-----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, CiSFygRUWkN35j5RefSKfnA4j9dBUyFpgH8d8C78pIerWTsu/7SBWXRV2VglbDiJ VQfbJHX0ocF5fjP4QrC4Ig== 0000930661-97-001281.txt : 19970515 0000930661-97-001281.hdr.sgml : 19970515 ACCESSION NUMBER: 0000930661-97-001281 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERTAN INC CENTRAL INDEX KEY: 0000803227 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-RADIO TV & CONSUMER ELECTRONICS STORES [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: 97604978 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 SECURITIES AND EXCHANGE COMMISSION ---------------------------------- WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31,1997 or -------------- [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ------- ------- Commission file number 1-10062 ------- InterTAN, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-2130875 - ------------------------------- -------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 201 Main Street, Suite 1805 Fort Worth, Texas 76102 - ------------------------------ ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (817) 348-9701 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- At April 30, 1997, 11,686,015 shares of the registrant's common stock, par value $1.00 per share, were outstanding. PART I - FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS The Registrant's financial statements at and for the quarter ended March 31, 1997, providing the information required by Rule 10-01 of Regulation S-X, are included herewith as Exhibit A. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by Item 303 of Regulation S-K is included herewith as Exhibit B. 2 EXHIBIT A - FINANCIAL STATEMENTS AT AND FOR THE QUARTER ENDED MARCH 31, 1997. 3 CONSOLIDATED STATEMENTS OF OPERATIONS INTERTAN, INC. - -------------------------------------------------------------------------------- (In thousands, except per share data)
Three Months Ended Nine Months Ended March 31 March 31 -------------------- -------------------- 1997 1996 1997 1996 -------- -------- ------- -------- Net sales and operating revenues..................... $109,555 $108,757 $412,776 $403,840 Other income ........................................ 289 196 545 697 ----------------------------------------------------- 109,844 108,953 413,321 404,537 ----------------------------------------------------- Operating costs and expenses: Cost of products sold.............................. 58,802 59,410 229,335 226,661 Selling, general and administrative expenses....... 50,766 48,840 166,508 156,754 Depreciation and amortization...................... 2,566 2,014 7,162 5,827 ----------------------------------------------------- 112,134 110,264 403,005 389,242 ----------------------------------------------------- Operating income (loss).............................. (2,290) (1,311) 10,316 15,295 Foreign currency transaction (gains) losses.......... 124 (69) (802) (261) Interest expense, net................................ 1,503 1,516 5,008 5,163 ----------------------------------------------------- Income (loss) before income taxes.................... (3,917) (2,758) 6,110 10,393 Provision for income taxes........................... 1,216 1,350 6,373 6,369 ----------------------------------------------------- Net income (loss).................................... $ (5,133) $ (4,108) $ (263) $ 4,024 ===================================================== Primary net income (loss) per average common share... $ (0.45) $ (0.38) $ (0.02) $ 0.37 Fully diluted net income (loss) per average common share............................... $ (0.45) $ (0.38) $ (0.02) $ 0.34 Average common shares outstanding.................... 11,527 10,943 11,373 10,964 Average common shares outstanding assuming full dilution............................. 11,527 10,943 11,373 17,722
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. 4 CONSOLIDATED BALANCE SHEETS INTERTAN, INC. - -------------------------------------------------------------------------------- (In thousands, except share amounts)
March 31 June 30 March 31 1997 1996 1996 ----------------------------------------------- Assets Current Assets: Cash and short-term investments.................................... $ 39,036 $ 34,096 $ 38,597 Accounts receivable, less allowance for doubtful accounts.......... 9,829 9,422 10,775 Inventories........................................................ 171,757 162,207 160,916 Other current assets............................................... 6,258 7,628 8,585 Deferred income taxes.............................................. 435 3,831 1,853 ----------------------------------------------- Total current assets.......................................... 227,315 217,184 220,726 Property and equipment, less accumulated depreciation and amortization................................................... 38,904 39,129 38,690 Other assets......................................................... 2,648 2,928 2,851 Deferred income taxes................................................ - 2,392 4,958 ----------------------------------------------- $268,867 $261,633 $267,225 =============================================== Liabilities and Stockholders' Equity Current Liabilities: Short-term bank borrowings......................................... $ 9,769 $ 975 $ - Current maturities of notes payable to Tandy Corporation........... 6,958 6,958 17,071 Accounts payable................................................... 21,641 24,082 15,227 Accounts payable to Tandy Corporation.............................. 398 894 470 Accrued expenses................................................... 31,518 25,833 26,031 Income taxes payable............................................... 12,290 12,971 13,689 ----------------------------------------------- Total current liabilities..................................... 82,574 71,713 72,488 Long-term notes payable to Tandy Corporation, less current maturities......................................... 16,344 23,070 22,992 9% convertible subordinated debentures............................... 41,030 41,660 41,797 Other liabilities.................................................... 6,475 5,678 5,699 ----------------------------------------------- 146,423 142,121 142,976 ----------------------------------------------- Stockholders' Equity: Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding........................ - - - Common stock, $1 par value, 40,000,000 shares authorized, 11,629,245, 11,172,506 and 11,034,112 shares issued and outstanding................................. 11,629 11,173 11,034 Additional paid-in capital......................................... 113,686 111,678 111,008 Retained earnings.................................................. 18,869 19,132 25,397 Foreign currency translation effects............................... (21,740) (22,471) (23,190) ----------------------------------------------- Total stockholders' equity.................................... 122,444 119,512 124,249 ----------------------------------------------- Commitments and contingent liabilities............................... $268,867 $261,633 $267,225 ===============================================
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. 5 Consolidated Statements of Cash Flows InterTAN, Inc.
- ------------------------------------------------------------------------------------------------------------------------------ (In thousands) Nine months ended March 31 ------------------------------ 1997 1996 ------------------------------ Cash flows from operating activities: Net income (loss)....................................................................... $ (263) $ 4,024 Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation and amortization...................................................... 7,162 5,827 Deferred income taxes.............................................................. 5,801 6,708 Foreign currency transaction gains, unrealized..................................... (735) (261) Other.............................................................................. 1,706 1,786 Cash provided by (used for) current assets and liabilities: Accounts receivable................................................................ (307) (2,100) Inventories........................................................................ (8,370) (12,990) Other current assets............................................................... 1,203 524 Accounts payable................................................................... (3,168) (2,400) Accounts payable to Tandy Corporation.............................................. (499) 26 Accrued expenses................................................................... 5,525 496 Income taxes payable............................................................... (483) (346) ------- -------- Net cash provided by operating activities.......................................... 7,572 1,294 ------- -------- Cash flows from investing activities: Additions to property and equipment..................................................... (6,566) (9,649) Proceeds from sales of property and equipment........................................... 161 343 Other investing activities.............................................................. 1,089 1,955 ------- -------- Net cash used in investing activities................................................. (5,316) (7,351) ------- -------- Cash flows from financing activities: Changes in short-term bank borrowings, net............................................. 8,630 3,718 Proceeds from issuance of common stock to employee plans................................ 1,427 1,445 Proceeds from exercise of stock options................................................. - 760 Principal repayments on long-term borrowings............................................ (6,958) (6,958) ------- -------- Net cash provided by (used in) financing activities................................... 3,099 (1,035) Effect of exchange rate changes on cash.................................................. (415) 429 ------- -------- Net increase (decrease) in cash and short-term investments............................... 4,940 (6,663) Cash and short-term investments, beginning of period..................................... 34,096 $ 45,260 ------- -------- Cash and short-term investments, end of period........................................... 39,036 38,597 ======= ========
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. 6 Consolidated Statements of Stockholders' Equity InterTAN, Inc.
