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Tandy Ends Tough Year With $19.2M Loss

‘Going concern’ language removed from audit opinion; Sean John license signed.

A look from the Sean John footwear collection.

Tandy Brands Accessories ended its dramatic fiscal year with fresh financing in place and more than $19 million in red ink on its books from restructuring initiatives.

The company also reported Friday that it had entered into a licensing agreement with Christian Casey LLC to market Sean John belts, small leather goods and gift items in the U.S. and Canada for a period of three years and extended its licensing agreement with Haggar for belts and small leather goods sold in the U.S. and Canada for an additional three years, to the end of 2016.

“We expect to deliver Sean John products to retailers in summer 2014,” said Rob McCarten, executive vice president of the company and president of the Tandy Brands unit. “Our current Haggar line is performing well at retail with opportunities for volume growth at department stores.”

 

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In the three months ended June 30, the Dallas-based firm logged a net loss of $3.8 million, or 53 cents a diluted share, higher than the loss of $22 million, or 32 cents, registered in the final quarter of fiscal 2012. Eliminating items related to its restructuring earlier in the year as well as interest, taxes, depreciation and amortization, adjusted EBITDA loss for the quarter was flat at $1.5 million.

Sales declined 4.3 percent, to $20.6 million from $21.6 million, as the company continued to work through its inventory of exited products.

For the full year, the net loss rose to $19.2 million, or $2.69 a diluted share, from a loss of $3.7 million, or 52 cents, and adjusted EBITDA swung to a loss of $1 million from earnings of $1.8 million. Revenues were down 3.1 percent to $114 million from $117.6 million in fiscal 2012.

Tandy spent much of the year digging itself out of a hole created by a difficult holiday in 2012 in which problems in its gift business led to it falling out of the profit covenants of its credit agreement with Wells Fargo. After undertaking a restructuring plan that included both staff and facility reductions and a strategic review of the business with Deloitte Financial Advisory Services, it obtained $40.5 million in new financing from Salus Capital Partners and King Trade Capital which, while carrying hefty interest rates, avoided dilution of its stock.

Roger Hemminghaus, who succeeded Rod McGeachy as chief executive officer of the firm earlier this month, said, “Our fourth-quarter results reflect the cost savings and lower margins we expected in the restructuring plan as we continue to liquidate exited products while preparing for a successful holiday 2013.”

The company also reported that its auditors modified the wording of their audit opinion so that it no longer contained wording about Tandy’s uncertain ability to continue as a growing concern. “We are pleased that our new lenders are supporting our efforts to execute our business plan,” the ceo commented.