-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WFF2UWr0bpIh1AAJqhr1g8FOPm7eelrWDWtjTmIMdPAFA3nfHYxJsOY0Qb3iOeSX Lv4qyAqt4IZg6Z6B3pORkw== 0000930661-96-000403.txt : 19960625 0000930661-96-000403.hdr.sgml : 19960625 ACCESSION NUMBER: 0000930661-96-000403 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAN INC CENTRAL INDEX KEY: 0000803227 STANDARD INDUSTRIAL CLASSIFICATION: 5731 IRS NUMBER: 752130875 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10062 FILM NUMBER: 96561552 BUSINESS ADDRESS: STREET 1: 201 MAIN STREET SUITE 1805 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173489701 MAIL ADDRESS: STREET 1: 201 MAIN ST STREET 2: STE 1805 CITY: FORT WORTH STATE: TX ZIP: 76102 10-Q 1 FORM 10-Q FOR QE 3-31-96 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, 1996 or -------------- [ ] Transaction report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ---------- -------------- Commission file number 1-10062 ------- InterTAN, Inc. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-2130875 - - ------------------------------- --------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 201 Main Street, Suite 1805 Fort Worth, Texas 76102 - - ------------------------------------------ --------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 348-9701 ------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- At April 30, 1996, 11,046,147 shares of the registrant's common stock, par value $1.00 per share, were outstanding. PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS The Registrant's financial statements at and for the quarter ended March 31, 1996, providing the information required by Rule 10-01 of Regulation S-X, are included herewith as Exhibit A. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by Item 303 of Regulation S-K is included herewith as Exhibit B. EXHIBIT A - FINANCIAL STATEMENTS AT AND FOR THE QUARTER ENDED MARCH 31, 1996. Consolidated Statements of Operations InterTAN, Inc.
- - -------------------------------------------------------------------------------------------------------------------- (In thousands, except per share data) Three Months Ended Nine Months Ended March 31 March 31 --------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Net sales and operating revenues........................ $ 108,757 $ 101,001 $ 403,840 $ 396,484 Other income............................................ 196 217 697 1,183 ------------------------------------------------------------ 108,953 101,218 404,537 397,667 ------------------------------------------------------------ Operating costs and expenses: Cost of products sold................................. 59,410 56,344 226,661 226,735 Selling, general and administrative expenses.......... 48,840 45,678 156,754 148,231 Depreciation and amortization......................... 2,014 1,865 5,827 5,861 ------------------------------------------------------------ 110,264 103,887 389,242 380,827 ------------------------------------------------------------ Operating income (loss)................................. (1,311) (2,669) 15,295 16,840 Foreign currency transaction (gains) and losses......... (69) 86 (261) (146) Interest expense, net................................... 1,516 1,631 5,163 6,042 ------------------------------------------------------------ Income (loss) before income taxes....................... (2,758) (4,386) 10,393 10,944 Provision (benefit) for income taxes.................... 1,350 736 6,369 (1,638) ------------------------------------------------------------ Net income (loss)....................................... $ (4,108) $ (5,122) $ 4,024 $ 12,582 ============================================================ Primary net income (loss) per average common share...... $ (0.38) $ (0.51) $ 0.37 $ 1.26 Fully diluted net income (loss) per average common share.................................. $ (0.38) $ (0.51) $ 0.34 $ 0.89 Average common shares outstanding....................... 10,943 10,026 10,964 10,012 Average common shares outstanding assuming full dilution................................ 10,943 10,026 17,722 17,161
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. Consolidated Balance Sheets InterTAN, Inc.
- - ---------------------------------------------------------------------------------------------------------- (In thousands, except share information) March 31 June 30 March 31 1996 1995 1995 ------------------------------------ Assets Current Assets: Cash and short-term investments...................................... $ 38,597 $ 45,260 $ 53,695 Accounts receivable, less allowance for doubtful accounts............ 10,775 8,710 8,776 Inventories.......................................................... 160,916 146,184 139,901 Other current assets................................................. 8,585 9,377 10,307 Deferred income taxes................................................ 1,853 8,484 32 ------------------------------------ Total current assets............................................ 220,726 218,015 212,711 Property and equipment, less accumulated depreciation and amortization..................................................... 38,690 34,996 34,844 Other assets........................................................... 2,851 4,117 4,206 Deferred income taxes.................................................. 4,958 4,911 13,695 ------------------------------------ $ 267,225 $ 262,039 $ 265,456 ==================================== Liabilities and Stockholders' Equity Current Liabilities: Short-term bank borrowings $ - $ - $ 362 Current maturities of notes payable to Tandy Corporation............. 17,071 6,958 6,958 Accounts payable..................................................... 15,227 14,039 8,610 Accounts payable to Tandy Corporation................................ 470 429 359 Accrued expenses..................................................... 26,031 25,104 29,853 Income taxes payable................................................. 13,689 13,903 14,107 ------------------------------------ Total current liabilities....................................... 72,488 60,433 60,249 Long-term notes payable to Tandy Corporation, less current maturities........................................... 22,992 39,833 39,757 9% convertible subordinated debentures................................. 41,797 43,722 42,882 Other liabilities...................................................... 5,699 4,725 4,607 ------------------------------------ 142,976 148,713 147,495 ------------------------------------ Stockholders' Equity: Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding.......................... - - - Common stock, $1 par value, 40,000,000 shares authorized, 11,034,112, 10,192,767 and 10,090,046 shares issued and outstanding................................... 11,034 10,193 10,090 Additional paid-in capital........................................... 111,008 106,376 105,850 Retained earnings.................................................... 25,397 21,373 25,832 Foreign currency translation effects................................. (23,190) (24,616) (23,811) ------------------------------------ Total stockholders' equity...................................... 124,249 113,326 117,961 ------------------------------------ Commitments and contingent liabilities................................. $ 267,225 $ 262,039 $ 265,456 ====================================
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. Consolidated Statements of Cash Flows InterTAN, Inc.
- - ----------------------------------------------------------------------------------------------------------------- (In thousands) Three months ended Nine months ended March 31 March 31 --------------------------------------------------------- 1996 1995 1996 1995 ---------------------------------------------------------- Cash flows from operating activities: Net income (loss).......................................... $ (4,108) $ (5,122) $ 4,024 $ 12,582 Adjustments to reconcile net income to cash provided by (used in) operating activities: Results from the Australia and U.K. transitional months.. - - - (1,740) Depreciation and amortization............................ 2,014 2,340 5,827 7,609 Deferred income taxes.................................... 1,125 660 6,708 (1,986) Foreign currency transaction (gains) losses, unrealized.. 6 (7) (261) (452) Other.................................................... 640 (175) 1,786 (583) Cash provided by (used for) current assets and liabilities: Receivables.............................................. 4,591 5,013 (2,100) (1,578) Inventories.............................................. 5,544 19,089 (12,990) 8,236 Other current assets..................................... (1,555) (1,924) 524 (1,632) Accounts payable......................................... (6,185) (24,533) 1,318 (4,675) Accounts and short-term notes payable to Tandy Corporation................................ 100 (10) 26 (913) Accrued expenses......................................... (8,652) (8,643) 496 (1,099) Income taxes payable..................................... 160 (40) (346) (296) -------------------------------------------------------- Net cash provided by (used in) operating activities...... (6,320) (13,352) 5,012 13,473 -------------------------------------------------------- Cash flows from investing activities: Additions to property and equipment........................ (2,324) (1,407) (9,649) (4,575) Proceeds from sales of property and equipment.............. 157 41 343 1,396 Other investment activities................................ 1,235 (374) 1,955 (624) -------------------------------------------------------- Net cash used in investing activities..................... (932) (1,740) (7,351) (3,803) -------------------------------------------------------- Cash flows from financing activities: Changes in short-term borrowings, net..................... - 369 - 369 Proceeds from issuance of common stock to employee plans... 554 1,015 1,445 2,626 Proceeds from exercise of stock options.................... - - 760 - Principal repayments on long-term borrowings............... (3,479) (3,479) (6,958) (3,479) -------------------------------------------------------- Net cash used in financing activities..................... (2,925) (2,095) (4,753) (484) -------------------------------------------------------- Effect of exchange rate changes on cash..................... 281 393 429 243 -------------------------------------------------------- Net increase (decrease) in cash and short-term investments.. (9,896) (16,794) (6,663) 9,429 Cash and short-term investments, beginning of period........ 48,493 70,489 45,260 44,266 -------------------------------------------------------- Cash and short-term investments, end of period.............. $ 38,597 $ 53,695 $ 38,597 $ 53,695 ========================================================
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. Consolidated Statements of Stockholders' Equity InterTAN, Inc.
