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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 QUARTERLY PERIOD ENDED DECEMBER 31, 2002
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 and zip code)
(817) 548-0090
(Registrant's telephone number, including area code)
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.
X
Yes _______ No _______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
X
Yes _______ No _______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Number of shares outstanding
Class at February 11, 2003
COMMON STOCK, $1.00 PAR VALUE 5,926,198
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TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED DECEMBER 31, 2002
TABLE OF CONTENTS
================================================================================
PART I -- FINANCIAL INFORMATION
Item Page No.
1. Financial Statements 3 - 12
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13 - 17
3. Quantitative and Qualitative Disclosures About Market Risk 18
4. Controls and Procedures 18
PART II -- OTHER INFORMATION
Item
4. Submission of Matters to a Vote of Security Holders 19
6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
CERTIFICATIONS 21-22
EXHIBIT INDEX 23-26
2
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 Six Months
Ended Ended
December 31 December 31
---------------------- -----------------------
2002 2001 2002 2001
-------- -------- --------- -------
Net sales $ 66,222 $ 60,607 $ 126,250 $ 114,713
Cost of goods sold 42,993 39,391 82,236 74,464
-------- -------- --------- -------
Gross margin 23,229 21,216 44,014 40,249
Selling, general and administrative expenses 15,512 13,803 30,638 27,113
Depreciation and amortization 1,078 1,335 2,158 2,722
-------- -------- --------- -------
Total operating expenses 16,590 15,138 32,796 29,835
-------- -------- --------- -------
Operating income 6,639 6,078 11,218 10,414
Interest expense (749) (857) (1,407) (1,635)
Royalty and other income 45 3 46 12
-------- -------- --------- -------
Income before provision for income taxes and cumulative
effect of accounting change 5,935 5,224 9,857 8,791
Provision for income taxes 2,308 2,033 3,835 3,418
-------- -------- --------- -------
Net income before cumulative effect of accounting change 3,627 3,191 6,022 5,373
Cumulative effect of accounting change for
SFAS No. 142, net of income taxes of $369,000 - - (581) -
-------- -------- --------- -------
Net income $ 3,627 $ 3,191 $ 5,441 $ 5,373
======== ======== ========= =======
Earnings per common share
Before cumulative effect of accounting change $ 0.61 $ 0.55 $ 1.02 $ 0.94
Cumulative effect of accounting change - - (0.10) -
-------- -------- --------- -------
$ 0.61 $ 0.55 $ 0.92 $ 0.94
======== ======== ========= =======
Earnings per common share - assuming dilution
Before cumulative effect of accounting change $ 0.60 $ 0.55 $ 1.01 $ 0.93
Cumulative effect of accounting change - - (0.10) -
-------- -------- --------- -------
$ 0.60 $ 0.55 $ 0.91 $ 0.93
======== ======== ========= =======
Common shares outstanding 5,929 5,763 5,908 5,740
======== ======== ========= =======
Common shares outstanding - assuming dilution 6,019 5,794 5,995 5,760
======== ======== ========= =======
Cash dividends per common share None None None None
The accompanying notes are an integral part of these financial statements.
3
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FILE NUMBER 0 -18927
FORM 10 - Q
================================================================================
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
December 31, June 30,
2002 2002
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,428 $ 6,506
Accounts receivable, net 44,161 33,699
Inventories:
Raw materials and work in process 5,251 4,957
Finished goods 50,984 47,861
Other current assets 5,058 4,806
--------- -----------
Total current assets 107,882 97,829
--------- -----------
Property and equipment, at cost 30,550 29,441
Accumulated depreciation (15,777) (14,373)
--------- -----------
Net property and equipment 14,773 15,068
--------- -----------
Other assets:
Goodwill 11,480 12,467
Intangible assets, less amortization 5,139 5,403
Other assets 2,397 2,670
--------- -----------
Total other assets 19,016 20,540
--------- -----------
$ 141,671 $ 133,437
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,409 $ 12,755
Accrued expenses 8,830 6,857
--------- -----------
Total current liabilities 18,239 19,612
--------- -----------
Other liabilities:
Notes payable 33,376 30,000
Other noncurrent liabilities 3,541 3,161
--------- -----------
Total other liabilities 36,917 33,161
--------- -----------
Stockholders' equity:
Preferred stock, $1 par value, 1,000,000 shares authorized, none issued - -
Common stock, $1 par value, 10,000,000 shares authorized,
5,926,198 shares and 5,899,173 shares issued and outstanding
as of December 31, 2002 and June 30, 2002, respectively 5,926 5,899
Additional paid-in capital 23,020 22,690
Cumulative other comprehensive income (2,165) (1,706)
Retained earnings 59,734 54,293
Treasury stock, at cost 0 (512)
--------- -----------
Total stockholders' equity 86,515 80,664
--------- -----------
$ 141,671 $ 133,437
========= ===========
The accompanying notes are an integral part of these financial statements.
