ITEM 1.
BUSINESS.
What do we do?
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, sporting goods, neckwear and gift accessories. Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, including DOCKERS®, LEVI’S®, LEVI STRAUSS SIGNATUREtm, JONES NEW YORK®, TOTES®, ROLFS®, HAGGAR®, WOOLRICH®, JORDACHE®, BUGLE BOY®, CANTERBURY®, PRINCE GARDNER®, PRINCESS GARDNER®, AMITY®, COLETTA®, STAGG®, ACCESSORY DESIGN GROUP®, TIGER® and ETON®, as well as private brands for major retail customers. We sell our products through all major retail distribution channels throughout the United States and Canada, including mass merchants, national chain stores, 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.
On July 1, 2004 we acquired Superior Merchandise Company (sometimes known as “Superior” or “ETON”). Through this acquisition we have added gift accessories to our product line that we will sell under the ETON® and licensed totes® brands. We also recently entered the men’s neckwear business, utilizing a direct-to-retailer sales model. We design and promote men’s neckties which are manufactured overseas and shipped directly to our retail customers in the United States, allowing our pricing to be very competitive compared to established neckwear suppliers.
As a result of the Company’s 2005 audit, an error was identified related to an overstatement of a deferred tax asset associated with the tax return treatment of intercompany charges with our Canadian operation that required restatement of the fiscal 2004 and prior financial statements. The restatement reduced 2004 and 2003 reported earnings by $85,000 and $125,000, or $0.01 and $0.02 per diluted share, respectively. In addition, beginning stockholders’ equity for fiscal 2003 was reduced by approximately $741,000. This deferred tax adjustment had no impact on the Company’s 2005 financial results.
What are our product lines?
Our primary products consist of belts and small leather goods, such as wallets, which accounted for approximately 53.8% and 18.9% of our net sales for fiscal 2005, respectively. Our other products include women’s handbags, socks, scarves, gloves, hats, hair accessories, suspenders, cold weather accessories, sporting goods accessories, and other fashion accessories. Collectively, these other products accounted for the remaining 27.3% of our net sales in fiscal 2005.
Fiscal 2005 Product Line Sales
(as a % of net sales)
To facilitate our internal operations as well as our customer relationships, our products are generally organized along men’s and women’s product lines. As a result, we have two reportable segments: (1) men’s accessories and (2) women’s accessories. Men’s and boys’ products accounted for approximately 60.8% of net sales during fiscal 2005, and women’s and girls’ products accounted for approximately 39.2% of net sales during the same period. Financial information regarding our operations and assets by segment appears on pages 33-34 of our 2005 Annual Report to Stockholders, and is incorporated herein by reference.
Belts
We, along with our predecessors, have been manufacturing and marketing belts for over 70 years, and belts remain our largest single product category, representing approximately 53.8%, 54.6% and 53.1% of net sales in fiscal 2005, 2004 and 2003, respectively. We compete in all four categories of the belt market: casual, work, dress and fashion. In fiscal 2005, we manufactured approximately 33.4% of the men’s belts we distributed and imported the balance, including all women’s belts, from China, Guatemala and various other countries.
Fiscal 2005 Belt Sales
Men’s belt sales increased by $4.2 million during 2005, but women’s belt sales decreased by $2.7 million during the same period, resulting in an overall increase of $1.5 million, or 1.3%, in our total belt sales compared to fiscal 2004. In fiscal 2005, sales of men’s and boys’ belts represented $91.4 million, or 76.8% of total belt sales, and women’s and girls’ belts represented $27.7 million, or 23.2% of total belt sales.
Small Leather Goods
Our small leather goods consist primarily of men’s and women’s wallets sold under licensed, private and proprietary brands. Our small leather goods are primarily sourced from manufacturers in foreign countries, such as China, due to the labor-intensive nature of manufacturing small leather goods and the relatively low cost of labor in those countries. Sales of small leather goods accounted for approximately $41.7 million, or 18.9% of our net sales in fiscal 2005. Sales of small leather goods accounted for approximately 21.1% and 19.8% of our net sales in fiscal 2004 and 2003, respectively.
