<PAGE> 1
================================================================================
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, 2000 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:
Not Applicable
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, 2000
Common stock, $1 par value 5,808,968
================================================================================
<PAGE> 2
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2000
================================================================================
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I -- FINANCIAL INFORMATION
Item Page No.
---- --------
<S> <C>
1. Financial Statements 3-10
2. Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations 11-14
3. Qualitative and Quantitative Disclosures About Market Risk 15
PART II -- OTHER INFORMATION
Item
----
4. Submission of Matter to a Vote of Security Holders 15
6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
EXHIBIT INDEX 18
</TABLE>
2
<PAGE> 3
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)
<TABLE>
<CAPTION>
Three Months
Ended
September 30
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 54,184 $ 53,256
Cost of goods sold 35,288 34,372
------------ ------------
Gross margin 18,896 18,884
Selling, general and administrative expenses 13,506 12,667
Depreciation and amortization 1,058 833
------------ ------------
Total operating expenses 14,564 13,500
------------ ------------
Operating income 4,332 5,384
Interest expense (1,021) (893)
Royalty and other income 17 31
------------ ------------
Income before provision for income taxes 3,328 4,522
Provision for income taxes 1,293 1,754
------------ ------------
Net income $ 2,035 $ 2,768
============ ============
Earnings per common share $ 0.36 $ 0.48
============ ============
Earnings per common share - assuming dilution $ 0.36 $ 0.47
============ ============
Common shares outstanding 5,612 5,797
============ ============
Common shares outstanding - assuming dilution 5,626 5,873
============ ============
Cash dividends per common share None None
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
3
<PAGE> 4
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FILE NUMBER 0-18927
FORM 10-Q
================================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 384 $ 661
Accounts receivable, net 44,431 31,105
Inventories:
Raw materials and work in process 4,624 4,759
Finished goods 55,369 50,581
Other current assets 2,444 2,371
------------ ------------
Total current assets 107,252 89,477
------------ ------------
Property and equipment, at cost 22,812 22,317
Accumulated depreciation (9,908) (9,305)
------------ ------------
Net property and equipment 12,904 13,012
------------ ------------
Other assets:
Goodwill, less amortization 11,172 11,410
Other assets, less amortization 8,709 7,785
------------ ------------
Total other assets 19,881 19,195
------------ ------------
$ 140,037 $ 121,684
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 7,525 $ --
Accounts payable 4,859 6,547
Accrued expenses 6,013 4,004
------------ ------------
Total current liabilities 18,397 10,551
------------ ------------
Other liabilities:
Notes payable 50,000 41,075
Other noncurrent liabilities 187 184
------------ ------------
Total other liabilities 50,187 41,259
------------ ------------
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized,
none issued -- --
Common stock, $1 par value, 10,000,000 shares authorized,
5,808,968 shares issued and outstanding
as of September 30, 2000, and June 30, 2000 5,809 5,809
Additional paid-in capital 22,394 22,426
Cumulative other comprehensive income (307) (479)
Retained earnings 45,595 43,560
Treasury stock, at cost (2,038) (1,442)
------------ ------------
Total stockholders' equity 71,453 69,874
------------ ------------
$ 140,037 $ 121,684
============ ============
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
4
<PAGE> 5
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FILE NUMBER 0-18927
FORM 10-Q
================================================================================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,035 $ 2,768
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation 641 465
Amortization 346 411
Other (151) 6
Change in assets and liabilities:
Accounts receivable (13,326) (14,369)
Inventories (4,654) (4,145)
Other assets (819) (246)
Accounts payable (1,688) (1,256)
Accrued expenses 2,013 2,733
------------ ------------
Net cash used for operating activities (15,603) (13,633)
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (495) (531)
Purchase of assets of Frank Spielburg Sales, LLC -- (3,561)
------------ ------------
Net cash used for investing activities (495) (4,092)
------------ ------------
Cash flows from financing activities:
Sale of stock to stock purchase program 367 439
Exercise of employee stock options -- 37
Purchase of treasury stock (996) --
Proceeds from borrowings 33,525 31,545
Payments under borrowings (17,075) (13,795)
------------ ------------
Net cash provided by financing activities 15,821 18,226
------------ ------------
Net increase (decrease) in cash and cash equivalents (277) 501
Cash and cash equivalents at beginning of period 661 180
------------ ------------
Cash and cash equivalents at end of period $ 384 $ 681
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 729 $ 416
Income taxes -- 45
Noncash activities:
None
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
<PAGE> 6
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,
2000, are not necessarily indicative of the results that may be expected for the
year ended June 30, 2001. 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, 2000.
