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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO
SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 2002
Commission File Number 0-18927
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
(full title of Plan)
TANDY BRANDS ACCESSORIES, INC.
690 East Lamar Blvd., Suite 200
Arlington, Texas 76011
(Name of issuer of the securities held pursuant to
the Plan and address of its principal
executive office.)
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CONTENTS
<Table>
<Caption>
Page
----
TABLE OF CONTENTS ............................................... 2
CERTIFIED PUBLIC ACCOUNTANT'S REPORT ............................ 5
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS ................. 6
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS ...... 7
NOTES TO FINANCIAL STATEMENTS ................................... 8-14
SCHEDULES ....................................................... 15-17
SIGNATURE PAGE .................................................. 18
CONSENT OF INDEPENDENT ACCOUNTANTS .............................. 19
</Table>
2
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
3
(WP LOGO)
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2002 AND 2001
TABLE OF CONTENTS
<Table>
Report of Independent Auditors ............................................ 5
Financial Statements:
Statements of Net Assets Available for Benefits ........................ 6
Statements of Changes in Net Assets Available for Benefits ............. 7
Notes to Financial Statements .......................................... 8
Supplemental Schedules:
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) ......... 16
Schedule H, Line 4j - Schedule of Reportable Transactions .............. 17
</Table>
NOTE: All other schedules required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974 have been omitted since they are either not applicable or
the information required therein has not been included in the financial
statements or notes thereto.
4
(WP LOGO)
(WHITLEY PENN LETTERHEAD)
(WHITLEY PENN LOGO)
REPORT OF INDEPENDENT AUDITORS
To the Administrative Committee and Participants of
Tandy Brands Accessories, Inc. Employees Investment Plan
We have audited the accompanying statements of net assets available for benefits
of Tandy Brands Accessories, Inc. Employees Investment Plan as of June 30, 2002
and 2001 and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Tandy Brands
Accessories, Inc. Employees Investment Plan as of June 30, 2002 and 2001, and
the changes in its net assets available for benefits for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Security Act of 1974. The supplemental schedules have been subjected
to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as whole.
/s/ WHITLEY PENN
Fort Worth, Texas
February 21, 2003
5
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<Table>
<Caption>
June 30,
2002 2001
------------- -------------
ASSETS
Investments, at fair value:
Shares of registered investment companies:
Mutual funds $ 730 $ 1,370,310
Tandy Brands Accessories, Inc. common stock 9,967,146 5,034,021
Participants' loans 21,022 19,610
------------- -------------
9,988,898 6,423,941
Receivables:
Employee contributions 28,825 73,057
Employer contributions 21,134 53,901
------------- -------------
49,959 126,958
Cash and cash equivalents 2,618,850 25,605
------------- -------------
Total assets 12,657,707 6,576,504
LIABILITIES
Excess contributions payable 79,628 4,006
------------- -------------
NET ASSETS AVAILABLE FOR BENEFITS $ 12,578,079 $ 6,572,498
============= =============
</Table>
See accompanying notes.
6
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<Table>
<Caption>
June 30,
2002 2001
------------- -------------
ADDITIONS TO NET ASSETS
Investment income:
Net realized and unrealized
gains (losses) on investments $ 4,683,505 $ (2,576,814)
Interest and dividends 29,505 94,163
------------- -------------
4,713,010 (2,482,651)
Contributions:
Employee contributions 954,094 1,003,793
Employer contributions 680,855 709,069
Rollover contributions 7,681 360,462
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1,642,630 2,073,324
------------- -------------
Total additions (deductions) 6,355,640 (409,327)
DEDUCTIONS FROM NET ASSETS
Benefit payments 292,771 277,647
Contribution refunds 57,288 4,006
------------- -------------
350,059 281,653
------------- -------------
Net increase (decrease) 6,005,581 (690,980)
NET ASSETS AVAILABLE for BENEFITS
Beginning of year 6,572,498 7,263,478
------------- -------------
End of year $ 12,578,079 $ 6,572,498
============= =============
</Table>
See accompanying notes.
