Tandy Brands Reports Third Quarter 2008 Financial Results

ARLINGTON, Texas, May 15, 2008 (BUSINESS WIRE) -- TBAC | news | PowerRating | PR Charts -- Tandy Brands Accessories, Inc. (Nasdaq GM:TBAC) today announced financial results for the third fiscal quarter ended March 31, 2008 and the board of directors approval of a $0.04 per common share quarterly dividend payable July 18, 2008 to stockholders of record at the close of business on June 30, 2008.

For the third quarter of fiscal 2008, net sales were $30.1 million compared to $37.9 million in the third quarter of fiscal 2007. The decline was due primarily to a retail environment which continues to be challenging. The Company reported a net loss for the quarter of $2.2 million, or $0.32 per diluted share. The loss was primarily attributable to not realizing economies of scale and leverage with the sales decline. For the third quarter of fiscal 2007, the Company had a net loss of $1.4 million, or $0.21 per diluted share.

During the quarter, the Company continued to implement changes to its operations as part of its strategic review process aimed at offsetting the impact of the challenging retail environment and general economic conditions. The Company's cost reduction strategies were successful in reducing selling, general and administrative costs for the quarter by $2.6 million compared to the same period last year. The Company also noted that sales of inventory written down in the second quarter at prices greater than had been estimated to be realizable resulted in improved gross margins for each of its businesses in the third quarter. The Company has closed its West Bend, Wisconsin distribution facility and listed the property for sale.

Sales Growth Initiatives

The Company continues to pursue both new licenses and private label programs in order to diversify sales and generate opportunities for renewed growth. The Company noted the previously announced license for gift items under the Goodyear brand will open a new channel of distribution, providing further diversification. The Company also plans to expand the women's gift line making the overall line appeal to a broader consumer base and launch the Rolfs 1915 brand of men's small leather goods.

Operational Improvements

In addition to the closure of its West Bend, Wisconsin distribution facility, the Company is taking additional steps to reduce costs. Management believes such expenses as sample production costs can be reduced and a wide variety of cost reductions can be achieved through process enhancements and careful control of discretionary costs such as travel and consulting fees. Longer-term, reconfiguring the Company's facilities might significantly reduce rent expense. The Company has increased its estimate of the annual cost savings it will achieve through its strategic transformation process from $4 million to $7 million, including the benefits of the actions which have already been implemented.

Balance Sheet

The Company's financial position remains strong following the inventory and intangible asset write downs of the previous quarter. Inventories at the close of the third quarter were $36.8 million versus $64.4 million at June 30, 2007, a reduction of 43%. Accounts receivable and payable were described as appropriate and consistent with expectations. Outstanding borrowings were $4.4 million at quarter end and credit facility borrowing availability was $21.6 million. Stockholders' equity of $62.5 million equated to $8.91 per share at March 31, 2008.

J.S.B. Jenkins, Chief Executive Officer, commented, "We are satisfied our strategic transformation process is well underway. We believe that over the course of the next several quarters we will be able to capitalize on new business initiatives, drive our costs to appropriate levels, and generate sustainable levels of profitability and cash flow. In connection with the corporate leadership changes announced in February 2008, we have retained an executive search firm to assist with hiring a President/COO."

Mr. Jenkins concluded, "I am grateful for the support of our board of directors, our management team, and our employees during this process. We will do nothing less than remake the way our Company does business in order to be competitive and successful, regardless of the realities of the market."

Conference Call

The Company has scheduled a conference call for 4:30 p.m. EDT on May 16, 2008. Parties interested in participating in the conference call may dial-in at 888-219-1217, while international callers may dial-in at 913-312-1445. A replay of the call will be available through Friday, May 23, 2008 and can be accessed by dialing 888-203-1112, or 719-457-0820 for international callers, and entering conference pin code 1684592. A live webcast of the conference call will be broadcast at www.viavid.net.

About Tandy Brands Accessories, Inc.