4
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
FILE NUMBER 0 -18927
FORM 10 - Q
================================================================================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
DECEMBER 31,
----------------------
2002 2001
-------- --------
Cash flows from operating activities:
Net income $ 5,441 $ 5,373
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Depreciation 1,983 2,008
Amortization 264 767
Cumulative effect of accounting change, net 581 -
Other (387) (322)
Change in assets and liabilities:
Accounts receivable (10,462) (5,053)
Inventories (3,417) 3,544
Other assets 140 (684)
Accounts payable (3,346) (2,668)
Accrued expenses 1,988 3,320
-------- --------
Net cash provided by (used for) operating activities (7,215) 6,285
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (1,109) (553)
-------- --------
Net cash used for investing activities (1,109) (553)
-------- --------
Cash flows from financing activities:
Exercise of employee stock options 95 -
Sale of stock to stock purchase program 775 621
Proceeds from borrowings 43,125 43,908
Payments under borrowings (39,749) (49,186)
-------- --------
Net cash provided by (used for) financing activities 4,246 (4,657)
-------- --------
Net increase (decrease) in cash and cash equivalents (4,078) 1,075
Cash and cash equivalents at beginning of period 6,506 79
-------- --------
Cash and cash equivalents at end of period $ 2,428 $ 1,154
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,012 $ 1,428
Income taxes 2,548 1,811
Noncash activities:
None.
The accompanying notes are an integral part of these financial statements.
5
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED 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 and six month periods ended
December 31, 2002 are not necessarily indicative of the results that may be
expected for the year ended June 30, 2003. For further information, refer to the
consolidated financial statements and footnotes thereto included in our 2002
Annual Report.
NOTE 2 - IMPACT OF NEW ACCOUNTING STANDARDS
Effective July 1, 2002, we adopted Statement of Financial Accounting
Standards, commonly referred to as SFAS, No. 142, "Goodwill and Other Intangible
Assets." Please refer to Note 6 for information regarding goodwill and other
intangible assets and the impact the adoption of this statement had on our
condensed consolidated financial statements.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations," effective for fiscal years
beginning after June 15, 2002. This statement addresses financial accounting and
reporting for legal obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. We adopted SFAS No.
143 during the first quarter of fiscal 2003. The adoption of this statement did
not have a material effect on our consolidated financial position or statements
of income, stockholders' equity and cash flows.
In August 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for Impairment or Disposal of Long-Lived Assets," effective for
fiscal years beginning after December 15, 2001. This statement addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. We adopted SFAS No. 144 during the first quarter of fiscal 2003. The
adoption of this statement did not have a material effect on our consolidated
financial position or statements of income, stockholders' equity and cash flows.
In July 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." This
statement addresses financial accounting and reporting for costs associated with
exit or disposal activities, such as restructurings, terminating employees
involuntarily and consolidating facilities. SFAS No. 146 is effective for exit
and disposal activities that are initiated after December 31, 2002. We do no not
expect the adoption of this statement to have a material effect on our
consolidated financial position or statements of income, stockholders' equity
and cash flows.
On December 31, 2002, the Financial Accounting Standards Board issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure."
This statement amends SFAS No. 123, "Accounting for Stock-Based Compensation,"
to provide alternative methods of transition to SFAS No. 123's fair value method
of accounting for stock-based employee compensation. SFAS No. 148 also amends
the disclosure provisions of SFAS No. 123 and APB Opinion No. 28, "Interim
Financial Reporting," to require disclosure in the summary of significant
accounting policies of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income and earnings per
share in annual and interim financial statements. While the Statement does not
amend SFAS No. 123 to require companies to account for employee stock options
using the fair value method, the disclosure provisions of SFAS No. 148 are
applicable to all companies with stock-based employee compensation, regardless
of whether they account for that compensation using the fair value method of
Statement 123 or the intrinsic value method of APB Opinion No. 25. SFAS No. 148
is effective for the first interim period beginning after December 15, 2002. We
do not expect the adoption of this statement to have a material effect on our
consolidated financial position or statements of income, stockholders' equity
and cash flows.
6
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 - COMPREHENSIVE INCOME
The following table illustrates the components of comprehensive income, net
of related tax, for the three and six months ended December 31, 2002 and 2001
(in thousands).
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
---------------------- ---------------------
2002 2001 2002 2001
------ ------ ------ ------
Net income $ 3,627 $ 3,191 $ 5,441 $ 5,373
Foreign currency translation adjustments 34 (246) (235) (307)
Fair Value of interest rate swap 74 89 (224) (926)
------ ------ ------ ------
Comprehensive income $ 3,735 $ 3,034 $ 4,982 $ 4,140
====== ====== ====== ======
7
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share amounts).