NOTE 2 - IMPACT OF NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," and its
amendments Statements 137 and 138, in June 1999 and June 2000, respectively. The
Statement requires the Company to recognize all derivatives on the balance sheet
at fair value. Derivatives that are not hedges must be adjusted to fair value
through income. If the derivative is a hedge, depending on the nature of the
hedge, changes in the fair value of derivatives are either offset against the
change in fair value of assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. The adoption of Statement No.
133, as amended on July 1, 2000, resulted in the cumulative effect of an
accounting change, net of tax, of approximately $308,000 in other comprehensive
income.
The Company's risk management policy as it relates to derivative instruments is
to mitigate, subject to market conditions, against interest rate risk. The
Company does not enter into any derivative instrument for the purposes of
speculative investment. The Company's overall risk management philosophy is
reevaluated as business conditions arise.
The Company is subject to interest rate risk on its long term debt. The Company
manages its exposure to changes in interest rates by the use of variable and
fixed interest rate debt. In addition the Company has hedged its exposure to
changes in interest rates on a portion of its variable debt by entering into a
interest rate swap agreement to lock in a fixed interest rate for a portion of
these borrowings. As a result, the Company entered into a five-year interest
rate swap agreement converting $15,000,000 of outstanding indebtedness from a
variable to a fixed interest rate. The average receive rate is based on a 90 day
LIBOR rate. The interest rate swap agreement as a derivative represents a valid
cash flow hedge instrument under Statement No. 133. At September 30, 2000, the
receive and pay rates related to the interest rate swap were 7.69% and 6.52%,
respectively.
6
<PAGE> 7
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for the
three months ended September 30, 2000 and 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
September 30
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income $ 2,035 $ 2,768
Foreign currency translation adjustments (136) 22
Cumulative effect of change in accounting
principle - fair value of interest rate swap 308 --
------------ ------------
Comprehensive income $ 2,207 $ 2,790
============ ============
</TABLE>
7
<PAGE> 8
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - EARNINGS PER SHARE
The following sets forth the computation of basic and diluted earnings
per share (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months
Ended
September 30
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
Numerator for basic and diluted earnings per share:
Net income $ 2,035 $ 2,768
============ ============
Denominator:
Weighted average shares outstanding 5,599 5,780
Contingently issuable shares 13 17
------------ ------------
Denominator for basic earnings per
share - weighted average shares 5,612 5,797
Effect of dilutive securities:
Employee stock options 12 65
Director stock options 2 11
------------ ------------
Dilutive potential common shares 14 76
Denominator for diluted earnings per
share - adjusted weighted - average
shares 5,626 5,873
============ ============
Basic earnings per share $ 0.36 $ 0.48
============ ============
Diluted earnings per share $ 0.36 $ 0.47
============ ============
</TABLE>
8
<PAGE> 9
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
The Company sells its products to a variety of retail outlets, including mass
merchants, national chain stores, major department stores, men's and women's
specialty stores, catalog retailers, grocery stores, drug stores and the retail
exchange operations of the United States military. The Company and its
corresponding customer relationships are organized along men's and women's
product lines. As a result, the Company has two reportable segments: (1) men's
accessories consisting of belts, wallets, suspenders and other small leather
goods and (2) women's accessories consisting of belts, wallets, handbags, socks,
scarves, hats and hair accessories. General corporate expenses are allocated to
each segment based on the respective segment's asset base. Depreciation and
amortization expense related to assets recorded on the Company's corporate
accounting records are allocated to each segment as described above. Management
measures profit or loss on each segment based upon income or loss before taxes
utilizing the accounting policies consistent in all material respects with those
described in Note 1 of the Company's 2000 Annual Report. No intersegment revenue
is recorded.
Information regarding operations and assets by segment are as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenue from external customers:
Men's accessories $ 30,784 $ 28,084
Women's accessories 23,400 25,172
------------ ------------
$ 54,184 $ 53,256
============ ============
Operating income (loss)(1):
Men's accessories 3,628 3,155
Women's accessories 704 2,229
------------ ------------
$ 4,332 $ 5,384
============ ============
Interest expense (1,021) (893)
Other income(2) 17 31
------------ ------------
Income before income taxes $ 3,328 $ 4,522
============ ============
Depreciation and amortization expense:
Men's accessories $ 671 $ 553
Women's accessories 387 280
------------ ------------
$ 1,058 $ 833
============ ============
Capital expenditures:
Men's accessories $ -- $ 30
Women's accessories 218 13
Corporate 277 488
------------ ------------
$ 495 $ 531
============ ============
</TABLE>
(1) Operating income consists of net sales less cost of sales and
specifically identifiable selling, general and administrative expenses.
(2) Other income includes royalty income on corporate tradenames and other
income not specifically identifiable to a segment.
9
<PAGE> 10
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - SUBSEQUENT EVENTS
On October 18, 2000, the Company's Board of Directors approved a plan to
repurchase, from time to time in the open market or through negotiated
transactions, shares of the Company's common stock at an aggregate purchase
price of up to $2,000,000 million (the "repurchase program"). This program is an
extension of the nearly completed $4,000,000 million stock repurchase plan the
Company initiated in October 20, 1999 and extended in April 26, 2000. Any open
market purchases will be at prevailing market prices. The timing of any
repurchases will depend on market conditions, market price, and management's
assessment of the Company's liquidity and cash flow needs. Any repurchased
shares will be added to the Company's treasury shares and may be used for the
Company's stock plans and other corporate purposes. The funds required for the
repurchases will be provided from the Company's current cash balances, operating
cash flow, or the Company's credit facility. During the three-months ended
September 30, 2000, the Company repurchased 137,710 shares of treasury stock
under the repurchase program at a cost of approximately $996,000. During the
three months ended September 30, 2000, 46,925 shares of treasury stock were
reissued to the Company's employee stock purchase program.
10
<PAGE> 11
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Tandy Brands Accessories, Inc. (the "Company") is a leading designer,
manufacturer and marketer of branded men's, women's and children's accessories,
including belts and small leather goods such as wallets. The Company's product
line also includes handbags, socks, scarves, hats, hair accessories and
suspenders. The Company's merchandise is marketed under a broad portfolio of
nationally recognized licensed and proprietary brand names, including
DOCKERS(R), JONES NEW YORK(R), FLORSHEIM(R), PERRY ELLIS(R), ROLFS(R),
HAGGAR(R), BUGLE BOY(R), CANTERBURY(R), PRINCE GARDNER(R), PRINCESS GARDNER(R),
AMITY(R), DON LOPER(R), ACCESSORY DESIGN GROUP(R), TEX TAN(R) and TIGER(R), as
well as private brands for major retail customers. The Company sells its
products through all major retail distribution channels throughout the United
States and Canada, including mass merchants, national chain stores, department
stores, men's and women's specialty stores, catalogs, grocery and drug stores.
See Note 6 for a discussion of certain subsequent events.
RESULTS OF OPERATIONS
Sales and gross margin data from the Company's segments for the three
months ended fiscal 2000 compared to the same period last year were as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net sales:
Men's accessories $ 30,784 $ 28,084
Women's accessories 23,400 25,172
------------ ------------
Total net sales $ 54,184 $ 53,256
============ ============
Gross margin:
Men's accessories $ 11,916 $ 10,732
Women's accessories 6,980 8,152
------------ ------------
Total gross margin $ 18,896 $ 18,884
============ ============
Gross margin as a percentage of sales:
Men's accessories 38.7% 38.2%
Women's accessories 29.8% 32.4%
Total 34.9% 35.5%
</TABLE>
11
<PAGE> 12
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1999
NET SALES
For the three-month period ended September 30, 2000, net sales increased 1.7% to
$54,184,000 as compared to net sales of $53,256,000 for the same period last
year. Net sales of men's accessories increased 9.6% for the three-month period
ended September 30, 2000 as compared to the same period last year. The increase
in men's sales was attributable to increased mass merchant sales. Net sales of
women's accessories decreased 7.0% for the three-month period ended September
30, 2000 as compared to the same period last year. The decrease was attributable
to sales of lower women's fashion trend items and the loss of JONES NEW YORK(R)
handbag sales. However, the decrease was partially offset by a 14.9% increase in
women's small leather goods sales to certain department store and specialty
retailers.
GROSS MARGINS
Gross margins increased for the three-month period ended September 30, 2000,
$12,000, or 0.1% as compared to the same period for the prior year. As a
percentage of sales, gross margins decreased 0.6% for the three month period
ended September 30, 2000 as compared to the same period last year. The overall
decrease was due to higher close out sales of women's fashion trend accessories
resulting in the recognition of approximately $258,000 related to inventory
markdowns as compared to the same quarter in the prior year. However, the
overall gross margin percentage decrease was partially offset by a 0.5% increase
in gross margins related to the men's accessories segment.
OPERATING EXPENSES
Selling, general and administrative expenses as a percentage of net sales for
the three months ended September 30, 2000 increased 1.1% as compared to the same
period of the prior year. The increase resulted from higher wages, advertising
and rent expenses.
Depreciation and amortization expenses increased 27.0% to $1,058,000 for the
three months ended September 30, 2000, compared to $833,000 in the same period
of the prior year. The increase is attributable to capital expenditures related
to the leasehold improvements and equipment related to the new distribution
facility in Dallas, Texas, for women's accessories as well as additional
hardware and software applications.
Interest expense for the three-month period ended September 30, 2000 increased
$128,000 as compared to the same period for the prior year. The increase is
primarily related to higher interest rates during the first quarter of fiscal
2001.
The effective tax rate for the three months ended September 30, 2000 was 38.9%
which is consistent with the same period in the prior year.
Net income for the three-month period ended September 30, 2000 decreased 26.5%
to $2,035,000 or $.36 per diluted share, compared to net income of $2,768,000 or
$.47 per diluted share, for the same three months last year. The decrease in net
income was primarily due to lower margin sales mix of women's accessories and
increased selling, general and administrative expenses.
12
<PAGE> 13
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Generally, the Company's primary sources of liquidity are cash flows from
operations and the Company's lines of credit. The Company has two unsecured
domestic bank credit lines aggregating $90,000,000, which can be used for
seasonal borrowings and letters of credit. The Company's borrowings under its
credit lines were $57,525,000 and $65,175,000 as of September 30, 2000 and 1999,
respectively.
For the three months ended September 30, 2000, the Company's operating
activities used cash of $15,603,000 compared to $13,633,000 for the same period
last year. The increase was attributable to lower net income and higher
inventory and customer display fixture purchases.
Capital expenditures were $495,000 for the three months ended September 30,
2000. The decrease of $36,000 over the same prior year period is due to the
timing of capital investments during fiscal 2001. Management anticipates that
the Company's level of capital investment for fiscal 2001 will approximate the
prior year. Capital commitments for fiscal 2001 include additional equipment for
the Company's distribution facility in Dallas, Texas, as well as additional
hardware and software applications.
The Company examines the carrying value of its excess of cost over net assets
acquired (Goodwill) and other intangible assets as current events and
circumstances warrant to determine whether there are any impairment losses. If
indicators of impairment were present in intangible assets used in operations,
and future cash flows were not expected to be sufficient to recover the assets'
carrying amount, an impairment loss would be charged to expense in the period
identified. No event has been identified that would indicate an impairment of
the value of material intangible assets recorded in the consolidated financial
statements.
The Company has never paid a cash dividend on its Common Stock. The Company
currently intends to retain its earnings for the foreseeable future to provide
funds for the expansion of its business. The Company's existing credit
agreements currently contain covenants related to the maintenance of certain
financial ratios, which could impose certain limitations on the payment of
dividends.
See Note 6 for a discussion of the Company's stock repurchase program.
The Company believes it has adequate financial resources and access to
sufficient credit facilities to satisfy its future working capital needs.
SEASONALITY
The Company's quarterly sales and net income results are fairly consistent
throughout the fiscal year, with a seasonal increase during the second quarter.
INFLATION
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.
13
<PAGE> 14
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of financial condition and results of
operations and other sections of this Form 10-Q contain forward looking
statements that are based on current expectations, estimates and projections
about the industry in which the Company operates, management's beliefs and
assumptions made by management. In addition, other written or oral statements
which constitute forward-looking statements may be made by or on behalf of the
Company. Words such as "expects," "anticipates," "intends," "plans," "believes,"
"seeks," "estimates," or variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions which are difficult to predict. Therefore, actual outcomes and
results may differ materially from what is expressed or forecasted in such
forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
14
<PAGE> 15
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to interest rate risk on its long term debt. The Company
manages its exposure to changes in interest rates by the use of variable and
fixed interest rate debt. In addition the Company has hedged its exposure to
changes in interest rates on a portion of its variable debt by entering into a
interest rate swap agreement to lock in a fixed interest rate for a portion of
these borrowings. At September 30, 2000 the Company had borrowings under its
credit lines of $57,525,000 bearing a weighted-average interest rate of 7.55%.
The Company entered into a five-year interest rate swap agreement converting
$15,000,000 of outstanding indebtedness from a variable to a fixed interest
rate. The average receive rate is based on a 90 day LIBOR rate. At September 30,
2000, the receive and pay rates related to the interest rate swap were 7.69% and
6.52%, respectively. At September 30, 2000, the fair value of the interest rate
swap agreement was approximately $466,000. Interest differentials to be paid or
received because of the swap agreement are reflected as an adjustment to
interest expense over the related debt period. The potential impact of market
conditions on the fair value of the Company's indebtedness is not expected to be
material. Given that such lines of credit bear interest at floating market
interest rates, the fair value of amounts borrowed thereunder approximates
carrying value.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of stockholders was held on October 17, 2000.
(b) The matters voted upon were as follows:
(i) The election of three directors in Class III to serve for
three-year terms expiring in 2003, 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 nominee were as
follows:
<TABLE>
<S> <C> <C> <C>
Dr. James F. Gaertner
For 5,107,344 Against/Withheld 40,649 Abstain -0- Broker Non-votes -0-
Mr. Gene Stallings
For 5,107,344 Against/Withheld 40,649 Abstain -0- Broker Non-votes -0-
Mr. Roger R. Hemminghaus
For 5,107,344 Against/Withheld 40,649 Abstain -0- Broker Non-votes -0-
</TABLE>
Directors whose terms continued after the annual meeting are as
follows:
Mr. Marvin J. Girouard
Mr. J.S.B. Jenkins
Mr. C. A. Rundell, Jr.
Ms. Colombe M. Nicholas
15
<PAGE> 16
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended September
30, 2000. However, the Company filed a report on Form 8-K subsequent to the
quarter ended September 30, 2000 as listed below. The exhibits filed as a part
of this report are listed below.
(a) The following documents are filed as part of this report:
Exhibit No. Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
The Company filed a Form 8-K on October 16, 2000 regarding the press release
announcing its financial results for the first quarter of fiscal 2001.
16
<PAGE> 17
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
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/ Stanley T. Ninemire
--------------------------------------
Stanley T. Ninemire
Senior Vice President, Chief Financial
Officer and Treasurer
Date: November 13, 2000
17
<PAGE> 18
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
EXHIBIT INDEX
<TABLE>
<CAPTION>
Incorporated by Reference
(If applicable)
-------------------------------------------------------
Exhibit Number and Description Form Date File No. Exhibit
------------------------------ --------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
(4) Instruments defining the rights
of security holders, including
indentures
4.1 Certificate of Designations,
Powers, Preferences and
Rights of Series A Junior
Participating Cumulative
Preferred Stock of Tandy
Brands Accessories, Inc. S-1 11/02/90 33-37588 4.1
4.2 Form of Common Stock
Certificate of Tandy
Brands Accessories, Inc. S-1 11/02/90 33-37588 4.2
4.3 Form of Preferred Share
Purchase Rights Certificate
Of Tandy Brands
Accessories, Inc. S-1 11/02/90 33-37588 4.3
4.4 Rights Agreement dated
November 7, 1990,
Between Tandy Brands
Accessories, Inc.
And First National
Bank of Boston S-1 11/02/90 33-37588 10.5
(27) Financial Data Schedule
27.1 Financial Data Schedule N/A N/A N/A N/A
</TABLE>
18
