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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.

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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.

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InterTAN, Inc.

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

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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

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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.

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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.

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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

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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

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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.

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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.

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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”

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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.”

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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.

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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.

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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.

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FINANCIAL HIGHLIGHTS

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Introductory Note Regarding Forward-looking Information

Certain statements contained in MD&A for InterTAN, Inc. (the “Company” or “InterTAN”) constitute forward-looking statements that involve risks and uncertainties. These forward-looking statements include statements regarding:

Important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are discussed in Part I of this Annual Report on Form 10-K. 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.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related revenues and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. The estimates and assumptions made require judgment on the part of management and are based on the Company’s historical experience and various other factors that are believed to be reasonable in the circumstances. Management continually evaluates the information that forms the basis of its estimates and assumptions as the business of the Company and the business environment generally changes. The use of estimates is pervasive throughout the Company’s financial statements. The following are the accounting policies and estimates which management believes to be most important to the business of the Company.

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Revenue recognition

Revenue is recognized when merchandise is delivered to customers or, in the case of service revenue, when the service has been performed. For the Company, net sales and operating revenues include items related to normal business operations, including the sale of goods to customers, service contract revenue, cellular and satellite activation income, residual income and sales-based volume rebates. Retail sales are recorded at the time of the sale to the customer. Service contract revenue relates to the sale of extended warranty plans. Revenue from such plans is recognized rateably over the life of the contract, generally three years. Cellular and satellite activation income is commission revenue received from carriers for obtaining new customers. Activation income is recognized when a customer’s product is activated onto a particular carrier’s network in one of the Company’s stores. An appropriate provision for contract cancellations is also recorded, based on the Company’s historical cancellation experience. Residual income is participation income received from cellular and satellite carriers, based on the customer’s continued use of the carrier’s network. Residual income is recognized monthly, based on the contractual percentage of each customer’s monthly bill. Sales-based volume rebates are additional commission revenue from cellular and satellite carriers. Such rebates are recognized as income when prescribed activation level thresholds are achieved, either on a quarterly or on an annual basis.

Accounts receivable

The Company’s accounts receivable includes amounts due from its strategic vendor partners, commercial customers and its dealers. The carrying value of each account is carefully monitored with a view to assessing the likelihood of collection. An allowance for doubtful accounts is provided for an estimate of losses that could result from customers defaulting on their obligation to the Company. In assessing the amount of reserve required, a number of factors are considered including the age of the account, the credit worthiness of the customer, payment terms, the customer’s historical payment history and general economic conditions. Because the amount of the reserve is an estimate, the actual amount collected could differ from the carrying value of the debt.

Inventory

Inventory is the Company’s largest asset class, comprising over 50% of the Company’s total assets. The Company’s inventory consists primarily of finished goods held for retail sale. Inventories are valued at the lower of cost, based on the average cost method, or market value. Purchase-based volume rebates are credited to inventory or cost of products sold, as appropriate. The Company assesses the market value of its inventory on a regular basis by reviewing, on an item-by-item basis, the realizable value of its inventory, net of anticipated selling costs. If it is management’s judgment that the selling price of an item must be lowered below its cost in order for it to be sold, then the carrying value of the related inventory is written down to realizable value. A number of factors would be taken into consideration in assessing realizable value including the quantity on hand, historical sales, technological advances, the existence of a replacement product, and consumer demand and preferences. Depending on market conditions, the actual amount received on sale could differ from management’s estimate.

Accrued expenses

The Company is constantly required to make estimates of future payments that will be made which relate to the current accounting period. These estimates range from things such as accrued but unpaid wages and bonuses to estimates of insurance, warranty and pending litigation claims. In establishing appropriate accruals, management must make judgments regarding the amount of the disbursement that will ultimately be incurred. In making such assessments, management uses historical experience as well as any other special circumstances surrounding a particular item. The actual amount paid could differ from management’s estimate.

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Income taxes

The Company is liable for income taxes in many jurisdictions including the United States, Canada, including its provinces and, previously, Australia. In making an estimate of its income tax liability the Company must first make an assessment of which items of income and expense are taxable in a particular jurisdiction. This process involves a determination of the amount of taxes currently payable as well as the assessment of the effect of temporary timing differences resulting from different treatment of items for accounting and tax purposes. These differences in the timing of the recognition of income or the deductibility of expenses result in deferred income tax balances that are recorded as assets or liabilities as the case may be on the Company’s balance sheet. If different judgments had been used, the Company’s income tax liability could have been different from the amount recorded. In addition, there can be no assurance that the taxing authorities of those jurisdictions will, upon audit, agree with the Company’s assessment.

