Back to GetFilings.com

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the Fiscal Year Ended June 30, 2003

OR

For the transition period from              to             

Commission file number 1-10062

InterTAN, Inc.

(Exact name of registrant as specified in its charter)

Securities registered pursuant of Section 12(g) of the Act:    None

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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

The aggregate market value of the voting stock held by non-affiliates of the registrant as of August 25, 2003 was $190,782,031 based on the New York Stock Exchange closing price on such date.

As of August 25, 2003 there were 20,619,175 shares of the registrant’s Common Stock outstanding.

Table of Contents

Documents Incorporated by Reference

Portions of the definitive Proxy Statement for the 2003 Annual Meeting of Stockholders are incorporated by reference into Part III. With the exception of those portions that are incorporated by reference in this Annual Report on Form 10-K, the definitive 2003 Proxy Statement is not to be deemed incorporated into or filed as part of this Report.

2

Table of Contents

InterTAN, Inc.

Form 10-K for the Year Ended June 30, 2003

Table of Contents

3

Table of Contents

4

Table of Contents

PART I

Description of Business

InterTAN, Inc. (“InterTAN” or the “Company”) was incorporated in the State of Delaware in June 1986 in order to receive from RadioShack Corporation (“RadioShack U.S.A.”), formerly named Tandy Corporation, the assets and businesses of its foreign retail operations, conducted in Canada under the “RadioShack” trade name and in Australia, the United Kingdom and Europe under the “Tandy” trade name. Following the transfer of assets, on January 16, 1987 RadioShack U.S.A. distributed shares of InterTAN common stock to the RadioShack U.S.A. stockholders in a tax-free distribution on the basis of one InterTAN share for every ten RadioShack U.S.A. shares held. Thus RadioShack U.S.A. effected a spin-off and divestiture of these foreign retail operations and its then ownership interest in InterTAN and its operations, thereby constituting InterTAN as an independent public corporation. The Company’s operations in continental Europe were closed during fiscal years 1993 and 1994. During fiscal year 1999, the Company sold its subsidiary in the United Kingdom. The Company sold its subsidiary in Australia during fiscal year 2001. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—(Gain) Loss on Disposal of Subsidiary Company.” In April 2002, the Company acquired selected assets and retail locations of Battery Plus, a specialty retailer of batteries and other consumer electronics products.

InterTAN is now engaged principally in the sale of consumer electronics products and services through company-operated retail stores and dealer outlets in Canada. The Company also operates wireless telecommunications stores (the “Rogers Wireless Stores”) under contract with Rogers Wireless Inc. (“Rogers Wireless”). InterTAN’s ongoing retail operations are conducted through its wholly-owned subsidiary, InterTAN Canada Ltd. (“InterTAN Canada” or “RadioShack Canada”), a British Columbia corporation which operates in Canada under the trade names “RadioShack” and “Battery Plus”. As used herein, “InterTAN” or “Company” sometimes collectively refers to InterTAN and InterTAN Canada, according to the context.

The Company’s web site address is www.intertan.com. The Company makes available, free of charge through its web site, its Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports as soon as practicable after filing or furnishing the material with the Securities and Exchange Commission.

As at June 30, 2003, InterTAN Canada operated a total of 498 RadioShack stores and 38 Battery Plus stores in Canada. In addition, a network of dealers accounted for a further 337 retail locations. RadioShack Canada uses a form of contract management program in 64 of its company-operated stores. See “Notes to Consolidated Financial Statements—Note 1.” The Company also operated 79 Rogers Wireless Stores at June 30, 2003. See “Strategic Alliances—Rogers Wireless Stores.”