- ----------------------------------------------------------------------------------------------------------------------------- (In thousands) Foreign Additional Currency Total Common Stock Paid-in Retained Translation Stockholders' Shares Amount Capital Earnings Effects Equity ------------------------------------------------------------------------------ Balance at June 30, 1996................. 11,173 $11,173 $111,678 $19,132 ($22,471) $119,512 Net foreign currency translation adjustments................. - - - - 731 731 Issuance of common stock to employee plans....................... 456 456 2,008 - - 2,464 Net income............................... - - - (263) - (263) ------- ------- -------- ------- -------- -------- Balance at March 31, 1997................ 11,629 $11,629 $113,686 $18,869 ($21,740) $122,444 ====== ======= ======== ======= ======== ========
The comments in Management's Discussion and Analysis of Financial Condition and Results of Operations are an integral part of these statements. 7 EXHIBIT B - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION ------------------------------------------------------- With the exception of historical information, the matters discussed herein are forward-looking statements about the business, financial condition and prospects of InterTAN, Inc. (the "Company"). The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, but not limited to, international economic conditions, interest and foreign exchange rate fluctuations, various tax issues, including possible reassessments, changes in product demand, competitive products and pricing, availability of products, inventory risks due to shifts in market conditions, dependence on manufacturers' product development, the regulatory and trade environment, real estate market fluctuations and other risks indicated in the Company's previous filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, and in many cases the Company cannot predict the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. RESULTS OF OPERATIONS --------------------- The Company is a retailer of consumer electronics products with locations in Canada, Australia and the United Kingdom. The number of company-operated stores and dealers at March 31, 1997 and 1996 is presented in the table below: SALES OUTLETS
THREE MONTHS ENDED THREE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 ------------------------ ----------------------- ENDING OPENED CLOSED ENDING OPENED CLOSED CANADA Company-operated 452* 1 4 448 2 3 Dealers 429 6 3 420 3 5 ----- -- -- ----- -- -- 881 7 7 868 5 8 === == == ===== == = AUSTRALIA Company-operated 212 - 1 209 2 1 Dealers 195 1 16 202 2 18 ----- -- -- ----- -- -- 407 1 17 411 4 19 ===== == == ===== == == UNITED KINGDOM Company-operated 348 - 3 346 1 2 Dealers 172 - 3 175 10 - ----- -- -- ----- -- -- 520 - 6 521 11 2 ===== == == ===== == == TOTAL Company-operated 1,012 1 8 1,003 5 6 Dealers 796 7 22 797 15 23 ----- -- -- ----- -- -- 1,808 8 30 1,800 20 29 ===== == == ===== == ==
*In addition, the Company operated 49 stores on behalf of Rogers Cantel Inc. 8 OPERATING INCOME The Company's operating income (loss) for each geographic segment for the three and nine-month periods ended March 31, 1997 and 1996 is presented in the following table (in thousands): OPERATING INCOME (LOSS) ------------------------
UNITED CORPORATE CANADA AUSTRALIA KINGDOM EXPENSES TOTAL ------ --------- ------- -------- -------- Three Months Ended March 31, 1997 $ 3,210 $ 547 $(4,963) $(1,084) $(2,290) Three Months Ended March 31, 1996 $ 3,589 $ 153 $(3,801) $(1,252) $(1,311) Nine Months Ended March 31, 1997 $16,247 $3,914 $(6,712) $(3,133) $10,316 Nine Months Ended March 31, 1996 $19,326 $2,370 $(2,874) $(3,527) $15,295
Foreign exchange fluctuations accounted for $263,000 of the increase in the consolidated operating loss for the three-month period ended March 31, 1997. For the nine-month period ended March 31, 1997, the effect of foreign exchange fluctuations was not significant. NET SALES Net sales for the quarter ended March 31, 1997 were $109,555,000, an increase of 0.7% over the sales for the same quarter in the prior year of $108,757,000. When the impact of fluctuations in the value of the US dollar in relation to the currencies of the countries in which the Company operates is removed, the sales increase reverses to a loss of 2.2%. Comparative store sales, measured at the same exchange rate, decreased by 4.5% from the same quarter in the prior year. Year to date, sales have increased by 2.2% in US dollars. In local currency, however, year to date sales have decreased by 0.2%. Comparative store sales for the nine months ended March 31, 1997 have decreased 2.0% from the same period a year ago. The table which follows shows by country the percentage changes in net sales for the quarter and nine months ended March 31, 1997 compared to the corresponding periods in the prior year. Changes are presented in both US dollars and local currencies to illustrate the effects of exchange rate fluctuations. The change in comparative store sales, measured at the same exchange rates, is also shown: 9 NET SALES --------- PERCENTAGE INCREASE (DECREASE) ------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, 1997 MARCH 31, 1997 LOCAL COMPARATIVE LOCAL COMPARATIVE US$ CURRENCY STORE US$ CURRENCY STORE ----- -------- ----------- ----- -------- ----------- Canada 1.1 % 0.4 % (3.4)% (0.2)% (0.2)% (2.9)% Australia (1.4)% (4.2)% (7.6)% 9.7 % 4.0 % 1.2 % United Kingdom 1.6 % (4.7)% (4.1)% 1.7 % (2.5)% (2.6)%
Like most retailers, the sales performance of the Company for the quarter was negatively affected by the fact that last year was a leap year, resulting in an extra selling day in February, and by the fact that Easter in 1997 fell in March rather than April, as was the case a year ago. Management estimates that these two factors combined to affect the sales comparison with last year by approximately $2 million or 2 percentage points. In addition, soft computer and cellular sales depressed sales in all three of the Company's markets. Management believes that consumers have delayed major computer purchases in the anticipation of the introduction of the new MMX technology. The roll-out of these products took place much later in the countries in which the Company operates than was the case in the United States. The transition from analog to digital-based cellular products has also had a negative effect on sales performance, particularly in the U.K. and Australia. In Canada, severe winter weather conditions in Eastern Canada and certain regions of the west placed pressure on sales. While the performance of the new company-operated Cantel stores continues to run short of expectations, some improvements have been made. Management has recently been reorganized at store level to control costs and the stores have been remerchandised to display the complete product assortment - both cellular and other communications end equipment and accessories - more effectively. At quarter-end, the Company operated 49 stores on behalf of Rogers Cantel Inc., increasing to 57 stores in April. The impact of soft cellular sales was felt most in Australia. In that country, the government-controlled air network will not be supporting analog product beyond 1999. Management believes customers are reluctant to commit to a product which has such a short life. While digital product is available, until recently its pricing was such that it was not an affordable alternative to many consumers. Management anticipates that this situation should be improved with the introduction of newer, more attractively priced digital products late in the fiscal year. In the U.K., sales performance was affected by the nature of the Company's agreement to sell computers for the German manufacturer, Vobis Microcomputer AG ("Vobis"). Under this arrangement, Vobis retains title to and merchandising control of the inventory and the Company is the sales agent for Vobis, receiving a commission on each sale. Had the Company purchased, 10 managed and sold computer inventory as it had done in the past, the revenue generated from the sale of computers, rather than commissions earned, would have produced an overall small sales gain. Difficulties with product supply and quality have also been experienced with this program. Management is actively working with Vobis to address these issues. Cellular sales were also soft in the U.K., with the number of activations down from a year ago. Management attributes this decline to a pricing policy by carriers designed to encourage consumers away from analog product, which has been traditionally more affordable than digital product. GROSS MARGIN AND COST OF PRODUCTS SOLD The gross margin percentage increased to 46.3% in the third quarter of fiscal 1997 from 45.4% a year ago, an increase of 90 basis points. The most significant improvement was in Australia, where margins strengthened by 5.4 percentage points over the same quarter last year. In the United Kingdom, margins declined by 60 basis points, while in Canada margins increased by 10 basis points. Year to date, the consolidated gross margin percentage is 50 basis points ahead of the prior year. The effect of a higher gross margin percentage, combined with the effect of stronger currencies generally, was partially offset by the negative impact of lower sales. Overall, gross margin dollars for the quarter increased by $1,407,000: Increase in margin percentage $ 1,118,000 Decrease in sales (1,135,000) Foreign exchange rate effects 1,424,000 ----------- $ 1,407,000 =========== In Canada, pricing cuts were taken on a selected group of products which were then promoted in an effort to grow sales. Despite the pressure that this strategy placed on margins, Canada was nevertheless able to achieve a slight increase in the gross margin percentage by increasing the proportion of higher margin private label products, especially batteries and parts and accessories, in the sales mix. A higher gross margin percentage continues to be a significant factor in the improved performance of the Australian subsidiary. There are a variety of reasons for this margin increase, including initiatives directed at increasing the level of extended warranty contracts and the introduction of an innovative and profitable service to recondition rechargeable batteries. Cellular air time rebates, reflecting cumulative activations, continue to be an increasingly important factor in Australia's margin improvement. Finally, while weak cellular sales depressed overall sales, the reduction had a positive effect on the gross margin performance. 11 In the U.K., significant efforts were made to promote the sale of discontinued merchandise, not only to clear older stock and reduce inventory levels generally, but also to generate sales. Sales of these products drove down the gross margin percentage for the quarter. The negative effect of this reduction was partially offset by commissions from the sale of Vobis computers, which flow directly to margin. See discussion under "Net Sales". SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Total selling, general and administrative expenses ("SG&A expenses") for the three months ended March 31, 1997 were $50,766,000 compared to $48,840,000 in the third quarter of the prior year, an increase of $1,926,000 or 3.9%. Year to date, SG&A expenses have increased from $156,754,000 for the nine months ended March 31, 1996 to $166,508,000 in the current period, an increase of $9,754,000 or 6.2%. Foreign currency rate fluctuations accounted for $1,587,000 and $3,710,000 of the increase for the quarter and year-to-date, respectively. When these foreign currency effects are eliminated, SG&A expenses for the quarter and year to date increased, at constant exchange rates by 0.7% and 3.8%, respectively. The following table provides a breakdown of SG&A expenses by major category for the three and nine-month periods ended March 31, 1997 (percentages shown are as a rate to sales): SELLING, GENERAL AND ADMINISTRATIVE EXPENSES -------------------------------------------- (In thousands, except percents)
