shall the same be subject to seizure by any
creditor of the Participant or his Beneficiary under any writ or proceeding at
law, in equity or in bankruptcy. Further, no Participant or Beneficiary shall
have power to sell, assign, transfer, encumber, or in any manner anticipate or
dispose of the benefits to which he is entitled or may become entitled under a
Plan Agreement.
Section 5.5
(a) During the period that Participant is receiving benefits under a
Plan Agreement and for one (1) year after cessation of payment of benefits,
Participant agrees that he will not, either directly or indirectly, within the
United States of America or in any country of the world that InterTAN sells,
imports, exports, assembles, packages or furnishes its products, articles,
parts, supplies, accessories or services or is causing them to be sold,
imported, exported, assembled, packaged or furnished through related entities,
representatives, agents, or otherwise, own, manage, operate, join, control, be
employed by, be a consultant to, be a partner in, be a creditor of, engage in
joint operations with, be a stockholder, officer or director of any corporation,
sole proprietorship or business entity of any type, or participate in the
ownership, management, direction, or control or in any other manner be connected
with, any business of manufacturing, designing, programming, servicing,
repairing, selling, leasing, or renting any products, articles, parts, supplies,
accessories or services which is at the time of Participant's engaging in such
conduct competitive with products, articles, parts, supplies, accessories or
services manufactured, sold, imported, exported, assembled, packaged or
furnished by InterTAN, except as a shareholder owning less than five percent
(5%) of the shares of a corporation whose shares are traded on a stock exchange
or in the over-the-counter market by a member of the National Association of
Securities Dealers. "Consumer Electronic Products" are those type of products
sold at the retail level to the ultimate customer as are advertised by InterTAN
in its most recently published annual catalogs and monthly flyers.
Manufacturing of Consumer Electronic Products and sale of Consumer Electronic
Products at levels of distribution other than the retail level are not
considered a violation of this covenant.
(b) (i) In the event that a Participant takes Retirement and
engages in any of the activities described in the
immediately preceding paragraph, or engaged in any of
such activities prior to Retirement, then, without any
further notification, and upon determination by the
Committee that such a Participant is engaged or has
engaged in such activities, such Committee's decision to
be conclusive and binding upon all concerned, and
notwithstanding any other provisions of the Plan or of
the Plan Agreement with such Participant, InterTAN's
obligation to a Participant to pay any Retirement or
death benefits hereunder shall automatically cease and
terminate, and InterTAN shall have no further obligation
to such Participant or Beneficiary pursuant to the Plan
5
<PAGE>
or the Plan Agreement. InterTAN may enforce this
provision by suit for damages which shall include but not
be limited to all sums paid to Participant hereunder, or
for injunction, or both.
(ii) Provided, however, that in the event a Participant is
being paid benefits under Section 8.5, Section 8.6 or
Section 10.2 and not otherwise, and engages in any of the
activities described in Section 5.5(a) InterTAN must give
notice to the Participant specifying in detail the
alleged violation of Section 5.5(a). Participant will be
allowed ninety (90) days to cure such default. If the
Committee feels there is continuing competition, then,
without any further notice or opportunity to cure, and
upon determination by the Board of Directors of InterTAN
that such a Participant is engaged in such activities,
such Board's decision to be conclusive and binding upon
all concerned, and notwithstanding any other provisions
of the Plan or of the Plan Agreement with such
Participant, InterTAN's obligation to a Participant to
pay any benefits hereunder shall automatically cease and
terminate, and InterTAN shall have no further obligation
to such Participant or Beneficiary pursuant to the Plan
or the Plan Agreement. InterTAN may enforce this
provision by suit for damages which shall include but not
be limited to all sums paid to Participant hereunder, or
for injunction, or both
Section 5.6 InterTAN may liquidate out of the interest of a Participant
hereunder, but only as Retirement or death benefits become due and payable
hereunder, any outstanding loan or loans or other indebtedness of a Participant
owing to InterTAN. InterTAN may elect not to distribute Retirement or death
benefits to any Participant or to a Beneficiary unless and until all unpaid
loans or other indebtedness due to InterTAN from such Participant, together with
interest, have been paid in full.
