- Announces third quarter fiscal 2013 results
- Updates on potential new credit facility
DALLAS, May 14, 2013 (GLOBE NEWSWIRE) -- Tandy Brands Accessories, Inc. TBAC today reported financial results for its fiscal third quarter and nine-month periods ended March 31, 2013 and provided an update on current events.
Third Quarter Results
Net sales for the third quarter were $19.6 million, which was down $4.3 million compared to the prior year third quarter. Net sales in the accessories segment were $18.3 million for the third quarter, a decline of $3.9 million from fiscal 2012. The decline reported in the accessories segment net sales was a result of lower levels of replenishment orders from the Company's largest customer in the current year. Gifts segment net sales decreased by $0.4 million to $1.3 million due to longer times to process and re-sell holiday season returns.
"Our third quarter net sales were impacted by abnormally low levels of replenishment sales to the largest customer in our accessories segment," said Rod McGeachy, President and Chief Executive Officer of Tandy Brands. "This decline was driven by their decision to delay new spring roll-outs early in the quarter and does not represent any material change in our market share."
Third quarter fiscal 2013 gross margin as a percentage of net sales was 26.7 percent, compared to 31.7 percent in the third quarter of fiscal 2012. Accessories segment gross margin was 30.6 percent, compared to 34.0 percent in the comparable prior year period. This decline was primarily due to higher sales to close-out customers in the current year in connection with the previously announced restructuring plan, and lower customer deductions in the prior year. Gifts segment gross margin was (28.3) percent, compared to 2.4 percent in the comparable prior year period, primarily due to an increased mix of sales of returned holiday products to close-out customers.
"Margins were what we expected this quarter," said McGeachy. "Our margin percentages contracted on higher freight rates and lower recoveries on close-out sales."
Total selling, general and administrative (SG&A) expense for the fiscal 2013 third quarter was $2.2 million lower (or 23 percent) than in the comparable prior year period due to lower compensation costs and $0.9 million lower bad debt provisions.
For the third quarter, the Company reported a net loss of $8.5 million, or ($1.19) per diluted share, compared to a net loss of $3.1 million, or ($0.43) per diluted share, in the comparable prior year period. Adjusted net loss, which excludes investments in new licenses and certain one-time items such as inventory write-downs, intangible impairments and severances, was $2.7 million, down from an adjusted net loss of $1.7 million in the prior year.
Nine-Month Results
Net sales for the nine-month period ended March 31, 2013 were $93.4 million, compared to net sales of $96.0 million reported in the prior-year period. The gifts segment net sales increased by $4.0 million, or 14%, over the prior year due to increased holiday 2012 shipments resulting from new programs. Net sales for the accessories segment declined by 10% to $59.7 million due to a $0.6 million investment in retail space and decreased sales of $3.8 million from exited product categories in the current year. This decline was partially offset by higher levels of replenishment orders from the Company's largest customer.
Gross margin as a percentage of net sales for the nine-month period ended March 31, 2013 was 21.5 percent, which includes a $6.7 million non-cash inventory write-down to accelerate liquidation of returned gift inventories and products exited in connection with the Company's previously announced restructuring plan. Excluding the impact of the inventory write-down in the current year period, gross margin as a percentage of net sales was 28.7 percent, compared to 32.7 percent in prior year period.
Accessories segment gross margin, excluding the impact of the inventory write-down, was 32.0 percent, compared to 33.9 percent in the comparable prior year period. This decline was due to lower sales of previously written-down inventory and higher sales concessions to introduce new products. Gifts segment gross margin, excluding the impact of the inventory write-down, was 22.8 percent, compared to 30.0 percent in the comparable prior year period. This decline was due to higher sales concessions, higher holiday season returns and higher in-bound freight.
Total SG&A expense for the nine-month period declined $2.1 million, or 7%, to $27.7 million on lower compensation costs, bad debt provisions and variable distribution costs.
For the nine-month period ended March 31, 2013, the Company reported a net loss of $15.4 million, or ($2.16) per diluted share, compared to a net loss of $1.4 million, or ($0.20) per diluted share, in the prior year period. Adjusted net loss decreased $2.0 million to $1.6 million compared to adjusted net income of $0.4 million in the prior year period.
Financial Position
At March 31, 2013, the Company reported inventories of $28.2 million, current assets of $34.9 million, current liabilities of $26.0 million, and $4.2 million of net borrowing availability (before reducing for a $2.7 million excess availability requirement).
"Our liquidity is consistent with our forecasts," said McGeachy.
Updates on Potential New Credit Facility
The Company announced it signed non-binding term sheets with lenders who could replace the Company's current lender on or before May 31, 2013. If executed, terms under the proposed credit facility would improve liquidity against the Company's current assets.
The non-binding term sheets contain customary pre-close requirements with respect to diligence investigations and customary post-close covenants. Borrowings under the proposed credit facility are expected to bear interest in the LIBOR plus 8.5% to LIBOR plus 11.3% range (or 9.3% to 12.0%) over a 24 month period.
"We continue to pace for a late May close and announcement of a new credit facility which we believe will provide us the liquidity we need to execute our recently announced restructuring initiatives," said McGeachy.