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
----------------------- --------------------
2002 2001 2002 2001
------- ------ ------- -----
Numerator for basic and diluted earnings per
share:
Net income before cumulative effect of
accounting change $ 3,627 $ 3,191 $ 6,022 $ 5,373
Cumulative effect of accounting change for
SFAS No. 142, net of income taxes - - (581) -
======= ====== ======= =====
Net income $ 3,627 $ 3,191 $ 5,441 $ 5,373
======= ====== ======= =====
Denominator:
Weighted average shares outstanding 5,913 5,750 5,892 5,727
Contingently issuable shares 16 13 16 13
------- ------ ------- -----
Denominator for basic earnings per
share - weighted average shares 5,929 5,763 5,908 5,740
Effect of dilutive securities:
Employee stock options 66 29 73 18
Director stock options 24 2 14 2
------- ------ ------- -----
Dilutive potential common shares 90 31 87 20
Denominator for diluted earnings per
share - adjusted weighted - average
shares 6,019 5,794 5,995 5,760
======= ====== ======= =====
Earnings per common share
Before cumulative effect of accounting change $ 0.61 $ 0.55 $ 1.02 $ 0.94
Cumulative effect of accounting change - - (0.10) -
------- ------ ------- -----
$ 0.61 $ 0.55 $ 0.92 $ 0.94
======= ====== ======= =====
Earnings per common share - assuming dilution
Before cumulative effect of accounting change $ 0.60 $ 0.55 $ 1.00 $ 0.93
Cumulative effect of accounting change - - (0.10) -
------- ------ ------- -----
$ 0.60 $ 0.55 $ 0.91 $ 0.93
======= ====== ======= =====
8
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 - DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
We sell our 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, golf pro
shops, sporting goods stores and the retail exchange operations of the United
States military. To facilitate our internal operations as well as our customer
relationships, we organize our products along men's and women's product lines.
As a result, we have two reportable segments: men's accessories, consisting of
belts, wallets, suspenders and other small leather goods and women's
accessories, consisting of belts, wallets, handbags, socks, scarves, hats and
hair accessories. We allocate general corporate expenses to each segment based
on the respective segment's asset base. We allocate depreciation and
amortization expense related to assets recorded on our corporate accounting
records to each segment as described above. We measure profit or loss on each
segment based on income or loss before taxes utilizing the accounting policies
consistent in all material respects with those described in Note 1 of our 2002
Annual Report. No inter-segment revenue is recorded.
The following table sets forth information regarding operations and assets
by reportable segment (in thousands).
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- --------------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenue from external customers:
Men's accessories $ 30,605 $ 30,143 $ 60,848 $ 57,285
Women's accessories 35,617 30,464 65,402 57,428
-------- -------- -------- --------
$ 66,222 $ 60,607 $126,250 $114,713
======== ======== ======== ========
Operating income(1):
Men's accessories 3,131 3,329 5,606 5,595
Women's accessories 3,508 2,749 5,612 4,819
-------- -------- -------- --------
$ 6,639 $ 6,078 $ 11,218 $ 10,414
======== ======== ======== ========
Interest expense (749) (857) (1,407) (1,635)
Other income(2) 45 3 46 12
-------- -------- -------- --------
Income before income taxes and cumulative
effect of accounting change $ 5,935 $ 5,224 $ 9,857 $ 8,791
======== ======== ======== ========
Depreciation and amortization expense:
Men's accessories $ 586 $ 822 $ 1,186 $ 1,667
Women's accessories 492 513 972 1,055
-------- -------- -------- --------
$ 1,078 $ 1,335 $ 2,158 $ 2,722
======== ======== ======== ========
Capital expenditures:
Men's accessories $ 47 $ -- $ 203 $ --
Women's accessories 33 310 145 451
Corporate 338 94 761 102
-------- -------- -------- --------
$ 418 $ 404 $ 1,109 $ 553
======== ======== ======== ========
(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
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS
Effective July 1, 2002, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets." This statement changed the accounting for goodwill and
indefinite-lived intangible assets from an amortization approach to an
impairment-only approach. The SFAS No. 142 goodwill impairment model is a
two-step process. The first step compares the fair value of a reporting unit
that has goodwill assigned to it, to its carrying value. We estimate the fair
value of a reporting unit using discounted cash flow analysis. If the fair value
of the reporting unit is determined to be less than its carrying value, a second
step is performed to compute the amount of goodwill impairment, if any. Step two
allocates the fair value of the reporting unit to the reporting unit's net
assets other than goodwill. The excess of the fair value of the reporting unit
over the amounts assigned to its net assets other than goodwill is considered
the implied fair value of the reporting unit's goodwill. The implied fair value
of the reporting unit's goodwill is then compared to the carrying value of its
goodwill. Any shortfall represents the amount of goodwill impairment.
Using the SFAS No. 142 approach described above, we recorded a transitional
goodwill impairment charge during the first quarter of fiscal 2003 of $950,000
($581,000 net of tax), presented as a cumulative effect of accounting change.
This charge related to our women's segment of products.
The transitional impairment charge resulted from application of the new
impairment methodology introduced by SFAS No. 142. Previous accounting rules
incorporated a comparison of carrying value to undiscounted cash flows, whereas
new rules require a comparison of carrying value to fair value, which is lower.
Under previous requirements, no goodwill impairment would have been recorded on
July 1, 2002.
Pursuant to SFAS No. 142, goodwill and indefinite-lived intangible assets
must be tested for impairment annually at the same time every year, and in
between annual testing dates if an event occurs or circumstances change that
would more likely than not reduce the fair value of the reporting unit below its
carrying value. In conjunction with the adoption of SFAS No. 142, we reassessed
the useful lives and the classification of our finite-lived acquired intangible
assets and determined that no revisions were necessary. The following table
illustrates the gross carrying amount and accumulated amortization of our
acquired intangible assets as of December 31, 2002 and June 30, 2002 (in
thousands).
