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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

or

Commission file number 1-10062

InterTAN, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (705) 728-6242

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

At January 31, 2004, 20,211,214 shares of the registrant’s common stock, par value $1.00 per share, were outstanding.

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INTRODUCTORY NOTE REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this Report on form 10-Q constitute forward-looking statements that involve risks and uncertainties. The forward-looking statements include statements regarding:

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

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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.

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ITEM 1 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Operations

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

(Unaudited)

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

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Consolidated Balance Sheets

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

(Unaudited)

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

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Consolidated Statements of Cash Flows

(U.S. dollars in thousands)

(Unaudited)

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

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Notes to Consolidated Financial Statements

Note 1 Basis of Financial Statements

The fiscal year end of the Company has been June 30. On December 5, 2003, the Board of Directors approved a change in fiscal year end from June 30 to March 31 to better reflect the Company’s operational business cycle. Accordingly, the current fiscal period of the Company will only include nine months and will end March 31, 2004. Hereinafter the nine-month period ending March 31, 2004 will be referred to as “the 2004 fiscal period”.

The accompanying consolidated unaudited financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, “Interim Financial Statements”, and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements have been prepared in conformity with accounting principles and practices (including consolidation practices) as reflected in InterTAN, Inc.’s (“InterTAN” or the “Company”) Annual Report on Form 10-K for the fiscal year ended June 30, 2003, and, in the opinion of the Company, include all adjustments necessary for a fair presentation of the Company’s financial position as of December 31, 2003 and 2002 and the results of its operations for the three and six months ended December 31, 2003 and 2002 and its cash flows for the six months ended December 31, 2003 and 2002. Such adjustments are of a normal and recurring nature. Operating results for the three and six months ended December 31, 2003 are not necessarily indicative of the results that can be expected for the fiscal period ending March 31, 2004. These are interim financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003.

Certain previous year amounts have been reclassified to conform to the current-year presentation. This included reclassifying the current and non-current balances of deferred service contract costs, which had previously been netted against deferred service contract revenue, to assets. This reclassification has no impact on the consolidated statements of operations, stockholders’ equity and cash flows.

Note 2 New Accounting Standards

During fiscal year 2003, the Company changed its method of accounting for vendor allowances in accordance with Emerging Issues Task Force Consensus No. 02-16 (“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. 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 cumulative effect of the change in the method of accounting for vendor allowances resulted in an after-tax, non-cash charge to net income of $580,000.

In January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51.” FIN 46 requires certain variable interest entities to be consolidated by the primary beneficiary of the entity if the equity investors in an entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for all new variable interest entities created or acquired after January 31, 2003. For variable interest entities created or acquired prior to February 1, 2003, the provisions of FIN 46 must be applied for the first interim or annual period ending after December 15, 2003. The adoption of FIN 46 did not have a material impact on the Company’s consolidated financial statements as it does not currently have any

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interests in any variable interest entities. FIN 46 was amended in December 2003 (“FIN46R”). The provisions of FIN46R must be applied for the first interim or annual period ending after March 15, 2004. Management does not anticipate that the adoption of FIN46R will have a material impact on the Company’s consolidated financial statements.

In April 2003, the FASB issued Financial Accounting Standards No. 149 (“FAS 149”) – “Amendment of Statement 133 on Derivative Instruments and Hedging Activities”. This statement amends FAS 133 by requiring that contracts with comparable characteristics be accounted for similarly and clarifies when a derivative contains a financing component that warrants special reporting in the statement of cash flows. FAS 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and must be applied prospectively. The adoption of FAS 149 did not have a material impact on the Company’s consolidated financial statements.

In May 2003, the FASB issued Financial Accounting Standards No. 150 (“FAS 150”) – “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity”. This statement established standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003 and must be applied prospectively by reporting the cumulative effect of a change in an accounting principle for financial instruments created before the issuance date of the Statement and still existing at the beginning of the interim period of adoption. The adoption of FAS 150 did not have a material impact on the Company’s consolidated financial statements as it does not currently have any financial instruments with characteristics of both liabilities and equity.

