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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001021408-02-001917.txt : 20020414
<SEC-HEADER>0001021408-02-001917.hdr.sgml : 20020414
ACCESSION NUMBER: 0001021408-02-001917
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020212
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: 02538443
BUSINESS ADDRESS:
STREET 1: 3300 HGWY #7
STREET 2: STE 904
CITY: CONCORD ONTARIO CAN
STATE: TX
ZIP: 76102
BUSINESS PHONE: 9057609701
MAIL ADDRESS:
STREET 1: 201 MAIN ST
STREET 2: STE 1805
CITY: FORT WORTH
STATE: TX
ZIP: 76102
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended December 31, 2001 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)
279 Bayview Drive
Barrie, Ontario Canada L4M 4W5
- ------------------------------------------ --------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (705) 728-6242
----------------------------
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 January 31, 2002, 24,585,081 shares of the registrant's common stock, par
value $1.00 per share, were outstanding.
1
<PAGE>
PART I
Page
Introductory note regarding forward-looking information 3
ITEM 1 - Financial Statements and Supplementary Data
Consolidated Statements of Operations 4
Consolidated Balance Sheets 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II
ITEM 1 - Legal Proceedings 23
ITEM 4 - Submission of Matters to a Vote of Security Holders 23
ITEM 6 - Exhibits and Reports on Form 8-K 23
OTHER
Signatures 26
2
<PAGE>
Introductory Note Regarding Forward-Looking Information
Certain statements in this Report on form 10-Q constitute forward-looking
statements that involve risks and uncertainties. The forward-looking statements
include statements regarding:
. The resolution of the Company's dispute with the purchaser of its former
subsidiary in Australia.
. The outcome of various Australian, Canadian and United States income tax
issues.
. The benefits of extending the Company's expanded range of digital cameras
to a wider range of its stores.
. The impact on sales and profits of the Company's strategy to selectively
expand the video game business.
. The Company's ability to establish a more reliable source of supply for
computers with Pentium 4 technology and position itself more aggressively
in that marketplace.
. The Company's ability to expand its retail square footage through both new
stores and expanding the size of certain existing stores.
. The benefits of the Company's investment in additional human resources in
sales areas of responsibility.
. The impact on selling, general and administrative expenses of the
restructuring program completed during the second quarter.
. Future levels of interest income and expense.
. The ability of the Company's inventory management program to positively
impact obsolescence risk and improve cash flow.
. The adequacy of the Company's liquidity.
. The adequacy of the indemnity obtained from the purchaser of the Company's
former subsidiary in the United Kingdom.
. Possible payments under indemnities provided to the purchaser of InterTAN
Australia Ltd.
. Forecasted capital expenditures for fiscal year 2002.
. Estimates of cash required to fund the repurchase of common stock.
Important factors that could cause actual results to differ materially from
those indicated in the forward-looking statements include, but are not limited
to:
. International political, military and economic conditions.
. Interest and foreign exchange rate fluctuations.
. Actions of United States and foreign taxing authorities, including
computations of balances owing.
. Changes in consumer demand and preference.
. Consumer confidence.
. 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.
. The value of the Company's common stock and the general condition of the
stock market.
. Real estate market fluctuations and
. Other risks indicated in InterTAN's previously filed periodic reports with
the Securities and Exchange Commission, including its Form 10-K for the
2001 fiscal year.
These risks and uncertainties are beyond the ability of the Company to control,
and in many cases the Company cannot predict the risks and uncertainties that
could cause its actual results to differ materially from those indicated by the
forward-looking statements.
3
<PAGE>
ITEM 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Operations
(U.S. dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
2001 2000 2001 2000
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and operating revenues $ 135,831 $ 164,050 $ 226,196 $ 284,001
Other income (loss) (13) 32 (2) 91
- -----------------------------------------------------------------------------------------------------------------
135,818 164,082 226,194 284,092
Operating costs and expenses:
Cost of products sold 82,894 99,899 137,756 172,101
Selling, general and administrative expenses 32,715 44,036 60,401 80,915
Depreciation and amortization 1,395 1,629 2,760 3,221
Restructuring charge - - 3,213 -
- -----------------------------------------------------------------------------------------------------------------
117,004 145,564 204,130 256,237
- -----------------------------------------------------------------------------------------------------------------
Operating income 18,814 18,518 22,064 27,855
Foreign currency transaction gains (losses) 156 (126) 295 (252)
Interest income 309 195 1,035 629
Interest expense (96) (527) (200) (651)
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 19,183 18,060 23,194 27,581
Income taxes 8,325 7,896 10,480 12,092
- -----------------------------------------------------------------------------------------------------------------
Net income $ 10,858 $ 10,164 $ 12,714 $ 15,489
- -----------------------------------------------------------------------------------------------------------------
Basic net income per average common share $ 0.42 $ 0.37 $ 0.48 $ 0.56
Diluted net income per average common share $ 0.42 $ 0.36 $ 0.47 $ 0.54
- -----------------------------------------------------------------------------------------------------------------
Average common shares outstanding 25,651 27,744 26,744 27,888
Average common shares outstanding assuming dilution 26,097 28,403 27,203 28,676
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
Consolidated Balance Sheets
(U.S. dollars in thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
December 31 June 30 December 31
2001 2001 2000
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Current Assets
Cash and short-term investments $ 70,739 $ 86,233 $ 20,207
Accounts receivable, less allowance for doubtful accounts 25,355 12,598 28,753
Inventories 86,789 90,394 137,161
Other current assets 1,819 1,151 950
Deferred income taxes 2,179 2,290 2,258
- --------------------------------------------------------------------------------------------------------------------------
Total current assets 186,881 192,666 189,329
Property and equipment, less accumulated depreciation and amortization 21,120 19,817 25,149
Other assets 16 16 24
Deferred income taxes 2,884 3,031 2,451
- --------------------------------------------------------------------------------------------------------------------------
Total Assets $ 210,901 $ 215,530 $ 216,953
==========================================================================================================================
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 25,348 $ 20,034 $ 28,042
Accrued expenses 23,253 13,650 26,800
Income taxes payable 24,832 24,913 27,130
Deferred service contract revenue - current portion 5,677 5,507 5,655
- --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 79,110 64,104 87,627
Deferred service contract revenue - non current portion 5,167 4,599 5,052
Other liabilities 2,333 2,518 6,421
- --------------------------------------------------------------------------------------------------------------------------
Total liabilities 86,610 71,221 99,100
==========================================================================================================================
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,
31,706,175, 31,225,048 and 30,969,117, respectively, issued 31,706 31,225 30,969
Additional paid-in capital 154,967 151,744 148,862
Common stock in treasury, at cost, 6,680,768, 3,101,818
and 3,102,178 shares, respectively (66,949) (35,405) (35,403)
Retained earnings 26,466 13,752 5,714
Accumulated other comprehensive loss (21,899) (17,007) (32,289)
- --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 124,291 144,309 117,853
==========================================================================================================================
Commitments and contingencies (See Notes 3, 8 and 9)
Total Liabilities and Stockholders' Equity $ 210,901 $ 215,530 $ 216,953
==========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended
(U.S. dollars in thousands) December 31
(Unaudited) 2001 2000
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 12,714 $ 15,489
Adjustments to reconcile net income to cash
used in operating activities:
Depreciation and amortization 2,760 3,221
Stock-based compensation 712 582
Other 14 46
Cash provided by (used in) assets and liabilities:
Accounts receivable (13,474) (16,211)
Inventories (725) (18,196)
Other current assets (733) 207
Accounts payable 6,374 2,580
Accrued expenses 10,223 10,720
Income taxes payable 1,113 (2,556)
Deferred service contract revenue 1,247 589
- ---------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities 20,225 (3,529)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Additions to property and equipment (5,158) (6,757)
Proceeds from sales of property and equipment 105 171
Other investing activities (121) 627
- ---------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (5,174) (5,959)
- ---------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock to employee plans 792 972
Proceeds from exercise of stock options 2,023 234
Purchase of treasury stock (31,367) (15,373)
- ---------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (28,552) (14,167)
- ---------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1,993) (888)
- ---------------------------------------------------------------------------------------------------------------
Net decrease in cash and short-term investments (15,494) (24,543)
Cash and short-term investments, beginning of year 86,233 44,750
- ---------------------------------------------------------------------------------------------------------------
Cash and short-term investments, end of year $ 70,739 $ 20,207
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
Notes to Consolidated Financial Statements
Note 1 Basis of Financial Statements
The accompanying unaudited financial statements have been prepared in accordance
with Rule 10-01 of Regulation S-X, "Interim Financial Statements", and do not
include all information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial statements have been
prepared in conformity with accounting principles and practices (including
consolidation practices) as reflected in InterTAN, Inc.'s ("InterTAN" or the
"Company") Annual Report on Form 10-K for the fiscal year ended June 30, 2001,
and, in the opinion of the Company, include all adjustments necessary for a fair
presentation of the Company's financial position as of December 31, 2001 and
2000 and the results of its operations for the three and six months ended
December 31, 2001 and 2000 and its cash flows for the six months ended December
31, 2001 and 2000. Such adjustments are of a normal and recurring nature.
Operating results for the three and six months ended December 31, 2001 are not
necessarily indicative of the results that can be expected for the fiscal year
ending June 30, 2002. 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, 2001.
Note 2 New Accounting Standards
In June 2001, the FASB issued Financial Accounting Standards Nos. 141 and 142
("FAS 141" and "FAS 142"). FAS 141 provides for new rules to be used in
accounting for business combinations and is effective for business combinations
initiated after June 30, 2001. FAS 142 changes the accounting treatment of both
existing and newly-acquired goodwill. FAS 142 is effective for fiscal years
beginning after December 15, 2001. However, early adoption is permitted. The
Company adopted both of these new accounting standards in the first quarter of
fiscal year 2002. The adoption of FAS 141 and FAS 142 did not have a material
effect on the Company's financial statements.
Note 3 Disposal of Australian Subsidiary
During the fourth quarter of fiscal year 2001, the Company sold its former
subsidiary in Australia. The consolidated balance sheet as at December 31, 2000
and the consolidated statements of operations and cash flows for the three and
six months then ended include the results of the Australian subsidiary.
The gain on disposal reported in the fourth quarter of fiscal year 2001 was
based on management's calculation of certain adjustments to be paid following
completion of the sale. The purchaser has advised the Company that it disagrees
with management's calculation of those adjustments. Management believes that its
calculation of the adjustments is appropriate and that there are strong
arguments against the position adopted by the purchaser and is in the process of
vigorously defending its position. Should the purchaser prevail in this dispute,
the Company would have an additional liability of approximately $2,000,000.
Under the terms of the sale agreement, during the nine-month period following
the sale, which period ended January 31, 2002, the Company indemnified the
purchaser against any inaccuracies in the financial statements of the former
Australian subsidiary as of the date of sale. Except as relating to the matter
described above, no claims were made under this indemnity within the prescribed
time period. Layered on top of this indemnity is a two-year indemnity covering
tax matters only and which expires April 30, 2003. This indemnity has a limit of
A$4,000,000 (approximately $2,000,000). To date, no claims have been made under
this tax indemnity. In addition, the Company indemnified the purchaser against
termination costs with respect to certain employees. One claim has been received
under this indemnity for an amount of approximately $60,000. The time for making
additional claims under this indemnity has now expired.
7
<PAGE>
Management believes there are authoritative arguments in support of the position
that this transaction is exempt from Australian capital gains tax by virtue of
the tax treaty between the United States and Australia, and, accordingly, no
Australian tax was recorded with respect to the sale. However, there can be no
assurance that the Australian tax authorities will not challenge this position.
If Australian tax were to apply to the gain on sale, the Company would have an
additional liability of approximately $7,000,000.
Note 4 Restructuring Charge
During the first quarter of fiscal year 2002, the Company recorded a
restructuring charge of $3,213,000. Approximately $500,000 of this charge
related to the write-off of costs incurred in connection with the study of
various alternatives to enhance shareholder value. This study began during
fiscal year 2001 and was concluded during the first quarter of fiscal year 2002.
The remainder represented the cost of restructuring the Company's Board of
Directors and streamlining the Company's Corporate Office and integrating it
with InterTAN's operating subsidiary, InterTAN Canada Ltd.
The following is a summary of activity within this reserve during fiscal year
2001:
<TABLE>
<CAPTION>
Balance Balance
June 30 Provision December 31
(U.S. dollars in thousands) 2001 Recorded Paid 2001
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Professional fees and related expenses $ - $ 510 $ 510 $ -
Retirement, severance and other
compensation costs - 2,659 531 2,128
Other charges - 44 44 -
- ----------------------------------------------------------------------------------------
$ - $ 3,213 $ 1,085 $ 2,128
========================================================================================
</TABLE>
Note 5 Treasury Stock Repurchase Program
By June 30, 2001, the Company had completed two previously announced share
repurchase programs. Under the two programs combined, a total of 3,000,000
shares were acquired at an aggregate cost of $34,162,000. During the first
quarter of fiscal year 2002, the Company's Board of Directors announced a third
share repurchase program under which management was authorized to purchase up to
2,800,000 shares of the Company's common stock. By September 30, 2001, 1,894,100
shares had been acquired at an aggregate cost of $15,496,000. During early
October, the remaining 905,900 shares were purchased for a total additional
consideration of $7,650,000. The average cost of all shares acquired under this
plan was $8.27 per share, including commissions. On October 25, 2001, the
Company's Board of Directors announced a fourth share repurchase program. Under
this program, management is authorized, subject to appropriate market
conditions, to repurchase up to 2,600,000 shares of the Company's common stock,
approximately 10% of shares then outstanding. By December 31, 2001, 764,700
shares had been acquired under this plan at an aggregate cost of $8,221,000,
approximately $10.75 per share, including commissions.
Note 6 Net Income per average Common share
Basic earnings per share ("EPS") is calculated by dividing the net income or
loss for a period by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted.