DECEMBER 31, JUNE 30,
2002 2002
------------ --------
Amortized intangible assets
(various, principally tradenames):
Gross carrying amount $ 8,774 $ 8,774
======== =======
Accumulated amortization $ (3,635) $ (3,371)
======== =======
Net amortized intangible assets $ 5,139 $ 5,403
======== =======
10
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
Amortization expense for acquired finite-lived intangible assets during the
six months ended December 31, 2002 was $264,000. The following table illustrates
our estimated amortization expense for the remainder of fiscal 2003 through June
30, 2007.
Estimated amortization expense :
Fiscal year ending 6/30/03 $ 242,000
Fiscal year ending 6/30/04 394,000
Fiscal year ending 6/30/05 361,000
Fiscal year ending 6/30/06 361,000
Fiscal year ending 6/30/07 361,000
The following table reconciles net income, earnings per common share and
earnings per share, assuming dilution, adjusted to exclude amortization expense
recognized in such periods related to goodwill (in thousands except per share
amounts).
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
------------------------- ---------------------
2002 2001 2002 2001
------ ------ ------- ------
Reported net income before cumulative effect
of accounting change $ 3,627 $ 3,191 $ 6,022 $ 5,373
Add back after-tax amounts:
Goodwill amortization - 157 - 313
------- ------- -------- -------
Adjusted net income before cumulative effect
of accounting change $ 3,627 $ 3,348 $ 6,022 $ 5,686
======= ======= ======== =======
Earnings per common share before accounting
change:
Reported net income $ 0.61 $ 0.55 $ 1.02 $ 0.94
Goodwill amortization - 0.03 - 0.05
------- ------- -------- -------
Adjusted basic earnings per common share
before accounting change $ 0.61 $ 0.58 $ 1.02 $ 0.99
======= ======= ======== =======
Earnings per share - assuming dilution before
accounting change:
Reported net income $ 0.60 $ 0.55 $ 1.01 $ 0.93
Goodwill amortization - 0.03 - 0.05
------- ------- -------- -------
Adjusted earnings per share - assuming dilution
before accounting change $ 0.60 $ 0.58 $ 1.01 $ 0.98
======= ======= ======== =======
11
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)
The following table illustrates the changes in the carrying amount of
goodwill by reportable segment for the six months ended December 31, 2002.
JUNE 30, IMPAIRMENT DECEMBER 31,
2002 LOSSES OTHER (1) 2002
-------- ---------- --------- ------------
Men's accessories $ 9,733 $ - $ (37) $ 9,696
Women's accessories 2,734 (950) - 1,784
-------- ----- ----- -------
Total $ 12,467 $ (950) $ (37) $ 11,480
======== ===== ===== =======
(1) Difference due to foreign currency translation adjustments.
NOTE 7 - SUBSEQUENT EVENT (EMPLOYEE BENEFIT PLAN)
On January 1, 2003, the Company adopted the Tandy Brands Accessories,
Inc. Supplemental Executive Retirement Plan (the "SERP") for certain of its
corporate officers. The SERP provides that upon retirement, a participant will
receive annual benefits (or a discounted lump-sum at the time of retirement in
lieu of annual benefits) which, when added to Social Security retirement
benefits, generally equal the participant's target percentage of 60% of the
average of the highest annual salary and bonus for any three years. If the
participant retires before the age of 65, the benefit is reduced by 5% for each
year the participant age is less than 65.
12
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
We are 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. Our product line also includes handbags, socks, scarves, gloves,
hats, hair accessories, suspenders, cold weather accessories and sporting goods
accessories. We market our merchandise under a broad portfolio of nationally
recognized licensed and proprietary brand names, including DOCKERS(R),
LEVI'S(R), JONES NEW YORK(R), PERRY ELLIS(R), ROLFS(R), HAGGAR(R), WOOLRICH(R),
JORDACHE(R), INDIAN MOTORCYCLE(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. We sell our 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, golf pro
shops, sporting goods stores and the retail exchange operations of the United
States military.
RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED DECEMBER 31, 2002 COMPARED TO THE THREE AND SIX
MONTHS ENDED DECEMBER 31, 2001
NET SALES AND GROSS MARGINS
The following table illustrates sales and gross margin data from our
reportable segments for the three and six months ended December 31, 2002
compared to the same period last year.
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------ -----------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales:
Men's accessories $ 30,605 $ 30,143 $ 60,848 $ 57,285
Women's accessories 35,617 30,464 65,402 57,428
-------- -------- -------- --------
Total net sales $ 66,222 $ 60,607 $ 126,250 $ 114,713
======== ======== ======== ========
Gross margin:
Men's accessories $ 11,883 $ 11,555 $ 22,962 $ 21,703
Women's accessories 11,346 9,661 21,052 18,546
-------- -------- -------- --------
Total gross margin $ 23,229 $ 21,216 $ 44,014 $ 40,249
======== ======== ======== ========
Gross margin as a percentage of sales:
Men's accessories 38.8% 38.3% 37.7% 37.9%
Women's accessories 31.9% 31.7% 32.2% 32.3%
Total 35.1% 35.0% 34.9% 35.1%
13
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
For the three-month period ended December 31, 2002, net sales increased
9.3% to $66,222,000 compared to net sales of $60,607,000 for the same period
last year. Net sales of men's accessories increased 1.5% for the three month
period ended December 31, 2002 compared to the same period last year. We
attribute the increase in net sales of men's accessories to increased mass
merchant store orders and, despite a difficult retail environment, increased
sales of men's small leather goods at the department store level. Net sales of
women's accessories increased 16.9% for the three month period ended December
31, 2002 compared to the same period last year. We attribute the increase in net
sales of women's accessories, to higher sales of our Rolfs(R) handbags, licensed
small leather goods and belts such as LEVI'S(R) and DOCKERS(R) as well as
increased sales of women's mass merchant accessories sales. For the six month
period ended December 31, 2002, net sales increased 10.1%,to $126,250,000
compared to net sales of $114,713,000 for the same period last year. The sales
increases were attributable to higher men's mass merchant accessories sales as
well as women's accessories sales increases.