Results of Operations

The Company 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 its wholly owned subsidiary, InterTAN Canada Ltd., which operates in Canada under the trade names “RadioShack” and “Battery Plus”. The Company previously also had retail and dealer outlets in Australia. These operations were conducted through a wholly owned subsidiary, InterTAN Australia Ltd., which operated under the “Tandy” name. The Australian subsidiary was sold effective April 2001. See “(Gain) Loss on disposal of subsidiary company.” 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 Wireless stores”). At June 30, 2003, 79 Rogers Wireless stores were in operation. In April 2002, the Company acquired the business and selected assets of Battery Plus, a retailer of batteries and other specialty consumer electronics products. At June 30, 2003, 38 Battery Plus stores were in operation.

All references to “Canada” or “RadioShack Canada”, “Australia” or “Tandy Australia” or “Corporate Headquarters” refer to the Company’s reportable segments, unless otherwise noted.

Overview

There were a number of special factors and charges in fiscal years 2003, 2002 and 2001 that significantly impacted the Company’s results of operations and affected the comparability of the reported results with other periods. The results for fiscal year 2003 include a foreign exchange loss of $1,683,000 relating to certain forward foreign exchange contracts that the Company held in the fourth quarter that had been marked to market. See “Currency Transaction (Gains) Losses”. The fiscal year 2003 results also include a tax charge in the amount of $250,000 relating to a dividend distribution from InterTAN Canada Ltd. to the parent company and a tax charge of $1,050,000 which represents U.S. tax relating to the Company’s various treasury stock repurchase programs. See “Income Taxes”.

During fiscal year 2002, the Company recorded restructuring charges of $2,912,000 in connection with the consolidation and integration of its Corporate Office with that of its Canadian subsidiary and the reorganization of its merchandising and marketing departments. In conjunction with this restructuring, the Company also expensed costs aggregating $510,000 incurred in connection with the study of various alternatives to enhance shareholder value. The fiscal year 2002 results also include an inventory charge of $3,500,000 designed to expedite the acceleration of the Company’s transition towards a more streamlined merchandise strategy focused on higher growth products and an adjustment to the carrying value of certain receivables related to one of its divested businesses. See “Restructuring Charges”.

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As previously discussed, effective April 30, 2001, the Company sold its subsidiary in Australia and recorded a gain on disposal of $4,101,000. In addition, the Company settled many of its remaining tax issues with the Canadian and United States tax authorities and recorded a charge of $700,000 in conjunction with such settlement. See “(Gain) loss on Disposal of Subsidiary Company” and “Income Taxes”.

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Change in Accounting Principle—Vendor Allowances

In September 2002 the Emerging Issues Task Force of the Financial Accounting Standards Board (“the FASB”) issued Consensus No. 02-16 (“EITF 02-16”)—“Accounting by a Reseller for Cash Consideration Received from a Vendor”, with final consensus reached in March 2003. EITF 02-16 establishes new accounting standards for recording allowances received by a vendor or other supplier in a retailer’s financial statements. During fiscal year 2003, the Company changed its method of accounting for such allowances in accordance with EITF 02-16. The new standard requires that these allowances and certain other amounts received by resellers from vendors be treated as a reduction of the cost of inventory acquired from the vendor and recorded as a component of the cost of products sold when the related product or service is sold, unless the amount represents a reimbursement of a specific, identifiable and incremental cost incurred to sell the vendor’s products or services. The Company continues to record vendor allowances that represent reimbursements of specific, identifiable and incremental costs incurred to sell the vendor’s products or services as a reduction of the related cost in its consolidated statements of operations. Previously, and in accordance with generally accepted accounting principles, the Company had recognized and recorded vendor allowances as a reduction of advertising expense included in selling, general and administrative expenses. The following table compares selected data for the fiscal years ended June 30, 2003, 2002 and 2001 with the corresponding prior-year period, both as reported and pro forma, as if the change had been given retroactive effect:

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Segment Reporting Disclosures

The Company’s business was traditionally managed along geographic lines, with its Corporate Headquarters also treated as a separate business unit. All references to “Canada”, “Australia” and “Corporate Headquarters” refer to the Company’s reportable segments, unless otherwise noted. Following the disposal 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, effective in fiscal year 2002, the Company now has only one business segment referred to herein as “Canada”, the “Canadian subsidiary” or “RadioShack Canada.” Transactions between operating segments were not common and were not material to the segment information.

Summarized in the table below are the net sales and operating revenues, operating income (loss), and assets for the Company’s reportable segments for the fiscal years ended June 30, 2003, 2002 and 2001. The results for fiscal years 2002 and 2001 have not been adjusted to reflect the change in accounting policy for vendor allowances:

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Sales Outlets

The Company’s sales outlets by type is summarized in the following table:

The dealers included in the preceding table 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 InterTAN company stores. The dealer agreements contain a license permitting the dealer to designate the consumer electronics department of the dealer’s business as a “RadioShack Dealer”. Sales to dealers accounted for approximately 12%, 13% and 12% of sales during fiscal year 2003, 2002 and 2001, respectively. The Company intends to continue to explore opportunities to expand its dealer base in Canada to produce profitable sales from communities too small to support company-operated stores.