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31 MARCH 31 1997 1996 1997 1996 ------------- ------------- ------------- ------------- AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. AMOUNT PCT. ------- ---- ------- ---- ------- ---- ------- ---- Advertising $ 5,384 4.9 $ 5,344 4.9 $ 22,240 5.4 $ 20,704 5.1 Rent 10,831 9.9 10,110 9.3 32,634 7.9 30,590 7.6 Payroll 20,459 18.7 19,997 18.4 67,418 16.3 63,620 15.8 Taxes (other than income taxes) 4,336 4.0 3,927 3.6 13,714 3.3 12,636 3.1 Telephone and Utilities 1,917 1.7 1,842 1.7 5,637 1.4 5,248 1.3 Other 7,839 7.1 7,620 7.0 24,865 6.0 23,956 5.9 ------- ---- ------- ---- -------- ---- ------- ---- Total $50,766 46.3 $48,840 44.9 $166,508 40.3 $156,754 38.8 ======= ==== ======= ==== ======== ==== ======== ====
As indicated above, while SG&A expenses increased by $1,926,000 for the quarter, $1,587,000 of this increase was attributable to foreign currency rate effects. Previous initiatives to control SG&A spending had an effect in the third quarter, as the real increase in SG&A spending of $339,000, measured at constant exchange rates, is more than explained by one-time severance 12 costs and the scheduled increase in the royalty payable to Tandy Corporation ("Tandy"). Consequently, a sales performance which fell short of expectations was the major factor contributing to an increase in the SG&A percentage for the quarter of 1.4 percentage points to 46.3%. Management's stated objective for fiscal year 1997 was to achieve a one percentage point increase in operating margin as a percentage of sales (i.e., the gross margin percentage, net of the change in the SG&A percentage). While the gross margin percentage for the quarter was increased by 90 basis points, the effect of this improvement was more than offset by the increase in the SG&A percentage. In future quarters, management will continue its focus on this issue and will take further action to keep SG&A growth more closely aligned with realized sales gains. However, as a result of performance year to date, management believes it is unlikely that the operating margin objective will be achieved for the fiscal year. NET INTEREST EXPENSE Net interest expense of $1,503,000 for the three months ended March 31, 1997 was comparable with the corresponding amount reported during the same quarter last year. Net interest expense for the nine months ended March 31, 1997 of $5,008,000 was $155,000 lower than in the same period last fiscal year. PROVISION FOR INCOME TAXES An income tax provision of $1,216,000 was recorded during the quarter, primarily relating to the profits of the Canadian subsidiary. In the third quarter of fiscal year 1996, a net tax provision of $1,350,000 was recorded. For the nine months ended March 31, 1997, income tax expense of $6,373,000 was recorded compared to $6,369,000 in the first nine months of the prior year. The unusually high effective tax rate, on a consolidated basis, is due to the fact that the Company received no tax benefit from the operating losses incurred by its U.K. subsidiary, while tax expense must be recognized on the profits of the Canadian subsidiary. Management expects this trend to continue until profitability is restored in the U.K. NET INCOME PER AVERAGE COMMON SHARE The primary and fully diluted net losses per average common share were $0.45 for the three-month period ended March 31, 1997, as compared to a loss of $0.38 for the same quarter in the prior year. For the nine-month period ended March 31, 1997, the primary and fully diluted net losses per average common share were $0.02, compared to net incomes of $0.37 and $0.34, respectively, for the same period a year ago. 13 In the nine-month period ended March 31, 1996, the difference between primary and fully diluted net income per average common share was due primarily to the Company's 9% convertible subordinated debentures (the "Debentures"), which are convertible into 6,745,346 common shares. The Company has outstanding warrants exercisable for 1,449,007 common shares at an exercise price of $6.618 per share. At March 31, 1997 and March 31, 1996, directors and employees of the Company and its subsidiaries held options to purchase 795,333 and 502,000 shares, respectively, at prices ranging from $5.31 to $8.1875 per share. The outstanding warrants and options were also considered in determining primary and fully diluted net income per average common share. The dilutive effect of these various instruments will likely continue in future periods, and exchange rate impacts on the Debentures could increase or decrease their dilutive effects. In February 1997, the Financial Accounting Standards Board ("FASB") issued Financial Accounting Standard No. 128, Earnings per Share ("FAS 128"), which is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. Effective December 31, 1997, the Company will adopt FAS 128, which established new standards for computing and presenting earnings per share ("EPS"). The statement requires dual presentation of basic and diluted EPS on the face of the income statement for entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation, to the numerator and denominator of the diluted EPS computation. Basic EPS excludes the effect of potentially dilutive securities while diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, converted, or resulted in the issuance of common stock that would then share in the earnings of the entity. For the three and nine months ended March 31, 1997, pro forma basic and diluted loss per common share computed pursuant to FAS 128 would not have differed from that presented on the face of the Consolidated Statement of Operations. FINANCIAL CONDITION ------------------- Most balance sheet accounts are translated from their values in local currency to US dollars at the respective month end rates. The table below outlines the percentage change, to March 31, 1997, in exchange rates as measured against the US dollar:
FOREIGN EXCHANGE RATE FLUCTUATIONS ---------------------------------- % INCREASE % INCREASE (DECREASE) (DECREASE) FROM MARCH 31, 1996 FROM JUNE 30, 1996 ------------------- ------------------ Canada (1.8) (1.5) Australia 0.5 (0.2) United Kingdom 7.3 5.6
14 INVENTORIES Inventories have increased from $162,207,000 at June 30, 1996 to $171,757,000 at March 31, 1997, an increase of $9,550,000. Inventories at March 31, 1996 were $160,916,000, resulting in a year-on-year increase of $10,841,000. Approximately 20% of each of these increases is attributable to foreign currency rate effects, in particular a stronger pound sterling. The remainder is primarily attributable to the United Kingdom subsidiary, where higher inventory levels have resulted from the implementation of the Company's merchandising strategy, which places greater emphasis on private label products, as these products require larger order sizes and longer order lead time. The effects of this strategy had been experienced earlier in Canada and Australia. Also contributing to the increases in the United Kingdom subsidiary's inventory was a lower than expected level of sales both during the third quarter and year-to- date. Inventory levels in the United Kingdom subsidiary are being actively managed down and some improvement was experienced during the third quarter. Management anticipates that by the end of the fiscal year, inventories in the United Kingdom subsidiary will be more closely aligned with the prior year. Management also believes that the Company's inventory, in all three countries, is of good quality and will be sold through in the ordinary course of business, without the need for significant mark downs. CURRENT MATURITIES OF NOTES PAYABLE TO TANDY CORPORATION Current maturities of notes payable to Tandy have decreased from $17,071,000 at March 31, 1996 to $6,958,000 at March 31, 1997 and June 30, 1996. This decrease results from the scheduled repayment of the Series B Note to Trans World Electronics, Inc. ("Trans World"), a subsidiary of Tandy, in the principal amount of $10,113,000. The balances of $6,958,000 at March 31, 1997 and June 30, 1996, represent the amount of the Series A Note payable to Trans World over the next twelve months. ACCOUNTS PAYABLE The level of accounts payable has decreased from $24,082,000 at June 30, 1996 to $21,641,000 at March 31, 1997. At March 31, 1997, accounts payable were $6,414,000 higher than at March 31, 1996. This increase in accounts payable result primarily from an increase in the level of inventories, deferred payment terms with suppliers and from foreign currency rate effects. ACCRUED EXPENSES Accrued expenses have increased from $25,833,000 at June 30, 1996 and $26,031,000 at March 31, 1996 to $31,518,000 at March 31, 1997. These increases result from a variety of timing differences, including the payment of compensation, advertising costs and property and sales taxes. The increase in the sale of extended warranties has also lead to an increase in deferred service contract income. 