8
<PAGE>
Basic and diluted net income per average common share and a reconciliation of
the numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation is set out below:
<TABLE>
<CAPTION>
Three months ended December 31
--------------------------------------------------------------------------------
(U.S.dollars in thousands, 2001 2000
--------------------------------------------------------------------------------
except for per share data) Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 10,858 $ 10,164
========== ===========
Basic EPS
Income available to
common stockholders $ 10,858 25,651 $ 0.42 $ 10,164 27,744 $ 0.37
======== =========
Effect of Dilutive Securities
Stock options - 446 - 659
---------- ----------- ----------- ----------
Diluted EPS
Income available to
common stockholders including
assumed conversions $10,858 26,097 $ 0.42 $ 10,164 28,403 $ 0.36
========== =========== ======== =========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
Six months ended December 31
--------------------------------------------------------------------------------
(U.S.dollars in thousands, 2001 2000
--------------------------------------------------------------------------------
except for per share data) Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 12,714 $ 15,489
========== ===========
Basic EPS
Income available to
common stockholders $ 12,714 26,744 $ 0.48 $ 15,489 27,888 $ 0.56
======== =========
Effect of Dilutive Securities
Stock options - 459 - 788
---------- ---------- ----------- ----------
Diluted EPS
Income available to
common stockholders including
assumed conversions $ 12,714 27,203 $ 0.47 $ 15,489 28,676 $ 0.54
========== ========== ======== =========== ========== =========
</TABLE>
At December 31, 2001 and 2000, the Company's directors and employees held
options to purchase 1,401,798 and 1,659,357 common shares, respectively, at
prices ranging from $2.4792 to $14.75. During the three months ended December
31, 2001 and 2000, all but 582,822 and 248,402 of such options were considered
in calculating diluted EPS. These options were excluded because the option
exercise price was greater than the average market price of the Company's common
stock during such periods. The dilutive effect of these options in future
periods will depend on the average price of the Company's common stock during
such periods.
9
<PAGE>
Note 7 Comprehensive Income
Comprehensive income is defined as the change in equity (net assets) of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. For the Company, comprehensive income
includes net income and the net change in foreign currency translation effects.
The comprehensive income for the three months ended December 31, 2001 and 2000
was $10,024,000 and $11,393,000, respectively. For the six month-periods ended
December 31, 2001 and 2000, comprehensive income was $7,822,000 and $12,661,000,
respectively.
Note 8 Income Taxes
The provision for domestic and foreign income taxes for the three and six-month
periods ended December 31, 2001 was $8,325,000 and $10,480,000, respectively,
representing Canadian income tax on the profits of the Company's Canadian
subsidiary. The effective rate of tax for the six-month period ended December
31, 2001 was higher than normal because a full valuation allowance was recorded
against the deferred tax asset arising from certain components of the
restructuring charge recorded in the first quarter that were not currently tax
deductible. For the three and six-month periods ended December 31, 2000, the
provision was $7,896,000 and $12,092,000, including Canadian income tax on the
profits of the Canadian subsidiary as well as Australian income tax on the
profits of the Company's former subsidiary in Australia.
During fiscal year 1999, the Company reached an agreement with the Canadian tax
authorities relating to the settlement of a dispute regarding the 1990 to 1993
taxation years resulting in a charge of $8,039,000. While the amount in dispute
has been agreed and a settlement agreement has been executed, the Company has
not yet been fully reassessed and, accordingly, this amount has not been paid.
Management estimates the remaining payment relating to these issues to be
approximately $11,000,000.
Late in fiscal year 2001, the Company reached an agreement with both the
Canadian and United States tax authorities, settling substantially all of its
remaining outstanding tax issues and recorded an additional provision of
$700,000. Although agreement in principle has been reached on these issues,
final statements summarizing amounts owing have not been received from either
government. Because of the age of these issues and the terms of the settlements,
there are complex interest computations to be made. Accordingly, it is not
practical for management to determine with precision the exact liability
associated with these matters. Management estimates that, at current rates of
exchange, the liability to settle all outstanding tax issues, including the
matter described immediately above, is in the range of $22,000,000 to
$25,000,000. Management further believes that it has a provision recorded
sufficient to pay the estimated liability resulting from these issues; however,
the amount ultimately paid could differ from management's estimate.
The Company has one remaining issue in dispute with the Internal Revenue Service
("IRS") in the United States. The Company disagrees with the position of the IRS
on this issue and, on the advice of legal counsel, believes it has meritorious
arguments in its defense and is in the process of vigorously defending its
position. It is management's determination that no additional provision need be
recorded for this matter. However, should the IRS prevail in its position, the
Company could potentially have an additional maximum liability of $1,700,000.
10
<PAGE>
Note 9 Commitments and Contingencies
In connection with the sale of its former United Kingdom subsidiary during
fiscal year 1999, the Company remains contingently liable as guarantor of
certain leases of InterTAN U.K. Limited. At December 31, 2001 the remaining
lease obligation assumed by the purchaser and guaranteed by the Company was
approximately $18,000,000 and the average remaining life of such leases was
approximately 5 years. If the purchaser were to default on the lease
obligations, management believes the Company could reduce the exposure through
assignment, subletting and other means. The Company has obtained an indemnity
from the purchaser for an amount equal to management's best estimate of the
Company's potential exposure under these guarantees. At December 31, 2001, the
amount of this indemnity was approximately $7,400,000. The amount of this
indemnity declines over time as the Company's risk diminishes. Apart from this
matter and the issues discussed in Notes 3 and 8, there are no material pending
proceedings or claims, other than routine matters incidental to the Company's
business, to which the Company or any of its subsidiaries is a party, or to
which any of its property is subject.
Note 10 Segment Reporting
The Company was traditionally managed along geographic lines, with its Corporate
Headquarters also treated as a separate business unit. Following the sale of the
Company's former subsidiary in Australia during the fourth quarter of fiscal
year 2001, the Company undertook a restructuring program to streamline its
operations and integrate its former Corporate Headquarters with its Canadian
subsidiary. Accordingly, the Company now has only one business segment, referred
to herein as "Canada", the "Canadian subsidiary" or "RadioShack Canada".
Transactions between segments during prior periods were not common and were not
material to the segment information. The table below summarizes net sales and
operating revenues, operating income (loss) and identifiable assets for the
Company's segments. Consolidated operating income is reconciled to the Company's
income before income tax:
Net Sales and Operating Revenues and
Operating Income by Segment
(U.S. dollars in thousands)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31 December 31
2001 2000 2001 2000
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales and operating revenues
Canada $ 135,831 $ 132,946 $ 226,196 $ 225,805
Australia - 31,104 - 58,196
- ---------------------------------------------------------------------------------------------------------------------
$ 135,831 $ 164,050 $ 226,196 $ 284,001
- ---------------------------------------------------------------------------------------------------------------------
Operating income (loss)
Canada $ 18,814 /1/ $ 19,128 $ 22,064 /1/ $ 28,368
Australia - 670 - 1,907
- ---------------------------------------------------------------------------------------------------------------------
18,814 19,798 22,064 30,275
Corperate Headquarters' expenses - /1/ (1,280) - /1/ (2,420)
- ---------------------------------------------------------------------------------------------------------------------
Operating income 18,814 18,518 22,064 27,855
Foreign currency transaction gains (losses) 156 (126) 295 (252)
Interest income 309 195 1,035 629
Interest expense (96) (527) (200) (651)
- ---------------------------------------------------------------------------------------------------------------------
Net income before income taxes $ 19,183 $ 18,060 $ 23,194 $ 27,581
=====================================================================================================================
</TABLE>
/1/ During fiscal year 2002, the Company's former Corporate
Headquarters unit was integrated with its Canadian subsidiary.
11
<PAGE>
Identifiable Assets by Segement
(U.S. dollars in thousands) December 31 June 30 December 31
2001 2001 2000
- -----------------------------------------------------------------------------
Canada $ 210,901 /1/ $ 163,016 $ 160,068
Australia - - 52,871
Corporate Headquarters - /1/ 52,514 4,014
- -----------------------------------------------------------------------------
$ 210,901 $ 215,530 $ 216,953
=============================================================================
/1/ During fiscal year 2002, the Company's former Corporate
Headquarters unit was integrated with its Canadian subsidiary.
12
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
InterTAN is engaged in the sale of consumer electronics products primarily
through company-operated retail stores and dealer outlets in Canada. The
Company's retail operations are conducted through a wholly-owned subsidiary,
InterTAN Canada Ltd., which operates under the trade name "RadioShack". The
Company's Corporate Headquarters was integrated with the operations of its
Canadian subsidiary during the second quarter of fiscal year 2002. During fiscal
year 2001, the Company also had retail and dealer outlets in Australia.
Operations in Australia were carried out through a wholly-owned subsidiary,
InterTAN Australia Ltd., which conducted business under the trade name "Tandy".
The Company's Australian subsidiary was sold effective April 2001. The
"RadioShack" and "Tandy" trade names are used under license from RadioShack
Corporation ("RadioShack U.S.A."). In addition, the Company has entered into an
agreement in Canada with Rogers Wireless Inc. ("Rogers") to operate
telecommunications stores ("Rogers AT&T" stores) on its behalf. At December 31,
2001, 58 Rogers AT&T stores were in operation.
Overview
There were a number of special factors and charges in the first six months of
fiscal years 2002 and 2001 that significantly impacted the Company's results of
operations and affected the comparability of reported results for both the three
and six-month periods ended December 31, 2001.
As previously discussed, effective April 30, 2001, the Company sold its
subsidiary in Australia. The consolidated balance sheet as at December 31, 2000
and the consolidated statements of operations and cash flows for the three and
six months then ended include the results of the Australian subsidiary.
During the first quarter of fiscal year 2002, the Company recorded a
restructuring charge of $3,213,000. See "Restructuring Charge". Management
estimates that the tax provision for the quarter was reduced by approximately
$1,030,000 as a result of the deductibility for tax purposes of a portion of the
restructuring costs.
The tables below reflect the Company's sales, operating income, net income, and
net income per share for the three and six-month periods ended December 31, 2001
and 2000, adjusted to eliminate the following: sales and results of InterTAN
Australia Ltd. for the three and six-month periods ended December 31, 2000; the
restructuring charge during the six-month period ended December 31, 2001; and
the effect of the restructuring charge on the tax provision for the six-month
period ended December 31, 2001.
<TABLE>
<CAPTION>
Three months ended Six months ended
----------------------------- -------------------------------
(U.S. dollars in thousands, except December 31 December 31
per share amounts) 2001 2000 2001 2000
----------------------------- -------------------------------
<S> <C> <C> <C> <C>
Sales and other operating revenues $ 135,831 $ 164,050 $ 226,196 $ 284,001
Sales of Australian subsidiary - (31,104) - (58,196)
-------------- -------------- -------------------------------
Canadian sales in U.S. dollars $ 135,831 $ 132,946 $ 226,196 $ 225,805
============== ============== ===============================
Canadian sales in Canadian dollars $ 214,698 $ 202,805 $ 354,466 $ 340,425
============================= ===============================
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------------ ---------------------
(U.S. dollars in thousands, except December 31 December 31
per share amounts) 2001 2000 2001 2000
------------------------ ---------------------
<S> <C> <C> <C> <C>
Operating income $ 18,814 $ 18,518 $ 22,064 $ 27,855
Adjustments
Income of Australian subsidiary $ - $ (670) $ - $ (1,907)
Restructuring charge - - 3,213 -
--------- ------------ --------- -----------
Comparable operating income $ 18,814 $ 17,848 $ 25,277 $ 25,948
========= ============ ========= ===========
Net income $ 10,858 $ 10,164 $ 12,714 $ 15,489
Adjustments
Income of Australian subsidiary - (441) - (1,269)
Restructuring charge - - 3,213
Effect of restructuring charge on income taxes - - (1,030 -
--------- ------------ --------- ----------
Comparable net income $ 10,858 $ 9,723 $ 14,897 $ 14,220
========= ============ ========= =========
Diluted earnings per share $ 0.42 $ 0.36 $ 0.47 $ 0.54
========= ============ ========= =========
Comparable diluted earnings per share $ 0.42 $ 0.34 $ 0.55 $ 0.50
========= ============ ========= =========
</TABLE>
Restructuring Charge
During the first quarter of fiscal year 2002, the Company recorded a
restructuring charge of $3,213,000. Approximately $500,000 of this charge
related to the write-off of costs incurred in connection with the study of
various alternatives to enhance shareholder value. This study began during
fiscal year 2001 and was concluded during the first quarter of fiscal year 2002.
The remainder represents the cost of restructuring the Company's Board of
Directors and streamlining the Company's Corporate Office and integrating it
with InterTAN's operating subsidiary, InterTAN Canada Ltd. Management estimates
that as a result of this action, selling, general and administrative expenses
will be reduced on an annualized basis by approximately $1,300,000. The full
benefits of the plan will not be felt until the third quarter of fiscal year
2002.
The following is a summary of activity within this reserve during fiscal year
2002:
<TABLE>
<CAPTION>
Balance Balance
June 30 Provision December 31
(U.S. dollars in thousands) 2001 Recorded Paid 2001
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Professional fees and related expenses $ - $ 510 $ 510 $ -
Retirement, severance and other
compensation costs - 2,659 531 2,128
Other charges - 44 44 -
- -------------------------------------------------------------------------------------
$ - $ 3,213 $ 1,085 $ 2,128
- -------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
Foreign Exchange Effects
Profit and loss accounts, including sales, are translated from local currency
values to U.S. dollars at monthly average exchange rates. During the second
quarter of fiscal year 2002, the U.S. dollar was 3.5% stronger against the
Canadian dollar relative to the comparable value during the second quarter of
the prior year. As a result, the same local currency amounts in Canada
translated into fewer U.S. dollars as compared with the prior year. For example,
if local currency sales in Canada in the second quarter of fiscal year 2002 were
the same as those in the second quarter of the prior year, the fiscal year 2002
income statement would reflect a 3.5% decrease in sales when reported in U.S.
dollars. For the six months ended December 31, 2001, the U.S. dollar was 3.8%
stronger against the Canadian dollar than during the comparable period last
year.