The format for InterTAN’s company-operated stores in Canada typically incorporates the concept of small, strategically located stores in malls, power centers and shopping centers, each providing the customer with convenience and readily available products and services to meet a wide range of consumer electronic needs. While the average size of a RadioShack Canada store is approximately 1,800 square feet, many newer stores have a larger footprint and average 2,000 to 2,500 square feet. During fiscal year 2003, the Company introduced its “Digital Revolution Store” concept. At June 30, 2003, 19 Digital Revolution Stores were in operation. This new store format will be gradually rolled out as new stores are added and existing stores are refitted or relocated. This model more prominently displays the latest digital technologies and unique electronic gadgets to reflect continued consumer preference for these products. Battery Plus stores are smaller than the

5

Table of Contents

Company’s RadioShack stores, ranging from kiosks of about 200 square feet to stores averaging about 800 square feet. Rogers Wireless stores are similar in size to Battery Plus stores. InterTAN emphasizes product knowledge and customer service. Research has confirmed that the Company’s sales associates are noted for their helpfulness and product knowledge and that customers look to the Company’s stores to find the answers to their technology questions. The Company has also successfully installed an E-learning system for the training of its sales associates which helps maintain the Company’s strength of knowledgeable and helpful service.

The “dealers” included in the above totals are independent retail businesses which operate under their own trade names but are permitted, under dealer agreements, to purchase any of the products sold by company-operated stores. The dealer agreements contain a sub-license permitting such dealer to designate its consumer electronics department or business as a “RadioShack Dealer.” InterTAN’s dealer network enables the Company to penetrate smaller markets that do not have a population base large enough to support a company-operated store.

InterTAN also provides after-sale service for many of the products it sells during warranty periods and beyond. The Company also offers out-of-warranty repair service to customers for a wide range of nationally branded electronic products as well as being an authorized repair center for in-warranty repairs for many nationally branded products. The Company’s service centers provide repair capability within a satisfactory turnaround period. The Company also offers extended warranty plans to its customers. Under these plans, the Company will either repair or replace defective product, depending on the nature of the contract, for a specified number of years beyond the normal warranty period.

The Company also operates an e-commerce site, www.radioshack.ca, which provides information to and takes orders from customers. RadioShack.ca allows customers the convenience of shopping for a wide variety of electronics and other products from their desktop computer. Customers have the option of having product delivered to their door or taking delivery at their nearest RadioShack store.

Employees

As at June 30, 2003 InterTAN employed approximately 2,891 persons. Approximately 111 of InterTAN Canada’s employees, who are engaged in warehousing and distribution operations, are represented by a union. In the fourth quarter of fiscal year 2003, the terms of a new three-year collective agreement were ratified with these employees. The Company considers its relationships with its employees to be good.

Products and Distribution

Historically, InterTAN was for the most part a private label retailer. While brand name products were included in the product assortment, they were selected primarily to complement the Company’s own private label lines as extensions or to offer consumers a choice against which they could compare the relative capability and value of InterTAN’s private label products. In recent years, this strategy has undergone a re-evaluation. The pace at which new high-tech, digital products are being introduced into the market place has been increasingly rapid. Had the Company continued its private label strategy, many opportunities would have been missed because of the time involved in bringing private label offerings of these products to market. In addition, the increasing brand consciousness of consumers was essentially inconsistent with a focused, private label strategy. From a merchandising point of view, increasingly shorter product life cycles conflicted with the large minimum order requirements needed to sustain a broadly-based private label offering. In today’s rapidly changing world in consumer electronics, product must be purchased on a just-in-time basis in order to minimize the risk of obsolescence.

6

Table of Contents

As part of its efforts to meet its customers demands, the Company now offers a wide range of nationally and internationally branded product including, among others, Panasonic, Compaq, Hewlett Packard, Epson, Sony, Lexmark, Sharp, StarChoice, Express Vu, JVC, TDK, Fuji, Sanyo, D-Link, Nokia, Motorola and Ericsson (the lack of a ^®, TM or SM is not intended, regarding all of the names referred to herein above, to indicate a lack of registration thereof). While this strategy, in combination with others, has resulted in an increase in gross profit dollars, the strategy has also put pressure on the gross margin percentage as branded goods generally carry margins below those of the Company’s historical private label offerings. However, this pressure is partially mitigated by the fact that branded product can often be acquired under more favorable payment and delivery terms, provides advertising support, reduces warranty exposure and reduces inventory risks.