- - ------------------------------------------------------------------------------------------------------ (In thousands) Foreign Currency Common Stock Additional Retained Translation Shares Amount Paid-in Capital Earnings Effects -------------------------------------------------------------------- Balance at June 30, 1995.......... 10,193 $10,193 $106,376 $21,373 ($24,616) Net foreign currency translation adjustments.......... 1,426 Issuance of common stock to employee plans................ 344 344 2,135 Issuance of common stock under stock option plans......... 118 118 642 Issuance of common stock upon conversion of debentures.... 379 379 1,855 Net income........................ 4,024 ------------------------------------------------------------------ Balance at March 31, 1996......... 11,034 $11,034 $111,008 $25,397 ($23,190) ==================================================================
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. EXHIBIT B - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTORY NOTE REGARDING FORWARD LOOKING INFORMATION ------------------------------------------------------- With the exception of historical information, the matters discussed herein are forward-looking statements about the business, financial condition and prospects of InterTAN, Inc. (the "Company"). The actual results of the Company could differ materially from those indicated by the forward looking statements because of various risks and uncertainties including, but not limited to, international economic conditions, interest and foreign exchange rate fluctuations, various tax issues, including possible reassessments, changes in product demand, competitive products and pricing, availability of products, inventory risks due to shifts in market conditions, dependence on manufacturers' product development, the regulatory and trade environment, real estate market fluctuations and other risks indicated in the Company's previous filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and in many cases the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward looking statements. RESULTS OF OPERATIONS --------------------- The Company is a retailer of consumer electronics products with locations in Canada, Australia and the United Kingdom. The number of company-operated stores and dealers at March 31, 1996 and 1995 is presented in the table below:
SALES OUTLETS THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 1996 MARCH 31, 1995 ----------------------- ----------------------- ENDING OPENED CLOSED ENDING OPENED CLOSED CANADA Company-operated 448 2 3 448 - 1 Dealers 420 3 5 430 6 8 --------------------- --------------------- 868 5 8 878 6 9 ===================== ===================== AUSTRALIA Company-operated 209 2 1 204 - 6 Dealers 202 2 18 265 - 2 --------------------- --------------------- 411 4 19 469 - 8 ===================== ===================== UNITED KINGDOM Company-operated 346 1 2 335 2 1 Dealers 175 10 0 159 5 6 --------------------- --------------------- 521 11 2 494 7 7 ===================== ===================== TOTAL Company-operated 1,003 5 6 987 2 8 Dealers 797 15 23 854 11 16 --------------------- --------------------- 1,800 20 29 1,841 13 24 ===================== =====================
OPERATING PROFIT The Company's operating profit (loss) for each geographic segment for the three and nine-month periods ended March 31, 1996 and 1995 is presented in the following table (in thousands): OPERATING PROFIT ----------------
UNITED CORPORATE CANADA AUSTRALIA KINGDOM EXPENSES TOTAL ------- ---------- -------- ---------- -------- Three Months Ended March 31, 1996 $ 3,589 $ 153 $(3,801) $(1,252) $(1,311) Three Months Ended March 31, 1995 $ 3,285 $ (395) $(4,150) $(1,409) $(2,669) Nine Months Ended March 31, 1996 $19,326 $2,370 $(2,874) $(3,527) $15,295 Nine Months Ended March 31, 1995 $20,245 $ 870 $ (80) $(4,195) $16,840
The impact of foreign exchange fluctuations on the comparison of operating results for the three and nine months ended March 31, 1996 with same periods in the prior year was minimal. The reduction in the operating loss for the three months ended March 31, 1996 reflected sales increases in all three countries as well as an overall increase in margins and a reduction in selling, general and administrative ("SG&A") expenses as a rate to sales. The reduction in operating income for the nine months ended March 31, 1996 is generally reflective of results for the second quarter being below expectations. NET SALES Net sales for the quarter ended March 31, 1996 were $108,757,000, an increase of 7.7% over the sales for the same quarter in the prior year of $101,001,000. When the impact of fluctuations in the value of the US dollar in relation to the currencies of the countries in which the Company operates is removed, the sales increase, in constant dollars, is reduced to 7.3%. Comparative store sales increased by 6.4% over the same quarter in the prior year. Year to date, sales have increased by 1.9% and 1.6% in US dollars and local currency, respectively. Comparative store sales for the nine months ended March 31, 1996 have increased 1.1% over the same period a year ago. The table which follows shows by country the percentage changes in sales for the quarter and nine months ended March 31, 1996 compared to the corresponding periods in the prior year. Changes are presented in both US dollars and local currencies to illustrate the effects of exchange rate fluctuations. The change in comparative store sales, measured in constant dollars, is also shown: NET SALES --------- PERCENTAGE INCREASE (DECREASE) ------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, 1996 MARCH 31, 1996 LOCAL COMPARATIVE LOCAL COMPARATIVE US$ CURRENCY STORE US$ CURRENCY STORE ----------------------------- ------------------------------- Canada 8.2% 5.3% 4.2% 1.6% 0.1% 0.1% Australia 23.4% 22.0% 21.3% 9.9% 10.3% 11.8% United Kingdom (1.3)% 2.0% 1.0% (1.7)% (0.5)% (2.6)%
While the market for consumer electronics products in Canada continues to be difficult, management is encouraged by the sales performance of RadioShack Canada, which recovered during the third quarter following a second quarter which fell short of management's expectations. A significant increase in revenue from the sale of cellular phones was one of the factors contributing to improved sales in Canada. The overall sales gain was achieved despite ongoing competitive pressure reflecting a sluggish consumer electronics market in Canada. Certain of the Company's competitors experienced sales losses for the quarter. Management is also encouraged that the sales increases in Australia, which started in the second quarter, have continued. While cellular phone sales have been a major factor driving these sales increases, sales gains were experienced broadly across the product line during the three months ended March 31, 1996. Double digit sales gains were experienced in several of the Company's product categories. As was the case in Canada, the Company's success in Australia occurred at a time when certain retailers were experiencing difficult trading conditions. In the UK, trading in the High Street market in which the Company operates continues to be difficult. During the three months ended March 31, 1996, a major electronics retailer announced the closure of almost 200 High Street stores. While management believes that these closures will better position the company in the long run, during the closedown process, greater competition could be experienced. Following a difficult second quarter, management views the modest sales gain in the UK in the third quarter with optimism. The Company's merchandising strategy has also put pressure on sales in the short term in all markets. This strategy includes de-emphasizing the video game business and replacing certain high ticket but low margin branded products with an expanded range of lower ticket but more profitable private label products. This strategy requires sales growth in other products just to remain even with the prior year. Management believes that as its merchandising strategy continues to be implemented, this strategy, together with the Company's many new service initiatives, will have an overall positive impact on sales. GROSS PROFIT AND COST OF GOODS SOLD The gross margin percentage increased to 45.4% in the third quarter of fiscal 1996 from 44.2% a year ago, an increase of 1.2 percentage points. The most significant improvement was in the United Kingdom, where margins strengthened by 3.9 percentage points over the same quarter last year. In Canada, margins increased by 0.8 percentage points, while in Australia margins declined by 3.4 percentage points. Year to date, margins are running ten basis points ahead of the Company's objective of a full percentage point gain over the prior year. Management anticipates that this objective will also be achieved for the year as a whole. Increased sales, a higher gross margin percentage and foreign exchange rate effects all combined to produce an increase in gross margin dollars for the quarter of $4,689,000:
Increase in margin percentage $1,132,000 Increase in sales 3,265,000 Foreign exchange rate effects 292,000 ---------- $4,689,000 ==========