15 INCOME TAXES PAYABLE Income taxes payable were $12,290,000 at March 31, 1997 compared to balances at June 30, 1996 and March 31, 1996 of $12,971,000 and $13,689,000, respectively. An audit of the Canadian income tax returns of the Canadian subsidiary for the 1987 to 1989 taxation years was completed during fiscal year 1994, resulting in additional tax being levied against the Canadian subsidiary. The Company has appealed these reassessments and, pending the outcome of these matters, the Company, by Canadian law, was required to pay one-half of the tax in dispute. The tax levied by Revenue Canada in reassessing those years was offset by refunds arising from the carry-back of losses incurred in subsequent years. Depending on the ultimate resolution of these issues, the Company could potentially have an additional liability in the range of $0 to $10,700,000. The Company believes it has meritorious arguments in defense of the issues raised by Revenue Canada and it is in the process of vigorously defending its position. It is management's determination that no additional provision need be recorded for these reassessments. In order for the Company to succeed in appealing certain aspects of these reassessments, it must succeed in defending the possible reassessments discussed in the immediately following paragraph. The Company was advised in August 1995 that Revenue Canada intended to extend the scope of its 1987 to 1989 reassessments to raise certain issues flowing from the spin-off of the Company from Tandy in fiscal year 1987. Management disagrees with Revenue Canada's views on these issues and will vigorously defend the Company's position should Revenue Canada pursue these issues. Management believes it has meritorious arguments supporting its stance and, accordingly, no additional provision has been recorded for these possible reassessments. Tax reassessments related to these issues, if successfully pursued, could potentially range from $14,000,000 to $20,000,000. As required by Canadian law, the Company would likely be required to post a deposit of one-half of the tax in dispute, including interest, in order to appeal any reassessment. An audit of the Canadian income tax returns of the Canadian subsidiary for the 1990 to 1993 taxation years was commenced during the 1995 fiscal year. The Company has been advised that Revenue Canada is challenging certain interest deductions relating to the Canadian subsidiary's former operations in continental Europe and is proposing to tax certain foreign exchange gains related to such operations. Management estimates that the possible range of loss should Revenue Canada ultimately prevail in these matters, after all appeals have been unsuccessfully pursued by the Company, could range from $18,000,000 to $25,000,000. Assuming Revenue Canada pursues these issues, in order for the Company to proceed with such appeals, the Company would likely be required to post a cash deposit or letters of credit equal to one-half of the 1990-1993 tax in dispute, together with interest, which management estimates should not exceed $9,000,000. Notwithstanding that the Company is still in discussions with Revenue Canada regarding these issues, Revenue Canada was required to issue a protective reassessment for one 16 of the years because the time period during which such reassessment could legally be issued was about to expire. The amount of the reassessment, including interest, is approximately $13,800,000. This amount relates to the 1992 taxation year only and is reflected in the range described immediately above. The Company has appealed this reassessment and, as indicated above, may be required to post a cash deposit or letters of credit equal to one-half of the reassessment, pending the outcome of such appeal. Management believes it has meritorious arguments in support of the deductibility of such interest and in support of its treatment of the foreign exchange gains and is prepared to vigorously defend its position should the Canadian tax authorities proceed with such a challenge following the conclusion of discussions with the Company and its advisors. Accordingly, it is management's assessment that no provision need be recorded for these possible claims. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Operating activities generated $7,572,000 in cash during the nine months ended March 31, 1997 compared to $1,294,000 in the same period of the prior year, an increase of $6,278,000. Increases in inventory levels used $4,620,000 less cash than in the previous fiscal year. Accrued expenses conserved $5,525,000 in cash for the period as compared to $496,000 in the previous year, the difference relating primarily to the timing of advertising expenditures and an accrual for the payment of sales related taxes in the United Kingdom. The benefits of the additional cash generated by these changes were partially offset by a reduction in net income, adjusted to reconcile net income to cash, which generated $4,413,000 less cash than last year, falling from $18,084,000 for the nine months ended March 31, 1996 to $13,671,000 at the end of the third quarter of the current fiscal year. Cash flow from investing activities consumed $5,316,000 during the current year to date period, as compared with $7,351,000 a year ago. This decrease is primarily attributable to a planned reduction in capital spending. Financing activities provided $3,099,000 in cash during the nine months ended March 31, 1997, while consuming $1,035,000 in cash during the same period a year ago. This change results primarily from an increase of $4,912,000 in the level of short-term borrowings needed to finance operations. This increase in cash was partially offset by the fact that there were no exercises of stock options by employees, thus no cash generated, during the nine months ended March 31, 1997. The exercise of such options had generated $760,000 in cash a year ago. The Company's principal sources of liquidity during fiscal year 1997 are its cash and short-term investments, its cash flow from operations and its banking facilities. On May 6, 1994, InterTAN Canada Ltd., InterTAN, Inc., and InterTAN U.K. Limited entered into a one-year credit agreement ("Syndicated Loan Agreement") with a syndicate of banks. This agreement established a one year revolving facility in an amount which is determined using an inventory level calculation not to exceed Cdn$60,000,000 ($43,332,000 at March 31, 1997 exchange rates). This agreement has been renewed and now extends through mid-August, 1997. 17 The Company intends to request a further extension of the facility prior to August, 1997 and reasonably believes that the banking syndicate will agree to such renewal; however, there can be no guarantee of such renewal. This facility is used primarily to provide letters of credit in support of purchase orders and, from time to time, to finance inventory purchases. At March 31, 1997, there were borrowings against the credit facility aggregating $9,769,000. In September 1996, the Company's Australian subsidiaries, InterTAN Australia Ltd. and Technotron Sales Corp. Pty. Ltd., entered into a credit agreement with an Australian bank (the "Australian Facility"). This agreement established a credit facility in the amount of A$12,000,000 ($9,432,000 at March 31, 1997 exchange rates). The Australian Facility has no fixed term and may be terminated at any time upon five days prior written notice by the lender. All or any part of the facility may be used to provide letters of credit in support of purchase orders. A maximum amount of A$5,000,000 ($3,930,000 at March 31, 1997 exchange rates) may be used in support of short-term borrowings. Interest is charged on such borrowings at the Australian Indicator Lending Rate plus 1.25 percentage points. At March 31, 1997, there were no borrowings outstanding against the Australian Facility. In addition to the credit facilities described above, the Company's principal sources of outside financing have been from the borrowings evidenced by the Series A Note payable to Trans World and the Debentures. Both the Series A Note and the Syndicated Loan Agreement preclude the Company from paying dividends on its common stock. Accordingly, any such payment would require the refinancing of any amounts outstanding under these loan agreements or the consent of the Company's banking syndicate and Trans World; there can be no assurance that either event would occur. In addition, the Series A Note and the Syndicated Loan Agreement contain covenants which require the Company to maintain tangible net worth at a specified minimum level and which limit the level of debt due both to Tandy as well as other parties, annual capital spending and lease commitments and require the Company to maintain debt to equity and working capital ratios at agreed levels. These loan agreements also require the Company to meet certain interest coverage ratios. At March 31, 1997, the Company was in compliance with all of these requirements. Management expects that the Company will meet these requirements, as modified, during the remainder of fiscal year 1997. The Company's primary uses of liquidity during the remainder of fiscal year 1997 will include the funding of capital expenditures which the Company anticipates will approximate $2,200,000 during the remainder of fiscal year 1997, mainly related to store expansion, remodeling and upgrading. As previously described, the Company believes that it may be required to post additional tax deposits or letters of credit with Revenue Canada in order to appeal existing, and, possibly, additional reassessments of tax. See "Income Taxes Payable". Management believes that the Company's cash and short-term investments on hand and its cash flow from operations coupled with the Syndicated Loan Agreement and the Australian Facility 18 will provide the Company with sufficient liquidity to meet its planned requirements through the 1997 Christmas selling season, provided the amount of any additional tax deposits were not at the upper end of the ranges described above under "Income Taxes Payable". If this were the case, the Company would be required to seek additional sources of liquidity. Management is currently in the process of studying additional funding alternatives. However, there can be no assurance that additional funding would be available, if required, on terms acceptable to the Company. CONTINGENCIES ------------- Claims have been made by a former employee for damages for wrongful dismissal totaling approximately $870,000. The Company is vigorously defending this action. The Company believes that the possible range of loss in this matter is less than the amount claimed by this former employee, and the Company has recorded a provision representing its best estimate of any liability which may ultimately arise. In the fourth quarter of fiscal year 1993, the Company recorded a pre-tax charge of $77,400,000 in connection with the Company's plan to close its continental European retail operations. The shutdown process is now substantially complete. Management believes that the remaining provision is adequate to provide for the Company's remaining obligations in Europe, including claims brought against the Company by certain trade creditors, former employees, dealers and franchisees. Apart from these matters and those described under "Income Taxes Payable", there are no material pending legal proceedings or claims, other than routine litigation incidental to the Company's business, to which the Company or any of its subsidiaries is a party, or to which any of its property is subject. BASIS OF FINANCIAL STATEMENTS ----------------------------- The accompanying unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation SX, "Interim Financial Statements", and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The financial statements have been prepared in conformity with accounting principles and practices (including consolidation practices) as reflected in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996, and, in the opinion of the Company, include all adjustments necessary for fair presentation of the Company's financial position as of March 31, 1997 and 1996 and the results of its operations for the three and nine months ended March 31, 1997 and 1996 and its cash flow for the nine months ended March 31, 1997 and 1996. Such adjustments are of a normal and recurring nature. Operating results for the three and nine months ended March 31, 1997 are not necessarily indicative of the results that can be expected for the fiscal year ended June 30, 1997. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1996. 19 PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS The various matters discussed under the heading "Contingencies" on page 19 of this Form 10-Q are incorporated herein by reference. ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were put to a vote of the Company's stockholders during the three month period ended March 31, 1997. ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Required by Item 601 of Regulation S-K: Exhibit No. Description 3(a) Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(a)(i) Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN's Annual Report on Form 10- K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(a)(ii) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference). 20 Exhibit No. Description 3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(b)(iii) Amended and Restated Bylaws (filed as Exhibit 3(b)(iii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1996 and incorporated herein by reference). 4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a)). 4(b) Amended and Restated Rights Agreement between InterTAN Inc. and The First National Bank of Boston (Filed as Exhibit 4(b) to InterTAN's report on Form 8-K dated September 25, 1989 and incorporated herein by reference). 4(c) Trust Indenture securing the issue of 9% Convertible Subordinated Debentures due August 30, 2000 (Filed as Exhibit 4(c) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1993 and incorporated herein by reference). 4(d) Warrant Agreement dated August 5, 1993 between InterTAN, Inc. and Trans World Electronics, Inc. (filed as Exhibit 10(h) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1993, and incorporated herein by reference). *10(a) Amending Agreement dated February 11, 1997 amending the Credit Agreement. *10(b) Third Amendment to InterTAN Advertising Agreement dated to be effective as of January 1, 1997. 21 Exhibit No. Description *10(c) Retirement Agreement dated March 3, 1997 between InterTAN, Inc. and James Michael Wood. *11 Statement of Computation of Earnings Per Share. *27 Article 5, Financial Data Schedule. - ---------------------- * Filed herewith b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended March 31, 1997. 22 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. InterTAN, Inc. (Registrant) Date: May 14, 1997 By: /s/James T. Nichols --------------------------------- James T. Nichols President and Chief Executive Officer (Authorized Officer) By: /s/Douglas C. Saunders ---------------------------------- Douglas C. Saunders Vice President and Corporate Controller (Principal Accounting Officer) 23 INTERTAN, INC. FORM 10-Q INDEX TO EXHIBITS Exhibit No. Description 3(a) Restated Certificate of Incorporation (Filed as Exhibit 3(a) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(a)(i) Certificate of Amendment of Restated Certificate of Incorporation (Filed as Exhibit 3(a)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(a)(ii) Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Filed as Exhibit 3(a)(i) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's Registration Statement on Form 10 and incorporated herein by reference). 3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1990 and incorporated herein by reference). 3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as Exhibit 3(b)(ii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1995 and incorporated herein by reference). 3(b)(iii) Amended and Restated Bylaws (filed as Exhibit 3(b)(iii) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1996 and incorporated herein by reference). Exhibit No. Description 4(a) Articles Fifth and Tenth of the Restated Certificate of Incorporation (included in Exhibit 3(a)). 4(b) Amended and Restated Rights Agreement between InterTAN Inc. and The First National Bank of Boston (Filed as Exhibit 4(b) to InterTAN's report on Form 8-K dated September 25, 1989 and incorporated herein by reference). 4(c) Trust Indenture securing the issue of 9% Convertible Subordinated Debentures due August 30, 2000 (Filed as Exhibit 4(c) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1993 and incorporated herein by reference). 4(d) Warrant Agreement dated August 5, 1993 between InterTAN, Inc. and Trans World Electronics, Inc. (filed as Exhibit 10(h) to InterTAN's Annual Report on Form 10-K for fiscal year ended June 30, 1993, and incorporated herein by reference). *10(a) Amending Agreement dated February 11, 1997 amending the Credit Agreement. *10(b) Third Amendment to InterTAN Advertising Agreement dated to be effective as of January 1, 1997. *10(c) Retirement Agreement dated March 3, 1997 between InterTAN, Inc. and James Michael Wood. *11 Statement of Computation of Earnings Per Share. *27 Article 5, Financial Data Schedule. - ------------------- * Filed herewith EX-10.(A) 2 AMENDING AGREEMENT Exhibit 10(a) ------------- AMENDING AGREEMENT ------------------ THIS AGREEMENT, dated as of February 11, 1997, is made by and between INTERTAN CANADA LTD., a corporation existing under the laws of the Province of Alberta ("ICL"), INTERTAN U.K. LIMITED, a limited liability company existing under the laws of England ("IUK"), INTERTAN INC., a corporation existing under the laws of Delaware ("InterTAN"), CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian chartered bank ("CIBC"), as Agent and the Lenders from time to time listed on the signature pages hereof. WHEREAS the parties hereto entered into a credit agreement dated as of May 6, 1994 whereby the Lenders established certain credits in favour of the Borrowers which agreement was amended by Amending Agreement dated as of April 25, 1995 and further amended by Amending Agreement dated as of March 1, 1996, Amending Agreement dated as of June 25, 1996 and Amending Agreement dated as of September 11, 1996 (together referred to as the "Credit Agreement"); AND WHEREAS the parties wish to further amend the Credit Agreement; NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the parties hereto agree as follows: 1. INTERPRETATION. In this Agreement, defined terms shall have the meaning -------------- given in the Credit Agreement. 2. AMENDMENTS. ---------- (a)Section 11.1(m) is amended to read as follows: (m) Cash Interest Coverage Ratio. ---------------------------- InterTAN will have a Cash Interest Coverage Ratio calculated at the end of each period set out below of not less than (i) 1.25:1 for the nine month period ending March 31, 1994 and the twelve month periods ending June 30, 1994 and September 30, 1994, (ii) 1.50:1 for the twelve month period ending December 31, 1994, (iii) 1.05:1 for the twelve month period ending March 31, 1996, 1.25:1 for the twelve month period ending June 30, 1996, .90:1 for the twelve month period ending September 30, 1996 and (iv) 1.0:1 for the twelve month periods ending December 31, 1996 and March 31, 1997, 1.05:1 for the twelve 2 month period ending June 30, 1997 and 1.50:1 for each twelve month period ending each March 31, June 30, September 30 and December 31 thereafter. 3. AMENDMENT FEE. The Borrower shall pay to the Agent for the benefit of the ------------- Lenders, upon the execution and delivery of this Agreement, a fee for the amendment of the Credit Agreement equal to one-fifth of one percent of the amount of the Credits, to be dispersed to the Lenders according to their pro rata shares. 4. CONTINUING EFFECT. Each of the parties hereto acknowledges and agrees ----------------- that the Credit Agreement as amended by this Agreement shall be and continue in full force and effect. 5. COUNTERPARTS. This Agreement may be executed in counterparts, each of ------------ which will be deemed to be an original and which together will constitute one and the same agreement. IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date and year first above written. CANADIAN IMPERIAL BANK OF COMMERCE, as Agent By: /s/ Jeff Bond ------------------------------------------- Authorized Officer CANADIAN IMPERIAL BANK OF COMMERCE, as Lender By: /s/ H.D. Chataway ------------------------------------------- Authorized Officer THE FIRST NATIONAL BANK OF BOSTON, as U.K. Administrative Agent and as a Lender By: /s/ Judith C.E. Kelly ------------------------------------------- Vice President 3 LLOYDS BANK PLC By: /s/ J.N. Mortell ------------------------------------------- Manager, Corporate Banking CREDIT LYONNAIS CANADA By: /s/ Dexter M. Blackwood ------------------------------------------- By: /s/ C.M. Stade ------------------------------------------- INTERTAN CANADA LTD. By: /s/ James G. Gingerich ------------------------------------------- Vice President INTERTAN INC. By: /s/ James T. Nichols ------------------------------------------- President and CEO INTERTAN U.K. LIMITED By: /s/ James T. Nichols ------------------------------------------- Director EX-10.