Over the past five years, InterTAN’s strategy focused on a product plan dedicated to profitable sales growth by improving gross profit dollars while at the same time increasing sales. Fundamental to this plan is a product offering which includes both national brands and private label goods, emphasis on strategically selected core categories which yield attractive margins, and in which management believes the Company has a strong position in its markets, and managing the percentage of lower margin product in the overall sales mix. This strategy has been complemented by the introduction of certain service initiatives designed not only to produce revenue in their own right, but also to increase traffic in the Company’s stores. Many of these service initiatives include after sale compensation that serve to improve gross margins.

During the second half of Fiscal 2003, in response to market conditions and its perception of gross margin trends in the consumer electronics industry, the Company revised its merchandising strategy to focus added attention on certain product segments that allow the company to better differentiate its product offering from mainstream and large format consumer electronics retailers. The Company believes that this strategy will deliver improved gross margins to the shareholders and make its product offering less easily duplicated by competitors. Management continues to review its product assortment, placing emphasis on introducing new accessories, including unique gadgets, which the Company has been known for offering. These products tend to carry a higher margin than the Company average.

The Company intends to continue the use of private label lines to complement its branded strategy. Management believes that its private label products offer value to the consumer and also produce above average gross margins for the Company. As part of this strategy, the Company works closely with sourcing and trading companies including RadioShack U.S.A.’s purchasing and export agent, RadioShack International Procurement Limited Partnership (“RIPLP”) in an effort to leverage RadioShack U.S.A.’s sourcing capabilities to negotiate favorable prices with Far East vendors. See “Suppliers” and “Merchandise, License and Advertising Agreements”.

InterTAN’s stores carry a broad range of brand name and private label, quality consumer electronic products. The selection of products offered for sale is comprehensive, ranging from, among other things, small parts and accessories to large ticket items such as computers and stereo systems. Types of product include: telecommunications products and services, direct-to-home satellite, personal electronics, computers and related services, batteries, parts and accessories, communications products, audio/video gear, digital cameras and accessories and video game gear. It is management’s view that the range of products offered by InterTAN, in particular its parts and accessories, is broader than that typically offered by others in the retail consumer electronics industry and many of its products are exclusively carried by InterTAN within Canada. However, many products sold through the Company’s retail outlets are sold by many other retail stores, including department stores, consumer electronics chains and computer outlets.

7

Table of Contents

Many of the Company’s private label products are similar, and in many instances identical, to those sold through RadioShack U.S.A.’s retail stores in the United States. Certain of these products carry the trade-marks of RadioShack U.S.A., which are used under license from RadioShack U.S.A. See “Merchandise, License and Advertising Agreements—License Agreements.” Other products carry the Company’s trademarked brands.

In the fourth quarter of fiscal year 2002, the Company replaced its aging warehousing and distribution system hardware and software with new, state of the art equipment and software which became operational in the first quarter of fiscal year 2003. The long-term benefits of this system will include improved inventory management and reduced labour costs in the warehouse and in its stores.

Management Information Systems

The Company’s information systems are used to process inventory, accounting, payroll, communications and other operating information for all aspects of the Company’s operations. In addition, each of the Company’s stores has one or more computers that serve as point-of-sale terminals and are linked to the operational headquarters. This information network, referred to as POS, provides detailed sales and margin information on a daily basis, updates InterTAN’s customer database and provides improved financial controls, as well as acting as a monitor of individual store performance. The POS systems are also linked directly to a system used to automatically replenish a store’s stock as inventory is sold. Refinements are made on a continuing basis to the Company’s information systems in order to increase the efficiency of store inventories, inventory requirements forecasting and flow, advertising and consumer information, E-Commerce, and to enhance opportunities for employee learning.