Fiscal 2005 Small Leather Goods Sales
In fiscal 2005, sales of men’s and boys’ small leather goods represented $17.4 million, or 41.7% of total small leather goods sales, and women’s and girls’ small leather goods represented $24.3 million, or 58.3% of our total small leather goods sales.
Other Accessories
In addition to belts and small leather goods, we distribute accessories such as women’s handbags, socks, scarves, gloves, hats, hair accessories, men’s suspenders, neckwear, sporting goods accessories and gift accessories. These products are marketed under certain of our proprietary brands, licensed brands and private brands. These other accessories complement our core belt and small leather goods products. We purchase all of our other accessory items, which are manufactured according to our design specifications, from foreign and domestic sources. In fiscal 2005, our sales of other accessories totaled $60.4 million, or 27.3% of our net sales. Sales of other accessories accounted for 24.3% and 27.1% of our net sales in fiscal 2004 and 2003, respectively.
What brands do we sell?
Our brand sales consist of licensed brands, private brands and proprietary brands which accounted for approximately 11.9%, 56.4% and 31.7% of our net sales for fiscal 2005, respectively.
Fiscal 2005 Brand Sales
(as a % of net sales)
Exclusive License Agreements
We have been awarded exclusive license agreements for several well recognized brands, including Dockers®, Levi’s®, Levi Strauss Signaturetm, Jones New York®, Bugle Boy®, Haggar®, Woolrich® and Jordache®. Through our acquisition of ETON on July 1, 2004 we have also acquired an exclusive license agreement for totes® gift accessories.
Generally, our license agreements cover specific products and require us to pay annual royalties, ranging from 2% to 8% of net sales, based on minimum sales quotas or sales. The terms of the agreements are typically four to ten years, with options to extend the terms, provided certain sales or royalty minimums are achieved. For fiscal 2005, sales of our licensed products accounted for approximately $26.4 million, or 11.9% of our net sales, with no sales associated with any individual license agreement accounting for more than 5% of net sales. However, the combined sales related to all of our Levi Strauss license agreements resulted in sales of $11.4 million or 5.1% of our net sales.
Private Brand Products
In fiscal 2005, private brand products accounted for approximately $124.8 million, or 56.4% of our net sales. In a private brand program we are responsible for designing, manufacturing and delivering unique products for select customers according to the customer’s individual requirements. These programs offer our customers exclusivity and pricing control over their products, both of which are important factors in the retail marketplace. We believe our flexible sourcing capabilities, advanced electronic inventory management and replenishment systems, and design, product development and merchandising expertise provide retailers with a superior alternative to direct sourcing of their private brand products. Our principal private brand programs include those for leading retailers such as:
•
Wal-Mart;
•
Target;
•
JCPenney;
•
Sears; and
•
Payless ShoeSource.
Our principal private brand programs also include nationally recognized private brand names such as:
•
Farah®;
•
Faded Glory®;
•
Meeting Street®;
•
No Boundaries®;
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St. John’s Bay®;
•
Croft & Barrow®;
•
Mossimo®; and
•
Cherokee®.
Proprietary Brands
In addition to our licensed and private brands, we produce and market products under our own registered trademarks and trade names. We own leading and well recognized trademarks such as Rolfs®, Amity®, Canterbury®, Tiger®, Accessory Design Group®, Prince Gardner®, Princess Gardner®, and, through our acquisition of Superior, the ETON® brand. We intend to build on the success of our proprietary brand portfolio by pursuing additional ownership opportunities and expanding the assortment of products we offer and the retail channels we serve with our proprietary brands. Net sales under our proprietary brands were approximately $70.0 million, or 31.7% of our net sales in fiscal 2005.
Distribution of Our Key Brands
Our key brands and each brand’s targeted distribution channels and primary products are as follows:
What are our channels of distribution?