Section 5.7 Subject to termination or amendment of the Plan, any Plan
Agreement, or both, a Participant's participation in the Plan shall continue
during his Disability or his taking a Leave of Absence. A Participant who is
Disabled or on Leave of Absence shall notify InterTAN of his date of Retirement
as provided in Section 5.3 hereof.
ARTICLE SIX
AMENDMENTS OF PLAN AGREEMENTS
Section 6.1 The Committee may enter into amendments to the Plan Agreement with
any Participant for the purpose of increasing the benefits payable to the
Participant or his Beneficiary in view of increases in his compensation
following the execution of the initial Plan Agreement or the last amendment
thereto and for the purpose of amending any provision of this Plan as it might
apply to a Participant. In such cases, the acceptance of an amendment by a
Participant is voluntary and until the amended Plan Agreement has been submitted
to and accepted by him, it shall not be effective.
ARTICLE SEVEN
BENEFICIARIES OF PARTICIPANT
6
<PAGE>
Section 7.1 At the time of his acceptance of a Plan Agreement, a Participant
shall be required to designate the Beneficiary to whom benefits under the Plan
and his Plan Agreement will be payable upon his death. A Beneficiary may be one
(1) or more persons or entities, such as dependents, persons who are natural
objects of the Participant's bounty, an inter vivos or testamentary trust, or
his estate. Such Beneficiaries may be designated contingently or successively as
the Participant may direct. The designation of his Beneficiary shall be made by
the Participant on a Beneficiary Designation Form to be furnished by the
Committee and filed with it.
Section 7.2 A Participant may change his Beneficiary, as he may desire, by
filing new and amendatory Beneficiary Designation Forms with the Committee.
Section 7.3 In the event a Participant designates more than one (1) Beneficiary
to receive benefit payments simultaneously, each such Beneficiary shall be paid
such proportion of such benefits as the Participant shall have designated. If
no such percentage designation has been made, the Committee shall hold all
benefit payments until the Beneficiaries agree as to the distribution of the
funds or a judicial determination has been made.
Section 7.4 If the designated Beneficiary dies before the Participant in
question and no Beneficiary was successively named, or if the designated
Beneficiary dies before complete payment of the deceased Participant's benefits
have been made and no Beneficiary was successively named, the Committee shall
direct that such benefits (or the balance thereof) be paid to those persons who
are the deceased Participant's heirs-at-law determined in accordance with the
laws of descent and distribution then in force in the Province of Ontario for
separate personal property, such determination to be made as though the
Participant had died intestate and domiciled in Ontario.
Section 7.5 Whenever any person entitled to payments under this Plan shall be a
minor or under other legal disability or, in the sole judgment of the Committee,
shall otherwise be unable to apply such payments to his own best interest and
advantage (as in the case of illness, whether mental or physical, or where the
person not under legal disability is unable to preserve his estate for his own
best interest), the Committee may in the exercise of its discretion direct all
or any portion of such payments to be made in any one or more of the following
ways unless claims shall have been made therefor by an existing and duly
appointed guardian, conservator, committee or other duly appointed legal
representative, in which event payment shall be made to such representative:
(1) directly to such person unless such person shall be an infant or
shall have been legally adjudicated incompetent at the time of the payment;
(2) to the spouse, child, parent or other blood relative to be
expended on behalf of the person entitled or on behalf of those dependents as to
whom the person entitled has the duty of support;
(3) to a recognized charity or governmental institution to be expended
for the benefit of the person entitled or for the benefit of those dependents as
to whom the person entitled has the duty of support; or
(4) to any other institution, approved by the Committee, to be
expended for the benefit of the person entitled or for the benefit of those
dependents as to whom the person entitled has the duty of support.
The decision of the Committee will, in each case, be final and binding upon all
persons and the Committee shall not be obliged to see to the proper application
or expenditure of any payments so made. Any payment made pursuant to the power
herein conferred upon the Committee shall operate as a complete discharge of the
obligations of InterTAN and of the Committee.
7
<PAGE>
Section 7.6 If the Committee has any doubt as to the proper Beneficiary to
receive payments hereunder, the Committee shall have the right to withhold such
payments until the matter is finally adjudicated or the Committee may direct
InterTAN to bring a suit for interpleader in any appropriate court, pay any
amounts due into the court, and InterTAN shall have the right to recover its
reasonable attorney's fees from such proceeds so paid or to be paid. Any payment
made by the Committee, in good faith and in accordance with this Plan, shall
fully discharge the Committee and InterTAN from all further obligations with
respect to such payments.
