8-K 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: July 12, 2000 TANDYCRAFTS, INC. A DELAWARE CORPORATION 1-7258 75-1475224 ------ ---------- (Commission File Number) (IRS Employer Identification No.) 1400 Everman Parkway Fort Worth, Texas 76140 (817) 551-9600 ITEM 2. ACQUISITIONS OR DISPOSITION OF ASSETS Through a series of transactions, the last of which was completed in July 2000, the Company finalized the sale of the assets and certain liabilities of its Gifts and Office Supplies divisions, consisting of Rivertown Button, Licensed Lifestyles, J-Mar and Sav-On Office Supplies. Cash from the sales totaled approximately $12,088,000. Estimated liabilities retained including contingencies relating to lease commitments and related cost total approximately $1,300,000. Proceeds from the sales will be used to liquidate the retained liabilities and reduce outstanding bank debt. The dispositions are being accounted for as discontinued operations for financial reporting purposes. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (b) Unaudited pro forma consolidated financial information Tandycrafts, Inc. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma consolidated statements of operations for the years ended June 30, 1999, 1998, and 1997, and for the nine months ended March 31, 2000 and 1999 reflect the historical accounts of Tandycrafts, Inc. (the "Company") adjusted to give effect to the dispositions of the Company's Gift and Office Supply business segments as if the dispositions had occurred as of the beginning of each period presented. The following unaudited pro forma consolidated balance sheet as of March 31, 2000 reflects the historical consolidated balance sheet of the Company adjusted to give effect to the disposition of the Company's Gift and Office Supply business segments as if such dispositions had taken place on March 31, 2000. The unaudited pro forma consolidated financial information should be read in conjunction with the Company's historical financial statements and other disclosures included in the June 30, 1999 annual report or Form 10K and most recent quarterly reports on Form 10Q. The unaudited pro forma consolidated financial data is for informational purposes only. It is not necessarily indicative of the results of operations or the financial position which would have been attained had the dispositions been consummated at the foregoing dates and is not intended to project the Company's financial condition on any future date or results of operations for any future period. Tandycrafts, Inc. Pro Forma Consolidated Statement of Operations For the Nine Months Ended March 31, 2000 (In thousands, except per share data) HISTORICAL DISCONTINUED PRO FORMA CONSOLIDATED OPERATIONS (1) CONSOLIDATED ------------ -------------- ------------ Net sales $ 119,115 $ 29,931 $ 89,184 Cost of goods sold 81,713 19,136 62,577 ------------ -------------- ------------ Gross profit 37,402 10,795 26,607 Selling, general and administrative 32,743 9,090 23,653 Depreciation and amortization 3,362 566 2,796 ------------ -------------- ------------ Operating income 1,297 1,139 158 Interest expense, net 2,701 771(2) 1,930 ------------ -------------- ------------ Income (loss) before income tax (1,404) 368 (1,772) Provision (benefit) for income taxes (463) 121 (584) ------------ -------------- ------------ Income (loss) from continuing operations $ (941) $ 247 $ (1,188) ============ ============== ============ Loss per average common share - continuing operations Basic and Diluted $ (0.08) $ (0.10) ============ ============ Weighted average common shares 12,049 12,049