In Canada, a shift in the sales mix from national brands to higher margin house brands and strong cellular sales contributed to the overall improvement in gross margins. The planned de-emphasis of video games and related software was also a factor. In Australia, several factors contributed to the apparent reduction in trading margins. Margins in Australia last year had benefited from stock taking gains. In addition, in the current quarter, margins were lowered as a result of a writedown of some older generation computers and printers as management prepares to clear those products. If margins were adjusted for these factors, margins would have, on a like for like basis, increased by over one percentage point in Australia. While margins increased significantly in the United Kingdom, it should be noted that last year's margins had been reduced by a large stock taking loss provision. Management's focus on inventory controls helped ensure that these losses did not recur. The majority of the total margin improvement resulted from a merchandising strategy which places greater emphasis on the Company's higher margin core categories, including parts and accessories and private label goods. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Total selling, general and administrative expenses for the three months ended March 31, 1996 were $48,840,000 compared to $45,678,000 in the third quarter of the prior year, an increase of $3,162,000 or 6.9%. Year to date, SG&A expenses have increased from $148,231,000 to $156,754,000, an increase of $8,523,000 or 5.7%. The effect of foreign currency rate fluctuations on both of these comparisons was not significant. The following table provides a breakdown of SG&A expenses by major category for the three and nine month periods ended March 31, 1996 (percentages shown are as a rate to sales): SELLING, GENERAL AND ADMINISTRATIVE EXPENSES --------------------------------------------
(In thousands, except percents) THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31 MARCH 31 1996 1995 1996 1995 ----------------------------- ------------------------------ AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. ---------------------------- ------------------------------ Advertising $ 5,344 4.9 $ 4,950 4.9 $ 20,704 5.1 $ 19,677 5.0 Rent 10,110 9.3 9,531 9.4 30,590 7.6 29,591 7.5 Payroll 19,997 18.4 18,562 18.4 63,620 15.8 60,315 15.2 Taxes (other than income taxes) 3,927 3.6 3,897 3.9 12,636 3.1 12,249 3.1 Telephone & Utilities 1,842 1.7 1,886 1.9 5,248 1.3 5,345 1.3 Other 7,620 7.0 6,852 6.7 23,956 5.9 21,054 5.3 ----------------------------- ------------------------------ Total $48,840 44.9 $45,678 45.2 $156,754 38.8 $148,231 37.4 ============================= ==============================
Higher investments in advertising, store rent and human resources in all three countries accounted for part of the increase in SG&A expense for the quarter. Other factors contributing to the increase included the new royalty payable to Tandy Corporation and higher repair costs as the "Repair Shop at Radio Shack" initiative is rolled out. These increases were partially offset by a reduction in spending at Corporate Headquarters. Management's stated objective was to hold SG&A expense as a rate to sales at a level consistent with the prior year. That objective was more than met during the third quarter, as SG&A expense was reduced from 45.2% to 44.9% of sales. However, as sales during the second quarter were short of the Company's expectations, it was not possible to achieve this objective for the nine-month period ended March 31, 1996. While management anticipates continued improvement in the SG&A rate during the fourth quarter, it is likely that there will be an increase in SG&A expense as a rate to sales for the year as a whole. NET INTEREST EXPENSE Net interest expense declined by $115,000 from $1,631,000 in the third quarter of fiscal year 1995 to $1,516,000 during the three months ended March 31, 1996. The reduction reflects the scheduled repayment of term debt and the voluntary conversion of some of the Company's convertible debentures by the holders thereof. For similar reasons, net interest expense for the nine months ended March 31, 1996, at $5,163,000, was $879,000 lower than in the same period last fiscal year. PROVISION FOR INCOME TAXES An income tax provision of $1,350,000 was recorded during the quarter, primarily relating to the profits of the Canadian subsidiary. In the third quarter of fiscal year 1995, a net tax provision of $736,000 was recorded, as a provision against the profits of the Canadian subsidiary was partially offset by a credit relating to the loss carry-forwards of the Canadian subsidiary. For the nine months ended March 31, 1996, income tax expense of $6,369,000 was recorded compared to a net benefit of $1,638,000 in the first nine months of the prior year. The primary reason for this increase is that during the second quarter of fiscal year 1995, a benefit of $7.1 million was recorded, arising from a reduction in the valuation allowance against the Company's deferred tax assets, resulting from revised estimates with respect to the Company's ability to utilize its deferred tax assets. NET INCOME PER AVERAGE COMMON SHARE The Company issued Cdn$60,000,000 aggregate principal amount of 9% convertible subordinated debentures ("Debentures") in the second quarter of fiscal year 1994, which are convertible to common stock at Cdn$8.42 per share. During the first quarter of the current fiscal year, the holders of Cdn$3,188,000 aggregate principal amount of Debentures elected to convert into common stock resulting in an increase of 378,514 common shares outstanding. The Company currently has outstanding 1,449,007 warrants to purchase shares of common stock held by Trans World Electronics Inc. ("Trans World"), a subsidiary of Tandy Corporation ("Tandy"), the Company's principal supplier, at an exercise price of US$6.618 per share. In addition, at quarter end, directors and employees of the Company and its subsidiaries held options to purchase 502,000 shares at prices ranging from $5.31 to $8.1875. Employee options exercised during the three and nine-month periods ended March 31, 1996 resulted in increases of 0 and 118,000 common shares, respectively, outstanding. Primary and fully diluted net loss per average common share were each $0.38 and $0.51 for the three-month periods ended March 31, 1996 and March 31, 1995, respectively. Because losses were experienced in both quarters, the Debentures, the warrants held by Trans World and the options held by directors and employees were all anti-dilutive. They have, therefore been excluded from both the primary and fully dilutive calculations in each period. For the nine-month period ended March 31, 1996, primary net income per average common share was $0.37 compared to $1.26 for the same period in fiscal year 1995. The impact of the warrants held by Trans World and the options held by directors and employees resulted in increases in the average number of common shares outstanding for the nine-month period ending March 31, 1996 and March 31, 1995 of 107,000 and 105,000 shares, respectively. The effect of these adjustments on primary net income per average common share during those periods was not material. Fully diluted net income per average common share for the nine-month periods ended March 31, 1996 and March 31, 1995 was $0.34 and $0.89, respectively. This dilution of net income per average common share was primarily attributable to the Debentures. The dilutive effect of the Debentures and the warrants held by Trans World may be significant in future periods and exchange rate impacts on the Debentures could increase or decrease their dilutive effects. FINANCIAL CONDITION ------------------- Most balance sheet accounts are translated from their values in local currency to US dollars at the respective month end rates. The table below outlines the percentage change, to March 31, 1996, in exchange rates as measured against the US dollar. FOREIGN EXCHANGE RATE FLUCTUATIONS ----------------------------------
% INCREASE % INCREASE (DECREASE) (DECREASE) FROM MARCH 31, 1995 FROM JUNE 30, 1995 -------------------- ------------------- Canada 2.9 1.0 Australia 6.5 10.3 United Kingdom (5.8) (4.2)