We sell our products to a variety of retail outlets, including the following:
•
department stores;
•
e-commerce websites;
•
specialty chains;
•
national chain stores;
•
mass merchants;
•
outlet stores;
•
the retail exchange operations of the United States military;
•
off-price stores;
•
golf pro shops;
•
sporting goods stores;
•
supermarkets;
•
individual specialty stores;
•
uniform stores;
•
catalog retailers;
•
TV shopping networks;
•
shoe stores;
•
drug stores;
•
wholesale clubs; and
•
office supply stores.
Who are our customers?
We maintain strong relationships with various major retailers in the United States and Canada, including the following:
For fiscal 2005 and 2004, Wal-Mart accounted for 38.0% and 37.0% of our net sales, respectively, and Target accounted for 13.0% and 14.0%, respectively. No other customer accounted for 10% or more of our total revenues. In fiscal 2005, our top ten customers accounted for approximately 74.5% of net sales. A decision by Wal-Mart, Target or any other significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to decrease the amount of merchandise purchased from us or to change their manner of doing business with us could have a material adverse effect on our financial position and results of operations.
How do we maintain strong customer relations?
We believe our success is due in large part to our strong customer relationships, strong sales and marketing organization and superior customer service. Factors which help facilitate these characteristics include our “quick response” distribution, vendor inventory management services, electronic data interchange capabilities and expertise in the communication of fashion and lifestyle concepts through product lines and innovative point-of-sale presentations. We develop and manage our accounts through the coordinated efforts of senior management, regional managers, account executives and an organization of salespeople and independent sales representatives. Members of our senior management or senior account executives manage our relationships with certain of our national accounts such as Wal-Mart, Target, Shopko, Dillard’s, JCPenney, Sears, and Meijer’s.
We maintain in-store customer service relationships with various specialty stores, national chain stores and major department stores. We have a team of more than 160 sales associates in the United States and approximately 10 sales associates in Canada. These sales associates are organized on a regional basis and supervised by regional sales managers. Sales associates are responsible for overseeing accounts within a defined geographic territory, developing and maintaining business relationships with their respective customers, preparing and conducting line presentations, and assisting customers in the implementation of programs at the individual store level. In addition, sales associates may, depending on the needs of an individual customer, assist in the maintenance and presentation of merchandise on the selling floor. Our regional sales organization is supported by account executives. Sales personnel, other than senior managers, generally are compensated based on a combination of salary and commission.
Did we have firm backlog orders for fiscal 2005 and the prior fiscal year?
We had firm backlog orders at June 30, 2005 and 2004, totaling $10,194,000 and $10,258,000, respectively. Our backlog orders are fairly consistent throughout the year with a seasonal increase during the first and second quarter. Generally, whether we can fill our backlog orders is dependent on product availability. Historically, the amount of unfilled backlog orders has been immaterial. The backlog at June 30, 2005 may not be indicative of future results.
How do we merchandise and develop our products?
Senior managers are responsible for generating profitable performance results by developing, planning, selling and implementing merchandise programs for their accounts. Individual senior managers develop and maintain business relationships with customers’ buyers and merchandise managers. Senior managers also develop and propose comprehensive programs relating to product mix, pricing and fixturing and they assist customers’ buyers and merchandise managers in the implementation of these programs. We coordinate the implementation of marketing programs through the efforts of senior and regional managers. Senior and regional managers are compensated based on a combination of salary and bonus tied to various measures of profitability and sales performance.
Our product development and merchandising professionals work closely with our customers, suppliers and licensors to interpret market trends, develop new products and create and implement comprehensive merchandising programs which consist of packaging, point-of-sale fixturing and presentation materials. We believe our ability to design all of our products internally represents a significant competitive advantage because retail customers have become increasingly reliant on the design and merchandising expertise of their suppliers.
What is our competitive position?
Competition in the fashion accessories industry is intense. The accessories market is highly fragmented, and management believes we are one of the largest competitors in the accessories industry. Based on our analysis, we have found that the sectors of the accessories industry we serve have grown at an average annual rate of 3-5% in recent years. In our opinion, this growth has resulted from:
•
the trend toward more casual attire, which has increased demand for accessories outside the traditional dress category;
•
increased consumer awareness of branded accessories as a fashion and lifestyle statement; and
•
a desire for newness and change in accessories styles.
