Tandy Announces Fiscal 2010 First Quarter Results

November 10, 2009 4:00 PM EST

    --  Net sales up 8 percent - first increase in 12 quarters
    --  Operating income improves by $1.1 million
    --  Net earnings of $0.15 per share versus year ago net loss of $(0.18) per
        share

ARLINGTON, Texas--(BUSINESS WIRE)-- Tandy Brands Accessories, Inc. (Nasdaq: TBAC) today reported results for the first quarter of fiscal 2010 ended September 30, 2009.

Tandy reported net income of $1.1 million, or $0.15 per diluted share, on net sales of $37.2 million, for the first quarter of fiscal 2010 versus a net loss of $(1.3) million, or $(0.18) per share, on net sales of $34.6 million for the quarter ended September 30, 2008. The current year results include a pretax bargain purchase gain of $1.4 million associated with the acquisition of certain assets of the Chambers Belt Company in July.

Operating income for the quarter was $69,000 versus an operating loss of $(988,000) for the first quarter of fiscal 2009. The company said the improvement was due to the increase in net sales, improved gross margins, and reduced operating expenses as a percentage of sales.

The increase in net sales was a result of solid contributions from all product categories, paced by growth in the gifts business. Gift sales in the quarter were $5.4 million compared to $3.4 million in the first quarter of fiscal 2009. Accessories segment sales improved by $581,000 to $31.8 million.

Quarter in Review

"The first quarter was a good start to the fiscal year, particularly given the current economic climate," said Rod McGeachy, President and Chief Executive Officer of Tandy. "We are proud to report the first year-over-year sales increase in 12 quarters. Our gifts business continued to show significant sales growth, and more importantly, gross margin improvement. Also, the Chambers acquisition and new eyewear products have been immediately accretive to earnings and have helped to offset a decline in our core product sales due to softness in the retail environment."

Mr. McGeachy added that Tandy's first quarter results were positively impacted by tight control over operating expenses and that focus will continue throughout fiscal 2010. "We expect to complete the move and consolidation of our corporate headquarters into our Dallas distribution center in December, resulting in significant annual savings in occupancy costs."

Mr. McGeachy said that while Tandy's retail partners maintain a very conservative approach to inventory replenishment as the holiday season approaches, the company is well-positioned to continue the net sales growth and profit improvement that was reported in the first quarter. "We will continue to focus investments on our highest return opportunities and maintain appropriate inventory levels. We reiterate our guidance of 8 to 12 percent sales growth and that we expect to post a significant improvement in profitability for fiscal 2010," said Mr. McGeachy.

Financial Position

At the end of the first quarter, Tandy had $1.9 million of cash and borrowings of $16.5 million under its $27.5 million credit facility. In October 2009, Tandy announced that it had signed a new amendment to its line-of-credit financing facility with Comerica Bank extending the term to April 2011 while reducing the interest rate.

"This new financing is more than sufficient to meet our seasonal requirements, while also providing us the flexibility needed to achieve our longer-term growth objectives," said Mr. McGeachy. "Our strong financial position continues to be a competitive advantage for us as our customers look to partner with suppliers who can support them in these challenging times."

Conference Call

Tandy has scheduled a conference call for 8:30 a.m. ET on November 11, 2009. Parties interested in participating in the conference call may dial-in at 877-407-8035, while international callers may dial-in at 201-689-8035. A replay of the call will be available through November 30, 2009 and can be accessed by dialing 877-660-6853, or 201-612-7415 for international callers, and entering account number 286 and conference ID number 325579. The conference call will be broadcast live at www.InvestorCalendar.com.

About Tandy

Tandy is a leading designer and marketer of branded men's, women's and children's accessories, including belts, small leather goods, eyewear, neckwear and sporting goods, and gifts. Merchandise is sold under various national brand names as well as private labels to all major levels of retail distribution, including the e-commerce web sites for Rolfs(R) at www.rolfs.net and Sport Beads at www.sport-beads.com.

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

                                                       2009        2008

Net sales                                            $ 37,193    $ 34,617

Cost of goods sold                                     22,964      22,607

 Gross margin                                          14,229      12,010

Selling, general and administrative expenses           13,194      12,429

Depreciation and amortization                          677         569

Acquisition transaction costs                          289         -

 Total operating expenses                              14,160      12,998

Operating income (loss)                                69          (988   )

Interest expense                                       (268   )    (148   )

Other income                                           36          89

Acquisition bargain purchase gain                      1,379       -

 Income (loss) before income taxes                     1,216       (1,047 )

Income taxes                                           113         233

 Net income (loss)                                   $ 1,103     $ (1,280 )

Income (loss) per common share                       $ 0.16      $ (0.18  )

Income (loss) per common share assuming dilution     $ 0.15      $ (0.18  )

Cash dividends declared per common share             $ -         $ 0.04

Common shares outstanding                              6,930       6,988

Common shares outstanding assuming dilution            7,115       6,988

Tandy Brands Accessories, Inc. And Subsidiaries

Unaudited Consolidated Balance Sheets

(in thousands)

                                                       September 31  June 30

                                                         2009          2009

Assets

Current assets:

 Cash and cash equivalents                             $ 1,861       $ 3,670

 Accounts receivable                                     26,932        19,566

 Inventories                                             36,097        23,022

 Other current assets                                    7,184         8,282

  Total current assets                                   72,074        54,540

Property and equipment                                   5,431         3,776

Other assets:

 Intangibles                                             6,647         2,742

 Other assets                                            893           908

  Total other assets                                     7,540         3,650

                                                       $ 85,045      $ 61,966

Liabilities And Stockholders' Equity

Current liabilities:

 Accounts payable                                      $ 12,001      $ 9,369

 Accrued expenses                                        6,447         8,056

 Acquisition earn out                                    3,767         -

 Note payable                                            16,524        -

  Total current liabilities                              38,739        17,425

Other liabilities                                        2,999         2,825

Stockholders' equity:

 Preferred stock, $1.00 par value, 1,000 shares          -             -
 authorized, none issued

 Common stock, $1.00 par value, 10,000 shares
 authorized,

  7,058 shares and 7,037 shares issued and outstanding   7,058         7,037

 Additional paid-in capital                              34,961        34,867

 Retained earnings (deficit)                             1,047         (56    )

 Other comprehensive income                              1,364         984

 Shares held by Benefit Restoration Plan Trust           (1,124 )      (1,116 )

  Total stockholders' equity                             43,307        41,716

                                                       $ 85,045      $ 61,966

    Source: Tandy Brands Accessories, Inc.

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