ARTICLE EIGHT
TERMINATION OF PARTICIPATION
Section 8.1 Except as provided in section 8.4, 8.5, 8.6, 10.1 and 10.2 hereof,
termination of a Participant's employment by InterTAN other than by reason of
Retirement, Permanent Disability or Leave of Absence, whether by action of
InterTAN or the Participant's resignation, shall terminate the Participant's
participation in the Plan. Neither the Plan nor the Plan Agreement shall in any
way obligate InterTAN to continue the employment of a Participant, nor will
either limit the right of InterTAN to terminate a Participant's employment at
any time, for any reason, with or without cause.
Section 8.2 Except as provided in Sections 8.4, 8.5, 8.6, 10.1 and 10.2 hereof,
participation in the Plan by a Participant shall also terminate if the Plan or
his Plan Agreement is terminated by InterTAN in accordance with Article Ten.
Section 8.3 Except as provided in Section 8.4, 8.5, 8.6, 10.1 and 10.2 hereof,
upon termination of a Participant's participation in the Plan, all of InterTAN's
obligations to the Participant and his Beneficiary(ies) under the Plan and Plan
Agreement and each of them, shall terminate and be of no further effect.
Section 8.4 Except as provided in Section 8.4, 8.5, 8.6, 10.1 and 10.2, if a
Participant's participation in the Plan is terminated, by:
(a) termination of the Plan;
(b) termination of the Plan Agreement; or
(c) Termination of employment for any reasons other than
(i) death or Retirement, which shall be governed by Article
Five, or
(ii) dishonest or fraudulent conduct of a Participant or the
conviction of a Participant of a felony crime, in which
event no vesting under Section 8.4, 8.5, 8.6, 10.1 or
10.2 shall occur,
then such Participant shall be entitled, as set forth below, to a percentage of
his Plan Benefit Amount as follows:
8
<PAGE>
Age Attained at Date of Event
Set Forth in 8.4(a), (b) or (c) % Vested
------------------------------- --------
Age 54 or younger 0%
Age 55 to 65 A percent as determined
in 5.1(b) hereof
Age 65 to 70 100%
Age 70 to 75 A percent as determined
in 5.1(c) hereof
Age 75 and thereafter 0%
The amount payable under this Section 8.4 shall be determined as of
the date of the event set forth in Section 8.4(a), (b) or (c) hereof and such
amount as so determined at that time shall not be altered or changed thereafter
except that the provisions of Section 5.5 hereof shall remain fully applicable
during the Participant's employment by InterTAN, during the payment of benefits
under this Section 8.4 and for one (1) year after termination of employment or
payment of benefits. The amount payable under this Section 8.4 shall be paid as
set forth in Section 5.3 hereunder to commence on the first day of the month
next following thirty (30) days after cessation of Participant's employment with
InterTAN.
Section 8.5 In the event that:
(a) any person, corporation, partnership, association, joint stock
company, trust, unincorporated organization, or government, including a
political subdivision thereof (or any combination thereof acting for the purpose
of acquiring, holding, voting, or disposing of equity securities of InterTAN),
acquires beneficial ownership of at least twenty percent (20%) of the then
issued and outstanding common stock of InterTAN; or
(b) on any day more than fifty percent (50%) of the members of the
Board of Directors of InterTAN (excluding those members replacing deceased
Directors) were not Directors two (2) years prior to such date; or
(c) substantially all the assets of InterTAN are sold or InterTAN is
merged or consolidated or otherwise acquired by or with another corporation
(other than an InterTAN subsidiary) unless, as the result of any such merger,
consolidation, or acquisition,
(i) InterTAN is the surviving entity, and
(ii) not more than twenty percent (20%) of InterTAN's then
issued and outstanding common stock is sold or
exchanged as the result of such merger, consolidation,
or acquisition;
then for a period of three (3) years from the occurrence of any such event any
Participant shall be vested with and be entitled to receive a benefit equal to
his Plan Benefit Amount conditioned upon and subject to such Participant's
employment with InterTAN being terminated, whether voluntary or involuntary,
during such three-year period. Such benefit shall be payable in accordance with
Section 5.3 commencing on the first day of the month next following thirty (30)
days after the date on which such Participant terminated his employment or had
his employment terminated. Provided, however, if a Participant becomes entitled
to benefits under this Section 8.5 after the date of his Normal Retirement, then
the amount payable hereunder shall be reduced in the same amounts as set forth
in Section 5.1 (c) hereof.
