SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: February 6, 1996 (Date of earliest event reported): (January 23, 1996) TANDYCRAFTS, INC. A DELAWARE CORPORATION 1-7258 75-1475224 ------ ---------- (Commission File Number) (IRS Employer Identification No.) 1400 Everman Parkway Fort Worth, Texas 76140 (817) 551-9600 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS ------------------------------------ (a) General. On January 23, 1996, Tandycrafts, Inc. (the "Company") announced the implementation of a strategic restructuring program which includes the divestiture of Prestige Leather Creations ("Prestige"), the sale or closure of certain other individually insignificant businesses and the closure of 11 retail stores (collectively, the "Other Businesses"). Such announcement was filed as an exhibit to a Current Report on Form 8-K dated January 24, 1996, and is incorporated herein by reference. The sale of Prestige is deemed to involve a significant amount of assets as defined in the instructions to Form 8-K. The Company has entered into a letter of intent to sell substantially all of the assets of Prestige to certain members of the current management of Prestige; however, this transaction is subject to completion. The Company has also entered into letters of intent with various buyers to sell substantially all of the assets of certain of the Other Businesses; however, all such agreements are subject to completion. The pro forma financial information required pursuant to Article 11 of Regulation S-X with respect to the planned dispositions noted above is furnished under Item 7 of this Report. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS ------------------------------------------------------------------- (a) Pro Forma Financial Information. -------------------------------- Pro Forma Financial Information Pro Forma Condensed Consolidated Balance Sheet - September 30, 1995 Pro Forma Condensed Consolidated Statement of Income - Year Ended June 30, 1995 Pro Forma Condensed Consolidated Statement of Income - Three Months Ended September 30, 1995 Notes to Pro Forma Condensed Consolidated Financial Statements SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. Date: February 6, 1996 By:/s/ Jerry L. Roy ------------------------- Jerry L. Roy, President and Chief Executive Officer Date: February 6, 1996 By:/s/ Michael J. Walsh ------------------------- Michael J. Walsh Chief Financial Officer TANDYCRAFTS, INC. PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma financial information is based on the historical financial statements of Tandycrafts, Inc. (the "Company") adjusted to give effect to the disposition of the assets of Prestige Leather Creations ("Prestige"), the disposition of the assets of certain other individually insignificant businesses and the closure of 11 retail stores (collectively, the "Other Businesses") pursuant to a strategic restructuring plan as if such dispositions had taken place on June 30, 1994 for the pro forma condensed consolidated statements of income and on September 30, 1995, for the pro forma condensed consolidated balance sheet using the assumptions and adjustments set forth in the accompanying notes to the pro forma condensed consolidated financial statements. The pro forma financial information is not necessarily indicative of the results of operations or the financial position which would have been attained had the dispositions been consummated at either of the foregoing dates or earlier, or which may be attained in the future, nor does it give effect to any matters other than those described in the notes thereto. The pro forma financial information should be read in conjunction with the historical financial statements of the Company. TANDYCRAFTS, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 1995 (UNAUDITED) (DOLLARS IN THOUSANDS) Historical ----------- Tandycrafts, Other Pro Forma ASSETS Inc. Prestige(a) Businesses(b) Proceeds(c) Exit costs(d) Consolidated ----------- ----------- ------------- ----------- ------------- ------------ Current assets Cash and cash equivalents $ 2,068 $ - $ - $ - $ - $ 2,068 Accounts receivable, net 32,319 (1,370) (5,230) 2,429 - 28,148 Inventories 66,062 (2,532) (9,487) - - 54,043 Other current assets 3,695 (129) (930) - - 2,636 ----------- ----------- ----------- ----------- ----------- ----------- Total current assets 104,144 (4,031) (15,647) 2,429 - 86,895 ----------- ----------- ----------- ----------- ----------- ----------- Property and equipment, net 28,285 (516) (1,926) - - 25,843 Other assets 619 (33) (41) 725 - 1,270 Goodwill, net 47,277 (5,640) (1,898) - - 39,739 ----------- ----------- ----------- ----------- ----------- ----------- $ 180,325 $ (10,220) $ (19,512) $ 3,154 $ - $ 153,747 =========== =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 3,400 $ - $ - $ - $ - $ 3,400 Accounts payable 14,199 (203) (1,469) - - 12,527 Accrued liabilities and other 9,996 (3,545) (6,838) 2,972 1,756 4,341 ----------- ----------- ----------- ----------- ----------- ----------- Total current liabilities 27,595 (3,748) (8,307) 2,972 1,756 20,268 ----------- ----------- ----------- ----------- ----------- ----------- Long-term debt 59,000 - - (5,338) - 53,662 Deferred taxes 2,029 - - - - 2,029 Stockholders' equity Common stock, $1 par value; 50,000,000 shares authorized, 18,527,988 issued 18,528 - - - - 18,528 Additional paid-in capital 18,009 - - - - 18,009 Retained earnings 80,093 (6,472) (11,205) 5,520 (1,756) 66,180 Treasury stock (24,929) - - - - (24,929) ----------- ----------- ------------ ----------- ----------- ----------- Total stockholders' equity 91,701 (6,472) (11,205) 5,520 (1,756) 77,788 ----------- ----------- ------------ ----------- ----------- ----------- $ 180,325 $ (10,220) $ (19,512) $ 3,154 $ - $ 153,747 =========== =========== ============ =========== =========== =========== TANDYCRAFTS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE YEAR ENDED JUNE 30, 1995 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Historical ----------- Tandycrafts, Other Interest Pro Forma Inc. Prestige (e) Businesses (f) Expense (g) Consolidated (h) ------------ ----------- ------------- ---------- --------------- Net sales $ 256,523 $ (8,852) $ (40,646) $ - $ 207,025 Operating costs and expenses: Cost of goods sold 155,644 (5,871) (24,770) - 125,003 Selling, general and administrative 83,544 (4,465) (15,414) - 63,665 Depreciation and amortization 5,475 (197) (738) - 4,540 ---------- ---------- ------------ ---------- --------------- Total operating costs and expenses 244,663 (10,533) (40,922) - 193,208 ---------- ---------- ------------ ---------- --------------- Operating income 11,860 1,681 276 - 13,817 Interest expense, net 3,833 (263) 3,570 ---------- ---------- ------------ ---------- --------------- Income before income taxes 8,027 1,681 276 263 10,247 Provision for income taxes 2,810 588 97 92 3,587 ---------- ---------- ------------ ---------- --------------- Net income $ 5,217 $ 1,093 $ 179 $ 171 $ 6,660 ========== ========== ============ ========== =============== Net income per share $0.46 $0.58 ===== ===== Average common and common share equivalents outstanding 11,434 11,434 ====== ====== TANDYCRAFTS, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Historical ----------- Tandycrafts, Other Interest Pro Forma Inc. Prestige (e) Businesses (f) Expense (g) Consolidated (h) ----------- ----------- ------------- ---------- --------------- Net sales $ 62,349 $ (1,873) $ (8,691) $ - $ 51,785 Operating costs and expenses: Cost of goods sold 38,813 (1,215) (5,414) - 32,184 Selling, general and administrative 20,913 (809) (3,565) - 16,539 Depreciation and amortization 1,525 (53) (186) - 1,286 ----------- ----------- ------------- ---------- -------------- Total operating costs and expenses 61,251 (2,077) (9,165) - 50,009 ----------- ----------- ------------- ---------- -------------- Operating income 1,098 204 474 - 1,776 Interest expense, net 1,085 - - (66) 1,019 ----------- ----------- ------------- ---------- -------------- Income before income taxes 13 204 474 66 757 Provision for income taxes 4 71 166 23 264 ----------- ----------- ------------- ---------- -------------- Net income $ 9 $ 133 $ 308 $ 43 $ 493 =========== =========== ============= ========== ============== Net income per share $0.00 $0.04 ===== ===== Average common and common share equivalents outstanding 11,769 11,769 ====== ====== TANDYCRAFTS, INC. NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (a) The adjustments in this column represent the elimination of the historical assets and liabilities of Prestige as of September 30, 1995, with the net after-tax loss resulting from the elimination of such balances reflected as a charge to retained earnings. (b) The adjustments in this column represent the elimination of the historical assets and liabilities of the Other Businesses as of September 30, 1995, with the net after-tax loss resulting from the elimination of such balances reflected as a charge to retained earnings. (c) The adjustments in this column represent the estimated proceeds from the sale of Prestige and the Other Businesses based on signed letters of intent with various buyers. Estimated cash proceeds at closing are reflected as a reduction of long-term debt. The net after-tax effect of the estimated cash proceeds and receivables is reflected as a credit to retained earnings. No proceeds have been assumed with respect to the disposition of assets of businesses for which letters of intent have not yet been obtained. The aggregate net assets for such businesses at September 30, 1995 was approximately $4.0 million. (d) The adjustments in this column represent estimated transaction costs and other exit costs (e.g., lease obligations and other contractual commitments) directly related to the disposition of Prestige and the Other Businesses. The net after-tax effect of such estimated costs is reflected as a charge to retained earnings. (e) The adjustments in this column represent the elimination of the historical income, expenses and related income tax effect of Prestige for the respective period. (f) The adjustments in this column represent the elimination of the historical income, expenses and related income tax effect of the Other Businesses for the respective period. (g) The adjustment to interest expense reflects the use of the estimated net proceeds resulting from the disposition of the assets of Prestige and the Other Businesses as reflected in Notes (c) and (d), above, to reduce long-term debt based on an annual interest rate of 7%. For purposes of this adjustment, no consideration has been given to the realization of expected benefits from tax carrybacks, totaling approximately $8.9 million, related to the sale or disposition of Prestige and the Other Businesses as reflected in Notes (a) and (b), above. (h) The pro forma income statements do not reflect certain estimated nonrecurring charges (i.e., transaction and other exit costs) related to the disposition of Prestige and the Other Businesses. Such costs are reflected in the pro forma balance sheet as indicated in Note (d), above.