ACCOUNTS RECEIVABLE Accounts receivable have increased from $8,710,000 at June 30, 1995 to $10,775,000 at March 31, 1996. At March 31, 1996, accounts receivable were $1,999,000 higher than at March 31, 1995. These increases result primarily from increased revenue due from cellular phone carriers as a result of the growth in that business, in particular in Canada and Australia. INVENTORIES Inventories have increased from $146,184,000 at June 30, 1995 to $160,916,000 at March 31, 1996, with increases being experienced in Australia and the United Kingdom. Inventories at March 31, 1995 were $139,901,000, with year on year increases experienced in all three countries. The Company's new merchandising strategy, which places greater emphasis on private label products contributed to these increases, as these products require larger order sizes and longer order lead time. Also contributing to the increase in inventories was the improvement in the Company's in-stock position in Australia as well as the broadening of the product assortment. Management believes that the Company's inventory is of good quality and will be sold through in the ordinary course of business without the need for significant mark downs. PROPERTY AND EQUIPMENT Property and equipment has increased from $34,844,000 and $34,996,000 at March 31, 1995 and June 30, 1995, respectively, to $38,690,000 at March 31, 1996. These increases are the result of planned increases in the level of capital investment, primarily in store fixtures and other improvements at store level, for both new and upgraded stores. Previously, the Company's capital spending had approximated depreciation expense, with the result that there were no ascertainable changes in the net property and equipment balance. CURRENT MATURITIES OF NOTES PAYABLE TO TANDY CORPORATION Current maturities of notes payable to Tandy have increased from $6,958,000 at March 31, 1995 and June 30, 1995 to $17,071,000 at March 31, 1996. This increase results from the fact that the Series B Note payable to Trans World in the principal amount of $10,113,000 is now all classified as a current liability, as repayment in full is required in August, 1996. ACCOUNTS PAYABLE The level of accounts payable has increased from $14,039,000 and $8,610,000 at June 30, 1995 and March 31, 1995, respectively, to $15,227,000 at March 31, 1996. These increases in accounts payable result primarily from an increase in the level of inventories generally. INCOME TAXES PAYABLE Income taxes payable were $13,689,000 at March 31, 1996 as compared to balances at June 30, 1995 and March 31, 1995 of $13,903,000 and $14,107,000, respectively. An audit of the Canadian income tax returns of the Canadian subsidiary for the 1987 to 1989 taxation years was completed during fiscal year 1994, resulting in additional tax being levied against the Canadian subsidiary. The Company has appealed these reassessments and, pending the outcome of these matters, the Company, by Canadian law, is required to pay one-half of the tax in dispute. The tax levied by Revenue Canada in reassessing those years was offset by refunds arising from the carryback of losses incurred in subsequent years. Depending on the ultimate resolution of these issues, the Company could potentially have an additional liability in the range of $0 to $10,000,000. The Company believes it has meritorious arguments in defense of a number of the issues raised by Revenue Canada and it is in the process of vigorously defending its position. It is management's determination that no additional provision need be recorded for these reassessments. In order for the Company to succeed in appealing certain aspects of these reassessments, it must succeed in defending the possible reassessments discussed immediately below. The Company was advised in August 1995 that Revenue Canada intended to extend the scope of its reassessments to raise certain issues flowing from the spin-off of the Company from Tandy Corporation in fiscal year 1987. Management disagrees with Revenue Canada's views on these issues and will vigorously defend the Company's position should Revenue Canada pursue these issues. Management believes it has meritorious arguments supporting its stance and, accordingly, no additional provision has been recorded for these possible reassessments. Tax assessments related to these issues, if pursued, could potentially range from $13,000,000 to $20,000,000. As required by Canadian law, the Company would be required to post a deposit of one-half of the tax in dispute, including interest, in order to appeal any assessment. An audit of the Canadian income tax returns of the Canadian subsidiary for the 1990 to 1993 taxation years was commenced during the 1995 fiscal year. While this audit has not yet been completed and no formal report has been issued by Revenue Canada, the Company recently became aware that Revenue Canada may seek to disallow certain interest expense relating to the Canadian subsidiary's former operations in continental Europe. Management believes it has meritorious arguments in support of the deductibility of such interest and is prepared to vigorously defend its position should the Canadian tax authorities proceed with such a challenge. Because Revenue Canada has not fully asserted its position, management is presently unable to reasonably estimate the range of loss which could arise should Revenue Canada ultimately prevail in this matter after all appeals have been unsuccessfully pursued by the Company. Assuming Revenue Canada pursues this matter, in order for the Company to proceed with such appeals, the Company would be required to post a deposit equal to one-half of the 1990-1993 tax in dispute, together with interest. While management is also unable to determine the actual amount of deposit which would be required, management presently believes that the amount would not exceed $5,000,000. As indicated, management believes it has meritorious arguments to support the deductibility of the interest in question and, accordingly, it is management's assessment that no additional provision need be recorded for this possible claim. At this time it is not possible to determine whether any other issues will be raised by Revenue Canada as a consequence of its audit of the 1990 to 1993 taxation years. An audit of the French branch of the Canadian subsidiary was completed by the French tax authorities in fiscal year 1992 for the 1988 through 1990 taxation years. An assessment of approximately $2,000,000 has been issued. The Company has appealed this assessment. It is management's view that the position of the French tax authorities on this matter is without merit and that the Company will be successful in its appeal process. Accordingly, no provision has been made in the accounts for this assessment. In order to avoid having to pay this tax while the appeal proceeds, the Company has provided the French tax authorities with a letter of guarantee for the amount in dispute. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company's principal sources of outside financing are its loans from Tandy, a revolving bank facility and the Debentures. On August 5, 1993, Tandy, through its wholly-owned subsidiary, Trans World, acquired the debt then outstanding under the Company's Revolving Credit and Term Loan Agreement of $41,748,000. This debt was then restructured as a term loan facility ("Series A Note") bearing interest at 8.64%. It is payable semi-annually over a six year period commencing February 25, 1995. In addition, Tandy provided the Company with a $10,113,000 three year loan ("Series B Note") which bears interest at 8.11% and is due on August 25, 1996. The agreement governing these loans is herein referred to as the "Tandy Loan Agreement". As part of the financial restructuring indicated above, the Company entered into a Merchandise Agreement with Tandy which allows the Company to use Tandy's export unit as its exclusive exporter of products from the Far East through June 30, 2000. The Merchandise Agreement requires the Company to support a percentage of purchase orders placed with Far Eastern suppliers with either letters of credit or cash deposits. The percentage ranges from a low of 60% in the December to April period to a high of 90% in August. In October, 1995 agreement was reached to lower the letter of credit posting requirement on Canadian purchases. On May 6, 1994, InterTAN Canada Ltd., InterTAN, Inc., and InterTAN U.K. Limited entered into a one-year credit agreement ("Syndicated Loan Agreement") with a syndicate of banks. In April, 1995, the Syndicated Loan Agreement was extended for a further year to April, 1996. Effective March 1, 1996, the Syndicated Loan Agreement was further amended and extended until August 16, 1996. Subsequently, the Company and the banking syndicate have agreed in principle to a further extension of the Syndicated Loan Agreement to August, 1997, subject to the completion of a definitive agreement with respect to such extension; however, there can be no assurance of such renewal. This facility is used to provide letters of credit in support of purchase orders issued to Far Eastern suppliers, for general working capital purposes and to support foreign exchange contracts. At March 31, 1996 there were no borrowings for working capital purposes against the facility. Both the Tandy Loan Agreement and the Syndicated Loan Agreement preclude the Company from paying dividends on its common stock. In addition, the Tandy Loan Agreement and the Syndicated Loan Agreement contain covenants which require the Company to maintain tangible net worth at a specified minimum level and which limit the level of debt due both to Tandy as well as other parties, capital spending, lease commitments and store openings and require the Company to maintain debt to equity and working capital ratios at agreed levels. These loan agreements also require the Company to meet certain interest coverage ratios. At March 31, 1996, the Company was in compliance with these requirements. During fiscal year 1994, the Company closed a private placement