Suppliers

During fiscal year 2003, InterTAN Canada acquired approximately 9.5% of its inventory pursuant to a merchandise agreement with RadioShack U.S.A. and acquired the balance from numerous other sources.

Under its merchandise arrangements with RadioShack U.S.A., InterTAN may purchase private label products which RadioShack U.S.A. has available for sale in the United States in its then current catalog, or those products which may otherwise be reasonably available from RadioShack U.S.A. or through RIPLP. Through its ongoing relationship with RadioShack U.S.A., InterTAN is able to take advantage of RadioShack U.S.A.’s sourcing strength to obtain selected products which management believes generate gross margins which are higher than industry averages and which offer enhanced customer value. The Company also uses this relationship to offer its customers a broad and deep range of parts and accessories. RadioShack U.S.A has agreed that it will not cancel these merchandise arrangements in the event of a change of control, except at the request of the acquirer. See Amending Agreement section of “Merchandise, License and Advertising Agreements”. While the Company from time to time enters into exclusivity arrangements with certain suppliers (see “Business—Strategic Alliances”), with the exception of Rogers Wireless, InterTAN is not materially dependent on any one supplier other than RadioShack U.S.A. See “Merchandise, License and Advertising Agreements.” A loss or disruption in service from Rogers Wireless could have a material adverse effect on RadioShack Canada’s business until such time as an alliance could be concluded with one of Canada’s other major cellular carriers.

Strategic Alliances

InterTAN has the largest number of sales outlets among consumer electronics retailers in Canada. The Company has over 30 years of retail experience. Research has confirmed that consumers rank RadioShack Canada first among its competitors for its knowledgeable and friendly sales associates. Management believes

8

Table of Contents

that there are opportunities to leverage on this strength by forming strategic alliances with other businesses that are also leaders in their respective fields.

Rogers Wireless Stores

The Company has entered into an alliance with Rogers Wireless to operate telecommunications stores under the banner “Rogers Wireless”. At June 30, 2003 the Company operated 79 Rogers Wireless stores in major malls across Canada. These stores predominantly carry Rogers Wireless cellular communications products and accessories. Additionally, most of RadioShack Canada’s 498 company-operated RadioShack stores exclusively feature Rogers Wireless communications products and services. Rogers funded the construction of sections in those stores for the exclusive offering of Rogers Wireless cellular products (including digital), paging and other services. This relationship aligns the Company’s consumer electronics retail expertise with Rogers Wireless technological strength. See “Management’s Discussion and Analysis—Sales Outlets”

High Speed Internet Access

The Company has formed alliances with the majority of Canada’s providers of high speed Internet access. These alliances make Internet connectivity, through either high-speed cable modem or DSL, available in the Company’s stores. The Company will continue to refine its Internet strategy as technological advances and market opportunities dictate.

Merchandise, License and Advertising Agreements

Merchandising Agreement

The Company and RadioShack U.S.A. are parties to a Merchandise Agreement that requires the Company to use RIPLP as its exclusive purchasing agent for products from the Far East, which will be branded with the trademark RadioShack U.S.A., during the term thereof. Under the Merchandising Agreement, the Company must pay RIPLP commissions of approximately 4% of purchases as well as an annual purchasing agent/exporter fee. For fiscal year 2003 and future periods this fee was set at $532,500 and will increase pro-rata if consolidated sales exceed $400,000,000 and will be reduced by certain credits the Company earns by purchasing products through RIPLP. This Merchandise Agreement expires June 30, 2010.