Note 3 Stock Based Compensation

The Company measures the expense associated with its stock-based compensation using the intrinsic value method. Application of this method generally results in compensation expense equal to the quoted price of the shares granted under the option less the amount, if any, the director or employee is required to pay for the underlying shares.

Because the Company uses the intrinsic value method of accounting for compensation expense related to stock options granted to employees and directors and because, with the exception of certain options granted to directors during fiscal year 1999, the exercise price of the stock options granted is equal to the market price of the common stock on the date of the grant, compensation expense has typically not been recognized upon the grant of stock options. Had the Company adopted the fair value method of recognizing stock-based compensation, the estimated fair value of the options granted would have been amortized to compensation expense over the vesting period. Pro forma information is presented below for the three and six months ended December 31, 2003 and 2002 as if the Company had adopted the fair value method.

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Note 4 Earnings per Share

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

Basic and diluted net income per average common share and a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation is set out below:

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At December 31, 2003 and 2002, the Company’s directors and employees held options to purchase 1,127,441 and 980,187 common shares, respectively, at prices ranging from $2.4792 to $11.875. During the three months ended December 31, 2003 and 2002, all but 357,589 and 650,269 of such options were considered in calculating diluted EPS. These options were excluded because the option exercise price was greater than the average market price of the Company’s common stock during such periods. The dilutive effect of these options in future periods will depend on the average price of the Company’s common stock during such periods.

Note 5 Bank Debt

In December 2002 the Company’s Canadian subsidiary entered into a new credit facility (the “Credit Facility”) in the amount of C$85,000,000 (Approximately $65,569,000 at December 31, 2003 exchange rates) with a major Canadian bank, replacing its existing asset-backed facility which had been in place since December 1997. The Credit Facility consists of two revolving renewable facilities and a five-year non-revolving term facility.

The first one-year renewable revolving facility is for C$30,000,000 (approximately $23,142,000 at December 31, 2003 rates of exchange.) This facility is intended for normal working capital requirements and is available throughout the year. The Credit Facility, as amended on September 15, 2003, provides that the amount that can be used for letters of credit is limited to C$5,000,000 during fiscal year 2003 (approximately $3,857,000 at December 31, 2003 rates of exchange), increasing to C$14,000,000 and C$17,000,000 during fiscal years 2004 and 2005, respectively. Further increases of C$2,000,000 each are contemplated for fiscal years 2006 and 2007.

The second one-year renewable revolving facility is for C$45,000,000 (approximately $34,713,000 at December 31, 2003 rates of exchange) This facility is for seasonal working capital requirements and is available only during the annual period of September 1 to January 31. This facility cannot be used for letters of credit and must be repaid in full each January 31.

Advances under these revolving facilities are limited to a borrowing base calculation tied to the Company’s accounts receivable and inventories. At December 31, 2003, no amounts were outstanding under either facility. The short-term bank borrowings of $4,677,000 at December 31, 2003 represent a book overdraft due to outstanding cheques. At December 31, 2003, C$3,035,000 (approximately $2,341,000 at December 31, 2003 rates of exchange) was committed in support of letters of credit. At December 31, 2003, C$41,965,000 (approximately $32,372,000 at December 31, 2003 rates of exchange) was available for use under these facilities.

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The Credit Facility also includes a five-year non-revolving term facility in the amount of C$10,000,000 (approximately $7,714,000 at December 31, 2003 rates of exchange). This facility is intended for capital expenditures or the repurchase of the Company’s common stock. In December 2002, the Company drew down on this facility in full to finance the seventh share repurchase program announced in October 2002. At December 31, 2003 C$8,000,000 (approximately $6,171,000 at December 31, 2003 rates of exchange) was outstanding under this facility. A repayment of C$2,000,000 (approximately $1,543,000 at December 31, 2003 rates of exchange) was made on December 15, 2003. Further repayments of C$2,000,000 are due on December 17, 2004 through December 17, 2007, inclusive.