Sales Outlets
The Company's sales outlets by type and geographic region is summarized in the
following table:
<TABLE>
<CAPTION>
June 30 Dec. 31 Dec. 31
2001 Opened Closed 2001 2000
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Canada
Company-operated 473 14 - 487 469
Rogers AT&T 55 3 - 58 52
Dealer 360 12 2 370 362
------------------------------------------------------------------------
888 29 2 915 883
------------------------------------------------------------------------
Australia
Company-operated - - - - 223
Dealer - - - - 105
------------------------------------------------------------------------
- - - 328
------------------------------------------------------------------------
Total
Company-operated 473 14 - 487 692
Rogers AT&T 55 3 - 58 52
Dealer 360 12 2 370 467
------------------------------------------------------------------------
888 29 2 915 1,211
------------------------------------------------------------------------
</TABLE>
Net Sales and Operating Revenues
Net sales at RadioShack Canada for the second quarter in U.S. dollars were
$135,831,000. In local currency, this represented an increase over the prior
year quarter of 6%. Measured on the same basis, comparable stores increased by
3%. The sales comparison, measured in U.S. dollars, was adversely affected by a
decline in the value of the Canadian dollar of 3.5% compared with the same
period last year. Taking this decline into consideration, sales in U.S. dollars
for the second quarter of fiscal year 2002 increased by 2% over the same quarter
last year.
During the quarter, consumers continued to demonstrate a preference towards a
more digital-focused product base. Sales of digital cameras were very strong. To
date the Company's significantly deeper assortment of these products has only
been introduced into about one-third of its stores. Encouraged by results during
the holiday season, management will be expanding the number of stores in which
the full assortment is available. This year, the Company made a strategic
decision to delay the release of its catalog until the second quarter and to
greatly expand the range of products featured in the catalog. This action,
combined with the Company's expanded range of parts and accessories fueled
double-digit growth in more traditional accessory products and
15
<PAGE>
growth of over 30% in digital accessories and PC software, in particular
entertainment titles. The Company's decision to introduce Playstation products
into its stores was well accepted by consumers. Management will continue to
pursue opportunities to expand the gaming business, provided it is satisfied
with the incremental gross profit dollar potential of each respective line.
Sales of DVD players, camcorders, wireless handset units (cellular) and
direct-to-home satellite all showed strong double-digit growth.
The only digital category that suffered during the quarter was personal computer
hardware. While demand for Pentium 4 computers was strong, the supply of 1.5GHz
Pentium 4 chips was tight. This situation was compounded by a low allocation by
certain manufactures to the Canadian marketplace. The end result was that very
few of the Company's stores had a consistent lineup over the holiday period.
That situation has improved only modestly early in the third quarter. Management
believes that the Canadian consumer's demand for high speed internet access
combined with the benefits of Windows XP to various applications, including
digital photography, will continue to drive demand for Pentium 4 computers.
Accordingly management is in the process of developing a strategy which will
give the company a more reliable supply and a more aggressive position in the
marketplace.
Sales of more traditional analog products, in general, yielded disappointing
results. Sales of analog personal electronics, landline telephones and toys
showed declines. In some cases, the effects of unit sales growth were offset by
falling retail prices, which put pressure on overall sales growth. Management
will evaluate this information to migrate not only the Company's product
assortment but also its overall store plan to better present the products in
demand by consumers.
Gross Profit
While consolidated gross profit dollars for the quarter declined, this reduction
in gross profit dollars was more than attributable to the sale of the Company's
Australian subsidiary. Gross profit dollars at RadioSack Canada, measured at the
same exchange rates, increased by 5%.
The following analysis summarizes the components of the change in gross profit
dollars for the second quarter from the comparable prior year period:
(U.S. dollars in thousands)
Increase in sales $ 2,962
Decrease in gross margin percentage (545)
Foreign currency effects (1,826)
-------------
591
Disposal of Australian subsidiary (11,805)
-------------
Change in gross profit dollars $ (11,214)
=============
The gross margin percentage in the Canadian subsidiary declined by 40 basis
points. During the holiday season, the Company offered a significantly enhanced
range of digital products, as consumers' preferences shifted towards these
products relative to more traditional analog technologies. While many of these
products carry less than the Company's traditional margins, management believes
that the strategic shift in product preferences will continue and the Company
will continue to position the Company for profitable sales growth in response to
these changes in demand. Sales declines during the quarter in more conventional
landline
16
<PAGE>
telephones, personal electronics and toys also put pressure on margins.
Management will continue to reallocate its resources and selling space to take
advantage of digital opportunities. The pressure on margins generated by these
shifts in product demand were partially offset by the Company's continued strong
performance in subscriber-based services and attendant increases in after the
sale compensation in the form of residuals and, in particular, sales-based
volume rebates. For the quarter, after the sale compensation was $4,142,000,
about 3% of total revenue. On a comparable basis, this represented an increase
of over 50% over the same quarter last year.
Selling, General and Administrative Expenses
The following table provides a breakdown of selling, general and administrative
expense ("SG&A") by major category:
<TABLE>
<CAPTION>
Three months ended December 31 Six months ended December 31
2001 2000 2001 2000
(U.S. dollars in thousands, Dollars % of Sales Dollars % of Sales Dollars % of Sales Dollars % of Sales
except percents)
- ------------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Canadian and Corporate expenses
Payroll $ 14,406 10.6 $13,983 10.5 /1/ $ 27,053 12.0 $ 25,959 11.5 /1/
Advertising 4,311 3.2 6,398 4.8 /1/ 6,946 3.1 9,632 4.3 /1/
Rent 5,072 3.7 4,830 3.6 /1/ 9,493 4.2 9,063 4.0 /1/
Taxes (other than income tax) 2,114 1.6 1,775 1.3 /1/ 4,217 1.9 3,760 1.7 /1/
Telephone and utlities 812 0.7 783 0.6 /1/ 1,671 0.7 1,600 0.7 /1/
Other 6,000 4.3 5,472 4.2 /1/ 11,021 4.8 10,417 4.6 /1/
- ---------------------------------------------------------------------------------- ------------------------------------------
32,715 24.1 33,241 25.0 /1/ 60,401 26.7 60,431 26.8 /1/
Australian expenses - - 10,795 34.7 /2/ - 20,484 35.2 /2/
- ---------------------------------------------------------------------------------- ------------------------------------------
Consolidated expenses $ 32,715 24.1 $44,036 26.8 /3/ $ 60,401 26.7 $ 80,915 28.5 /3/
================================================================================== ==========================================
</TABLE>
/1/ Percentages are of Canadian sales.
/2/ Percentage is of Australian sales.
/3/ Percentage is of consolidated sales.
As previously indicated, following the sale of the Australian subsidiary during
the fourth quarter of fiscal year 2001, the Company streamlined its remaining
operations and integrated its former Corporate headquarters with those of its
Canadian subsidiary. See "Overview". To make comparisons more meaningful, in the
following discussion, the selling, general and administrative expenses of the
Company's former Corporate Headquarters for the prior year period have been
aggregated with those of RadioShack Canada.
SG&A expenses at RadioShack Canada and the Company's former Corporate
Headquarters in U.S. dollars decreased by $526,000 over the comparable quarter
last year. This comparison was influenced by the effects of a weaker Canadian
dollar. Measured at the same exchange rates, SG&A expense in these two segments
increased by less than 2%.
The following is a breakdown of the same-exchange-rate increase (decrease) in
SG&A expense in Canada and Corporate Headquarters during the second quarter of
fiscal year 2002 over the same quarter in the prior year:
<PAGE>
(In thousands)
Payroll $ 899
Advertising (1,867)
Rent 410
Taxes (other than income taxes) 512
Telephone and utilities 56
Other 578
- -----------------------------------------------------------
Increase $ 588
- -----------------------------------------------------------
Payroll and rent were both up over the prior year. Payroll increased not only in
response to higher sales, but also as a result of a conscious decision on the
part of management to invest additional resources both in central units and in
stores. The investment of additional staff involved in sales support functions
is already evident in a significant reduction in Canadian inventory levels. See
"Financial Condition - Inventories." Management believes that the benefits of
the Company's investment in people in the field will be evident in future
periods as the Company commits to having a highly trained, energized staff to
meet the challenges of continued advancements in digital technologies. Rent
expense was driven primarily by an increase in retail square footage, both as a
result of an increase in new, and therefore not mature, stores, and as a result
of increasing the size of selected stores as strategic opportunities to enhance
product assortments present themselves. The Company is currently planning about
20 new company-operated stores during this fiscal year 2002 and, importantly, 14
of those stores were open in time for the holiday selling season. At lease
renewal, management will continue to pursue opportunities to increase the size
of the Company's stores in strategic locations where it believes such action
would result in profitable sales growth. Taxes (other than income taxes),
primarily represents business taxes on the Company's stores and head office and
warehouse locations. The increase in this expense category was a result of the
combination of regular rate increases, new stores and increases in the size of
existing stores. The effects of higher costs in the payroll, rent and tax
expense categories were substantially offset by a more efficient advertising
spend and some tactical reductions in television advertising as the holiday
season unfolded.
Foreign Currency Transaction Gains / Losses
Foreign currency transaction gains were $156,000 during the second quarter of
fiscal year 2002 compared with losses of $126,000 for the comparable quarter
last year.
Interest income and expense
Interest income for the quarter was $309,000 compared with $195,000 a year ago.
The increase results primarily from the investment of proceeds from the sale of
the Australian subsidiary. Interest income will likely be lower in future
periods as a substantial portion of these funds have already been used to fund
the Company's stock buy-back programs. Additional funds will also be required to
complete the stock buy back program announced in October 2001 and to fund the
payment of income taxes. See "Liquidity and Capital Resources." Interest expense
for the quarter was $96,000 and consisted entirely of commitment fees and loan
amortization charges, as there were no borrowings during the quarter. In the
second quarter of fiscal year 2001, interest expense was $527,000, as RadioShack
Canada borrowed under its credit line to finance the seasonal build of
inventories. Such borrowings were not necessary this year.
18
<PAGE>
Provision for Income Taxes
The provision for income taxes for the quarter was $8,325,000, and consisted
entirely of Canadian taxes on the profits of RadioShack Canada. The effective
rate for the quarter was 43.4%. Last year, the provision for tax was $7,896,000
and included a small amount of Australian tax on the profits of InterTAN
Australia. The effective tax rate a year ago was 43.7%.
Financial Condition
- -------------------
Most balance sheet accounts are translated from their values in local currency
to U.S. dollars at the respective month end rates. The table below outlines the
percentage change, to December 31, 2001, in the value of the Canadian dollar as
measured against the U.S. dollar:
- -----------------------------------------------------------------------------
Percentage decrease from December 31, 2000 5.9%
Percentage decrease from June 30, 2001 4.9%
=============================================================================
Accounts Receivable
- -------------------
Accounts receivable were $25,355,000 at December 31, 2001 compared with
$28,753,000 at December 31, 2000 and $12,598,000 at June 30, 2001. The decrease
from December 31, 2000 is attributable to the sale of the Australian subsidiary
and foreign currency effects. The increase from June 30, 2001 resulted from the
seasonal build up of dealer receivables for the holiday selling season and
seasonal increases in amounts due from vendors for various subscriber-based
services, including activation income, residuals and sales-based volume rebates.
Inventories
Inventories at December 31, 2001 were $86,789,000, down from $137,161,000 a year
ago and $90,394,000 at June 30, 2001. The sale of the Australian subsidiary
accounts for only a portion of the reduction from December 31, 2001. The balance
is attributable to significant improvements in inventory management at
RadioShack Canada. Canadian inventories, measured in local currency, were
approximately 10% lower at December 30, 2001 than at the same date a year ago
and days sales in inventory was reduced 13% from the prior year. These
improvements are a direct result of the Company's investment in people involved
in sales support functions and from the benefits of the Company's micro
merchandising program. The Company is now sourcing locally-purchased inventory
more frequently, and purchasing in smaller quantities. This strategy will
reflect positively on both cash flow requirements and the risk of obsolescence.
The benefits of the new inventory strategy are also evident in the comparison
with inventory levels at June 30, 2001. Despite seasonal fluctuations and the
introduction of over 500 new SKUs, inventories at RadioShack Canada at December
31, 2001 were up, in local currency, less than 1% from June 30, 2001 levels.
Accounts payable
Accounts payable were $25,348,000 at December 31, 2001 compared to $28,042,000
at December 31, 2000 and $20,034,000 at June 30, 2001. The reduction from
December 31, 2000 is explained by the sale of the Australian
19
<PAGE>
subsidiary, partially offset by the fact that extended payment terms were
obtained from certain key vendors this year. The increase from June 30, 2001 is
due to increased purchases for the holiday season as well as the fact that
certain of those purchases benefited from extended payment terms.
Accrued Expenses
Accrued expenses were $23,253,000 at December 31, 2001 compared with $26,800,000
at December 31, 2000 and $13,650,000 at June 30, 2001. The decrease from
December 31, 2000 relates primarily to the sale of the Australian subsidiary.
The increase from the June 30, 2001 level is due to the seasonal increase in
certain sales-sensitive accruals and to the restructuring charge recorded in the
first quarter of fiscal year 2002. See `Restructuring Charge."
Income Taxes Payable
Income taxes payable were $24,832,000 at December 30, 2001 compared with
$27,130,000 at December 31, 2000 and $24,913,000 at June 30, 2001. The reduction
from December 31, 2000 is due primarily to foreign currency effects. The
reduction from June 30, 2001 is also due to foreign currency effects, partially
offset by the fact that during the first half of the year, the provision for tax
exceeded installment payments during the same period as a result of the
seasonality of the business.
During fiscal year 1999, the Company reached an agreement with the Canadian tax
authorities relating to the settlement of a dispute regarding the 1990 to 1993
taxation years resulting in a charge of $8,039,000. While the amount in dispute
has been agreed and a settlement agreement has been executed, the Company has
not yet been fully reassessed and, accordingly, this amount has not been paid.