Tandycrafts, Inc. Pro Forma Consolidated Statement of Operations For the Nine Months Ended March 31, 1999 (In thousands, except per share data) HISTORICAL DISCONTINUED PRO FORMA CONSOLIDATED OPERATIONS (1) CONSOLIDATED ------------ -------------- ------------ Net sales $ 140,006 $ 31,232 $ 108,774 Cost of goods sold 101,008 20,018 80,990 ------------ -------------- ------------ Gross profit 38,998 11,214 27,784 Selling, general and administrative 43,588 9,139 34,449 Restructuring charge 8,145 - 8,145 Depreciation and amortization 2,918 811 2,107 ------------ -------------- ------------ Operating income (loss) (15,653) 1,264 (16,917) Interest expense, net 1,600 629(2) 971 ------------ -------------- ------------ Income (loss) before income tax (17,253) 635 (17,888) Provision (benefit) for income taxes (4,471) 209 (4,680) ------------ -------------- ------------ Income (loss) from continuing operations $ (12,782) $ 426 $ (13,208) ============ ============== ============ Loss per average common share - continuing operations Basic and Diluted $ (1.04) $ (1.08) ============ ============ Weighted average common shares 12,236 12,236
Tandycrafts, Inc. Pro Forma Consolidated Statement of Operations For the Year Ended June 30, 1999 (In thousands, except per share data) HISTORICAL DISCONTINUED PRO FORMA CONSOLIDATED OPERATIONS (3) CONSOLIDATED ------------ -------------- ------------ Net sales $ 194,698 $ 57,830 $ 136,868 Cost of goods sold 139,525 39,157 100,368 ------------ -------------- ------------ Gross profit 55,173 18,673 36,500 Selling, general and administrative 64,118 27,880 36,238 Restructuring charge 8,145 - 8,145 Impairment of long lived assets 9,522 9,522 - Depreciation and amortization 4,327 1,567 2,760 ------------ -------------- ------------ Operating loss (30,939) (20,296) (10,643) Interest expense, net 2,173 839(2) 1,334 ------------ -------------- ------------ Loss from continuing operations before income tax (33,112) (21,135) (11,977) Benefit for income taxes (9,279) (6,844) (2,435) ------------ -------------- ------------ Loss from continuing operations $ (23,833) $ (14,291) $ (9,542) ============ ============== ============ Loss per average common share - continuing operations Basic and Diluted $ (1.96) $ (0.78) ============ ============ Weighted average common shares 12,182 12,182
Tandycrafts, Inc. Pro Forma Consolidated Statement of Operations For the Year Ended June 30, 1998 (In thousands, except per share data) HISTORICAL DISCONTINUED PRO FORMA CONSOLIDATED OPERATIONS (3) CONSOLIDATED ------------ -------------- ------------ Net sales $ 232,495 $ 62,144 $ 170,351 Cost of goods sold 153,484 39,795 113,689 ------------ -------------- ------------ Gross profit 79,011 22,349 56,662 Selling, general and administrative 63,182 19,396 43,786 Loss on sale of business unit 623 - 623 Depreciation and amortization 4,828 1,562 3,266 ------------ -------------- ------------ Operating income 10,378 1,391 8,987 Interest expense, net 3,259 - 3,259 ------------ -------------- ------------ Income from continuing operations 7,119 1,391 5,728 before income tax Provision for income taxes 2,502 488 2,014 ------------ -------------- ------------ Income from continuing operations $ 4,617 $ 903 $ 3,714 ============ ============== ============ Income per average common share - continuing operations Basic $ 0.37 $ 0.29 ============ ============ Diluted $ 0.36 $ 0.29 ============ ============ Weighted average common shares Basic 12,645 12,645 Diluted 12,659 12,659
Tandycrafts, Inc. Pro Forma Consolidated Statement of Operations For the Year Ended June 30, 1997 (In thousands, except per share data) HISTORICAL DISCONTINUED PRO FORMA CONSOLIDATED OPERATIONS (3) CONSOLIDATED ------------ -------------- ------------ Net sales $ 244,924 $ 62,032 $ 182,892 Cost of goods sold 160,325 36,838 123,487 ------------ -------------- ------------ Gross profit 84,599 25,194 59,405 Selling, general and administrative 79,185 21,860 57,325 Depreciation and amortization 5,374 1,670 3,704 ------------ -------------- ------------ Operating income (loss) 40 1,664 (1,624) Interest expense, net 3,085 - 3,085 ------------ -------------- ------------ Income (loss) from continuing operations before income tax (3,045) 1,664 (4,709) Provision (benefit) for income taxes (1,127) 616 (1,743) ------------ -------------- ------------ Income (loss) from continuing operations $ (1,918) $ 1,048 $ (2,966) ============ ============== ============ Income (loss) per average common share - continuing operations Basic and Diluted $ (0.15) $ (0.24) ============ ============ Weighted average common shares 12,423 12,423