(B) 3 THIRD AMENDMENT TO INTERTAN ADVERTISING AGREEMENT Exhibit 10(b) ------------- Third Amendment to ------------------ InterTAN Advertising Agreement ------------------------------ This Third Amendment to the InterTAN Advertising Agreement (the "Agreement") is by and between InterTAN, the InterTAN Group, and Tandy (all as defined in the Agreement). The parties hereto agree as follows: 1. Paragraph 1. of the Agreement (as previously amended), Section a), entitled "License of Materials". is hereby deleted and in its place is added the ---------------------------------------------------------------------- following: - --------- "a) License of Materials. -------------------- (i) Subject to all payments required hereunder being timely made by INTERTAN GROUP and to INTERTAN GROUP's compliance with all the terms of this Agreement, TANDY agrees to provide InterTAN with the following (which are collectively referred to in this Agreement as "Materials"): (a) Market Research. Copies of all printed market research --------------- completed between January 1, 1994 and to December 31, 1997 on The Repair Shop at Radio Shack, You've Got Questions! We've Got Answers! and the Radio Shack Gift Express programs ("Programs") which were used by TANDY in the development of new and updated marketing strategies for TANDY's Radio Shack Division; 1 (b) Program Schedules. Copies of printed Radio Shack ----------------- advertising schedules and calendars (including all changes) for 1997 for the Programs; (c) Sales Percentage. Printed bi-monthly advice of sales growth ---------------- percentage by category for the Programs in 1997; (d) Flyers and Inserts. Pre-release printed copies of all ------------------ flyers and inserts for the Programs used by TANDY during 1997; (e) Television Commercials. Video tape copies of all newly ---------------------- developed television commercials used by TANDY for the Programs during 1997; and (f) Radio Commercials. Cassette copies of all newly developed ----------------- radio commercials used by TANDY for the Programs during 1997. (ii) Subject to TANDY's entering into a definitive agreement with Lord, Dentsu & Partners and subject to the provisions of that agreement, TANDY grants a non-assignable, non-exclusive license to INTERTAN GROUP to use the Materials in the Licensed Countries in the limited manner specified in this Agreement. (iii) INTERTAN GROUP shall have no right to sublicense or disclose any of the Materials to any third party other than dealers and franchisees duly granted a sublicense by INTERTAN GROUP in accordance with the terms and conditions of the applicable License Agreement. INTERTAN GROUP agrees to use the Materials provided only as a source for concepts and ideas and will not use the actual Materials provided in any other way. (iv) INTERTAN GROUP will use only photography, talent, props and backdrops which it currently owns, or which it purchases or licenses for its own use, in any advertisements produced by the INTERTAN GROUP arising from the Materials. 2 (v) INTERTAN GROUP agrees to keep all information specified in subparagraphs (i)(a), (b) and (c) above confidential and not to provide this information to any third party. INTERTAN GROUP agrees to keep all items specified in subparagraphs (i)(d), (e) and (f) above confidential until five days after an item has been published or broadcast to the general public anywhere in the United States. INTERTAN agrees to return to TANDY or destroy all copies and originals of confidential information within 30 days after expiration or other termination of this Agreement." 2. Paragraphs 3.b)(i) and (ii) of the Agreement are hereby deleted in its entirety and in their place the following is substituted: (i) During the term of this Agreement, InterTAN also agrees to pay TANDY, on a monthly basis, in U.S. Dollars, 6% of all payments of compensation for services which are made by TANDY to Lord, Dentsu & Partners under the agreement then existing between Lord, Dentsu & Partners and TANDY, provided that the total of such monthly payments in the aggregate for the term of the Agreement as amended hereby shall not exceed $196,813. (ii) TANDY will invoice InterTAN monthly for 6% of such payments made during the preceding month beginning with the first full month following the effective date of the Agreement as amended by this Third Amendment thereto. TANDY will invoice, and InterTAN shall pay TANDY in April, 1997, 6% of the aggregate amount of the payments made to Lord, Dentsu & Partners during the period from January 1, 1997 to March 31, 1997. Further, the parties hereto agree that 50% of the base retainer of $3,000 per month actually paid to DMB&G Associates, L.L.C. by InterTAN for its consulting services, up to a maximum of $18,000.00, may be taken as a credit against amounts due hereunder, provided that InterTAN furnishes to TANDY proof of payment prior to or contemporaneously with the taking of each credit. 3 3. Paragraph 10 of the Agreement, entitled "TERM." is hereby deleted in its ---- entirety and in its place the following is substituted: "10. TERM. ---- The term of this Agreement is from January 1, 1997 through December 31, 1997. In the event TANDY's agreement with Lord, Dentsu & Partners terminates prior to the expiration of the term of this Agreement, and provided that no party hereto is then in default of this Agreement, the parties hereto agree to negotiate terms for an amendment to this Agreement to provide for its possible continuation for the balance of the remaining term under such new terms and conditions as are appropriate under the circumstances, in TANDY's opinion." 4. Paragraph 11.of the Agreement, entitled "EXTENSION OF TERM." is hereby ----------------- deleted in its entirety and in its place the following is substituted: "11. EXTENSION OF TERM. ----------------- At January 1, 1998 this Agreement may be extended on new or existing terms and conditions, at TANDY's option. INTERTAN GROUP shall provide TANDY a written request for extension at least 30 days prior to December 1, 1997. If the parties agree to extend this Agreement and agree on all terms thereof, the parties shall enter into a written amendment stating the new terms." 4 5. Paragraph 12. Section a) of the Agreement, entitled "Expiration." Is hereby ---------- deleted in its entirety and in its place the following is substituted: "a) Expiration. Unless the term is extended by written contract of ---------- the parties, and unless earlier terminated as hereinabove provided, this Agreement shall automatically expire and terminate at the expiration of the term provided in paragraph 10, as amended, or at the same time as the License Agreements, whichever is earlier." 6. The Agreement is hereby ratified and confirmed in all other respects and all of its provisions, as amended, shall continue in full force and effect. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 5 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the dates shown beneath their respective signatures hereto, to be effective as of January 1, 1997. InterTAN Inc. By: /s/ James T. Nichols ---------------------------------------- Title: President and CEO ------------------------------------ Date Signed: April 7, 1997 ------------------------------- InterTAN Canada Ltd. By: /s/ James T. Nichols ---------------------------------------- Title: President ------------------------------------- Date Signed: April 7, 1997 ------------------------------- InterTAN U.K. Limited By: /s/ James T. Nichols ---------------------------------------- Title: Director ------------------------------------- Date Signed: April 7, 1997 ------------------------------- 6 InterTAN Australia Ltd. By: /s/ James T. Nichols ---------------------------------------- Title: Director ------------------------------------- Date Signed: April 7, 1997 ------------------------------- Tandy Corporation By: /s/ Dwain H. Hughes ---------------------------------------- Title: Senior Vice President and Chief ------------------------------------- Financial Officer ----------------- Date Signed: April 14, 1997 ------------------------------- 7 EX-10.(C) 4 RETIREMENT AGREEMENT Exhibit 10(c) ------------- RETIREMENT AGREEMENT -------------------- This Retirement Agreement ("Agreement") is made and entered into by and between James Michael Wood ("Executive") and InterTAN, Inc. ("Company"). RECITALS -------- WHEREAS, Executive has been employed by the Company Group (as defined below) since November 1, 1990 and the Company has employed the Executive since March 1, 1995 as its Vice President-Marketing Services; and WHEREAS, the Executive and the Company have reached the following agreement relating to the Executive's employment with the Company, and his resignation as an employee of the Company, and to provide a complete release by the Executive of any claims or causes of action he might have against the Company in connection with his employment by the Company and resignation from such employment. NOW, THEREFORE, in consideration of the payments set forth below, and the mutual promises and actions contained herein, it is agreed as follows: AGREEMENT --------- 1. Departure from Employment. Effective February 28, 1997 (the ------------------------- "Termination Date"), the Executive has resigned from employment with the Company, and the Executive has relinquished all officer and director positions, all other titles, and all authorities with respect to the Company and all members of the Company Group (as defined below)(including without limitation InterTAN Canada Ltd. and InterTAN Texas, Inc.), and the Executive has returned (or will return) to the Company all Company-issued credit/charge/phone cards, building security and garage access cards, office keys and all other Company property, including all Confidential Information described in Section 4 below. --------- As used herein, "Company Group" means the Company, and any entity that directly or indirectly controls, is controlled by, or is under common control with, the Company, and for purposes of this definition "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity through the ownership of voting securities. Upon execution of this Agreement, the parties hereto agree that the InterTAN, Inc. Deferred Compensation Plan (the "Plan") dated November 1, 1990 between the Company and Executive shall terminate and the terms and provisions of this Agreement shall supersede the Plan. 2. Payments and Benefits. ---------------------- (a) Separation Payments. Subject to the provisions of, and in ------------------- consideration of the Executive's agreement to comply with the terms of this Agreement, the Executive will receive special separation payments totaling $250,000.00 to be paid in one hundred twenty (120) equal monthly installments, commencing March 1, 1997, less appropriate deductions, offsets, and withholdings as required by law or as provided in this Agreement. However, such payments shall cease and/or be repaid to the Company in the event the Executive breaches this Agreement, as provided in Sections 4, 7 and 9 hereof. All payments made hereunder are inclusive of ------------------- any and all severance or other termination payments or benefits under any plan, program or policy of the Company, including, without limitation, the Plan. (b) Continuation of Certain Benefits. Provided the Company timely -------------------------------- receives a proper election notice from Executive regarding coverage continuation, and provided Executive timely remits in advance all applicable monthly premium payments to the Company, the Executive shall be entitled to continuation of major medical and dental insurance benefits for such time and to the extent provided by applicable law. Notwithstanding anything herein to the contrary, any or all of such benefits may be modified or amended from time to time by the Company. 3. Stock Options. All unvested options now held by the Executive on ------------- shares of Company common stock shall be subject to accelerated vesting; thereafter, all vested options will be exercisable in accordance with and subject to the provisions of the applicable plans and agreements, which may be modified or amended from time to time in accordance with the original terms of the plans. 