Any provision hereof to the contrary notwithstanding, any shares of InterTAN
common stock sold or exchanged as the result of any acquisition agreement
initiated by InterTAN whereby InterTAN acquires
9
<PAGE>
control of or substantially all the assets of another corporation shall not
constitute an event described in Section 8.5 (a) or (c).
No Participant shall be entitled to benefits under this Section 8.5 unless such
Participant's employment relationship with InterTAN is terminated within any
three-year period beginning on the date of occurrence of any event described in
Section 8.5 (a), (b) or (c), provided, however, the occurrence of each such
event shall mark the commencement of a new and separate three year period.
It is specifically provided that the provisions of Section 5.5 shall remain
fully applicable during the payment of benefits under this Section 8.5 and shall
continue for a one year period following termination of the payment of benefits.
In the event of the death of a Participant prior to the receipt of all benefits
payable under this Section, all remaining benefits shall be paid to his
designated Beneficiary.
Section 8.6 In the event that a Participant's employment with InterTAN is
involuntarily terminated for any reason other than those reasons set forth in
Section 8.4(c)(ii), and within a one year period beginning on the date of such
termination there occurs an event described in Section 8.5(a), (b) or (c) then
such Participant, or his Beneficiary if such Participant dies after termination
of employment, shall be entitled to receive a benefit equal to his Plan Benefit
Amount payable in accordance with Section 5.3 commencing on the first day of the
month next following thirty (30) days after the occurrence of such event
described in Section 8.5 (a), (b) or (c). Provided, however, if a Participant
becomes entitled to benefits under this Section 8.6 after the date of his Normal
Retirement, then the amount payable hereunder shall be reduced in the same
amounts as set forth in Section 5.1 (c) hereof.
It is specifically provided that the provisions of Section 5.5 shall remain
fully applicable during the payment of benefits under this Section 8.6 and shall
continue for a one year period following termination of the payment of benefits.
In the event of the death of a Participant prior to the receipt of all benefits
payable under this Section, all remaining benefits shall be paid to his
designated Beneficiary.
ARTICLE NINE
ADMINISTRATION OF THE PLAN
Section 9.1 The Plan shall be administered by the Committee as it is presently
constituted or as it may be changed from time to time by the Board of Directors
of InterTAN.
Section 9.2 In addition to the express powers and authorities accorded the
Committee under the Plan, it shall be responsible for:
(a) construing and interpreting the Plan;
(b) computing and certifying to InterTAN the amount of benefits to be
provided in each Plan Agreement for the Participant or the Beneficiary of the
Participant; and
(c) determining the right of a Participant or a Beneficiary to
payments under the Plan and otherwise authorizing disbursements of such payments
by InterTAN;
in these and all other respects its decisions shall be conclusive and binding
upon all concerned.
Section 9.3 InterTAN agrees to hold harmless and indemnify the members of the
Committee against any and all claims and causes of action by or on behalf of any
and all parties whomsoever, and all losses therefrom, including without
limitation the cost of defense and attorney's fees, based upon or arising out of
any act or omission relating to or in connection with the Plan other than losses
resulting from any such Committee member's fraud or willful misconduct.
10
<PAGE>
ARTICLE TEN
TERMINATION OR AMENDMENT OF THE PLAN
OR PLAN AGREEMENTS
Section 10.1 InterTAN reserves the right to terminate or amend this Plan or any
Plan Agreement, in whole or in part, at any time, or from time to time, by
resolution of the Board of Directors of InterTAN provided, however, no amendment
to the Plan or to any Plan Agreement shall alter the vested rights of a
Participant or Beneficiary applicable on the effective date of such termination
or amendment and, except for increases in Plan compensation as provided herein,
such vested rights shall remain unchanged. Rights are deemed to have vested if
benefits are actually being paid or if the only condition precedent to the
payment of benefits is the termination of employment (unless terminated for
reasons set forth in Section 8.4(c)(ii), in which event all benefits are
forfeited) with InterTAN or the giving of notice of retirement or the occurrence
of an event described in Section 8.5(a), (b) or (c).
