TANDY BRANDS ACCESSORIES, INC. 
By DALLAS, Nov. 10, 2010 /PRNewswire-FirstCall/ -- Tandy Brands Accessories, Inc. (Nasdaq: TBAC) today reported financial results for its first quarter ended September 30, 2010.
Net sales for the first quarter were $29.2 million, a decrease of $8.0 million, compared to $37.2 million reported in the prior year first quarter. First quarter net sales were impacted by reduced belt assortments and curtailed levels of replenishment orders by a significant customer and the timing of certain shipments to other customers being delayed until later in the current fiscal year. Net sales of $2.9 million for the gifts segment decreased $2.5 million over the prior year first quarter due to retailers delaying in-store dates.
"Although the first quarter presented challenges from a top-line perspective, we remain optimistic about our medium-term prospects. Due to a recent arrangement with a significant customer, we expect to regain lost belt market share on an annualized basis. Additionally, our gifts sales are occurring later this year, but we expect strong second quarter selling and fiscal year 2011 gifts net sales to be consistent with fiscal year 2010," said Rod McGeachy, President and Chief Executive Officer of Tandy Brands.
Primarily as a result of lower net sales, first quarter 2011 adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) declined $2.9 million to an adjusted EBITDA loss of $1.7 million. First quarter 2010 adjusted EBITDA was $1.2 million and excluded charges for restructuring and certain acquisition-related items, including a one-time, bargain purchase gain of $1.4 million associated with the acquisition of certain assets of the Chambers Belt Company in July 2009. For the fiscal 2011 first quarter, the company reported a net loss of $2.7 million, or ($0.39) per diluted share, compared to net income of $1.1 million, or $0.15 per diluted share, in the first quarter 2010.
First quarter 2011 gross margin percentage was 34.9 percent, compared to 38.3 percent in the 2010 first quarter. The decline was attributable to lower sales of previously written-down inventory, higher freight costs and promotional pressures from our retail partners.
Total selling, general and administrative (SG&A) expenses for the first quarter of fiscal 2011 were reduced $1.3 million to $11.9 million, as a result of decreases in facilities expenses, compensation costs, bad debt provisions, royalties and professional services expenses.
Financial Position
The company ended the 2011 first quarter with $31.7 million in working capital, including $19.7 million of receivables, $49.0 million of inventories, and borrowings of $21.6 million. At September 30, 2010, $5.6 million of borrowing capacity was available under the U.S. credit facility.
Inventories increased $12.9 million from September 30, 2009 primarily due to the timing of sales between the current year's first and second quarters. "Fiscal 2011 shipments are occurring later than in fiscal 2010 based on the desired in-store dates from our retail partners. Our customers are building holiday inventory levels later this year than last year," said McGeachy.
Outlook
"For fiscal year 2011, we expect net sales to decline by mid-single digits, gross margins to decline slightly, and our SG&A expenses to be between $44 and $46 million," said McGeachy.
During the quarter, the company entered into a new licensing agreement to sell products under the Wolverine label. "Our new license agreement with Wolverine is proving to be an excellent addition to our brand portfolio, and we continue to pursue similar license agreements to further expand our product offerings," said McGeachy.
"Furthermore, we continue to seek acquisitions of branded companies in order to achieve our long-term growth objectives," said McGeachy.
Conference Call
Tandy Brands has scheduled a conference call for 11:00 a.m. Eastern Time (10:00 a.m. Central) on November 11, 2010 to discuss the first quarter 2011 results. To participate in the teleconference, investors should dial 877-317-6789 a few minutes before the start time and reference the Tandy Brands conference call. International callers should dial 1-412-317-6789. The conference call can also be accessed by visiting the investor relations section of the company's Web site,www.tandybrands.com.
A replay of the call will be available through November 18, 2010 and can be accessed by dialing 877-344-7529 and entering confirmation code 445781. International callers may dial 1-412-317-0088.
About Tandy Brands
Tandy Brands is a leading designer and marketer of branded men's, women's and children's accessories, including belts, gifts, small leather goods, eyewear, neckwear, and sporting goods. Merchandise is marketed under various national as well as private brand names through all major retail distribution channels.