In 1996 and as amended in June 2001, the Company entered into an Operating and Marketing Agreement (the “Mall Store Agreement”) with Rogers, under which Rogers has outsourced the operation of certain of its dealer locations (the “Rogers Wireless stores”) to the Company. Under this agreement, the Company has appointed Rogers as the exclusive supplier of wireless communications services to its customers, both in the Rogers Wireless stores and in the Company’s RadioShack stores. The Rogers Wireless stores are dedicated primarily to the sale of wireless services offered by Rogers to customers, including related hardware. In addition, up to 25% of the retail square footage of each store may be used to sell other products offered by the Company in its RadioShack stores that do not compete with services and products offered by Rogers. At June 30, 2003, the Company operated 79 Rogers Wireless locations.

Pursuant to the Mall Store Agreement, Rogers negotiates the lease arrangement of each store and is the tenant under the lease. The Company has neither primary nor secondary responsibility for the Rogers Wireless store leases. Rogers is responsible for the leasehold improvements in each store and is also responsible for payment of the rent, premises liability insurance costs, realty taxes, common area maintenance charges and mall marketing promotion costs. The Company owns the inventory in the Rogers Wireless stores and is also responsible for the installation, maintenance and other costs of the stores’ point-of-sale systems. In addition, the Company is

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responsible for the operating costs of the Rogers Wireless stores including payroll and related costs, and any percentage rent attributable to the sale of non wireless-based products. Employees working in the Rogers Wireless stores are employees of the Company and not Rogers.

Rogers’ primary source of revenue from the Rogers Wireless stores is the future income stream it will receive from customers who subscribe to its wireless services. While the Company purchases some of the inventory sold in both the Rogers wireless stores and in its own RadioShack stores from Rogers, the Company believes it could purchase such inventory directly from third party vendors, other than prepaid product, at comparable prices.

The Company receives the following revenues from the sale of Rogers’ wireless services and products. Except where indicated, the basis of computation of these amounts is identical in the Rogers Wireless stores and the Company’s RadioShack stores:

The Company also receives co-operative advertising support from Rogers for advertising in both channels.

The purchase-based volume rebate described above is recorded as revenue annually when calculated. Upon adoption of EITF 02-16 such volume rebates were reclassified as a reduction of cost of goods sold. This had the impact of reducing revenue by approximately $400,000 and reducing cost of sales by a like amount. Certain co-operative advertising payments received from Rogers are treated as a reduction in selling, general and administrative expenses. These payments represent a reimbursement of costs to market Rogers’ wireless services and do not represent a reduction in the cost of product purchased from Rogers. These costs to market Rogers’ wireless service are specific, identifiable and incremental. The aggregate consideration received from Rogers is less than the costs being reimbursed.

The current Mall Store Agreement, unless renewed by the parties, runs through December 31, 2006.

Seasonality

InterTAN’s business is seasonal; sales peak in the November—December holiday selling season. The Company’s cash flow requirements are also seasonal since inventories build prior to the holiday selling season. Significant inventory growth typically begins to build in late summer and peaks in November.

Foreign currency effects

Profit and loss accounts, including sales, are translated from local currency values into U.S. dollars at the monthly average exchange rates. The impact of fluctuations of local country currencies against the U.S. dollar can be significant. During fiscal year 2003 the Canadian dollar was stronger on average against the U.S. dollar

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than it was in fiscal year 2002. As a result, the same local currency amounts translate into more U.S. dollars as compared with the prior year. For example, if local currency sales in Canada in fiscal year 2003 were equal to those in fiscal year 2002, the fiscal year 2003 income statement would reflect a 3.6% increase in sales when reported in U.S. dollars. If local currency sales in Canada in fiscal year 2002 were equal to those in fiscal year 2001, the fiscal year 2002 income statement would reflect a 3.3% decrease in sales when reported in U.S. dollars.

Estimates of fiscal year 2004 results contained in MD&A assume a Canadian dollar exchange rate of $0.65. The average rate of exchange during fiscal year 2003 was $0.6599.

Net Sales and Operating Revenues

Fiscal 2003 Results Compared with Fiscal 2002

Sales in U.S. dollars for fiscal year 2003 were $403,052,000, an increase over the prior year of $9,243,000, or 2.3%. This increase was more than attributable to the effects of a year on year decline in the value of the U.S. dollar relative to the Canadian dollar, the latter being the functional currency of the Company’s Canadian subsidiary. In local currency, sales declined by 1.3%. Comparable store sales declined by 4.4%, also measured in local currency. The difference between the total sales performance and the comparable store sales performance is explained primarily by the addition, on a net basis, of 13 Rogers Wireless stores and 10 company-operated RadioShack stores. See “Results of Operations—Sales Outlets.” In addition, the Battery Plus stores were acquired late in fiscal year 2002 and were, therefore, excluded from the comparable store calculation for most of the year. Dealer sales were down by 5.5%.

