Tandy Brands Accessories Inc. Reports Operating Results (10-Q)
Tandy Brands Accessories Inc. has a market cap of $22.3 million; its shares were traded at around $3.2001 with and P/S ratio of 0.2.
Highlight of Business Operations: We also assumed Chambers licenses with Wrangler Apparel, Inc. to sell mens, womens and boys belts and accessories in the mass merchants and western markets (Wrangler Mass and Western/Specialty, respectively) and a manufacturing contract between Chambers and Maquiladora Chambers de Mexico, S.A. de C.V. The Wrangler Mass license expired in June 2010 and the Western/Specialty license expires in December 2010. The Western/Specialty license had minimum royalty guarantees of $497,000 through December 2009 and has a $210,000 annual guarantee thereafter. We received notice during fiscal 2010 that the Western/Specialty license will not be renewed once it expires; however, because a significant retail partner began ordering additional private label products from us under other trade names, we do not expect the license expiration to have a significant impact on our operations.
The equipment we acquired is being depreciated using the straight line method over periods of three to five years (first quarter fiscal 2011 and 2010 $84,000). The customer list is being amortized over seven years in proportion to the estimated undiscounted cash flows which may be derived from the acquired assets (fiscal 2011 first quarter $146,000; fiscal 2010 first quarter $182,000). The trade names have an indefinite-life and, therefore, are not being amortized.
We have a $27.5 million credit facility for borrowings and letters of credit which was amended effective May 10, 2010, to extend its term an additional eighteen months, expand our ability to acquire fixed assets, and adjust the tangible net worth financial covenant. At September 30, 2010, we had $5.6 million borrowing availability based on our accounts receivable and inventory levels, outstanding letters of credit totaling $1.0 million, and $20.9 million outstanding borrowings under the facility. Borrowings, which are due on the amended facilitys expiration in October 2012, bear interest at the daily adjusting one-month LIBOR rate plus 4% (3.5% beginning September 1, 2010 as we met the specified conditions set forth in the credit agreement) or, if such rate is not available under the terms of the credit facility note, the lenders prime rate plus 2%.
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