The Credit Facility requires that the Company remain in compliance with certain financial ratios including the current ratio, fixed charge coverage ratio, tangible net worth and total adjusted debt to tangible net worth. The Company was in compliance with all these covenants at December 31, 2003. Borrowing rates under the facility range from Canadian prime plus 0.50% to prime plus 1.5%, based on the Company’s quarterly performance against predetermined fixed charge coverage ratios. Using the same criteria, the Company may borrow at Canadian bankers’ acceptance and LIBOR rates plus from 1.50% to 2.5%. Letters of credit are charged at rates ranging from 1.5% per annum to 2.5% per annum, using the same performance criteria. Using the same fixed charge coverage test, a standby fee of 0.25% to 0.50% is payable on the unused portion of the revolving credit facilities at that time. The weighted average interest rate paid by the Company under its credit facility for the quarter was 7.44%.

Security granted by InterTAN Canada Ltd. to secure its obligations under the Credit Facility include a demand debenture with a face value of C$125,000,000 (approximately $96,425,000 at December 31, 2003 rates of exchange), general security agreement, charge/mortgage on real property owned by it and a general assignment of accounts receivable. The obligations of InterTAN Canada Ltd. are further secured by a guarantee issued by InterTAN, Inc. of all future indebtedness, liability and obligations now or in the future owing by it to lenders under the Credit Facility.

The cost of establishing the Credit Facility, including professional fees and a loan origination fee were approximately C$1,000,000 (approximately $771,000 at December 31, 2003 rates of exchange). These costs have been allocated between the revolving and non-revolving facilities. Costs aggregating C$290,000 (approximately $224,000 at December 31, 2003 rates of exchange) were allocated to the short-term facilities and the remaining C$710,000 (approximately $548,000 at December 31, 2003 rate of exchange) were allocated to the long-term facility. These costs will be amortized over the terms of the respective facilities.

Note 6 Restructuring Charge

During fiscal year 2002, the Company recorded restructuring charges aggregating $2,912,000, representing the cost of streamlining the Company’s Corporate Office and integrating it with InterTAN’s operating subsidiary, InterTAN Canada Ltd., and of reorganizing the merchandising and marketing groups.

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The following is a summary of activity within the restructuring reserve during the six months ended December 31, 2003:

The remaining balance will be paid on a monthly basis through December 2011.

Note 7 Treasury Stock Repurchase Program

By June 30, 2003, the Company had completed seven previously announced share repurchase programs. In total, under all seven plans, 11,736,250 shares had been acquired by June 30, 2003 for total consideration of $122,278,904, or approximately $10.42 per share. On April 22, 2003 the Company announced an eighth stock repurchase program under which management is authorized, subject to regulatory approval and market conditions, to purchase up to 1,025,000 additional shares, approximately 5% of the Company’s common shares then outstanding. Regulatory approval to proceed with this plan was received in July 2003. During the second quarter of fiscal year 2004, 586,400 shares were acquired under the eighth plan at an aggregate cost of $5,715,437, or approximately $9.75 per share.

Note 8 Comprehensive Income

Comprehensive income is defined as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income includes net income and the net change in foreign currency translation effects. The comprehensive income for the three months ended December 31, 2003 and 2002 was $13,127,000 and $8,697,000, respectively. For the six months ended December 31, 2003 and 2002, comprehensive income was $14,547,000 and $6,384,000, respectively.

Note 9 Income Taxes

The provision for domestic and foreign income taxes for the three and six months ended December 31, 2003 was $10,847,000 and $12,664,000, respectively, representing Canadian income tax on the profits of the Company’s Canadian subsidiary as well as $2,400,000 in United States taxes, representing management’s estimate of the tax owing as a result of the conclusion of a long outstanding dispute with the Internal Revenue Service. The Company, on the advice of counsel, had believed that the chances of a favorable outcome on this matter were good and accordingly, no loss provision had been previously recorded. In January 2004, the Company was advised that the United States Tax Court had issued a judgment in favor of the Internal Revenue Service. The Company intends to appeal the Tax Court decision. For the three and six months ended December 31, 2002, the provision was $6,174,000 and $7,837,000, respectively.