Sales of digital cameras grew by over 66%, reflecting the growing demand for this product. The Company has responded to this demand with a broader and deeper assortment. Double-digit growth in this category is expected to continue in fiscal year 2004. Sales of wireless products increased by 12%. This sales gain resulted not only from new users, but also from customers upgrading their hardware. Importantly, the Company has been successful in increasing the level of contracted phone sales as opposed to sales of prepaid models. Management believes this will continue to be a growth category in fiscal year 2004, with a high single-digit or low double-digit gain expected. Sales of video games and related gear and software were also very strong, showing an increase of 35% over last year, reflecting the successful introduction of those products into the Company’s stores. While further growth in this category is expected, the pace of growth will be slower, with low double-digit growth anticipated. Sales of toys grew by 9%. Many of the Company’s products in the toy line performed well. Management anticipates mid single-digit growth from this category for fiscal year 2004. Sales of audio/video products increased by 7%. The rapid adoption of DVD players by consumers as well as the success of home theatre contributed to this performance. Management believes a mid single-digit gain is realistic for this category in fiscal year 2004. The Company believes it has the broadest and deepest assortment of batteries in the marketplace. This competitive edge, combined with effective promotion, produced a 5% sales gain in this category in fiscal year 2003. A solid single-digit sales increase is projected for fiscal year 2004. After the sale compensation, including residuals and sales-based volume rebates, increased by 2% during fiscal year 2003 and represented about 2% of total revenue. Management expects similar results during fiscal year 2004.

Sales of computers declined by 28% and sales of computer accessories and software declined by 2% and 22% respectively. The PC market was very volatile in Canada during fiscal year 2003. There was an ample supply of product and competition for customers was fierce. The Company took a conservative approach in this environment, which may have contributed to a decline in sales. Lower hardware sales also had an effect on the

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sale of related accessories and software. For fiscal year 2004, the Company plans to offer a wider and deeper assortment of computers in selected stores. Additional emphasis will be placed on laptop models which the Company sees as an area of particular growth. Management anticipates single-digit growth in this category for fiscal year 2004. Sales of home satellite systems were down 23% over the prior year. Part of this decline is attributable to vendor-driven price reductions, as unit sales were down only 17%. The satellite market is a maturing one and has also been hurt by the activities of gray and black marketers, offering systems featuring U.S. based programming at prices well below market levels. The carriers are forecasting that in the coming year, year over year subscriber growth will decline. Management anticipates that the Company will mirror the performance of the industry as a whole. Sales of communication products were down 8%, reflecting, in part, lower price points. The Company belies that a low single-digit sales gain is achievable for fiscal year 2004. Sales of parts and accessories declined by 9% during fiscal year 2004. Late in fiscal year 2002, the Company streamlined its product assortment as part of a redirection in its merchandising strategy. See “Gross Profit—Fiscal 2002 Results Compared with Fiscal 2001.” Management believes that the reduction of assortments undertaken a year ago had a negative impact on sales and profits in the parts and accessory category and is taking aggressive steps to augment many segments of the Company’s product line. Emphasis will be placed on unique and unusual items that historically have differentiated the Company from its competitors. To date over 700 new or replacement products have been introduced with a further 700 expected to arrive in time for the holiday selling season. Many of these new products fall into the parts and accessory category. Management believes that a high single-digit gain can be achieved in the parts and accessory categories for fiscal year 2004. Sales of prepaid cellular airtime cards declined by 12%. This reduction is in part due to the emphasis placed by the Company on the sale of contracted phones and in part because of a wider distribution channel for the cards, including through the internet.

Overall, management anticipates that total revenues for fiscal year 2004 will increase by 3% to 5%.

Fiscal 2002 Results Compared with Fiscal 2001

When the sales of the Company’s Australian subsidiary are removed from sales of fiscal year 2001, the Canadian subsidiary showed a sales increase, in U.S. dollars of $11,456,000, or 3.0%. The effects of a weaker Canadian dollar adversely affected this comparison. Measured in local currency, sales in the Company’s Canadian subsidiary increased by 6.5%, with comparable store sales increasing by 3.7%. The difference between the total sales gain and comparable store sales growth is explained primarily by new stores. At June 30, 2002, excluding the Battery Plus stores which were acquired late in the year, the Company operated about 5% more RadioShack and Rogers Wireless stores than at the same time in fiscal 2001. An increase in after the sale compensation, including residuals and sales-based volume rebates, which are not credited to individual stores was also a factor. Sales in the dealer division increased by 1.3%.

