Mail Stop 0308
March 8, 2005
Mark J. Flaherty
Chief Financial Officer
Tandy Brands Accessories, Inc.
690 East Lamar Boulevard, Suite 200,
Arlington, TX 76011
RE: Tandy Brands Accessories, Inc.
Form 10-K for the fiscal year ended June 30, 2004
Form 10-Q for the six months ended December 31, 2004
File No. 000-18927
Dear Mr. Flaherty:
We have reviewed the above referenced filings and have the
following comments. We have limited our review to your financial
statements and related disclosures and will make no further review
of
your documents. Where indicated, we think you should revise your
document in response to these comments in future filings. If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with supplemental information so we may better
understand your disclosure. After reviewing this information, we
may
or may not raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the Fiscal Year Ended June 30, 2004
Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies, page 18
Revenues
1. In future filings, please revise your disclosure to state where
you include costs incurred for shipping and handling in the income
statement. Please disclose the amounts of shipping and handling
costs classified as selling and marketing expense and general and
administrative expense for each period presented. See paragraphs
5-7
of EITF 00-10.
2. Please disclose the types of expenses that you include in the
cost
of goods sold line item and the costs included in selling, general
and administrative expenses. If the costs of your distribution
network are not included in costs of goods sold, please also
disclose
the amount of the distribution costs included in selling, general
and
administrative expenses.
Note 5: Credit Arrangements, page 22
3. We note the amortization of debt origination costs in the
Consolidated Statements of Cash Flows. Please disclose the origin
of
the debt origination costs, the credit arrangement they pertain
to,
and the amortization period.
Note 7: Commitments, page 24
4. In future filings, please disclose the terms of renewal options
and escalation clauses. See paragraph 16d.ii. of FAS 13.
Note 11: Dividends, page 30
5. In future filings, please clearly articulate the most
significant
restrictions on the payment of dividends, indicating the sources,
pertinent provisions, and the amount of retained earnings or net
income restricted or free of restrictions. See Regulation S-X,
Rule
4-08(e).
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
General
6. In future filings, in MD&A, please include a discussion
regarding
the impact of recently issued accounting standards on your
financial
statements. See SAB Topic 11:M. If, by the nature of the
pronouncement, it is clear that it will have no impact on you, no
further discussion is needed. Unless it is clear from your Form
10-K
that a standard will not apply to you, then affirmatively indicate
the anticipated effect of adoption. To the extent the
pronouncement
will have a material effect on your financial statements; such
disclosure should be considered in the financial statements as set
forth in the SAB.
Results of Operations, page 39
7. In future filings, please include a tabular presentation of net
sales revenues by product category for the periods presented and
expand your narrative discussion to indicate the extent to which
material changes are attributable to pricing, mix or volume of
goods
sold. Clarify why direct sales shipments lower your gross margin
and
why there were higher than anticipated customer allowances.
Please
refer to SEC Release No. 33-8350 and Item 303(a)(3)(iii) of
Regulation S-K.
Quantitative and Qualitative Disclosures About Market Risk, page
42
8. In future filings, please provide information about your market
risk exposure to changes in foreign currency exchange rates in
accordance with Item 305 of Regulation S-K.
Critical Accounting Policies, page 43
9. In future filings, revise your disclosures to present a more
robust discussion as to why these are critical accounting
policies.
Such disclosure should supplement, not duplicate, the description
of
accounting policies that are already disclosed in the notes to the
financial statements. The disclosure should provide greater
insight
into the quality and variability of information regarding
financial
condition and operating performance. The discussion in MD&A
should
present your analysis of the uncertainties involved in applying a
principle at a given time or the variability that is reasonably
likely to result from its application over time.
* Discuss why management believes the accounting policy is
critical;
* Discuss how accurate your estimates and assumptions have been in
the past, how much they have changed in the past and whether they
are
likely to change in the future;
* Include quantitative disclosure of your sensitivity to change
based
on other outcomes that are reasonably likely to occur and that
would
have a material effect on the company.
Refer to Item V of Release Nos. 33-8350/34-48960.
Form 10-Q for the Quarter Ended December 31, 2004
Condensed Consolidated Financial Statements and Notes to Condensed
Consolidated Financial Statements
General
10. In future filings, please include footnote disclosure
concerning
goodwill and other intangible assets in the interim financial
statements. Ensure your disclosure includes specifically what is
included in the value of the intangible assets, such as customer
lists and trade names, the amortization period for each
individually
material item, and how you determined that the amortization period
was reasonable. See Rule 10-01(5) of Regulation S-X.
Note 9: Acquisitions
11. For the Superior Merchandise Company acquisition on July 1,
2005,
we note that the amount you attributed to goodwill is significant
in
relation to the total consideration. In future filings, please
expand your disclosures related to goodwill pursuant to paragraph
51b
of SFAS 141.
Note 10: Contingencies
12. We note your contingency in the 2nd quarter of 2005. Please
tell
us and disclose in future filings the nature of the pending legal
product liability contingency and the total damages alleged at
each
balance sheet date. See SAB Topic 5:Y and FAS 5, paragraphs 9-10.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
13. We note that you recorded a $1.8 million return reserve due to
the nature of ETON`s gift accessory business. As this is a newly
acquired business, tell us your methodology for determining the
reserve for returns and allowances.
* * * *
Please send us your response to these comments within 10
business days or tell us when you will provide us with a response.
Please furnish a cover letter keying your responses to our
comments
and provide any requested supplemental information. Please file
your
response letter on EDGAR. Please understand that we may have
additional comments after reviewing your responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
If you have any questions regarding these comments, please
direct them to Dave Irving, Staff Accountant, at (202) 942-1920
or,
in his absence, to Donna Di Silvio, at (202) 942-1852, or the
undersigned at (202) 942-2823. Any other questions regarding
disclosure issues may be directed to H. Christopher Owings,
Assistant
Director, at (202) 942-1900.
Sincerely,
Michael Moran
Branch Chief
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Mr. Mark J. Flaherty
Tandy Brands Accessories, Inc.
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