Management estimates the remaining payment relating to these issues to be
approximately $11,000,000.
Late in fiscal year 2001, the Company reached an agreement with both the
Canadian and United States tax authorities, settling substantially all of its
remaining outstanding tax issues and recorded an additional provision of
$700,000. Although agreement in principle has been reached on these issues,
final statements summarizing amounts owing have not been received from either
government. Because of the age of these issues and the terms of the settlements,
there are complex interest computations to be made. Accordingly, it is not
practical for management to determine with precision the exact liability
associated with these matters. Management estimates that, at current rates of
exchange, the liability to settle all outstanding tax issues, including the
matter described immediately above, is in the range of $22,000,000 to
$25,000,000, and anticipates that payment of a substantial portion of this
amount will be required during the current fiscal year. Management further
believes that it has a provision recorded sufficient to pay the estimated
liability resulting from these issues; however, the amount ultimately paid could
differ from management's estimate.
The Company has one remaining issue in dispute with the Internal Revenue Service
("IRS") in the United States. The Company disagrees with the position of the IRS
on this issue and, on the advice of legal counsel, believes it has meritorious
arguments in its defense and is in the process of vigorously defending its
position. It is management's determination that no additional provision need be
recorded for this matter. However, should the IRS prevail in its position, the
Company could potentially have an additional maximum liability $1,700,000.
20
<PAGE>
Other Liabilities
Other liabilities were $2,333,000 at December 31, 2001 compared with $6,421,000
at December 31, 2000 and $2,518,000 at June 30, 2001. The reduction in the level
of other liabilities from December 31, 2000 relates to the disposal of the
Australian subsidiary. Foreign currency effects explain the reduction from June
30, 2001.
Liquidity and Capital Resources
- -------------------------------
Cash flows from operating activities during the six-month period ended December
31, 2001 generated $20,225,000 in cash, while consuming $3,529,000 in cash
during the comparable period last year. This improvement was due primarily to
changes in working capital requirements, partially offset by a decrease in net
income, adjusted for non-cash items. In the six months ended December 31, 2001,
changes in working capital generated $4,025,000 in cash. In the comparable prior
period, working capital requirements consumed $22,867,000 in cash. This variance
is due primarily to the effects of lower inventories at RadioShack Canada. Net
income, adjusted for non-cash items, generated $16,200,000 in cash during the
six-month period ended December 31, 2001, compared with $19,338,000 a year ago.
This decrease is primarily due to the disposal of the Company's former
Australian subsidiary.
Cash flow from investing activities consumed $5,174,000 and $5,959,000 in cash
during the six-month periods ended December 31, 2001, and 2000 respectively, as
the effects of routine additions to property and equipment were partially offset
by the proceeds from the sale of property and equipment and from other investing
activities. The reduction is partially attributable to the effects of the
disposal of the Australian subsidiary.
During the six-month period ended December 31, 2001, cash flow from financing
activities consumed $28,552,000 in cash. In August 2001, the Company's Board of
Directors announced its third share repurchase program under which management
was authorized to purchase up to 2,800,000 shares of the Company's common stock.
This program was completed in October 2001 at a total cost of $23,146,000. In
October 2001, a fourth stock buy back program was announced under which
management was authorized to purchase up to 2,600,000 additional shares of the
Company's common stock. By December 31, 2001, 764,700 shares had been acquired
under this program at a cost of $8,221,000. These cash outflows were partially
offset by proceeds from the issuance of common stock to employee plans and from
the exercise of stock options. During the six-month period ended Dectember 31,
2000, cash flow from financing activities consumed $14,167,000 in cash. In April
2000, the Company announced that the Board of Directors had authorized a program
for the repurchase of up to 1,500,000 common shares. By June 30, 2000, 285,200
shares had been acquired under this program. During the first quarter of fiscal
year 2001, the remaining 1,214,800 shares were acquired at an aggregate cost of
$15,529,000. This cash outflow was partially offset by proceeds from the
issuance of stock to employee plans and from the exercise of stock options.
On May 4, 2001, InterTAN Canada Ltd. and InterTAN, Inc. extended its revolving
credit facility (the "Revolving Loan Agreement") in an amount not to exceed
C$75,000,000 (approximately $47,100,000 at December 31, 2001 exchange rates).
The Revolving Loan Agreement matures March 22, 2003. The amount of credit
actually available at any particular time is dependent on a variety of factors,
including the level of eligible inventories and accounts receivable of InterTAN
Canada Ltd. The amount of available credit is then reduced by the amount of
trade accounts payable then outstanding as well as certain other reserves. A
loan origination fee of C$37,500 (approximately $24,000 at December 31, 2001
exchange rates) was payable on closing. A further payment of C$37,500 is
required on March 22, 2002. Borrowing rates under the facility range from prime
to prime plus 0.75%, based on the Company's quarterly performance against
predetermined EBITDA to fixed charge ratios. Using the same criteria, the
Company may borrow at bankers' acceptance and LIBOR rates plus from 0.75% to
2.0%. Letters of credit are charged at rates ranging from 0.75% per annum to
2.0% per annum, using the same performance criteria. In addition, a standby fee
of 0.65% is payable on the unused portion of the credit facility. The Revolving
Loan Agreement is collateralized by a first priority lien over all of the assets
of
21
<PAGE>
InterTAN Canada Ltd. and is guaranteed by InterTAN, Inc. This facility will be
used primarily to finance seasonal inventory build up and, from time to time, to
provide letters of credit in support of purchase orders. At December 31, 2001,
there were no borrowings against the Revolving Loan Agreement, and approximately
$10,000 was committed in support of letters of credit. There was approximately
C$55,000,000 (approximately $35,000,000 at December 31, 2001 exchange rates) of
credit available for use at December 31, 2001 under this facility.
Under the terms of the Company's Merchandise Agreement with RadioShack U.S.A.,
purchase orders with Far Eastern suppliers must be supported, based on a formula
set out in the Merchandise Agreement, by letters of credit issued by banks on
behalf of InterTAN, by a surety bond, or backed by cash deposits. The Company
has secured surety bond coverage from a major insurer (the "Bond") in an amount
not to exceed $12,000,000. Use of the Bond gives the Company greater flexibility
in placing orders with Far Eastern suppliers by releasing a portion of the
credit available under the Revolving Loan Agreement for other purposes.
The Company's primary uses of liquidity during the remainder of fiscal year 2002
will include the funding of capital expenditures, funding the repurchase of
common stock and payments in settlement of tax issues. Management estimates that
capital expenditures in Canada during the remainder of fiscal 2002 will
approximate $8,000,000. These expenditures relate primarily to investments in
store assets, including new stores, renovating and relocating existing stores
and store fixtures and equipment, improvements to the Company's distribution
center and enhancements to management information systems. On October 25, 2001,
the Company's Board of Directors announced an additional share repurchase
program. Under this program, management is authorized, subject to appropriate
market conditions, to repurchase up to 2,600,000 shares of the Company's common
stock, approximately 10% of shares then outstanding. By December 31, 2001,
764,700 shares had been acquired under this plan at an aggregate cost of
$8,221,000, approximately $10.75 per share, including commissions. While
additional purchases under this program will depend on market conditions,
management estimates that the program could require between $18,000,000 and
$24,000,000 in cash during fiscal 2002. Late in fiscal year 2001, the Company
reached agreements with both the Canadian and United States tax authorities,
settling certain outstanding tax issues. See "Income Tax". Management estimates
that during fiscal year 2002 payments flowing from these settlements, together
with other matters previously agreed, will be approximately $22,000,000 to
$25,000,000.
Management believes that the Company's cash and short-term investments on hand
and its cash flow from operations combined with its banking facilities and the
Bond will provide the Company with sufficient liquidity to meet its planned
requirements through fiscal year 2002.
22
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
The various matters discussed in Notes 3, and 8 to the Company's
Consolidated Financial Statements on page 7 and 10 of this Form 10-Q
are incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held in November 9,
2001, the following persons were re-elected to the Board of Directors:
William C. Bousquette
Brian E. Levy
In such connection, Messrs. Bousquette and Levy received 23,162,132
and 23,168,242 votes, respectively, "For" election and 116,496 and
110,386 votes, respectively, were withheld. In total 23,278,628 shares
were authorized to vote.
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).
23
<PAGE>
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) Rights Agreement between InterTAN, Inc. and Bank
Boston, NA (filed as Exhibit 4 to the company's
Form 8-A filed on September 17, 1999 and
incorporated herein by reference)
*10 (a) Ninth Amendment to Loan Agreement between
InterTAN Canada Ltd., InterTAN, Inc. and Bank
America Canada dated as of November 15, 2001.
* 10(b) Retirement Letter Agreement between James G.
Gingerich and InterTAN, Inc. dated September 25,
2001.
* 10 (c) Composite copy of InterTAN Inc.'s Deferred
Compensation Plan reflecting amendments thereto
authorized by the Board of Directors of InterTAN,
Inc. on November 9, 2001.
* 10 (d) Addendum No. 2 to Deferred Compensation Plan
Agreement between Jeffrey A. Losch and InterTAN,
Inc. dated November 1, 2001.
* 10 (e) Addendum No. 2 to Deferred Compensation Plan
Agreement between Jeffrey A. Losch and InterTAN,
Inc. dated November 1, 2001.
* 10 (f) Addendum No. 2 to Deferred Compensation Plan
Agreement between Jeffrey A. Losch and InterTAN,
Inc. dated November 1, 2001.
________________________
* Filed herewith
24
<PAGE>
b) Reports on Form 8-K:
A Report on Form 8-K was filed on October 29, 2001 to report that on
October 25, 2001 the Board of Directors had authorized management,
subject to obtaining applicable securities regulators' approval and
market conditions, to repurchase up to 2,600,000 shares of the
Company's common stock.
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
InterTAN, Inc.
(Registrant)
Date: February 12, 2002 By: /s/ James P. Maddox
-------------------
James P. Maddox
Vice-President and Chief Financial Officer
(Chief Financial Officer)
By: /s/ Brian E. Levy
----------------------
Brian E. Levy
President and Chief Executive Officer
(Authorized Officer)
26
<PAGE>
InterTAN, Inc.
Quarterly Report on Form 10-Q
Three Months Ended December 31, 2001
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'sRegistration Statement on Form
10 and incorporated herein by reference).
3(b) Bylaws (Filed on Exhibit 3(b) to InterTAN's Registration
Statement on Form 10 and incorporated herein by reference).
3(b)(i) Amendments to Bylaws through August 3, 1990 (Filed as
Exhibit 3(b)(i) to InterTAN's Annual Report on Form 10-K for
fiscal year ended June 30, 1990 and incorporated herein by
reference).
3(b)(ii) Amendments to Bylaws through May 15, 1995 (Filed as
Exhibit 3(b)(ii) to InterTAN's Annual Report on Form 10-K
for fiscal year ended June 30, 1995 and incorporated herein
by reference).
3(b)(iii) Amended and Restated Bylaws (filed as Exhibit 3(b)(iii)
to InterTAN's Annual Report on Form 10-K for fiscal year
ended June 30, 1996 and incorporated herein by reference).
4(a) Articles Fifth and Tenth of the Restated Certificate of
Incorporation (included in Exhibit 3(a)).
4(b) Rights Agreement between InterTAN, Inc. and Bank Boston, NA
(filed as Exhibit 4 to the
<PAGE>
company's Form 8-A filed on September 17, 1999 and
incorporated herein by reference)
* 10 (a) Ninth Amendment to Loan Agreement between InterTAN Canada
Ltd., InterTAN, Inc. and Bank America Canada dated as of
November 15, 2001.
* 10 (b) Retirement Letter Agreement between James G. Gingerich and
InterTAN, Inc. dated September 25, 2001.
* 10 (c) Composite copy of InterTAN Inc.'s Deferred Compensation Plan
reflecting amendments thereto authorized by the Board of
Directors of InterTAN, Inc. on November 9, 2001.
* 10 (d) Addendum No. 2 to Deferred Compensation Plan Agreement
between Jeffrey A. Losch and InterTAN, Inc. dated November
1, 2001.
* 10 (e) Addendum No. 2 to Deferred Compensation Plan Agreement
between Jeffrey A. Losch and InterTAN, Inc. dated November
1, 2001.
* 10 (f) Addendum No. 2 to Deferred Compensation Plan Agreement
between Jeffrey A. Losch and InterTAN, Inc. dated November
1, 2001.
___________________
* Filed herewith
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(A)
<SEQUENCE>3
<FILENAME>dex10a.txt
<DESCRIPTION>NINTH AMENDMENT TO LOAN AGREEMENT
<TEXT>
<PAGE>
Exhibit 10(a)
INTERTAN CANADA LTD.
INTERTAN, INC.
NINTH AMENDMENT TO LOAN AGREEMENT
This Ninth Amendment to Loan Agreement (this "Amendment") is dated as of
November 15, 2001 and entered into by and among, inter alia, InterTAN Canada
Ltd., as Canadian Borrower, InterTAN, Inc., as the Parent, the financial
institutions listed on the signature pages hereof (the "Lenders"), and Bank of
America Canada, a Canadian chartered bank, as agent for the Lenders (the
"Agent"), and is made with reference to that certain Loan Agreement dated as of
December 22, 1997 (as amended and in effect the "Loan Agreement"), by and among
the Canadian Borrower, the Lenders and the Agent, as amended by the
Rectification and Amendment No. 1 dated as of February 24, 1998, the Second
Amendment to Loan Agreement dated as of January, 1999, the Third Amendment to
Loan Agreement dated as of April 12, 1999, the Fourth Amendment to Loan
Agreement dated as of July 31, 1999, the Fifth Amendment to Loan Agreement dated
as of October 1, 1999, the Sixth Amendment to Loan Agreement dated as of
December 24, 2000, the Seventh Amendment to Loan Agreement dated as of March 21,
2001 and the Eighth Amendment to Loan Agreement dated as of May 4, 2001.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Loan Agreement.