Gross margins increased by $2,013,000 for the three month period ended
December 31, 2002, or 9.5% compared to the same period last year. As a
percentage of sales, gross margins increased 0.1% for the three month period
ended December 31, 2002 compared to the same period last year. The overall
increase was due to slightly higher margin sales of men's and women's small
leather goods sales as compared to the same period last year which offset the
gross margins from sales increases related to our mass merchant customers. For
the six-month period ended December 31, 2002, the gross margin percentage
decreased .2% compared to the same period last year. The overall decrease was
due to a greater sales mix weighted towards mass merchant accessories during the
first quarter of fiscal 2003 and direct sales shipments of women's accessories
to Payless Shoes.
OPERATING EXPENSES
Selling, general and administrative expenses as a percentage of net sales
for the three months ended December 31, 2002 increased 0.6% compared to the same
period last year. The increase resulted from higher salary expenses as well as
increased distribution labor due to the West Coast dock strike which totaled
$383,000. For the six-month period ended December 31, 2002, selling, general and
administrative expenses as a percentage of net sales increased .7% compared to
the same period of the prior year. The increase resulted from higher salary
expense due to nonrecurring costs associated with the implementation of
distribution software in our Dallas, Texas distribution center totaling
$290,000, higher compensation expense totaling $164,000 as well as severance
costs totaling $430,000.
Depreciation and amortization expenses as a percentage of net sales for the
three and six months ended December 31, 2002 decreased 0.6% and 0.7%, for the
same periods of the prior year, respectively. We attribute this decrease
primarily to the adoption of SFAS No. 142 "Goodwill and Other Intangible
Assets," in which goodwill is no longer amortized (see note 6 to the condensed
consolidated financial statements). Goodwill amortization expense for the same
three and six month period in the prior year was approximately $255,000 and
$510,000, respectively.
Interest expense for the three and six month periods ended December 31,
2002 decreased $108,000 and $228,000, respectively, compared to the same period
last year. This decrease primarily relates to lower interest rates as well as
lower debt levels compared to the same period last year.
The effective tax rate for the three and six months ended December 31, 2002
was 38.9%, which is consistent with the same period last year.
Net income for the three month period ended December 31, 2002 increased
13.7% to $3,627,000, or $.60 per diluted share, compared to net income of
$3,191,000, or $.55 per diluted share for the same period in the prior year. Net
income, before the cumulative effect of accounting change resulting from the
adoption of SFAS No. 142, for the six month period ended December 31, 2002
increased 12.1% to $6,022,000, or $1.01 per diluted share, compared to net
income of $5,373,000, or $.93 per diluted share, for the same period last year.
In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets." Under the new rules, goodwill and
indefinite-lived intangible assets are no longer amortized but are reviewed
annually for impairment. Separable intangible assets that do not have an
indefinite life will continue to be amortized over their useful lives.
14
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
As discussed in our 2002 Annual Report, the required adoption of SFAS No.
142 is considered a change in accounting principle and the cumulative effect of
adopting this standard resulted in a non-cash after-tax charge in the first
quarter of fiscal 2003 of $581,000, or $(0.10) per diluted share. This amount
does not affect our on-going operations. The adoption of the new accounting
standard will result in an annual reduction in amortization expense of
approximately $1 million.
Net income, after the cumulative effect of accounting change resulting from
the adoption of SFAS No. 142, for the six month period ended December 31, 2002
was $5,441,000, or $.91 per diluted share, compared to net income of $5,373,000,
or $.93 per diluted share, for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended December 31, 2002, our operating activities used
cash of $7,215,000, compared to providing cash of $6,285,000 for the same period
last year. The cash provided from operations during fiscal 2002 was the result
of an introduction of improved inventory control measures. The usage of cash
during the six months ended December 31, 2002 was attributable to the timing of
disbursements related to fall season inventory procurement which closely
approximates the current seasonality of our business.
Capital expenditures totaled $1,109,000 for the six months ended December
31, 2002, an increase of $556,000 from the same period last year. We attribute
this increase to the implementation of a distribution software application
during the first and second quarter of fiscal 2003. We anticipate that our
capital expenditures for fiscal 2003 will approximate our capital investments of
property and equipment for fiscal 2002. Capital commitments for fiscal 2003
include additional equipment for our distribution facility in Dallas, Texas, as
well as additional hardware and software applications. We expect to fund our
fiscal 2003 capital commitments through cash flows from operations and drawing
on our existing credit facility.
