<PAGE>
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 September 30, 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 September 30, 1996
- -------------------------- ----------------------------------------------
Common stock, $1 par value 5,417,198
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TANDY BRANDS ACCESSORIES, INC.
Form 10-Q
Quarter Ended September 30, 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
PART II -- OTHER INFORMATION
Item
4. Submission of Matters to a Vote of Security Holders 8
6. Exhibits and Reports on Form 8-K 8
SIGNATURES 9
INDEX TO EXHIBITS AND EXHIBITS 10 - 13
2
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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
Ended
September 30, 1996
------------------
1996 1995
------- -------
Gross sales, less discounts, returns
and allowances $23,661 $22,703
Royalty, interest and other income 2 65
------ ------
Total revenues 23,663 22,768
------ ------
Costs and expenses:
Cost of goods sold 14,728 14,101
Selling, general and administrative 6,522 6,515
Depreciation and amortization 446 517
Interest 286 323
------ ------
Total costs and expenses 21,982 21,456
------ ------
Income before income taxes 1,681 1,312
Provision for income taxes (618) (466)
------ ------
Net Income $1,063 $846
====== ======
Average common shares and common share
equivalents 5,436 5,322
===== =====
Earnings per average common share and
common share equivalent $0.20 $0.16
===== =====
Cash dividends per common share None None
The accompanying notes are an integral part of these condensed financial
statements.
3
<PAGE>
Tandy Brands Accessories, Inc. and Subsidiaries
File Number 0-18927
Form 10-Q
Condensed Consolidated Balance Sheets
(Dollars in thousands)
September 30, June 30,
1996 1996
--------------- ----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 361 $ 88
Accounts receivable, net 16,951 13,746
Inventories:
Raw materials and work in process 6,714 6,046
Finished goods 25,559 20,564
Other current assets 1,797 2,505
------ ------
Total current assets 51,382 42,949
------ ------
Property and equipment, at cost 9,461 9,326
Accumulated depreciation (4,517) (4,246)
------ ------
Net property and equipment 4,944 5,080
------ ------
Other assets:
Goodwill, less amortization 8,384 8,526
Other assets, less amortization 1,783 1,856
------ ------
Total other assets 10,167 10,382
------ ------
TOTAL ASSETS $ 66,493 $ 58,411
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 6,250 $ 2,200
Accounts payable 2,427 4,624
Accrued expenses 2,545 2,043
------ ------
Total current liabilities 11,222 8,867
------ ------
Other liabilities:
Notes payable 16,800 12,400
Other noncurrent liabilities 316 297
------ ------
Total other liabilities 17,116 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, 5,417,198 shares and
5,382,267 shares issued and outstanding
as of September 30, 1996, and June 30,
1996, respectively 5,417 5,382
Additional paid-in capital 18,244 18,038
Retained Earnings 14,494 13,427
------ ------
Total stockholders' equity 38,155 36,847
------ ------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 66,493 $ 58,411
====== ======
The accompanying notes are an integral part of these condensed financial
statements.
4
<PAGE>
Tandy Brands Accessories, Inc. and Subsidiaries
File Number 0-18927
Form 10-Q
Condensed Consolidated Statement of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended
September 30,
--------------------------
1996 1995
---------- ----------
Cash Flows from operating activities:
Net income $ 1,063 $ 846
Adjustments to reconcile net income to net
cash provided by (used for) continuing
activities:
Depreciation 231 260
Amortization 195 299
Other 40 193
Change in assets and liabilities, net of
effects from acquisitions:
Accounts Receivable (3,205) (3,816)
Inventories (5,663) 1,462
Other assets 770 (267)
Accounts payable (2,197) (2,097)
Accrued expenses 502 300
------- -------
Net cash used for operating activities (8,264) (2,820)
------- -------
Cash flows from investing activities:
Purchases of property and equipment (154) (151)
------- -------
Net cash used for investing activities (154) (151)
------- -------
Cash flows from financing activities:
Exercise of employee stock options, net of
purchase of treasury stock -- 15
Sale of stock to stock purchase program 241 300
Proceeds from borrowings 14,300 9,670
Payments under borrowings (5,850) (8,450)
------- -------
Net cash provided by financing activities 8,691 1,535
------- -------
Net increase (decrease) in cash and cash
equivalents 273 (1,436)
Cash and cash equivalents at beginning of period 88 1,488
------- -------
Cash and cash equivalents at end of period $ 361 $ 52
======= =======
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 280 $ 367
Income Taxes 32 10
Noncash activities:
None.