SECTION 1. AMENDMENTS TO LOAN AGREEMENT
1.1 Subsection 2.4(a) of the Loan Agreement is hereby amended by adding the
following at the end thereof:
"Notwithstanding any other terms hereof, BACAN shall have the right
in its unfettered discretion to have any affiliate of BACAN or any of
its or such affiliate's branches enter into F/X Transactions with the
Canadian Borrower for amounts and on terms as may be approved by
BACAN in its sole discretion and, in connection therewith, to provide
such affiliate or branch with credit support. In any such case, the
Canadian Borrower shall indemnify and save harmless BACAN for and in
respect of any losses, costs, liabilities, damages and expenses which
may be suffered or incurred by BACAN in respect of such F/X
Transaction and/or credit support, such credit support and the
Canadian Borrower's foregoing obligations shall form part of the
Obligations and the foregoing provisions shall apply equally to any
F/X Transaction entered into by such branch of affiliate as if such
F/X Transaction was entered into by BACAN."
1.2 Subsection 15.3(a) of the Loan Agreement is hereby amended by deleting the
phrase "is a non-resident of Canada" in the fourth line thereof and
replacing it with "is not (or is not considered to be) a resident of
Canada".
1.3 Section 15.3 of the Loan Agreement is hereby amended by adding the
following as subsection (c) thereof:
<PAGE>
-2-
"Notwithstanding the foregoing or any other terms hereof, in the event that
Bank of America Canada assigns to an affiliate, branch or affiliate's
branch all of its rights, benefits and obligations hereunder in accordance
with Section 15.3(a), then (i) Bank of America Canada shall,
contemporaneous with such assignment, be deemed to have resigned as Agent,
(ii) all references to "Agent" shall be deemed to be references to such
affiliate, branch or affiliate's branch, (iii) Bank of America Canada shall
be released and discharged from any further obligation hereunder but shall
continue to be entitled to the benefit of any indemnities or protections
herein provided including, without limitation, the provisions of Article
14, (iv) Bank of America Canada and such affiliate, branch or affiliate's
branch shall be deemed to have executed and delivered an Assignment and
Acceptance Agreement sufficient to give effect to the assignment,
substantially in the form of Exhibit O, and (v) each of the parties hereto
---------
agrees to execute and deliver and do and perform such documents, acts and
things as are necessary to record and give effect to the foregoing."
1.4 Section 16.18 of the Loan Agreement is hereby amended by deleting the
reference to "governmental authority" in the third line thereof and
substituting "Public Authority" therefor.
1.5 Subsection 16.19(a) of the Loan Agreement is hereby amended by deleting the
reference to "governmental" in the fifth line thereof and substituting "any
Public Authority" therefor.
SECTION 2. CONDITIONS TO EFFECTIVENESS
2.1 This Amendment shall become effective upon the satisfaction of the
conditions precedent set out in Section 2.2 below (the date of satisfaction
of such conditions being referred to herein as the "Ninth Amendment
Effective Date").
2.2 On or before the date hereof, each of the Canadian Borrower and the Parent
shall deliver or cause to be delivered to the Agent two (2) originally
fully executed copies of this Amendment, as executed by the Canadian
Borrower and the Parent.
SECTION 3. BORROWER'S AND PARENT'S REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Amendment and to amend
the Loan Agreement in the manner provided herein, each of the Canadian Borrower
and Parent represents and warrants to the Agent and each Lender that the
following statements are true, correct and complete:
A. Authorization, Validity, and Enforceability of this Amendment. The
Canadian Borrower or the Parent, as applicable, has the corporate power and
authority to execute and deliver this Amendment and to perform the Loan
Agreement as amended by this Amendment (the "Amended Agreement"). The Canadian
-----------------
Borrower or the Parent, as applicable, has taken all necessary corporate action
(including, without limitation, obtaining
<PAGE>
-3-
approval of its stockholders if necessary) to authorize its execution and
delivery of this Amendment and the performance of the Amended Agreement. This
Amendment has been duly executed and delivered by the Canadian Borrower or the
Parent, as applicable, and this Amendment and the Amended Agreement constitute
the legal, valid and binding obligations of the Canadian Borrower or the Parent,
as applicable, enforceable against it in accordance with their respective terms
without defence, setoff or counterclaim. The Canadian Borrower's or the
Parent's, as applicable, execution and delivery of this Amendment and the
performance by the Canadian Borrower or the Parent, as applicable, of the
Amended Agreement do not and will not conflict with, or constitute a violation
or breach of, or constitute a default under, or result in the creation or
imposition of any Lien upon the property of the Canadian Borrower or the Parent,
as applicable, or any of its Subsidiaries by reason of the terms of (a) any
contract, mortgage, Lien, lease, agreement, indenture, or instrument to which
the Canadian Borrower or the Parent, as applicable, is a party or which is
binding on it, (b) any Requirement of Law applicable to the Canadian Borrower or
the Parent, as applicable, or any of its Subsidiaries, or (c) the certificate or
articles of incorporation or amalgamation or bylaws of the Canadian Borrower or
the Parent, as applicable, or any of its Subsidiaries.
B. Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or other person is necessary or required in connection
with the execution, delivery or performance by, or enforcement against, the
Canadian Borrower or the Parent, as applicable, or any of its Subsidiaries of
this Amendment or the Amended Agreement except for such as have been obtained or
made and filings required in order to perfect the Agent's security interests.
C. Absence of Default. No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute an Event or an Event of Default.
SECTION 4. MISCELLANEOUS
A. Reference to and Effect on the Loan Agreement and the Other Loan
Documents.
(1) On and after the Ninth Amendment Effective Date, each reference
in the Loan Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Loan Agreement,
and each reference in the other Loan Documents to the "Loan
Agreement", "thereunder", "thereof" or words of like import
referring to the Loan Agreement shall mean and be a reference to
the Amended Agreement.
(2) Except as specifically amended by this Amendment, the Loan
Agreement and the other Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed.
(3) The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of
any provision of, or operate as a waiver of any right, power or
remedy of the Agent or
<PAGE>
-4-
any Lender under, the Loan Agreement or any of the other Loan
Documents.
B. Captions. The captions contained in this Amendment are for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge or restrict any provision.
C. Governing Law. THIS AMENDMENT SHALL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.
D. Counterparts; Effectiveness. This Amendment may be executed in any
number of counterparts, and by the Agent, each Lender, the Parent and the
Canadian Borrower in separate counterparts, each of which shall be an original,
but all of which shall together constitute one and the same amendment; signature
pages may be detached from multiple separate counterparts and attached to a
single counterpart so that all signature pages are physically attached to the
same document. This Amendment (other than the provisions of Section 1 hereof,
the effectiveness of which is governed by Section 2 hereof) shall become
effective upon the execution of a counterpart hereof by the Canadian Borrower,
the Parent, the Agent and the Lenders and receipt by the Canadian Borrower and
the Agent of written or telephonic notification of such execution and
authorization of delivery thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
INTERTAN CANADA LTD.
By: /s/ James P. Maddox
---------------------------------
Name: James P. Maddox
Title: Vice President, Finance
INTERTAN, INC.
By: /s/ James P. Maddox
----------------------------------
Name: James P. Maddox
Title: Vice President, Finance
BANK OF AMERICA CANADA,
as Agent and as the Lender
By: /s/ Jeff Burdon
-----------------------------------
Name: Jeff Burdon
Title: Vice-President
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(B)
<SEQUENCE>4
<FILENAME>dex10b.txt
<DESCRIPTION>RETIREMENT AGREEMENT
<TEXT>
<PAGE>
Exhibit 10(b)
[LOGO] InterTAN, INC.
3300 Highway 7, Suite 904 . Concord, Ontario L4K 4M3
BRIAN E. LEVY
President
Chief Executive Officer
(905) 760-9708
(905-760-9723 FAX
September 25, 2001
Mr. James G. Gingerich
46 Quail Run Boulevard
MAPLE ON L6A 1E9
Dear Jim:
Re: Retirement Agreement
This will confirm our agreement concerning the terms of your retirement as an
employee of InterTAN, Inc. ("InterTAN" or the "Company") effective December 31,
2001 (the "Retirement Date").
Transitional Matters
From now and until the Retirement Date, you will provide your full assistance
and cooperation to the Company to accomplish a supportive and complete
transition to a new management team. Your assistance will include training,
orientation, counsel and appropriate introduction of your successor to the
investment and analyst community and is expected to include travel and
face-to-face meetings with such parties. You are expected to take an affirmative
and proactive role in arranging these meetings and contacts at the convenience
of the incoming executive team. You will also be expected to work towards the
resolution of any issues arising from the sale of the Company's Australian
subsidiary. You will also fully comply with all other direction or instruction
given from time to time by the Company's President and CEO or the Board of
Directors.
<PAGE>
-2-
Retirement Allowance
Provided that you are not in default of your non-competition and
non-solicitation obligations set forth below, InterTAN will pay you the sum of
$1,541,108 (US) payable in 120 equal monthly instalments of $12,843 (US), less
required withholdings, beginning on February 1, 2002 and ending on January 1,
2012. At your election, any monthly instalment may instead be paid in Canadian
dollars provided that you give clear notice of such election at least ten (10)
working days prior to the end of the month for which you wish to be paid in
Canadian dollars. The exchange rate to be used in calculating the appropriate
Canadian dollar equivalent amount shall be the exchange rate that is published
in the Wall Street Journal on the date that is the last business day of the
month that is requested to be paid in Canadian dollars. Payment for any month in
which you so elect to be paid in Canadian dollars may be delayed by up to seven
working days in order to give the Company reasonable time to complete the
currency calculation and provide funds to you. In the event of your death prior
to January 1, 2012, the remaining monthly payments will be made to your spouse
or to such other person or persons as you may designate in a beneficiary
designation form filed with the Organization and Compensation Committee of
InterTAN.
Acceleration of Certain Stock Options
On or about the Retirement Date and provided that you have discharged your
duties in a satisfactory manner to such date, the Board of Directors will
accelerate the then unvested portion of those stock options granted to you on
June 7, 1999 and June 5, 2000; provided further that the market price as listed
on the NYSE of the Company's common stock on the date the acceleration is
authorized by the Board of Directors is not in excess of the exercise price
stipulated in either or both of the stock option grants that are the subject
matter of the acceleration. In accordance with the terms of the 1996 Stock
Option Plan, you will have a twelve-month period commencing on your Retirement
Date in which to exercise such accelerated options.
Non-Competition/Non-Solicitation
You agree that for the period from the Retirement Date to December 31, 2006,
whether in Canada or in any other country in which InterTAN carries on business,
you will not, without the prior written consent of InterTAN:
(a) be employed or engaged by or in any way participate in the ownership
(of a material interest), management, direction or control or provide,
directly or indirectly, any services to: (i) any entity whose primary
business is the retail sale of consumer electronics and related
products or services; or (ii) any major supplier of products or
services offered for retail sale by InterTAN or InterTAN Canada Ltd.
(for greater clarity, a major supplier shall be deemed to be any one
of the fifteen largest contributors to RadioShack Canada's cooperative
advertising programs or any one of the largest fifteen vendors (or a
party who operates as an agent to supplier(s)) to RadioShack Canada as
measured in wholesale dollars
<PAGE>
-3-
purchased by RadioShack Canada as either list is constituted from time
to time and shall also include Microsoft, Inc., or RadioShack
Corporation, or any of their respective affiliates); and
(b) with the exception of Douglas C. Saunders, recruit, hire or become
involved in any form of business association with any employee of
InterTAN or InterTAN Canada Ltd. nor any person who has been an
employee within the period of 12 months preceding such recruitment,
hiring or association.
It is acknowledged that the determination of whether an entity constitutes a
"major supplier" shall be made at the time you first became employed or engaged
by or in any way participated in the ownership (of a material interest),
management, direction or control or provided any services to that particular
entity. You agree that if you knowingly, recklessly or wilfully violate any of
the foregoing covenants such conduct will result in the immediate cessation of
any retirement benefits to be paid to you under this agreement. Furthermore,
InterTAN will have the right to recover from you any benefits paid to you during
any period of time when you were in breach of any one or more of the foregoing
covenants.
Change Of Control
In the event there occurs certain change of control events as described in the
Company's Deferred Compensation Plan occur on or before December 31, 2001, all
terms of this letter agreement (other than this paragraph) are null and void.
Other Matters
Your participation in the Company's Group RRSP, Stock Purchase Plan, Restricted
Stock Unit Plan and Deferred Compensation Plan will cease effective the
Retirement Date. You also acknowledge that, pursuant to the terms of the 1986
and 1996 Stock Option Plans, that only those options that are vested as at
December 31, 2001 (which may include those options that are the subject matter
of the potential acceleration referred to above) are subsequently exercisable by
you and that such exercise period expires on December 31, 2002 in the case of
grants designated as NSO's (Non-qualified Stock Options) and on March 31, 2002
in the case of grants designated as ISO's (Incentive Stock Options). InterTAN
will transfer to you or to such other person as you may direct, any policy or
policies of life insurance maintained by InterTAN on your life, provided that
the terms of such policy or policies permit such a transfer and provided that
you agree to bear any costs associated with such transfer.
The terms of this letter will release InterTAN, its directors, officers and
affiliates from, and will be in full and final satisfaction of, any and all
obligations which InterTAN may have to you arising out of or in any way
connected with your employment by InterTAN and the termination of that
employment, including, but not limited to, any obligations arising under your
employment letter dated March 1, 1995 as amended by my letter of February 15,
2000 and as further amended by my letter of February 19, 2001, InterTAN's
Deferred Compensation Plan and your Plan Agreement thereto dated November 11,
1997 and the Addendum thereto dated September 12,
<PAGE>
-4-
2000. The terms of this letter also satisfy any and all obligations that
InterTAN may have to you pursuant to the Employment Standards Act of Ontario or
any other applicable statute or regulation.
Please signify your acceptance of the foregoing by signing and returning the
enclosed copy of this letter where indicated below.
Sincerely,
InterTAN, Inc.