As a result of recent consolidation in the retail industry, retailers have increasingly chosen to consolidate their supply bases to a core group of companies that have the resources and expertise to meet the retailers’ increasing demands. We believe we are well positioned to continue to capitalize on these market trends.
Our ability to remain competitive depends largely on our ability to maintain our customer relationships, create new designs and products and offer high quality merchandise at competitive prices. The following table summarizes our primary competitors:
Product Segment
Primary Competitors
Men’s and Boys’ Belts
Swank, Randa/Humphreys, Cipriani and Fossil
Men’s Wallets
Buxton, Randa/Humphreys, Mundi, Fossil, Swank and Cipriani
Women’s and Girls’ Belts
Cipriani, Liz Claiborne, Circa, Accessory Network and Fossil
Women’s Handbags
Nine West, Liz Claiborne, Kenneth Cole and Fossil
Women’s Personal Leather Goods
Buxton, Mundi, Fossil, Liz Claiborne and Nine West
We compete on the basis of customer service, brand recognition, product quality and price. We believe our ability to compete successfully is based on our strong customer relationships, superior customer service, strong national brand portfolio, national distribution capabilities, proprietary inventory management systems, flexible sourcing and product design and innovation.
How do we seek to grow our business?
We seek increased sales and earnings through a variety of means, including increased sales through our current operating units, as well as growth through the acquisition of assets and similar businesses. Since our incorporation in Delaware on November 1, 1990, we have acquired numerous businesses. Over the last three years, we made the following acquisition:
Where and how do we manufacture our products?
Our manufacturing facilities are located in Yoakum, Texas, and Scarborough, Ontario. These facilities have the capacity to manufacture approximately 6.7 million belts per year. During fiscal 2005, our manufacturing facilities operated at approximately 92% of capacity. We continually seek to increase the automation of our manufacturing operations. We believe we are one of the lowest-cost domestic belt producers because of our automated equipment, large production volumes and economies of scale in raw materials and finished goods sourcing.
In fiscal 2005, we sourced certain finished products representing approximately 85% of our net sales from outside manufacturers, both domestic and foreign. We have strong relationships with a number of high quality, low-cost foreign manufacturers who provide particularly labor-intensive products, such as small leather goods, manufactured to our specifications.
Our transactions with our foreign manufactures and suppliers are subject to the risks of doing business abroad. Imports into the United States (both finished goods and raw materials) are affected by, among other things, the cost of transportation, and imposition of import duties and restrictions. The United States, Canada, China and other countries in which our products are manufactured may, from time to time, impose new quotas, tariffs or other restrictions, or adjust presently prevailing quotas, duty or tariff levels, which could affect our operations and our ability to import products at current or increased levels. We cannot predict the likelihood or frequency of any such events occurring.
Financial information regarding our net sales, total assets and property, plant and equipment, by geographic location, appears on page 34 of our Annual Report to Stockholders, and is incorporated herein by reference.
To what extent is our business seasonal?
Our quarterly sales and net income results are fairly consistent throughout the fiscal year, with a seasonal increase during the first and second quarter. Due to the nature of ETON’s gift accessories business, a significant portion of their sales occur during the Christmas holiday season - the first and second quarter of our fiscal year.
What are the sources and availability of our raw materials?
Our raw materials requirements are limited to materials used in the manufacture of men’s belts, as this is the only product we manufacture ourselves. These raw materials consist primarily of leather hides and hardware, such as buckles, and are readily available from a variety of foreign and domestic sources. As a result, we have not experienced any significant disruption of product flow based on our raw materials needs.
Are we subject to governmental regulations?
Many of our products are manufactured in countries other than the United States. Accordingly, those countries and the United States may from time to time modify existing quotas, duties, tariffs, or import restrictions, or otherwise regulate or restrict imports in a manner which could be material and adverse to us. In addition, economic and political disruptions in Asia and other parts of the world from which we import goods could have an adverse effect on our ability to maintain an uninterrupted flow of products to our major customers.