During fiscal year 2002, consumers continued to demonstrate a preference towards a more digital-focused product base. This was most evident in the computer accessory and software categories, where sales increased by almost 50%. This strong performance reflects the emphasis placed on those categories by management through both promotion and a significant expansion in the product range. Importantly, included in the computer accessory category are video cameras which posted a sales gain of 111% for the year. Following a successful test, a broader assortment of cameras was rolled out to a greater number of stores. The Company’s decision to introduce Playstation video gaming products into its stores was well accepted by consumers. From a zero base in fiscal year 2001, these products accounted for over 2% of the Company’s revenue in fiscal year 2002. In the cellular category, sales of handsets were up 15%. However, due to continuing lower retail prices as a result of technological advances and competition among manufacturers, the increase in cellular revenue was lower, showing high single-digit growth. Revenue from after the sale compensation and extended warranty plans also made a strong contribution to the revenue line, posting increases of 27% and 19%, respectively.

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Sales of computer hardware and monitors declined by 23% during fiscal year 2002. Earlier in the year, demand for older generation machines declined, as consumers delayed major purchases in anticipation of the introduction of Windows XP and machines with Pentium 4 technology. The effects of this drop in demand were further increased by the fact that early offerings of Pentium 4 machines were priced well above consumers’ comfort level. During the critical holiday selling season, 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 manufacturers to the Canadian marketplace. The end result was that very few of the Company’s stores had a consistent line-up over the holiday period. The sales comparison with the prior year was also adversely affected by the conclusion of a government sponsored program to subsidize the purchase of computers by families in the province of Quebec. This program produced a sales performance in the computer hardware category last year that proved impossible to match. While the performance of the computer category was disappointing, it was reflective of a soft market in Canada generally for PC’s. The sales performance in the satellite category was adversely affected by the activities of gray and black marketers. For the year, unit sales of satellite systems increased by 14% over the prior year, considerably less than the rate of growth experienced in the prior year. However pricing action by the carriers and promotional activity by the Company resulted in a 9% drop in satellite revenues for the year. 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.

Gross Profit

Fiscal 2003 Results Compared with Fiscal 2002

Gross profit dollars for fiscal year 2003 were $163,741,000, $13,313,000 higher than in fiscal year 2002. Last year, gross profit dollars had been depressed by a special charge related to a change in the Company’s merchandising strategy. See “Fiscal 2002 Results Compared with Fiscal 2001” below. In addition, had the adoption of EITF 02-16 been given retroactive effect, gross profit dollars would have increased by a further $6,210,000 during fiscal year 2002. Foreign currency effects also had a significant impact on the comparison. The following table summarizes the components of the change in gross profit from the prior year:

The following table illustrates comparable gross profit as a percentage of sales:

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For some time, the Company has experienced pressure on its gross margin percentage, primarily as a result of a shift in consumer demand towards products, primarily digital and other branded goods, most of which carry margins below the Company’s traditional levels. During the first quarter of fiscal 2003, margins were also negatively influenced by the sell-through of clearance merchandise. This trend began to improve during the second quarter when InterTAN reported a gross margin percentage that was within 20 basis points of the prior year. Further improvement occurred during the third quarter, such that the gross margin for the three months ended March 31, 2003 was flat with the prior year at 39.9%. A strong fourth quarter margin performance resulted in comparable pro forma margins, including the effects of EITF 02-16 but excluding the effects of the inventory charge described above, for the year as a whole being more or less flat with the prior year. Comparable fourth quarter gross margins were approximately 300 basis points higher than in the prior year. Lower PC and satellite sales as a portion of the sales mix was a contributing factor to this improvement. In addition to the effects of the $3,500,000 inventory charge recorded last year, fourth quarter margins a year ago were further reduced by the sell through of clearance merchandise, which cannibalized the sale of regularly priced product. Fourth quarter margins this year also benefited from the introduction of some of the new products described earlier. These products typically carry higher margins than other products in the assortment.

For fiscal year 2004, management believes that an increase in the gross margin percentage of 50 to 100 basis points can be achieved. The main factor contributing to this result is the introduction of over 1400 new items to the product line. As indicated above, many of these products typically carry higher margins than the fiscal year 2003 mix of products in the assortment. Although sales of computers are expected to increase, the Company believes that these sales can be achieved at higher margins than in the past. Sales of computer accessories are also expected to increase which will help offset the effects of an increase in computer sales in the overall sales mix.