The accompanying notes are an integral part of these condensed financial
statements.
5
<PAGE>
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 month period ended
September 30, 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
<PAGE>
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 Months Ended September 30, 1996, Compared to the Three Months Ended
September 30, 1995.
First quarter results for Tandy Brands Accessories, Inc. reflected growing sales
and profitability. Net sales for the three month period ended September 30,
1996, were $23,661,000. This represents a 4.2% increase when compared to last
year's first quarter sales of $22,703,000. More importantly, while net sales
were up only 4.2%, net income for the quarter ended September 30, 1996, was
$1,063,000, or $0.20 a share, up 25% when compared to net income of $846,000,
or $0.16 a share, for the same period last year. The increase in net income
and earnings per share reflects the effect of strategic initiatives executed by
Tandy Brands over the last 18 months. One of those initiatives included a
detailed review and subsequent curtailment of many variable selling, general
and administrative expenses.
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 three 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
$750,000 with a Canadian bank for seasonal borrowings, letters of credit and
foreign exchange forward contract requirements of H.A. Sheldon. As of
September 30, 1996, the Company had borrowings under its lines of credit of
$23,050,000. This represents a 6.7% reduction when compared to debt
outstanding as of September 30, 1995.
For the three months ended September 30, 1996, the Company used cash of
$8,264,000 for operating activities compared to $2,820,000 used for operating
activities for the same period in the prior year. The use of cash for
operating activities is primarily attributable to a seasonal increase in
accounts receivable and inventories.
Capital expenditures were $154,000 for the three months ended
September 30, 1996, compared to $151,000 for the same period of the prior
year. These expenditures remain at low levels in response to a static retail
market and the fact that there are no significant capital expenditures projects
under way.
The Company believes that it has adequate financial resources and sufficient
credit facilities to satisfy its future working capital needs.
7
<PAGE>
TANDY BRANDS ACCESSORIES, INC.
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
(a) No matters were submitted to the Security Holders for a vote during the
quarter ended September 30, 1996.
ITEM 6. Exhibits and Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended September 30, 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
<PAGE>
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/s J.S.B. Jenkins
-------------------------------------
J.S.B. Jenkins
President and Chief Executive Officer
s/s R. Bruce Cole
-------------------------------------
R. Bruce Cole
Vice President and Treasurer
(Principal Financial Officer)
Date: November 14, 1996
9
<PAGE>
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 11 N/A N/A N/A N/A
statement
(27) Financial Statement Schedule
27.1 Financial statement
schedule 12 N/A N/A N/A N/A
10
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
Ended
September 30,
-----------------------
1996 1995
---------- ----------
Weighted average common
shares outstanding 5,403,000 5,285,000
Common share equivalents 33,000 37,000
---------- ----------
Average common shares and
common share equivalents 5,436,000 5,322,000
========== ==========
11
<PAGE>
TANDY BRANDS ACCESSORIES, INC.
Exhibit 27. Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 361
<SECURITIES> 0
<RECEIVABLES> 16,951
<ALLOWANCES> 1,003
<INVENTORY> 26,412
<CURRENT-ASSETS> 1,797
<PP&E> 9,461
<DEPRECIATION> 4,517
<TOTAL-ASSETS> 66,493
<CURRENT-LIABILITIES> 11,222
<BONDS> 0
0
0
<COMMON> 5,417
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 66,493
<SALES> 23,661
<TOTAL-REVENUES> 23,663
<CGS> 14,728
<TOTAL-COSTS> 21,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 286
<INCOME-PRETAX> 1,681
<INCOME-TAX> 681
<INCOME-CONTINUING> 1,063
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,063
<EPS-PRIMARY> .200
<EPS-DILUTED> .200
</TABLE>