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. In October 2002, a payment of approximately $7,300,000 was made in satisfaction of a significant portion of these issues. Management estimates that its liability with respect to the remaining issues is approximately $2,725,000. 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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Note 10 Product Warranties

Products sold in the Company’s stores typically carry a one-year warranty covered by the product manufacturer. Accordingly, the Company does not provide for the expected warranty costs. The Company also offers extended warranty plans to its customers. These contracts extend the warranty period beyond the original warranty period provided by the manufacturer and provide enhanced benefits. The term of these contracts, including the original warranty period, is typically three years. As the Company is the primary obligor on these contracts, all revenue on the sale of extended warranty plans is deferred and is amortized on a straight-line basis, over the term of the contract. The Company has certain recourse for a portion of the obligation against the manufacturer during the one-year warranty period covered by such manufacturer. The Company pays its sales associates a specific commission on the sale of extended warranty plans. These costs are also deferred and expensed ratably over the term of the contracts. The following is a summary of the activity in the deferred revenue and deferred charge accounts during the three and six months ended December 31, 2003:

Note 11 Commitments and Contingencies

In connection with the sale of its former United Kingdom subsidiary during fiscal year 1999, the Company remains contingently liable as guarantor of certain leases of InterTAN U.K. Limited. At December 31, 2003 the remaining lease obligation assumed by the purchaser and guaranteed by the Company was approximately $14,000,000 and the average remaining life of such leases was approximately 4 years. If the purchaser were to default on the lease obligations, management believes the Company could reduce the exposure through assignment, subletting and other means. The Company has obtained an indemnity from the purchaser for an amount equal to management’s best estimate of the Company’s potential exposure under these guarantees. At December 31, 2003, the amount of this indemnity was approximately £4,000,000 (approximately $7,144,000 at December 31, 2003 exchange rates.) The amount of this indemnity declines over time as the Company’s risk diminishes. It was reduced to £3,000,000 (approximately $5,358,000 at December 31, 2003 exchange rates) in

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January 2004 and will be reduced by a further £1,000,000 each succeeding January, until it is reduced to zero in January 2007.

In April 2001, the Company sold its Australian subsidiary. The gain on disposal reported in 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 $3,126,000 at December 31, 2003 rates of exchange.

Management believes there are authoritative arguments in support of the position that the gain on the sale of the Australian subsidiary 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 $10,445,000, at December 31, 2003 rates of exchange, which the Company would vigorously dispute.

Apart from these matters and the issues discussed in Note 9, there are no pending proceedings or claims, other than immaterial routine matters incidental to the Company’s business, to which the Company or any of its subsidiaries is a party, or to which any of its property is subject.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

InterTAN is engaged in the sale of consumer electronics products primarily through company-operated retail stores and dealer outlets in Canada. The Company’s retail operations are conducted through a wholly owned subsidiary, InterTAN Canada Ltd., which operates in Canada under the trade names “RadioShack” and “Battery Plus”. The Company previously also had retail and dealer outlets in Australia. The “RadioShack” trade name is 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 wireless telecommunications stores (“Rogers Wireless Stores”). At December 31, 2003, 84 Rogers Wireless stores were in operation. For a discussion of the Company’s agreement with Rogers, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Sales Outlets” in InterTAN’s Annual Report on Form 10-K for the fiscal year ended June 30, 2003. The Company also acquired selected assets of Battery Plus, a retailer of batteries and other specialty consumer electronics products in April 2002. At December 31, 2003, 35 Battery Plus stores were in operation.

On December 5, 2003, the Board of Directors approved a change in fiscal year end from June 30 to March 31 to better reflect the Company’s operational business cycle. Accordingly, the current fiscal period of the Company for 2004 will only include nine months and will end March 31, 2004. Hereinafter the nine-month period ending March 31, 2004 will be referred to as “the 2004 fiscal period”.

