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Tandy Brands Reports Fiscal 2013 Second Quarter Earnings Results And Provides Update On Current Events

Six-Month Results

Net sales for the six-month period ended December 31, 2012 were $73.8 million compared to net sales of $72.2 million reported in the prior-year period. An increase in net sales of the gifts segment to $32.4 million, up from $27.9 million was due to strong second quarter sales. Net sales for the accessories segment declined by six percent to $41.4 million due to a $0.6 million investment in retail space and lower sales of exited product categories in the current year.

Gross margin as a percentage of net sales was 20.2 percent in the first half of fiscal 2013. Excluding the inventory write-down during the current year quarter, gross margin was 29.2 percent, compared to 33.0 percent in the first half of fiscal 2012. The decline was primarily due to higher freight costs, sales concessions, returns of unsold inventories, and a higher mix towards customer-direct shipments in the gifts segment, and lower sales of previously written-down inventory in the accessories segment.

Total SG&A expense for the six-month period increased $0.1 million to $20.1 million on higher variable selling costs which were partially offset by decreases in compensation costs.

For the six-month period ended December 31, 2012, the Company reported a net loss of $6.9 million, or ($0.97) per diluted share, compared to net income of $1.7 million, or $0.23 per diluted share in the prior year period. Adjusted net income decreased $1.5 million to $0.7 million compared to adjusted net income of $2.2 million in the prior year period. 

Financial Position

Working capital declined to $14.7 million at December 31, 2012 from $20.7 million at June 30, 2012 primarily due to the $6.7 million inventory write-down. Receivables declined to $7.1 million from $16.4 million at December 31, 2011 primarily due to an accelerated payment arrangement with the Company's second largest customer which provided approximately $11.7 million of cash in the current year second quarter. Inventories net of reserves were $29.7 million at December 31, 2012. Inventories, excluding the $6.7 million write-down, were $36.4 million compared to $32.7 million in the prior year period due to carrying inventories for new accessories programs with spring deliveries and higher levels of unsold gift products. 

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