License Agreement

The Company has a License Agreement with RadioShack U.S.A. that permits InterTAN to use the “RadioShack” trade name in Canada. The expiry date of the License Agreements is June 30, 2010. Either party may terminate the License Agreement by providing five years’ prior written notice. Each of the license agreements also provides for a license to use certain of RadioShack U.S.A.’s trademarks. In addition, InterTAN has the right to sub-license to its dealers. In consideration for these rights, the Company is obliged to pay a sales-based royalty of 1% of consolidated sales using or deriving benefit from the use of the service marks or trade marks licensed under the agreement. As discussed below, RadioShack U.S.A.’s rights to revoke both the Merchandise Agreement and the License Agreement in the event of a change in control of InterTAN or a breach of the terms of these agreements have been varied by the Amending Agreement.

Amending Agreement

In April 2001, the Company entered into an additional agreement with RadioShack U.S.A. (the “Amending Agreement”). The Amending Agreement provides that should there be a change in control of the Company and the acquirer does not desire to use the “RadioShack” trade name, trade or service marks in Canada, the Company shall pay the sum of $22,500,000 to RadioShack U.S.A. In consideration therefore, RadioShack agreed that it would terminate the existing License and Merchandise Agreements as a result of such change in control only at the request of the acquirer. RadioShack U.S.A. further agrees that it will cooperate with the

9

Table of Contents

Company and the acquirer in effecting a transition by allowing a reasonable transition period for changing store signage and point-of-sale materials and the sell-through of existing inventory and merchandise on order.

The rights to use the trade names licensed by RadioShack U.S.A. are currently an integral part of InterTAN’s marketing strategy. Should the license be lost, management believes the Company can migrate to an appropriate and credible alternative brand within a reasonable period of time and can continue to source merchandise in the Far East.

Advertising Agreement

Pursuant to an advertising agreement with RadioShack U.S.A., the Company is entitled to the limited use of certain marketing materials, research and marks developed by or for RadioShack U.S.A. since January 1, 1994. The right to use any marks covered by the agreement are vested in the Company by being added to the license agreements described above. The fee payable to RadioShack U.S.A. under this agreement for calendar years 2002 and 2003 is $45,000. This fee increases to $55,000 for 2004 and subsequent years.

Seasonality

Like other retailers, InterTAN’s business is seasonal, with sales peaking in the November—December holiday selling season. Cash flow requirements are also seasonal since inventories build prior to the holiday selling seasons. Significant inventory growth begins to build in late summer and peaks in mid November.

Competition

The consumer electronics industry in Canada is highly competitive. Based on publicly available material, InterTAN believes that the largest retailer in Canada in fiscal year 2003 (other than department stores) which had a product line similar to, or competitive with, products offered for sale by InterTAN Canada was Future Shop which operated through approximately 104 locations. In November 2001, Future Shop was acquired by Best Buy Co. Inc., a U.S. based big box retailer. In addition to its Future Shop locations, Best Buy opened 10 locations under its own banner primarily in the greater Toronto market with plans to open approximately 10 additional new stores in the coming year in locations across Canada. InterTAN’s other main competitors in Canada are department stores, computer and business product specialty retailers, general retailers and other consumer electronics retailers. Certain of the Company’s competitors have greater resources, financial or otherwise, than InterTAN. While there can be no assurance as to the extent to which competition may affect future sales growth and profit potential, management believes that InterTAN Canada’s range of products and service orientation differentiate the Company from other consumer electronics retailers in Canada, or similar big box entrants into the marketplace. The Company has also established a market position in important growth categories, including wireless and other digital products, as well as more unique electronic gadgets. The Company also distinguishes itself from its competitors through its “Power-Up” philosophy, which espouses that most products be readily and effectively displayed and that employees be well versed on appropriate product knowledge to enable them to provide hands on interactive demonstrations.

Backlog of Orders

The Company has no material backlog of orders for the products it sells.

10

Table of Contents

Inflation

Over the past three years, the Company has not been significantly impacted by inflation and does not expect inflation to have a significant impact on operations in the foreseeable future unless global situations substantially affect the world economy.