Fiscal 2002 Results Compared with Fiscal 2001

Gross profit dollars for fiscal year 2002 were $37,375,000 lower than during fiscal year 2001. This reduction is more than explained by the sale of the Company’s Australian subsidiary and a charge of $3,500,000 to write down inventory in the Canadian subsidiary to net realizable value. The following summarizes the components of the change in gross profit from the prior year:

During the latter part of fiscal year 2002, the Company carried out an in depth review of its merchandising strategy in light of changing consumer preferences, consumer perceptions of the Company’s stores and product positioning. As a consequence of that study, management took the decision to refocus the Company’s product assortment to expedite the acceleration of the Company’s transition to a more streamlined merchandising

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strategy focused on higher growth products, to improve product adjacencies and to create an innovative category management strategy, while maintaining a strong focus on its core electronic, wireless and accessories business. In order to facilitate this transition, the Company re-evaluated its merchandise offering, and commenced an aggressive strategy to eliminate products incongruent with its new assortment. As a consequence of this decision, the Company recorded a charge of $3,500,000 to write down the affected inventory to net realizable value.

The reduction in the gross margin percentage in Canada during fiscal year 2002 was 200 basis points. Of this amount, 90 basis points are explained by the effects of the inventory charge described above. The sell through of the affected inventory had a further impact on the gross margin percentage as it yielded nominal gross profit dollars. The remainder of the decline in the gross margin percentage was primarily as a result of sales growth in high tech, primarily digital product categories. During fiscal year 2002, the Company offered a significantly enhanced range of digital products, as consumers’ preferences shifted towards these products relative to more traditional analog technologies. Sales declines during the year in more conventional landline telephones, personal electronics and toys also put pressure on margins. The pressure on margins generated by these shifts in product demand was 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 year, after the sale compensation, which has no associated product cost, was approximately $8,500,000, about 2% of total revenue. On a comparable basis, this represented an increase of 27% over the prior year.

Selling, General and Administrative Expenses

Fiscal 2003 Results Compared to Fiscal 2002

The following table provides a breakdown of selling, general and administrative expense (“SG&A”) by major category compared to the results for fiscal year 2002, both as reported and pro forma, as if the change in accounting policy for vendor returns had been given retroactive effect:

SG&A Expenses by Category

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During fiscal year 2003, SG&A expenses increased by $14,094,000 when compared to fiscal year 2002 results on a pro forma basis. Approximately $4,879,000 of this increase is attributable to foreign exchange. Measured in local currency, this represented an increase of 7.2% in SG&A over the prior year. The following is a breakdown of the same-exchange-rate increase in SG&A expense over the prior year using the pro forma results:

The company invested significantly in additional stores during fiscal year 2003 by adding a net of 10 new RadioShack stores and a net of 13 new Rogers stores. The addition of these new stores has contributed considerably to the increase in payroll costs over the prior year. As well, payroll for fiscal year 2003 reflects a full year of operation of the Battery Plus stores acquired in the fourth quarter of fiscal year 2002. Extra resources added in the distribution centre due to short-term difficulties in the implementation of the new warehouse system also contributed to the increase in payroll costs. Additional personnel were added in the second and third quarters of fiscal year 2003 to ensure that the new distribution system kept the stores in stock over the holiday selling season and to re-align inventory levels after this period. Staff in the warehouse has now been lowered to levels less than that of the previous year, reflecting the successful implementation of the new distribution system. Rent increased as a result of both the addition of new stores and regular increases on lease renewals. As previously discussed, the Company does not pay rent on any of the Rogers stores. Taxes (other than income taxes) represents business taxes on the Company’s head office and distribution center and its retail locations. This category would increase as a result of the increase in the store count and increases in the local property tax rates. Telephone and utilities expense has increased as a result of the placement of high-speed internet service in the stores to allow for customer demonstrations and as a result of the increase in the number of new stores in fiscal year 2003.

Management does not anticipate a significant increase in SG&A expense in fiscal year 2004. While the planned addition of new stores will increase payroll and rent expense, these increases will be offset by initiatives taken in the third quarter of fiscal year 2003 to reduce the field sales force by culling the ranks of less productive staff and the elimination of various non-selling positions. Management estimates that SG&A expenses, as a percentage of sales, for fiscal year 2004 will be 50 to 100 basis points lower than fiscal year 2003.

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Fiscal 2002 Results Compared to Fiscal 2001

The following table provides a breakdown of SG&A by major category for fiscal year 2002, both as reported and pro forma, compared to the results for fiscal year 2001, both as reported and pro forma, as if the change in accounting policy for vendor returns had been given retroactive effect:

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” and “Segment Reporting Disclosures.” In connection with this reorganization, the Company recorded restructuring charges of $2,912,000 during fiscal year 2002. To make comparisons of fiscal year 2002 results with those of fiscal year 2001 more meaningful, in the following discussion, the selling, general and administrative expenses of the Company’s former Corporate Headquarters for the prior year periods have been aggregated with those of RadioShack Canada.