Tandycrafts, Inc. Pro Forma Consolidated Balance Sheet As of March 30, 2000 (In thousands, except per share data) HISTORICAL DISCONTINUED PRO FORMA CONSOLIDATED OPERATIONS (4) CONSOLIDATED ------------ -------------- ------------ ASSETS Current assets: Cash and short-term investments $ 913 $ - $ 913 Trade accounts receivable, net of allowance for doubtful accounts 21,668 2,483 19,185 Inventories, at lower of cost or market 36,349 7,280 29,069 Other current assets 5,346 372 4,974 ------------ -------------- ------------ Total current assets 64,276 10,135 54,141 ------------ -------------- ------------ Property and equipment 55,200 6,234 48,966 Less accumulated depreciation (26,006) (4,648) (21,358) ------------ -------------- ------------ Net property and equipment 29,194 1,586 27,608 ------------ -------------- ------------ Other assets 586 - 586 Deferred tax assets 7,634 (762)(5) 8,396 Investment in Discontinued Operations 5,371 5,371 - Goodwill, net 20,145 126 20,019 ------------ -------------- ------------ TOTAL ASSETS $ 127,206 $ 16,456 $ 110,750 ============ ============== ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 12,369 $ 3,380 $ 8,989 Accrued liabilities and other 15,182 580 14,602 Current portion of long-term debt 1,800 1,800 - ------------ -------------- ------------ Total current liabilities 29,351 5,760 23,591 Long-term debt 40,000 9,024 30,976 Other non-current liabilities 1,292 - 1,292 ------------ -------------- ------------ Total liabilities 70,643 14,784 55,859 ------------ -------------- ------------ Stockholders' equity: Common stock, $1 par value, 50,000,000 shares authorized, 18,527,988 shares issued 18,528 - 18,528 Additional paid-in capital 20,493 - 20,493 Retained earnings 41,534 1,672(6) 39,862 Treasury shares at cost (23,992) - (23,992) ------------ -------------- ------------ Total stockholders' equity 56,563 1,672 54,891 ------------ -------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 127,206 $ 16,456 $ 110,750 ============ ============== ============
Tandycrafts, Inc. Pro Forma Financial Statements Footnote 1.Represents the historical results of operations of Sav-On Office Supplies for the nine month periods ended March 31, 2000 and 1999, which are being removed for pro forma purposes from the Company's consolidated results of operations for the same periods. Note that the operating results of and the estimated loss on the disposal of the Gift Division were reflected in discontinued operations in the financial statements as of March 31, 2000 and 1999. 2.Reflects the pro forma reduction of interest as a result of applying the proceeds of $12,088,000 to reduce the Company bank debt after liquidating the estimated retained liabilities of $1,264,000 assuming an interest rate of 9.5% and 7.75% for fiscal years 2000 and 1999, respectively. 3.Represents the historical results of operations of the disposed segments (Rivertown button, Licensed Lifestyles, J-Mar (the "Gift Division"), and Sav- On Office Supplies) for the three years ended June 30, 1999, 1998 and 1997, which are being removed for pro forma purposes from the Company's consolidated results of operations for the same periods. 4.Represents the book value of the assets and liabilities sold, net of deferred tax assets relating to the loss on disposal (see note 2). 5.Represents deferred tax benefit discussed in note 4. 6.Represents the estimated loss on the disposal of Sav-On Office Supplies plus the estimated additional loss on the disposal of the Gift division, net of related deferred tax benefit. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned thereunto duly authorized. TANDYCRAFTS, INC. Date: July 27, 2000 By:/s/ Michael J. Walsh ----------------------------- Michael J. Walsh, Chairman and Chief Executive Officer Date: July 27, 2000 By:/s/ James D. Allen ----------------------------- James D. Allen, President and Chief Operating Officer Date: July 27, 2000 By:/s/ Leo Taylor ----------------------------- Leo Taylor, Senior Vice President of Finance (Principal Finance Officer)