Brian E. Levy
President and Chief Executive Officer
*******
Accepted and agreed to this 3/rd/ day of November, 2001.
/s/ Ann Robinson /s/ James G. Gingerich
- ------------------------------------ ----------------------------
Witness James G. Gingerich
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(C)
<SEQUENCE>5
<FILENAME>dex10c.txt
<DESCRIPTION>DEFERRED COMPENSATION PLAN
<TEXT>
<PAGE>
Exhibit 10(c)
Composite Copy
(as of November 9, 2001)
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
- --------------------------------------------------------------------------------
ARTICLE ONE
PURPOSE
Section 1.1 The purpose of this InterTAN, Inc. Deferred Compensation Plan
(the "Plan") is to enable InterTAN, Inc. ("InterTAN") and its subsidiaries to
secure and retain the services of outstanding key executive personnel by
providing, subject to the provisions of the Plan, income payments to key
executive employees during their lifetime and to their beneficiaries following
their death.
ARTICLE TWO
DEFINITIONS
Section 2.1 Beneficiary. The recipient(s) designated (in accordance with
Article Seven) by a Participant in the Plan to whom benefits are payable
following his death.
Section 2.2 Committee. The Organization and Compensation Committee of the
Board of Directors of InterTAN, which shall administer the Plan in accordance
with Article Nine.
Section 2.3 Disability. A physical or mental condition which, in the opinion
of the Committee, totally and presumably permanently, prevents a Participant
from substantially performing duties for which such Participant is suited to
perform either by education or training, or if such Participant is on a Leave of
Absence when such condition develops, substantially performing duties for which
such Participant is suited to perform either by education or training. A
determination that Disability exists shall be based upon competent medical
evidence satisfactory to the Committee. The date that any person's Disability
occurs shall be deemed to be the date such condition is determined to exist by
the Committee.
Section 2.4 Employee. A regular full-time executive employee of InterTAN.
Section 2.5 Leave of Absence. Any period during which:
(a) an Employee is absent with the prior consent of InterTAN,
which consent shall be granted under uniform rules applied to all Employees on a
nondiscriminatory basis, but only if such person is an Employee immediately
prior to the commencement of such period of authorized absence and resumes
employment with InterTAN not later than the first working day following the
expiration of such period of authorized absence; or
(b) an Employee is a member of the Armed Forces of the United
States or that nation in which he resides, and his reemployment rights are
guaranteed by law, but only if such person is an Employee immediately prior to
becoming a member of such Armed Forces and resumes employment with InterTAN
within the period during which his reemployment rights are guaranteed by law.
<PAGE>
Section 2.6 Participant. An Employee who has been selected and has accepted
a Plan Agreement as provided in Article Three.
Section 2.7 Plan Agreement. The agreement between InterTAN and a
Participant, entered into in accordance with Article Three, and in the form of
attached Exhibit "A" (as such form may be amended from time to time hereunder).
Section 2.8 Plan Benefit Amount. Plan Benefit Amount means the dollar
amount set forth and so designated in a Participant's Plan Agreement.
Section 2.9 Retirement. The following classifications of Retirement as
referred to in this Plan are defined as follows:
(a) Early Retirement. The voluntary election, as opposed
to involuntary termination by InterTAN, prior to the Participant's attaining the
age of sixty-five (65) years, by a Participant to terminate his employment after
attaining the age of fifty-five (55) years.
(b) Normal Retirement. The termination of a Participant's
service with InterTAN at the date of attaining age sixty-five (65) years.
(c) Late Retirement. The termination of a Participant's
service with InterTAN after the Participant's attaining the age of sixty-five
(65) years.
Section 2.10 InterTAN. InterTAN, Inc., a Delaware corporation, and those
subsidiary corporations in which InterTAN owns at least eighty percent (80%) of
the total combined voting power of all classes of stock entitled to vote.
Section 2.11 InterTAN Subsidiary. Any corporation in which InterTAN owns at
least eighty percent (80%) of the total combined voting power of all classes of
stock entitled to vote.
ARTICLE THREE
SELECTION OF PARTICIPANTS AND
AGREEMENT TO PARTICIPATE
Section 3.1 The Committee, in its sole and exclusive discretion, shall
select from among the key executive employees of InterTAN, candidates for
participation in the Plan. A candidate shall become a Participant only upon his
execution of a Plan Agreement and a Beneficiary Designation Form (a form being
attached as Exhibit "B").
Section 3.2 Subject to Section 8.4 hereof, the Committee reserves the
right, at its discretion, and without prejudice or liability, to terminate any
Plan Agreement with any Participant of InterTAN at any time prior to the
Participant's retirement or death.
2
<PAGE>
ARTICLE FOUR
LIFE INSURANCE
Section 4.1 InterTAN may obtain life insurance insuring the life of any
Participant as a means of funding InterTAN's obligations to his Beneficiary in
whole or part. InterTAN shall be the sole owner and beneficiary of all such
policies of insurance so obtained and of all incidents of ownership therein,
including without limitation, the rights to all cash and loan values, dividends
(if any), death benefits and the right to terminate. No Beneficiary or
Participant shall be entitled to any rights, interests or equities in such
policies or to any specific asset of InterTAN of any type, and on the contrary,
their rights against InterTAN under the Plan shall be solely as general
creditors.
Section 4.2 If as a result of misrepresentations made by a Participant in
any application for life insurance upon his life obtained by InterTAN hereunder,
the insurance carrier or carriers or any reinsurance thereof successfully
avoid(s) payment to InterTAN of the proceeds of its or their policy or policies,
or such proceeds are not payable because the Participant's death results from
suicide within two (2) years of the issuance of such policy or within two (2)
years of the issuance to InterTAN of additional policies obtained by InterTAN
hereunder, then, in any of said events, notwithstanding any other provisions of
the Plan or of the Plan Agreement with such Participant, InterTAN shall have no
obligation to his Beneficiary to provide any of the death benefits otherwise
payable under the terms thereof.
Section 4.3 Each Participant shall cooperate in the securing of life
insurance on his life by furnishing such information as the insurance company
may require, taking such physical examinations as may be necessary, and taking
any other action which may be requested by InterTAN or the insurance company to
obtain such insurance coverage. If a Participant refuses to cooperate in the
securing of life insurance, or if InterTAN is unable to secure life insurance at
a rate that it deems acceptable, acting reasonably, then the Plan Agreement
shall be of no force and effect as to a Participant unless InterTAN waives such
requirement in writing.
ARTICLE FIVE
BENEFITS PAYABLE TO PARTICIPANTS AND
TO BENEFICIARIES OF PARTICIPANTS
Section 5.1 Subject to the terms and conditions of the Plan, upon the
Retirement of a Participant, InterTAN agrees to pay to Participant a Retirement
benefit as follows:
(a) Normal Retirement. If a Participant retires at the
date of Normal Retirement, then InterTAN agrees to pay to Participant or to the
designated Beneficiary of Participant in the event of the death of Participant
prior to the termination of payment of Retirement benefits hereunder, all from
its general assets, an amount equal to such Participant's Plan Benefit Amount,
such sum to be paid as set forth in Section 5.3 hereof.
(b) Early Retirement. If a Participant retires at a time
that constitutes an Early Retirement, then InterTAN agrees to pay to Participant
or to the designated Beneficiary of Participant in the event of the death of
Participant prior to the termination of payment of Early Retirement benefits
hereunder, all from its general assets, an amount equal to such Participant's
Plan Benefit Amount reduced by five percent (5%) per year for each year that
Early Retirement precedes the date of Normal Retirement. Such year shall be a
fiscal year beginning on the date a Participant attains age fifty-five (55). Any
reduction for a part of a year shall be prorated on a daily basis assuming a 365
day year. Such amount shall be paid as set forth in Section 5.3 hereof.
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(c) Late Retirement. If a Participant retires at a date
that constitutes Late Retirement, then InterTAN agrees to pay to Participant or
to the designated Beneficiary of Participant in the event of the death of
Participant prior to the termination of payment of Late Retirement benefits
hereunder, all from its general assets, an amount equal to such Participant's
Plan Benefit Amount, reduced by a percentage determined as follows:
Age on Date of Percent of Reduction
Late Retirement of Plan Benefit Amount
--------------- ----------------------
66 0%
67 0%
68 0%
69 0%
70 0%
71 20%
72 40%
73 60%
74 80%
75 100%
The percent of reduction of a Participant's Plan Benefit Amount shall be
measured on a fiscal year beginning on the date of Participant's date of birth
and shall commence on the day after the date a Participant attains age 70, and
any reduction for a part of a year shall be prorated on a daily basis at the
applicable percentage assuming a 365 day year. Such amount shall be paid as set
forth in Section 5.3 hereof.
Section 5.2 Subject to the terms and conditions of the Plan, upon the death
of a Participant, but only if the Participant is an Employee of InterTAN at his
death (except as set forth in Section 5.2(c) below) and is not entitled to
Retirement benefits pursuant to a Plan Agreement at such time, InterTAN agrees
to pay to his Beneficiary from its general assets an amount equal to such
Participant's Plan Benefit Amount as reflected in Employee's Plan Agreement or,
as the case may be, in the last amendment to such Plan Agreement. With respect
to such benefits, however, it is further provided that:
(a) no benefits shall be payable to the Beneficiary of a
Participant in those instances covered by Section 4.2;
(b) if a Participant dies while an Employee of InterTAN
after the date of his Normal Retirement, then the amount payable to his
Beneficiary upon a Participant's death shall be reduced as set forth in Section
5.1(c) hereof.
(c) the death of a Participant within the first year
after involuntary termination of employment with InterTAN as provided in Section
8.6 shall not defeat the right of such Participant's Beneficiary to receive
benefits under this Section 5.2 so long as an event described in Section 8.5(a),
(b) or (c) occurs within one year of the date of termination of the
Participant's employment.
Section 5.3 The aggregate amount payable upon the Normal Retirement, Early
Retirement, Late Retirement, benefits due and payable under Section 8.5 or 8.6
hereof or death of a Participant to a Participant or his Beneficiary shall be
paid in one hundred twenty (120) equal monthly installment payments commencing
on the first day of the month next following thirty (30) days after Retirement
or after the Committee's receipt of a certified death or proof of death
certificate verifying the Participant's death or at the time stated in Section
8.5 or 8.6 hereof. A Participant shall notify InterTAN of Retirement by hand
delivery or by certified or registered mail, return receipt requested, postage
prepaid, of a written Notice of Retirement specifying the effective date of
Retirement, such written notice to be addressed to: Organization and
Compensation Committee of the Board of Directors, InterTAN, Inc., Suite 904,
3300 Highway #7, Concord, Ontario, Canada L4K 4M3. Such notice shall be deemed
to be received when
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actually received by said Organization and Compensation Committee at said
address as may be changed from time to time in the Plan Agreements, as amended.
Section 5.4 Until actually paid and delivered to the Participant or to the
Beneficiary entitled to same, none of the benefits payable by InterTAN under any
Plan Agreement shall be liable for the debts or liabilities of either the
Participant or his Beneficiary, nor shall the same be subject to seizure by any
creditor of the Participant or his Beneficiary under any writ or proceeding at
law, in equity or in bankruptcy. Further, no Participant or Beneficiary shall
have power to sell, assign, transfer, encumber, or in any manner anticipate or
dispose of the benefits to which he is entitled or may become entitled under a
Plan Agreement.
Section 5.5
(a) During the period that Participant is receiving
benefits under a Plan Agreement and for one (1) year after cessation of payment
of benefits, Participant agrees that he will not, either directly or indirectly,
within the United Sates of America or in any country of the world that InterTAN
sells, imports, exports, assembles, packages or furnishes its products,
articles, parts, supplies, accessories or services or is causing them to be
sold, imported, exported, assembled, packaged or furnished through related
entities, representatives, agents, or otherwise, own, manage, operate, join,
control, be employed by, be a consultant to, be a partner in, be a creditor of,
engage in joint operations with, be a stockholder, officer or director of any
corporation, sole proprietorship or business entity of any type, or participate
in the ownership, management, direction, or control or in any other manner be
connected with, any business of manufacturing, designing, programming,
servicing, repairing, selling, leasing, or renting any products, articles,
parts, supplies, accessories or services which is at the time of Participant's
engaging in such conduct competitive with products, articles, parts, supplies,
accessories or services manufactured, sold, imported, exported, assembled,
packaged or furnished by InterTAN, except as a shareholder owning less than five
percent (5%) of the shares of a corporation whose shares are traded on a stock
exchange or in the over-the-counter market by a member of the National
Association of Securities Dealers. "Consumer Electronic Products" are those type
of products sold at the retail level to the ultimate customer as are advertised
by InterTAN in its most recently published annual catalogs and monthly flyers.
Manufacturing of Consumer Electronic Products and sale of Consumer Electronic
Products at levels of distribution other than the retail level are not
considered a violation of this covenant.
(b) (i) In the event that a Participant takes Retirement and
engages in any of the activities described in the
immediately preceding paragraph, or engaged in any of
such activities prior to Retirement, then, without
any further notification, and upon determination by
the Committee that such a Participant is engaged or
has engaged in such activities, such Committee's
decision to be conclusive and binding upon all
concerned, and notwithstanding any other provisions
of the Plan or of the Plan Agreement with such
Participant, InterTAN's obligation to a Participant
to pay any Retirement or death benefits hereunder
shall automatically cease and terminate, and InterTAN
shall have no further obligation to such Participant
or Beneficiary pursuant to the Plan or the Plan
Agreement. InterTAN may enforce this provision by
suit for damages which shall include but not be
limited to all sums paid to Participant hereunder, or
for injunction, or both.
(ii) Provided, however, that in the event a Participant is
being paid benefits under Section 8.5, Section 8.6 or
Section 10.2 and not otherwise, and engages in any of
the activities described in Section 5.5(a) InterTAN
must give notice to the Participant specifying in
detail the alleged violation of Section 5.5(a).