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During fiscal year 2002, comparable SG&A expenses increased by $5,073,000. Measured in local currency, this represented an increase of 7.8%. The following is a breakdown of the same-exchange-rate increase (decrease) in SG&A expense in Canada and Corporate Headquarters over the same quarter in the prior year on an as-reported basis:

Payroll in stores increased both as a result of higher sales and due to an enhancement in the pay plan for store personnel. The Company believed this new plan would continue to deliver long-term benefits, including improved morale and retention of key personnel. Personnel turnover was reduced significantly during fiscal year 2002. Payroll in central units also increased as management was strengthened and key resources were added, in particular in support of the inventory and supply chain management functions. The effect of these payroll increases was substantially mitigated by the benefits of the restructuring and consolidation of the Corporate Office in the first quarter of fiscal year 2002. Rent increased as a result of an increase of 57 new company-operated stores, including 42 Battery Plus stores added during the fourth quarter, as well as scheduled rent increases. Taxes (other than income taxes) primarily represents business taxes on the Company’s head office and distribution center and its retail locations. This expense category would increase with the store count as well as increases in local property tax rates. Other SG&A expenses in fiscal year 2002 included the write-off of costs aggregating $510,000 incurred in connection with the study of various alternatives to enhance shareholder value. An increase in insurance costs also contributed to an increase in other SG&A expenses.

Depreciation

Fiscal 2003 Results Compared to Fiscal 2002

Depreciation expense increased during fiscal year 2003 by $1,249,000. This increase is largely due to the addition of the new warehouse and distribution centre.

Management estimates that depreciation expense for fiscal year 2004 will be approximately $6,500,000.

Fiscal 2002 Results Compared to Fiscal 2001

Depreciation and amortization expense decreased during fiscal year 2002 by $683,000. This reduction is more than explained by the disposal of the Australian subsidiary. Comparable depreciation expense increased by $563,000, or 11.0%. Capital spending in Canada during fiscal 2002 was primarily related to the new warehouse and distribution center (which will not become operational until fiscal year 2003), new stores and remodelling and relocating existing stores, and on information systems.

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(Gain) Loss on Disposal of Subsidiary Company

During the fourth quarter of fiscal year 2001, the Company sold its former subsidiary in Australia and recorded a gain of $4,101,000. The consolidated statements of operations and cash flows for the fiscal year ended June 30, 2001 includes the results of the Australian subsidiary.

The gain on disposal reported in the 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 and has commenced legal action in support of its claim. Management believes that its calculation of the adjustments is appropriate and that there are strong arguments against the position adopted by the purchaser. The Company 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 $2,695,000.

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 noted 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 expired April 30, 2003. This indemnity had a limit of A$4,000,000 (approximately $2,695,000). No claims were 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 $84,000. The time for making additional claims under this indemnity has now expired.

United States federal and Australian withholding tax on the sale were approximately $600,000. 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 $9,350,000, which the Company would vigorously dispute.

During the fourth quarter of fiscal year 2002, the Company re-evaluated the collectability of certain receivables relating to one of its divested operations and recorded a non-cash charge of $217,000.

Restructuring Charges

During the first quarter of fiscal year 2002, the Company recorded a restructuring charge of $2,703,000, representing the cost of streamlining the Company’s Corporate Office and integrating it with InterTAN’s operating subsidiary, InterTAN Canada Ltd.

During the fourth quarter of fiscal year 2002, the Company announced a further restructuring of its merchandising and marketing groups to streamline the decision making process and to optimise responsiveness. In connection with this restructuring, the Company recorded a charge of $209,000 during the fourth quarter of fiscal year 2002.

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The following is a summary of activity within the restructuring reserve during fiscal years 2003 and 2002:

In conjunction with the restructuring during the first quarter of fiscal year 2002, the Company also expensed costs aggregating $510,000 incurred in connection with the study of various alternatives to enhance shareholder value. This amount has been included in selling, general and administrative expenses.

In conjunction with the restructuring during the fourth quarter of fiscal year 2002, the Company also recorded an inventory charge of $3,500,000 designed to expedite the acceleration of the Company’s transition towards a merchandise strategy focused on higher growth, primarily digital products. This inventory adjustment was charged to cost of products sold.

Currency Transaction (Gains) Losses

A foreign currency transaction loss of $2,112,000 arose during fiscal year 2003. This loss was the result of the impact of a sudden and unanticipated decline in the value of the U.S. dollar relative to the Canadian dollar. The primary reason for this loss was a charge of $1,683,000 which was recorded in the fourth quarter. It is the Company’s policy to manage its exposure to the foreign currency risk related to outstanding U.S. dollar purchase orders in its Canadian subsidiary by either maintaining U.S. dollar cash balances or by purchasing forward foreign exchange contracts. Significant U.S. dollar denominated orders were outstanding in the March/April time frame and, consistent with Company policy, those orders were backed with forward exchange contracts against anticipated delivery dates. Between March 31, 2003 and June 30, 2003 the U.S. dollar declined in value by over 8% relative to the Canadian dollar. For financial accounting purposes, under FAS 133, these contracts could not be treated as hedges and had to be marked to market and included in the consolidated statement of operations, rather than being deferred and included in the cost of inventory, as acquired.