of Cdn$60,000,000 of 9% subordinated convertible debentures which will mature on August 30, 2000. Interest on the Debentures is payable semi-annually, at the end of February and August. At December 31, 1995, Cdn$56,812,000 of Debentures were outstanding. The conversion rate is 118.7310 common shares for each Cdn$1,000 face amount of Debentures, equivalent to a conversion price of approximately Cdn$8.42, or $6.19 per share at the March 31, 1996 exchange rate. The Debentures are subordinated to all senior indebtedness of the Company, including the Company's revolving bank facility and the Tandy Loan Agreement. Operating activities used $6,320,000 in cash during the three months ended March 31, 1996 compared to $13,352,000 in the third quarter of the prior year. Net income for the quarter, adjusted to reconcile net income to cash, used $323,000 in cash, while using $2,304,000 in cash during the same period in fiscal year 1995. Reductions in inventory levels generated cash of $5,544,000 in the March 1996 quarter and $19,089,000 in the March 1995 quarter. The effect of this reduction in the rate of inventory decline was more than offset by a reduction in the rate of liquidation of accounts payable, which consumed $6,185,000 in cash during the quarter compared with $24,533,000 a year ago. For the nine months ended March 31, 1996, operating activities contributed $5,012,000 in cash compared with $13,473,000 in the same period of fiscal 1995. Year to date, the increase in the level of inventories has consumed $12,990,000 in cash, whereas a year ago reductions in inventories had generated $8,236,000 in cash. This negative swing in cash was partially offset by a variety of factors, including an increase in cash generated by net income adjusted to reconcile to cash and an increase, rather than a reduction, in the level of accounts payable. Cash flow from investing activities consumed $932,000 during the current quarter compared with $1,740,000 a year ago. The effect of increases in capital spending over the third quarter of fiscal year 1995, as the Company proceeds with a plan to upgrade and remodel its stores, was more than offset by an increase in cash generated by other investment activities. Year to date, investing activities have consumed $7,351,000 in cash compared to $3,803,000 in the prior year, as the effects of the increased capital spending program were partially offset by an increase in cash generated from other investing activities. Management anticipates that fiscal year 1997 capital spending will continue at a level at least equal to that of the current fiscal year. During the third quarter of fiscal year 1996, financing activities used $2,925,000 in cash as the effect of cash consumed by principal repayments on long-term debt was partially offset by cash generated from the issuance of common stock to employee plans. During the third quarter of fiscal 1995, financing activities had consumed $2,095,000 in cash, as proceeds from the issuance of shares to employee plans and cash generated from short-term bank borrowings were more than offset by the repayment of long-term debt. Year to date, financing activities have consumed $4,753,000 in cash compared with $484,000 in the same period a year ago, as cash used in the repayment of long- term debt was partially offset by cash generated by the issuance of common stock to employee plans and proceeds received on the exercise of stock options by employees. The Company's principal use of liquidity in the remainder of fiscal year 1996 will be the funding of capital additions, estimated to be $2.5 million, primarily related to store expansion, remodeling and upgrading. In addition, as discussed above, the Company believes that it is possible the Canadian subsidiary could receive reassessments of tax from Revenue Canada. See "Income Taxes Payable". The Company's primary sources of liquidity for the remainder of fiscal year 1996 will be its cash and short-term investments on hand, cash generated from operations and available borrowings under the Syndicated Loan Agreement. The Company anticipates that these sources will provide the Company with adequate liquidity to meet its planned cash flow requirements through fiscal year 1996. While the Syndicated Loan Agreement will be used primarily to support letters of credit issued in accordance with the Merchandise Agreement, management believes that it will be necessary to borrow against the facility as inventories are built for the 1996 Christmas selling season. Additionally, the Company will be required to seek further liquidity to provide it with the resources to build inventories as the 1996 Christmas selling season approaches and possibly for deposits required on potential contested tax reassessments. Management is currently in advanced negotiations with lenders involving a plan to increase the Company's liquidity to the required level. Alternatives under consideration include increasing the credit line under the existing facility, augmented by additional bank support outside of the Syndicated Loan Agreement. Management has agreed in principle with its banking syndicate to a renewal of such facility consistent with the plan presently under discussion and believes that the additional financing presently being sought will be obtained; however, there can be no assurance of such renewal on terms acceptable to the Company or that such additional financing will be obtained. The plan under negotiation would provide the Company with sufficient additional liquidity to meet its requirements through fiscal year 1997, including payments of principal and interest under the Tandy Loan Agreement aggregating $15,354,000 required in August, 1996, provided the amount of any additional tax deposits were not at the upper end of the ranges described above. If this were the case, the Company would be required to seek additional sources of liquidity. Management is currently in the process of studying additional funding alternatives. However, there can be no assurance that additional funding would be available, if required. CONTINGENCIES ------------- A claim by a former employee for damages for wrongful dismissal remains outstanding. The Company is vigorously defending this action. The Company believes that the possible range of loss in the matter is not material, and has recognized a provision representing its best estimate of the liability which may ultimately arise from this claim. In February 1996, the Company settled a lawsuit with a former executive officer for an amount within the reserve established by the Company relating to the claim. In the fourth quarter of fiscal year 1993, the Company recorded a pre-tax charge of $77,400,000 in connection with the Company's plan to close its continental European retail operations. This provision represented management's best estimate of the costs of inventory liquidation, lease commitments, payroll and severance, other operating costs during the shutdown period and losses on the disposal of fixed assets and leasehold interests. The shutdown process is now substantially complete. Management believes that the remaining provision of $2,024,000 is adequate to provide for the Company's remaining obligations in Europe, including claims brought against the Company by former employees, dealers and franchisees. Apart from these matters and those described under "Income Taxes Payable", there are no material pending legal proceedings or claims, other than routine litigation incidental to the Company's business, to which the Company or any of its subsidiaries is a party, or to which any of its property is subject. BASIS OF FINANCIAL STATEMENTS ----------------------------- The accompanying unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation 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 the Company's Annual Report on Form 10- K for the fiscal year ended June 30, 1995, and, in the opinion of the Company, include all adjustments necessary for fair presentation of the Company's financial position as of March 31, 1996 and 1995 and the results of its operations and its cash flow for the three and nine months ended March 31, 1996 and 1995. Such adjustments are of a normal and recurring nature. Operating results for the three and nine months ended March 31, 1996 are not necessarily indicative of the results that can be expected for the fiscal year ended June 30, 1996. 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, 1995. PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS The matters discussed in the first paragraph under the heading "Contingencies" herein above are incorporated herein by reference. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were put to a vote of the stockholders during the three- month period ended March 31, 1996. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Required by Item 601 of Regulation S-K: Exhibit No. Description ----------- ----------- [S] [C] 3(a) Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(a)(i) Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(a)(ii) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b) Bylaws (Filed as Exhibit 3(b) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference). 