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Tandy Brands Faces New Credit Issue as Loss Drops

Firm in violation of covenants as storm-related delays hold back shipments.

Tandy Brands Accessories Inc. is confronting a credit crunch with its senior lender after a typhoon in China last month delayed shipments.

As it reported a lower loss in the quarter ended Sept. 30 on Thursday, Tandy said that its gift product deliveries for holiday had been impeded first by the late closing of its new credit facilities with senior lender Salus Capital Partners and junior lender King Trade Capital and later by the damage caused to Chinese production facilities by Typhoon Fitow in early October.

“As a consequence, our October shipments by week, as reset by our senior lender in the first amendment, were later than planned, triggering weekly covenant violations,” said Roger Hemminghaus, chief executive officer of Tandy Brands. He added that the company is in talks with Salus “but can provide no assurance as to the outcome of those discussions.”

Tandy agreed to terms with Salus and King in July as its credit facility with Wells Fargo Bank was about to expire, but the ceo said it took too months longer than expected to finalize the facilities.

In the quarter, the net loss declined to $958,000, or 13 cents a share, from a loss of $1.3 million, or 18 cents, in the 2012 quarter. Revenues declined 23 percent to $19.9 million from $25.9 million, with both accessories and gifts volume down for the period. The 2012 revenue figures included sales inflated by Tandy’s decision to exit certain categories.

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However, Tandy compensated for the sales decrease with lower expenses. The firm’s total for cost of goods sold and selling, general and administrative costs were cut by 26.6 percent to $19.5 million.

Shares of Tandy were down 9 cents, or 24.3 percent, to 28 cents as markets neared the close Thursday.