SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15 (d)
of the Securities Exchange Act of 1934
_________________________
For the Period Ended December 31, 1996 Commission File Number 0-18927
TANDY BRANDS ACCESSORIES, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2349915
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
690 East Lamar Boulevard, Suite 200, Arlington, TX 76011
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 548-0090
_______________________________________________________________________________
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Class Number of shares outstanding at December 31, 1996
- - -------------------------- ----------------------------------------------
Common stock, $1 par value 5,446,633
TANDY BRANDS ACCESSORIES, INC.
Form 10-Q
Quarter Ended December 31, 1996
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Item Page No.
1. Financial Statements 3 - 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 8
PART II -- OTHER INFORMATION
Item
4. Submission of Matters to a Vote of Security Holders 9
6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
INDEX TO EXHIBITS AND EXHIBITS 11 - 13
2
Tandy Brands Accessories, Inc. and Subsidiaries
File Number 0-18927
Form 10-Q
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
December 31 December 31
----------------- -----------------
1996 1995 1996 1995
------- ------- ------- -------
Gross sales, less discounts, returns
and allowances $29,879 $24,406 $53,540 $47,109
Royalty, interest and other income 50 30 52 95
------ ------ ------ ------
Total revenues 29,929 24,436 53,592 47,204
------ ------ ------ ------
Costs and expenses:
Cost of goods sold 18,993 14,898 33,721 28,999
Selling, general and administrative 7,473 7,284 13,995 13,799
Depreciation and amortization 428 549 874 1,066
Interest 355 400 641 723
------ ------ ------ ------
Total costs and expenses 27,249 23,131 49,231 44,587
------ ------ ------ ------
Income before income taxes 2,680 1,305 4,361 2,617
Provision for income taxes (980) (464) (1,598) (930)
------ ------ ----- -----
Net Income $1,700 $841 $2,763 $1,687
====== ====== ====== ======
Average common shares and common
share equivalents 5,464 5,347 5,450 5,335
===== ===== ===== =====
Earnings per average common share
and common share equivalent $0.31 $0.16 $0.51 $0.32
===== ===== ===== =====
Cash dividends per common share None None None None
The accompanying notes are an integral part of these condensed financial
statements.
3
Tandy Brands Accessories, Inc. and Subsidiaries
File Number 0-18927
Form 10-Q
Condensed Consolidated Balance Sheets
(Dollars in thousands)
December 31, June 30,
1996 1996
--------------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 551 $ 88
Accounts receivable, net 15,623 13,746
Inventories:
Raw materials and work in process 7,037 6,046
Finished goods 25,760 20,564
Other current assets 1,818 2,505
------ ------
Total current assets 50,789 42,949
------ ------
Property and equipment, at cost 9,745 9,326
Accumulated depreciation (4,759) (4,246)
------ ------
Net property and equipment 4,986 5,080
------ ------
Other assets:
Goodwill, less amortization 8,232 8,526
Other assets, less amortization 1,798 1,856
------ ------
Total other assets 10,030 10,382
------ ------
TOTAL ASSETS $ 65,805 $ 58,411
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 3,000 $ 2,200
Accounts payable 3,555 4,624
Accrued expenses 3,168 2,043
------ ------
Total current liabilities 9,723 8,867
------ ------
Other liabilities:
Notes payable 15,800 12,400
Other noncurrent liabilities 268 297
------ ------
Total other liabilities 16,068 12,697
------ ------
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000
shares authorized, non-issued
Common stock, $1 par value, 10,000,000
shares authorized, 5,446,633 shares and
5,382,267 shares issued and outstanding
as of December 31, 1996, and June 30,
1996, respectively 5,447 5,382
Additional paid-in capital 18,391 18,038
Retained Earnings 16,176 13,427
------ ------
Total stockholders' equity 40,014 36,847
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 65,805 $ 58,411
====== ======
The accompanying notes are an integral part of these condensed financial
statements.