Outlook
"We look forward to starting fiscal 2014 with a new credit facility, a significantly lower risk gifts order book, a solid restructuring plan, and the opportunity for continued growth in our Eddie Bauer, Haggar, Wolverine, Miss Me, and Sperry Top-Sider products," said McGeachy.
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 and bags. 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. The Company has based these forward-looking statements on its current expectations about future events, estimates and projections about the industry in which it operates. Forward-looking statements are not guarantees of future performance. Actual results may differ materially from those suggested by these forward-looking statements as a result of a number of known and unknown risks and uncertainties that are difficult to predict, including, without limitation, our ability to successfully complete our proposed new credit facility, our ability to secure additional or alternative capital, our ability to successfully implement certain restructuring initiatives, general economic and business conditions, competition in the accessories and gifts markets, acceptance of the Company's product offerings and designs, continued good relationships with our suppliers, issues relating to distribution, the termination or non-renewal of any material licenses, the Company's ability to maintain proper inventory levels, a significant decrease in business from or loss of any major customers or programs, and a possibility of our gifts business being substantially different. Those and other risks are more fully described in the Company's filings with the Securities and Exchange Commission. The forward-looking statements included in this release are made only as of the date hereof. Except as required under federal securities laws and the rules and regulations of the United States Securities and Exchange Commission, the Company does not undertake, and specifically declines, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this release, whether as a result of new information, future events, changes in assumptions, or otherwise.
| Tandy Brands Accessories, Inc. And Subsidiaries | ||||
| Unaudited Consolidated Statements Of Operations | ||||
| (in thousands except per share amounts) | ||||
| Three Months Ended | Nine Months Ended | |||
| March 31 | March 31 | |||
| 2013 | 2012 | 2013 | 2012 | |
| Net sales | $ 19,582 | $ 23,862 | $ 93,367 | $ 96,039 |
| Cost of goods sold | 14,349 | 16,288 | 66,571 | 64,673 |
| Inventory write-down | -- | -- | 6,694 | -- |
| 14,349 | 16,288 | 73,265 | 64,673 | |
| Gross margin | 5,233 | 7,574 | 20,102 | 31,366 |
| Selling, general and administrative expenses | 7,586 | 9,817 | 27,701 | 29,846 |
| Depreciation and amortization | 466 | 549 | 1,434 | 1,699 |
| Intangibles and held for sale impairments | 3,006 | -- | 3,006 | -- |
| Restructuring charges | 2,575 | -- | 2,575 | -- |
| Total operating expenses | 13,633 | 10,366 | 34,716 | 31,545 |
| Operating loss | (8,400) | (2,792) | (14,614) | (179) |
| Interest expense | (236) | (207) | (1,007) | (956) |
| Other income (expense) | 60 | (2) | 65 | (13) |
| Loss before income taxes | (8,576) | (3,001) | (15,556) | (1,148) |
| Income tax expense (benefit) | (101) | 64 | (170) | 266 |
| Net loss | $ (8,475) | $ (3,065) | $ (15,386) | $ (1,414) |
| Other comprehensive (loss) income: | ||||
| Currency translation adjustments | (173) | 154 | 5 | (225) |
| Total comprehensive loss | (8,648) | (2,911) | (15,381) | (1,639) |
| Loss per share: | ||||
| Basic | (1.19) | (0.43) | (2.16) | (0.20) |
| Diluted | (1.19) | (0.43) | (2.16) | (0.20) |
| Weighted average common shares outstanding: | ||||
| Basic | 7,130 | 7,074 | 7,131 | 7,074 |
| Diluted | 7,130 | 7,074 | 7,131 | 7,074 |
| Tandy Brands Accessories, Inc. And Subsidiaries | |||
| Unaudited Consolidated Balance Sheets | |||
| (in thousands) | |||
| March 31 | June 30 | March 31 | |
| 2013 | 2012 | 2012 | |
| Assets | |||
| Current assets: | |||
| Cash | $ 252 | $ 217 | $ 287 |
| Accounts receivable, net | 4,001 | 7,042 | 7,881 |
| Inventories, net | 28,192 | 28,743 | 26,894 |
| Inventory deposits | 225 | 7,107 | 669 |
| Other current assets | 2,189 | 2,824 | 2,839 |
| Total current assets | 34,859 | 45,933 | 38,570 |
| Property and equipment, net | 4,918 | 5,474 | 5,719 |
| Other assets: | |||
| Intangibles | 1,236 | 4,115 | 4,311 |
| Other assets | 675 | 934 | 929 |
| Total other assets | 1,911 | 5,049 | 5,240 |
| $41,688 | $56,456 | $49,529 | |
| Liabilities And Stockholders' Equity | |||
| Current liabilities: | |||
| Accounts payable | $11,536 | $10,548 | $ 5,326 |
| Accrued compensation | 801 | 1,309 | 1,361 |