Section 10.2 In the event the Plan or any Plan Agreement is terminated or
adversely amended to the detriment of any Participant and within a one year
period from the effective date of any such amendment or termination there occurs
an event described in Section 8.5(a), (b) or (c), then any Participant so
affected whose employment with InterTAN is terminated, voluntarily or
involuntarily, within a three year period from the date such event occurs shall
be entitled to receive those benefits set forth in Section 8.5 hereof to the
same extent and in the same amounts as though such amendment or termination had
not occurred. This Section 10.2 shall not apply to any Participant who, on the
date of occurrence of any event described in Section 8.5(a), (b) or (c), has
previously retired or has otherwise voluntarily terminated his employment with
InterTAN.
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.1 The Plan and Plan Agreement and each of their provisions shall be
construed and their validity determined under the laws of the Province of
Ontario and InterTAN and each Participant under the Plan hereby submits and
attorns to the exclusive jurisdiction of the courts of the Province of Ontario.
Section 11.2 The masculine gender, where appearing in the Plan or any Plan
Agreement, shall be deemed to include feminine gender. The words "herein",
"hereunder" and other similar compounds of the word "here" shall mean and refer
to the entire Plan and Plan Agreement, not to any particular provision, section
or subsection, and words used in the singular or plural may be construed as
though in the plural or singular where they would so apply.
Section 11.3 INTENTIONALLY DELETED.
Section 11.4 Any person born on February 29 shall be deemed to have been born
on the immediately preceding February 28 for all purposes of this Plan.
Section 11.5 This Plan shall be binding upon and inure to the benefit of any
successor of InterTAN and any such successor shall be deemed substituted for
InterTAN under the terms of this Plan. As used in this Plan, the term
"successor" shall include any person, firm, corporation, or other business
entity which at any time, whether by merger, purchase, or otherwise, acquires
all or substantially all of the assets or business of InterTAN.
11
<PAGE>
Section 11.6 A participant shall not be required to mitigate the amount of any
payment provided for in this Plan seeking other employment or otherwise.
Section 11.7 In the event that a Participant institutes any legal action to
enforce his rights under, or to recover damages for breach of any of the terms
of, this Plan or any Plan Agreement, the Participant, if he is the prevailing
party, shall be entitled to recover from InterTAN all actual expenses incurred
in the prosecution of said suit including but not limited to attorneys' fees,
court costs, and all other actual expenses.
Section 11.8 Notwithstanding all other provisions in the Plan, in the event a
Participant is entitled to benefits under two (2) separate sections of the Plan,
the maximum a Participant may receive under this Plan is ten (10) times
Participant's Plan Benefit Amount, payable in accordance with Section 5.3
hereof.
12
<PAGE>
Exhibit "A"
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
,19
----------------------- ---
PLAN AGREEMENT
To:_____________________________________________________________________________
(Name of Participant)
The Organization and Compensation Committee of the Board of Directors
of InterTAN, Inc. (the "Committee") has selected you to participate in the
Deferred Compensation Plan (the "Plan"), a copy of which is furnished to you
herewith.
Your participation in the Plan is voluntary and conditioned upon your
acceptance of this Plan Agreement in the manner provided below, by which it
shall be agreed between us as follows:
1) Your participation in the Plan and the rights accruing to you
and your designated Beneficiary(ies) thereunder shall be in
all respects subject to the terms and conditions of the Plan,
the full text of which, and as it may be from time to time
amended, is incorporated herein by reference. You agree to be
bound by the terms and provisions of the Plan, and
specifically, but without limitation, to the noncompetition
provisions set forth in Section 5.5 of the Plan.
2) For the purpose of determining the amount of benefits payable
by InterTAN, Inc. ("InterTAN") under the Plan, it is agreed
and stipulated that your Plan Benefit Amount is U.S.
$__________. At the end of this Plan Agreement is an Addendum,
which from time to time may be used to alter the Plan Benefit
Amount as defined in the Plan by filling in the changed amount
of the Plan Benefit Amount, by dating such change, and by
InterTAN and you executing such Addendum.
3) You acknowledge receipt of a Beneficiary Designation Form
furnished you herewith and agree that upon your acceptance and
return of this Plan Agreement as provided below, you will
deliver such form completed as therein required.