Generally, our primary sources of liquidity are cash flows from operations
and our line of credit. We have an $80,000,000 committed secured revolving
credit facility, which can be used for seasonal borrowings and letters of
credit. This credit facility is secured by substantially all of our assets along
with our subsidiaries' assets and requires us to maintain certain financial
covenants which, if not maintained, could adversely impact our liquidity
position. Our borrowings under our credit facility were $33,376,000 as of
December 31, 2002 and $42,122,000 as of December 31, 2001. As of December 31,
2002, we had approximately $35,777,000 of credit available to us under our
credit facility.
We have never paid a cash dividend on our common stock. We currently intend
to retain earnings for the foreseeable future to provide funds for the expansion
of our business and the reduction of debt. Our existing credit facility
restricts our ability to pay dividends.
We believe we have adequate financial resources and access to sufficient
credit lines to satisfy our future working capital needs.
OFF BALANCE SHEET ARRANGEMENTS
We do not have transactions, arrangements or relationships with "special
purpose" entities, nor do we have any off balance sheet debt.
15
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
CRITICAL ACCOUNTING POLICIES
The preparation of our consolidated financial statements in accordance with
accounting principles generally accepted in the United States requires the use
of estimates that affect the reported value of assets, liabilities, revenues and
expenses. These estimates are based on historical experience and various other
factors we believe to be reasonable under the circumstances, the results of
which form the basis for our conclusions. We continually evaluate the
information used to make these estimates as the business and economic
environment changes. Actual results may differ from these estimates under
different assumptions or conditions. The use of estimates is pervasive
throughout the consolidated financial statements, but the accounting policies
and estimates considered most critical are as follows:
REVENUES
We recognize revenue when merchandise is shipped to customers and title to
the goods has passed to the customer. We record sales returns and allowances at
the time we can reasonably estimate the amounts.
INVENTORIES
Inventories are stated at the lower of cost (principally standard cost
which approximates actual cost on a first-in, first-out basis) or market. Cost
includes materials, direct and indirect labor and factory overhead. Market, with
respect to raw materials, is replacement cost; and for work-in-process and
finished goods, it is net realizable value. If circumstances arise in which the
market value of items in inventory decline below cost, an inventory markdown
would be estimated and charged to expense in the period identified. We closely
monitor fashion trend items and anticipate additional inventory markdowns if
market indications in fashion trends justify further reserves.
GOODWILL
We adopted the provisions of SFAS No. 142, effective July 1, 2002. This
statement changed the accounting for goodwill and indefinite-lived intangible
assets from an amortization approach to an impairment-only approach. The SFAS
No. 142 goodwill impairment model is a two-step process. The first step compares
the fair value of a reporting unit that has goodwill assigned to it, to its
carrying value. We estimate the fair value of a reporting unit using discounted
cash flow analysis. If the fair value of the reporting unit is determined to be
less than its carrying value, a second step is performed to compute the amount
of goodwill impairment, if any. Step two allocates the fair value of the
reporting unit to the reporting unit's net assets other than goodwill. The
excess of the fair value of the reporting unit over the amounts assigned to its
net assets other than goodwill is considered the implied fair value of the
reporting unit's goodwill. The implied fair value of the reporting unit's
goodwill is then compared to the carrying value of its goodwill. Any shortfall
represents the amount of goodwill impairment.
We continually evaluate whether events and circumstances have occurred that
indicate the remaining balance of goodwill may not be recoverable. In evaluating
impairment, we estimate the sum of the expected future cash flows derived from
such goodwill. Such evaluations for impairment are significantly impacted by
estimates of future revenues, costs and expenses and other factors.
16
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
DERIVATIVES
Our risk management policy as it relates to derivative investments is to
mitigate, subject to market conditions, against interest rate risk. We do not
enter into any derivative investments for the purpose of speculative investment.
We reevaluate our overall risk management philosophy as business conditions
arise.
SEASONALITY
Our quarterly sales, net income and use of cash results are fairly
consistent throughout the fiscal year, with a seasonal increase during the
second quarter.
INFLATION
Although our operations are affected by general economic trends, we do not
believe inflation has had a material effect on our results of operations.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward looking statements that are based on
current expectations, estimates and projections about the industry in which we
operate, 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 our behalf. Words such as "expect," "anticipate," "intend,"
"plan," "believe," "seek," "estimate," or variations of such words and similar
expressions are intended to identify 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 these forward-looking statements. We undertake no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
17
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk on our long-term debt. We manage our
exposure to changes in interest rates by the use of variable and fixed interest
rate debt. In addition, we have hedged our exposure to changes in interest rates
on a portion of our variable debt by entering into an interest rate swap
agreement to lock in a fixed interest rate for a portion of these borrowings. At
December 31, 2002, our borrowings under our credit facility totaled $33,376,000,
bearing a weighted-average interest rate of 4.44%. On July 1, 2001, we entered
into a three year interest rate swap agreement with Wells Fargo Bank, N.A.,
which expires on June 27, 2004, converting $30,000,000 of outstanding
indebtedness from a variable to a fixed interest rate. The average receive rate
is based on a 90-day LIBOR rate. At December 31, 2002, the receive rates related
to the interest rate swap were 1.81% and the pay rates related to interest rate
swap were 5.60%. Interest differentials paid or received under the swap
agreement are reflected as an adjustment to interest expense when paid. The
interest rate swap agreement represents a valid cash flow hedge investment under
SFAS No. 133. As such, during fiscal 2003 and 2002, changes in the fair value of
the interest rate swap were recognized as other comprehensive income with the
fair value at December 31, 2002, approximating ($2,065,000). The potential
impact of market conditions on the fair value of our 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.