3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a) above). 4(b) Amended and Restated Rights Agreement between InterTAN, Inc. and The First National Bank of Boston (Filed as Exhibit 4(b) to InterTAN's report on Form 8-K dated September 25, 1989 and incorporated herein by reference). 4(c) Trust Indenture securing the issue of 9% Convertible Subordinated Debentures due August 30, 2000 (Filed as Exhibit 4(c) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1993 and incorporated herein by reference). 10(a) Second Amendment to InterTAN Advertising Agreement dated to be effective as of January 1, 1996. 10(b) Third Amendment to Merchandise Agreement dated February 1, 1996. 10(c) Amending Agreement dated March 1, 1996 between, among others, InterTAN, Inc. and Canadian Imperial Bank of Commerce. 11 Computation of Earnings Per Share. 27 Article 5 Financial Data Schedule. 99 Reclassification of Prior Year Balances. b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended March 31, 1996. 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 13, 1996 By:/s/James T. Nichols ------------------------------------- James T. Nichols President and Chief Executive Officer (Principal Executive Officer) By:/s/Douglas C. Saunders ------------------------------------- Douglas C. Saunders Vice President and Corporate Controller (Principal Accounting Officer) EX-10.A 2 2ND AMENDMENT TO ADVERTISING AGREEMENT Exhibit 10(a) Second Amendment to ------------------- InterTAN Advertising Agreement ------------------------------ This Second Amendment to the InterTAN Advertising Agreement (the "Agreement") is by and between InterTAN, the InterTAN Group, and Tandy (all as defined in the Agreement). The parties hereto agree as follows: 1. Paragraph 1. of the Agreement, Section a), entitled "License of Materials". --------------------- is hereby deleted and in its place is added the following: "a) License of Materials. -------------------- (i) Subject to all payments required hereunder being timely made by INTERTAN GROUP and to INTERTAN GROUP's compliance with all the terms of this Agreement, TANDY agrees to provide InterTAN with the following (which are collectively referred to in this Agreement as "Materials"): (a) Market Research. Copies of all printed market research --------------- completed between January 1, 1994 and to December 31, 1996 on The Repair Shop at Radio Shack, You've Got Questions! We've Got Answers! and the Radio Shack Gift Express programs ("Programs") which were used by TANDY in the development of new and updated marketing strategies for TANDY's Radio Shack Division; 1 (b) Program Schedules. Copies of printed Radio Shack ----------------- advertising schedules and calendars (including all changes) for 1996 for the Programs; (c) Sales Percentage. Printed bi-monthly advice of sales growth ---------------- percentage by category for the Programs in 1996; (d) Flyers and Inserts. Pre-release printed copies of all ------------------ flyers and inserts for the Programs used by TANDY during 1996; (e) Television Commercials. Video tape copies of all newly ---------------------- developed television commercials used by TANDY for the Programs during 1996; and (f) Radio Commercials. Cassette copies of all newly developed ----------------- radio commercials used by TANDY for the Programs during 1996. (ii) Subject to TANDY's entering into a definitive agreement with Lord, Dentsu & Partners and subject to the provisions of that agreement, TANDY grants a non-assignable, non-exclusive license to INTERTAN GROUP to use the Materials in the Licensed Countries in the limited manner specified in this Agreement. (iii) INTERTAN GROUP shall have no right to sublicense or disclose any of the Materials to any third party other than dealers and franchisees duly granted a sublicense by INTERTAN GROUP in accordance with the terms and conditions of the applicable License Agreement. INTERTAN GROUP agrees to use the Materials provided only as a source for concepts and ideas and will not use the actual Materials provided in any other way. (iv) INTERTAN GROUP will use only photography, talent, props and backdrops which it currently owns, or which it purchases or licenses for its own use, in any advertisements produced by the INTERTAN GROUP arising from the Materials. 2 (v) INTERTAN GROUP agrees to keep all information specified in subparagraphs (i)(a), (b) and (c) above confidential and not to provide this information to any third party. INTERTAN GROUP agrees to keep all items specified in subparagraphs (i)(d), (e) and (f) above confidential until five days after an item has been published or broadcast to the general public anywhere in the United States. INTERTAN agrees to return to TANDY or destroy all copies and originals of confidential information within 30 days after expiration or other termination of this Agreement." 2. Paragraph 10. Of the Agreement, entitled "TERM." Is hereby deleted in its ---- entirety and in its place the following is substituted: "10. TERM. ---- The term of this Agreement is from January 1, 1996 through December 31, 1996. In the event TANDY's agreement with Lord, Dentsu & Partners terminates prior to the expiration of the term of this Agreement, and provided that no party hereto is then in default of this Agreement, the parties hereto agree to negotiate terms for an amendment to this Agreement to provide for its possible continuation for the balance of the remaining term under such new terms and conditions as are appropriate under the circumstances, in TANDY's opinion." 3. Paragraph 11.of the Agreement, entitled "EXTENSION OF TERM." is hereby ----------------- deleted in its entirety and in its place the following is substituted: 3 "11. EXTENSION OF TERM. ----------------- At January 1, 1997 this Agreement may be extended on new or existing terms and conditions, at TANDY's option. INTERTAN GROUP shall provide TANDY a written request for extension at least 30 days prior to December 1, 1996. If the parties agree to extend this Agreement and agree on all terms thereof, the parties shall enter into a written amendment stating the new terms." 4. Paragraph 12. Section a) of the Agreement, entitled "Expiration." Is hereby ---------- deleted in its entirety and in its place the following is substituted: "a) Expiration. Unless the term is extended by written contract of the ---------- parties, and unless earlier terminated as hereinabove provided, this Agreement shall automatically expire and terminate at the expiration of the term provided in paragraph 10, as amended, or at the same time as the License Agreements, whichever is earlier." 5. The Agreement is hereby ratified and confirmed in all other respects and all of its provisions, as amended, shall continue in full force and effect. 4 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the dates shown beneath their respective signatures hereto, to be effective as of January 1, 1996. InterTAN Inc. By: /s/James T. Nichols ----------------------------------------- Title: President -------------------------------------- Date Signed: Feb. 8, 1996 -------------------------------- InterTAN Canada Ltd. By: /s/James T. Nichols ----------------------------------------- Title: President -------------------------------------- Date Signed: Feb. 8, 1996 -------------------------------- InterTAN U.K. Limited By: /s/James T. Nichols ----------------------------------------- Title: Director -------------------------------------- Date Signed: Feb. 8, 1996 -------------------------------- 5 InterTAN Australia Ltd. By: /s/James T. Nichols ----------------------------------------- Title: Director -------------------------------------- Date Signed: Feb. 8, 1996 -------------------------------- Tandy Corporation By: /s/Dwain H. Hughes ----------------------------------------- Title: Senior Vice President and -------------------------------------- Chief Financial Officer Date Signed: February 12, 1996 -------------------------------- 6 EX-10.B 3 3RD AMENDMENT TO MERCHANDISE AGREEMENT Exhibit 10(b) THIRD AMENDMENT TO MERCHANDISE AGREEMENT THIS THIRD AMENDMENT TO MERCHANDISE AGREEMENT (the "Third Amendment") is entered into as of February 1, 1996, by and among InterTAN Canada Ltd. ("ITC"), a corporation organized under the laws of the Province of Alberta, Canada, InterTAN, Inc. ("ITI"), a Delaware corporation, InterTAN Australia Ltd. ("ITA"), a corporation organized under the laws of the State of New South Wales, Australia, InterTAN U.K. Limited ("ITUK"), a corporation organized under the laws of England and Wales, and Technotron Sales Corp. Pty. Ltd. ("TSC"), a corporation organized under the laws of the State of New South Wales, Australia (along with their respective current or future subsidiaries, being collectively referred to herein as the "ITI-GROUP") and Tandy Corporation ("TANDY"), a Delaware corporation, and A&A International, Inc. ("A&A"), a Nevada corporation. WHEREAS, each of the parties hereto entered into that certain Merchandise Agreement signed on or about October 8, 1993, and dated (or which is hereby deemed to have been dated) as of October 15, 1993 (the "Agreement"); and WHEREAS, the Agreement has been amended by the First Amendment to Merchandise