4
Tandy Brands Accessories, Inc. and Subsidiaries
File Number 0-18927
Form 10-Q
Condensed Consolidated Statement of Cash Flows
(Dollars in thousands)
(Unaudited)
Six Months Ended
December 31
--------------------------
1996 1995
---------- ----------
Cash Flows from operating activities:
Net income $ 2,763 $ 1,687
Adjustments to reconcile net income to net
cash provided by (used for) continuing
activities:
Depreciation 523 520
Amortization 429 624
Other (38) 50
Change in assets and liabilities:
Accounts receivable (1,877) (1,517)
Inventories (6,187) 6,118
Other assets 599 182
Accounts payable (1,069) (2,736)
Accrued expenses 1,125 (134)
------- -------
Net cash used for (provided by) operating
activities (3,732) 4,794
------- -------
Cash flows from investing activities:
Purchases of property and equipment (423) (418)
------- -------
Net cash used for investing activities (423) (418)
------- -------
Cash flows from financing activities:
Exercise of employee stock options, net of
purchase of treasury stock -- 20
Sale of stock to stock purchase program 418 482
Proceeds from borrowings 25,950 14,070
Payments under borrowings (21,750) (19,995)
------- -------
Net cash provided by (used for) financing
activities 4,618 (5,423)
------- -------
Net increase (decrease) in cash and cash
equivalents 463 (1,047)
Cash and cash equivalents at beginning of period 88 1,488
------- -------
Cash and cash equivalents at end of period $ 551 $ 441
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 774 $ 757
Income Taxes 816 636
Noncash activities:
None
The accompanying notes are an integral part of these condensed financial
statements.
5
Tandy Brands Accessories, Inc. and Subsidiaries
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Accounting Principles.
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended
December 31, 1996, are not necessarily indicative of the results that may be
expected for the year ended June 30, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Tandy Brands Accessories, Inc. and Subsidiaries Annual Report on Form 10-K for
the year ended June 30, 1996.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
GENERAL
Tandy Brands Accessories, Inc. (the "Company") manufactures and markets men's,
women's and children's accessories. The Company's business is conducted
primarily in the United States. Historically, the Company's sales and operating
results are generally consistent throughout the fiscal year, but there is
normally a seasonal increase during the second quarter.
Although the Company's operations are affected by general economic trends, the
Company does not believe that inflation has had a material effect on the results
of operations.
RESULTS OF OPERATIONS
Three and Six Months Ended December 31, 1996, Compared to the Three and Six
Months Ended December 31, 1995.
For the three month period ended December 31, 1996, net sales increased 22%
to $29,879,000, as compared to net sales of $24,406,000 for the same period
last year. Net income for the second quarter increased 102% to $1,700,000,
or $ .31 per share, compared to net income of $841,000, or $ .16 per share,
for the same three months last year.
For the six month period ended December 31, 1996, net sales increased 14% to
$53,540,000, as compared to net sales of $47,109,000 for the same period last
year. Net income for the six month period increased 64% to $2,763,000, or
$ .51 per share, compared to net income of $1,687,000, or $ .32 per share,
for the same six months last year.
The net sales increases for the three and six months reflect sales increases
of women's products of $4,429,000 and $5,860,000, respectively, as compared
to the same periods of the prior year. Consistent with Company historical
trends, these increased women's sales were made at lower gross margins compared
to men's product sales. However, these women's product sales incur lower
selling, general and administrative expenses than men's product sales which
resulted in improved net income performance as a percentage of sales compared
to the three and six months results for the prior year. Additionally, decreased
selling, general and administrative expenses as a percent of sales for the three
and six month periods ended December 31, 1996, reflect the results of certain
strategic initiatives in fiscal 1996, which included curtailment of many
variable selling, general and administrative expenses.
Men's products had net sales increases over the prior year in both the three
and six month periods of $1,257,000 and $499,000, respectively. Men's belt
and wallet sales increases offset sales decreases in the Company's neckwear
business caused by loss of customers and fashion trends moving toward more
casual men's business dress.
The effective tax rate for the three and six months ended December 31, 1996,
was 36.6% compared to 35.5% for the same prior year periods.
7
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash flows from operations and
the Company's lines of credit. The Company has two unsecured bank credit
lines aggregating $45,000,000 which can be used for seasonal borrowings and
letters of credit. The Company also has an unsecured line of credit of
$1,500,000CND with a Canadian bank for seasonal borrowings, letters of credit
and foreign exchange forward contract requirements of the Company's
Canadian operations. The Company's borrowings under its credit lines
increased $1,248,000 to $18,800,000 from $17,552,000 as of December 31, 1996
and 1995, respectively.
For the six months ended December 31, 1996, the Company's operating
activities used cash of $3,732,000. The use of cash resulted primarily from
a $6,187,000 increase in inventories, a $1,877,000 increase in accounts
receivable, a decrease in accounts payable of $1,069,000 offset by net income
of $2,763,000. The net use of cash relates to the increasing sales trends
for the first two quarters of fiscal 1997 requiring increased inventory levels
and booked orders for shipment in the Company's third fiscal quarter.
Capital expenditures were $423,000 for the six months ended December 31,
1996, which approximated the $418,000 expended for the same period of the
prior year.