Geographic/Segment Analysis

InterTAN was traditionally organised along geographic lines. The Company’s segments included its Canadian, Australian and United Kingdom retail operations and its Corporate Headquarters. The Company’s Australian and United Kingdom subsidiaries were segments through April 2001 and January 1999, respectively, at which time those subsidiaries were sold. InterTAN closed all company-operated outlets in continental Europe during fiscal years 1993 and 1994.

Following the sale of its Australian subsidiary, the Company announced a restructuring plan that provided for the full integration of its Corporate Headquarters and RadioShack Canada. Under this plan, essentially all corporate support functions were merged with like functions at RadioShack Canada. The restructuring plan also involved Executive Officer retirements and new appointments as well as a reduction in the size of the Company’s Board of Directors. Accordingly, the Company now has only one business segment.

A table included in Note 17 to the Company’s Consolidated Financial Statements and which appears on page 76 of this Annual Report on Form 10-K shows net sales, depreciation, operating income (loss), identifiable assets and capital expenditures of the Company by segment / geographic area for the three years ended June 30, 2003. This table is incorporated herein by reference.

Factors That Could Affect Future Performance

This report contains certain forward-looking statements about the business and financial condition of InterTAN, including various statements contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” below. The forward-looking statements are reasonably based on assumptions regarding future events that are subject to important risk factors. Accordingly, actual results may vary significantly from those expressed in the forward-looking statements, and the inclusion of such statements should not be regarded as a representation by the Company or any other person that the anticipated results expressed therein will be achieved. The following information sets forth certain factors that could cause the actual results to differ materially from those contained in the forward-looking statements.

Loss of the relationship with RadioShack U.S.A. would require the Company to re-brand its stores and find alternative sources of supply.

RadioShack U.S.A., including certain of its affiliates, is one of the Company’s principal suppliers and is the licensor of the Company’s principal trade names and marks. Maintaining its contractual relationships, particularly the supply and license arrangement, with RadioShack U.S.A. is currently an integral part of the Company’s strategy. The loss of such relationships with RadioShack U.S.A. would require the Company to transition to a new, appropriate and credible brand. See “Business—Suppliers”, “—Merchandise, License, Amending and Advertising Agreements” and Note 5 to the Consolidated Financial Statements which is incorporated herein by reference.

11

Table of Contents

The Company’s quarterly operating results are subject to significant variations and may not be indicative of financial results for the year as a whole.

The Company’s quarterly results of operations may fluctuate significantly as the result of the timing of the opening of, and the amount of net sales contributed by, new stores and the timing of costs associated with the selection, leasing, construction and opening of new stores, as well as seasonal factors, product introductions and changes in product mix. In addition, sales can be affected as a result of store closures. The Company’s business is seasonal, with sales and earnings being relatively lower during the fiscal quarters other than the second fiscal quarter which includes the holiday selling season. Adverse business and economic conditions during this period may adversely affect results of operations. In addition, excluding the effects of new store openings, the Company’s inventories and related short-term financing needs are seasonal, with the greatest requirements occurring during its second fiscal quarter. The Company’s financial results for a particular quarter may not be indicative of results for an entire year and the Company’s revenues and/or expenses will vary from quarter to quarter. The Company’s operating results may also be affected by changes in global and regional economic conditions in the markets where its stores are located, as well as by weather and other natural conditions. See “Business—Seasonality” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is incorporated herein by reference.

Competition in the consumer electronics market may reduce the demand for, or the price of, the Company’s products.

The retailing industry in which the Company operates is highly competitive. Products substantially similar to those sold through the Company’s retail outlets are sold by many other retail stores, including department and discount stores, consumer electronics chains, cellular specialists and computer outlets. The nature and extent of competition differs from store to store and also from product line to product line. Certain of the Company’s competitors are larger, have a higher degree of market recognition and have greater resources, financial or otherwise, than the Company.