Participant will be allowed ninety (90) days to cure
such default. If the Committee feels there is
continuing competition, then, without any further
notice or opportunity to cure, and
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upon determination by the Board of Directors of
InterTAN that such a Participant is engaged in such
activities, such Board's decision to be conclusive
and binding upon all concerned, and notwithstanding
any other provisions of the Plan or of the Plan
Agreement with such Participant, InterTAN's
obligation to a Participant to pay any benefits
hereunder shall automatically cease and terminate,
and InterTAN shall have no further obligation to such
Participant or Beneficiary pursuant to the Plan or
the Plan Agreement. InterTAN may enforce this
provision by suit for damages which shall include but
not be limited to all sums paid to Participant
hereunder, or for injunction, or both
Section 5.6 InterTAN may liquidate out of the interest of a Participant
hereunder, but only as Retirement or death benefits become due and payable
hereunder, any outstanding loan or loans or other indebtedness of a Participant
owing to InterTAN. InterTAN may elect not to distribute Retirement or death
benefits to any Participant or to a Beneficiary unless and until all unpaid
loans or other indebtedness due to InterTAN from such Participant, together with
interest, have been paid in full.
Section 5.7 Subject to termination or amendment of the Plan, any Plan
Agreement, or both, a Participant's participation in the Plan shall continue
during his Disability or his taking a Leave of Absence. A Participant who is
Disabled or on Leave of Absence shall notify InterTAN of his date of Retirement
as provided in Section 5.3 hereof.
ARTICLE SIX
AMENDMENTS OF PLAN AGREEMENTS
Section 6.1 The Committee may enter into amendments to the Plan Agreement
with any Participant for the purpose of increasing the benefits payable to the
Participant or his Beneficiary in view of increases in his compensation
following the execution of the initial Plan Agreement or the last amendment
thereto and for the purpose of amending any provision of this Plan as it might
apply to a Participant. In such cases, the acceptance of an amendment by a
Participant is voluntary and until the amended Plan Agreement has been submitted
to and accepted by him, it shall not be effective.
ARTICLE SEVEN
BENEFICIARIES OF PARTICIPANT
Section 7.1 At the time of his acceptance of a Plan Agreement, a
Participant shall be required to designate the Beneficiary to whom benefits
under the Plan and his Plan Agreement will be payable upon his death. A
Beneficiary may be one (1) or more persons or entities, such as dependents,
persons who are natural objects of the Participant's bounty, an inter vivos or
testamentary trust, or his estate. Such Beneficiaries may be designated
contingently or successively as the Participant may direct. The designation of
his Beneficiary shall be made by the Participant on a Beneficiary Designation
Form to be furnished by the Committee and filed with it.
Section 7.2 A Participant may change his Beneficiary, as he may desire, by
filing new and amendatory Beneficiary Designation Forms with the Committee.
Section 7.3 In the event a Participant designates more than one (1)
Beneficiary to receive benefit payments simultaneously, each such Beneficiary
shall be paid such proportion of such benefits as
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the Participant shall have designated. If no such percentage designation has
been made, the Committee shall hold all benefit payments until the Beneficiaries
agree as to the distribution of the funds or a judicial determination has been
made.
Section 7.4 If the designated Beneficiary dies before the Participant in
question and no Beneficiary was successively named, or if the designated
Beneficiary dies before complete payment of the deceased Participant's benefits
have been made and no Beneficiary was successively named, the Committee shall
direct that such benefits (or the balance thereof) be paid to those persons who
are the deceased Participant's heirs-at-law determined in accordance with the
laws of descent and distribution then in force in the Province of Ontario for
separate personal property, such determination to be made as though the
Participant had died intestate and domiciled in Ontario.
Section 7.5 Whenever any person entitled to payments under this Plan shall
be a minor or under other legal disability or, in the sole judgment of the
Committee, shall otherwise be unable to apply such payments to his own best
interest and advantage (as in the case of illness, whether mental or physical,
or where the person not under legal disability is unable to preserve his estate
for his own best interest), the Committee may in the exercise of its discretion
direct all or any portion of such payments to be made in any one or more of the
following ways unless claims shall have been made therefor by an existing and
duly appointed guardian, conservator, committee or other duly appointed legal
representative, in which event payment shall be made to such representative:
(1) directly to such person unless such person shall be an
infant or shall have been legally adjudicated incompetent at the time of the
payment;
(2) to the spouse, child, parent or other blood relative to be
expended on behalf of the person entitled or on behalf of those dependents as to
whom the person entitled has the duty of support;
(3) to a recognized charity or governmental institution to be
expended for the benefit of the person entitled or for the benefit of those
dependents as to whom the person entitled has the duty of support; or
(4) to any other institution, approved by the Committee, to be
expended for the benefit of the person entitled or for the benefit of those
dependents as to whom the person entitled has the duty of support.
The decision of the Committee will, in each case, be final and binding upon all
persons and the Committee shall not be obliged to see to the proper application
or expenditure of any payments so made. Any payment made pursuant to the power
herein conferred upon the Committee shall operate as a complete discharge of the
obligations of InterTAN and of the Committee.
Section 7.6 If the Committee has any doubt as to the proper Beneficiary to
receive payments hereunder, the Committee shall have the right to withhold such
payments until the matter is finally adjudicated or the Committee may direct
InterTAN to bring a suit for interpleader in any appropriate court, pay any
amounts due into the court, and InterTAN shall have the right to recover its
reasonable attorney's fees from such proceeds so paid or to be paid. Any payment
made by the Committee, in good faith and in accordance with this Plan, shall
fully discharge the Committee and InterTAN from all further obligations with
respect to such payments.
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ARTICLE EIGHT
TERMINATION OF PARTICIPATION
Section 8.1 Except as provided in section 8.4, 8.5, 8.6, 10.1 and 10.2
hereof, termination of a Participant's employment by InterTAN other than by
reason of Retirement, Permanent Disability or Leave of Absence, whether by
action of InterTAN or the Participant's resignation, shall terminate the
Participant's participation in the Plan. Neither the Plan nor the Plan Agreement
shall in any way obligate InterTAN to continue the employment of a Participant,
nor will either limit the right of InterTAN to terminate a Participant's
employment at any time, for any reason, with or without cause.
Section 8.2 Except as provided in Sections 8.4, 8.5, 8.6, 10.1 and 10.2
hereof, participation in the Plan by a Participant shall also terminate if the
Plan or his Plan Agreement is terminated by InterTAN in accordance with Article
Ten.
Section 8.3 Except as provided in Section 8.4, 8.5, 8.6, 10.1 and 10.2
hereof, upon termination of a Participant's participation in the Plan, all of
InterTAN's obligations to the Participant and his Beneficiary(ies) under the
Plan and Plan Agreement and each of them, shall terminate and be of no further
effect.
Section 8.4 Except as provided in Section 8.4, 8.5, 8.6, 10.1 and 10.2, if
a Participant's participation in the Plan is terminated, by:
(a) termination of the Plan;
(b) termination of the Plan Agreement; or
(c) Termination of employment for any reasons other than
(i) death or Retirement, which shall be governed by
Article Five, or
(ii) dishonest or fraudulent conduct of a Participant
or the conviction of a Participant of a felony
crime, in which event no vesting under Section
8.4, 8.5, 8.6, 10.1 or 10.2 shall occur,
then such Participant shall be entitled, as set forth below, to a percentage of
his Plan Benefit Amount as follows:
Age Attained at Date of Event
Set Forth in 8.4(a), (b) or (c) % Vested
------------------------------- --------
Age 54 or younger 0%
Age 55 to 65 A percent as determined
in 5.1(b) hereof
Age 65 to 70 100%
Age 70 to 75 A percent as determined
in 5.1(c) hereof
Age 75 and thereafter 0%
The amount payable under this Section 8.4 shall be determined
as of the date of the event set forth in Section 8.4(a), (b) or (c) hereof and
such amount as so determined at that time shall not be altered or changed
thereafter except that the provisions of Section 5.5 hereof shall remain fully
applicable during the Participant's employment by InterTAN, during the payment
of benefits under this Section 8.4 and for one (1) year after termination of
employment or payment of benefits. The amount
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payable under this Section 8.4 shall be paid as set forth in Section 5.3
hereunder to commence on the first day of the month next following thirty (30)
days after cessation of Participant's employment with InterTAN.
Section 8.5 In the event that:
(a) any person, corporation, partnership, association,
joint stock company, trust, unincorporated organization, or government,
including a political subdivision thereof (or any combination thereof acting for
the purpose of acquiring, holding, voting, or disposing of equity securities of
InterTAN), acquires beneficial ownership of at least twenty percent (20%) of the
then issued and outstanding common stock of InterTAN; or
(b) on any day more than fifty percent (50%) of the members
of the Board of Directors of InterTAN (excluding those members replacing
deceased Directors) were not Directors two (2) years prior to such date; or
(c) substantially all the assets of InterTAN are sold or
InterTAN is merged or consolidated or otherwise acquired by or with another
corporation (other than an InterTAN subsidiary) unless, as the result of any
such merger, consolidation, or acquisition,
(i) InterTAN is the surviving entity, and
(ii) not more than twenty percent (20%) of InterTAN's
then issued and outstanding common stock is sold
or exchanged as the result of such merger,
consolidation, or acquisition;
then for a period of three (3) years from the occurrence of any such event any
Participant shall be vested with and be entitled to receive a benefit equal to
his Plan Benefit Amount conditioned upon and subject to such Participant's
employment with InterTAN being terminated, whether voluntary or involuntary,
during such three-year period. Such benefit shall be payable, at Participant's
election:
(A) in accordance with Section 5.3 commencing on the first day of the
month next following thirty (30) days after the date on which
such Participant's employment with InterTAN was terminated,
whether voluntarily or involuntarily (the "Termination Date"); or
(B) in a Lump Sum Payment to be made, at Participant's election, by
check or by wire transfer in immediately available funds to an
account designated by Participant.
In order for Participant to elect to receive a Lump Sum Payment, Participant
must make such election by providing written notice of such election (the
"Election Notice") in the same manner Participant would give notice under
Section 5.3 if Participant was retiring, within thirty business days after the
Termination Date. InterTAN shall pay the Lump Sum Payment to Participant within
ten business days after receipt by InterTAN of the Election Notice.
For purposes of this Section 8.5, "Lump Sum Payment" shall mean an amount equal
to (i) the net present value, calculated using the Discount Rate, of
Participant's Plan Benefit Amount if it were paid in one hundred twenty (120)
equal monthly installments, less (ii) any applicable income tax withholding.
For purposes of this Section 8.5, "Discount Rate" shall mean the per annum yield
for U.S. Treasury Bonds having a maturity date closest in proximity to the ten
year anniversary of the Termination Date, as published in the Wall Street
Journal on the date nearest to InterTAN's receipt of the Election Notice.
Provided, however, if a Participant becomes entitled to benefits under this
Section 8.5 after the date of his Normal Retirement, then the Plan Benefit
Amount shall be reduced in the same amounts as set forth in Section 5.1 (c)
hereof.
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Any provision hereof to the contrary notwithstanding, any shares of InterTAN
common stock sold or exchanged as the result of any acquisition agreement
initiated by InterTAN whereby InterTAN acquires control of or substantially all
the assets of another corporation shall not constitute an event described in
Section 8.5 (a) or (c).
No Participant shall be entitled to benefits under this Section 8.5 unless such
Participant's employment with InterTAN is terminated, whether voluntarily or
involuntarily, within any three-year period beginning on the date of occurrence
of any event described in Section 8.5 (a), (b) or (c), provided, however, the
occurrence of each such event shall mark the commencement of a new and separate
three-year period.
It is specifically provided that the provisions of Section 5.5 shall remain
fully applicable during the payment of benefits under this Section 8.5 and shall
continue for a one year period following termination of the payment of benefits.
In the event of the death of a Participant prior to the receipt of all benefits
payable under this Section, all remaining benefits shall be paid to his
designated Beneficiary.
Section 8.6 In the event that a Participant's employment with InterTAN is
involuntarily terminated for any reason other than those reasons set forth in
Section 8.4(c)(ii), and within a one year period beginning on the date of such
termination there occurs an event described in Section 8.5(a), (b) or (c) then
such Participant, or his Beneficiary if such Participant dies after termination
of employment, shall be entitled to receive a benefit equal to his Plan Benefit
Amount payable in accordance with Section 5.3 commencing on the first day of the
month next following thirty (30) days after the occurrence of such event
described in Section 8.5 (a), (b) or (c). Provided, however, if a Participant
becomes entitled to benefits under this Section 8.6 after the date of his Normal
Retirement, then the amount payable hereunder shall be reduced in the same
amounts as set forth in Section 5.1 (c) hereof.
It is specifically provided that the provisions of Section 5.5 shall remain
fully applicable during the payment of benefits under this Section 8.6 and shall
continue for a one year period following termination of the payment of benefits.
In the event of the death of a Participant prior to the receipt of all benefits
payable under this Section, all remaining benefits shall be paid to his
designated Beneficiary.
ARTICLE NINE
ADMINISTRATION OF THE PLAN
Section 9.1 The Plan shall be administered by the Committee as it is
presently constituted or as it may be changed from time to time by the Board of
Directors of InterTAN.
Section 9.2 In addition to the express powers and authorities accorded the
Committee under the Plan, it shall be responsible for:
(a) construing and interpreting the Plan;
(b) computing and certifying to InterTAN the amount of
benefits to be provided in each Plan Agreement for the Participant or the
Beneficiary of the Participant; and
(c) determining the right of a Participant or a Beneficiary
to payments under the Plan and otherwise authorizing disbursements of such
payments by InterTAN;
in these and all other respects its decisions shall be conclusive and binding
upon all concerned.
Section 9.3 InterTAN agrees to hold harmless and indemnify the members of
the Committee against any and all claims and causes of action by or on behalf of
any and all parties whomsoever, and all losses therefrom, including without
limitation the cost of defense and attorney's fees, based upon or
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arising out of any act or omission relating to or in connection with the Plan
other than losses resulting from any such Committee member's fraud or willful
misconduct.