Agreement (dated November 1, 1993) and the Second Amendment to Merchandise Agreement (dated October 2, 1995); and WHEREAS, the parties hereto have agreed to modify the applicable open order coverage requirements to be secured by letters of credit maintained by ITUK as set out in Section 1.3 of the Agreement, as previously amended; and WHEREAS, in order to give affect to the parties' intentions, the parties hereto desire to execute this Third Amendment. NOW, THEREFORE, for good and valuable consideration, receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Terms used herein shall have the meanings set ------------ forth in the Agreement, as amended by the First Amendment and Second Amendment thereto, except as otherwise defined herein. Section 2. Amendment to Section 1.3. Section 1.3 of Article I of the ------------------------- Agreement, as previously amended by the First Amendment and Second Amendment thereto, is hereby further amended by adding the following new provision to the end of Section 1.3 as set out below: "(i) Notwithstanding anything to the contrary in the Agreement, as amended, the required percentage (as calculated according to the foregoing subsections of this Section 1.3) of the aggregate U.S. dollar amount of Open Orders as specified in the L/C Notice to be covered by the applicable L/C maintained by ITUK shall be further reduced so as to provide ITUK with a reduction of the required coverage in an amount equal to the percentage derived by dividing (i) the gross amount of sales made by ITUK to RadioShack International ("RSI"), under that certain Master Sales Agreement (dated December 31, 1995) in each successive fiscal quarter of ITUK by (ii) the amount of gross sales earned by ITUK in the applicable fiscal quarter (for example, if during ITUK's third quarter of its 1996 fiscal year the sales to RSI represent 4% of ITUK's gross sales for such period, ITUK shall receive a 4% equivalent reduction (on a point by point basis) in its required letter of credit coverage for the fourth quarter of its 1996 fiscal year). Such percentage shall be determined by ITUK on a quarterly basis, to be applicable for the immediately succeeding fiscal quarter, on or before the thirtieth (30th) day following ITUK's close of each fiscal quarter (commencing with the first calendar quarter of 1996). Additionally, on or before the thirtieth (30th) day following the close of each fiscal quarter, ITUK shall furnish to RSI and A&A International, Inc. a complete and accurate report, certified as such by an officer of ITUK or ITI, showing ITUK's gross sales for the quarter and gross sales to RSI, less itemized discounts and allowances deducted from such gross sales price, of all products sold by ITUK to RSI during the preceding fiscal quarter." Section 3. Ratification of Merchandise Agreement and Prior Amendments ---------------------------------------------------------- Thereto. The Agreement, as amended by the First Amendment and Second Amendment - - -------- thereto, is in all other respects hereby ratified and confirmed, and all of its provisions, as hereby amended, continue in full force and effect. Section 4. Governing Law. THIS THIRD AMENDMENT SHALL BE SUBJECT TO -------------- ARTICLE 7, SECTION 7.1 OF THE AGREEMENT, AS AMENDED, ENTITLED "Texas Law --------- Applicable; Submission to Jurisdiction." SECTION 7.1 OF THE AGREEMENT, AS - - --------------------------------------- AMENDED, IS HEREBY ADOPTED BY REFERENCE AND INCORPORATED HEREIN FOR ALL PURPOSES AS IF SET OUT AT LENGTH. Section 5. Execution in Counterparts. This Third Amendment may be -------------------------- executed in any number of counterparts and by different parties hereto and separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same Third Amendment. Delivery of an executed counterpart of a signature page to this Third Amendment by telecopy shall be as effective as delivery of a manually executed counterpart of this Third Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Merchandise Agreement to be executed by their duly authorized officers, or representatives, all as of the day and year first above written. TANDY CORPORATION By: /s/Dwain H. Hughes ------------------------------ Its: Senior Vice President ------------------------------ A&A INTERNATIONAL, INC. By: /s/David Christopher ------------------------------ Its: President ------------------------------ InterTAN CANADA LTD. By: /s/James T. Nichols ------------------------------ Its: President ------------------------------ InterTAN, INC. By: /s/James T. Nichols ------------------------------ Its: President ------------------------------ InterTAN AUSTRALIA LTD. By: /s/James T. Nichols ------------------------------ Its: Director ------------------------------ InterTAN U.K. LIMITED By: /s/James T. Nichols ------------------------------ Its: Director ------------------------------ TECHNOTRON SALES CORP. PTY. LTD By: /s/James T. Nichols ------------------------------ Its: Director ------------------------------ EX-10.C 4 AMENDING AGREEMENT EXHIBIT 10(c) AMENDING AGREEMENT ------------------ THIS AGREEMENT, dated as of March 1, 1996, is made by and between INTERTAN CANADA LTD., a corporation existing under the laws of the Province of Alberta ("ICL"), INTERTAN U.K. LIMITED, a limited liability company existing under the laws of England ("IUK"), INTERTAN, INC., a corporation existing under the laws of Delaware ("InterTAN"), CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian chartered bank ("CIBC"), as Agent, and the Lenders from time to time listed on the signature pages hereof. WHEREAS the parties hereto entered into a credit agreement dates as of May 6, 1994 whereby the Lenders established certain credits in favour of the Borrowers which agreement was amended by the Amending Agreement dated as of April 25, 1995 (together referred to as the "Credit Agreement"); AND WHEREAS the parties wish to further amend the Credit Agreement; NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the parties hereto agree as follows: 1. INTERPRETATION. In this Agreement, defined terms shall have the meaning -------------- given in the Credit Agreement. 2. AMENDMENTS. ---------- (a) The definition of Repayment Date in Section 1.1 is amended to read as follows: "REPAYMENT DATE" means August 16, 1996, or such later date as may be from time to time applicable pursuant to Section 3.5. (b) Section 11.1(m)(iii) is amended so that Section 11.1(m) will read in its entirety as follows: (m) Cash Interest Coverage Ratio. ---------------------------- InterTAN will have a Cash Interest Coverage Ratio calculated at the end of each period set out below of not less than (i) 1.25:1 for each of the nine month period ending March 31, 1994, the twelve month period ending June 30, 1994 and the twelve month period ending September 30, 1994, (ii) 1.50:1 for the twelve month period ending December 31, 1994, and (iii) 1.05:1 for the twelve month period ended March 31, 1996, 1.25:1 for the twelve month period ended June 30, 1996 and 1.50:1 for each twelve month period ending each March 31, June 30, September 30 and December 31 thereafter. 3. AMENDMENT AND EXTENSION FEE. The Borrowers shall pay to the Agent --------------------------- upon the execution and delivery of this Agreement, a fee for the amendment of the Credit Agreement and for the extension of the Repayment Date equal to one- tenth of one percent of the amount of the Credits, to be disbursed to the Lenders according to their Pro Rata Shares. 4. CONTINUING EFFECT. Each of the parties hereto acknowledges and ----------------- agrees that the Credit Agreement as amended by this Agreement shall be and continue in full force and effect. 5. COUNTERPARTS. This Agreement may be executed in counterparts, each ------------ of which will be deemed to be an original and which together will constitute one and the same agreement. IN WITNESS WHEREOF of the parties hereto have executed this Agreement as of the date and year first above written. CANADIAN IMPERIAL BANK OF COMMERCE, AS AGENT By: /s/ Doug Cornett ------------------------------------ Authorized Officer: Doug Cornett CANADIAN IMPERIAL BANK OF COMMERCE, AS LENDER By: /s/ H. D. Chataway ------------------------------------ Authorized Officer: Harold D. Chataway THE FIRST NATIONAL BANK OF BOSTON, AS U.K. ADMINISTRATIVE AGENT AND AS A LENDER By: /s/ Judy C.E. Kelly ------------------------------------ Authorized Officer: Vice President LLOYDS BANK PLC By: /s/ J. N. Mortell ------------------------------------ Authorized Officer: Manager Corporate Banking CREDIT LYONNAIS CANADA By: /s/ C. M. Stade ------------------------------------ Authorized Officer: Caroline Stade, Assistant Vice President INTERTAN CANADA LTD. By: /s/ James G. Gingerich ------------------------------------ Name: James G. Gingerich Title: Vice President INTERTAN, INC. By: /s/ James T. Nichols ------------------------------------ Name: James T. Nichols Title: President and CEO INTERTAN U.K. LIMITED By: /s/ James T. Nichols ------------------------------------ Name: James T. Nichols Title: Director EX-11 5 COMPUTATION OF EARNINGS PER SHARE Exhibit 11 Statement of Computation of Earnings per Share InterTAN, Inc.