A foreign currency gain of $41,000 and a loss of $353,000 occurred during fiscal years 2002 and 2001, respectively. These gains and losses resulted from a variety of factors, including the effect of fluctuating foreign currency values on certain assets and trade payables denominated in currencies other than the functional currency of the debtor.

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Interest Income and Expense

Interest income was $299,000, $1,444,000 and $1,737,000 during fiscal years 2003, 2002, and 2001, respectively. The reduction in interest income during fiscal years 2003 and 2002 resulted from a reduction in the Company’s cash resources as a result of the repurchase of common stock during those periods and the payment of previously disputed tax balances relating to prior periods. Declining interest rates were also a factor in the reduction in interest income.

Interest expense during fiscal year 2003 increased by $615,000. Interest expense during fiscal year 2002 decreased by $470,000. During fiscal year 2003 the Company borrowed from its operating line to finance the seasonal build-up of inventory. The Company also used its non-revolving term facility to finance the Company’s seventh stock repurchase program. Interest expense for fiscal year 2002 consisted entirely of amortization of loan origination costs and standby fees, as the Company did not need to borrow under its credit line during the year.

Management anticipates net interest expense for fiscal year 2004 to be approximately $1,500,000, reflecting a full year of interest on the outstanding balance of the non-revolving term facility.

Income Taxes

The provision for income taxes in fiscal year 2003 includes a provision for Canadian taxes on the profits of RadioShack Canada. The provision also included Canadian tax on a dividend distribution to the parent Company and United States income taxes related to the Company’s stock repurchase program. The Company, along with all taxpayers, had benefited from a two-year exemption from this tax and anticipated that this exemption would be continued. However, the exemption was removed in the final tax bill enacted in May 2003. The latter two items totalled $1,300,000. The effective tax rate for fiscal year 2003 was 50.7%. Excluding the dividend distribution tax and the United States taxes described above, the effective rate would have been 43%. Management estimates that the effective tax rate for fiscal year 2004 will be approximately 41%. The provision for income taxes in fiscal year 2002 and 2001 included a provision for Canadian taxes on the profits of RadioShack Canada. No provision for Australian taxes was made during fiscal year 2001, because the Australian subsidiary had a pre-tax loss through the date of its sale. The fiscal year 2001 provision included a special charge of $700,000 related to the settlement of outstanding issues with the Canadian and United States authorities as well as a provision of $581,000 relating to the sale of the Australian subsidiary. See “Gain (Loss) on Disposal of Subsidiary Company.”

During fiscal years 1999 and 2001, the Company reached agreements with the Canadian tax authorities, settling substantially all of its remaining outstanding Canadian tax issues. Because of the age of these issues and the terms of the settlements, there were complex interest computations to be made. At June 30, 2002, final statements summarizing amounts owing had not been received. Management estimated that at June 30, 2002, the liability to settle all outstanding Canadian tax issues was approximately $11,000,000 to $13,000,000. In October 2002, a payment of approximately $7,300,000 was made in satisfaction of a significant portion of these issues. This payment was net of the application of an overpayment of fiscal year 2002 income taxes of approximately $2,900,000, resulting in a reduction of the Company’s liability of approximately $10,200,000. Management estimates that its liability with respect to the remaining issues is approximately $2,500,000. 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.

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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 defence 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 liability of approximately $2,300,000.

Earnings per Share

Basic earnings per share (“EPS”) is calculated by dividing the net income or loss by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted.

The Company’s only dilutive instruments are the options to purchase common stock held by the Company’s directors and employees. At June 30, 2003, the Company’s directors and employees held options to purchase 1,175,722 common shares at prices ranging from $2.48 to $11.95 per share. During quarters one through four of fiscal year 2003, all but 495,169; 650,269; 565,081 and 552,770 of options then outstanding were included in the computation of diluted earnings per common share. These options were excluded because the option exercise price was greater than the average market price of the common stock during the particular quarter. The dilutive effect of the various options held by the Company’s directors and employees in future periods will depend on the average market price of the Company’s common stock during such periods.

Management estimates the earnings per share for fiscal year 2004 will be approximately $0.65 to $0.75 per diluted share. This estimate assumes an average of 21,250,000 shares outstanding.

New Accounting Standards

In June 2001, the FASB issued Financial Accounting Standards No. 143 (“FAS 143”). FAS 143 requires that the Company recognize as a component of asset cost, the fair market value for an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair market value can be made. FAS 143 is effective for fiscal years beginning after June 15, 2002. The Company adopted FAS 143 on July 1, 2002. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.