Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. TANDY BRANDS ACCESSORIES INC (869487) 10-Q published on Nov 14, 2013 at 10:52 am
Reporting Period: Sep 29, 2013
As of November 14, 2013, we were in violation of certain provisions contained in the Credit Agreement, including the covenant relating to satisfaction of minimum availability targets and certain disbursement and shipment requirements for certain weeks. These violations were primarily a result of the delays in gifts shipments and payments resulting from the effects of Typhoon Fitow, which impacted several of our suppliers in Asia.
During the first quarter of fiscal 2014, we issued 815,000 performance units comprised 50% of cash and 50% of phantom shares of our common stock, to certain employees. Each unit has a $1.00 assigned value and the number of phantom shares of common stock attributable to each award was determined based on the fair market value of our common stock on the date of grant. The units will vest if, and only if, there is a change of control of the Company during the performance cycle, which is July 1, 2013 or September 16, 2013 through December 31, 2013.
As of November 14, 2013, we were in violation of certain provisions contained in the Credit Agreement, including the covenant relating to satisfaction of minimum availability targets and certain disbursement and shipment requirements for certain weeks. These violations were primarily a result of the delays in gifts shipments and payments resulting from the effects of Typhoon Fitow, which impacted several of our suppliers in Asia.
Our senior lender has not, as of the date of this report, accelerated the indebtedness and continues to advance funds. However, the senior lender may, in accordance with the terms of our senior credit agreement, exercise any available remedies under the credit agreement while we are in default and could refuse to continue to advance funds. In the event the senior lender refuses to advance funds or accelerates the indebtedness, we do not believe the Company has sufficient liquidity and capital resources to repay the debt and continue normal operations. In such an event, there can be no assurance that we would be successful in obtaining additional capital resources or that we would have sufficient liquidity and capital resources to meet future financial obligations. The Company is currently in discussions with the senior lender concerning the default under the senior credit agreement. If we are unable to obtain a waiver of the default or a modification of the terms of the credit agreement, restructure our finances or if the senior lender refuses to advance funds, the Company may need to restructure, sell assets, explore a potential bankruptcy filing or explore other alternatives.
Gross margins were 27.8% and 31.6% for the first quarter of fiscal 2014 and 2013, respectively. Accessories segment margins were 28.2% in the fiscal 2014 first quarter compared to 33.9% in the same quarter last year. The decline was due to increased material and freight costs in the current year and higher sales to close out customers, which were a result of our prior year restructuring plan. The gifts segment margin was up 40 basis points in the fiscal 2014 first quarter compared to the same quarter last year as a result of a higher customer deductions and freight costs in the prior year.