Theoretically, we are also exposed to market risk with respect to changes
in the global price level of certain commodities used in the production of our
products. We routinely purchase leather hides during the year for use in the
manufacture of men's belts. We also purchase a substantial amount of leather
items from third-party suppliers. An unanticipated material increase in the
market price of leather could increase the cost of these products to us and
therefore have a negative effect on our results of operations.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the date of this report, we carried out
an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 13a-14 of the Exchange Act. Based upon that
evaluation, our Chief Executive Officer and our Chief Financial Officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to us (including our consolidated
subsidiaries) required to be included in our Exchange Act filings.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the date
we carried out our evaluation.
18
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We held our 2002 Annual Meeting of Stockholders on October 16, 2002. The
stockholders voted on the following matters at the meeting:
1. The re-election of J.S.B. Jenkins to our board of directors to serve as
a Class III director for a three year term expiring at the 2005 annual meeting
of stockholders, or until his successor is elected and qualified. The
stockholders re-elected Mr. Jenkins to our board of directors. The following
table indicates the number of votes cast for, the number of votes withheld and
the number of broker non-votes with respect to the election of Mr. Jenkins.
FOR WITHHELD BROKER NON-VOTES
- --- -------- ----------------
4,778,580 692,611 -0-
The following directors' terms continued after the 2002 Annual Meeting:
Ms. Colombe M. Nicholas
Dr. James F. Gaertner
Mr. Gene Stallings
Mr. Roger R. Hemminghaus
Mr. C.A. Rundell, Jr.
2. To adopt and approve the Tandy Brands Accessories, Inc. 2002 Omnibus
Plan. The stockholders approved this proposal. The following table indicates the
number of votes cast for, the number of votes cast against, the number of
abstentions and the number of broker non-votes with respect to this matter.
FOR AGAINST ABSTAIN BROKER NON-VOTES
- --- ------- ------- ----------------
2,144,936 1,340,204 59,481 1,926,569
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
A list of exhibits filed as part of this report is set forth in the Exhibit
Index, which immediately precedes such exhibits and is incorporated herein by
reference.
(b) Reports on Form 8-K.
We filed a Form 8-K on October 17, 2002 to report the issuance of the press
release announcing our financial results for the first quarter of fiscal 2003.
We filed a Form 8-K on January 22, 2003 to report the issuance of the press
release announcing our financial results for the second quarter of fiscal 2003.
19
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/ Mark J. Flaherty
--------------------------------------
Mark J. Flaherty
Chief Financial Officer
Date: February 12, 2003
20
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
CERTIFICATION BY CHIEF EXECUTIVE OFFICER
I, J.S.B. Jenkins, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tandy Brands
Accessories, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 12, 2003 /s/ J.S.B. Jenkins
--------------------------------------
J.S.B. Jenkins
Chief Executive Officer
21
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
CERTIFICATION BY CHIEF FINANCIAL OFFICER
I, Mark J. Flaherty, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Tandy Brands
Accessories, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: February 12, 2003 /s/ Mark J. Flaherty
----------------------------------------
Mark J. Flaherty
Chief Financial Officer
22
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
EXHIBIT INDEX
Incorporated by Reference
(if applicable)
-------------------------------------------------------------------
Exhibit Number and Description Form Date File No. Exhibit
------------------------------ ---- ---- -------- -------
(3) Articles of Incorporation and By-laws
3.1 Certificate of Incorporation of Tandy
Brands Accessories, Inc. S-1 11/02/90 33-37588 3.1
3.2 By-laws of Tandy Brands
Accessories, Inc. S-1 11/02/90 33-37588 3.2
3.3 Amendment No. 1 to By-laws of
Tandy Brands Accessories, Inc. 10-Q 5/10/02 0-18927 3.3
(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 Form of Rights Certificate of Tandy
Brands Accessories, Inc. 8-K 11/02/99 0-18927 4.5
4.5 Amended and Restated Rights
Agreement dated October 19, 1999,
between Tandy Brands Accessories,
Inc. and Bank Boston, N.A. 8-K 11/02/99 0-18927 4.6
4.6 Amendment to Rights Agreement
dated October 19, 1999, between
Tandy Brands Accessories, Inc. and
Fleet National Bank (f.k.a. Bank
Boston, N.A.) 10-Q 05/10/02 0-18927 4.7
(10) Material Contracts
10.1 Tandy Brands
Accessories, Inc. 1991