Safe Harbor Language
Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted or expected results. Those risks include, among other things, the competitive environment in the industry in general and in the company's specific market areas, changes in costs of goods and services and economic conditions in general and in the company's specific market area. Those and other risks are more fully described in the company's filings with the Securities and Exchange Commission.
Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Consolidated Statements Of Operations
(in thousands except per share amounts)
Three Months Ended
September 30
2010 2009
---- --
Net sales $29,248 $37,193
Cost of goods sold 19,037 22,964
------ ------
Gross margin 10,211 14,229
Selling, general and
administrative expenses 11,865 13,194
Depreciation and amortization 645 677
Acquisition related costs 30 289
--- ---
Total operating
expenses 12,540 14,160
Operating income (loss) (2,329) 69
Interest expense (186) (268)
Other income 43 36
Acquisition bargain purchase
gain - 1,379
--- -----
Income (loss) before
income taxes (2,472) 1,216
Income taxes 216 113
--- ---
Net income (loss) $(2,688) $1,103
Income (loss) per common share $(0.39) $0.16
Income (loss) per common share
assuming dilution $(0.39) $0.15
Common shares outstanding 6,970 6,930
Common shares outstanding
assuming dilution 6,970 7,115
Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Consolidated Balance Sheets
(in thousands)
September
30 June 30
2010 2010
Assets
Current assets:
Cash and cash equivalents $489 $830
Restricted cash 1,358 1,333
Accounts receivable 19,681 18,630
Inventories 48,997 31,371
Other current assets 6,024 8,114
----- -----
Total current assets 76,549 60,278
Property and equipment, net 7,057 8,658
Other assets:
Intangibles 5,493 5,717
Other assets 774 879
--- ---
Total other assets 6,267 6,596
----- -----
$89,873 $75,532
======= =======
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $19,734 $13,497
Accrued compensation 1,698 3,202
Accrued expenses 1,797 1,795
Note payable 21,601 9,425
------ -----
Total current liabilities 44,830 27,919
Other liabilities 3,650 3,793
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000 shares
authorized, none issued - -
Common stock, $1.00 par value, 10,000 shares
authorized,
6,972 shares and 6,933 shares issued and
outstanding, respectively 6,972 6,933
Additional paid-in capital 34,308 34,172
Retained earnings (deficit) (1,530) 1,158
Other comprehensive income 1,643 1,557
----- -----
Total stockholders' equity 41,393 43,820
------ ------
$89,873 $75,532
======= =======
Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Non-GAAP Disclosures
(in thousands except per share amounts)
Our adjusted EBITDA, a non-GAAP measurement, is defined as net income (loss) before interest, taxes, depreciation and amortization, and certain acquisition-related items. Adjusted EBITDA is presented because we believe it provides useful information about our business activities and also is frequently used by securities analysts, investors, and other interested parties in evaluating a company's performance. Not all companies utilize identical calculations; therefore, our presentation of adjusted EBITDA may not be comparable to other identically titled measures of other companies. EBITDA and adjusted EBITDA have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results of operations as reported under U.S. generally accepted accounting principles ("GAAP"). The following table reconciles our GAAP net income (loss) to the adjusted EBITDA disclosures.
Three Months Ended
September 30
2010 2009
---- ----
Net (loss) income $(2,688) $1,103
Income taxes 216 113
Interest expense 186 268
Depreciation and amortization 645 677
Acquisition bargain purchase gain - (1,379)
Acquisition related costs 30 289
Other income (43) (36)
Restructuring - 169
Adjusted EBITDA (loss) $(1,654) $1,204
======= ======
We have provided our adjusted net income (loss) disclosure, a non-GAAP measurement, as we believe it is important for our stakeholders to understand the impact of certain items on our statements of operations. The following table reconciles our GAAP net income (loss) to the adjusted net income (loss) disclosure.
Three Months Ended
September 30
2010 2009
---- ----
Net (loss) income $(2,688) $1,103
Acquisition bargain purchase gain - (1,379)
Acquisition related costs 30 289
Restructuring - 169
Adjusted net (loss) income $(2,658) $182
======= ====
Common shares outstanding assuming dilution 6,970 7,115
Adjusted net (loss) income per common share
assuming dilution $(0.38) $0.03
SOURCE Tandy Brands Accessories, Inc.