Due to the fact that we sell our products to retail exchange operations of the United States military, and thus are a supplier to the federal government, we must comply with all federal statutes applicable to federal government suppliers. Historically, we have not made any material modifications or accommodations as a result of government regulations.
How many employees do we have?
We had approximately 1,250 employees as of June 30, 2005. We believe employee relations are generally good.
What role does intellectual property play in our business?
We believe our trademarks, our licenses to use certain trademarks and our other proprietary rights in and to intellectual property are important to our success and our competitive position and we seek to protect our intellectual property rights against infringement. Specifically, we seek to protect our interests not only in our brands but in our designs as well. We devote considerable resources to the establishment and protection of our intellectual property on a nationwide basis and in selected foreign markets. Our trademarks remain valid and enforceable as long as the marks are used in connection with our products and services and the required registration renewals are filed.
What are our working capital practices?
We do not enter into long-term agreements with any of our customers. Instead, we enter into a number of purchase order commitments with our customers for each of our lines every season. Due to the production time required by our foreign suppliers to produce and ship goods to our distribution centers, we attempt, based on internal estimates, to carry on-hand inventory levels necessary for the timely shipment of initial shipment and replenishment orders of men’s and women’s accessories to our customers. A decision by the customer buyer of a group of stores or any significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to significantly change the amount of merchandise purchased from us, or to change the customer buyer’s manner of doing business with us, may have a significant effect on our financial condition and results of operations. However, this exposure is mitigated in that we sell our products to a variety of retail partners throughout the United States and Canada.
Where can investors access additional information regarding Tandy Brands?
Our website address is www.tandybrands.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Forms 3, 4 and 5 filed by our officers, directors and stockholders holding 10% or more of our common stock and all amendments to those reports are available free of charge through our website, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”). You may also read and copy any reports, proxy statements or other information that we file with the SEC at the SEC’s public reference room at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation and location of the public reference room. Our SEC filings are also available to the public, free of charge, at the SEC’s website at www.sec.gov.
ITEM 2.
ITEM 2.
PROPERTIES.
We own and lease numerous facilities throughout the United States and lease facilities in Canada and Hong Kong. We currently lease our corporate offices which are located in Arlington, Texas. We believe our properties are adequate and suitable for the particular uses involved. The following table summarizes our properties:
The total space we owned, leased and occupied as of June 30, 2005, was as follows:
ITEM 3.
ITEM 3.
LEGAL PROCEEDINGS.
We are not involved in any material pending legal proceedings, other than ordinary routine litigation incidental to our business.
ITEM 4.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2005.
PART II
ITEM 5.
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
What is the principal market for our common stock?
The principal market for our common stock is the NASDAQ National Market System. Our common stock is listed on the NASDAQ National Market System under the symbol “TBAC.” Information regarding the high and low sales prices for our common stock for each full quarterly period within the two most recent fiscal years as reported on NASDAQ appears on page 50 of our 2005 Annual Report to Stockholders, and is incorporated herein by reference.
How many common stockholders do we have?
As of September 1, 2005, we had approximately 839 common stockholders of record.
Did we declare any cash dividends in fiscal 2005 or the prior fiscal year?
On August 12, 2003, our board of directors declared the company’s first quarterly dividend. During fiscal 2004 and 2005, we declared and paid dividends as set forth in the following table:
We expect quarterly dividends will continue to be paid in fiscal 2006. On August 16, 2005, our board of directors declared a dividend of $0.0275 per share payable to stockholders of record as of September 30, 2005. The payment of the dividend will occur on October 20, 2005. The payment of dividends in the future will be at the sole discretion of our board of directors and will depend on our profitability, financial condition, capital needs, future prospects, contractual restrictions and other factors deemed relevant by our board of directors.
How many shares of common stock are authorized for issuance under our equity compensation plans?