7
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
A. DESCRIPTION OF THE PLAN
The following description of the Tandy Brands Accessories, Inc. Employees
Investment Plan (the "Plan") provides only general information. Participants
should refer to the Plan agreement for a more complete description of the Plan's
provisions.
GENERAL
Tandy Brands Accessories, Inc. (the "Company") established the Plan effective as
of January 1, 1991, as amended and restated effective July 1, 2000. The Plan is
a defined contribution plan covering substantially all employees of the Company
who have completed one year of service, of not less than 1,000 hours per year.
The Plan is subject to Titles I and II of the Employees Retirement Income
Security Act of 1974 ("ERISA") relating to the protection of employee benefit
rights and amendments to the Internal Revenue Code ("IRC"), respectively, but is
not subject to Title IV, relating to plan termination insurance coverage, such
insurance will not be extended to participants in the Plan in the future.
Effective September 28, 2001, the Plan sponsor changed from Morgan Stanley Dean
Witter as trustee, custodian and record keeper and appointed ADP Retirement
Services ("ADP") as record keeper and State Street Bank and Trust ("State
Street") as trustee and custodian of the Plan.
CONTRIBUTIONS
Company contributions are discretionary based on eligible participants' salary
deferral. The Plan provides for the Company to match participant contributions
at 100% of the first 5% of the participant's annual compensation as determined
annually by the Company's Board of Directors. Each participant may contribute
during the Plan year from 1% to 10% of their compensation on a before tax basis,
subject to Internal Revenue Service limitations ("IRS").
A participant is generally not subject to federal income tax on their deferrals,
Company contributions or earnings thereon in the Plan, until withdrawal from the
Plan.
PARTICIPANT ACCOUNTS
The Plan adopted daily valuation as the method of valuing participant accounts.
Each participant's account is credited with the participant's contributions and
the allocation of the Company's contributions and actual earnings thereon. The
benefit to which a participant is entitled is the benefit that can be provided
from the participant's vested account.
8
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (continued)
A. DESCRIPTION OF THE PLAN - CONTINUED
VESTING
Participants are immediately vested in their contributions plus actual earnings
thereon. Vesting in the Company's matching contribution portion of their
accounts plus actual earnings thereon is based on years of continuous service,
as defined by the Plans. Generally, a participant is 100% vested upon completing
three years of credited service. Following is the vesting schedule as related to
the Plan:
<Table>
<Caption>
VESTING
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than 1 0%
1 33%
2 67%
3 100%
</Table>
A participant will be fully vested in all of their accounts under the Plan
(including those accounts attributable to the Company's contributions) upon
reaching the Plan's normal retirement age (age 65), their disability or death.
LOANS
Participants may borrow from their account a minimum of $1,000 up to a maximum
amount equal to the lesser of $50,000 or 50% of their account balance. Loan
terms range up to 5 years (or longer for the purchase of a primary residence).
The loans are secured by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as determined by the
Plan as prime as published by the Wall Street Journal plus one percent.
Principal and interest are paid ratably through payroll deductions. Effective
September 28, 2001, the Plan Sponsor amended the Plan to temporarily suspend the
loan provision.
BENEFIT PAYMENTS
On termination of service due to death or retirement, or in instances of
disability, financial hardship or attainment of age 59 1/2, a participant may
elect to receive (a) lump-sum payment in cash, (b) monthly installments over any
designated period, not to exceed ten years; (c) a combination of lump-sum
payment in cash and Company stock. If withdrawing participants are not
completely vested in their account balance, The subsequent forfeitures are
available for reduction of Company contributions. Disbursements for benefits are
recorded when paid.
9
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
A. DESCRIPTION OF PLAN - CONTINUED
FORFEITURES
Forfeited balances of terminated participants non-vested accounts are used (1)
to restore the accounts of rehired participants who are re-employed prior to
incurring a five year break in service and who are eligible for such
restoration, as defined in the Plan and (2) to reduce future Company
contributions. Approximately $2,200 of forfeitures were available and unused at
June 30, 2001. No unused forfeitures were available at June 30, 2002.