If you desire to participate in the Plan, please accept and return the
enclosed copy of this letter, together with your completed Beneficiary
Designation Form, to David S. Goldberg, on or before thirty (30) days from the
date hereof, whereupon you shall become a Participant in the Plan according and
subject to the terms thereof. If you do not accept and return such copy within
the above time period, then we will assume that you have voluntarily elected not
to participate in the Plan.
Yours very truly,
INTERTAN, INC.
By:
---------------------------
ACCEPTED THIS day of
-----------
,19 .
- ----------------- ---
- -------------------------
(Participant)
<PAGE>
Exhibit "B"
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
BENEFICIARY DESIGNATION FORM
As a participant in the InterTAN, Inc. Deferred Compensation Plan (the "Plan"),
I, the undersigned, direct the benefits payable at my death under the Plan to be
made as follows:
(1) Primary Beneficiary. I designate , whose current
------------
address is , and Social Security No. is ,
--------------------------- ------------
as the sole Primary Beneficiary to receive the benefits payable at my death
under the Plan.
(2) Contingent Beneficiaries. In the event the Primary
Beneficiary should predecease me, or in the event our deaths shall occur
simultaneously, or if such designated Primary Beneficiary should die before
complete payment of the benefits payable at my death under the Plan, I designate
the following person(s) as the Contingent Beneficiary(ies) to receive such
benefits, or the balance thereof, either successively in the following order, or
contemporaneously in the proportions indicated:
NAME: RELATIONSHIP:
----------------------------- ---------------
CURRENT ADDRESS:
-----------------------------------------------------------
PROPORTION TO RECEIVE
SOCIAL SECURITY NO.: (IF APPLICABLE):
--------------- ----------------------
NAME: RELATIONSHIP:
------------------------------ -------------------
CURRENT ADDRESS:
-----------------------------------------------------------
PROPORTION TO RECEIVE
SOCIAL SECURITY NO.: (IF APPLICABLE):
--------------- -----------------------
(3) If at the time of my death none of the above Beneficiaries survive me,
or none of them shall survive to receive all of the benefits payable at my death
under the Plan, then such benefits, or the balance thereof, shall be distributed
as provided in the Plan.
(4) The rights of the designated Beneficiaries and all payments to them
shall be in all respects subject to the terms and provisions of the Plan, a copy
of which as currently in effect was furnished to me prior to my execution of
this Beneficiary Designation Form.
(5) I reserve the right to change my designated Beneficiary(ies)
by filing a new Beneficiary Designation Form with the Organization and
Compensation Committee as provided in the Plan and understand that no such
change shall be effective unless received by the Committee prior to my death.
SIGNED this day of 19 .
----- ---------- --
-------------------------------
(Participant)
<PAGE>
Exhibit 10(B)
[LOGO]
3300 Highway # 7, Suite 904, Concord, Ontario L4M 4K3
Brian E. Levy
President &
Chief Executive Officer
Direct: (905) 760-9708
February 15, 2000
Mr. James G. Gingerich
3300 Highway # 7
Suite 904
Concord, ON
L4K 4M3
Dear Jim:
Re: Amendment to Employment Letter
This letter confirms the following amendments to the letter agreement
between you and InterTAN, Inc. (the "Company") dated March 1, 1995 concerning
your employment arrangements with the Company (the "Agreement"):
1. The last sentence of the Agreement is hereby amended by deleting the phrase
"State of Texas" and replacing it by the phrase "Province of Ontario" so
that such sentence now reads: "This Agreement shall be governed by the laws
of the Province of Ontario."
2. The Agreement is hereby amended by the deletion of the entire section
titled "Change of Control" in the Agreement and is replaced by the
following clause:
"Change of Control
-----------------
In the event that you are either:
(i) involuntarily terminated; or
(ii) there is a material reduction in the scope or level of your
duties, responsibilities or the effective authority associated
with your position within an eighteen (18) month period following
a "change of control" (as such term is defined in the Company's
Deferred Compensation Plan, as amended) of the Company,
you shall be entitled to receive severance benefits in an amount equal to
eighteen (18) months of your then current base salary and base bonus,
payable in equal monthly installments over the eighteen (18) month period
commencing on your employment termination date, and shall be entitled to
the continuation of
Tel: (905) 760-9701 Fax: (905) 760-9722
<PAGE>
Company paid health, dental and life insurance (then in effect, whether
group or non-group) benefits for such 18 month period."