- - --------------------------------------------------------------------------------------------------------------------- (in thousands, except per share data) Three Months Ended Nine Months Ended -------------------------- --------------------------- March 31 March 31 1996 1995 1996 1995 --------------------------- -------------------------- Primary Earnings Per Share Net income (loss)......................................... $ (4,108) $ (5,122) $ 4,024 $ 12,582 =========================== ========================== Weighted average number of common shares outstanding...... 10,943 10,026 10,857 9,907 Weighted average number of common shares issuable under warrants and stock option plans, net of assumed treasury stock repurchases at average market prices.......................................... (a) (a) 107 105 --------------------------- -------------------------- Weighted average number of common and common equivalent shares outstanding.......................... 10,943 10,026 10,964 10,012 =========================== ========================== Primary net income (loss) per average common share $ (0.38) $ (0.51) $ 0.37 $ 1.26 =========================== ========================== Fully Diluted Earnings Per Share Reconciliation of net income (loss) per statements to amounts used in computation of fully diluted net income (loss) per average common share: Net income (loss), as reported............................ $ (4,108) $ (5,122) $ 4,024 $ 12,582 Adjustments for assumed conversion of the 9% convertible subordinated debentures: Add interest on the debentures............................ (a) (a) 2,873 2,945 Add amortization expense on the debentures................ (a) (a) 271 273 Add foreign exchange loss recognized on interest payable on convertible debentures..................... (a) (a) - 14 Less foreign exchange transaction loss (gain) recognized on the debentures.......................... (a) (a) (117) (486) Add income tax effect of the debentures................... (a) (a) (1,069) - --------------------------- -------------------------- Net income (loss), as adjusted............................ $ (4,108) $ (5,122) $ 5,982 $ 15,328 =========================== ========================== Reconciliation of weighted average number of shares outstanding to amount used in computation of fully diluted net income per average common share: Weighted average number of shares outstanding............. 10,943 10,026 10,857 9,907 Adjustments for assumed conversion of 9% convertible subordinated debentures to common stock................ (a) (a) 6,745 7,124 Adjustments for assumed exercise of warrants and stock options, net of assumed treasury stock repurchases at period end prices................ (a) (a) 107 130 Adjustment for conversion of debentures held for part of period .......................................... (a) (a) 13 - Weighted average number of common and common --------------------------- -------------------------- equivalent shares outstanding, as adjusted............. 10,943 10,026 17,722 17,161 =========================== ========================== Fully diluted net income (loss) per average common shares.......................................... $ (0.38) $ (0.51) $ 0.34 $ 0.89 =========================== ==========================
(a) These items are anti-dilutive and thus are omitted from the calculation. EX-27 6 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1996 JUL-01-1995 MAR-31-1996 38,597 0 10,775 0 160,916 220,726 38,690 0 267,225 72,489 64,789 0 0 11,034 113,215 267,225 403,840 404,537 226,661 226,661 0 0 5,163 10,393 6,369 4,024 0 0 0 4,024 0.37 0.34
EX-99 7 RECLASSIFICATION OF PRIOR YEAR BALANCES EXHIBIT 99 INTERTAN, INC. RECLASSIFICATION OF PRIOR YEAR BALANCES During the year the Company made certain minor reclassifications in the presentation of certain revenue and expense items on the Consolidated Statements of Operations. Prior year balances have been reclassified, as appropriate, to conform with the current year presentation. Set out below are tables which compare, on a quarterly basis, the Statements of Operations for the prior year as reported and as reclassified. These tables exclude foreign currency transaction gains and losses, interest expense and provision for income taxes, none of which were affected by the reclassification. All amounts shown are in thousands.
(in thousands) First Quarter Ended Second Quarter Ended Third Quarter Ended September 30, 1994 December 31, 1994 March 31, 1995 --------------------------- -------------------------- -------------------------- As As As As As As Reported Reclassified Reported Reclassified Reported Reclassified ----------- -------------- ---------- -------------- ---------- -------------- Net sales..............................$ 108,464 $ 111,799 $ 179,836 $ 183,684 $ 97,707 $ 101,001 Other income........................... 1,496 104 2,328 862 1,610 217 --------------------------- -------------------------- --------------------------- 109,960 111,903 182,164 184,546 99,317 101,218 --------------------------- -------------------------- --------------------------- Operating costs and expenses: Cost of products sold................ 62,964 64,402 103,720 105,989 54,522 56,344 Selling, general and administrative expenses........... 44,924 45,429 57,011 57,124 45,599 45,678 Depreciation and amortization........ 2,027 2,027 1,969 1,969 1,865 1,865 --------------------------- -------------------------- --------------------------- 109,915 111,858 162,700 165,082 101,986 103,887 --------------------------- -------------------------- --------------------------- Operating income (loss)................$ 45 $ 45 $ 19,464 $ 19,464 $ (2,669) $ (2,669) =========================== ========================== =========================== Nine Months Ended Fourth Quarter Ended Twelve Months Ended March 31, 1995 June 30, 1995 June 30, 1995 --------------------------- -------------------------- -------------------------- As As As As As As Reported Reclassified Reported Reclassified Reported Reclassified ----------- -------------- ---------- -------------- ---------- -------------- Net sales..............................$ 386,007 $ 396,484 $ 91,777 $ 95,267 $ 477,784 $ 491,751 Other income........................... 5,434 1,183 1,410 34 6,844 1,217 --------------------------- -------------------------- --------------------------- 391,441 397,667 93,187 95,301 484,628 492,968 --------------------------- -------------------------- --------------------------- Operating costs and expenses: Cost of products sold................ 221,206 226,735 50,838 52,701 272,044 279,436 Selling, general and administrative expenses........... 147,534 148,231 45,285 45,536 192,819 193,767 Depreciation and amortization........ 5,861 5,861 1,643 1,643 7,504 7,504 Provision for business restructuring. - - (1,600) (1,600) (1,600) (1,600) --------------------------- -------------------------- --------------------------- 374,601 380,827 96,166 98,280 470,767 479,107 --------------------------- -------------------------- --------------------------- Operating income (loss)................$ 16,840 $ 16,840 $ (2,979) $ (2,979) $ 13,861 $ 13,861 =========================== ========================== ===========================
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