4. Consulting Services; Confidentiality and Non-Solicitation. --------------------------------------------------------- (a) Consulting Services. ------------------- During the period in which the Executive is receiving separation payments hereunder, the Executive agrees to use reasonable best efforts to be available upon the reasonable request of the President of the Company to provide services and assistance to the Company, its successors, assigns, employees, agents or representatives at such times and places as mutually agreed to by the Executive and the President of the Company. The Company agrees to reimburse the Executive for reasonable out-of-pocket expenses incurred by the Executive in connection with the performance of such services. Both parties agree that once the Executive finds other employment or moves his residence from the Dallas/Fort Worth area, any request for services or assistance by the Company that would be injurious to Executive's job or create a hardship due to travel time will be considered to be not reasonable. 2 (b) Confidentiality and Non-Solicitation. ------------------------------------ (i) The Executive acknowledges that the Company's (including all members of the Company Group) continued operations and success is dependent upon (x) certain processes, formulae, specifications, designs, systems, sales procedures, and confidential information of the Company which are valuable, special, and unique assets; and (y) the Company's continuing relationship with, and knowledge about, its customers and the goodwill such relationships create. The Executive acknowledges that all of the following information is confidential and a valuable, special, and unique asset of the Company's business: (1) the names, addresses, and telephone numbers of the Company's customers; (2) the amount, nature, volume, and other information regarding any products or services sold to any customer or required by any customer; (3) the nature of the internal business operation of the Company; (4) the methods, processes, formulae, specifications, designs, systems, and know-how used, developed, or acquired by the Company in its business; (5) the Company's prices or charges to customers for its products and services; and (6) information regarding the salaries, bonuses or other compensation paid by the Company to its employees. (ii) The Executive acknowledges that all of the information described in paragraph (i) of this Section is "Confidential Information," which is the sole and exclusive property of the Company. The Executive acknowledges that all Confidential Information was revealed to the Executive in trust, based solely upon the confidential employment relationship then existing between the Company and the Executive. The Executive agrees: (1) that all writings or other records concerning Confidential Information are the sole and exclusive property of the Company; (2) that all manuals, forms, and supplies furnished to or used by the Executive and all data or information placed thereon by the Executive or any other person are the Company's sole and exclusive property; (3) that, upon execution of this Agreement, or upon request of the Company at any time, the Executive shall deliver to the Company all such writings, records, forms, manuals, and supplies and all copies of such; (4) that the Executive will not make or retain any copies of such for his own or personal use, or take the originals or copies of such from the offices of the Company; and (5) that the Executive will not, at any time, publish, distribute, or deliver any such writing or records to any other person or entity, or disclose to any person or entity the contents of such records or writings or any of the Confidential Information. (iii) The Executive further agrees that at no time will he either directly or indirectly, solicit any employee of the Company (x) to accept employment, whether permanent or temporary, with the Executive or any business entity which competes with and/or provides services similar to the Company and with which the Executive is associated in any manner, or (y) to terminate such employee's employment with the Company. 3 (iv) The Executive acknowledges that the restrictions contained in this Section (the "Restrictions"), in view of the nature of the business in which the Company is engaged, are reasonable and necessary in order to protect the legitimate interests of the Company, and that any violation thereof would result in irreparable injury to the Company, and the Executive therefore further acknowledges that, in the event that Executive violates, or threatens to violate, any of such Restrictions, the Company shall be entitled to obtain from any court of competent jurisdiction, without the posting of any bond or other security, preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits, and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies in law or equity to which the Company or any affiliate or subsidiary of the Company may be entitled. If the Executive violates any of the Restrictions, the restricted period shall not run in favor of the Executive from the time of commencement of any such violation until such time as the violation shall be cured by the Executive to the satisfaction of the Company. If any Restriction, or any part thereof, is determined in any judicial or administrative proceeding to be invalid or unenforceable, the remainder of the Restrictions shall not thereby be affected and shall be given full effect, without regard to the invalid provisions. If the period of time or scope of activity in the Restrictions should be adjudged unreasonable in any judicial or administrative proceeding, then the court or administrative body shall have the power to reduce the period of time or the scope covered and, in its reduced form, such provision shall then be enforceable and shall be enforced. 5. Release by the Executive; Release by Company. -------------------------------------------- (a) In consideration of the benefits and payments provided and to be provided by Company herein, and as a material inducement to the Company to enter into this Agreement, the Executive hereby releases, acquits and forever discharges the Company, its owners, stockholders, predecessors, successors, assigns, agents, directors, officers, employees, representatives, attorneys, divisions, subsidiaries, affiliates, and all persons acting by, through, under or in concert with any of them, from any and all charges, complaints, claims, controversies, demands, rights, disputes, and causes of action of any nature whatsoever, known or unknown, asserted or unasserted, accrued or not accrued, arising prior to or existing at the time of the execution of this Agreement which the Executive may have or claim to have against any of the persons or entities released regarding any matter. This Release includes, but is not limited to, any claim or cause of action for discrimination under Title VII of the Civil Rights Act of 1964, the Texas Commission on Human Rights Act, the Age Discrimination in Employment Act, and the Americans With Disabilities Act. It also includes any other statutory or common law cause of action providing rights for employees against their employers. The Executive 4 further covenants not to sue the Company or any member of the Company Group or file any claim or charge with any agency complaining of any action with respect to his employment with the Company or any member of the Company Group. (b) In consideration of the covenants made by Executive herein, and as a material inducement to the Executive to enter into this Agreement, the Company hereby releases, acquits and forever discharges the Executive, his successors, assigns, and legal representatives, from any and all charges, complaints, claims, controversies, demands, rights, disputes, and causes of action of any nature whatsoever, known or unknown, asserted or unasserted, accrued or not accrued, arising prior to or existing at the time of the execution of this Agreement which the Company may have or claim to have against the Executive. Notwithstanding the foregoing, the Company does not release its claim to be reimbursed by Executive for $1,369.91 relating to prior year tax equalization payments. The Company further covenants not to sue the Executive with respect to his employment with the Company or any member of the Company Group. 6. Tax Payments, Withholdings and Reporting. The Executive recognizes ---------------------------------------- that the payments and benefits provided under this Agreement, including without limitation those provided pursuant to Section 2, may result in taxable income to --------- him which the Company will report to the appropriate taxing authorities. The Company shall have the right to deduct from any payment made under this Agreement to the Executive, any business entity controlled by him or any other person or entity, any federal, state, local or foreign income, employment or other taxes it determines are required by law to be withheld with respect to such payments or benefits provided thereunder or to require payment from the Executive which he agrees to pay upon demand, for the purpose of satisfying any such withholding requirement. 7. Non-Compliance. All of the payments provided hereunder pursuant to -------------- Section 2 are conditioned upon the Executive's compliance with the provisions of - --------- Sections 4 and 9 hereof. Each of the aforementioned provisions are material - ---------------- terms of this Agreement, and in the event of any violation of any such provision of this Agreement by the Executive or anyone acting at Executive's direction or on his behalf, or in the event the Executive or anyone acting at his direction or on his behalf, at any time shall substantially denigrate any of the persons or entities released under Section 5 above, including without limitation by way --------- of news media or the expression to news media of personal views, opinions, or judgments, the Company shall be entitled to withhold and terminate all payments provided or to be provided in Section 2, without waiving the right to pursue any --------- other available legal or equitable remedies. The Company agrees that no statement shall be made to third parties about the Executive by executive officers or directors of the Company that substantially denigrates him, including without limitation by way of news media or the expression to news media of personal views, opinions or judgments. The provisions of this Section ------- 7 shall not be applicable to any truthful statement required to be made by the - - Executive or any representative of the Company or its affiliates in any legal proceeding or governmental (including all agencies thereof) or regulatory filing or investigation. 5 The Executive further agrees to reasonably cooperate with the Company, its financial and legal advisors, and/or government officials, in any claims, investigations, administrative proceedings, lawsuits, and other legal, internal or business matters, as reasonably requested by the Company. To the extent the Executive incurs travel or other expenses with respect to such activities, the Company agrees to reimburse him for such reasonable expenses documented and approved in accordance with Company policy. 