Future Capital Structure

On November 3, 2003, the Company announced that its Board of Directors had authorized management to prepare for a change of the domicile of the Company from Delaware to Canada. Ultimate implementation of this change will be subject to shareholder approval and the Board’s judgment that such a change is in the best interests of the Company having particular regard to legislative and market conditions at the time. When implemented, this transaction, referred to as an inversion, is expected to provide the Company with several advantages over its current structure. Such advantages include:

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It is anticipated that requisite filings with the Securities and Exchange Commission will be made by mid to late February 2004 and that subject to obtaining necessary regulatory and shareholder approvals, the Company could complete the inversion by mid to late May 2004. The costs associated with the transaction are estimated to be approximately $1,500,000, with as much as $880,000 of such amount to be incurred in the final quarter of the 2004 fiscal period.

Restructuring Charge

During fiscal year 2002, the Company recorded a restructuring charge of $2,912,000, representing the cost of streamlining the Company’s Corporate Office and integrating it with InterTAN’s operating subsidiary, InterTAN Canada Ltd., and the restructuring of its merchandising and marketing groups.

The following is a summary of activity within this reserve during the six months ended December 31, 2003:

The remaining balance will be paid on a monthly basis through December 2011.

Foreign Exchange Effects

Profit and loss accounts, including sales, are translated from local currency values to U.S. dollars at monthly average exchange rates. During the second quarter of the 2004 fiscal period, the Canadian dollar was 19.1% stronger against the U.S. dollar relative to the comparable value during the second quarter of the prior year. As a result, the same local currency amounts in Canada translated into more U.S. dollars as compared with the prior year. For example, if local currency sales in Canada in the second quarter of the 2004 fiscal period were the same as those in the second quarter of the prior year, the 2004 fiscal period income statement would reflect a 19.1% increase in sales when reported in U.S. dollars. For the six months ended December 31, 2003, the Canadian dollar was 16.9% stronger against the U.S. dollar than during the comparable period last year.

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Sales Outlets

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

Net Sales and Operating Revenues

Sales for the quarter in U.S. dollars were $171,284,000. In Canadian dollars, this represented a total sales increase of 5% over the prior year. Comparable store sales increased by 2% over the same period last year. This difference is attributable to new stores as, since December 31, 2002 the Company has opened, on a net basis, 18 new company owned RadioShack stores and 7 new Rogers Wireless stores. Sales, measured in U.S. dollars, increased by 25%, reflecting a Canadian dollar that was almost 20% stronger than during the second quarter last year. For the six months ended December 31, 2003, sales in local currency increased by 3% while sales measured in U.S. dollars increased by 21%, reflecting a Canadian dollar that was almost 17% stronger over the same period in the prior year. Comparable store sales for the six months ended December 31, 2003 increased by 1% over the same period last year.

All major product category groups performed well over the quarter with the exception of the home and personal entertainment product group. The computer and digital camera group achieved a sales gain of 14%. The Company’s strategy to revitalize the sales of CPU’s, laptops and accessories continues to be successful and digital cameras continue to perform well. The parts, accessories and seasonal product group posted an 11% sales gain, driven by the sales of the many new gadgets and unique product items the Company has introduced into this product line. In addition, toys also performed well, in part as a result of a more attractive assortment and more effective promotion. Batteries continue to produce steady growth in this category. Sales in the telephone, wireless and communication category increased by 8%, primarily as a result of increased wireless revenue, as the Company continues to place emphasis on the sale of more profitable contract phones. The increase in this product group was partially offset by a reduction in revenue from the sale of prepaid airtime, as the Company and its carrier deemphasized prepaid phones and as prepaid airtime became more readily available in other channels. Sales of home and personal entertainment products declined by 9%, largely as a result of the continued malaise in the home satellite market. In addition, sales of video gaming products also declined sharply as the Company minimized its exposure in the video gaming and software business which has shifted a large part of the risk of obsolescence of these products to retailers. After the sale compensation in the form of residuals and sales-based volume rebates increased by 8.2%.

Gross Profit

The gross profit percentage for the quarter was 42.3%, compared with 40% in the second quarter of fiscal year 2003, an increase of 230 basis points. Gross profit dollars, measured in local currency, increased by $17,499,000 for the quarter. For the six months ended December 31, 2003, gross profit dollars increased by $23,178,000. The following analysis summarizes the components of the changes in gross profit dollars for the

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second quarter of the 2004 fiscal period and for the six months ended December 31, 2003 with the comparable prior year periods: