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: January 26, 1999
Date of Earliest Event Reported: January 22, 1999
TANDYCRAFTS, INC.
A DELAWARE CORPORATION
1-7258 75-1475224
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(Commission File Number) (IRS Employer Identification No.)
1400 Everman Parkway
Fort Worth, Texas 76140
(817) 551-9600
ITEM 5. OTHER EVENTS
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(a) On January 22, 1999, Registrant issued a press release announcing
the unaudited results of operations for the three- and six-month
periods ended December 31, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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(c) Exhibits.
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Exhibit
Number Description
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99 Copy of press release announcing the
unaudited results of operations for the three-
and six-month periods ended December 31, 1998.
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.
TANDYCRAFTS, INC.
Date: January 26, 1999 By:/s/ Michael J. Walsh
--------------------------
Michael J. Walsh,
President
Date: January 26, 1999 By:/s/ James D. Allen
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James D. Allen
Chief Financial Officer
For Immediate Release
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TANDYCRAFTS REPORTS SECOND QUARTER AND
FIRST HALF RESULTS
COMPANY REPURCHASED 500,000 SHARES OF COMMON STOCK
IN SIX-MONTH PERIOD
FT. WORTH, Texas (January 22, 1999) -- Tandycrafts, Inc. (NYSE: "TAC"), a
wholesaler and retailer of consumer and business products, today reported
results for the second quarter and first half of its 1999 fiscal year. Losses
were reported for both periods, primarily due to charges which were previously
disclosed in the Company's announcement of plans to close its leather and crafts
retail stores and related manufacturing operations.
Including previously-announced pretax charges of $14.6 million, Tandycrafts,
Inc. reported a net loss of $12.2 million ($1.00 per share), on net sales of
$52.9 million in the quarter ended December 31, 1998. Second quarter results
included a non-recurring $11.1 million pretax charge related to the closure of
leather and crafts retail stores and related manufacturing operations, and a
$3.5 million pretax charge primarily related to the Company's guaranty of bank
debt arising from the sale of Cargo Furniture and Accents. In the second
quarter of the previous fiscal year, the Company reported net income of $3.1
million ($0.24 per share) and net sales of $73.2 million.
Management indicated that 68% of the overall decrease in second quarter sales
was related to the divested Joshua's Christian Stores operation and declining
sales in the Leather and Crafts division. The balance of the decline in sales
was attributed to an exceptionally strong one-time promotion by the Frames and
Wall Decor division in the second quarter of FY1998, along with a reduction in
sales at the Novelties and Promotional division. The decrease in Novelties and
Promotional sales resulted from that division's strategy of focusing upon
larger, more profitable customers, overall softness in the licensed product
market and reduced sales of NBA licensed merchandise. Sales in the Office
Supplies division rose modestly, when compared with the second quarter of the
previous fiscal year.
Reflecting strong cash flows and the Company's continued commitment to
strengthening its balance sheet, Tandycrafts has reduced its outstanding long-
term debt to $32.5 million as of December 31, 1998. This represents a 29%
decrease when compared with long-term debt of $46.0 million outstanding a year
earlier. The Company also repurchased approximately 500,000 shares of its
common stock during the past six months.
"In the context of our long-term strategy for restructuring the Company with a
focus upon profitable and growing businesses, the second quarter was a busy,
productive period for Tandycrafts," commented Michael J. Walsh, President and
Chief Executive Officer of Tandycrafts, Inc. "The Board of Directors and
Tandycrafts' management devoted a considerable amount of time and effort towards
evaluating the Company's core competencies and identifying actions which can
maximize future shareholder values. This led to the difficult decision to close
our leather and crafts retail and manufacturing operations, which have been
unprofitable in recent periods, and we began executing the closure plan in early
January. The lagging performance of our leather business masked solid progress
and excellent growth potential in our Frames and Wall Decor and Office Supplies
divisions. By exiting the leather and crafts business and focusing upon our
other businesses, we believe the Company's long-term earnings potential will be
greatly enhanced."
For the six-month period ended December 31, 1999, the Company reported net sales
of $103.9 million, versus $128.6 million in the corresponding period of the
previous fiscal year. Approximately $22.9 million of the sales decrease was
related to the sale of Joshua's Christian Stores and the weak performance in the
Leather and Crafts division. The balance of the decline resulted from overall
softness in the licensed product market and management's decision to forego
certain unprofitable sales in the Novelties and Promotional products division.
Sales in the Frames and Wall Decor and the Office Supplies divisions increased
during the first half of FY1999, when compared with the prior-year period.
Tandycrafts reported a net loss of $11.2 million ($0.91 per share) for the six
months ended December 31, 1999, compared with net income of $4.0 million ($0.32
per share) in the year-earlier period. Operating results during the first six
months of FY1999 were negatively impacted by pretax charges totaling $14.6
million (described above).
"Our solid financial condition has enabled Tandycrafts to place its strategic
emphasis upon those consumer products operations that are profitable and which
offer above-average prospects for growth over the long term," stated James D.
Allen, Chief Financial Officer of the Company. "Additionally, we are continuing
to pursue investments which will allow the Company to improve productivity,
strengthen its corporate and divisional infrastructure and enhance prospects for
profitability in the 21st Century."
Tandycrafts, Inc. manufactures, distributes and/or retails products through four
distinct product-related divisions: Frames and Wall Decor, Leather and Crafts,
Office Supplies, and Novelties and Promotional. Its products are marketed and
sold through various channels, including direct-to-consumer (e.g., retail
stores, mail order, the Internet) and wholesale distribution (e.g., direct sales
force, telemarketing, outside sales representatives). The Company is
headquartered in Ft. Worth, Texas and its common stock is listed on the New York
Stock Exchange under the ticker symbol "TAC".
This press release includes statements that may constitute "forward-looking"
statements, usually containing the words "believe", "estimate", "project",
"expect" or similar expressions. These statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Factors that would cause or contribute to such differences include, but are not
limited to, continued acceptance of the Company's products in the marketplace,
competitive factors, dependence upon third-party vendors, and other risks
detailed in the Company's periodic report filings with the Securities and
Exchange Commission. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or changes
after the date of this release.
For further information, please contact:
James Allen, Chief Financial Officer at (817) 551-9600
Or R. Jerry Falkner, CFA, Investor Relations Counsel at (800) 377-9893
(Financial Highlights Follow)
<TABLE><S><C>
Three Months Ended Six Months Ended
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December 31, December 31, December 31, December 31,
1998 1997 1998 1997
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Net sales $ 52,853 $ 73,237 $ 103,918 $ 128,596
Operating costs and expenses:
Cost of goods sold 39,476 48,702 74,267 84,536
Selling, general and administrative 20,354 17,665 33,431 33,597
Restructuring charge 8,145 - 8,145 -
Depreciation and amortization 1,088 1,259 2,167 2,529
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Total operating costs and expenses 69,063 67,626 118,010 120,662
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Operating income (loss) (16,210) 5,611 (14,092) 7,934
Interest expense, net 591 911 1,083 1,773
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Income (loss) before income taxes (16,801) 4,700 (15,175) 6,161
Provision (benefit) for income taxes (4,578) 1,644 (3,960) 2,156
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Net income (loss) $ (12,223) $ 3,056 $ (11,215) $ 4,005
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Net income (loss) per share:
Basic and diluted ($1.00) $0.24 ($0.91) $0.32
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Weighted average common shares:
Basic 12,179 12,685 12,326 12,661
Diluted 12,184 12,685 12,330 12,661
</TABLE>
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