The following table provides information regarding the number of shares of our common stock that may be issued on exercise of outstanding stock options and warrants under our existing equity compensation plans as of June 30, 2005. These plans are as follows:
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the 1993 Employee Stock Option Plan;
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the 1997 Employee Stock Option Plan;
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the Nonqualified Formula Stock Option Plan for Non-Employee Directors;
•
the Nonqualified Stock Option Plan for Non-Employee Directors;
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the 2002 Omnibus Plan;
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the 1995 Stock Deferral Plan for Non-Employee Directors;
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the Stock Purchase Program; and
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nonqualified stock option agreements with certain non-employee directors.
(1)
Includes options to purchase 24,800 shares of common stock under the 1993 Employee Stock Option Plan, 486,979 shares of common stock under the 1997 Employee Stock Option Plan, 69,669 shares of common stock under the Nonqualified Formula Stock Option Plan for Non-Employee Directors, and 318,764 shares of common stock under the 2002 Omnibus Plan. Also includes 21,712 shares of common stock issuable upon settlement of phantom stock units under the 1995 Stock Deferral Plan for Non-Employee Directors.
(2)
Calculation of weighted-average exercise price does not include phantom stock units credited to participants’ accounts under the 1995 Stock Deferral Plan for Non-employee Directors.
(3)
Includes 309,964 shares of common stock issuable under the 2002 Omnibus Plan and 28,288 shares of common stock issuable under the 1995 Stock Deferral Plan for Non-Employee Directors. Upon adoption of the 2002 Omnibus Plan by our stockholders at our 2002 annual stockholders’ meeting, the number of shares authorized and reserved for issuance under our previously existing stock option plans were transferred to the 2002 Omnibus Plan and are presently authorized and reserved for issuance under that plan. All shares of common stock authorized and reserved for issuance on the exercise of outstanding stock options under our previous stock option plans and the 2002 Omnibus Plan will, on the cancellation or expiration of any such stock options, automatically be authorized and reserved for issuance under the 2002 Omnibus Plan.
(4)
Includes options to purchase an aggregate of 19,250 shares of common stock under nonqualified stock option agreements for non-employee directors, dated October 16, 2001, with each of Dr. James F. Gaertner (4,250), Marvin J. Girouard (4,250), Gene Stallings (4,250), Roger R. Hemminghaus (2,500) and Colombe M. Nicholas (4,000). These options became fully vested six months after the date of grant and expire on October 16, 2011.
(5)
Includes 86,601 shares of common stock issuable under the Stock Purchase Program. The Stock Purchase Program was approved by our stockholders in December 1990; however, subsequent amendments to increase the number of shares of common stock available for issuance under the Stock Purchase Program were not required to be approved by our stockholders and therefore were not submitted to our stockholders for approval. NASD Rule 4350(i), effective June 30, 2003, requires, among other things stockholder approval of certain amendments to equity compensation plans. We have submitted a proposal to our stockholders for approval at our annual meeting to be held October 18, 2005 which, if approved, will increase the number of shares of common stock issuable under the Stock Purchase Program by 500,000 shares. The Stock Purchase Program is open to all full-time employees who have been employed at least six months, but less than one year or who have been employed one year or more and are contributing to the Tandy Brands Accessories, Inc. Employees Investment Plan. Under the Stock Purchase Program, participants may contribute 5% or 10% of their earnings and we match 25% or 50% of each participant’s contribution depending on their length of employment. The Stock Purchase Program purchases treasury stock, if available, or unissued common stock directly from the company at monthly average market prices. The participant’s shares are fully vested upon purchase and the participant may withdraw from the Stock Purchase Program at any time. The shares purchased under the Stock Purchase Program are distributed to participants annually.
Did the company repurchase any shares of common stock during the fourth quarter of fiscal 2005?
The following table provides information regarding repurchases of shares of common stock made by us during the quarter ended June 30, 2005. All of such shares were purchased in the open market and held in a rabbi trust established under our Benefit Restoration Plan:
(1)
On September 10, 1999, our Board of Directors approved a plan to repurchase, from time to time in the open market or through privately negotiated transactions, shares of our common stock at an aggregate purchase price of up to $2,000,000, and on October 17, 2000, our Board increased the plan by up to an additional $2,000,000. On April 21, 2001, our Board determined to temporarily discontinue any purchases under the stock repurchase plan. Since such time, the Board has not authorized management to resume repurchases under the plan.