8. No Admission. This Agreement shall not in any way be construed as an ------------ admission by the Company (including each member of the Company Group) of any act of discrimination or other unlawful act whatsoever against the Executive or any other person, and the Company (including each member of the Company Group) specifically disclaims any liability to or discrimination against the Executive or any other person on the part of itself, its employees, or its agents. 9. Confidentiality. The Executive and the Company agree that the terms --------------- of the Agreement shall be confidential and that neither party will now or at any time in the future disclose or cause to be disclosed the terms of this Agreement except (a) to employees of the Company to the limited extent necessary to perform the terms of this Agreement, (b) as required to be disclosed in the Proxy Statement relating to the Company's 1997 annual meeting of stockholders, and (c) as may be necessary (i) in filing tax returns or SEC or other governmental submissions, (ii) in connection with enforcing the terms and conditions of this Agreement in a court of law as provided herein, (iii) in response to a valid subpoena or other lawful process, (iv) in connection with seeking advice from professional advisors, or (v) except as otherwise required by applicable law. In the event that either party breaches this non-disclosure provision, the other party will be entitled to injunctive relief to obtain specific performance of this provision and will be entitled to recover its costs and reasonable attorneys' fees. The Company hereby acknowledges that Executive resigned from his employment with the Company under amicable terms and Executive shall be permitted to state such to any prospective employers. 10. Miscellaneous Provisions. ------------------------ (a) Assignment. The Executive represents that he has not transferred ---------- or assigned, or purported to assign or transfer, to any person or entity any claim involving the Company (including any member of the Company Group) or any portion thereof or interest therein. Any assignment in violation of the foregoing shall be null and void. Subject to the foregoing, this Agreement shall extend to, be binding upon, and inure to the benefit of the parties hereto and, as the case may be, their heirs, legatees, representatives, successors, and assigns. In the event that there shall occur any transaction involving a change of control of the Company, then the Company shall cause the party acquiring control of the Company to assume the obligations of the Company under this Agreement. (b) Severance. If any provision of this Agreement is or may be held --------- by a court of competent jurisdiction to be invalid, void, or unenforceable to any extent, the validity of the remaining parts, terms or provisions of this Agreement shall not be 6 affected thereby, and such illegal or invalid part, term, or provision shall be deemed not to be part of this Agreement. The remaining provisions shall nevertheless survive and continue in full force and effect without being invalidated in any way. (c) Entire Agreement. This Agreement sets forth the entire agreement ---------------- between the parties and there are no other agreements or understandings other than those set forth in this Agreement. (d) Texas Law. This Agreement is made within the State of Texas and --------- shall in all respects be interpreted, enforced, and governed under the laws of the State of Texas, and shall in all cases be construed as a whole (according to its fair meaning, and not strictly for or against any of the parties). (e) Counterparts. This Agreement may be executed in counterparts, ------------ each of which shall be construed as an original for all purposes, but all of which taken together shall constitute one and the same Agreement. (f) Patent Assignment. ----------------- (i) Executive shall deliver to the Company prior to its execution of this Agreement a duly signed Assignment regarding Executive's invention of that certain "Information Tag for Butterfly Hook" (U.S. Patent Office Serial No. 08/678,030) (the "Tag"). (ii) Company hereby agrees with Executive that it will further wholly assign its ownership interest in the Tag to United Displaycraft of Des Plaines, Illinois ("UD") and negotiate and execute a Royalty Arrangement (herein so called) whereby the Company would be paid a 7.5% lifetime royalty based upon future Tag sales by UD to persons other than the Company Group. Contemporaneously with Company's and UD's execution of the Royalty Arrangement, Company will assign and transfer to Executive its property rights in such Royalty Arrangement, in accordance with the terms thereof. (g) Further Acts. In addition to the actions and documents recited in ------------ this Agreement as contemplated to be performed, executed and/or delivered by the parties, the parties hereby agree to perform, execute, and/or deliver or cause to be performed, executed and/or delivered upon the date of execution of this Agreement, and thereafter, any and all further acts, deeds, documents, and assurances as are reasonably necessary to consummate the transactions contemplated by this Agreement. (h) Indemnification. Executive shall be entitled to indemnification --------------- to the extent permitted under Article XIV of the Company's Amended and Restated Bylaws. 7 11. SEPARATE COUNSEL. THE EXECUTIVE IS ADVISED BY THE COMPANY THAT BEFORE ---------------- HE SIGNS THIS AGREEMENT HE SHOULD CONSULT WITH AN ATTORNEY. 12. 21 DAYS TO SIGN; 7-DAY REVOCATION PERIOD. THE EXECUTIVE UNDERSTANDS ----------------------------------------- THAT HE MAY TAKE UP TO 21 CALENDAR DAYS FROM THE DATE OF THE AGREEMENT TO CONSIDER THIS AGREEMENT BEFORE SIGNING IT. FULLY UNDERSTANDING THE EXECUTIVE'S RIGHTS TO TAKE TWENTY-ONE (21) DAYS TO CONSIDER SIGNING THIS AGREEMENT, AND AFTER HAVING SUFFICIENT TIME TO CONSIDER THE EXECUTIVE'S OPTIONS, THE EXECUTIVE HEREBY WAIVES HIS RIGHT TO TAKE THE FULL TWENTY-ONE (21) DAY PERIOD. THE EXECUTIVE FURTHER UNDERSTANDS THAT HE MAY REVOKE THIS AGREEMENT AT ANY TIME DURING THE SEVEN (7) CALENDAR DAYS AFTER SIGNING IT, AND THAT THIS AGREEMENT SHALL NOT BECOME EFFECTIVE UNTIL THE SEVEN (7) DAY REVOCATION PERIOD HAS PASSED. SIGNED this 3rd day of March, 1997. /s/ J. Michael Wood -------------------------------------------- Executive THE STATE OF TEXAS (S) (S) COUNTY OF TARRANT (S) Before me, a Notary Public, on this day personally appeared James Michael Wood, known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed. Given under my hand and seal of office this 3rd day of March, 1997. /s/ Deborah L. Ward -------------------------------------------- Notary Public Signature (PERSONALIZED SEAL) INTERTAN, INC. By: /s/ David S. Goldberg --------------------------------------- Name: David S. Goldberg Title: Vice President, Secretary and General Counsel 8 THE STATE OF TEXAS (S) (S) COUNTY OF TARRANT (S) Before me, a Notary Public, on this day personally appeared David S. Goldberg, known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of InterTAN, Inc., and that he has executed the same on behalf of said corporation for the purposes and consideration therein expressed, and in the capacity therein stated. Given under my hand and seal of office this 3rd day of March, 1997. /s/ Deborah L. Ward ------------------------------------------------- Notary Public Signature (PERSONALIZED SEAL) 9 EX-11 5 STATEMENT OF COMPUTATION OF EARNINGS PER SHARE STATEMENT OF COMPUTATION OF EARNINGS PER SHARE Exhibit 11 INTErTAN, INC. - -------------------------------------------------------------------------------- (in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------ ----------------------- MARCH 31 MARCH 31 1997 1996 1997 1996 ----------------------- ---------------------- PRIMARY EARNINGS PER SHARE Net income......................................................... $(5,133) $(4,108) $ (263) $ 4,024 ======================= ====================== Weighted average number of common shares outstanding............... 11,527 10,943 11,373 10,857 Weighted average number of common shares issuable under warrants and stock option plans, net of assumed treasury stock repurchases at average market prices........................ (a) (a) (a) 107 ----------------------- ---------------------- Weighted average number of common and common equivalent shares outstanding.............................................. 11,527 10,943 11,373 10,964 ======================= ====================== Primary net income per average common share $ (0.45) $ (0.38) $ (0.02) $ 0.37 ======================= ====================== FULLY DILUTED EARNINGS PER SHARE Reconciliation of net income per statements to amounts used in computation of fully diluted net income per average common share: Net income, as reported............................................ $(5,133) $(4,108) $ (263) $ 4,024 Adjustments for assumed conversion of the 9% convertible subordinated debentures: Add interest on the debentures..................................... (a) (a) (a) 2,873 Add amortization expense on the debentures......................... (a) (a) (a) 271 Less foreign exchange transaction gain recognized on the debentures................................................. (a) (a) (a) (117) Less income tax effect on the debentures........................... - (a) - (1,069) ----------------------- ---------------------- Net income, as adjusted............................................ $(5,133) $(4,108) $ (263) $ 5,982 ======================= ====================== Reconciliation of weighted average number of shares outstanding to amount used in computation of fully diluted net income per average common share: Weighted average number of shares outstanding...................... 11,527 10,943 11,373 10,857 Adjustments for assumed conversion of 9% convertible subordinated debentures to common stock........................... (a) (a) (a) 6,745 Adjustments for assumed exercise of warrants and stock options, net of assumed treasury stock repurchases at period end prices... (a) (a) (a) 107 Adjustment for converted debentures................................ - - - 13 Weighted average number of common and common equivalent shares outstanding, as adjusted........................................ 11,527 10,943 11,373 17,722 ======================= ====================== Fully diluted net income per average common shares................. $ (0.45) $ (0.38) $ (0.02) $ 0.34 ======================= ======================
(a) These items are anti-dilutive and thus are omitted from the calculation. EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1997 JUL-01-1997 MAR-31-1997 39,036 0 9,829 0 171,757 227,315 38,904 0 268,867 82,574 57,374 0 0 11,629 110,815 268,867 412,776 413,321 229,335 229,335 0 0 5,008 6,110 6,373 (263) 0 0 0 (263) (0.02) (0.02)
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