INTERTAN INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2003 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 incorporation or organization)		(IRS Employer Identification No.)

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 April 30, 2003, 20,542,220 shares of the registrant’s common stock, par value $1.00 per share, were outstanding.

		Page

	PART I

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	16

ITEM 3—	Quantitative and Qualitative Disclosures About Market Risk	26

ITEM 4—	Controls and Procedures	28

	PART II

ITEM 1—	Legal Proceedings	28

ITEM 4—	Submission of Matters to a Vote of Security Holders	28

ITEM 6—	Exhibits and Reports on Form 8-K	28

	OTHER

Signatures and Certifications under Section 302 of the Sarbanes-Oxley Act of 2002		30

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 and the timing of payments related thereto;

The impact of the increase in the Company’s product assortment on future sales;

Estimates of future foreign exchange rates;

Management’s estimates of future sales growth and gross margin percentages;

Future levels of interest income and expense and income taxes;

The resolution of the collective agreement with the Company’s unionized employees at the Barrie distribution center;

The impact of the cost cutting initiatives undertaken during the third quarter on future selling, general and administrative expenses;

The ability of the Company’s inventory management program to manage the planned increase in the product assortment without a significant increase in inventory levels;

The impact on future cash flows of the eighth common stock repurchase program, planned capital expenditures and payments of income tax balances, including estimates of future borrowings under the Company’s revolving credit agreement;

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; and

Possible payments under indemnities provided to the purchaser of InterTAN Australia Ltd.

Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements include, but are not limited to:

Rulings of Courts and the activities of government and regulatory bodies;

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 2002 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.

ITEM 1—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Operations

(U.S. dollars in thousands, except per share data)

(Unaudited)

	Three months ended March 31						Nine months ended March 31
	2003			2002			2003			2002
Net sales and operating revenues	$	81,865		$	82,678		$	312,149		$	308,874
Other income (loss)		(3	)		1			(11	)		(1	)

		81,862			82,679			312,138			308,873
Operating costs and expenses:
Cost of products sold		49,162			49,662			190,932			187,418
Selling, general and administrative expenses		30,825			27,063			97,082			87,990
Depreciation and amortization		1,735			1,388			5,045			4,132
Restructuring charge		—			—			—			2,703

		81,722			78,113			293,059			282,243

Operating income		140			4,566			19,079			26,630
Foreign currency transaction gains (losses)		(131	)		(33	)		37			262
Interest income		64			266			223			1,301
Interest expense		(249	)		(102	)		(831	)		(302	)

Income (loss) before income taxes		(176	)		4,697			18,508			27,891
Income taxes		228			2,294			8,433			12,774

Net income (loss)	$	(404	)	$	2,403		$	10,075		$	15,117

Basic net income (loss) per average common share	$	(0.02	)	$	0.10		$	0.48		$	0.58
Diluted net income (loss) per average common share	$	(0.02	)	$	0.10		$	0.47		$	0.57

Average common shares outstanding		20,600			24,175			21,053			25,900
Average common shares outstanding assuming dilution		20,600			24,670			21,240			26,371

The accompanying notes are an integral part of these consolidated financial statements.

Consolidated Balance Sheets

(U.S. dollars in thousands, except share amounts)

(Unaudited)

	March 31 2003		June 30 2002		March 31 2002
Assets
Current Assets
Cash and short-term investments	$	10,915	$	14,699	$	36,601
Accounts receivable, less allowance for doubtful accounts		14,241		12,903		13,748
Inventories		87,240		81,314		82,497
Other current assets		1,966		1,300		1,975
Deferred income taxes		1,417		1,374		2,174

Total current assets		115,779		111,590		136,995
Property and equipment, less accumulated depreciation and amortization		30,667		29,604		22,438
Other assets		659		328		336
Deferred income taxes		3,731		3,580		2,878

Total Assets	$	150,836	$	145,102	$	162,647


Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	19,064	$	12,793	$	13,227
Accrued expenses		13,509		19,445		15,726
Income taxes payable		3,081

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