Tandy Brands Accessories Reports Third Quarter Fiscal 2009 Financial Results

For the third fiscal quarter ended March 31, 2009, the company reported a net loss of $12.3 million, or $1.78 per share, on net sales of $25.1 million compared to a net loss of $2.2 million, or $0.32 per share, on net sales of $30.1 million for the quarter ended March 31, 2008. The 2009 third fiscal quarter results include a noncash inventory write-down of $7.5 million, and a charge of $844,000 associated with a corporate restructuring plan announced in January 2009.

For the nine months ended March 31, 2009, the company reported a net loss of $12.6 million, or $1.82 per share, on net sales of $102.6 million compared to a net loss of $44.6 million, or $6.52 per share, on net sales of $119.1 million for the nine months ended March 31, 2008. The prior year nine-month results include charges of $36.5 million associated with the write-down of inventory ($18.7 million) and goodwill and other intangible assets ($17.8 million).

Quarter Review

The company attributed the decline in net sales to the ongoing weak economic environment as consumers continued to cut back on spending and the company's retail partners maintained an extremely conservative approach to inventory replenishment. In addition, the company's financial results were significantly impacted by the noncash write-down of $7.5 million of inventory as a result of management's decision to implement a new inventory life-cycle management program and move away from low margin products with either small shipping quantities or slow turn-over rates.

"The retail environment continues to be very challenging, and our sales results reflect those difficulties," said Rod McGeachy, president and chief executive officer of Tandy Brands. "Nonetheless, we are taking the necessary steps to help ensure that we are well-positioned for the future. Our two key objectives are to stabilize our operating platform and to drive profitable growth. Thus, we are keeping a tight control on expenses while simultaneously upgrading our management team. Also, we're investing in profitable growth initiatives while making sure our product offerings are market-right and carefully controlled from an inventory perspective."

During the quarter, the company announced that it employed several new key executives, including Hilda McDuff as Chief Merchandising Officer (CMO) and Kristin Sperling as Vice President of Sourcing. Furthermore, the company announced in January an organizational restructuring plan that identified more than $3 million in anticipated annualized savings.

"We have built a management team which will provide us with capability-based advantages. And we will continue to streamline our cost structure in order to stabilize our operating platform, improve our profitability and invest for growth," said Mr. McGeachy.

In an effort to drive profitable growth, on March 31, 2009, Tandy announced it is launching an Eyewear Division, which expands the company's presence as a leading fashion accessories company into the emerging new category of reading glasses. Since the close of the quarter, Tandy announced it has signed a definitive agreement to purchase certain strategic assets from Chambers Belt Company, including certain existing inventory and manufacturing assets in Mexico, and intellectual property including the rights to the Chambers name. Each of these measures is expected to benefit fiscal 2010, which begins July 1, 2009.

"These product additions and acquisitions should have an immediate and accretive impact on our financial results in fiscal 2010," said Mr. McGeachy.

Financial Position

Borrowing availability under the company's credit facility was $20 million and outstanding borrowings were $468,000 at quarter's end. Effective March 31, 2009, the company amended its credit facility reducing the credit line to $27.5 million from $35 million.

"Our strong financial position has enabled us to take advantage of certain opportunities to accelerate our strategic growth plans, such as the Chambers Belt acquisition," said Mr. McGeachy. "And we will continue to look at other organic and acquisitive opportunities that will provide profitable growth."

Conference Call

The company has scheduled a conference call for 5 p.m. ET on May 14, 2009. Parties interested in participating in the conference call may dial-in at 877-407-9205, while international callers may dial-in at 201-689-8054. A replay of the call will be available through May 28, 2009 and can be accessed by dialing 877-660-6853, or 201-612-7415 for international callers, and entering account number 286 and conference ID number 321435. The conference call will be broadcast live at www.InvestorCalendar.com.

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, 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. And Subsidiaries
Unaudited Consolidated Statements Of Operations
(in thousands except per share amounts)
                                                 Three Months Ended            Nine Months Ended
                                                 March 31,                     March 31,
                                                 2009           2008           2009           2008
Net sales                                        $  25,051      $  30,066      $  102,612     $  119,147
Cost of goods sold                                  15,876         18,387         65,666         77,559
Inventory write-down                                7,504          -              7,504          18,725
                                                    23,380         18,387         73,170         96,284
                       Gross margin                 1,671          11,679         29,442         22,863
Selling, general and administrative expenses        13,085         12,464         39,533         42,868
Depreciation and amortization                       444            699            1,487          2,594
Goodwill and other intangibles impairment           -              -              -              17,774
Restructuring charges                               844            612            844            1,050
                       Total operating expenses     14,373         13,775         41,864         64,286
Operating loss                                      (12,702 )      (2,096 )       (12,422 )      (41,423 )
Interest expense                                    (140    )      (177   )       (508    )      (1,287  )
Other income                                        43             3              148            52
                       Loss before income taxes     (12,799 )      (2,270 )       (12,782 )      (42,658 )
Income taxes (benefit)                              (521    )      (58    )       (176    )      1,980
                       Net loss                  $  (12,278 )   $  (2,212 )    $  (12,606 )   $  (44,638 )
Loss per common share                            $  (1.78   )   $  (0.32  )    $  (1.82   )   $  (6.52   )
Loss per common share assuming dilution          $  (1.78   )   $  (0.32  )    $  (1.82   )   $  (6.52   )
Cash dividends declared per common share         $  -           $  0.04        $  0.04        $  0.12
Common shares outstanding                           6,914          6,869          6,945          6,850
Common shares outstanding assuming dilution         6,914          6,869          6,945          6,850

Tandy Brands Accessories, Inc. And Subsidiaries
Unaudited Consolidated Balance Sheets
(in thousands)
                                                                                                   March 31,        June 30,
                                                                                                   2009             2008
Assets
Current assets:
             Cash and cash equivalents                                                             $   2,231        $   2,855
             Accounts receivable                                                                       17,104           22,147
             Inventories                                                                               25,744           35,535
             Other current assets                                                                      7,104            8,783
                                             Total current assets                                      52,183           69,320
Property and equipment                                                                                 4,233            5,382
Other assets:
             Intangibles                                                                               2,822            3,069
             Other assets                                                                              702              1,617
                                             Total other assets                                        3,524            4,686
                                                                                                   $   59,940       $   79,388
Liabilities And Stockholders' Equity
Current liabilities:
             Accounts payable                                                                      $   6,794        $   10,312
             Accrued expenses                                                                          6,308            5,361
             Note payable                                                                              468              363
                                             Total current liabilities                                 13,570           16,036
Other liabilities:
             Supplemental executive retirement obligation                                              -                1,893
             Other liabilities                                                                         2,622            3,581
                                             Total other liabilities                                   2,622            5,474
Stockholders' equity:
             Preferred stock, $1.00 par value, 1,000 shares authorized, none                           -                -
             issued
             Common stock, $1.00 par value, 10,000 shares authorized,
                                             7,037 shares and 7,049 shares issued and outstanding      7,037            7,049
             Additional paid-in capital                                                                34,808           34,840
             Retained earnings                                                                         2,449            15,337
             Other comprehensive income                                                                570              1,666
             Shares held by Benefit Restoration Plan Trust                                             (1,116 )         (1,014 )
                                             Total stockholders' equity                                43,748           57,878
                                                                                                   $   59,940       $   79,388

SOURCE: Tandy Brands Accessories

Tandy Brands Accessories, Inc. 
Rod McGeachy, 817-548-0090 
Chief Executive Officer 
or 
Investor Relations 
Beacon Street Group 
Kenneth E. Pieper, 972-491-2153