Tandy Brands Accessories, Inc.
TBAC today provided an update on the results achieved from its
restructuring plan announced March 18^th and announced the execution of new
credit facilities.
"We learned some tough lessons in fiscal year 2013. Today we are pleased to
announce that we have not only executed our previously announced restructuring
plans, but we have also finalized a new capital structure, both of which we
expect will improve our competitive and financial position as we begin fiscal
2014," said Rod McGeachy, President and Chief Executive Officer. "Furthermore,
I am pleased that we were able to accomplish this with no equity dilution to
our current shareholders," continued McGeachy.
Update on Restructuring Plan
The restructuring plan, announced on March 18, 2013, was designed to increase
profitability for the Company, improve working capital efficiency, improve
customer service and reduce overhead. The key elements of the plan included:
* Eliminating low-volume products
* Emphasizing licensed products and high volume private label products
* Reducing the amount of risk associated with the Gifts business
* Reducing corporate employee headcount by approximately 32%
* Closing or downsizing four of eight leased facilities
* Outsourcing and relocating Gifts distribution from Dallas to a third-party
provider in California
* Exiting development efforts and accelerating recognition of future
expenses associated with non-core brands
The Company has successfully reduced the risk profile associated with its
Gifts business, which was the primary source of the fiscal 2013 financial
issues, by significantly reducing product return privileges, limiting margin
agreements with retailers, locking freight rates, exiting underperforming
products, and relocating and outsourcing its Gifts distribution function.
"We think the steps we have taken have effectively reduced the risk associated
with our Gifts business and believe the profitability of this segment will be
greatly improved in fiscal 2014," said McGeachy.
Furthermore, the company confirmed today that it had successfully executed all
of the headcount reductions and facility consolidations as previously
announced.
The Company also announced the elimination of the Chief Restructuring Officer
("CRO") role. On March 8, 2013, the Company appointed John Little from
Deloitte Financial Advisory Services LLP as a consultant filling the CRO role
and performing the following duties under the CRO engagement:
o Evaluating capital structure alternatives and identifying additional
sources of financing
o Developing and executing plans to improve liquidity against existing
assets
o Executing profitability improvement initiatives
o Communicating with select key stakeholders
"John and the CRO role added value to our organization during a difficult
time," said McGeachy. "During the past four months we've successfully
maintained service to our retailers, executed our restructuring initiatives,
and closed our new credit facilities. We thank John for his contributions,"
said McGeachy.
Senior Credit Facility with Salus Capital Partners, LLC
On July 24th, the Company entered into a new credit agreement with Salus
Capital Partners, LLC, to provide senior financing up to $29 million. The
facility is comprised of a revolving credit facility in the amount of $27.5
million, and a term loan facility in the amount of $1.5 million, and expires
in July 2015 (the "Credit Facility"). Under the Credit Facility, borrowings
bear interest at either the base rate or LIBOR, plus an additional percentage
for each of the revolver and the term loan.
The Credit Facility is secured by a first priority lien on substantially all
of the assets of the Company and its subsidiaries, excluding certain goods and
related accounts receivable financed pursuant to the King Trade Facility (see
"Credit Facility with King Trade Capital" below), for which Salus will have a
second priority lien. The Credit Facility contains covenants which address
minimum consolidated EBITDA requirements, account concentration limitations,
budgeted expenses and accounts payable to inventory ratios. The Credit
Agreement also provides for customary representations, warranties, affirmative
covenants, negative covenants and events of default.
The Company used the proceeds of the initial advance under the Credit Facility
to repay indebtedness owing to Wells Fargo and to pay fees and expenses
incurred in connection with the Credit Agreement. The Company will use the
proceeds of future advances under the Credit Agreement for working capital
purposes.
Credit Facility with King Trade Capital
On July 24th, the Company entered into a Master Agreement ("Master Agreement")
with EPK Financial Corporation, d/b/a King Trade Capital ("King Trade"), that
provides for a purchase and sale facility (the "King Trade Facility") with
$11.5 million of maximum aggregate amount permitted to be outstanding. The
King Trade Facility is expected to provide the Company with financing to
purchase certain inventory related to the Company's holiday 2013 seasonal
gifts business.
The King Trade Facility is secured by (i) a first priority lien on the goods
and related accounts receivable financed by the Company under the King Trade
Facility, and (ii) a second priority lien on substantially all other assets of
the Company. The amounts payable under the King Trade Facility bear interest
at varying rates which depend primarily on the length of time such amounts are
outstanding, the amount advanced for each transaction and the aggregate of all
amounts advanced.
The Master Agreement contains representations and warranties and covenants
that are customary for such financing arrangements.
Outlook
"Although we experienced choppy waters in fiscal 2013, our organization is
stronger and we are excited about starting fiscal 2014 with new credit
facilities, additional liquidity, no equity dilution and with our
restructuring actions completed," said McGeachy.
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