The Company believes that the major competitive factors in its businesses include customer service, store location and number of stores, product availability and selection, price, technical support, and marketing and sales capabilities. The Company’s utilization of trained personnel and the ability to use national and local advertising media are important to the Company’s ability to compete in its businesses. Given the highly competitive nature of the retail industry, no assurances can be given that the Company will continue to compete successfully with respect to the above-referenced factors. See “Business—Geographic/Segment Analysis.”

Failure to arrange for the production of private label goods in sufficient amounts with timely delivery could have an adverse impact on the Company’s earnings.

The Company’s merchandise strategy places emphasis on private label products in certain product categories. These products are typically sourced for the Company in the Far East and manufactured to the Company’s order and specification. Consequently, private label products may require larger minimum order quantities and longer lead times than nationally branded product which is generally available locally on reasonably short notice. There can be no assurance that the Company will be able to arrange for the production of private label goods to the level required to meet its merchandising and profit objectives. Delays in the timing of arrival of goods from the Far East could also have an adverse impact on the Company’s business, particularly delays during the holiday selling season. See “Business—Products and Distribution” and “Suppliers”

12

Table of Contents

The inability of either the marketplace or the Company to successfully introduce new products and additional services to customers could adversely affect the Company’s business.

The Company’s operating results are, and will continue to be, subject in part to the introduction and acceptance of new products in the consumer electronics industry. Fluctuations in consumer demand, which could be caused by lack of successful product development, delays in product introductions, product related difficulties or lack of consumer acceptance, could adversely affect the growth rate of sales of products and services and could adversely affect the Company’s operating results. The Company’s operating results are also affected by its ability to anticipate and quickly respond to the changes taking place in its markets as consumers’ needs, interests and preferences alter with time. There can be no assurance that the Company will be successful in this regard. The Company’s strategy, particularly through certain of its strategic alliances, also includes offering direct-to-home satellite and additional communications products and services, which may include, among others, paging, cable television, communication, cellular phone service and Internet access. Entry into new markets entails risks associated with the state of development of the market, intense competition from companies already operating in those markets, potential competition from companies that may have greater financial resources and experience than the Company, regulatory changes, and increased selling and marketing expenses. There can be no assurance that the Company’s products or services will receive market acceptance in a timely manner, or at all, or that prices and demand in new markets will be at a level sufficient to provide profitable operations. See “Business—Products and Distribution” and “Strategic Alliances.”

The inability to open new, profitable stores and attract quality employees to operate those stores could have an adverse affect on the Company’s earnings.

The Company’s success is dependent in part upon its ability to open and operate new stores on a profitable basis and to increase sales at existing stores. The Company’s performance is also dependent to a significant degree upon its ability to hire, train and integrate qualified employees into its operations. The Company plans to open approximately a net of 15 new RadioShack stores in Canada in fiscal year 2004. There can be no assurances that the Company will be able to locate and obtain favorable store sites to meet its goals, attract and retain competent personnel, open new stores on a timely and cost-efficient basis or operate the new and existing stores on a profitable basis. The Company plans to open new stores in existing markets, which may result in the diversion of sales from existing stores and thus some reduction in comparable store sales. See “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Net Sales and Operating Revenues.”

The Company’s success is dependent to a significant degree upon the accuracy and proper utilization of its management information systems.

The Company’s ability to manage its inventories, accounts receivable, accounts payable and to price its products appropriately, depends upon the quality and utilization of the information generated by its management information systems. In addition, the success of the Company’s operations is dependent to a significant degree upon its management information systems. The failure of the Company’s management information systems to adapt to business needs resulting from, among other things, expansion of its store base and the further development of its various businesses, could have a material adverse effect on the Company. See “Business—Management Information Systems.”

13

Table of Contents

General economic and market conditions and price and volume fluctuations may adversely affect the market price of the common stock and the ability of the Company to access capital markets, if necessary, to finance its future operations.

