Tandy Brands Reports Fiscal 2010 Year-End and Fourth Quarter Earnings Results

DALLAS, Aug. 25 /PRNewswire-FirstCall/ -- Tandy Brands Accessories, Inc. (Nasdaq: TBAC) today reported its financial results for the fiscal year and fourth quarter ended June 30, 2010.

Fiscal 2010 net sales were $141.9 million, up 10 percent, compared to $129.0 million for the prior year.  Net income for fiscal 2010 was $1.2 million, or $0.17 per diluted share, compared to a net loss of $15.1 million, or ($2.18) per diluted share, in fiscal 2009.  

"Fiscal year 2010 was a transformational year for Tandy Brands, and we made significant progress toward stabilizing our operating platform and pursuing profitable growth," said Rod McGeachy, President and Chief Executive Officer of Tandy Brands.  "Disciplined expense management, facilities consolidation, and considerable improvements in working capital efficiencies resulted in improved bottom line results. Additionally, the successful integration of the Chambers acquisition propelled our top-line growth."

Fiscal 2010 and fiscal 2009 has been a period of significant transformation for Tandy Brands.  The results of both years have included unusual items as shown on the attached schedule.  Excluding these items, the company reported a fiscal 2010 adjusted net loss of $1.9 million, or ($0.26) per diluted share, compared with a fiscal 2009 adjusted net loss of $6.3 million, or ($0.91) per diluted share; a $4.4 million year over year improvement in adjusted net income.

The company also reported adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.7 million for fiscal 2010, which excluded charges for restructuring and certain acquisition-related items, compared to an adjusted EBITDA loss of $4.6 million in the prior year.  This represents a $6.3 million year-over-year improvement in adjusted EBITDA.  

Fiscal 2010 gross margins as a percentage of net sales improved to 37.0 percent, compared to 30.7 percent in fiscal 2009.  In addition to improved product sourcing, improvements in gross margins were primarily due to inventory write-downs of $6.9 million, or 5.4 margin percentage points, taken in fiscal 2009.  

Total selling, general and administrative (SG&A) expense for fiscal 2010 improved $1.9 million to $50.5 million from $52.4 million in the prior year.  This improvement from the prior year was primarily due to lower bad debt provisions and reduced salaries and benefits, travel, and professional service costs.

"While we continue to experience economic headwinds as sustained consumer spending remains challenged, we have made the necessary adjustments toward tight inventory and expense management," said McGeachy.  "Additionally, we continue to work with our retail partners to develop products and programs that fit their needs in order to drive organic growth."  

Fourth Quarter Results

Net sales for the quarter were $28.7 million, a 9 percent increase over net sales of $26.4 million reported in the same period last year.

The company reported a net loss of $3.4 million, or ($0.49) per diluted share, for the fourth quarter 2010, compared to a net loss of $2.5 million, or ($0.36) per diluted share, in the fourth quarter 2009.  Excluding the unusual items shown in the attached schedule, the company reported a fourth quarter 2010 adjusted net loss of $2.9 million, or ($0.42) per diluted share, a 12 percent improvement from the adjusted net loss of $3.3 million, or ($0.48) per diluted share, reported in the fourth quarter 2009.

The company also reported a fourth quarter 2010 adjusted EBITDA loss of $1.6 million, which excluded charges for restructuring and certain acquisition-related items, compared to an adjusted EBITDA loss of $3.2 million in the prior year quarter.  This represents a $1.6 million year-over-year improvement in adjusted EBITDA.  

Financial Position

The company ended fiscal 2010 with $32.4 million in working capital, including $18.6 million of receivables, $31.4 million of inventories, and borrowings of $9.4 million.  On May 10, 2010, the company's revolving line of credit was extended through October 31, 2012 and provides for more flexibility in its covenants.

Days of working capital improved to 104 days, down from 144 days in the prior year.  This was driven by lower bad debts and improved collections, inventory turning faster, and improved vendor terms.

"Overall, I am pleased with our fiscal year 2010 performance as we strengthened our financial position for future growth opportunities," said McGeachy.  "We made considerable progress in improving our cash cycle and solidifying our balance sheet as we look for opportunities to reinvest in our business."

Outlook

"Although economic headwinds persist, our turnaround strategy remains on pace, and we continue to focus on achieving sustainable profitability.  Looking ahead, we expect net revenues to remain flat or decline slightly, gross margins to remain relatively stable, and our SG&A run rate to be between $44 and $46 million, leading to continued improvements in profitability.  We continue to work to drive organic growth by expanding our branded and licensed product portfolio, expanding product categories and gaining market share through product design innovation, assortments and packaging," said McGeachy.  "We also continue to invest in our future by seeking opportunistic acquisitions in order to achieve our growth objectives."

Conference Call

Tandy Brands has scheduled a conference call for 11:00 a.m. Eastern Time (10:00 a.m. Central) tomorrow  to discuss the year-end and fourth quarter results.  To participate in the teleconference, investors should dial 877-317-6789 a few minutes before the start time and reference the Tandy Brands conference call. International callers should dial 1-412-317-6789. The conference call can also be accessed by visiting the investor relations section of the company's Web site, www.tandybrands.com.

A replay of the call will be available through September 2, 2010 and can be accessed by dialing 877-344-7529 and entering confirmation code 443783.  International callers may dial 1-412-317-0088. 

About Tandy Brands

Tandy Brands is a leading designer and marketer of branded men's, women's and children's accessories, including belts, gifts, small leather goods, eyewear, neckwear, and sporting goods.  Merchandise is marketed under various national as well as private brand names through all major retail distribution channels.

Safe Harbor Language

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted or expected results. Those risks include, among other things, the competitive environment in the industry in general and in the company's specific market areas, changes in costs of goods and services and economic conditions in general and in the company's specific market area. Those and other risks are more fully described in the company's filings with the Securities and Exchange Commission.

Our adjusted EBITDA, a non-GAAP measurement, is defined as net income (loss) before interest, taxes, depreciation and amortization, and certain acquisition related items.  Adjusted EBITDA is presented because we believe it provides useful information about our business activities and also is frequently used by securities analysts, investors, and other interested parties in evaluating a company's performance.  Not all companies utilize identical calculations; therefore, our presentation of adjusted EBITDA may not be comparable to other identically titled measures of other companies. EBITDA and adjusted EBITDA have limitations as analytical tools and you should not consider them in isolation, or as substitutes for analysis of our results of operations as reported under U.S. generally accepted accounting principles ("GAAP").  The following table reconciles our GAAP net income (loss) to adjusted EBITDA.

We have provided adjusted net income (loss) disclosures, non-GAAP measurements, as we believe it is important for our stakeholders to understand the impact of certain items on our statements of operations.  The following table reconciles our fiscal 2010 net income (loss) under GAAP to the adjusted net income (loss) disclosures.

SOURCE Tandy Brands Accessories, Inc.