Stock Option Plan* S-1 11/02/90 33-37588 10.8
10.2 Form of Stock Option
Agreement - 1991 Stock
Option Plan* S-1 11/02/90 33-37588 10.9
23
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
EXHIBIT INDEX
Incorporated by Reference
(if applicable)
--------------------------------------------------
Exhibit Number and Description Form Date File No. Exhibit
------------------------------ ---- ---- -------- -------
10.3 Tandy Brands Accessories,
Inc. Benefit Restoration
Plan and related Trust
Agreement and Amendments
No. 1 and 2 thereto* 10-K 09/25/97 0-18927 10.14
10.4 Form of Indemnification
Agreement between
Tandy Brands Accessories,
Inc. and each of its Directors
and Officers S-1 11/02/90 33-37588 10.15
10.5 Office Lease Agreement
dated March 6, 1991,
between John Hancock
Mutual Life Insurance
Co. and Tandy Brands
Accessories, Inc. relating
to the corporate offices S-1 11/02/90 33-37588 10.16
10.6 Tandy Brands Accessories,
Inc. Non-Qualified Formula
Stock Option Plan for Non-
Employee Directors* S-8 02/10/94 33-75114 28.1
10.7 Tandy Brands Accessories,
Inc. 1993 Employee Stock
Option Plan and form of Stock
Option Agreement thereunder* S-8 02/10/94 33-75114 28.2
10.8 Tandy Brands Accessories,
Inc. Non-Qualified Stock
Option Plan for Non-Employee
Directors* S-8 02/10/94 33-75114 28.3
10.9 Tandy Brands Accessories,
Inc. 1995 Stock Deferral Plan
for Non-Employee Directors* S-8 06/03/96 33-08579 99.1
10.10 Tandy Brands Accessories,
Inc. 1997 Employee Stock
Option Plan* S-8 12/12/97 33-42211 99.2
24
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
EXHIBIT INDEX
Incorporated by Reference
(if applicable)
-------------------------------------------------------------------
Exhibit Number and Description Form Date File No. Exhibit
------------------------------ ---- ---- -------- -------
10.11 Tandy Brands Accessories,
Inc. Employees Investment
Plan as Amended and
Restated Effective June 1,
2000* 10-K 09/26/00 0-18927 10.39
10.12 Credit Agreement Among
Tandy Brands Accessories,
Inc. as the Borrower, Wells
Fargo HSBC Trade Bank,
N.A. as Administrative Agent and as
Lender, and certain Financial
Institutions, as Lenders and Wells
Fargo Bank, N.A. as Arranger as of
June 27, 2001 10-K 09/25/01 0-18927 10.42
10.13 ISDA Master Agreement
between Tandy Brands
Accessories, Inc. and
Wells Fargo Bank, N.A.,
dated as of June 27, 2001 10-K 09/25/01 0-18927 10.42
10.14 Tandy Brands
Accessories, Inc. Stock Purchase
Program* S-8 02/12/02 33-55436 99.5
10.15 Limited Consent and
Waiver dated November 5, 2001
between Tandy Brands Accessories,
Inc. and Wells Fargo HSBC Trade
Bank, N.A. as Administrative Agent
under the Agreement 10-Q 11/13/01 0-18927 10.43
10.16 Amendment No. 2 to
the Tandy Brands
Accessories, Inc. 1997
Employee Stock Option Plan *
10-Q 5/10/02 0-18927 10.44
10.17 Amendment No. 4 to the Tandy
Brands Accessories, Inc.
Nonqualified Formula Stock Option
Plan For Non-Employee Directors *
10-Q 5/10/02 0-18927 10.44
10.18 Nonqualified Stock Option
Agreement for Non-Employee
Directors, dated October 16, 2001, by
and between Tandy Brands
Accessories, Inc. and Dr. James F.
Gaertner* S-8 5/15/02 33-88276 10.2
25
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
================================================================================
EXHIBIT INDEX
Incorporated by Reference
(if applicable)
-------------------------------------------------------------------
Exhibit Number and Description Form Date File No. Exhibit
------------------------------ ---- ---- -------- -------
10.19 Nonqualified Stock Option
Agreement for Non-Employee
Directors, dated October 16, 2001, by
and between Tandy Brands
Accessories, Inc. and Marvin J.
Girouard* S-8 5/15/02 33-88276 10.3
10.20 Nonqualified Stock Option
Agreement for Non-Employee
Directors, dated October 16, 2001, by
and between Tandy Brands
Accessories, Inc. and Gene Stallings* S-8 5/15/02 33-88276 10.4
10.21 Nonqualified Stock Option
Agreement for Non-Employee
Directors, dated October 16, 2001, by
and between Tandy Brands
Accessories, Inc. and Roger R.
Hemminghaus* S-8 5/15/02 33-88276 10.5
10.22 Nonqualified Stock Option
Agreement for Non-Employee
Directors, dated October 16, 2001, by
and between Tandy Brands
Accessories, Inc. and Colombe M.
Nicholas* S-8 5/15/02 33-88276 10.6
10.23 First Amendment to Credit
Agreement between Tandy Brands
Accessories, Inc. and Wells Fargo
HSBC Trade Bank, NA, dated June
28, 2002 10-K 9/27/02 0-18927 10.23
10.24 Tandy Brands Accessories, Inc.
2002 Omnibus Plan* 10-Q 11/12/02 0-18927 10.24
10.25 Tandy Brands Accessories, Inc.
Supplemental Executive Retirement
Plan* ** N/A N/A N/A N/A
(99) Other Exhibits
99.1 Certification pursuant to Section
906 of Sarbanes-Oxley Act (Chief
Executive Officer)** N/A N/A N/A N/A
99.2 Certification pursuant to Section
906 of Sarbanes-Oxley Act (Chief
Financial Officer)** N/A N/A N/A N/A
* Management contract or compensatory plan
** Filed herewith
26