The Company believes that its cash flows from operations and borrowing available
under bank lines of credit are sufficient to fund its operations.
8
TANDY BRANDS ACCESSORIES, INC.
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
(a) The annual meeting of stockholders was held on November 4, 1996.
(b) The matters voted upon were as follows:
(i) The election of two directors in Class III to serve for a three-
year term expiring in 1999, or until their successors are elected and
qualified. The number of votes cast for and against the election of
each nominee, as well as the number of abstentions and broker non-votes
with respect to the election of each niminee were as follows:
Mr. Clayton E. Niles
--------------------
For 4,465,918 Against/Withheld 82,431 Abstain 0 Broker Non-Votes 0
Mr. J.S.B. Jenkins
------------------
For 4,525,380 Against/Withheld 22,969 Abstain 0 Broker Non-Votes 0
Directors whose terms continued after the annual meeting are as follows:
Mr. C.A. Rundell, Jr.
Mr. Robert E. Runice
Dr. James F. Gaertner
Ms. Maxine Clark
(ii) The approval of the amendment to the Tandy Brands Accessories,
Inc. Nonqualified Formula Stock Option Plan for Non-Employee Directors
(the "Plan"). The number of votes cast for and against the approval of
the amendment to the Plan, as well as the number of abstentions and
broker non-votes with respect to the approval of the amendment to the
Plan were as follows:
For 3,930,010 Against/Withheld 302,362 Abstain 315,977 Broker Non-Votes 0
ITEM 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31, 1996.
The exhibits filed as a part of this report are listed below.
Exhibit No. Description
11 Statement Regarding Computation of Per Share Earnings
27 Financial Data Schedule
8
TANDY BRANDS ACCESSORIES, INC.
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 by the
undersigned thereunto duly authorized.
TANDY BRANDS ACCESSORIES, INC.
(Registrant)
/s/ J.S.B. Jenkins
-------------------------------------
J.S.B. Jenkins
President and Chief Executive Officer
/s/ Stan Ninemire
-------------------------------------
Stan Ninemire
Senior Vice President, Chief Financial
Officer and Treasurer
Date: February 14, 1997
10
TANDY BRANDS ACCESSORIES, INC.
EXHIBIT INDEX
Sequen-
tially Incorporated by Reference
Numbered (If applicable)
Exhibit Number and Description Page Form Date File No. Exhibit
- - ------------------------------ -------- ---- --------- -------- -------
(4) Instruments defining the
rights of security
holders, including
indentures
4.1 Certificate of N/A S-1 11/02/90 33-37588 4.1
Designations,
Powers, Preferences
and Rights of
Series A Junior
Participating
Cumulative
Preferred Stock of
Tandy Brands
Accessories, Inc.
4.2 Form of Common N/A S-1 11/02/90 33-37588 4.2
Stock Certificate
of Tandy Brands
Accessories, Inc.
4.3 Form of Preferred N/A S-1 11/02/90 33-37588 4.3
Share Purchase
Rights Certificate
of Tandy Brands
Accessories, Inc.
4.4 Rights agreement N/A S-1 11/02/90 33-37588 10.5
dated November 7,
1990, between Tandy
Brands Accessories,
Inc. and First
National Bank of
Boston
(11) Statement re: Computation
of per share earnings
11.1 Earnings per share 12 N/A N/A N/A N/A
statement
(27) Financial Statement Schedule
27.1 Financial statement
schedule 13 N/A N/A N/A N/A
11
TANDY BRANDS ACCESSORIES, INC.
Exhibit 11. Statement Regarding Computation of Per Share Earnings.
Earnings per Share - Earnings per share is determined by dividing net income by
the average number of common shares outstanding plus common stock equivalents.
Common stock equivalents consist of shares issuable under outstanding stock
options reduced by shares assumed to be purchased from the proceeds of such
options. Earnings per share, as presented, is both primary and fully diluted.
Three Months Six Months
Ended Ended
December 31 December 31
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Weighted average common
shares outstanding 5,432,000 5,312,000 5,418,000 5,299,000
Common share equivalents 32,000 35,000 32,000 36,000
---------- ---------- --------- ---------
Average common shares and
common share equivalents 5,464,000 5,347,000 5,450,000 5,335,000
========== ========== ========= =========
12
TANDY BRANDS ACCESSORIES, INC.
Exhibit 27. Financial Data Schedule
This schedule contains summary financial information extracted from Tandy
Brands Accessoiries, Inc.'s December 31, 1996, Form 10-Q and is qualified
in its entirety by reference to such form 10-Q filings. Dollars are in
thousands.