Tandy Brands Accessories, Inc. designs and markets fashion accessories for men, women and children. Key product categories include belts, wallets, suspenders, neckwear, gifts, and sporting goods. Merchandise is sold under various national brand names as well as private labels to all major levels of retail distribution, including the e-commerce web sites for Rolfs(R) at www.rolfs.net and Sport Beads at www.sport-beads.com.

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, inflation, 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.

TANDY BRANDS ACCESSORIES, INC. Consolidated Statements of Operations (in thousands except per share amounts) (unaudited) Three Months Ended Nine Months Ended March 31 March 31 ----------------- ------------------- 2008 2007 2008 2007 -------- -------- --------- --------- Net sales $30,066 $37,905 $119,147 $159,444 Cost of goods sold 18,387 24,303 77,559 100,625 Inventory write-down - - 18,725 - -------- -------- --------- --------- 18,387 24,303 96,284 100,625 -------- -------- --------- --------- Gross margin 11,679 13,602 22,863 58,819 Selling, general and administrative expenses 12,464 15,062 42,868 46,832 Depreciation and amortization 699 1,175 2,594 3,606 Goodwill impairment - - 16,475 - Intangible impairment - - 1,299 - Restructuring charges 612 - 1,050 - -------- -------- --------- --------- Total operating expenses 13,775 16,237 64,286 50,438 -------- -------- --------- --------- Operating (loss) income (2,096) (2,635) (41,423) 8,381 Interest expense (177) (141) (1,287) (1,033) Other income 3 459 52 540 -------- -------- --------- --------- (Loss) income before income taxes (2,270) (2,317) (42,658) 7,888 Income taxes (benefit) (58) ( 934) 1,980 3,036 -------- -------- --------- --------- Net (loss) income $(2,212) $(1,383) $(44,638) $ 4,852 ======== ======== ========= ========= (Loss) earnings per common share $ (0.32) $ (0.21) $ (6.52) $ 0.72 (Loss) earnings per common share assuming dilution $ (0.32) $ (0.21) $ (6.52) $ 0.71 Cash dividends declared per common share $ 0.04 $ 0.04 $ 0.12 $ 0.095 Common shares outstanding 6,869 6,730 6,850 6,705 Common shares outstanding shares assuming dilution 6,869 6,730 6,850 6,877

TANDY BRANDS ACCESSORIES, INC. Consolidated Balance Sheets (in thousands) (unaudited) March 31 June 30 2007 2007 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 4,470 $ 4,076 Accounts receivable 23,347 31,357 Inventories 36,769 64,372 Deferred income taxes - 3,454 Other current assets 8,613 3,879 --------- --------- Total current assets 73,199 107,138 Property and equipment 32,352 38,928 Accumulated depreciation (26,570) (28,380) --------- --------- Net property and equipment 5,782 10,548 Goodwill - 16,361 Other intangibles 3,151 4,882 Other assets 1,662 1,734 --------- --------- $ 83,794 $140,663 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,092 $ 16,903 Accrued expenses 5,386 6,439 Notes payable 4,349 6,069 --------- --------- Total current liabilities 16,827 29,411 Other liabilities: Supplemental executive retirement obligation 1,818 1,587 Deferred income taxes - 389 Other liabilities 2,688 1,369 --------- --------- Total other liabilities 4,506 3,345 Stockholders' equity: Common stock 7,008 6,912 Additional paid-in capital 34,588 33,616 Retained earnings 20,268 66,967 Other comprehensive income 1,604 1,326 Shares held by Benefit Restoration Plan Trust (1,007) (914) --------- --------- Total stockholders' equity 62,461 107,907 --------- --------- $ 83,794 $140,663 ========= =========

SOURCE: Tandy Brands Accessories, Inc.

Tandy Brands Accessories, Inc. J.S.B. Jenkins, 817-548-0090 Chief Executive Officer britt_jenkins@tandybrands.com or Investor Relations Integrated Corporate Relations James Palczynski, 203-682-8200 james.palczynski@icrinc.com

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