INVESTMENT OPTIONS
A participant may direct employee contributions and employer-matching
contributions to any of the eleven available mutual funds, as further disclosed
in the Plan documents, or in Tandy Brands Accessories, Inc. common stock.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements of the Plan are prepared on the accrual method of
accounting.
ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires the Plan
Administrator to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results may differ from these
estimates.
INVESTMENT VALUATION
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at quoted market prices, which represent the net asset
value of shares held by the Plan at year end. These investments are subject to
market or credit risks customarily associated with debt and equity investments.
Participant loans are valued at the unpaid principal balance, which approximates
fair value
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
10
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVESTMENT VALUATION - CONTINUED
The net realized and unrealized gains and losses on investments include realized
gains and losses on sales of investments during the year and unrealized
increases or decreases in the market value of investments held at year end.
CONTRIBUTIONS
Contributions from the participants and the employer are accrued in the period
in which they are deducted in accordance with salary deferral agreements and as
they become obligations of the Company, as determined by the Plan's
administrator.
PAYMENT OF BENEFITS
Benefits are recorded when paid.
C. INVESTMENTS
The following table presents the individual investments that exceeded 5% of the
Plan's net assets available for benefits at June 30,:
<Table>
<Caption>
2002 2001
------------- -------------
NON-PARTICIPANT DIRECTED:
Tandy Brands Accessories, Inc. common stock
(843,211 and 886,845 shares, respectively)** $ 9,823,413 $ 5,001,981
PARTICIPANT DIRECTED:
Tandy Brands Accessories, Inc. common stock
(12,338 and 5,695 shares, respectively) 143,733 32,040
------------- -------------
Total $ 9,967,146 $ 5,034,021
============= =============
</Table>
** All employee salary deferrals prior to the restatement of the Plan effective
July 1, 2000 which allows participant directed funds, are required per Plan
documents, to remain invested in Company stock.
11
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
C. INVESTMENTS - CONTINUED
The changes in net assets available for benefits for the non-participant
directed Company stock for the years ended June 30, are as follows:
<Table>
<Caption>
NON-PARTICIPANT DIRECTED
COMPANY STOCK
---------------------------
2002 2001
------------ ------------
ADDITIONS TO NET ASSETS
Investment income:
Net realized and unrealized
gains (losses) on investments $ 4,991,888 $ (2,135,334)
Contributions:
Non-cash contributions -- 241,104
------------ ------------
Total additions (deductions) 4,991,888 (1,894,230)
DEDUCTIONS TO NET ASSETS
Benefit payments 170,456 449,542
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Net increase (decrease) 4,821,432 (2,343,772)
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 5,001,981 7,345,753
------------ ------------
End of year $ 9,823,413 $ 5,001,981
============ ============
</Table>
12
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
D. TAX STATUS
The IRS has determined and informed the Company by a letter dated November 28,
1994, that the Plan and related trust are designed in accordance with applicable
sections of the IRC. The Plan has been amended since receiving the determination
letter, however, the Plan Administrator believes that the Plan is currently
designed and being operated in compliance with the applicable requirements of
the IRC. Therefore, the Plan Administrator believes that the Plan was qualified
and the related trust was tax-exempt as of the financial statement date.
E. PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts
F. ADMINISTRATION OF PLAN ASSETS
Contributions are held and managed by the trustee, who invests cash and
investment income received and makes distributions to participants.
Officers and employees of the Company perform certain administrative functions
for the Plan with no compensation from the Plan. Administrative expenses related
to the Plan are paid directly by the Company and are not reflected in the
accompanying financial statements.
G. BENEFITS PAYABLE
At June 30, 2002 and 2001, there were no amounts due to participants who had
elected to withdraw from the Plan and requested payment of benefits, but had not
yet been paid.
H. CONTRIBUTION REFUNDS
For the years ended June 30, 2002 and 2001, the excess contribution refunds were
$79,628 and $4,006, respectively. The Plan sponsor paid all taxes related to
these refunds.
I. PLAN AMENDMENTS
On August 14, 2001, the Plan sponsor approved amendments to the Plan effective
September 28, 2001. Participants will no longer be allowed to borrow against
their account, and participants will not be allowed to convert prior plan
employee contributions invested solely in Company stock.
