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TBAC > SEC Filings for TBAC > Form 10-Q on 15-Nov-2012All Recent SEC Filings




Quarterly Report


This Item 2 should be read in the context of the information included in our 2012 Annual Report on Form 10-K filed with the Securities and Exchange Commission and elsewhere in this Quarterly Report, including our unaudited consolidated financial statements and accompanying notes in Item 1 of this Quarterly Report.


We are a leading designer and marketer of branded men's, women's and children's accessories, including belts, gifts, small leather goods and bags. Our merchandise is marketed under a broad portfolio of nationally recognized licensed and proprietary brand names, including SPERRY TOP-SIDER®, ELIE TAHARI®, EDDIE BAUER®, TOTES®, MISS ME®, THE SHARPER IMAGE®, WOLVERINE®, HAGGAR®, ARNOLD PALMER®, DOCKERS®, EILEEN WEST®, BONE COLLECTOR®, KODIAK®, TERRA®, ROLFS®, AMITY®, CANTERBURY®, PRINCE GARDNER®, PRINCESS GARDNER®, CHAMBERS BELT COMPANY®, ABSOLUTELY FRESH®, SURPLUS®, as well as private brands for major retail customers. We sell our products through all major retail distribution channels throughout North America, including, without limitation, mass merchants, national chain stores, department stores, specialty stores, catalog retailers, golf pro shops, sporting goods stores, and the retail exchange operations of the United States military. We were incorporated as a Delaware corporation on November 1, 1990.


Business Segments
The following presents sales, gross margins, and operating expenses for our
business segments (in thousands of dollars):

                                   Three Months Ended
                                      September 30
                                    2012          2011
Net sales:
Accessories                      $   19,988     $ 21,512
Gifts                                 5,883        5,231
                                 $   25,871     $ 26,743
Gross margin:
Accessories                      $    6,768     $  7,283
Gifts                                 1,411        1,849
                                 $    8,179     $  9,132

Gross margin percent of sales:
Accessories                            33.9 %       33.9 %
Gifts                                  24.0 %       35.3 %
Total                                  31.6 %       34.1 %

Operating expenses:
Accessories                      $    2,502     $  2,759
Gifts                                 1,290        1,034
                                 $    3,792     $  3,793

Net Sales and Gross Margins
Our fiscal 2013 first quarter net sales were $25.9 million, which was $872,000, or 3%, lower than the prior year. Net sales for our accessories segment were $20.0 million for the first quarter of fiscal 2013, which was $1.5 million, or 7%, lower than the first quarter of fiscal 2012 primarily due to higher sales of exited product categories in the prior year, offset slightly by higher levels of replenishment orders by one of our largest customers during the current year. Gifts segment net sales of $5.9 million for the first quarter of fiscal 2013 were $652,000, or 12% higher than in the prior year primarily due to increased holiday shipments resulting from new programs acquired in fiscal 2012.

Gross margins were 31.6% and 34.1% for the first quarter of fiscal 2013 and 2012, respectively. Accessories segment margins were flat to the prior year. The gifts segment margin was 1130 basis points lower in the fiscal 2013 first quarter compared to the same quarter last year as a result of higher freight costs and higher customer deductions. Gross margins were also affected by more customer-direct shipments in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012, since these shipments carry lower gross margins due to being shipped directly from our suppliers to our customers (and not handled in our distribution centers), reducing the associated selling, general and administrative costs.

Operating Expenses
Total segment operating expenses of $3.8 million were flat compared to the prior year, and higher as a percentage of net sales, primarily due to increases in facilities costs to support growth in the gifts segment. Additional temporary distribution center space was procured during the current year period to support the increase in gifts inventory orders that will ship during the fiscal 2013 second quarter.

Total selling, general and administrative expenses of $8.9 million for the first quarter of fiscal 2013 were $266,000, or 3%, lower than the first quarter of fiscal 2012. The reductions were primarily due to decreased expenses such as compensation costs and variable distribution costs.

Interest and Taxes
Interest expense in the first quarter of fiscal 2013 was $75,000 lower than in the same quarter last year. The decrease was primarily attributable to non-recurrence of a $98,000 write-off of costs capitalized in connection with our previous credit facility. This decline was offset partially by higher borrowings in the first quarter of the current year.

Information about our income taxes is incorporated herein by reference to Note 6 of the notes to unaudited consolidated financial statements in Item 1 of this Quarterly Report.


Historically, our first and second quarter sales and operating results reflect a seasonal increase compared to the third and fourth quarters of our fiscal year. Sales and operating results for the first three months of fiscal 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2013.


Our primary sources of liquidity, which we believe will provide adequate financial resources for our short-term working capital needs, are cash flows from operating activities and our credit facilities ($1.0 million borrowing availability at September 30, 2012). We believe several sources of working capital are available which could be utilized at our senior lender's consent to fund longer-term needs, if necessaary. Information about our credit facilities is incorporated herein by reference to Note 4 of the notes to unaudited consolidated financial statements included in Item 1 of this Quarterly Report.

First quarter fiscal 2013 net cash used for operating activities was $6.4 million higher than in the prior year, primarily driven by the following: an increase in the net loss; $6.3 million higher current year accounts receivable due to a large one-time reduction in receivables as a result of the commencement of a factoring facility entered into with our largest customer during the prior year; $3.7 million higher current year inventory and other assets due to higher gift inventory; and $4.0 million higher accounts payable and accrued expenses due to higher gift inventory purchases to fulfill increased customer orders that will ship in the second quarter of fiscal 2013.

Investing activities for the first quarter of fiscal 2013 primarily consisted of purchases of software to improve fill-rates with our largest customer and operating equipment to improve efficiency in our distribution facilities. Investing activities for the prior year primarily related to the purchases of operating equipment for our distribution facilities.

Financing activities included credit facility net borrowings of $12.6 million and $5.7 million in the first quarters of fiscal 2013 and 2012, respectively, used to fund our operating activities. This $6.9 million increase from the prior year was primarily due to higher inventory purchases in the first quarter of fiscal 2013 over the first quarter of fiscal 2012 and not having the one-time cash inflows generated in the prior year from (1) the commencement of a factoring facility (entered into with our largest customer) and (2) the elimination of the requirement to maintain compensation balances with our Canadian subsidiary's lender (which occurred upon the termination of the Canadian subsidiary's credit facility) and the use of previously restricted cash to pay down our outstanding balance.


There have been no significant changes in the critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended June 30, 2012.

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