The price of the Common Stock may be subject to significant fluctuations in response to the Company’s operating results, developments in the consumer electronics industry, general market movements, economic conditions, and other factors. For example, announcements of fluctuations in the Company’s, its vendors’ or its competitors’ operating results, and market conditions for growth stocks or retail industry stocks in general, could have a significant impact on the price of the Common Stock. In addition, the U.S. stock market in recent years has experienced price and volume fluctuations in general that may have been unrelated or disproportionate to the operating performance of individual companies. These fluctuations, as well as general economic and market conditions, may adversely affect the market price of the Common Stock and the ability of the Company to access the capital markets, if necessary, to finance its future operations. See “Market for the Registrant’s Common Equity and Related Stockholder Matters” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” which is incorporated herein by reference.

Periodic fluctuations of the Canadian dollar against the U.S. dollar will impact the Company’s financial results.

The Company’s financial results are reported in U.S. dollars. Due to the structure of the Company’s operations, possible periodic fluctuation of the Canadian dollar against the U.S. dollar will have an impact on the Company’s financial results. RadioShack Canada conducts business in Canadian currency; accordingly, depreciation in the value of Canada’s currency against the U.S. dollar would reduce earnings as reported by the Company in its financial statements. RadioShack Canada purchased approximately 20% of its inventory in U.S. dollars. The products purchased were sold in Canada in Canadian dollars. Accordingly, exchange rate fluctuations could have an effect on the Company’s gross margins. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” which is incorporated herein by reference.

Currency exchange rates may fluctuate significantly over short periods of time. Such rates generally are determined by the forces of supply and demand in the foreign exchange markets and the relative merits of investments in different countries, actual or perceived changes in interest rates, and other complex factors, as seen from an international perspective. Currency exchange rates also can be affected unpredictably by intervention by U.S. or foreign governments or central banks, or the failure to intervene, or by currency controls or political developments in the United States or abroad.

Changes in the global economic and political conditions could have an impact on the Company’s financial results.

Changes in economic conditions including, but not limited to, recessionary trends, level of the equity markets, consumer credit availability, interest rates, inflation, consumers’ disposable income and spending levels, job security and unemployment, and overall consumer confidence could affect the operating results of the Company. The operating results of the Company may also, from time to time, be generally affected by global political conditions, including the War on Terrorism, as well as such conditions in Canada.

14

Table of Contents

InterTAN owns a 402,000 square-foot building (owned by InterTAN Canada) containing office and warehouse space and a retail location in Barrie, Ontario, Canada, where the headquarters of InterTAN Canada is located.

With the exception of a retail store being located in the property in Barrie discussed above, InterTAN’s retailing operations are primarily conducted in leased facilities. Typical RadioShack store sizes are between 1,800 and 2,500 square feet. Battery Plus stores are smaller, ranging in size from 200 square-foot kiosks to in-line stores of approximately 800 square-feet. Rogers Wireless stores are similar in size to Battery Plus stores.

Additional information on the Company’s properties is found in “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and in the “Notes to Consolidated Financial Statements” and is incorporated herein by reference. The following items are discussed further in the referenced pages of this Form 10-K.

With the exception of the matters discussed in Notes 2 and 9 of the “Notes to Consolidated Financial Statements” on pages 61 and 66 of this Form 10-K, such Notes being incorporated herein by reference, there are no pending legal proceedings, other than non-material ordinary routine litigation incidental to InterTAN’s business, to which InterTAN or any of its subsidiaries is a party or to which any of their property is subject.

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report.

15

Table of Contents

PART II

The principal United States market in which InterTAN’s common stock trades is the New York Stock Exchange. The common stock also trades in Canada on the Toronto Stock Exchange.

The high and low closing prices in U.S. dollars of InterTAN’s common stock on the New York Stock Exchange for each full quarterly period within the two most recent fiscal years is as set out below:

As of August 25, 2003 there were approximately 8,900 record shareholders of InterTAN’s common stock. This number excludes shareholders holding stock under nominee security position listing.

InterTAN has never declared cash dividends.

16

Table of Contents

FINANCIAL HIGHLIGHTS