On September 28, 2001, the Plan assets were transferred to State Street as the
trustee with ADP as the record keeper.
13
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
I. PLAN AMENDMENTS - CONTINUED
On April 23, 2002, the Plan's sponsor approved Comerica Bank, N.A. ("Comerica")
as investment provider, record keeper and trustee, effective July 1, 2002, and
to amend and restate the Plan using the Prototype Defined Contribution Plan and
Trust sponsored by Comerica.
Prior to the transfer of the Plan's assets to Comerica, State Street liquidated
substantially all mutual fund holdings into cash in the accompanying financial
statements. Comerica invested the transferred amounts into mutual funds
subsequent to year-end.
J. CONCENTRATION
Approximately 81% and 77% of the Plan's assets are invested in Tandy Brands
Accessories, Inc. common stock at June 30, 2002 and 2001, respectively.
K. SUBSEQUENT EVENTS
The Plan received a favorable letter of determination dated January 21, 2003
relating to all amendments to the Plan executed through August 14, 2001,
including amendments relating to tax laws collectively referred to as GUST.
14
SUPPLEMENTAL SCHEDULES
15
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
JUNE 30, 2002
EIN: 75-2349915
Plan: 001
<Table>
<Caption>
(c) DESCRIPTION (e) CURRENT
(a) (b) IDENTITY OF ISSUE OF INVESTMENTS (d) COST VALUE
- --- --------------------- ----------------------------------- ----------- -----------
* Tandy Brands Accessories, Common Stock (Non-Participant $ 5,725,911 $ 9,823,413
Inc. Directed)
* Tandy Brands Accessories, Common Stock (Participant -- 143,733
Inc. Directed)
AIM Value Fund -- --
Alliance Premier Growth Fund -- --
Calvert Income Fund -- 730
Morgan Stanley Dean Witter American Opportunities Fund -- --
Morgan Stanley Dean Witter Information Fund -- --
Morgan Stanley Dean Witter S & P Index Fund -- --
Morgan Stanley Dean Witter U.S. Government Securities Fund -- --
Oppenheimer Quest Balanced Value Fund -- --
Pilgrim International Value Fund -- --
Van Kampen Aggressive Growth Fund -- --
Van Kampen Emerging Growth Fund -- --
* Participant Loans Due 1-5 yrs.; 9%-10.5% -0- 21,022
----------
$9,988,898
==========
</Table>
* Indicates a party-in-interest to the Plan.
16
TANDY BRANDS ACCESSORIES, INC. EMPLOYEES INVESTMENT PLAN
SCHEDULE H, LINE 4j - SCHEDULE OF REPORTABLE TRANSACTIONS
Year Ended June 30, 2002
EIN: 75-2349915
Plan: 001
<Table>
<Caption>
(h) CURRENT
VALUE OF
ASSET ON
(a) IDENTITY OF (c) PURCHASE (g) COST OF TRANSACTION (i) NET GAIN
PARTY INVOLVED (B) DESCRIPTION OF ASSET PRICE (D) SELLING PRICE ASSET DATE OR (LOSS)
- -------------- ------------------------ ------------ ----------------- ---------- ----------- -------------
Category (i) -- A single security transaction in excess of 5% of Plan assets
- ---------------------------------------------------------------------------
Van Kampen Emerging Growth $ -- $ 332,261 $ 332,261 $332,261 $ --
There was no category (ii), (iii) or (iv) reportable transactions during the year ended June 30, 2002.
Columns (e) and (f) are not applicable.
</Table>
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
TANDY BRANDS ACCESSORIES, INC.
EMPLOYEES INVESTMENT PLAN
/s/ J.S.B. Jenkins
--------------------------------------
J.S.B. Jenkins
Administrative Committee Member
Date: March 28, 2003
18
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation of our report dated February 21, 2003,
accompanying the financial statements included in this annual report on Form
11-K, in the registration statement of Form S-8 (Registration No. 33-41262)
pertaining to the Tandy Brands Accessories, Inc. Employees Investment Plan and
the related prospectus.
/s/ WHITLEY PENN
Fort Worth, Texas
February 21, 2003
19