All other terms of your Agreement remain in full force and effect and
unamended. Nothing herein modifies or otherwise amends any of your rights and
entitlements under any other of the Company's plans and programs in which you
participate, including, without limiting the generality of the foregoing, the
1986 Stock Option Plan, the 1996 Stock Option Plan, the Deferred Compensation
Plan, the Employee Stock Purchase Program and any grants of restricted stock.
If the foregoing is acceptable, please sign and return a copy of
this letter to the attention of the undersigned.
Sincerely,
InterTAN, Inc.
/s/ Brian E. Levy
By: Brian E. Levy
President and Chief
Executive Officer
Agreed to and Accepted
this 29th day of February, 2000.
/s/ James G. Gingerich
___________________________
James G. Gingerich
Tel: (905) 760-9701 Fax: (905) 760-9722
<PAGE>
Exhibit 10(C)
[LOGO]
3300 Highway # 7, Suite 904, Concord, Ontario L4M 4K3
Brian E. Levy
President and
Chief Executive Officer
Direct: (905) 760-9708
February 15, 2000
Mr. Douglas C. Saunders
3300 Highway # 7
Suite 904
Concord, ON
L4K 4M3
Dear Doug:
Re: Amendment to Employment Letter
This letter confirms the following amendments to the letter agreement
between you and InterTAN, Inc. (the "Company") dated March 10, 1995 concerning
your employment arrangements with the Company (the "Agreement"):
1. The last sentence of the Agreement is hereby amended by deleting the phrase
"State of Texas" and replacing it by the phrase "Province of Ontario" so
that such sentence now reads: "This Agreement shall be governed by the laws
of the Province of Ontario."
2. The Agreement is hereby amended by the addition of the following clause to
the Agreement:
"Change of Control
-----------------
In the event that you are either:
(i) involuntarily terminated; or
(ii) there is a material reduction in the scope or level of your
duties, responsibilities or the effective authority associated
with your position within an eighteen (18) month period
following a "change of control" (as such term is defined in the
Company's Deferred Compensation Plan, as amended) of the
Company,
you shall be entitled to receive severance benefits in an amount equal to
twelve (12) months of your then current base salary and base bonus, payable
in one single lump sum payment, and shall be entitled to the continuation
of Company paid health, dental and life insurance (then in effect, whether
group or non-group) benefits for such 12 month period."
<PAGE>
All other terms of your Agreement remain in full force and effect and
unamended. Nothing herein modifies or otherwise amends any of your rights and
entitlements under any other of the Company's plans and programs in which you
participate, including, without limiting the generality of the foregoing, the
1986 Stock Option Plan, the 1996 Stock Option Plan, the Deferred Compensation
Plan and the Employee Stock Purchase Program.
If the foregoing is acceptable, please sign and return a copy of
this letter to the attention of the undersigned.
Sincerely,
InterTAN, Inc.
/s/ Brian E. Levy
By: Brian E. Levy
President and Chief
Executive Officer
Agreed to and Accepted
this 21st day of February, 2000.
/s/ Douglas C. Saunders
___________________________
Douglas C. Saunders
<PAGE>
Exhibit 10(D)
[LOGO APPEARS HERE]
3300 Highway # 7, Suite 904, Concord, Ontario L4M 4K3
Brian E. Levy
President and
Chief Executive Officer
Direct: (905) 760-9708
February 15, 2000
Mr. Jeffrey A. Losch
3300 Highway # 7
Suite 904
Concord, ON
L4K 4M3
Dear Jeff:
Re: Amendment to Employment Letter
This letter confirms the following amendments to the letter agreement
between you and InterTAN, Inc. (the "Company") dated February 23, 1999
concerning your employment arrangements with the Company (the "Agreement"):
The Agreement is hereby amended by the addition of the following clause to
the Agreement:
"Change of Control
-----------------
In the event that you are either:
(i) involuntarily terminated; or
(ii) there is a material reduction in the scope or level of your duties,
responsibilities or the effective authority associated with your
position within an eighteen (18) month period following a "change
of control" (as such term is defined in the Company's Deferred
Compensation Plan, as amended) of the Company,
you shall be entitled to receive severance benefits in an amount equal to
twelve (12) months of your then current base salary and base bonus, payable
in one single lump sum payment, and shall be entitled to the continuation
of Company paid health, dental and life insurance (then in effect, whether
group or non-group) benefits for such 12 month period."