ARTICLE TEN
TERMINATION OR AMENDMENT OF THE PLAN
OR PLAN AGREEMENTS
Section 10.1 InterTAN reserves the right to terminate or amend this Plan
or any Plan Agreement, in whole or in part, at any time, or from time to time,
by resolution of the Board of Directors of InterTAN provided, however, no
amendment to the Plan or to any Plan Agreement shall alter the vested rights of
a Participant or Beneficiary applicable on the effective date of such
termination or amendment and, except for increases in Plan compensation as
provided herein, such vested rights shall remain unchanged. Rights are deemed to
have vested if benefits are actually being paid or if the only condition
precedent to the payment of benefits is the termination of employment (unless
terminated for reasons set forth in Section 8.4(c)(ii), in which event all
benefits are forfeited) with InterTAN or the giving of notice of retirement or
the occurrence of an event described in Section 8.5(a), (b) or (c).
Section 10.2 In the event the Plan or any Plan Agreement is terminated or
adversely amended to the detriment of any Participant and within a one year
period from the effective date of any such amendment or termination there occurs
an event described in Section 8.5(a), (b) or (c), then any Participant so
affected whose employment with InterTAN is terminated, voluntarily or
involuntarily, within a three year period from the date such event occurs shall
be entitled to receive those benefits set forth in Section 8.5 hereof to the
same extent and in the same amounts as though such amendment or termination had
not occurred. This Section 10.2 shall not apply to any Participant who, on the
date of occurrence of any event described in Section 8.5(a), (b) or (c), has
previously retired or has otherwise voluntarily terminated his employment with
InterTAN.
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.1 The Plan and Plan Agreement and each of their provisions
shall be construed and their validity determined under the laws of the Province
of Ontario and InterTAN and each Participant under the Plan hereby submits and
attorns to the exclusive jurisdiction of the courts of the Province of Ontario.
Section 11.2 The masculine gender, where appearing in the Plan or any Plan
Agreement, shall be deemed to include feminine gender. The words "herein",
"hereunder" and other similar compounds of the word "here" shall mean and refer
to the entire Plan and Plan Agreement, not to any particular provision, section
or subsection, and words used in the singular or plural may be construed as
though in the plural or singular where they would so apply.
Section 11.3 INTENTIONALLY DELETED.
Section 11.4 Any person born on February 29 shall be deemed to have been
born on the immediately preceding February 28 for all purposes of this Plan.
Section 11.5 This Plan shall be binding upon and inure to the benefit of
any successor of InterTAN and any such successor shall be deemed substituted for
InterTAN under the terms of this Plan. As used in this Plan, the term
"successor" shall include any person, firm, corporation, or other business
entity which at any time, whether by merger, purchase, or otherwise, acquires
all or substantially all of the assets or business of InterTAN.
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Section 11.6 A participant shall not be required to mitigate the amount
of any payment provided for in this Plan seeking other employment or otherwise.
Section 11.7 In the event that a Participant institutes any legal action
to enforce his rights under, or to recover damages for breach of any of the
terms of, this Plan or any Plan Agreement, the Participant, if he is the
prevailing party, shall be entitled to recover from InterTAN all actual expenses
incurred in the prosecution of said suit including but not limited to attorneys'
fees, court costs, and all other actual expenses.
Section 11.8 Notwithstanding all other provisions in the Plan, in the
event a Participant is entitled to benefits under two (2) separate sections of
the Plan, the maximum a Participant may receive under this Plan is ten (10)
times Participant's Plan Benefit Amount, payable in accordance with Section 5.3
hereof.
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Exhibit 10(c)
Exhibit "A"
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
_________________________________, 19___
PLAN AGREEMENT
To:_____________________________________________________________________________
(Name of Participant)
The Organization and Compensation Committee of the Board of Directors of
InterTAN, Inc. (the "Committee") has selected you to participate in the Deferred
Compensation Plan (the "Plan"), a copy of which is furnished to you herewith.
Your participation in the Plan is voluntary and conditioned upon your
acceptance of this Plan Agreement in the manner provided below, by which it
shall be agreed between us as follows:
1) Your participation in the Plan and the rights accruing to you and
your designated Beneficiary(ies) thereunder shall be in all
respects subject to the terms and conditions of the Plan, the full
text of which, and as it may be from time to time amended, is
incorporated herein by reference. You agree to be bound by the
terms and provisions of the Plan, and specifically, but without
limitation, to the noncompetition provisions set forth in Section
5.5 of the Plan.
2) For the purpose of determining the amount of benefits payable by
InterTAN, Inc. ("InterTAN") under the Plan, it is agreed and
stipulated that your Plan Benefit Amount is U.S. $__________. At
the end of this Plan Agreement is an Addendum, which from time to
time may be used to alter the Plan Benefit Amount as defined in
the Plan by filling in the changed amount of the Plan Benefit
Amount, by dating such change, and by InterTAN and you executing
such Addendum.
3) You acknowledge receipt of a Beneficiary Designation Form
furnished you herewith and agree that upon your acceptance and
return of this Plan Agreement as provided below, you will deliver
such form completed as therein required.
If you desire to participate in the Plan, please accept and return
the enclosed copy of this letter, together with your completed Beneficiary
Designation Form, to David S. Goldberg, on or before thirty (30) days from the
date hereof, whereupon you shall become a Participant in the Plan according and
subject to the terms thereof. If you do not accept and return such copy within
the above time period, then we will assume that you have voluntarily elected not
to participate in the Plan.
Yours very truly,
INTERTAN, INC.
By:______________________________________
ACCEPTED THIS_______________ day of
____________________________, 19 ____.
_____________________________________
(Participant)
<PAGE>
Exhibit "B"
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
BENEFICIARY DESIGNATION FORM
As a participant in the InterTAN, Inc. Deferred Compensation Plan (the "Plan"),
I, the undersigned, direct the benefits payable at my death under the Plan to be
made as follows:
(1) Primary Beneficiary. I designate __________________________, whose
current address is __________________________, and Social Security No. is
_________________________, as the sole Primary Beneficiary to receive the
benefits payable at my death under the Plan.
(2) Contingent Beneficiaries. In the event the Primary Beneficiary should
predecease me, or in the event our deaths shall occur simultaneously, or if such
designated Primary Beneficiary should die before complete payment of the
benefits payable at my death under the Plan, I designate the following person(s)
as the Contingent Beneficiary(ies) to receive such benefits, or the balance
thereof, either successively in the following order, or contemporaneously in the
proportions indicated:
NAME:__________________________________ RELATIONSHIP:_______________________
CURRENT ADDRESS:________________________________________________________________
PROPORTION TO RECEIVE
SOCIAL SECURITY NO.:___________________ (IF APPLICABLE):________________________
NAME:__________________________________ RELATIONSHIP:_______________________
CURRENT ADDRESS:________________________________________________________________
PROPORTION TO RECEIVE
SOCIAL SECURITY NO.:___________________ (IF APPLICABLE):________________________
(3) If at the time of my death none of the above Beneficiaries survive me,
or none of them shall survive to receive all of the benefits payable at my death
under the Plan, then such benefits, or the balance thereof, shall be distributed
as provided in the Plan.
(4) The rights of the designated Beneficiaries and all payments to them
shall be in all respects subject to the terms and provisions of the Plan, a copy
of which as currently in effect was furnished to me prior to my execution of
this Beneficiary Designation Form.
(5) I reserve the right to change my designated Beneficiary(ies) by filing
a new Beneficiary Designation Form with the Organization and Compensation
Committee as provided in the Plan and understand that no such change shall be
effective unless received by the Committee prior to my death.
SIGNED this ______________day of _________19______ .
________________________
(Participant)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(D)
<SEQUENCE>6
<FILENAME>dex10d.txt
<DESCRIPTION>ADDENDUM NO.2 TO PLAN AGREEMENT
<TEXT>
<PAGE>
Exhibit 10(d)
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
Date: November 1, 2001
ADDENDUM NO. 2 TO PLAN AGREEMENT
To: JEFFREY A. LOSCH
As stipulated in section 2 of your plan agreement dated February 18, 2000
(the "Plan Agreement"), the Plan Benefit Amount as defined in the Deferred
Compensation Plan (the "Plan") may be amended from time to time by the execution
by you and InterTAN, Inc. of an addendum instrument that states the changed
amount of the Plan Benefit Amount and the date of such change.
Accordingly, effective the date hereof, the Plan Benefit Amount as set out
in the Plan Agreement is hereby changed to CDN $1,250,000.
All other terms and conditions of the Plan and Plan Agreement remain
unamended. Any capitalized terms used herein that are not specifically defined
shall have the meaning attributed to them in the Plan.
Please signify your acceptance of this change to your Plan Benefit Amount
by signing and returning the enclosed copy of this Addendum to myself or the
General Counsel of InterTAN, Inc. on or before thirty (30) days from the date
hereof. If you do not sign and return such copy within the above time period,
then the Plan Benefit Amount shall remain unchanged.
Yours very truly,
INTERTAN, INC.
By: /s/ Brian E. Levy
----------------------------------
Brian E. Levy
President & Chief Executive Officer
ACCEPTED THIS 12/th/ day of November, 2001.
/s/ Jeffrey A. Losch
- --------------------
Jeffrey A. Losch
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(E)
<SEQUENCE>7
<FILENAME>dex10e.txt
<DESCRIPTION>ADDENDUM NO.2 TO PLAN AGREEMENT
<TEXT>
<PAGE>
Exhibit 10(e)
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
November 1, 2001
PLAN AGREEMENT
To: HEINZ STIER
The Organization and Compensation Committee of the Board of Directors
of InterTAN, Inc. (the "Committee") has selected you to participate in the
Deferred Compensation Plan (the "Plan"), a copy of which is furnished to you
herewith.
Your participation in the Plan is voluntary and conditioned upon your
acceptance of this Plan Agreement in the manner provided below, by which it
shall be agreed between us as follows:
1) Your participation in the Plan and the rights accruing to you
and your designated Beneficiary(ies) thereunder shall be in all
respects subject to the terms and conditions of the Plan, the full
text of which, and as it may be from time to time amended, is
incorporated herein by reference. You agree to be bound by the
terms and provisions of the Plan, and specifically, but without
limitation, to the noncompetition provisions set forth in Section
5.5 of the Plan.
2) For the purpose of determining the amount of benefits payable
by InterTAN, Inc. ("InterTAN") under the Plan, it is agreed and
stipulated that your Plan Benefit Amount is Cdn. $1,857,000. At
the end of the Plan Agreement is an Addendum, which from time to
time may be used to alter the Plan Benefit Amount as defined in
the Plan by filling in the changed amount of the Plan Benefit
Amount, by dating such change, and by InterTAN and you executing
such Addendum.
3) You acknowledge receipt of a Beneficiary Designation Form
furnished you herewith and agree that upon your acceptance and
return of this Plan Agreement as provided below, you will deliver
such form completed as therein required.
If you desire to participate in the Plan, please accept and return the
enclosed copy of this letter, together with your completed Beneficiary
Designation Form, to Jeffrey A. Losch, on or before thirty (30) days from the
date hereof, whereupon you shall become a Participant in the Plan according and
subject to the terms thereof. If you do not accept and return such copy within
the above time period, then we will assume that you have voluntarily elected not
to participate in the Plan.
Yours very truly,
INTERTAN, INC.
By: /s/ Brian E. Levy
------------------------------------
Brian E. Levy, President & Chief
Executive Officer
ACCEPTED THIS 20/th/ day of November, 2001.
/s/ Heinz Stier
- --------------------------
Heinz Stier
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(F)
<SEQUENCE>8
<FILENAME>dex10f.txt
<DESCRIPTION>ADDENDUM NO.2 TO PLAN AGREEMENT
<TEXT>
<PAGE>
Exhibit 10(f)
INTERTAN, INC.
DEFERRED COMPENSATION PLAN
January 7, 2002
PLAN AGREEMENT
To: JAMES P. MADDOX
The Organization and Compensation Committee of the Board of Directors of
InterTAN, Inc. (the "Committee") has selected you to participate in the Deferred
Compensation Plan (the "Plan"), a copy of which is furnished to you herewith.
Your participation in the Plan is voluntary and conditioned upon your
acceptance of this Plan Agreement in the manner provided below, by which it
shall be agreed between us as follows:
1) Your participation in the Plan and the rights accruing to you and your
designated Beneficiary(ies) thereunder shall be in all respects
subject to the terms and conditions of the Plan, the full text of
which, and as it may be from time to time amended, is incorporated
herein by reference. You agree to be bound by the terms and provisions
of the Plan, and specifically, but without limitation, to the
noncompetition provisions set forth in Section 5.5 of the Plan.
2) For the purpose of determining the amount of benefits payable by
InterTAN, Inc. ("InterTAN") under the Plan, it is agreed and
stipulated that your Plan Benefit Amount is Cdn. $1,375,000. At the
end of the Plan Agreement is an Addendum, which from time to time may
be used to alter the Plan Benefit Amount as defined in the Plan by
filling in the changed amount of the Plan Benefit Amount, by dating
such change, and by InterTAN and you executing such Addendum.
3) You acknowledge receipt of a Beneficiary Designation Form furnished
you herewith and agree that upon your acceptance and return of this
Plan Agreement as provided below, you will deliver such form completed
as therein required.
If you desire to participate in the Plan, please accept and return the
enclosed copy of this letter, together with your completed Beneficiary
Designation Form, to Jeffrey A. Losch, on or before thirty (30) days from the
date hereof, whereupon you shall become a Participant in the Plan according and
subject to the terms thereof. If you do not accept and return such copy within
the above time period, then we will assume that you have voluntarily elected not
to participate in the Plan.
Yours very truly,
INTERTAN, INC.
By: /s/ Jeffrey A. Losch
-------------------------------
Jeffrey A. Losch, Senior Vice
President, Secretary & General
Counsel
ACCEPTED THIS 7/th/ day of January, 2002.
/s/ James P. Maddox
- ---------------------
James P. Maddox
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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