ITEM 6.
ITEM 6.
SELECTED FINANCIAL DATA.
The information required by this item appears on page 50 of our 2005 Annual Report to Stockholders, and is incorporated herein by reference.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The information required by this item appears on pages 38 through 49 of our 2005 Annual Report to Stockholders, and is incorporated herein by reference.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item appears on page 44 of our 2005 Annual Report to Stockholders, and is incorporated herein by reference.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears on pages 14 through 50 of our 2005 Annual Report to Stockholders, and is incorporated herein by reference. Following is a cross-reference for location of the required information:
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
ITEM 9A.
CONTROLS AND PROCEDURES.
We have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2005, our disclosure controls and procedures were effective in timely alerting them to material information (including information relating to our consolidated subsidiaries) required to be included in our filings under the Securities Exchange Act of 1934 and there has been no change in our internal control over financial reporting during the quarter ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except as set forth below.
In connection with the error identified related to a deferred tax asset associated with the tax return treatment of intercompany charges with our Canadian operation, subsequent to June 30, 2005 we have modified our control processes with respect to the treatment of foreign taxes. This includes, but not limited to a detailed review of foreign tax returns at both the parent and foreign subsidiary level to verify proper treatment of all foreign deferred tax items.
PART III
The information required by Items 10 through 14 is included in our definitive Proxy Statement relating to our 2005 Annual Meeting of Stockholders, and is incorporated herein by reference. Following is a cross-reference for location of the required information:
Page Number in the
Tandy Brands
Caption in the
Accessories, Inc.
Tandy Brands Accessories, Inc.
2005 Proxy
Item
2005 Proxy Statement
Statement
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
“Proposal One: Election of Directors”
“Proposal Two: Amendment to Stock Purchase Program”
5-7
7-9
“Executive Officers”
“Section 16(a) Beneficial Ownership Reporting Compliance”
“Corporate Governance
- Has the Board of Directors adopted a Code of Ethics?”
“Corporate Governance
- What are the Board of Directors’ committees?
What functions do they serve?”
19-21
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
“Executive Officer and Non-Employee Director Compensation
- How do we compensate our
executive officers?”
13-16
“Executive Officer and Non-Employee Director Compensation
- How do we compensate our non-employee directors?”
16-17
“Stock Performance”
“Corporate Governance
- What are the Board of Directors’ committees?
- What functions do they serve? - Compensation Committee Interlocks and Insider Participation”
19-21
“Report of Compensation Committee”
24-25
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
“Security Ownership of Certain
Beneficial Owners”
10-12
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
“Certain Relationships and
Related Transactions”
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
“Independent Auditor”
PART IV
ITEM 15.
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this report:
(1) The financial statements listed in response to Item 8 of this report have been incorporated herein by reference to pages 14 through 35 of our 2005 Annual Report to Stockholders.
(2) Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts and Report of Independent Registered Public Accounting Firm thereon. The financial statement schedule should be read in conjunction with the consolidated financial statements in our 2005 Annual Report to Stockholders. Financial statement schedules not included in this report have been omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.
(3) Exhibits: A list of the exhibits required to be filed as part of this report is set forth in the Index to Exhibits, which immediately precedes such exhibits, and is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: September 23, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Tandy Brands Accessories, Inc.
We have audited the consolidated financial statements of Tandy Brands Accessories, Inc. and subsidiaries as of June 30, 2005 and 2004, and for each of the three years in the period ended June 30, 2005, and have issued our report thereon dated August 10, 2005, incorporated by reference in this Annual Report on Form 10-K. Our audits also included the financial statement schedule listed in Item 15(a) of this Annual Report on Form 10-K. This schedule is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Fort Worth, Texas
August 10, 2005
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Year Ended June 30,
(1)
Represents uncollectible accounts written off, net of recoveries and application of allowances to sales returns.
TANDY BRANDS ACCESSORIES, INC. AND SUBSIDIARIES
EXHIBIT INDEX
*
Management contract or compensatory plan
**
Filed herewith