All other terms of your Agreement remain in full force and effect.
Nothing herein modifies or otherwise amends any of your rights and entitlements
under any other of the Company's plans and programs in which you participate,
including, without limiting the
<PAGE>
generality of the foregoing, the 1996 Stock Option Plan, the Deferred
Compensation Plan and the Employee Stock Purchase Program.
If the foregoing is acceptable, please sign and return a copy of
this letter to the attention of the undersigned.
Sincerely,
InterTAN, Inc.
/s/ Brian E. Levy
By: Brian E. Levy
President and Chief
Executive Officer
Agreed to and Accepted
this 21st day of February, 2000.
/s/ Jeffrey A. Losch
___________________________
Jeffrey A. Losch
<PAGE>
Exhibit 10(E)
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
February 18, 2000
PLAN AGREEMENT
To: JEFFREY A. LOSCH
The Organization and Compensation Committee of the Board of Directors of
InterTAN, Inc. (the "Committee") has selected you to participate in the Deferred
Compensation Plan (the "Plan"), a copy of which is furnished to you herewith.
Your participation in the Plan is voluntary and conditioned upon your
acceptance of this Plan Agreement in the manner provided below, by which it
shall be agreed between us as follows:
1) Your participation in the Plan and the rights accruing to you and
your designated Beneficiary(ies) thereunder shall be in all respects
subject to the terms and conditions of the Plan, the full text of
which, and as it may be from time to time amended, is incorporated
herein by reference. You agree to be bound by the terms and
provisions of the Plan, and specifically, but without limitation, to
the noncompetition provisions set forth in Section 5.5 of the Plan.
2) For the purpose of determining the amount of benefits payable by
InterTAN, Inc. ("InterTAN") under the Plan, it is agreed and
stipulated that your Plan Benefit Amount in Cdn. $785,000. At the end
of the Plan Agreement is an Addendum, which from time to time may be
used to alter the Plan Benefit Amount as defined in the Plan by
filling in the changed amount of the Plan Benefit Amount, by dating
such change, and by InterTAN and you executing such Addendum.
3) You acknowledge receipt of a Beneficiary Designation Form furnished
you herewith and agree that upon your acceptance and return of this
Plan Agreement as provided below, you will deliver such form completed
as therein required.
If you desire to participate in the Plan, please accept and return the
enclosed copy of this letter, together with your completed Beneficiary
Designation Form, to James G. Gingerich, on or before thirty (30) days from the
date hereof, whereupon you shall become a Participant in the Plan according and
subject to the terms thereof. If you do not accept and return such copy within
the above time period, then we will assume that you have voluntarily elected not
to participate in the Plan.
Yours very truly,
INTERTAN, INC.
/s/ Brian E. Levy
By: __________________________________________________
Brian E. Levy, President & Chief Executive Officer
ACCEPTED THIS 21st day of February, 2000.
/s/ Jeffrey A. Losch
________________________
Jeffrey A. Losch
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and the consolidated statements of income contained
in InterTAN, Inc. second quarter report on Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 49,450
<SECURITIES> 0
<RECEIVABLES> 11,479
<ALLOWANCES> 0
<INVENTORY> 115,343
<CURRENT-ASSETS> 180,490
<PP&E> 21,925
<DEPRECIATION> 0
<TOTAL-ASSETS> 206,662
<CURRENT-LIABILITIES> 77,069
<BONDS> 0
0
0
<COMMON> 30,408
<OTHER-SE> 88,033
<TOTAL-LIABILITY-AND-EQUITY> 206,662
<SALES> 104,604
<TOTAL-REVENUES> 104,673
<CGS> 59,817
<TOTAL-COSTS> 59,817
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 733
<INCOME-PRETAX> 6,613
<INCOME-TAX> 2,985
<INCOME-CONTINUING> 3,628
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,628
<EPS-BASIC> 0.12
<EPS-DILUTED> 0.12
</TABLE>