| Accrued expenses | 1,461 | 1,584 | 1,534 |
| Accrued restructuring charges | 2,237 | -- | -- |
| Credit facility | 9,995 | 11,810 | 7,563 |
| Total current liabilities | 26,030 | 25,251 | 15,784 |
| Other liabilities | 4,088 | 4,290 | 4,433 |
| Stockholders' equity: | |||
| Preferred stock, $1.00 par value, 1,000 shares authorized, none issued | -- | -- | -- |
| Common stock, $1.00 par value, 10,000 shares authorized, 7,130 shares, 7,102 shares and 7,075 shares issued and outstanding, respectively | 7,130 | 7,102 | 7,075 |
| Additional paid-in capital | 34,137 | 34,129 | 34,141 |
| Accumulated deficit | (31,356) | (15,970) | (13,732) |
| Other comprehensive income | 1,659 | 1,654 | 1,828 |
| Total stockholders' equity | 11,570 | 26,915 | 29,312 |
| $41,688 | $56,456 | $49,529 | |
| Tandy Brands Accessories, Inc. And Subsidiaries | ||
| Unaudited Consolidated Statements Of Cash Flows | ||
| (in thousands) | ||
| Nine Months Ended | ||
| March 31 | ||
| 2013 | 2012 | |
| Cash flows provided by operating activities: | ||
| Net loss | $(15,386) | $ (1,414) |
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
| Inventory write-down | 6,694 | -- |
| Intangibles and held for sale impairments | 3,006 | -- |
| Restructuring charges | 2,575 | -- |
| Deferred income taxes | (228) | 54 |
| Doubtful accounts receivable provision | 152 | 907 |
| Depreciation and amortization | 1,616 | 1,889 |
| Stock compensation expense | 17 | 72 |
| Amortization of debt costs | 92 | 168 |
| Other | (57) | (5) |
| Changes in assets and liabilities: | ||
| Accounts receivable | 2,896 | 5,470 |
| Inventories | (6,118) | 1,946 |
| Other assets | 36 | 487 |
| Inventory deposits | 6,882 | 3,531 |
| Accounts payable | 1,328 | (3,221) |
| Accrued expenses | (704) | (1,132) |
| Net cash provided by operating activities | 2,801 | 8,752 |
| Cash flows used for investing activities: | ||
| Purchases of property and equipment | (497) | (495) |
| Sales of property and equipment | 228 | 191 |
| Net cash used for investing activities | (269) | (304) |
| Cash flows used for financing activities: | ||
| Change in cash overdrafts | (645) | 414 |
| Change in restricted cash | -- | 1,447 |
| Net repayments under credit facility | (1,815) | (10,369) |
| Net cash used for financing activities | (2,460) | (8,508) |
| Effect of exchange-rate changes on cash | (37) | (67) |
| Net increase (decrease) in cash | 35 | (127) |
| Cash beginning of year | 217 | 414 |
| Cash end of period | $ 252 | $ 287 |
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 (loss) income before interest, taxes, depreciation and amortization, investments in new licenses and other one-time 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 should not be considered 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 loss to the adjusted EBITDA disclosures.
| Three Months Ended | Nine Months Ended | |||
| March 31 | March 31 | |||
| 2013 | 2012 | 2013 | 2012 | |
| Net loss | $(8,475) | $(3,065) | $(15,386) | $(1,414) |
| Income taxes | (101) | 64 | (170) | 266 |
| Interest expense | 236 | 207 | 1,007 | 956 |
| Depreciation and amortization | 466 | 549 | 1,434 | 1,699 |
| Other income (expense) | (60) | 2 | (65) | 13 |
| Inventory write-down | -- | -- | 6,694 | -- |
| Restructuring charges | 1,926 | -- | 1,926 | -- |
| Intangibles and held for sale impairments | 3,006 | -- | 3,006 | -- |
| Investment in new licenses | 242 | 213 | 1,250 | 597 |
| Facilities consolidation costs | -- | 222 | -- | 222 |
| Bad debt expense | (24) | 890 | 152 | 907 |
| Severance costs | 674 | -- | 785 | -- |
| Adjusted EBITDA | $(2,110) | $(918) | $633 | $3,246 |
We have provided our adjusted net (loss) income 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 loss to the adjusted net (loss) income disclosure.
| Three Months Ended | Nine Months Ended | |||
| March 31 | March 31 | |||
| 2013 | 2012 | 2013 | 2012 | |
| Net loss | $(8,475) | $(3,065) | $(15,386) | $(1,414) |
| Inventory write-down | -- | -- | 6,694 | -- |
| Restructuring charges | 1,926 | -- | 1,926 | -- |
| Intangibles and held for sale impairments | 3,006 | -- | 3,006 | -- |
| Investment in new licenses | 242 | 213 | 1,250 | 597 |
| Facilities consolidation costs | -- | 222 | -- | 222 |
| Bad debt expense | (24) | 890 | 152 | 907 |
| Severance costs | 674 | -- | 785 | -- |
| Write-off of unamortized debt costs | -- | -- | -- | 98 |
| Adjusted net (loss) income | $(2,651) | $(1,740) | $(1,573) | $410 |
| Common shares outstanding assuming dilution | 7,130 | 7,074 | 7,131 | 7,074 |
| Adjusted net (loss) income per common share assuming dilution | ($0.37) | ($0.25) | ($0.22) | $0.06 |
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